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The World Bank and IMF’s long shadow over Zambia’s copper mines

20 February 2008

What links the governments of Zambia and Bolivia? They have both been toughening their lines on extractive industry contracts, demanding higher revenues from the oil and mining transnationals operating in their countries. And the World Bank and IMF played an active role in promoting the ownership and tax regimes that the governments have now overturned.

Zambian President Levy Mwanawasa has announced the cancellation of all tax concessions for copper mining companies operating in Zambia, saying they were “unfair and unbalanced.” In their place “The government has, therefore, decided to introduce a new fiscal and regulatory regime in order to bring about equitable distribution of the mineral wealth.”

The change is dramatic. Without them mining firms would have earned US$4 billion in the 2008/9 financial year but would only have paid tax of US$300 million. Revenue is expected to double to US$650 million after the change.

Mwanawasa said the agreements which Zambia signed with foreign mining firms were not beneficial to his impoverished country. “The new regime introduces a windfall tax and a viable profit tax that has been designed to work in periods of both high and low prices,” Mwanawasa said. “This effective tax rate will not adversely affect the companies’ viability as their returns will remain well within the international norms,” the president said.

Civil society, the opposition and the parliament are fully backing the government stance, but foreign mining companies have not welcomed the tax reform. The international community which has been intervening in Zambia is getting anxious about their share of responsibility being pointed out.

The World Bank and IMF's long shadow over Zambia's copper mines : Kb