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Vice president before tribunal, sign of growing democracy

Zambia’s democracy is not yet matured but certainly it has been growing steadily. For the first time in the country’s history the Vice president has been subpoenaed to give evidence before a tribunal investigating a cabinet minister. Vice President Dr Guy Scott was like any other ordinary witness as he testified in the Tribunal probing allegations of abuse of office against Tourism and Arts Minister Sylvia Masebo. And like other witnesses, Dr Scott was also subjected to cross examinations by both the defence and prosecution teams.

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In his evidence Dr Scott defended Masebo for cancelling hunting safaris concessions and firing of managers at Zambia Wildlife Authority (ZAWA). He submitted that it was within the minister’s jurisdiction to ensure that ZAWA is properly run and that problems at the institution can affect the minister. In the absence of the board at ZAWA the minister had to act to save the organisation.

The Vice president endured close to three hours before the Sylvia Masebo tribunal as he gave evidence on the matter surrounding the dismissal of ZAWA senior managers and the cancellation of the hunting safari tender.

This is a sign that Zambia’s democracy is on the right path. Not only are citizens now able to take legal recourses against public officers suspected of abuse of office, but even senior government officials are made to appear before tribunals.

As the country celebrates its golden jubilee this year, there is need for concerted efforts by all citizens in promoting democracy, transparency and accountability and rule of law. These tenets should be properly nurtured.

The Masebo tribunal has set a good precedence by subpoenaing the Republican Vice President to appear as a witness.

 

 

Multinational corporations and tax evasion

It is a fact that Africa has not fully benefited from multinational corporations due to tax evasion, financial flaws and corruption being practiced by these companies.

In Zambia, this is a familiar situation that has left the country at the mercy of multinational corporations, especially in the mining sector. Despite Zambia being the world’s eighth largest producer of copper, revenues from the mines only account for less than 5 percent of Gross Domestic Product (GDP). This is negligible considering the increase in copper exports and favorable prices on the metal market.

What factors have then contributed to Zambia being literally robbed of her wasting assets (copper and other minerals)?

As cited earlier, tax evasion, financial flaws, corruption and other corporate frauds have made Zambia lose billion of kwacha from multinational mining corporations. Recently Vice president Guy Scott told parliament that Konkola Copper Mines has been involved in financial scam and that government was carefully monitoring the situation at the mine which has debts of about $1.5 million. It has been alleged that KCM has been falsifying its incomes to evade tax. But KCM is just among many multinationals linked to corporate fraud.

Another factor is that  Zambia Revenue Authority (ZRA) and Bank of Zambia (BoZ) lack capacity to monitor the operations of not only mining companies but also other multinational corporations working in Zambia. The two institutions cannot therefore adequately tax multinational corporations resulting in the country losing its much needed resources to finance service delivery by the government.

Similarly, most of the copper that is extracted in the country end up on the international market in raw form. The country has fewer refineries to enhance the value of copper. Though Zambia is the eighth largest producer of copper, it is the fourteenth in the world in terms of producing refined copper. With more copper refineries set up the country can benefit both from taxes and employment creation for many Zambians. At the moment, the copper extracted from Zambia is creating employment opportunities outside the country, a situation which is worrisome.

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Zambia is not fully benefiting from the mines

But perhaps one of the major factors is that the judiciary has not taken a keen interest in prosecuting multinational corporations for fraud and tax evasion. Apart from KCM that was fined K10 billion (not rebased) for polluting Kafue River, no multinational corporation has been criminally prosecuted for corporate fraud. Since most of the allegations against multinational corporations have come from civil society organisations and pressure groups, government institutions have appeared disinterested in the matter. The battle to ensure that multinational corporations contribute adequately to state coffers in accordance with their profits has been solely left to the civil society and pressure groups. Yet government has admitted that some multinational corporations are involved in reaping the country out of its resources.

