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Debates- Friday, 20th March, 2009
DAILY PARLIAMENTARY DEBATES FOR THE THIRD SESSION OF THE TENTH ASSEMBLY
Friday, 20th March, 2009
The House met at 0900 Hours
[MR SPEAKER in the Chair]
NATIONAL ANTHEM
PRAYER
_____
BUSINESS OF THE HOUSE
The Vice-President and Minister of Justice (Mr Kunda, SC.): Mr Speaker, I rise to give the House some idea of the Business it will consider next week.
On Tuesday, 24th March, 2009, the Business of the House will begin with questions, if there will be any. This will be followed by presentation of Government Bills, if there will be any. The House will then consider the Second Reading stage of the two Bills which were presented to the House on Friday, 27th February, 2009. These are the Excess Expenditure Appropriation (2006) Bill, 2009 and Supplementary Appropriation (2007) Bill, 2009
Thereafter, the House will resolve into Committee of Supply on this Year’s Estimates of Revenue of Expenditure and will continue with consideration of provincial heads of expenditure.
On Wednesday, 25th march, 2009, the Business of the House will start with questions, if there will be any. This will be followed by presentation of Government Bills, if there will be any. After that, the House will consider Private Members’ Motions, if there will be any. The House will also consider the Report of the Committee on Communications, Transport, Works and Supply on the Motion to adopt the Highway Code. The House will then consider the Second Reading stage of the two Bills that were referred to the Committee on Economic Affairs and Labour. These are the One-Stop Border Control Bill, 2009 and Mines and Minerals and Development (Amendment) Bill, 2009.
The House will then resolve into Committee of Supply to continue consideration of provincial heads of expenditure.
On Thursday, 26th March, 2009, the Business of the House will begin with questions, if there will be any. This will be followed by presentation of Government Bills, if there will be any. The House will then proceed with the Committee Stage of the two Bills, namely: the One-Stop Border Control Bill, 2009, and the Mines and Minerals Development (Amendment) Bill, 2009. Thereafter, the House will resolve into Committee of Supply to consider Head 99 − Constitutional and Statutory Expenditure.
Mr Speaker, on Friday, 27th March, 2009, the Business of the House will begin with His Honour the Vice-President’s Question Time. Thereafter, the House will consider questions, if there will be any. This will be followed by presentation of Government Bills, if there will be any. After that, the House will continue with the remaining stages of any Bills that will be before it.
The House will also deal with any other business that may still be outstanding.
Mr Speaker, on this day, all things being equal, I intend to move a Motion to suspend the relevant Standing Orders to enable the House complete all Business on the Order Paper and, thereafter, adjourn sine die.
Mr Speaker, I thank you.
Hon. Members: Hear, hear!
_______
HIS HONOUR THE VICE-PRESIDENT’S QUESTION TIME
STATEMENT ON THE FLOODS SITUATION IN WESTERN PROVINCE IN GENERAL
The Vice-President and Minister of Justice (Mr Kunda, SC.): Mr Speaker, I rise to give an update on the status of the flood situation in Western Province. In addressing this subject, I will begin by updating hon. Members of this House on the scale of the problem and interventions that the Government has put in place, so far, and, then, address the issue of the declaration of the flood situation in Shang’ombo a national disaster.
I wish to open my statement by stating that Western Province has a total number of seven districts, namely: Kaoma, Lukulu, Mongu, Sesheke, Senanga, Kalabo and Shang’ombo. Out of this number, my office, through the Disaster Management and Mitigation Unit (DMMU), has, so far, received reports of high water levels and floods in three districts. These are Lukulu, Kalabo and Shang’ombo.
Mr Speaker, the purpose of differentiating between high water levels and floods is to draw hon. Members of Parliament to the fact that high water level is not synonymous to floods.
It is important for hon. Members of this House to further note that this list is not exhaustive as my office continues to receive reports of high water levels and floods. The House will be informed once we have information from other districts that may be affected by the current heavy rains.
The nation may wish to know that some of the reports received, such as those from Shang’ombo and Kalabo, have been followed up with rapid assessments by our officials from DMMU, in conjunction with our co-operating partners, while the vulnerability and needs assessments are yet to be conducted in the remaining district of Lukulu. To this effect, the Zambia Vulnerability Assessment Committee chaired by DMMU, under my office, will early next week be in Lukulu and other parts of the country (as there are floods affected districts in other provinces) where reports have just been received, but assessments have not yet been conducted.
Mr Speaker, hon. Members of this House may wish to know that the common feature in the reports received from the three districts is that damage to infrastructure like roads, bridges and crops is more pronounced than damage to other sectors except Shang’ombo where there is significant displacement of the human population.
Mr Speaker, I now wish to draw the attention of all hon. Members of this House to the situation obtaining in each of the three affected districts.
Lukulu
Rapid flood impact assessment is to be undertaken next week to inform us of the scale of the problem and the necessary interventions required. The House may further wish to know that even the Provincial Disaster Management Committee has not, for now, determined the scale of the problem and the corresponding needs.
Mr Speaker, hon. Members of this House and the general public need to appreciate the reason why it is necessary for the Government to verify the reports before appropriate interventions are put in place. Most of the reports we get from the districts are suspect in terms of objectivity. For example, the report received from Lukulu District just indicated that the district had been affected by the floods situation, the area around the boma had become worse, one life had been lost and, as such, the district required 150 big tents with their components, 10,000 bottles of chlorine, 2000 by 50 kilogramme bags of white maize, drugs and other medical supplies. The report went further to state that the district had been asking for relief food for three years and that the relief food had not been supplied. For sure, hon. Members of this House, who cannot treat this kind of report with suspicion?
Mr Speaker, it is important for me to inform hon. Members of this House that, in fact, my office had actively and proactively pre-positioned 100 metric tonnes (2000 by 50 kilogramme bags) in the district prior to the onset of the rains. The purpose of this pre-positioning was to ensure that should there be floods and people displaced as it has been reported, the victims should access the maize with ease as it was within their reach.
Kalabo
I wish to inform hon. Members of Parliament that my office, through the DMMU, received reports of Kalabo having been affected by the floods with specific reference to the district’s prison having been flooded. A verification mission was immediately instituted. The findings were that yes, there was evidence of flooding in Kalabo caused by the torrential rainfall experienced by the district this year, coupled with incoming water from Angola through the Luanginga and Lueti rivers. It was further established that the prison had not been flooded as earlier reported except that due to the old age of the structure, there are cracks on the walls which were allowing water to get inside the prison. The problem was further exacerbated by the poor drainage system around the prison building.
The mitigation measures instituted were as follows:
(i) digging of additional open drains to take effluent and storm water off the prison premises;
(ii) reinforcement of prison security with temporal deployment of police officers;
(iii) the prison was decongested by transferring some of the convicts to Mongu Prison as well as moving some of them to the Office of the District Officer-In-Charge as an emergency temporal measure.
Like the case of Lukulu, Kalabo benefited from 100 metric tonnes of maize that was pre-positioned in anticipation of the floods situation in the district.
Hon. PF Member interjected.
Mr Speaker: Order! I will send you out.
May His Honour the Vice-President continue, please?
The Vice-President and Minister of Justice: Mr Speaker, the hon. Members of this House may wish to know that my office is in the process of dispatching maize to the district as the district is one of the twenty-nine districts benefiting from the 2008/09 Relief Food Programme (RFP). Meanwhile, the Government continues to monitor the flood situation in and around the district.
Shang’ombo
For the reasons well known to all of us, Mr Speaker, I will take more time to talk about the flood situation in Shang’ombo.
(a) Scale of the Problem
Upon receiving reports of floods in Shang’ombo, my office immediately partnered with the Zambia Air Force (ZAF) and carried out rapid assessments of the flood situation in the district. The rapid assessment conducted by my office and the co-operating partners established the following:
Shang’ombo District is the worst floods affected district. Three lives have already been lost. Two boys, aged three, died after drowning. The incident happened as the two minors were crossing over from one village to another to play. The two got into deeper flood waters and drowned. This was in February 2009. Another girl aged six died at Lisisi Village in February. The incident happened when the little girl tried to follow the mother to the crop fields. She slipped into deep flood waters and drowned. Hon. Members of Parliament will note that these incidences occurred in February, 2009 when the water levels were relatively lower than the current levels being experienced this month. I also need to emphasise here, through you, Mr Speaker, to the hon. Members of Parliament, that contrary to the earlier media reports, none of these was school going and the number of floods-related deaths recorded in Shang’ombo so far is three, and not four.
Three schools namely; Mutomena and Mambolomoka Basic and Lupuka Primary schools have been closed. The district has been completely cut off from the rest of the country. The stretch of the road connecting Shang’ombo to Sesheke has three wash away points while the embankment that connects Shang’ombo to Senanga has four big wash away points thus effectively making the two roads leading to Shang’ombo impassable.
The assessments have further established that forty-five households have been displaced and are currently in two camps of thirty-four and eleven households, respectively. Kindly note that this figure is tentative as fresh reports indicate that a number of households have started leaving the floods affected areas to upper land such as the former refugee camp at Nangweshi.
(b) Interventions in Shang’ombo
(i) preliminary assessments have been done conducted;
(ii) relief supplies in the form of tents, blankets, mealie-meal, kapenta, beans and medical supplies have been airlifted to the district to help address the plight of the displaced families;
(iii) the operation to reconnect Shang’ombo to the rest of the country through Sesheke/Sitoti/Shang’ombo route by installation of two Bailey bridges at Mboiwa (1) and Mboiwa (2) is under way as a combined team of officers from the DMMU, Zambia Army and Road Development Agency (RDA) has been mobilised and is expected to be on the ground by this evening;
(iv) it is hoped that Shang’ombo District will be reconnected to the rest of the country within the next nine days;
(v) the nation may further wish to know that the works on the Sesheke/Sitoti stretch have already started, utilising the resources (personnel and earth-moving equipment) available in the province. This is being done within the framework of the Western Province Provincial Disaster Management Committee chaired by the Provincial Permanent Secretary. The works by the provincial leadership are meant to prepare the passage of the Bailey bridge components and other inputs to the installation and launch of the two Bailey bridges;
(vi) logistical support in the form of financial resources has also been available to help the provincial team accomplish the task above; and
(vii) the hon. Members of this House may further wish to know that two boats have been sent to Shang’ombo to beef up the district’s logistical capabilities.
Meanwhile, a high level team comprising the Deputy Minister in my office, Deputy Minister in the Ministry of Communications and Transport who, in fact, is the area Member of Parliament of the most affected wards, the Permanent Secretary in charge of administration in my office and the National Co-ordinator at DMMU will leave tomorrow, Saturday, 21st March, 2009 for Kalabo, Senanga and Shang’ombo, as an advance team for an on-spot assessment of the situation.
(c) Issue of Declaration of Floods Situation as a National Disaster
I wish, first of all, to draw the attention of hon. Members of the House on the implication of the declaration of a disaster, it be localised or national.
When any Government, Zambia included, declares a national disaster, the implication is that that particular nation has re-aligned its priorities from developmental programmes. The priority now is to redirect resources budgeted for development to the response effort. This is the reason the declaration of a situation as a national disaster comes as a last option and it only comes when the situation fits into the technical definition of a disaster, that is to say, the losses incurred by a community affected outstrips the ability of the affected community to cope using their own resources. The hon. Members should, therefore, examine the situation on the basis of the following:
(i) Has Shang’ombo, as a district, failed to cope with the situation using its resources only? If the answer is yes, then the next question is:
(ii) Has Western Province failed to cope with the situation using its own resources? If the answer is yes, then the last question is:
(iii) Have we, as a country, Zambia failed to cope with the situation in Shang’ombo? The answer is definitely, no. As I have already addressed under the sub heading (b); the Government has and is still putting in place measures to address the situation in Shang’ombo.
In concluding, I wish to state that the flood situation in Shang’ombo is not, for now, at the scale where we must declare it a national disaster. We will, however, continue to monitor and review the situation.
At this stage, Mr Speaker, I wish to inform hon. Members that – and we held a seminar for hon. Members on disaster management and we were informed that at the moment, the legal framework to deal with disasters is inadequate and that we are trying to prepare grounds for us to present legislation in this House. Mr Speaker, for determination of whether a national disaster should be declared or not, in the current legislation, it is contained in the Food Reserve Act. Under that Act, a national disaster may be declared if certain factors are in place. Currently under our laws, there is no provision for a declaration of a partial disaster and I wish we could hold further seminars with hon. Members for us to appraise them on issues to do with disasters.
Mr Speaker, once we put in place a new law which we are working on to ensure that, it will be possible then to address any kind of situation, be it declaration of a partial disaster or a national disaster.
Mr Speaker, on the issue of the general floods response resource availability, I wish to submit to the hon. Members of this august House as follows: The Government, through my office and the line ministries, has strategic response capabilities in the form of food and non-food items such as skilled personnel, tents, blankets, industrial water pumps, water purification equipment, medical supplies and relief food materials to name a few. We are convinced, Mr Speaker, that with these resources, the Government with its in-country co-operating partners, is able to handle the current level of flooding in the country. Should need arise to appeal to our external co-operating partners, depending on the situation, the Government will not hesitate to do so especially that our National Disaster Management Policy is very clear on the fact that disaster management is the responsibility of everyone.
I also wish to say, and I did announce in this august House, that the Ministry of Finance and National Planning recently released a sum of K17 billion to enable us deal with any flood or emergency situation.
In conclusion, Mr Speaker, I wish to assure the hon. Members of this House and, through them, the general public that the Government will continue to review the floods situation in Western Province and the rest of the country.
I thank you, Mr Speaker.
Mr Speaker: His Honour the Vice-President’s Question Time continues.
Mr Mukanga (Kantanshi): Mr Speaker, I would like to find out from His Honour the Vice-President and Minister of Justice on what has happened to the committee which was mandated to have Dag Hammarskjöld repaired or built. This committee had fundraised a lot of money but nothing has been done and the site is still as it was.
The Vice-President and Minister of Justice: Mr Speaker, that committee goes back to the 1980’s. We will try to get a report on the current situation because that was a private committee outside the Government.
I thank you, Mr Speaker.
Mr Matongo (Pemba): Mr Speaker, the cattle restocking exercise in Pemba, and in the Southern Province generally, which started a few years ago, seems to have stalled or, in fact, stopped. What has happened to the money and, if it is still continuing, when shall we see cattle being given to the vulnerable groups in the province and in Pemba in particular?
The Vice-President and Minister of Justice: Mr Speaker, money for cattle restocking, I know for Central Province, for example is channelled through the provincial office. In your case, of course, you can make some inquiries there but this is another issue. We budget for this through the provincial administration. If there are any inadequacies or no budget allocation, then it is not there, but representations can still be made because it is important that these programmes continue.
