Zambia: International Mining Companies Threaten Legal Action

February 15th, 2008

International Mining companies in Zambia have rejected new royalty and tax regimes and have threatened to take international legal action against the Government of Zambia for these proposals, according to the Times of Zambia, February 12.

This reminds us once again of the vulnerability of poor nations when it comes to bargaining with the well financed international corporations. In 2007, the Zambian government was dragged into international court by another foreign corporation, U.S.-based Donegal International. In this vulture fund case, described by many as predatory, Zambia was forced to pay Donegal $15.5 million.

A majority of Zambians live on US$1 a day and there is a lack of revenue for health, education and sanitation services. As a consequence, the government is calling on mining companies to contribute their fair share of taxes to generate income for social spending. Most of these companies are engaged in copper production which accounts for 80% of Zambia’s foreign revenue.

The Zambian government introduced a windfall tax on base metals to be triggered at different price levels and an increased mineral royalty fee ranging from 0.6% to 3%. It has also increased the corporate tax from 25% to 30%. All rates are effective April 1.

When compared to other copper producing nations and global standards; Zambia’s mineral tax has been cited as the lowest, and hence does not hold much promise for revenue. Most of the mining contrasts were signed five years ago when the average price of copper was US$1, 200.00 per tonne but in 2007 copper hit a record high of US$8000.00 per tonne on the London metal exchange. Despite this surge in copper price and production, Zambia’s revenue still remains very low.

These international companies secretly signed a deal with government to help with public service projects – called development agreements. Two decades has passed and no real public benefit has emerged from this agreement.

Among those international companies threatening legal action against the government are Canadian First Quantum and a Swiss firm called Glencore International which together own Mopani Copper Mines. Others involved in the action are an Indian firm Vedanta Resources (which owns Konkola Copper Mines), a Canadian company called Equinox Minerals Limited, which along with U.S. based Freeport-McMoRan Copper & Gold Inc., own Lumwana mines, and China Nonferrous Metal Mining, which owns Non Ferrous China Africa.

Civil society groups and Religious leaders are supporting this bold move by government to renegotiate the mining deals. If implemented, this tax regime will generate spending income for the government which so desperately needs to fight Zambia’s HIV/AIDS epidemic and provide clean water and affordable primary education to million of children.

Other African nations such as Congo DR are currently in the process of renegotiating their previous mining agreement with foreign investors to get a fair share.

In light of this, true development will only come to developing nations when international investors are willing to give back equitably by paying sustainable taxes for their business operations and start to effectively implement corporate social responsibility in their pursuit of profits.

Resources for Action:

“Undermining Development: Copper mining in Zambia” A Joint Report by Christian Aid, Action for Southern Africa, and Scotland Aid Agency

Mining Watch Canada (MWC) is a pan-Canadian initiative that addresses irresponsible mineral policies and practices in Canada and around the world.

Return to Top