Alongside tax evasion and other frauds, multinational corporations especially in the mining sector have greatly benefited from various incentives entered into during the acquisition of mines. For instance, the recently released Foil Vedanta Report titled “Copper Colonisation Vedanta KCM and the copper loot of Zambia” says;

“KCM’s Development Agreement only requires it to pay 0.6% in royalties, fixed until 2018, and they have even argued that this is too high. Royalties are calculated as a percentage of the market value of minerals less the cost of smelting, refining and insurance, handling and transport from the mining area to the point of export or delivery within Zambia. KCM’s agreement allows them to deduct 100% of capital allowance from any investments made – such as prospecting, buildings and equipment, and losses from bad years may be carried over into good years”.

Clearly these incentives are too generous to give a company like KCM that reportedly recuperated its investment within three months after it was sold.

How then can Zambia maximise on it benefits from multinational corporations and in particular mining companies?

Government needs to devise forensic auditing methods for multinational companies operating in the country. Some of these companies have put up deceptive Corporate Social Responsibilities (CSRs) programmes and yet they are not contributing to government coffers as much as their profits. These companies have gotten away with huge profits through falsifying their true accounts.

Further, the Ministry of Finance needs to strengthen the capacity of Zambia Revenue Authority (ZRA) and Bank of Zambia (BoZ) and Central Statistical Office (CSO) to enable them monitor operations of mining companies and other multinational companies operating in Zambia. Without adequate capacity by these institutions, the country will continue failing to account for its resources.

The government should revisit some of the Development Agreements entered with the mining companies. Though it is not easy to renegotiate mining development agreements, some which will run till 2024, the government can use its political muscle to table the matter before these companies.

Strengthening the judiciary and other investigative wings to criminally prosecute mining companies can also help to scare them and reduce cases of tax evasion, corruption, corporate fraud and vices being committed by multinational companies. At the same time government investigative wings should develop interest in issues of multinational corporate affairs.

Copper is a diminishing asset and therefore the country needs to make the most out of it while it lasts. As the Foil Vedanta Report notes, civil society organisations and pressure groups have a greater role to play in raising awareness on the need for the country to benefit from it resources.

Hopefully, the just ended 3rd International Association of Prosecutors African-Indian Ocean Regional conference held in Livingstone will also come up with solutions to the problem of multinational corporations’ illegal practices.

By Nicholas Bwalya

Zambia’s Newspaper Headlines 04/03/2014, Daily Nation

Attorney General Mumba Malila says Masebo erred

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More borrowings amidst free falling kwacha

Finance Minister Alexander appears to be in comfort zone as the kwacha continues to fall and is seeking pleasure in increasing more debts for the country. He has just successfully pushed parliament to increase government borrowing from the domestic loan threshold of K200 million to K13 billion. Amidst fears from economists and other stakeholders that the country is quickly falling into another debt trap, the minister is still insisting that government should continue to borrow more money to fund infrastructure development.

Zambia’s current debt stands at slightly above $3.1 billion from around $500 million in September 2011 when the PF government came into power. When the country was in serious debt crisis between 1980 to around 2005, it had an external debt of about $7 billion.  The country had to be subjected to a strenuous Highly Indebt Poor Country (HIPC) programme before the debt was cleared.

Against this background therefore it is expected that government, and in particular the Minister of Finance, already understands the seriousness of Zambia’s debt crisis under HIPC and would not therefore like to experience a similar problem. Are government’s arguments for more borrowing justified and are the investments derived from borrowing able to sustain debt repayment?

Economists are concerned that most of the borrowing is not being channeled into investments that are able to generate repayment funds. If anything, much of the debt appears to be going into consumption related ventures such as wages for civil servants and cushioning the budget deficit incurred in last year’s budget. The IMF has already warned that Zambia’s debt would double by 2018 if the current rate of borrowing is not arrested.

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Finance Minister Alexander Chikwanda seems relaxed amidst a free failing kwacha and an increasing debt burden.

In the first two months of 2014, inflation has been going up and now stands at 7.3 percent while the local currency is trading at around K5.8 to a dollar. With the government targeting end of year inflation of no more than 6.5% at the end of this year, this target looks farfetched.