I thank you, Sir.{mospagebreak}
Mr Mbewe (Chadiza): Mr Speaker, in the Zambian society, there is an increase of immorality. What is the Government doing to curb the homosexuality which is on the increase in Zambia?
Laughter
The Vice-President and Minister of Justice: Mr Speaker that is a very important question.
Laughter
The Vice-President and Minister of Justice: Mr Speaker, Zambia is a Christian nation and it shall continue to be so because it is part of our Constitution. In this august House, in 2005, we passed very stiff laws against homosexuality and the issue of people having carnal knowledge against the order of nature.
Mr Speaker, we have prescribed imprisonment of not less than fifteen years for homosexuality but, of course, if there are certain aggravating factors under that law and if you have carnal knowledge of an animal, it is a minimum of twenty-five years. If you have carnal knowledge of a child, it is twenty-five years.
Mr Speaker, I know that there are some prominent people in society who are involved in these vices. Some could even be lawyers, engineers or journalists.
Laughter
The Vice-President and Minister of Justice: They are borrowing these foreign practices from outside the country. If you have any information, …
Laughter
The Vice-President and Minister of Justice: … please, let us know so that we can deal with such culprits.
Laughter
The Vice-President and Minister of Justice: There are some people, Sir, who are bi-sexual. They marry to cover their activities …
Laughter
The Vice-President and Minister of Justice: … but at the end of the day we know them.
Laughter
The Vice-President and Minister of Justice: Mr Speaker, homosexuality is a very bad thing.
Laughter
The Vice-President and Minister of Justice: As Members of Parliament, we should all come together to fight homosexuality.
I thank you, Sir.
Laughter
Mr L. J. Ngoma (Sinda): Mr Speaker, I would like to find out from His Honour the Vice-President, as they are intensifying the fight against corruption in this country, when - I am sure this question has been asked on several occasions - the Task Force on Corruption will be legislated so that should we have probably a change of Government, people do not suffer the consequences of running an entity which would be deemed illegal.
The Vice-President and Minister of Justice: Mr Speaker, as I earlier announced in this august House, we have adopted the National Anti-Corruption Policy. The purpose of this policy is for us to realign the fight against corruption. We will look at which institutions are relevant in the fight against corruption. The Anti-Corruption Commission (ACC) will be strengthened as the lead institution in the fight against corruption.
The Task Force on Corruption was established with a limited mandate to deal with crimes which occurred between 1991 and 2001. It is almost concluding its functions and it has executed its mandate. So, Cabinet will decide what to do with it. We are also looking into the possibility of creating specialisation in the ACC so that any work concerning corruption can be done there. We are also looking at the possibility of establishing a financial intelligence unit so that all these sophisticated criminals, who have sprung up in our society and feasting on public funds and things like that …
Laughter
Hon. Opposition Member: Feast?
The Vice-President and Minister of Justice: … can be brought to book. So, the Government will make a decision on that issue. However, we have no intention of legislating parallel institutions to the ACC. If co-operating partners want to help us, then let us strengthen the ACC by employing lawyers there and pay them well. Let us also engage experts and create specialisation so that they can fight sophisticated crime, including corruption.
I thank you, Sir.
Dr Scott (Lusaka Central): Mr Speaker, in this morning’s The Post, under the head line, “Food Reserve Agency (FRA) Reduces Maize Subsidies to Millers”, it is reported that the Government has spent K351 billion subsidising maize to millers in order to subsidise mealie-meal. Is the Vice-President satisfied that this has, in truth, been spent and it has had the desired effect since mealie-meal in Lusaka is around K60,000 and on the Copperbelt is around K80,000? People are putting their thumbs in ink and producing their national registration cards, as if they are voting, in order to get a bag of mealie-meal. Is he satisfied and how does he see the situation evolve as these subsidies are removed?
The Vice-President and Minister of Justice: Mr Speaker, there is need, of course, to review the way we are subsidising some of these commodities. There is a lot of speculation in issues to do with maize. Some of the people, indeed, were subsidising and that is the true position, but because the mealie-meal price has become so cheap, some people found it easy, then, to speculate and make a profit out of the Government’s subsidised maize. So, we will keep reviewing the situation and we will look into ways and means of controlling the skyrocketing prices which are as a result of speculation.
I thank you, Sir.
Mr Chisanga (Mkushi South): Mr Speaker, …
His Honour the Vice-President’s Question Time expired.
Laughter
_______
QUESTIONS FOR ORAL ANSWER
2011 ALL AFRICA GAMES
200. Mr D. Mwila (Chipili) asked the Minister of Sport, Youth and Child Development:
(a) Why the Government withdrew from hosting the 2011 All Africa Games;
(b) how much money had been spent on infrastructure that was being constructed for the All Africa Games;
(c) what would happen to the structures under construction; and
(d) what penalty would be imposed on Zambia for the failure to host the 2011 All Africa Games.
The Deputy Minister of Sport, Youth and Child Development (Dr Kalila): Mr Speaker, the Government, through my ministry, wishes to inform this august House that the 2011 All Africa Games could not be hosted due to the following reasons:
(i) The country is in the process of producing a new constitution and, therefore, the National Constitutional Conference has to be funded in order to have a new constitution in place before the 2011 Presidential, Parliamentary and Local Government elections;
(ii) The country will in 2010 hold a national census which will require a lot of resources;
(iii) The untimely death of our President, His Excellency, Dr Levy Patrick Mwanawasa SC, May His Soul Rest In Peace, led to huge resources being spent in honour of his State funeral. This affected the budget for preparations to the All Africa Games that were to be hosted, taking into account the cost of holding Presidential by-elections that were also not expected; and
(iv) The global financial crisis has affected the country through job losses …
Hon. Opposition Members: Aah! Ni boza.
Dr Kalila: … due to closure of companies especially the copper mines. As you might be aware Zambia’s economy is heavily reliant on copper. The Government has in turn decided to direct its resources to food security programmes to assist in the food shortage problem in the country that is also part of the credit crunch.
Mr Speaker, with regard to part (b) of the question, my ministry is pleased to inform this august House that K25,800,000,000 was released for infrastructure development in relation to the cancelled 2011 All Africa Games that was to be hosted by Zambia. K25,627,000,000 was spent on infrastructure development programmes leaving a balance of K173,000,000.
Mr Speaker, my ministry wishes to report that for the structures under construction which were earmarked of use during the 2011 All Africa Games, construction will continue as long as funding is released for the completion of these structures. These structures are at the National Institute of Public Administration (NIPA), Natural Resources Development College (NRDC), Evelyn Hone College and the University of Zambia.
Mr Speaker, lastly, my ministry wishes to report that the Supreme Council for Sport in Africa executive will hold its meeting in April this year. The purpose of the meeting will be to discuss Zambia’s withdraw from the games and decide on the action to be taken on Zambia’s withdrawal from hosting these games, if any. The outcome of the discussions will be availed to this Parliament.
I thank you, Sir.
Dr Kalila left his microphone on.
Mr Speaker: Switch off your microphone.
Mr D. Mwila: Mr Speaker, the All Africa Games governing body had advised the Government that Zambia had no capacity to host the 2011 All Africa Games but this Government did not heed that advice. Would the hon. Minister inform this House why we did not take that advice?
The Minister of Sport, Youth and Child Development (Mr Chipungu): Mr Speaker, my ministry is not aware of the advice the hon. Member is talking about.
Mr D. Mwila: Aah!
Mr Chipungu: In any case, there are eventualities like this one in any plans.
Mr Speaker, I thank you.
Colonel Chanda (Kanyama): Mr Speaker, I thank you for giving me this rare opportunity to ask a question. I find it extremely embarrassing that we have a Government that can accept responsibility to host a very important …
Mr Speaker: Hon. Member, you are debating. What is your question?
Colonel Chanda: Mr Speaker, my question is why is Zambia finding it difficult to host this function given the reasons that have been cited by the hon. Minister when other countries like Angola and South Africa that are also experiencing the same difficulties are able to host these major functions?
Interruptions
Mr Speaker: Order!
Mr Chipungu: Mr Speaker, I cannot speak for the Angolan Government, but I think for the Zambian Government the reasons are very clear as outlined by my hon. Deputy Minister.
I thank you, Mr Speaker.
Mrs Phiri (Munali): Mr Speaker, I would like to find out from this Government when it is going to stop using the death of the late President as an excuse for failing to host the 2011 All Africa Games because we were told that France paid the medical bills and bought the casket for the late President. Even well wishers contributed towards the funeral expenses. When is the Government going to stop using his name to embarrass this country?
Hon. Opposition Members: Hear, hear!
Mr Chipungu: Mr Speaker, we will never stop as long as it remains one of the reasons for not being able to host the 2011 All Africa Games.
I thank you, Mr Speaker.
Mr Bwalya (Chifubu): Mr Speaker, I would like to find out from the hon. Minister if the Local Organising Committee has been dissolved. If so, what will the Government do with the staff that signed contracts with the committee?
Mr Chipungu: Mr Speaker, yes, the committee has been dissolved and the issue of the assets of this organisation and its members of staff is being looked into by my ministry.
I thank you, Mr Speaker.
Hon. Opposition Member: Aah!
Mr Chipungu: Well, if you know the answer, do not ask.
Laughter
Mr Speaker: Order! The hon. Minister should be patient.
Laughter
Mr Lubinda (Kabwata): Mr Speaker, the Local Organising Committee invited a number of business people from the private sector to offer places to accommodate athletes. Upon such offers, a number of these private operators went into expansion programmes using borrowed finance. Now that the All Africa Games will not take place here after these private investors have committed themselves to huge loans which are very expensive, who is going to compensate them in view of the fact that the capacity they have built shall supersede the demand because of this country’s failure to host the 2011 All Africa Games?
Mr Chipungu: Mr Speaker, unfortunately, in business there are risks …
Hon. Government Members: Hear, hear!
Mr Chipungu: … and, therefore, it is entirely upon the business entities that undertook those expansions to see what they can do about that.
I thank you, Mr Speaker.
Laughter
Dr Machungwa (Luapula): Sir, this is the second time that Zambia has had to withdraw from hosting continental games. The first time it is was the Africa Cup and now it is the All Africa Games. Can the hon. Minister tell us if Zambia will probably never offer to host such games because we do not seem to have the capacity and we have had to withdraw each time we have tried?
Mr Chipungu: Mr Speaker, I cannot offer to say so. If there will be an improvement in the economy, obviously, Zambia may consider hosting an international tournament.
I thank you, Mr Speaker.
Mr Mukanga (Kantanshi): Mr Speaker, I would like to find out from the hon. Minister what benefits we have foregone as a nation by making this withdrawal.
Mr Chipungu: Mr Speaker, I am not too sure. I suppose the business community would actually say what opportunities have been foregone but I am not in a position do so.
I thank you, Mr Speaker.
Mr Chimbaka (Bahati): Mr Speaker, may I find from the Government whether an economic assessment has been made to find out whether there would have been benefits or not if Zambia had hosted the All Africa Games.
Mr Chipungu: Mr Speaker, I am sure this is almost the same question that was asked by another hon. Member.
I thank you, Mr Speaker.
REHABILITATION OF NDONDA DAM
201. Mr C. K. B. Banda, SC (Chasefu) asked the Minister of Agriculture and Co-operatives when the Government would rehabilitate the Ndonda Dam in Chief Kapichila’s area which was non-functional due to poor workmanship by the contractor in 2007.
Interruptions
Mr Speaker: Order!
The Minister of Agriculture and Co-operatives (Dr Chituwo): Mr Speaker, the Ministry of Agriculture and Co-operatives rehabilitated Ndonda Dam in Chief Kapichila’s area, Lundazi District, in 2006 using the Zambia National Service that was the contractor and was supervised by the ministry through the Technical Services Branch (TSB).
The current status is that since 2006, the dam has been holding adequate water for domestic use, livestock, fish and crop production. An irrigation scheme on the dam site with land of approximately 2.8 hectares was established in 2007.
I thank you, Mr Speaker.
Mr C. K. B. Banda, SC: Mr Speaker, in view of the fact that the area hon. Member of Parliament has evidence on the condition of the dam, would the ministry be prepared to undertake a trip with the hon. Member of Parliament to ascertain the actual position, which is not what has been portrayed?
Dr Chituwo: Mr Speaker, we have no difficulties in undertaking such a trip because the information we have is from our staff in the area which the hon. Member represents.
I thank you, Mr Speaker.
Mr D. Mwila: Mr Speaker, I would like to find out from the hon. Minister whether, after the completion of the rehabilitation, there was a check by his officers to confirm that the job had been completed fully.
Dr Chituwo: Mr Speaker, obviously the answer is yes, because this has been in operation.
I thank you, Sir.
__________
BILLS
SECOND READING
THE INCOME TAX (Amendment) BILL, 2009
The Minister of Finance and National Planning (Dr Musokotwane): Mr Speaker, I beg to move that the Bill be now read a second time.
Dr Musokotwane: Mr Speaker, the Bill before the House is seeking to revise the taxation of personal income tax in order to mitigate against the effects of inflation. Sir, inflation in this country is still relatively high and this erodes the purchasing power. The tax policy for 2009 is to give some relief on Pay-As-You-Earn (PAYE) by increasing the tax-free income threshold from K7,200,000 to K8,400,000 per annum.
Other changes under personal income tax include the upward adjustments of the exempt portion of terminal benefits and in tax credit for differently-abled persons. The other relief related to personal income tax is the change in the taxation of qualifying gratuity from basing it on the PAYE system to the new proposed system of taxing it on the same principle as terminal benefits.
The Government would have wished to provide better relief under personal income tax, but it is constrained by the prevailing economic environment.
Mr Speaker, the Bill is also seeking to increase the tax rate for advance income tax from 3 per cent to 6 per cent so as to encourage voluntary registration and improve compliance.
Sir, in 2007, the Government introduced an advance income tax on commercial imports by non-registered traders in order to encourage them to register for income tax and value added tax (VAT). After implementing this measure for one year, the evidence suggests that at 3 per cent advance income tax is still not high enough to compel these non-registered traders to register and start paying turnover tax.
Mr Speaker, the Government is concerned about the power shortage in the country and wishes to encourage investment in this sector in order to avert the problems. The changes proposed in this Bill seek to increase the period for carry forward of losses from five years to ten years as an incentive in order to stimulate investment in hydro and thermal power generation.
