Suicidal policies

It is too soon for another confrontation between Government and our foreign investors. SI 33 and 55 are still too fresh to have another bout of unrequited policy differences which may have dire effects on the economy.

The decision by the Energy Regulation Board (ERB) to increase electricity tariffs for mining companies by a hefty 28.8 percent is suicidal.

It is common knowledge that Mines are slowly but steadily shedding labour as operating costs increase while the price of copper has been declining. The Government was forced to intervene in KCM to save jobs in tenuous political agreement that has still to be tested.

What is disturbing is the unilateral nature of decision making which Government seems to be taking very important decisions concerning the economy. Already the Kwacha is sliding mainly because of diminishing investor confidence.

The steady and sustained dilution of “penzanomics” towards more authoritarianism has undermined the enabling environment that was created to attract foreign investment and thereby boost the economy.

Barely two weeks after Government withdrew statutory instruments 33 and 55 that were introduced with very little consultation with industry but ostensibly intended to curb alleged fraud by mining companies,  the new tariff has been introduced without any adequate consultation with the mining industry.

The Mining companies have now asked the Government to review this increase and have warned of dire consequences if this is not done.

This is not an empty warning; they have indicated in no uncertain terms that the 28 percent is unsustainable because they will not be able to absorb the cost which will exert excessive pressure on their operations.

It is very difficult to understand why Government would want to increase the cost of production for the mining industry at a time when copper prices are going down. It is a fact that underground mining has left very little margin for error or indeed profit. The additional costs will undoubtedly push costs even further.

We can almost predict the outcome. Expansion programmes will be shelved, workers will be laid off and some of the mines may even end up on care and maintenance while they remain unprofitable.

The mines are asking for dialogue to ensure that they factor any increases in their operating plans instead of the abrupt increases that have been made without regard to existing contractual obligations.

We have said before and would like to repeat that while brute force may work in the short run they are doomed in the long run where realities and dynamics of the moment will catch up.

The  mining  community is asking for  frank and open dialogue. Insularity will only prolong conflict and animosity.

The Government has to learn the art of dialogue and negotiations. It is not enough to issue edicts and dictates because the laws of business are sometimes immutable and may be breached at a price.

The mines for their problem are the proverbial geese that lay the copper eggs. They should not be subjected to sudden shocks and imbalances which may have long term deleterious effect.

Categorized | Editorial

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