Evidently, there is everything to worry about the direction of Zambia’s economy under the PF government. It does not take an economist to realize that the country’s economy will not be able to create the 200,000 jobs targeted this year. Neither will the country attain a 7 percent Gross Domestic Product (GDP) growth.

Where is the Bank of Zambia to explain the free fall of the kwacha? What about other technocrats within the Ministry of Finance? Surely there is need for more information on the performance of the kwacha and where the borrowings are going.

Government needs to seriously consider domestic sources of raising funds to support infrastructure development being implemented. There are a number of tax incentives, for instance, that have been given to mining companies. These should be removed to enable the country increase its revenue. Solely depending on borrowing may seem attractive at the moment but is disastrous in the medium and long term when time to pay back these debts is due.

Zambia’s Newspaper Headlines 28/02/2014

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LAZ warns of mass demonstrations

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Quest for an independent judiciary

The judiciary is one critical arm of government because it is  responsible   for  dispensing justice. When the judiciary is compromised, injustice thrives leaving citizens without any recourse for settling disputes.

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Chief Justice Lombe Chibesakunda. Her appointment was rejected by parliament.

Zambia, like other African states, has grappled with the separation of powers between, the three arms of government namely judiciary, legislature and executive. In many instances the executive has had more powers than the other two, a situation which is not ideal for democracy and rule of law. Largely this has been due to the fact the president, who is part of the executive, appoints members of the judiciary and legislature.

In the case of the judiciary, the president appoints all judges, including the chief justice, who is in charge of it. Though parliament (legislature) has to ratify these appointments, this exercise is merely academic and not a requirement. Even without ratification by parliament, a member of the judiciary can still be appointed, as the case was with the current Chief Justice Lombe Chibesakunda.

The appointment of judges by the president has been a major concern for those advocating for an independent judicial system. For instance, when President Michael Sata nominated Mutembo Nchito for the position of Director of Public Prosecutions (DPP) a lot of eyebrows were raised about his impartiality. Some Members of Parliament (MPs) under the parliamentary select committee were apprehensive that he would not be impartial as he had a pending legal case involving the defunct Zambian Airways debt with Development Bank of Zambia. But Mutembo’s appointment still went through the select committee.

Similarly, Lombe Chibesakunda’s appointment as Chief Justice was rejected by the parliamentary select committee but President Michael Sata over ruled it. And despite many calls from opposition parties and civil society organisations for her to resign, the Chief Justice has remained adamant.

Recently President Sata elevated High Court Judges Evans Hamaundu and Albert Wood to the position of Supreme Court Judge subject to ratification by parliament.

The two judges have issues to clear before they are ratified by parliament. Judge Hamaundu was the chairperson of the Tribunal appointed to probe Justice Minister and Patriotic Front Secretary General Wnyter Kabimba. Judge Wood is at the centre of the disputed Chikopa Tribunal and also faces a complaint of misconduct in the manner he handled the case involving DBZ and JCN Holdings with Post Newspapers. The complaint has been filed through the Judicial Complaints Authority by Zambian Voice, a civil society organisation championing good governance. It is therefore not strange that most observers have questioned the timing of the promotion of the two learned judges.  Wouldn’t their promotion have waited for the two judges to come clear of these issues?

When the appointment of people at the summit of the judiciary such as Chief Justice, DPP and Supreme Court judges is perceived to be irregular or raises suspicions, it breeds mistrust into the judicial system. The entire judiciary becomes questionable; a situation that sends fears among law abiding women and men but most importantly has potential to scare away foreign investors.

In law, they say that justice must not just be done but must be seen to be done, so too is the fact that judges must not just be impartial but must also be seen to be impartial as they dispense justice. Perception of judges has a huge bearing on the confidence of citizens in the judiciary. The more judges are perceived to be biased or irregularly chosen, the less confidence citizens have in the judiciary.

The Zambia people must therefore continue to demand for a judiciary that is completely detached from outside interference especially from the sitting government. Without an independence judicial system, justice for many Zambians, including foreigners, shall remain a much sought after rare commodity.

By Nicholas Bwalya

Zambia’s Newspaper Headlines 26/02/2014

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UPND takes lead in Katuba

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