Mr Speaker, with regard to taxation in the mining sector, the Government is concerned about the problems mining companies are facing, particularly in the wake of the global financial melt down. The Government has proposed to revise the tax regime for the mining sector once again and, among other things, we have proposed to do away with the windfall tax. We strongly think that the variable profit tax will still capture any extra monies from the mining companies that the windfall tax would otherwise capture.
Other proposed changes to the tax regime for the mining sector include making hedging income arising from mining operations to be part of mining income for income tax purposes. This will particularly help the new mines who entered into hedging arrangements with the financiers to protect their sources of funds needed for the payments of loans. The Bill has also proposed to increase the capital allowance rate for persons carrying on mining operations as an investment incentive that will contribute to making mining a viable sector.
Mr Speaker, I beg to move.
Hon. Government Members: Hear, hear!
Mr Imenda (Lukulu East): Mr Speaker, let me begin by expressing my gratitude for this opportunity to brief the House on the discussions undertaken by your Committee with regard to the Income Tax (Amendment) Bill No. 1 of 2009.
Mr Speaker, let me briefly outline the salient issues that your Committee encountered during the deliberations.
Mr Speaker, some tax relief is being ordered under the Income Tax (Amendment) Bill to individual income tax payers by adjusting the income tax bands so that the tax-free portion can be raised by about 17 per cent. However, the current rate of inflation of about 16.6 per cent cancels out this relief.
Sir, your Committee totally agree with the assertion that the budget failed to relate the cost of living to the tax exemption that has been provided to individual tax payers. It is clear that little consideration was given to the minimum amount required to meet the basic needs of a poor family in Zambia.
Your Committee argue that in establishing the tax exempt threshold, cognisance must be taken of the fact that the individual tax payer will bear the burden of paying 26.4 per cent of tax revenue compared with 10.8 per cent from the corporate sector and 1.4 per cent as mineral royalty tax. This raises serious questions of equity. They further call for a review of the tax exempt threshold in order to give meaningful relief to the Zambian worker by ensuring that the levels of tax free income, as provided by personal exemptions and deductions, should be above the poverty line at the cost of the living based on the cost of essential food items and non-food items for a family of six in Zambia is currently around K1.5 million per month. Under the Income Tax (Amendment) Bill, there is also tax relief proposed for various other types of income. However, these will, at best, result in marginal relief.
Sir, as regards concessions for the mining sector, your Committee observe that the fiscal regime that was created for the mining sector has been too generous for any investors and has not adequately protected the country’s interest and, thus, it is worrying that the Government is proposing to extend further concessions to the mining sector in the 2009 Budget. In fact, it appears that the mining industry appears to have been singled out for special favourable treatment in the 2009 Budget.
Hon. Opposition Member: Hear, hear!
Mr Imenda: While appreciating the important role that industry plays in the Zambian economy, your Committee reiterate that for a country that has proclaimed itself to be in a hurry to diversify, it is imprudent to continue to offer such substantial incentives to the very sector from which it seeks to diversify. Specifically, your Committee are concerned about the proposal to abolish windfall tax. This is even more worrying in the light of the fact that the capacity of the Zambia Revenue Authority (ZRA) to monitor mining transactions for the purpose of ensuring tax legislation is still not well developed while the mining companies have well developed and sophisticated operations methods. Your Committee’s position is strengthened by the fact that the Secretary to the Treasury conceded that the Ministry of Finance and National Planning did not know the actual cost of production of a pound of copper and has since engaged a consultant to undertake a study of three mines which have high, medium and low production cost profiles respectively.
In the same vein, without knowing the cost profiles, your Committee wonder whether the Government is still able to effectively evaluate the genuineness of claims by the mining companies to the effect that the mines are unprofitable at prevailing metal price levels and that there is need to place them on care and maintenance. Further, your Committee feel that since windfall tax is self-adjusting, it does not place an extra burden on the mining companies during times when the metal prices are below the threshold at which it becomes applicable as is presently the case.
Your Committee are also mindful and confident of the fact that the copper prices will certainly rebound in the next few years and Zambia will still need to benefit from such a price boom. It appears, to your Committee, that the mining companies wish to secure their future benefits once the copper prices rise and that is why we wish that windfall tax should not be abolished.
As regards the argument that there is an overlap between the Variable Profits Tax and windfall tax, your Committee wish to state that they do not believe this to be the case since the tax elements and the trigger points are different from the two tax types.
Your Committee, also, have not heard of any other major mineral producing country in the world dropping windfall tax simply because metal prices are depressed. In the light of these observations, your Committee strongly recommend that windfall tax Bill be retained even though it will be in the redundant state until the metal prices improve.
As regards contention that the windfall tax is punitive, your Committee recommend that the tax should be reviewed to make the threshold less punitive and it should be made deductible for the corporate tax purposes. Whatever the case, windfall tax should not be abolished but kept in abeyance.
Hon. Opposition Members: Hear, hear!
Mr Imenda: Similarly, Mr Speaker, your Committee are concerned about the proposal by the Government to allow hedging income to be part of the mining income for tax purposes. Hedging is a risk management mechanism. It is a complex and speculative arrangement involving at least two transactions and the use of complicated financial instruments known as the derivatives. The two most common forms are options and futures. It is even more complex in the covers of hedging drawn in a tax haven jurisdiction.
Furthermore, your Committee note that, as pointed out in the 2008 Speech, hedging is not a mining activity, hence there is no jurisdiction for the income derived from this activity to be treated as mining income. In fact, your Committee argue that this proposal, if implemented, may create serious discrimination and conflicts as other businesses undertaking hedging may also want to be treated in the same fashion. In addition, this proposal will subject Zambia’s tax base to speculation which, as history has taught us, cannot be relied upon.
Hon. Opposition Member: Hear, hear!
Mr Imenda: In tax designing, the tax base must be clearly defined for the avoidance of doubt, misinterpretation, non-arms length dealings and possible tax evasion. Since hedging is a complex transaction, the administrative costs involved in monitoring, assessing and final remittance processes are likely to outweigh the benefits. Your Committee fear that without proper monitoring, the practice of transfer pricing will result in Zambia getting minimal revenue out of the mining industry. In effect, this provision seeks to restore the position in the development agreements which this House and all Zambians agree was to the detriment of this country. For these reasons and those outlined above with regard to the capacity of the ZRA, your Committee do not support the proposal to allow hedging income to be part of mining income...
Hon. Opposition Member: Hear, hear!
Mr Imenda: … for tax purposes and we call for the withdrawal of this measure.
As regards other incentives offered to the mining industry, your Committee appreciate the need for the Government to assist the sector to survive the current worldwide depression by easing their cash flow problems through various fiscal instruments. However, your Committee urge the Government to exercise maximum caution in this endeavour and not succumb to unjustified pressure from the mining companies. More importantly, the Government must keep sight of its broader long-term economic goals in its dealings with the mining sector and the economy as a whole. In this regard, it is important for the Government to ensure that the incentives offered to the mining sector will not compromise mining development and local manufacturing sector. By the same token, it is hoped that mining companies will not continue to hold the Government to ransom as has been witnessed with the impending closures of some of the mines or placement of others on care and maintenance with consequent losses of jobs for the Zambian people.
Mr Speaker, I thank you.
Hon. Members: Hear, hear!
Mr Muyanda (Sinazongwe): Mr Speaker, I rise to seriously debate this Bill and advise the Government. The principal source of revenue for this Government is through tax and the mines should not go under the cover that the price of copper has fallen and, therefore, windfall tax should be withdrawn.
Sir, where will this Government find the money? It is only through PAYE that this Government has raised funds. There is a shortfall in this Budget. Why should we let the mining companies get away with it? One of the reasons the mining companies are holding this Government to ransom is that they have invested in the mining sector without training manpower. At the moment, there are no training schools.
Hon. Opposition Members: Hear, hear!{mospagebreak}
Mr Muyanda: When the Copper Industry Service Bureau was in operation in Kitwe, schools for miners were established starting from Sinazongwe when it was National Coal Board. All the mines, including Nkana and Nchanga, had schools. However, the present investors do not have training schools.
Mr Speaker, I am not speaking from without. We have Callum Mine in Sinazongwe which has been closed down on account of constant accidents underground. Much as we appreciate that this country is desperate for resources, the investors in Callum Mine in Sinazeze have failed this Government and the people of Zambia. Over ten people died underground. They do not have mine captains or shift bosses. They do not even know how to shutter underground. That is basic work. How do you get coal underground without trained manpower? It is only when one or two Chinese miners died underground, as a result of using unconventional methods of mining, that the Government woke up and closed down the mine. They do not care about the Zambian lives and yet they are hiding behind the high cost of mining.
Mr Speaker, it is common business knowledge that it takes money to make money. The investors should not simply come into Zambia and hope to dig copper with hands and expect high returns. It is not possible. They should invest in modern technical equipment to blast, survey and move the ore from underground. You need skilled manpower to move the coal.
Mr Speaker, some investors have come to merely milk without feeding the cow that they milk. I appeal to this Government to think twice about passing this Bill and withdraw it.
Hon. Opposition Members: Hear, hear!
Mr Muyanda: It is prudent and timely. There is nothing to be ashamed of because it is in the interest of Zambia and the Zambians who will be denied tax from the mines.
Mr Speaker, the mining sector is this country’s major industry. We have failed to manage the tourism sector in comparison with Botswana, Kenya and other countries. We must admit failure. When we fail to manage these industries, let us be bold enough to admit failure and take corrective measures.
Mr Speaker, if we rely on Variable Tax, what guarantee do we have that the mining companies will come out with honest production costs and ultimately pay genuine tax to the people of Zambia? Variable Tax provides a loophole for any tax payer through the declaration of less profits and consequently less income. Ultimately, we shall fail to develop this country due to being short of revenue.
Mr Speaker, the nation desperately needs money from its natural resources. The only resource that Zambia has at the moment which should be exploited is copper.
Mr Speaker, we are grappling with agriculture. We are failing to export beef when Botswana is doing so. We have failed basic disease control. How many years have we been independent? We cannot export beef to neighbouring countries that desperately need it and yet we have cattle. However, we cannot do that because of the Foot and Mouth Disease. The Government could raise income through tax revenues from the export of beef. Botswana is surviving well on the export of beef. Namibia has a meat corporation. A tiny country which is in the desert is doing very well. What about us who are not in the desert? The grass is there for our cows to graze. However, because there was a previous Government which used to say that “they are just cows. What about the cows? Leave them alone”, there is no development.
In cattle, there is more than just cows. There is beef and they provide protein, milk, hides and glue. You can also use cattle to improve your agriculture through the use of ox-drawn power. You can get manure to produce organic foods. It is a variety of products from cattle. When we fail because of ignorance, we should embrace constructive criticism.
Mr Speaker, the Southern and Western provinces are critical because they can help provide other sources of revenue.
Dr Kalumba: Hear, hear!
Mr Muyanda: The hon. Member of Parliament who is shouting “Hear, hear!” is a witness. We inducted him into livestock management. Today, Luapula Province has Brahmans.
Dr Kalumba: Hear, hear!
Mr Muyanda: He cannot deny that. The Luapula Province is another potential where this Government can gain tax revenue …
Hon. Members: Hear, hear!
Mr Muyanda: … instead of looking to tax men and the mining investors who are not telling us the truth. Let us not let them get away with it. My humble appeal to the highly learned doctor and Minister of Finance and National Planning and His Honour the Vice-President is to heed the advice to withdraw this Bill and revisit it.
I thank you, Mr Speaker.
Mr Milupi (Luena): Mr Speaker, I thank you for the opportunity to debate on the Income Tax (Amendment) Bill.
Mr Speaker, I have been consistent on this subject. The Bill is in two parts. One deals with PAYE, which I have no problems with, even though the thresholds could have been higher than they are, and the other which deals with the mining tax regime which I have problems with. It is bad for both this country and the Government.
Mr Speaker, the mining tax regime was brought into effect last year after serious consultations with stakeholders, including hon. Members of this House. The consultations also included chiefs. It is, therefore, surprising that hardly a year after the then President succumbed to pressure and was applauded by all sides of this House and outsiders, including the donor communities and the Church. It was on that basis that this country was going to get resources to diversify the economy.
Mr Speaker, the outside world applauded this country and Zambia was given as an example of a country that was taking serious steps to make sure that its natural resources were shared to its benefit. The country that was used to show it was not happening like that was Ghana. This appeared in international publications.
Mr Speaker, the economic crisis in the world is real. As a country, we must have the means to analyse what is happening in the world and its impact on our country before we take long-term measures. There are ways in which countries can react to crises. In this particular case, this country should have known that fact because it has been mining copper and other minerals since 1932.
Mr Sing’ombe: Hear, hear!
Mr Milupi: Those that have carried out studies will tell you that the prices of copper have been cyclical. In other words, they go up and down. This is why, because of this recession, there is a drop in copper prices, but I am as sure as surely as the sun rises from the east and sets in the west, they will go up.
Mr Sing’ombe: Hear, hear!
Mr Milupi: That is a phenomenon that is known. Those that do not want to know can consult Hon. Chota who spent many years on the marketing side of copper. He will tell you that copper price is cyclical.
Major Chizhyuka: Hear, hear!
Mr Milupi: Mr Speaker, when we look at the tax regime as it is being proposed now, where we intend to remove windfall tax and replace it with variable profit tax, I have a few things to say about it. As I have always said before in this House, that, as far as I and many other people are concerned, is a wrong move.
Hon. Opposition Members: Hear, hear!
Mr Milupi: This is what those from the donor community are saying. They find it absurd that they should continue supporting this country using their tax payers’ money when our own money is being taken to Canada, India and other places through the transfer of resources from this country.
Mr Lubinda: Shame!
Mr Sing’ombe: And China!
Mr Milupi: And China, of course.
I cannot understand why this Government has allowed itself to succumb to pressure from the mining companies. Therefore, let us analyse what variable profit tax means. variable profit tax is a scheme that was sought out by a Mr Phillips at the International Monetary Fund (IMF). It is recognised world over that it is good for high cost producers. That is a fact.
Sir, the reason we privatised the mining industry in Zambia was because the Zambia Consolidated Copper Mines (ZCCM) was assumed to be a high cost producer. At the time, they were producing copper at US $1 per pound or equivalent to US $2,200 per tonne. We had to hand over as they were producing copper at a high cost because they had a lot of Government responsibilities to undertake. These were schools, sports, roads, hospitals and many others. That is the reason we privatised ZCCM so that low cost producers could come in and run our mining industry. They came. Why then, are we introducing a tax regime that favours low cost producers? The people that we have brought in have come with new technology and all sorts of things. This is the reason we should expect low cost of production.
Sir, secondly, in as far as variable profit tax is concerned, the mining companies would, as I have said on the Floor of this House, sectionalise their operations into various companies.
