KCM Tax holiday

The fraudulent manner in which KCM was privatized under president Levy Mwanawasa must be fully investigated and the truth exposed to ensure that remedial measures are undertaken and ensure that any losses that have been suffered are fully recovered.

It may be painful and obviously some people will resist but the truth remains that the manner in which the KCM privatization was under taken by president Levy Mwanawasa should be fully investigated.

The figures do not add up just as the model of privatization has not been explained.

For a start KCM was not sold at US$ 25 million as it has been publicly declared. The US$25 million was supposed to represent subscription to the capital of the mine that gave Vedanta 51 per controlling interest.

Vedanta should also have paid US$16.8 million to ZCCM-IH as compensation for dilution of its shareholding from 42 per cent to 20.6 per cent but unfortunately this money was not paid instead the minister of finance at the time Mr Ng’andu Magande issued a credit note to ZCCM-IH against its government debt.

But what is most scandalous is the tax holiday and concession that government gave to Vedanta.

According to prominent businessman Andrew Sardanis president Mwanawasa gave Vedanta a US$2.5 billion allowing it to carry forward all the tax losses it incurred up to December 2003.

When fully computed the tax holiday meant that Zambia gave away US$2,453,588,000

There is everything wrong in the manner the initial payments were paid or not paid in the acquisition of the mine and secondly there was everything wrong in the manner Konkola was allowed to carry forward the assessed taxes which resulted in the US$ 2.5 billion bonanza.

There is no doubt that for a while the Zambian government faced tremendous difficulties in managing the mines which had been nationalized by UNIP. The country was hemorrhaging up to US$1 million for care and maintenance on plant and equipment that had suffered years of degradation due to under capitalization.

It was necessary therefore that investors were found to relieve the pressure, attract fresh investment and therefore facilitate the resuscitation of the mines.

The subsequent privatization combines with the green filed policy resulted in fresh capital that facilitated a turn round in fortune. The mines turned from being loss making to profit making.

It may be therefore government under president chiluba gave concessions in development agreements that have been subject to considerable debate however this debate fails into insignificance compared to KCM privatization debacle which Mr Sardanis said has been less than transparent.

The government must therefore under a full forensic audit and bring to book those responsible.

At the same time remedial measures must be taken to ensure that any losses suffered are recouped and ridiculous tax concessions nullified forthwith.


Categorized | Editorial

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