ZAMBIA's road map to promoting transparency and accountability in the management of its oil, gas and mineral resources is to be implemented under the Extractive Industries Transparency Initiative (EITI).
EITI is a global initiative launched in 2002 and endorsed by 27 nations across the world for promoting greater responsibility and clarity in countries rich in oil, gas and mineral resources.
The initiative is meant to publish all material payments made by extractive companies which include mining firms to Government and all revenues received by the State from those companies in order to come up with a reconciliation report.
The move will in the long run help settle down the dust raised by stakeholders concerning Zambia's mining sector's contribution of taxes and royalty payments made to the Government in turn making the system more transparent and accountable.
The report will reunite all payments collected by Zambia Revenue Authority (ZRA), local authorities, Zambia Consolidated Copper Mines-Investment Holdings (ZCCM-IH) and other Government agencies from the mining firms including small scale miners.
According to EITI administrative officer Kaonga Mazuba, the reconciliation report would make the public aware on the mining firm's payments to the State and later be able to question companies that are either contributing more or less.
"There has been an outcry from both the Government and stakeholders that this mining firm is paying so much and this one is paying less even on the royalty taxes that were removed we had a general concern but the beauty about this report is that it will reconcile all revenues collected by the Government and its agencies within a stipulated period," he said.
For example, Zambia is in the process of preparing the first reconciliation report that targets the 2008 financial year.
The report will be reconciled based on the audited data for all mining firms.
EITI will first target large scale mining firms because they already have audited reports as compared to small scale miners.
Mr Mazuba said all extractive industries become participating companies and once companies start extracting oil and gas they would be included under the petroleum sector.
The EITI will also act as a forum for dialogue between Government and companies operating in Zambia and provide a platform for border reforms.
Zambia Extractive Industry Council vice chairperson Sixtus Mulenga said the role of mining companies in the implementation of EITI would be to provide the required information and strengthen the partnership between Government and civil society.
This will promote a transparent business environment which reduces corruption and help create the culture of accountability in conformity with international best practices.
Consequently, all stakeholders will best understand how mining companies operate as well as provide leadership towards achieving the overall objective.
"The commitment to EITI process was shown by the signing of the Memorandum of Understanding (MOU) by the chamber of mines, Government and civil society where we agreed to work together to achieve a greater transparent system in the management of our oil, gas and mineral resources,"Dr Mulenga said.
He said Zambia would be able to attract more investment in the mining sector both local and foreign mining companies.
Between 2000 and 2010 mining companies have contributed investment worth over US$4 billion from green field projects such as Luwmana mine, Kanshanshi Copper mines, Konkola Deep mine, Nchanga smelter, Mufulira smelter, Mopani Copper mine and China Non-Ferrous Metals (NFC).
"We have seen the diversification of mines from the Copperbelt to non provincial areas such Southern, North-Western, Western and Luapula provinces," he said.
The country has also witnessed in boom in copper production from 250,000 tonnes in 2000 to 650,000 tonnes in 2009 with projected increase of one million tonnes per annum and beyond by 2014.
Zambia's foreign exchange reserves would increase while at the same time mineral exploration activities in all provinces will likely rise once the EITI process was fully implemented.
For example, in 2009 more than 100 million was spend on exploration activities in the country making it the most preferred destination for investment.
Commenting on how the EITI would address some of tax system in respect to mining companies, Dr Mulenga said as per norm and international best practices tax are supposed to be paid on profit not on revenue.
He said the abolished windfall tax was literally tax based on revenue which was contrary to international best practices.
Here in Zambia we have different tax regimes which are subjected to mining firms such as mineral royalty, variable tax, property rates and ground rates and carbon emission tax, customs, import duty.
All these will be included when coming up with the reconciliation report.
Companies targeted for EITI evaluation include Konkola Copper mine, Mopani, First Quantum Minerals Limited, Chibuluma Metals, China Non-Ferrous Metals (NFC), Luanshya Copper Mines, Ndola Lime.
Gemstone mining companies are Grizzly Mine,Kariba Minerals and Industrial Mining Companies, Lafarge Cement, Oriental quarry, Maamba Collieries,Collum Coal mine,Lumwana mine PLC and Albidon Mine.
Dr Mulenga who is Tranter Zambia chief executive officer said his company will also be reconciled based on the import and custom duty contribution as well as property and ground rates.
Mines and Mineral Development Permanent Secretary Godwin Beene said Zambia attained candidate status in July, 2009 after fulfilling the required EITI conditions and committed itself to work with civil society and private sector (mining companies) to implement the initiative.
Commenting on the small scale mining companies, Dr Beene implored small scale miners to start running mining as a serious business in that they can be credited for auditing.
"We will ensure as Government to bring the small scale miners as well as gemstone miners to a level where they can be audited so that they can be reconciled but at the moment our focus is on large scale mining before we incorporate them," he said.
Zambia is in the process of recruiting a legal consultant to carry out a legal review to identify and address legal impediments in the implementation of EITI.
"We are preparing for the first reconciliation report on company payments and incomes from the Government and we will also engage a consultant to conduct the validation process," he said.
Validation is a participatory evaluation, assessing progress and compliance with the EITI global standards.
Dr Beene said Zambia had already started the validation process which was aimed to provide an independent assessment of the progress achieved by implementing countries like Zambia.
The validation report looks at the process on whether the country followed the right steps and what measures they may need to take to make better and enhance progress on accountability.
For countries that have fully implemented EITI (compliant countries), validation will serve to provide an assessment of their ongoing fulfillment of all the EITI criteria Dr Beene explained that the validation was not an audit because it does not replicate the work of the extractive industries transparency initiative.
Should a company fail to complete the self assessment form, the validator will indicate this in the validation report, and include in the report any relevant information on the company that is in the public domain.