Each company will be assigned a strategic profit level to ensure that what remains in Zambia, which will be the mining operation, will have a lesser profit margin than the 8 per cent at which the variable profit tax kicks in. Thus, you will have a mining company that deals in shipment, refinery, smelting and concentrating. All these will have profit margins that will ensure that the core business will have left a profit less than the 8 per cent being proposed.
Major Chizhyuka: Hear, hear!
Mr Milupi: Mr Speaker, with respect to windfall tax which has been removed, it was recognised world over to be a good tax for high prices. It is also advantageous to have this tax because it is easy to administer. That is what the world knows especially in a country which is not sophisticated like Zambia. windfall tax is easier to administer, especially when you are dealing with mining companies that are sophisticated, because it is based on the price.
Sir, I have heard it said elsewhere that this does not take into account the incremental cost of production. Before, I came to this House, I had been in the mining industry for thirty years and I served at very high levels. I can say that in this windfall tax, there is no incremental production cost when the price goes very high.
Mr Sing’ombe: Tell them!
Mr Milupi: I was General Manager and Acting Technical Director in ZCCM.
Hon. Opposition Members: Hear, hear!
Mr Milupi: Mr Speaker, when we have a crisis such as the one we are facing in this country, the way the windfall tax …
Mr Sing’ombe: Ausika utwa!
Mr Milupi: … was structured by this Government was that it would kick in at US $2.50 per pound and this is how it is normally structured. You have to look at the average cost in the country and then double it to allow a point at which it kicks in. It was adequate at US $2.50. In case we wanted to give concessions to our partners, the mining companies, I would have been comfortable, for example, if it had been adjusted to US$3. Give them US $1.50 as an average cost of production in this country. It would still have been very high. I have evidence that certain companies are producing at US $1.40 or US $1.30. Some are even producing at US $1 per pound.
Sir, secondly, if we wanted to be kind to our partners we could have put a time limit. You do not abolish it. By bringing this law, you are abolishing it forever. The price of copper at the London Metal Exchange, today, is US $3,700 per tonne. It is going up.
Hon. Opposition Members: Hear, hear!
Mr Milupi: If you look at the fiscal measures, stimulus packages that Americans, Europeans and Chinese are putting place, it shows that this recession will not be long lasting. In the next twelve to eighteen months, this world will begin to pick up again. Where shall we be in terms of this windfall tax when we are abolishing the law now?
Hon. Opposition Members: Hear, hear!
Mr Milupi: Mr Speaker, the final point that I want to touch on is hedging. When Hon. Magande came to this House, last year, he recognised what is being recognised the world over, that the hedging business is difficult.
In a number of European countries, it is not recognised. In the Magande regime, hedging was taken as separate business so that the losses and gains could then be aggregated and whatever came up could then be taxed. What this law is asking us to do is to take hedging as part of the mining operations. It is not done anywhere else in the world.
Hon. Opposition Members: Hear, hear!
Mr Milupi: Where it has happened, this is what follows. You are dealing with sophisticated mining companies. You should ask Hon. Chota about the losses arising out of hedging because he was dealing with these matters. The losses would be reported in Zambia for tax purposes and any gains that would arise from hedging would not be reported here but in other countries. All the way, it is a loss for Zambia. It is not too late. I urge this Government to reflect very seriously on these matters. They are disadvantaging this country. They are removing the only possible source of revenue that we can get from our diminishing resources. All that we shall end up with, if we continue with strategies like this, will be big holes in our grounds.
Sir, the copper shall be gone. We shall not have the resources to diversify into agriculture and into other areas. If we are living at a very low income threshold, the aim to be a medium income country by 2030 is a pipedream, especially, if we are giving away resources like this and allowing the investors to slip through our fingers. In times of disasters such as floods, just like His Honour the Vice-President mentioned, we cannot even effectively deal with the situation because the resources that we could have to deal with things like that could have been taken away.
Sir, you have an opportunity to ensure that the interests of this country are looked after. How is it that even after the hon. Minister in his speech gave these concessions, hardly a month later, a company could come here and say that they were going to close Mufulira Mine and put Nkana Mine South Ore body, Central Shaft and Mindolo Shaft under care and maintenance? What sort of people are you dealing with? We should be serious. Let us look after the interests of this country and our own people. Let us seek to benefit from our resources.
I thank you, Mr Speaker.
Mr Sing’ombe: Muleumfwa!
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa (Katuba): Mr Speaker, I want to commend your Committee for a job well done.
Hon. Members: Hear, hear!
Mr Shakafuswa: Mr Speaker, Zambia’s economy is very small and it is operating at only about US$9 billion. For the Government to sustain its operations with that economy, it has to put in revenue measures.
Mr Speaker, Zambia is endowed with natural resources. You will find that these natural resources do not correspond with the economic activities and income that this country has. The reason is that we have opened up our country to so-called investors who, at the end of the day, gain at the expense of our nation. They also gain at the expense of this country having moneys which we need for developmental purposes.
Mr Speaker, when we brought in the windfall tax regimes, it was a way of giving relief to our people who finance the running of the Government through PAYE. If this regime had succeeded, it could have stopped dependency on taxing our people for Government operations. I will not blame the Government for coming up with this measure to do away with the windfall tax because I know that the new people did not understand the mathematics behind it.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: Mr Speaker, we sent a highly qualified team to America, India, Norway and parts of Africa to ascertain practices happening elsewhere. We found that Zambia was endowed with natural resources but people were not benefiting from these resources.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: Why do we not find a way of benefiting from our natural resources? Why should we be poor in a land of plenty? That was the basis on which we sent a team of fifteen professionals, drawn from all ministries and walks of life.
Mr Munaile: That is the language.
Mr Shakafuswa: After about a year of study, this team came back with a report. They found that the global cost of production in the world was about £1.25 per tonne. That was what was globally obtaining. In Zambia, we have to be very careful. We might be kind to these so-called investors in the mining industry. They got the mines at almost nothing but within a year, they got back the money they bought the mines at. Within a year, they were able to get back the cost of what they had invested in these mines. These investors should not take the Government and the people of Zambia for granted.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: When they were making the profits, they knew that business had ups and downs. This is the first downward turn. After all the money they have made, they have put their profits in their banks in Switzerland and India.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: In Zambia, we do not have anything to show that copper and gold prices were at their highest. I am talking about derivatives of copper, gold and other minerals. We are not even getting certain amounts which these people have got out of our land. We have not even got the actual return out of these amounts. To this effect, as Zambians, we are saying that these people can go ahead and develop India, China, France and the United Kingdom. In Zambia, we will still be beggars.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: Mr Speaker, a rate of US $250 per tonne at which the windfall tax was triggered is double the cost of production. All we were asking for was that since the prices were now good, we could share despite the good prices having nothing to do with innovation and improvement of technology in the mines. It is just the demand which is outside our environment. We said that at between US $2.5 per tonne to US $83 per pound, we were going to get 25 per cent of their profits. This was above the cost of production and the normal profit level. The people of Zambia cannot have a situation where they are seeing our natural resources leaving the country. The people who own those resources and their children will never be able to benefit from those resources. They will only be able to see holes and say we had resources…
Mrs Masebo: And contamination of drinking water!
Mr Shakafuswa: …and contaminated drinking water.
Mr Speaker, we might be kind to the investors today, but the people of Zambia will hold us accountable.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: Why should we be poor in the midst of plenty? This is what makes people think that, maybe, someone was bought or given money in return for favours.
Hon. Opposition Members: Hear, hear!
Mr Speaker: Order! Unless you have evidence, hon. Member for Katuba, move away from that allegation.
Mr Shakafuswa: Mr Speaker, I know that this Government is continuing with the legacy of Dr Mwanawasa. The whole basis of our campaign was continuity. I think that this Government will be honourable enough to consult further before moving ahead with this Bill. This is controversial and it might even go to a vote. I can see that His Honour, the Vice-President, is counting heads. Winning in this House will not mean that you have won.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: You might win today but, the following day, you will find that you actually lost.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: Move with the people. Do not move away from the people.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: You might coerce us to vote with you but it will be against my conscience. I am going to say this. It will be against my conscience because I believe that Zambians deserve better.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: I believe that the corporate world should not move away without giving the people of Zambia what they deserve. I think that we should find a way of having the corporate world pay for the activities of the Government.
Mr Speaker, I feel pity for the hon. Minister of Finance and National Planning because he is constrained due the world economic problems.
Mr Sikota: On a point of order, Sir.
Mr Speaker: I have not heard any disorderly way of debating by the hon. Member for Katuba, apart from the caution I have already given him. Therefore, what is the point of order about?
Mr Sikota: Mr Speaker, as the records will show, I am not one who frivolously rises on points of order.
Mr Speaker, I rise on a very serious point of order on the hon. Member for Katuba, who, in his debate stated “even if you coerce us to vote”. Is he in order to suggest that anybody in this House can be coerced to vote in a particular way? Is it in order for people to be coerced in this House to vote in a particular way? I need your serious ruling.
Mr Speaker: Indeed, the point of order that has been raised by the hon. Member for Livingstone is procedural. The hon. Member for Katuba is out of order. You are out of order because, here, you vote as a Member of Parliament.
You may continue.
Mr Shakafuswa: Mr Speaker, I thank you very much for that counsel. I will take it into consideration as I vote today.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: Mr Speaker, I was saying that the hon. Minister of Finance and National Planning is constrained with resources. Zambia is constrained with resources. We have roads, infrastructure and schools. However, in my constituency, from the Great North Road to the border with Mumbwa, there is no secondary school. There are places in my constituency whereby fifty-kilometre stretches have no boreholes. Do I tell my people that the Government is foregoing money?
Mr Speaker, it is not all the mining companies who have got high costs of production. We have companies which are running open pit mines. Is the cost of production the same as those which are mining underground? It is not the same. If there are companies which are running inefficiently, we should deal with them as individual cases. As Hon. Milupi said, instead of triggering the price at US $2.25 per pound, it is being triggered at US $3 per pound. The bottom line is that we have companies which neglected to pay when payment of windfall tax was law. Let those companies pay up.
Mr Speaker, we got almost K300 billion from this tax, which is a lot of money that can alleviate the poverty our nation is facing and assist this Government in …
Mr Speaker: Order!
Business was suspended from 1045 hours until 1100 hours.
[MADAM DEPUTY SPEAKER in the Chair]
Mr Shakafuswa: Madam Speaker, someone asked how much we collected from the windfall tax regime. We collected over K300 billion even though there were some people who did not want to pay. However, paying tax is an obligation because it is law. The Government, therefore, cannot simply say that they did not collect the tax. They have to ask the ZRA to collect that money so that the people of Zambia have relief and feel that they belong to this country.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: Madam Speaker, the bottom line is that this so-called poverty we are facing - and I am part of it - is because of some people in Zambia trying to please other people at the expense of Zambians.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: They will not run away. These resources are only found in Zambia.
Madam Speaker, these people make so much profit, which they keep in their accounts. They should use those profits to maintain the jobs of the people of Zambia. Some of these mining companies are not even employing Zambian labourers because, according to them, they are using new and advanced technology of mining, meaning that their cost of production is even supposed to reduce. With the increased technology, their cost of production is supposed to reduce enabling them to come within the threshold for windfall tax gain.
Madam Speaker, my only plea is that, and I know that this has been sunk into stone, …
Laughter
Mr Shakafuswa: …we live as Zambians.
Madam Speaker, sometimes, when we have got the power, we should know that we derive this power from the people of Zambia.
Hon. Opposition Members: Hear, hear!
Mr Shakafuswa: It is not ours. Sometimes, we want to exercise this power at the peril of the people of Zambia. We should know that being in Government is a social contract and, at the end of the day, we are doing it for the people of Zambia, those who put us in this place. The person who has no maize and mealie-meal today in Katuba is the one who voted for us to take care of him or her. If, however, we are taking care of ourselves, God will judge us and judge us harshly.
Madam Speaker, I thank you.
Mr Chota (Lubansenshi): From the onset, I would like to thank your Committee for this report which has been researched and presented in a manner which everyone is able to understand.
Madam Speaker, we should hear and appreciate the words of wisdom and listen to the words of not only wise men, but intelligent men like Hon. Milupi.
Madam Speaker, I will not delve into most of these because Hon. Milupi has already said that. Instead, I will discuss and try to convince my hon. Good friend, through you. I can still remember that at one time, we used to sit on the stair cases at the campus and discuss some of these things. Therefore, I know he is capable and he is listening.
Hon. Members: Who?
Mr Chota: The hon. Minister of Finance and National Planning.
Madam Speaker, I will try to give an early and very important piece of advice especially on the windfall tax and that this Bill should be stopped.
Hon. Opposition Members: Hear, hear!
Mr Chota: Madam Speaker, the ZRA has no personnel to undertake the tracking and, in actual fact, the sales of copper. Therefore, it will be impossible even for the hon. Minister of Finance and National Planning to track sales contracts and profits made by these companies. I hope my good friend and hon. Minister of Finance and National Planning is listening.
Madam Deputy Speaker: Order! They are here.
You may continue.
Mr Chota: Madam Speaker, hedging income is too complex to follow at our level. What happens is that you are bound to undertake futures options and speculate. That is what all these mining companies are doing when they go into futures contracts on hedging.
Madam, when you go to the London Metal Exchange, you may not even understand when they are doing it. Therefore, I do not know if we have the manpower and specialised personnel who are going to stand on the London Metal Exchange and understand what is going on. Not only that, at the moment, we have broad sellers who have come as miners, but they are sellers who are just marketing copper. I wonder whether you have noticed that these people are so fast in giving management up and other things. They are also agreeing that they will pay off all the workers. Do you know why they are saying that? It is because they have a lot of money which they got through futures contracts hedging. Even up to now, the owners of Luanshya Copper Mines are swimming in profits. You may not know that it is because of the hedging and the futures contracts which they signed. Some go up to six months. Yet, they are making profits even now. Therefore, they can pay everybody and go away because they are traders. Those are the people we have brought in the country.
Madam Speaker, if we allow this Bill to go through, what the mining companies will do is that they will undertake this hedging and make contracts with subsidiary companies.
Mr Lubinda: That is what they do.
Mr Chota: In this case, they use what we call switch-ons. This simply means that if you have your copper in Hong Kong or the Far East, and then, the same copper is wanted in South Africa, you will bring that copper so that is sold fast in South Africa. This is what we can switch-ons. Therefore, when it comes to a switch-on, nobody understands it in Zambia. The few people we had who understood this are either retired, forgotten or they are working somewhere in the foreign countries. These are very important skills that we need, but we forgot about them when MEMACO went under. Like Hon. Milupi said, the shipping lines will be the companies which will be getting and sharing that profit. What will happen is that when you transport your copper from Hong Kong back to South Africa, the profit will be shared. Nothing will be declared to Zambia.
