Government set to release $600m VAT refund to affected miners
According to a report by the Daily Mail newspaper on Wednesday, the government will start releasing the $600m in VAT refunds which has been withheld from mining companies which were failing to provide import certificates from destination countries where Zambian copper was being exported. The paper quoted the Minister of Mines who had said that some mining companies had stated complying with the requirement subsequent to which the Zambia Revenue Authority was instructed to begin working on repayment of the funds.
This impasse had led to some big mining players deferring as much as $1.3bn in capital expenditure citing “uncertainty in the tax regime” which was obviously a ploy to put pressure on the government. Mining players have put up billions of dollars over the last few years to expand their operation so one can say with a certain degree of certainty that they are not going away any time soon because of a few hundred million dollars! This comes in the same week in which findings of a forensic audit of Konkola Copper Mines (KCM) showed that the miner was insolvent and owed local contractors $59m. KCM is also locked in a legal battle against Brazilian contractor U&M Mining Zambia over a $43m dollar payment the contractor alleges it is owed. One can only laud the government for insisting on the compliance and not buckling under pressure (which hopefully they are not doing now!). This will clear up some uncertainty surrounding the mining sector as it enters into a crucial period over the next couple of years as copper output is set to exceed 1 million MT. However, will the miners win their fight against increased electricity tariffs?
Airtel set to roll out 147 LTE sites by year-end as it plays catch-up to MTN
Airtel is set to spend $80m to roll out 147 4G Long Term Evolution (LTE) sites by the end of this year. The rollout will initially be done in Lusaka and the Copperbelt. Airtlel’s Managing Director said that the service provider was “forced” to roll out LTE because of network challenges which it had been experiencing. The network challenges have seen Airtel lose subscribers which resulted in MTN surpassing them as market leader by subscribers in the first quarter of this year.
Zambia Breweries lays off 126 workers as sales volumes decline
Zambian Breweries is set to lay off 126 workers as a result of the increase in excise duty on clear beer from 40 to 60% in the 2014 national budget. The company increased the price of all the brands of beer it produces which led to a 19% decrease in sales volume. The company has been lobbying the Ministry of Finance to lower the excise tax – a request which will only be considered in the 2015 national budget.
Bank of Zambia to begin Open Market Operations amidst record high rates
Bank of Zambia will gradually begin Open Market Operations (OMOs) in a bid to counter record high interest rates. OMOs involve the buying and selling of government securities to increase or decrease liquidity in the banking system i.e. buying increases liquidity and selling decreases it. In an effort to counter the Kwacha’s sharp decline in the first half of the year, BoZ implemented a number of liquidity draining activities have led to an increase in interest rates. The interbank rate surpassed 25% this month and yields on 364 day t/bill increased to 22.95% in the latest auction from 20% prior to that. Maximum commercial bank lending rates also increased to 28%.
Trying to decipher this puzzle that is Zambia by using a variety of publicly available data (structured and unstructured) in conjunction with my own skill/experience. * * *