African governments and Zambia’s new dawn government in particular may have a lesson to learn from Central American negotiation skills after the confirmation that the Panama government has secured a minimum of $375 million per annum from First Quantum Minerals – FQM.
In a note shared with the Zambian Business Times – ZBT, has announced that its Panamanian subsidiary, Minera Panamá, S.A. (“MPSA”), has agreed and finalized the draft of a concession contract (the “Proposed Concession Contract”) with the Government of Panamá (the “Government”) for the Cobre Panamá mine.
The Proposed Concession Contract entails payment by FQMs MPSA of $375 million plus an additional $20 million to cover taxes and royalties up to the year end 2022 as well as payment by MPSA starting in 2023 of an annual minimum contribution of $375 million in Government income, comprised of corporate taxes, withholding taxes and a profit-based mineral royalty of 12 to 16 percent, with downside protections
And in respect to safeguarding public interest and respect for non state actors and national stakeholders and unlike the situation in Zambia were public deals are negotiated in secrete, the proposed Panama – FQM Concession Contract is subject to a 30-day public consultation process and approvals by the Panamanian Cabinet, Comptroller General of the Republic and the National Assembly.
Tristan Pascall, Chief Executive Officer, said, “After a lengthy and arduous negotiation process, the finalized Proposed Concession Contract outlines the basis for the future of Cobre Panamá for all stakeholders, including the Government, our investors and the country of Panamá.
In Zambia, government instead of negotiating for getting maximum benefits, Minister of Finance Dr. Situmbeko Musokotwane opted to make mineral royalty tax – MRT tax deductible resulting in an annual revenue loss of between $150 million to $200 million per annum adding up to about $1 billion in five years.
With $375m minimum annual revenues, Panama will recoup about $2 billion in five years. The Zambian government should also consider adopting wider public consultation when handling huge public deals especially if their impact goes beyond a five year time horizon.