Madam Speaker, in actual fact, what minerals do we produce in Zambia because we are exporting concentrates? How much have we got from minerals like gold, selenium, silver and cobalt because these are extracts from copper? We have even failed to follow that up.
Madam Speaker, why are we trying to shoot ourselves in the foot?
Hon. PF Members: Hear, hear!
Mr Chota: They have money.
Hon. Government Members: Hear, hear!{mospagebreak}
Mr Chota: Madam Speaker, if you go to Luwingu General Hospital today, you will find that there is no X-Ray. Yet, we have billions and trillions of kwacha being taken by the mining investors. The amount of money they made in three years would have built tarred roads in this country, including all the roads which go to Ng’umbo or any area. There were going to be tarred roads by now.
Hon. PF Members: Hear, hear!
Mr Chota: That is the kind of money which is supposed to be used for the Bottom Road…
Interruptions
Madam Deputy Speaker: Order! Hon. Members will not debate in their seats. You will listen from the one debating.
May the hon. Member for Lubansenshi Continue?
Mr Chota: Madam Speaker, with the kind of money from the mining industry, we would have built tarred roads everywhere in Zambia. If you meet with some of these chaps in the United Kingdom, they will look at you and put their hands in their pockets because they know they have completely swindled you.
Hon. PF Members: Hear, hear!
Mr Chota: Hon. Minister, I am saying that, please, stop this Bill.
Madam Speaker, the term which is used at the London metal Exchange is called co-tangle and they are know what they are doing because they will trade and discuss all matters in futures whilst you are looking. It will be like parables because you do not know anything.
Hon. PF Members: Hear, hear!
Interruptions
Madam Deputy Speaker: Order! Hon. Members, it is not correct.
Mr Chota: Madam Speaker, I know how wise and intelligent you are. Please, stop this Bill.
I thank you, Madam Speaker.
The Minister of Commerce, Trade and industry (Mr Mutati): Madam Speaker, some conclusions have been drawn that we do not understand and that the Bill is bad and so on and so forth.
Madam Speaker, I just want to comment on the two issues that have been raised: hedging income and windfall tax.
On hedging income, it is true that this income, in terms of its determination, requires a lot of sophistry. It is complicated because it deals with futures, options and a number of terms that Hon. Chota has referred to. There is collective understanding that the capacity for us to determine income via the route of hedging does not exist and it is complicated. That is collectively agreed. However, as a Government, we admit that, perhaps, we do not have that capacity to be able to determine correctly hedging income.
Interruptions
Mr Mutati: Therefore, going on the principle of simplicity, what we said, as a Government, is: why do you have to follow contracts of sale between related and subsidiary companies? Why should we not come up with a mechanism of determining revenue that is based on the London Metal Exchange (LME) price?
Interruptions
Mr Mutati: This is because you will not be cheated.
Mrs Masebo: Yes!
Mr Mutati: This is a public price. Otherwise, you will be cheated by hedging income because it is so complicated that you will never understand it. Therefore, what we need to do is multiply production by the London Metal Exchange (LME) price.
Mr Lubinda: Yes! Hear, hear!
Dr Scott: That is not what it says!
Mr Mutati: There is no hedging. Therefore, that is why we said that hedging is irrelevant because it does not make a difference. So, we should forget about hedging. Let us take a simple route which is ‘production’ multiplied by the ‘LME price’.
Dr Scott: That is not what the Act says!
Mr Mutati: By getting this hedging income as part of revenue, it means that you are basically going to ‘LME price’ multiplied by ‘production’.
Dr Scott: No!
Mr Mutati: That is what it is about.
Hon. Opposition Members: No!
Interruptions
Mr Mutati: This is what you must understand.
Interruptions
Madam Deputy Speaker: Order! Order in the House! Order!
Mr Mutati: Madam Speaker, I can now understand the complication of the subject.
Hon. Opposition Members: Yes!
Mr Mutati: The complication of the subject is that any hedging income …
Interruptions
Mr Mutati: Colleagues and hon. Members, please, listen.
Hedging income is purely production multiplied by a price that we have agreed upon. That is when you get the total income. Therefore, that is one mechanism to determine income. Another mechanism to determine income is ‘production’ multiplied by the ‘LME price’.
Hon. Opposition Members: No!
Interruptions
Mr Mutati: There are two. Yes, hedging is …
Madam Deputy Speaker: Order! Hon. Minister, continue debating and bring out your points as clearly as you can.
Interruptions
Madam Deputy Speaker: Order!
Interruptions
Madam Deputy Speaker: Order! Order!
Mr Mutati: Madam Speaker, …
Interruptions
Madam Deputy Speaker: Order!
Mr Kakoma: On a point of order, Madam.
Mr Mutati: Madam Speaker, …
Madam Deputy Speaker: Hon. Member, there is no order in the House.
You cannot raise a point of order when the House is disorderly. Who is the Chair going to give that point of order to? Firstly, we must have order in the House. It is in that order that you can raise a point of order.
Will the hon. Minister continue?
Interruptions
Mr Mutati: Madam Speaker, in summary …
Mr Nsanda: Make your speech short!
Mr Hachipuka: On a point of order, Madam.
Madam Deputy Speaker: Normally, you cannot raise a point of order on a Minister …
Hon. Members: Aah!
Madam Deputy Speaker: Order!
Interruptions
Madam Deputy Speaker: Order! Unless it is on a fact that you feel is not right.
Madam Deputy Speaker: A point of order is raised.
Major Chizhyuka: These are serious matters!
Hon. UPND Members: He is misleading the House!
Mr Hachipuka: Madam Speaker, is the hon. Minister of Commerce, Trade and Industry in order to mislead this House?
Major Chizhyuka: And the nation at large!
Mr Hachipuka: Let me prefix this by telling you that I was Director of Finance of the Zambia Consolidated Copper Mines …
Hon. UPND Members: Hear, hear!
Mr Hachipuka: … and General Manager and Managing Director for several years. Is he in order, therefore, to mislead the House and suggest that the price we are debating here is ‘production’ multiplied by ‘LME price’ when he knows that the LME price has several options? There are several options and he knows it. You can check it out on the Internet. Is he in order to mislead this House and make the argument so simple and even ignore Mr Speaker’s report? Is he in order?
Interruptions
Madam Deputy Speaker: Order! The hon. Minister has listened to that point of order. There is no way the Chair can allow any misleading of the House. He will state his case clearly and truthfully.
Interruptions
Mr Mutati: Madam Speaker, the LME price, just like a forex price, is determined by market forces. There is a quotable price on LME for the purpose of selling a product that is published on the London Stock Exchange.
Hon. UPND Members: We are not hedging!
Mr Mutati: Madam, I think let me just move on …
Hon. UPND Members: Yes!
Mr Mutati: … and deal with the issue of the windfall tax.
Interruptions
Mr Mutati: Madam Speaker, first of all, we must understand some of the principles of taxation which Hon. Hachipuka, being an accountant, would agree to. The principles of taxation relate to simplicity, equity in taxation, both horizontal and vertical, and …
Hon. UPND Members: Awee!
Mr Mutati: … buoyancy. Buoyancy deals with the equation of ensuring that there is income attributable to support socio-economic development and, at the same time, motivate investments and the return on investment. Those are the basic principles.
Now, let us test the windfall tax against these principles of taxation. I will begin with …
Hon. Member: Hear, hear!
Dr Scott: Why did you not bring it last week?
Mr Mutati: … the issue of simplicity. Windfall tax has a computation and is, indeed, simple because it is price times whatever number. Therefore, in terms of simplicity, it does meet the criteria. It is simple to administer.
The variable profit tax is complicated. Therefore, from a purely administrative perspective, we are saying that windfall tax in terms of computation is simple. Therefore, it means that …
Mr Sejani: Then you must withhold the tax!
Interruptions
Madam Deputy Speaker: Order! Order!
Mr Mutati: Hon. Members, wait!
Laughter
Mr Mutati: The second principle, hon. Members, …
Interruptions
Madam Deputy Speaker: Order! Order! The Chair definitely will not allow shouting in the House. Serious is the Motion and serious should the Members be. Time to vote is time to vote according to the request of the House. However, we will not pre-vote or coerce anybody on what has already been ruled on. Can we listen carefully and debate for and against the Bill in a clear manner?
Interruptions
Madam Deputy Speaker: Order! Do not force the Chair to act in a manner that may seem wrong to you. We are all supposed to listen and not to be shouting and be clearly defiant to the guidance.
Hon. Member: Hear, hear!
Madam Deputy Speaker: You may continue, hon. Minister.
Mr Mutati: The second principle is one of equity which I said should be both horizontal and vertical.
Horizontal equity, Madam Speaker, means that people in the same sector or industry must suffer or pay tax at the same level. Now, what that means is that if you have, within that same sector, a low producing company, medium producing, medium cost and high cost, this principle of windfall tax then ignores that horizontal equity. This is because a high producer will pay greater tax than a lower producer. Therefore, you are distorting the basis of taxation under the principle of horizontal equity. So, windfall tax distorts horizontal equity.
Now, there was a suggestion that, perhaps, we must put a trigger point; instead of US$2.5 per pound, this should move to US$3 per pound. Now, what that means is that by the time you get to US$3 – and you do not know when – what will happen is that the low producers, who would should pay you variable profit tax will not because you have not hit US $3. So, you have to wait until you get to US $3. In actual fact, you are foregoing today’s taxation in the hope of getting a windfall tax in the future. This is factual and that is why …
Mr Milupi: On a point of order, Madam Speaker.
Madam Deputy Speaker: A point of order is raised.
Mr Milupi: Madam Speaker, records of this House will show that this is the first time I am raising a point of order since 2006 when I came to this House. My point of order is on facts. Is the hon. Minister in order to suggest that, according to this tax regime, if we move the trigger point to US$3 per pound, it means that before we hit the price of US$3 per pound, we shall not collect any tax when, in actual fact, he knows that in addition to windfall tax and corporate tax, there is royalty tax and so on?
Madam Speaker, is he, in fact, in order, as a Minister who has so much intelligence and we have so much respect for him, to debate against windfall tax when, last year, when it came to the Floor of this House, himself, the whole Cabinet and everybody else supported this tax? What has changed?
Interruptions
Madam Deputy Speaker: The hon. Minister will consider that point of order and make clarifications. Will the hon. Minister continue, please?
Mr Mutati: Madam Speaker, I will clarify this matter so that we are factual. We have windfall tax and variable profit tax. You can either have one or the other in terms of taxation and the other taxes will still be paid. What I am saying is that when it comes to windfall tax, if you adjust it to US$3, you will only collect the windfall tax, if the price is better than US$3. That is factual. But in the case of variable profit tax, you can still collect it below US$3. That is what I am saying. With the current copper prices, we can continue to collect variable profit tax.
Interruptions
Madam Deputy Speaker: Order! Hon. Member for Mbabala, can you relax and be calm even when you do not agree with the person on the Floor, until you have your time, if at all you will?
Will the hon. Minister continue, please.
Mr Mutati: Madam Speaker, I am just clarifying the fact that we have the option of taking the variable profit tax because for the low producing companies, you can collect taxation even before the price reaches US$2.5 or US$3 per tonne. We are advocating for taxation where you collect income earlier rather than later.
Hon. Members: Both!
Mr Mutati: Madam Speaker, in the Act, the variable taxation is saying you cannot collect both variable profit tax and windfall tax.
Mr Lubinda: No!
Mr Mutati: If windfall tax is payable, then variable profit tax is not. That is what is in the current Act and that is what we are changing.
Interruptions
Madam Deputy Speaker: Order! It seems that the hon. Members are not ready to listen to one another and if that is the case, then we should come to a conclusion because we are not ready to listen to each other and make points. You can only listen with your ears and these do not make noise.
Laughter
Mr Mutati: Madam Speaker, let me just summarise that a taxation system must also motivate investment. When we introduced a tax system which included windfall tax, a number of investments did not take place and, therefore, opportunity for growth was also narrowed. Opportunity for employment was also narrowed and so we need to have a tax system that supports growth and jobs. We need to have a tax system which is equitable for the players that are in the same industry and there is no discrimination in terms of how they are treated. We must have a tax system which is less complicated and easy to administer and the changes that we are proposing in the amendments squarely fit in the principles of equity, buoyancy and simplicity.
I thank you, Madam Speaker.
Mr Hachipuka (Mbabala): Madam Speaker,
Mr Mwiimbu rose.
Madam Deputy Speaker: Order! We already have an hon. Member on the Floor.
Laughter
Mr Hachipuka: Madam Speaker, I wish to support the Committee report which, I believe, is the Hon. Mr Speaker’s Report and the fact that it was published means that you, Madam Deputy Speaker, authorised it and I thought I should make that statement so that the nation knows that there is a Mr Speaker’s Report which was produced subsequently after the Bills.
Madam Speaker, I would like to state clearly from the onset that the problem we have here is that this Government is so embroidered in the issue of foreign investment. That is why you have lost your people. You have lost the Zambians because your interest – and someone has told you – is that the only way you can develop Zambia is by having foreign investment in this country and you will do anything to get an investor in this country even if your people are starving.
Madam Speaker, I want to explain and re-echo the points raised by my young brother Hon. Mutati, the hon. Minister of Commerce, Trade and Industry. Why would Hon. Mutati, in the same Government and in the same post, come here to tell us that we should introduce windfall tax? During the reign of the late President Levy Patrick Mwanawasa, SC, he was here and he introduced the Bill that brought windfall tax. Why would he, today, come back and tell us that there is Variable Tax when he, as an accountant, knows that Variable Tax is Corporate Tax? What difference does it make? The complication is just the same. Why would he advocate removing windfall tax? He loses me and I want to tell the country that you have lost us because you are the same person who came to recommend windfall tax here and now you come and say you were wrong. What has changed?
Interruptions
Mr Hachipuka: Madam Speaker, as of now, the Americans and the whole world have recognised that there is a credit crunch. Where do you think the money will come from if you remove windfall tax?
You think someone will come here.
Hon. Opposition Member: It will come from impukunya amatobo.
Laughter
Mr Hachipuka: You have your own people. There is no hope that you will ever raise sufficient money to reduce the impoverishment in this country.
Mr Kambwili interjected.
Madam Deputy Speaker: Order!
Mr Hachipuka: Madam Speaker, I want to correct the impression he raised. There are so many experts in this country in many things. However, I like Hon. Mutati because he can sit and confuse you because of the respect we have for him.
