Government tells Equinox they will pay new taxes...

Government tells Equinox they will pay new taxes

http://www.lusakatimes.com/?p=1934">

The Lusaka Times reports that North-Western Province Permanent Secretary Jeston Mulando has urged Candian investors Equinox, who are building Africa's biggest mine at Lumwana, not to be scared of the recent announcement by President Levy Mwanawasa on increasing taxes. Yesterday's blog reported comments from Equinox's vice-president stating that he believed that company would not be subject to any change of terms as it already holds a Development Agreement.

Mr. Mulando seemed to rebut that assertion, stating the mines would still make enough profit with the 47 per cent tax.

Lumwana Managing Director, Harry Micheal, responded that the increase in tax was a blow to his company since they were still in construction phase. He lamented that soon after the President’s announcement on the increase in tax by mines, Equinox had lost three million US dollars. The Managing Director however, said he would travel to Lusaka to seek clarification from Government on the details of how they would effect the new tax regime on mines.

The Permanent Secretary also encouraged Lumwana management to procure materials from local people. Lumwana is typically described as being 'a new Copperbelt' emerging fully formed 'in the bush'. Little infrastructure surrounds the new plant, and the area has seen little formal employment. The company is building entire new settlements to house workers. Building is at an advanced stage, including the 5 km long converyor belt from the primary crusher to the process plant, a chemical storage shed, twin tower laboratory and a largest mill in the world. Management have confirmed that 320 housing units have been completed for junior workers and have targeted to construct 1,000 more houses. Mr. Micheal said that management wanted to complete construction works on time so that by the end of June this year full production of copper commences.

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Equinox think they are untouchable
Canadian Newsletter http://www.northernminer.com/issues/ISArticle.asp?id=78758&issue=01152008&ref=rss">'The Northern Miner' reports that at least one of Zambia's copper investors thinks they are untouchable.

While First Quantum Minerals declared themselves unwilling to comment on the president's announcement of a new tax regime because the ramifications are as yet unclear, Kevin van Niekerk, vice president of Equinox Minerals (who are developing the Lumwana project) told the Northern Miner he is confident that all Development Agreements will be honoured. "We will not see unilateral cancellation of existing Development Agreements," he says. "They are protected in law as binding international agreements." Van Niekerk seemed to believe that, as with Finance Minister Magande's announcement last year, the new system would apply only to new investments not those that already hold Development Agreements.

The report also claims, "Since the [Development] Agreements were created as part of a privatization process overseen by the World Bank and the IMF they hold international legal status,

meaning the Zambian government cannot modify the agreements even through legislation. Development Agreements are also secret, not available for public viewing or scrutiny.

" Now we know that second bit's not true any longer; many of the Development Agreements are published on this website.

But what about the first bit? Firstly, of course the Bank and Fund deny that they 'oversaw' the privatisation process - that is not how they chose to understand their own conditionality regime and they deny direct involvement in the negotiations - they were at most, they say, advising. So, what about his idea that the agreements have 'international legal status'?

I would suggest this is simply wrong and that the sovereign parliament can introduce any taxes it likes.

The constitutionality of the original agreements is much more likely to be challenged than Zambia's right to re-visit them. At worst, this could result in a tribunal at the Intenational Centre for the Settlement of Investment Disputes (ICSID), of which Zambia is a signatory. Bolivia recently http://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=OpenPage&PageType=AnnouncementsFrame&FromPage=Announcements&pageName=Announcement3">chose to exercise its right to leave ICSID in order to facilitate a significantly more radical re-working of its natural resource sector than is being considered in Zambia. I can't see any companies being foolish enough not to realise that things have moved politically in Zambia and that they need simply to accept a new regime. Bolivian investors are seeing their plants nationalised - the Zambian proposals, even if we can't fully understand what they are yet, are most unlikely to be anywhere near as radical.


As I said in the past the law works in many different ways and interpreted to suit the individaul Goverments.

please do your own research