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Ningbo Jintian Copper (Group) Co., Ltd.
Ningbo Jintian Copper (Group) Co., Ltd.

Why Should Zambians Be Suffering When Copper Prices are at an All Time High

1. There is no question that Zambia’s economy has gone through ups and downs since independence. Due to the fact that we are heavily dependent on copper exports, our economy has performed exceptionally well during the times that copper prices have been high on the world market, and has performed poorly during the times when copper prices have been low.

2. During the first and second republics, KK managed to build various national infrastructure out of proceeds of copper. He managed to provide free education from grade 1 to university, he managed to set up industries in each and every district of Zambia, all from proceeds of copper. This gravy train came to a screeching halt when copper prices fell on the world market in the late 80s, which was totally understandable.

3. Similarly, during the second term of the Mwanawasa administration, we benefited from high copper prices in terms of high economic growth, the extremely low exchange rate between the Kwacha and the Dollar and a generally low cost of living as well as a huge accumulation of foreign reserves.

4. However, this time around copper prices on the world market are not just high, but they are the highest ever, at more than US$11,000 per metric tonne. But the nation does not appear to be benefiting in any way. There are no visible infrastructure projects being undertaken. The few that are in the pipeline are not funded by taxpayers but through private public partnerships (PPP). There is no significant appreciation in the Kwacha against the dollar. The cost of living is extremely high. Economic growth is stagnant. The government is even failing to buy medicines in hospitals. Our foreign reserves are depleting at a very fast rate as BOZ tries to support the Kwacha. ZRA is failing to meet its targets.

5. In other words, there is nothing to show for the current highest copper prices on the world market in recorded history. Nothing at all. The question is why? Why should this country suffer when copper prices are low and then suffer again when copper prices are high? When are we ever going to take a break from suffering?

6. The answer is simple. We are unable to benefit from high copper prices because we have an administration in office that decided to give the mines a de facto tax holiday. Based on recent studies, on average the mines are able to make a decent profit and sustain their operations when copper prices are at US$4,000 per metric tonne. So imagine the number of supernormal profits that the mines are currently making with copper trading at more than US$11,000 per metric tonne? And yet, we as a nation are not benefiting a single Ngwee from those profits, yet it is our copper!

7. According to the Minister of Finance’s own admission in the 2022 national budget, this de facto tax holiday has resulted in loss of more than US$2.6 billion in tax revenue. And that is even a conservative estimate. Our estimate is that the net loss in tax revenue is north of US$5 billion. That money would have been enough to pay off the entire Eurobond and further clear all local contractors who are owed money.

8. But how does the new dawn administration give the mines a tax holiday when we are supposed to be reaping the benefits of high copper prices on the world market? That is the question that every well-meaning Zambia should ask. Well, it is because most mining houses actually funded UPND during the 20 plus years that it was in the opposition, and now it is time for payback. But since UPND as a political party is just as broke as any other political party, they cannot pay back their nkongole to the mining houses by themselves, so they have to use government resources to do so. They have to give the mines a de facto tax holiday. All at the expense of the Zambian citizens who are currently dying like flies in hospitals due to lack of medicines. What a sad day in the history of our nation indeed.