Laughter
Mr Hachipuka: It is not true that hedging means to multiply production by the London Metal Exchange (LME) price. The LME is a very complicated stock exchange for selling various metals. Please, remember this. If, for example, copper is produced here in Zambia, it has to logistically be moved to anybody who wants to buy it.
Mr D. Mwila: Yes.
Mr Hachipuka: For example, it has to be shipped to Japan or China. The person who has ordered that copper has several options. He can choose which month he wants you to deliver the copper. He has also the option to choose which price within three months of the LME. The LME can state, for example, that every day there is a price, and only Mutati knows this, but the person buying the copper is given the choice to make as to which day on which to price that copper, from day one to day 90.
There are ninety days within which to pick which price. Now, all of you know that the price goes up and down.
Mr Kambwili: Director of Finance, ZCCM!
Madam Deputy Speaker: Order!
Mr Hachipuka: Madam Speaker, that particular person has a choice to make as to which price suits that day. That is the industry and business. If that day it is £1 and the next day it is £1,000, then he has a choice within those three months to choose when he can buy. He can come to you and say you delivered and I have the option to buy at £31 or £35 and there is nothing you can do. So, for him to simply say it is production multiplied by the LME price is over simplifying the matter which concerns the country. I want him to check those facts that I am telling you now.
When you talk about hedging, it means you are allowing the person to choose the LME price within ninety days. You can go and check the way it operates and yet, you want to tell the Zambians that we are simply multiplying.
Laughter{mospagebreak}
Mr Hachipuka: It is a serious matter. Why would a leadership such as yours, of very high ranking, very well thought and very respectable Members of Parliament and hon. Ministers choose to mislead the Zambians by saying you will include hedging. As my colleague, Hon. Milupi, referred to the fact that hedging income is the easiest place to hide your profits.
Laughter
Mr Hachipuka: You can hide your profits and you can continuously report losses and those losses can even be written off against your potential Corporate Tax. I want to bet you my bottom dollar. Even when we - I want to say this, forgive me, Madam Speaker - called your people from the mines to explain hedging without knowing that there were few of us who were experts in there, they refused to answer that question. You can go and check our minutes.
Hon. Opposition Members: Yes.
Mr Hachipuka: When we called the Ministry of Finance and National Planning to explain why they had included hedging, their hon. Minister is there, they accepted that they did not have the skills to deal with it. You go and check our minutes, the background to this report, but you want to continue telling this country as if you know better. You know better what?
Hon. Opposition Members: Hear, hear!
Mr Kasongo: When they do not.
Mr Hachipuka: The Commissioner General admitted that he does not have sufficient skills, but he is going to build them in order to deal with this issue. Why do you want to venture in something that will lose us income? Why? What kind of people are you?
Hon. Opposition Members: Hear, hear!
Interruptions
Mr Hachipuka: No, through you, Madam Speaker, there should be integrity in this country and we should be able to do things that we are able to do.
Mr Kasongo: Hammer!
Mr Hachipuka: Our people are looking to you because you are in Government. You can check the things I am telling you now and you cannot doubt me because none of you has been a Director of Finance in the mining industry.
Hon. Opposition Members: Hear, hear!
Mr Hachipuka: None of you has even been …
Madam Deputy Speaker: Order! Hon. Member. You may be very concerned, but the qualifications of being here are very different from what you are referring to. So, debate the issues.
May you continue, please?
Mr Hachipuka: Thank you, Madam Speaker. I am glad I am educated.
Laughter
Mr Hachipuka: Please, colleagues, we cannot make a better appeal to you and do not be misled. You should withdraw this Bill and go and rehash it and you will win your numbers. I think I have made my points and the Hansard will record so.
I thank you, Madam Speaker.
Hon. Opposition Members: Hear, hear!
The Vice-President and Minister of Justice (Mr Kunda): Madam Speaker, I have listened very carefully.
Interruptions
Hon. Government Members: Hear, hear!
The Vice-President and Minister of Justice: Under the mining tax regime. There are various taxes which are payable, starting from Mineral Royalty Tax which is at 3 per cent, if I am not mistaken, and income tax which is at 30 per cent. Then, you cannot have both Variable Tax and windfall tax at the same time because that is what is in the law.
Mr Kambwili interjected.
The Vice-President and Minister of Justice: You apply either of the two. What we are suggesting from this side, having tested the application of these taxes, is that we should now apply only Variable Tax for the reasons which Hon. Mutati has explained.
Hon. Opposition Members: Aah!
The Vice-President and Minister of Justice: Madam Speaker, we are not saying that mining companies will not pay tax. There are already these levels of taxation which will apply in the mining industry. Now, since we introduced the windfall tax, there are certain factors or certain circumstances which we have had to consider in reviewing the tax regime. Mining companies have declared a dispute with us, based on the development agreements.
Hon. Opposition Members: Aah, ah!
The Vice-President and Minister of Justice: Some have paid the tax, some have not paid the tax and the factual position is that we will have to go to arbitration because of the issue of the windfall tax and, of course, we have to listen, like what is happening in other countries. For example, in Europe and the United States of America, there are stimulus packages being developed to deal with certain problems which are arising in a number of industries and with us, of course, we have to listen also to what those who are creating and keeping jobs for our people are saying.
Hon. Opposition Members: Aah, aah!
Mr Kambwili: Question!
The Vice-President and Minister of Justice: Therefore, we cannot take it for granted. It is common knowledge that some companies are closing down and, therefore, we must make the investment climate in this country attractive to investors, especially those who are maintaining our people in employment.
Mr Kambwili: On a point of order, Madam.
Madam Deputy Speaker: Order! That point of order is not allowed.
The Vice-President and Minister of Justice: Madam Speaker, let me point out one thing which a lot of people are missing. We should not miss the fact that the Income Tax (Amendment) Bill of 2009 that we are considering is not only about windfall tax. This Bill has significant financial implications. If it is withdrawn or defeated, it will throw the Budget off balance.
Hon. Opposition Members interjected.
The Vice-President and Minister of Justice: The objectives of this Bill are to increase the income tax threshold for individuals, the exempt portion of terminal benefits, tax for persons with disabilities, advance income rates from 3 to 6 per cent and providing for taxation of qualifying gratuity at a flat rate of 25 per cent. It is also meant to increase the pension contributions from K1 million, the period of carrying forward of losses, provide for taxation of donations made to public institutions as well as to deal with issues of declassifying hedging, provide for increase in the capital allowance rate for persons carrying out mining operations and, of course, abolishing of the windfall tax.
Now, if the issue of windfall tax is something which is of concern …
Mr Matongo: You can remove that part.
The Vice-President and Minister of Justice: You are saying that we can remove one part but it is not at this stage that we can remove the part to do with windfall tax. It would require us to go back and consult …
Hon. Opposition Members: Hear, hear!
The Vice-President and Minister of Justice: … on what to do with the windfall tax. If we see that there is merit or demerit in maintaining this tax, we can still make amendments but for us to defeat all these well-meaning provisions now …
Hon. Opposition Members interjected.
The Vice-President and Minister of Justice: … would not be right. We are determined to proceed with this Bill at this stage because it has several useful provisions.
Hon. Opposition Members: Aah!
The Vice-President and Minister of Justice: In any case, we have issues do with the Constituency Development Fund (CDF).
Hon. Opposition Members: No!
The Vice-President and Minister of Justice: Money for the CDF is coming from the tax measures which we have proposed in this Bill.
Interruptions
The Vice-President and Minister of Justice: So, I would like to urge hon. Members that there is no need at this stage for us to be fighting. Let us move this Bill to another stage …
Hon. Opposition Members: No!
The Vice-President and Minister of Justice: … so that we can make changes as we go along. Of course, we have listened to what the Opposition has said and we are going to consult. However, I am not saying that there is merit or demerit in what has been said by our colleagues. The process of consultations will still proceed but we cannot defeat the Bill at this particular stage.
Hon. Government Members: Hear, hear!
The Vice-President and Minister of Justice: I know that the Opposition are determined to fight because they came here to fight.
Hon. Opposition Members: Yes, for the people.
The Vice-President and Minister of Justice: As for us on this side, we would like to be reasonable ...
Interruptions
The Vice-President and Minister of Justice: … because we know that this Bill has a lot of provisions from which we can benefit as hon. Members in terms of the CDF and …
Interruptions
The Vice-President and Minister of Justice: … of course, several others. We have to build schools, clinics and, therefore, we mean well for our people.
Hon. Government Members: Hear, hear!
The Vice-President and Minister of Justice: Madam Speaker, we are doing this in good faith. We want to ensure that the mining companies do not collapse and that our people’s jobs are safeguarded.
Hon. Government Members: Hear, hear!
The Vice-President and Minister of Justice: So …
Mr Kambwili: Let us move to questions so that we ask you.
Laughter
The Vice-President and Minister of Justice: Madam Speaker, in conclusion, I would like to say that circumstances have changed and we cannot continue with certain tax measures. We, therefore, have to consult on the issue of windfall tax.
Hon. Opposition Members: Yes!
The Vice-President and Minister of Justice: However, this is a wrong stage for us to withdraw this Bill and, therefore, we are not going do so and we are going to vote in its favour.
Madam Speaker, I thank you:
Hon. MMD Member: Hear, hear!
Madam Deputy Speaker: I will allow one hon. Member from each side to debate before I call upon the hon. Minister of Finance and National Planning to wind-up debate. I urge the House to listen and analyse what these three hon. Members will say without heckling and making running commentaries.
Mr Lubinda (Kabwata): Madam Speaker, I thank you very much for allowing me to contribute to this very emotional and nationalistic debate. Let me state that all of us on this side are agreed that we are living through very difficult times. Those who are visitors this side are not included.
Laughter
Mr Lubinda: Madam, in accepting that we are living through very difficult times …
Madam Deputy Speaker: Order! The hon. Member will not mislead the nation that there are visitors in this House.
Laughter
Mr Lubinda: Madam Speaker, I thank you for your guidance. I want to say that these difficult times also give the best of opportunities for those who understand the need for fundamental economic reforms to develop this country. The fundamental economic reforms that are being proposed from this side are the departure from the past economic programmes of putting money in the pockets of foreigners at the expense of the local people.
Hon. Opposition Members: Hear, hear!
Mr Lubinda: People have spoken a lot about windfall and mining taxes, hedging and so on, but let me say one thing before I proceed. Only a few days ago, we were talking about this Cabinet having adopted the National Anti-Corruption Policy. What a shame that today this House …
Madam Deputy Speaker: Order! The word ‘shame’ has been ruled out of order. Use another word.
Mr Lubinda: Madam Speaker, what a pity and misleading position and how disheartening it is that on the Floor of this House, we are dangled a carrot and told that if we do not pass this Income Tax Bill, we will not get CDF. This is bribery in Parliament.
Hon. Opposition Members: Hear, hear!
Mr Lubinda: This must stop, forthwith. We are not going to vote against this Bill because there is CDF in the Budget, but for the best interest of the Zambian people.
Hon. Opposition Members: Hear, hear!
Mr Lubinda: Madam Speaker, from the outset, let me state that even those inclusions in the Income Tax Bill, which were referred to as being in the best interest of this country, are actually not even in the interest of this country. I want to draw the attention of the people of Zambia to the fact that even the 2009 Budget is being financed by the poor Zambians because the mining companies are being protected.
Out of the total revenue of this country, the poor Zambian tax payers are paying K2 trillion while companies are paying K1 trillion. Even in a year when this Government forced us to agree to have windfall tax, how much was collected from the mines? Zero. When the Development Agreement was brought on the Floor of this House, we told them to do away with it because it was unconstitutional, but now it has become a point of reference. That is extremely sad.
Madam Speaker, to be in this House is not a question of arrogance of numbers. We ought to listen to the words and voices of the poor people and of the voiceless who sent us here. It is not a question of who has the numbers, but a question of how many of the Zambian people are going hungry due to the failure by this Government, a government that has failed to draw revenue from the resources that God so kindly endowed upon the twelve million Zambians.
Hon. Opposition members: Hear, hear!
Mr Lubinda: Those are the matters that should come to the fore. I agree with the Vice-President and Minister of Justice. It will be sad that even before we debate disability credit we are going to vote on windfall tax. That is the reason those from the Opposition, wise men and women, suggested not to be pushed too hard. We do not want to vote. Withdraw this amendment, go and consult on windfall tax and bring it back.
Hon. Opposition Members: Hear, hear!
Mr Lubinda: Go and consult on hedging. When your minds are clear, come back to us. We do not want to be forced to accept an amendment Act which is not clear. During debate, some hon. Ministers say this while others say the other. You saw the contradiction from the hon. Ministers on this particular matter. How then do you expect us to support them?
As hon. Opposition Members, mere mortals, how should we believe them? Time has come for us to depart from our illness of the past and, in so doing, we ought to invest in our own people and not in foreigners.
I want to agree with Hon. Hachipuka that there seems to be a misunderstanding in this country in that this country will only develop if we protect foreign investors. For heaven’s sake, it will be remembered that last year, it was these noble men and women on the left of this House who pushed this Government to increase allowable tax on pension. We were told to do that but, this year, they are coming with a cosmetic increase of 14 per cent. The hon. Minister was saying that we should agree with this law because of that allowable pension fund of 14 per cent when, as a matter of fact, inflation is 16.6 per cent.
Madam Speaker, the amount of money they are saying should be allowed for pension contribution has only been increased by K20,000.00 as allowable pension. Therefore, what is that K20,000.00 in a country where the majority of the people are without any social security fund? That allowable pension is to encourage people to save in their pensions so that they do not spend now. To the contrary, do you think K20,000.00 is an incentive? It is, obviously not. It is far too low. Instead of giving relief to the citizens, you want to give relief to the mine owners. What about the disabilities that the Vice-President and Minister of Justice spoke about? In case the Vice-President and Minister of Justice would like the disabled people think we, on the Opposition side, are against them, let me state that we are the ones in support of them.
Madam Speaker, the Vice-President and Minister of Justice is proposing that we accept the increase in the threshold of credit to disability credit from K600,000.00 to K900,000.00 per year. What does that translate into in form of tax relief? Please, do not hoodwink the Zambian people. It is not K900,000.00 as you have stated. The tax relief you are giving to them is only K225,000.00 per year.
Hon. Minister of Finance and National Planning, how much is that per month? K18,750.00. Can you tell me how much that works out to be on a daily basis? K0,208.00 and it cannot even buy a sweet on the street and yet the disability credit is meant to give those disabled people an opportunity to live like you and me. Those people are the ones who are suffering because even our roads do not have any pavements for them. National Assembly is one of the buildings with no provision for the disabled. When they go on a bus, they need somebody to lift them to put them on the bus and there will be a price for that. And you are now saying we shall give then K18,750.00 per month and think that is relief. No, it is not.
Madam Speaker, let me end on matters that my colleagues spoke about very passionately. I would like to agree with my dear friend and brother, the hon. Member for Katuba, when he said today is a day when we shall be nationalistic. I could see the nationalism in Hon. Felix Mutati as he spoke. I could feel it in him because when the words were coming out, you could see that the man was at pains.
Laughter
Mr Lubinda: For those who have known Hon. Mutati over the last eight years, he is an extremely articulate man and his mind is always very clear and well focused. I am sure that when he reads the verbatim tomorrow, he will wonder whether he was the one speaking.
Hon. Opposition Members: Hear, hear!
Mr Mutati: On a point of order, Madam.
Madam Deputy Speaker: A point of order is raised.
Mr Mutati: Madam Speaker, I have listened attentively to the debate by Hon. Lubinda. Is he in order to suggest that in the eight years that I have tutored him, he has not graduated to debate properly? I need your serious ruling.
Laughter
Madam Deputy Speaker: Order! That point of order is out of order because it is misleading the Chair. The Chair did not hear that.
The hon. Member for Kabwata may continue.
Mr Lubinda: Madam Speaker, the hon. Minister was saying that hedging in this particular case is not an issue and that prices will be determined by production against the price at London Metal Exchange (LME) on the day of production. Had that been the case, why then would it be a matter or an issue? Why then would it be brought in the Bill? I just want to refer the House to the Bill so that I can demonstrate that my dear friends and co-tutor, we who have been tutoring many on that side (Government) Bench …
Madam Deputy Speaker: Order! Do not start misleading again. You debate the Bill and bring in what you want to say.
Mr Lubinda: Madam Speaker, one of the objects of the Bill, Object (I) says: ‘To classify hedging income arising from mining operations as part of mining income.’ What does that mean? It means that the income arising from the practice of hedging must be considered as part of the income of mining operations so that even for tax purposes, that fund should be included.
The argument that has been presented by those on this side has been that this is to allow mining companies bring hedging losses into their books so that they evade tax. That is the point. Wherever you saw hedging income, you should also be willing to substitute it with hedging losses. The basic thing which any child will understand is that this is a way of ensuring that the incomes or losses from this practice are captured in the books for the sake of influencing tax.
I want to state that there are many companies in the world that have collapsed because of the hedging practice. It is not only limited to the ninety days and it is not the price that is the future determined point, but it is the price at the day of cutting the deal…
Hon. Opposition Members: Yes.
Mr Lubinda: And what these mines are doing, like my colleagues explained, is that they go to their parent companies and say, “We are selling all our production today at today’s prices irrespective of whether the price of copper increases or not.” And as you can see, if they hedge now, the sell copper at the low price now when you have seen that prices on the London Metal Exchange (LME) are increasing, they will still get them declared to Zambia, at the value of copper at today’s price, and yet the prices are increasing. That is what we are saying no to. Please, protect the Zambians.
Major Chizhyuka: Well done.
Mr Lubinda: On the issue of windfall tax, the Vice-President and Minister of Justice said there is corporate tax, income tax and windfall tax. Yes when they came last year, they introduced all those taxes and we supported them. On what basis do they want to take away windfall tax?
We have also been told, Madam Speaker, that windfall tax is triggered by high profits or price. What should be the concern of miners now when the prices are low? All they are doing is to arm twist us and say, ”Can you hedge for us so that even when the prices are high, we will not pay you windfall tax?” We are saying no to that. The Zambians deserve better than what this Government is offering them.
I want to state, Madam Speaker, as I wind down that we, on this side of the House, are doing this because we have been informed by our people out there. All of us have discussed this matter. We started talking about it four years ago. As a matter of fact, the destruction of Development Agreements was not their initiative. As the Hansard will show, that matter was initiated from this side of the House and you followed suit. Thank you for listening us but, please, continue to listen. When you listen to the words of wisdom, you will do well for the Zambian people. Arrogance of numbers does not pay anybody. I want to say, today, like Hon. Shakafuswa said, we might lose the vote but I can assure you we will have won the argument out there.
Hon. Opposition Members: Hear, hear!
Mr Lubinda: Madam Speaker, Hon. Hachipuka referred to your Committee’s report. Let me conclude by quoting what your Committee say on Page 17, and I quote:
“Your Committee strongly recommend that windfall tax be retained even though it would be in a redundant state until the metal prices improve.”
Mr Lubinda: Keep it for us so that when the prices improve, we will benefit.
Hon. Opposition Members: Hear, hear!
Mr Lubinda: That is what your Committee are recommending. They further recommend, and I quote:
“For the reasons outlined above with regard to the capacity of the ZRA, your Committee also do not support the proposal to allow hedging income to be part of mining income tax for tax purposes.”
Madam, who are we in this House not to listen to our colleagues who we entrust the responsibility of sitting down, asking many stakeholders to come and submit to them? Who are we to say what they have written is nothing or not good? We, in this House, would like to protect the Zambian people and the integrity of this House and its Committees and, therefore, all of us in this House shall support the report of your Committee. We shall vote against this Bill.
I thank you, Madam.
Hon. Opposition Members: Hear, hear!
Mr Magande (Chilanga): Thank you, Madam Speaker, for giving me this opportunity to also make some comments on this very important Bill before us.
Major Chizhyuka: Be yourself. Protect the legacy.
Laughter
Mr Magande: Clearly, before the learned Vice-President and Minister of Justice made his contribution, I had a lot of remarks to comment, in particular, on the windfall tax. However, I am happy that the Vice-President and Minister and Justice has indicated that the Executive still has room to consult on this matter and that is very positive indeed.
Hon. Opposition Members: Hear, hear!
Mr Magande: As I try to make some comments, I also want to recall the words of the Vice-President and Minister of Justice, last week, in reply to one answer raised by Hon. Shakafuswa, that those of us who have left Government and are keeping Government secrets must still keep them. Madam Speaker, I am in a very difficult position in that with all the knowledge I have, I should keep quiet and see things happening in this country because of that secrecy of oath or oath of secrecy.
Hon. Opposition Members: Hear, hear!
Mr Magande: I was Director of Budgets in 1981. I then had an oath of secrecy as Director of Budgets. At that time, we used to fix prices of mealie-meal and announce them in the budgets. I kept that secret to an extent that when we were to announce prices of mealie-meal in this House through the Budget, not even my wife knew that the price was going to change. I want to assure His Honour the Vice-President and Minister of Justice that some of us will live to keep those secrets that are valuable to this country and the Zambian people but, please, let us contribute to the development of this country.
Hon. Opposition Members: Hear, hear!
Mr Magande: On the issue of windfall tax, it is not a secret that there are fifteen technical officers in the Government system now, and all the Minister of Finance and National Planning used to do was to go back and check on the list of those officers under the former Secretary to the Treasury, Mr Chibiliti, who went through this exercise of coming up with these taxes. They are still in the Government. Mr Chibiliti is still there in the Government and they will show why we had to come up with this kind of tax regime for the mining industry.
Hon. Opposition Members: Hear, hear!
Mr Magande: As was clearly indicated in this House, the Government’s development budget of Zambia, for many years, was dependent on donors. The donors, after going through the High Indebted Poor Country (HIPC) of having our US$7 billion debt forgiven, said do not build another US$7 billion debt. Do not, also, be dependent on us. You must depend on your natural resources.
Hon. Opposition Members: Hear, hear!
Mr Magande: That is the background to all this. We are being told that, now, they have made a provision for Valuable Added Tax. As has been explained by the qualified accountants in this House, that is coming under Company Tax. Can I say under Company Tax, the tax is going from K1.3 trillion to K1.1 trillion this year? It is going down by K200 billion. If that is foregone, and K900 billion out of last year’s windfall tax which we are supposed to collect, is going to be collected under Company Tax, where is this money? Where is it showing? There is a deficit under Company Tax. Are we, therefore, saying that the mines will not be able to pay?
Last year, as we were framing the budget, we were talking of a production of between 500,000 and 600,000 tonnes of copper. I think the production was 470,000 tonnes. The hon. Minister of Mines and Minerals Development, Mr M. B. Mwale, will admit that because all the investments have already begun in most of the mines, we expect a better production this year. For producing and exporting more copper, are we going to get less? What does this mean?
Madam Speaker, I just want to say all the arguments that have been raised by the experts like Hon. Milupi, Hon. Chota and, indeed, the financial experts like the hon. Minister of Commerce, Trade and Industry, Mr Felix Mutati, and the former Finance Director of the Zambia Consolidated Copper Mines (ZCCM) …
Hon. Opposition Members: Hear, hear!
Mr Magande: … point to the fact that we do not need to remove this tax from our statute books.
Hon. Opposition Members: Hear, hear!
Mr Magande: It is self adjusting because the price of copper is below the threshold. Nobody is paying one ngwee.
Madam Speaker, on our statute books, we have a law which stipulates that suicide is an offence.
Laughter
Mr Magande: Now, we are all intelligent people in this House. Imagine I commit suicide and you find me hanging in the next hour. I will have committed an offence. Yet, what court would you take me to when I am already a corpse?
Laughter
Mr Magande: I am already dead.
Hon. Members: Hear, hear!
Mr Magande: However, in order to discourage people from committing suicide, we have left that law in our statute books. What nuisance is it if we leave it there? Similarly, what nuisance is the windfall tax if we left it in the statute books?
Hon. Opposition Members: Hear, hear!
Mr Magande: Under the laws, the hon. Minister can suspend the windfall tax. Why can he not just suspend it?
Hon. Opposition Members: Hear, hear!
Mr Magande: We agreed when we were introducing this regime that we would change it when we have the capacity to go for Variable Tax. However, like I am asking, I have looked at Page 37 and all the three items which would constitute K900 billion have been removed. Where are they on the Estimates of Revenue? The reason is what Hon. Mutati said. It is very complicated to establish prices on the London Metal Exchange.
Zambia’s copper has sold on premium basis for many years. It means you can take a tonne of copper from Papua New Guinea to the London Metal Exchange and sell it at US $3. A tonne of copper from Nchanga in Zambia will sell at US $4. If the gentleman who wants to declare his tax is from Papua New Guinea and he tells you that your tax should be at US $3 per pound, are we going to believe him when he is earning another US $1 on our copper?
Madam Speaker, all these arguments that have been made here were made by a technical committee of fifteen officers. Can I reveal a secret?
Hon. Opposition Members: Hear, hear!
Madam Deputy Speaker: Order!
Mr Magande: The officers spent one week in Livingstone simulating mining companies. Some of them were acting as tax men and others as LME experts, and they were simulating what Nchanga Copper Mine would be producing and what it meant. You really want to come back and say that all that effort was for nothing?
Hon. Opposition Members: Hear, hear!
Mr Magande: Yes, I am aware that, sometimes, we ignore advice. If I seek someone’s advice, I take it seriously because I want to use it. I do not go back to the advisor and say you were wrong. That is what is happening now. Some of us who advised, and not the ones who failed to make a decision, are being said to be wrong.
Hon. Opposition Members: Hear, hear!
Mr Magande: What kind of arrangement is that?
Laughter
Mr Magande: Since His Honour the Vice-President has promised to consult on this matter, can I also plead that as the consultations go on, he looks at the other amendment. We are introducing a law to prohibit the export of cotton because we want industries here in Zambia. What is made out of cotton is cloth, including grey cloth. However, we have allowed importation of grey cloth. The cotton will not be exported because we want industries here, but we want people to bring cheap grey cotton from outside. Why?
Laughter
Mr Magande: Madam Speaker, we have deposits of gypsum, just like copper in Nchanga, at Lochnivar in Monze District.
Hon. UPND Members: Hear, hear!
Mr Magande: Local companies have been mining that gypsum and producing chalk. Those who may not know, I also favoured them to make sure they bring equipment to start manufacturing chalk ...
Hon. Opposition Members: Hear, hear!
Mr Magande: … when I was in authority to do so.
Laughter
Mr Magande: Now, we are saying that we are going to allow the importation of gypsum. Is it so that we close the mining in Monze by Zambians which is producing chalk and gypsum for other purposes? Why?
Hon. UPND Members: You have leaders there.
Mr Magande: Madam Speaker, we have now introduced free importation of vegetable oils. This is just oil from sunflower or soyabeans. When we were discussing agriculture, I saw an item on the improvement of production of soyabean inoculums. This is to produce more soyabeans by the farmers. Now, we are going to make it cheap for people to bring in vegetable oils. What are these vegetable oils? The only vegetable oil which has been under contention is palm oil from Malaysia. The Malaysians are our advisors on the Triangle of Hope. They are saying use your own cotton and vegetables. We want to accommodate palm oil in the country when we also want to start a palm oil plant in Mpika.
Hon. Opposition Members: Hear, hear!
Mr Magande: How do we develop our industries?
Madam Speaker, right now, I am very happy that the hon. Minister of Finance and National Planning has introduced a prohibitive customs duty on cell phones ...
Hon. Members: Hear, hear!
Mr Magande: … because we now have a company manufacturing cell phones here. If you went there, the young men and women who are working are the same the ones we see in Kalingalinga. These are the people we have to plan for.
Hon. Opposition Members: Hear, hear!{mospagebreak}
Mr Magande: If they can assemble a cell phone, how can they not produce oil from soyabeans?
Hon. Opposition Members: Hear, hear!
Mr Magande: How can they not mine gypsum in Monze?
Hon. Opposition Members: Hear, hear!
Mr Magande: No. I think we have to rethink some of these things.
Hon. Opposition Members: Hear, hear!
Mr Magande: I want to say to my good friend, the hon. Minister of Finance and National Planning, that I know he wants to balance the Budget. However, we can do better on some of these things.
Hon. Opposition Members: Hear, hear!
Mr Magande: Yesterday, under the Vote for the Ministry of Commerce, Trade and Industry, we said that we needed local products from local materials for local Zambians by the local Zambians. The materials are there. Why can we not use these to develop our country?
I thank you, Madam.
Dr Musokotwane: Madam Speaker, I am grateful for the various submissions that have been made. Let me take some time to go through some of these and respond to them point by point.
Madam Speaker, I find as unfortunate the idea that we are not being nationalistic by bringing these amendments to the House and that we have been bought. I totally reject this idea.
Madam Speaker, there are many ways of being nationalistic. I recall, in the 1960s and 1970s, that there was applause when the Government nationalised the mining industry. What was the idea? People applauded and said that they were going to control their own resources and become rich. What happened, in practice, is that this country became very poor.
The quantity of copper that was produced in this country fell from 750,000 tonnes in 1973 to 257,000 tonnes in 2002. The point I am trying to illustrate is that …
Interruptions
Madam Deputy Speaker: Order in the House! When some of you are debating, there is silence from others because they want to listen to you. It is just important that when the hon. Minister is speaking, we listen. That is the way we operate in this House. Allow the hon. Minister to make his point while we listen. You may continue, hon. Minister.
Dr Musokotwane: I thank you, Madam Speaker.
The point I am trying to illustrate is that, sometimes, we use a lot of emotions to cheat our people and say that if we take this route, it is going to serve them.
Madam Deputy Speaker: Order! The word “cheat” is unparliamentary.
Dr Musokotwane: Madam Speaker, I withdraw the word.
In actual fact, that is not always the case.
Madam Speaker, the mining industry has been growing very rapidly since privatisation. As I said, in 2002, copper production had fallen to 257,000 metric tonnes. By last year, we were producing about 550,000 metric tonnes. Why did this happen? To a large extent, this happened because of the conducive environment that we had created and attracted more K3 billion of capital investment into the sector. Therefore, it is important that we are very careful about the environments that we create in this country to ensure that this industry moves forward. Certainly, part of that environment is one to do with taxation and I will come back to this point in a while.
Madam, as a result of the expansion in the industry, let me mention that, in 2002, the tax contribution by the mining industry in this country was actually negative in the sense that for every single gain, Zambia was putting aside something like US $2 million a day …
Mr Kambwili: You have to justify that.
Dr Musokotwane: … to put in the mining industry. In other words, instead of the mining industry putting money into the Treasury, the opposite was happening.
Mr Kambwili: Question!
Interruptions
Dr Musokotwane: I have the experience about these things. So, please, do not argue with me because you do not know.
Laughter
Madam Deputy Speaker: Order!
Interruptions
Madam Deputy Speaker: Order! The hon. Minister will avoid that by speaking through the Chair. Try to face the Chair, too.
Dr Musokotwane: Madam Speaker, I thank you for your guidance.
Coming out of that situation whereby the tax contribution was negative to the tune of US$2 million per day, the tax contribution has slowly been coming up.
In 2003, this was K6.7 billion, and I am just talking about Company Tax. In 2004, it was K8.5 billion. In 2005, it jumped to K101.3 billion. In 2006, this had risen to K160 billion. In 2007, it increased to K602 billion.
Madam Speaker, therefore, clearly, the conducive environment that the Government has been putting in place contributed to this rising growth that we have seen. It is not just because of the price, but because investment and quantities of copper production had gone in and this is expected to increase. Therefore, this is very important that as we move forward, we should take this point into account.
By 2007, it was clear that the Zambian Government, and the nation at large, was not satisfied with the contribution by the mining sector in terms of taxation. As my predecessor has just mentioned, teams were set up to study the matter and make recommendations.
Madam, I have gone through these recommendations and I would like to put it to you that the recommendations that were made were not exactly those that were put to this House. The documents are there to show that. In particular, two options were considered. The first one was to have variable income tax, which is what we are suggesting now. The other one was the windfall income tax.
Madam Speaker, the recommendations that were made then, were that we go ahead …
Interruptions
Dr Musokotwane: Let me state that the recommendations that were made in that report were not exactly what was presented to this House.
Interruptions
Madam Deputy Speaker: Order!
Dr Musokotwane: Without going into a lot of detail, all we are suggesting, now, is that the basic principle that obtained then, which is that we must have a fair share of income, is a principle we must adhere to. However, there are several ways of dealing with that. In our opinion, the variable income tax is more superior compared to the windfall tax.
Mr Kambwili: Question!
Interruptions
Dr Musokotwane: Now, let me go into the issue of why I am justifying this.
Madam, simulations were, indeed, made, as my predecessor mentioned, about the variable income tax. Those simulations were unfortunately were wrong.
Hon. Opposition Members: Then the Government misled us!
Interruptions
Dr Musokotwane: They were wrong in the sense that the costs of production that were assumed ended up being unrealistic.
Mr Kambwili: On a point of order, Madam.
Dr Musokotwane: Let me give a few examples.
Madam Deputy Speaker: Order! Mr Kambwili will sit down.
Mr Daka: Send him out!
Mr Kambwili: Icongo iwe, tawakwata na liver! [Shut up! You do not even have a liver]
Laughter
Madam Deputy Speaker: Order! I do not want to name anybody. Sit down and stop that talk. Let the hon. Minister talk freely.
Interruptions
Madam Deputy Speaker: Order! The House has debated and I am sure you have seen the patience of the Chair to allow people to speak on this matter so that they persuade one another. Now, you have to reach a point of decision because you cannot go on forever. Basically, the whole day has been spent on one item on the Order Paper. We have to appreciate that. Therefore, let us listen. A decision has to be taken one way or the other. Let the hon. Minister speak.
Dr Musokotwane: I thank you, Madam Speaker.
Interruptions
Mr Hachipuka: On a point of order, Madam.
Madam Deputy Speaker: Order! Somebody insists that there is a procedural infringement.
Hon. Opposition Members: Yes!
Mr Hachipuka: Madam Speaker, is this hon. Minister of Finance and National Planning in order to inform this House that the simulations that were done are incorrect when there is a paragraph in the report produced by your Committee which states that the Ministry of Finance and National Planning itself, the Secretary to the Treasury and his team, which included the Permanent Secretary and the Zambia Revenue Authority Commissioner General, stated very clearly that there is currently an investigation into the cost profile of three mines that they picked? It is there in your report. This is to ascertain the costs to produce a pound of copper in this country. They do not have it, but he is telling us that they do know that when, in fact, your report says that they are currently carrying out an investigation using a consultant. Is he in order to mislead this House?
Interruptions
Madam Deputy Speaker: Order! This is why the Chair is saying let us listen carefully to one another. Issues of simulation and wrong data can lead to an investigation. So, let us listen and see the end of what the hon. Minister is saying. In my opinion, he is admitting that there was something wrong in the data that was used – this is the understanding of the Chair – and it could lead to investigations. Therefore, can we listen carefully to the hon. Minister?
Interruptions
Dr Musokotwane: Madam Speaker, thank you for your guidance. Indeed, Madam Speaker, you are right.
Madam Deputy Speaker: Order! Do not qualify the Chair’s ruling. Just go on, whether right or wrong.
Dr Musokotwane: Madam Speaker, you are actually right in your interpretation.
Laughter
Dr Musokotwane: Madam Speaker, the simulation had the following problems: Firstly, at a time when the simulation was being made, nobody had anticipated that the price of petroleum would have risen to the level where all of us know it reached.
Secondly, in view of the fact that at that time, there was frenzy in the mining sector, equipment became difficult to find and people had to wait for things like tyres for almost a year. Geologists and other experts became very expensive because everybody was looking for them. Labour became expensive. In view of that, the simulated cost at that time ended up being very seriously under estimated. We can quarrel about the level and so on and so forth but the truth of the matter is that many of the major aspects of production in the mining sector did go up and no reasonable person can doubt that.
Madam Speaker, that being the case, when the simulations have been redone in the after event, it was discovered that the cost had gone up quite substantially. As a result of that, the cost of windfall tax does not consider the cost of production, like in most other taxes. You will find that for every incremental dollar as revenue that was being collected as a result of the increased prices, the marginal tax, or rather the incremental, was actually more than a dollar. At some point, the mining companies would pray that the price of copper should not go up any higher because they ended up losing money. This is the problem that we are trying to resolve this time by suggesting that we move away from this type of tax because it entails that at every moment, we must also be able to predict what the cost of production is going to be. Now, what kind of problems did this raise?
Dr Kalumba: On a point of order, Madam Speaker.
Madam Deputy Speaker: Order! There is a point of order being raised. It is generally agreed that there should be no point of order on the hon. Minister.
Interruptions
Madam Deputy Speaker: Order!
Let us keep the dignity of our House. Do not get used to unparliamentary behaviour because we will do that at our own peril and at the judgment of the people out there as to how we conduct business in the House. It is not for a person but for the House that we keep the dignity of the House. It must be a statement of a factual mistake or procedure.
What is it, hon. Member?
Laughter
Dr Kalumba: Madam Speaker, I rise on a very serious point of order and I rarely do so. I am a leader and I am sensitive to certain things that are being said on the Floor. Is the hon. Minister in order to undo Government position on the question of windfall tax when the Leader of Government Business in the House has told us that the Government is involved in mediation over the same issue and yet we are conceding faults in our own strategy on the Floor?
Hon. Opposition Members: Hear, hear!
Madam Deputy Speaker: Order! The hon. Member who claims, and I believe, is a leader listened to the statement of the Vice-President together with the Chair. The Vice-President appealed to the House that this is a different stage. This is the understanding of the Chair. He did not say that they have given up. He said that they will go on, according to his appeal, to pass through this stage, and then they will continue consulting. The hon. Member may not put that into the mouths of the Government. They will make a decision and you will make a decision. Let the hon. Minister continue and guide us on where to go.
Hon. Opposition Members: Boma yalala!
Dr Musokotwane: Madam Speaker, one of the biggest problems that we have faced as a result of this is that there were new shafts that were supposed to be sunk at Nkana Mine because this mine only has only four years of life remaining. The new shaft was supposed to extend its life to about twenty-five years. As a result of this, that has been suspended.
Madam Speaker, the concern of the Government, at this particular moment, is to ensure that the jobs of the people on the Copperbelt are protected. If we take measures that discourage this investment so that the life of the mine is extended, whose interests are we serving?
Interruptions
Dr Musokotwane: Madam Speaker, as far as the Government is concerned, our mines are with the people on the Copperbelt. We will do everything possible to ensure that their jobs are protected and the measure that we are proposing is something that promotes the sinking of these new shafts so that people can get into jobs. We have been told…
Mr L. J. Mulenga: On a point of order, Madam.
Madam Deputy Speaker: Order! Sit down, hon. Member.
Laughter
Dr Musokotwane: Madam Speaker, we have been accused of saying that we are denying the Zambian people revenues by changing tax regimes.
Hon. Opposition Member: Hear, hear!
Dr Musokotwane: Madam Speaker, let me state that this tax has been a problem from the middle of last year. It was passed in this House in April. However, from the middle of last year, it has been a problem. This is why although there was K560 billion estimated to be collected in the year on this tax, only K125 billion was collected.
Madam Speaker, I am not the one who failed to collect this balance. Those who are accusing us of making the Government and the people of Zambia lose, are the ones who failed to collect this tax.
Hon. Opposition Members: Aah!
Dr Musokotwane: Why, therefore, should they now turn around and say that we are putting the people of Zambia at a disadvantage when they, themselves, failed to collect this tax?
Hon. MMD Members: Hear, hear!
Dr Musokotwane: Madam Speaker, I think that it important to be honest about these issues so that we do not paint others, especially those who come after you, to be failures.
Hon. Opposition Members: Aah!
Interruptions
Dr Musokotwane: Madam Speaker, I think that it is important, particularly for my predecessor, to acknowledge that even during his period, this tax was a problem and I believe that there are so many others who acknowledge this fact.
Hon. Opposition Members: Aah!
Dr Musokotwane: This is why he failed to collect the tax.
Madam Speaker, I thank you.
Hon. MMD Members: Hear, hear!
Hon. Opposition Members called for a division.
Question that the Income Tax (Amendment) Bill, 2009, be read a second time, put and the House voted.
Ayes ─ (63)
Mr A. Banda
Mr I. Banda
Mr Bonshe
Ms Changwe
Mr Chilembo
Mr Chinyanta
Mr Chipungu
Mr Chisanga
Dr Chituwo
Ms Cifire
Mr Daka
Mr Hamir
Mr Imasiku
Mr Kachimba
Mr Kaingu
Mr Kakusa
Dr Kalila
Dr Kalumba
Ms C. M. Kapwepwe
Dr Kawimbe
Dr Kazonga
Mr Kunda
Professor Lungwangwa
Mr Machila
Mr Malwa
Mr Mangani
Mrs Masebo
Mr Mbewe
Mr Mbulakulima
Mr Mubika
Mr Muchima
Mr Mufalali
Mr Mukuma
Mr Mulonga
Mr Mulongoti
Mr Mulyata
Mr Munkombwe
Dr S. Musokotwane
Mr Musosha
Mr Mutati
Mr M. B. Mwale
Mr V Mwale
Mr Mwaanga
Mr Mwanza
Mr Mwapela
Mr Namulambe
Mr Ndalamei
Mr Nkhata
Mr Pande
Mr D. B. Phiri
Dr Puma
Ms Sayifwanda
Mr Shawa
Lt Gen. Shikapwasha
Mr Sichamba
Mr Sichilima
Mr Sikazwe
Mr Silavwe
Mr Simbao
Mr Sinyinda
Mr F. R. Tembo
Ms V. Tembo
Mr Tetamashimba
Tellers for Ayes:
Mr Mbulakulima
Mr Matongo
Noes ─ (54)
Mr C. K. B. Banda
Ms E. M. Banda
Mr Beene
Colonel G. Chanda
Mr P. P. Chanda
Mr Chazangwe
Mr Chisala
Dr Chishimba
Mr Chitonge
Major Chizhyuka
Mr Chota
Mr Habeenzu
Mr Hachipuka
Mr Hamududu
Mr Hamusonde
Ms Imbwae
Mr Imenda
Mr Kakoma
Mr Kambwili
Ms Kapata
Mr Kapeya
Mr Kasoko
Dr Katema
Mr Katuka
Mr Lubinda
Mr Malama
Ms Masiye
Mr Matongo
Mr Milupi
Mr Mooya
Mr Mukanga
Mr C. Mulenga
Mr L. J. Mulenga
Mr Munaile
Mr Muntanga
Mr Mushili
Mr Muyanda
Ms Mwamba
Mr Mwango
Mr Mweemba
Mr Mwenya
Mr Mwiimbu
Mr D. Mwila
Mr Ngoma
Mr Nkombo
Mr Nsanda
Mr Ntundu
Mrs Phiri
Dr Scott
Mr Sejani
Mr Sikota
Mr Simuusa
Mr Sing’ombe
Mr Syakalima
Tellers for Noes:
Ms Cifire
Mr Beene
Question accordingly agreed to and the Bill read a second time.
Committed to a committee of the Whole House.
Committee on Wednesday, 25th March, 2009.
Madam Deputy Speaker: Order!
(Debate adjourned)
The House adjourned at 1320 hours until 1430 hours on Tuesday, 24th March, 2009.