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Markets

ActionAid Zambia has called on the Zambian government to consider cancelling or overhaul of unbalanced Double Tax Agreements – DTA or tax treaties with other countries saying Tax Treaties have recently not only been found to be unbalanced but also a source of tax evasion by most multinational companies, denying the host countries the much-needed revenue.

Zambia currently has DTA’s with Germany, Ireland, Norway, Sweden among other countries with no annual reviews or cost benefit analyses done and made public to check whether the country benefits or is on a net basis losing out. The DTA’s have been abused as a conduit for transfer pricing and “management fees” profit repatriation.

The Zambian Government recently cancelled its Double Tax Agreement with Mauritius and ActionAid has welcomed the saying it has for a long time been campaigning for cancellation and re-negotiation of problematic DTAs Zambia has with different countries and has been calling for revision and/or cancellation of regressive DTAs like the now cancelled Zambia and Mauritius DTA.

ActionAid Country Director Nalucha Ziba has told the Zambian Business Times – ZBT in an exclusive interview that the DTA between Zambia and Mauritius provided for 0 Percent Withholding Tax (WHT) on technical fees paid for technical services adding that with this provision, a Mauritius based Multinational Company, would take advantage of such provisions and not pay any WHT on technical services which is currently capped at 15 percent.

“For example, if this company engaged a sister company from Mauritius to provide technical services at a cost of USD100 million. This company when making this payment (USD100 million) to a sister company will not deduct any WHT. This implies that the entire USD100 million is untaxed. On the Contrarily, if the DTA provided for 15 Percent WHT on technical fees then USD 15 million would be deducted as Withholding Tax and remitted to Zambia Revenue Authority (ZRA),” She said.

Nalucha added that there is need for an impact assessment/cost benefit analysis to be done before signing is done and that the Zambian government should not follow the OECD model treaty but develop its own model.

She said government should also negotiate for favorable and/or fair DTA’s Withholding Tax rates (10%-15%) which will not only promote foreign direct investment but also ensure that government collects adequate tax revenue.

ActionAid has further suggested that all treaties should be re-negotiated transparently, and draft versions made available to the public prior to sign offs to ensure that the country benefits and remove opportunity for corrupt practices.

Nalucha has further disclosed that Zambia has signed DTAs with different countries such as Germany, Ireland, Norway, Sweden, Mauritius (now cancelled) to mention but a few and that a tax treaty will spell out how companies investing in a country that Zambia has signed a DTA with their country of origin should be taxed.

 

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ActionAid Zambia has called on the Zambian

Lifestyle

The development of the Northern Tourism Circuit has continued to receive lip service with more projects expected to strengthen the infrastructure and world class hotel service offering being either delayed or simply shelved.

For instance, the date of commencement of the construction of the Samfya hotel and resort expected to be financed by the workers compensation Fund Control Board – WCFCB is not yet set. This resort is expected to be a landmark and anchor development that would then support the development of side industries and smaller boutique hotels.

The Zambian Business Times – ZBT had received concerns that despite the hype and talk of developing the Northern Tourism Circuit, the construction of the Mosi-oa-tunya Livingstone resort based in the already more developed Southern Circuit has commenced while the Samfya beach resort is still on paper despite it having been on the cards for years.

When a check was done by ZBT, Workers’ Compensation Fund Control Board (WCFCB) Head of Communications and Customer Service Maybin Nkholomba confirmed in an exclusive interview that they are planning to build a hotel, shopping mall and international convention center but a market survey must first be done and concluded.

“At the moment, we have engaged a market consultant to do a market survey on what we are going to construct on the shores of Lake Bangweulu. We have tentatively planned to put up a hotel, a shopping mall and an International Convention Center”, he told ZBT.

In addition, he said that WCFCB is very impressed with the pace at which the project is moving and that the land was only given to them about two to three months ago.

“That project in fact is moving very fast, the land was given by the council 2/3 months ago, we first got interested to invest in Samfya after we attended the Luapula Expo. But we were looking for suitable parcel of land until we were given land some 2/3 months ago by Samfya township council and we have moved. We are receiving a lot of support from the provincial administration in Luapula and there is a committee in place that is expediting the development in Samfya”, he said.

Nkholomba further stated that the total cost for the whole project has not yet been ascertained because there is a consultant who is still doing a market survey. The estimation of the investment cost and development of the project will only be done after the market survey has been concluded.

“We cannot establish the cost now until the market survey has been done and the market survey will tell us exactly the kind of development to take there in terms of infrastructure, then we can be able to understand the actual cost. The market survey is done to understand the customer needs and what the region requires”, he said. He however stated that WCFCB is looking at delivering the project by next year.

Various stakeholders have indicated that the Northern Tourism Circuit development receives more lip service and nothing tangible is actually done on the ground. If you look at the expansion of the Mbala Airport, which was meant to house both military and civilian aircrafts, it has also been shelved, blocking the air transport option for high end tourist who are key customers for five star facilities.

In order to grow, diversify and jump start Zambia’s tourism offering, the development of the Northern Tourism Circuit has been on the cards for years. The current tourism master plan includes development of the Samfya waterfront and peninsula as well as the Kasaba bay and Tanganyika lake shore.

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The development of the Northern Tourism Circuit

Lifestyle

The confirmation that the treasury had released funds for clearing outstanding retirement, pension and retrenchment benefits for ex-Tazara, Zamtel and other government workers seems to have a different picture on the ground as some workers are now doubting if really these funds have been released.

An ex-Tazara worker John Chiufya, told the Zambian Business Times – ZBT that the ones handling the pension must provide updates and information as to why the payments of their packages is delaying so that they know what is happening.

I retired in 2013 from formal employment. Till date, I have not been given my money from my pension contributions from ZSIC. I just want to appeal to the government of the day to intervene in this matter because it seems like there is no one caring.

Furthermore, Chilufya said that the institutions that are handling the money should address the workers, keep them updated and let them know why its taking long to pay out the money when the treasury has confirmed disbursing the funds.

As you are aware, money has been released by government to pay off all retired employees. So, we should be addressed by NAPSA and ZSIC who are the custodians of the released funds. They should come and give us a statement, to show how much is due to us, so that if there is anything, we will know where to go. We need a well tabulated statement from the time one started work to when one retired.

Even though the K14 million has already been released, they do not know when they will be given their money.

Right now we are blank, we are in darkness. Apart from rumors, there is nothing I can tell you, there are just rumors as at now. And how we cope with life is that we depend on our creator, he gives us wisdom when he tells you to do something then you start doing it because if just fold your arms and do nothing, then you put your children to shame.

Chilufya says NAPSA and TAZARA have given the something but has not got anything form ZSIC and stresses that he has been contributing to ZSIC for a very long time.

When I retired, I was given something like leave days from the company and what we call golden handshakes and something from NAPSA, we were given. From TAZARA and from NAPSA, we were given something but from ZISC for pension, we never got anything.

He says he has been contributing to ZSIC pension from 1978 till 2013 and has not been given anything todate. “We were supposed to given something from ZSIC a long time ago, In my case I started contributing to ZSIC in September 1978 till 2013 June”, he said.

Even though they received something from NAPSA, he says there is still huge problem between them and NAPSA.

“We got from NAPSA but there is still a very big problem between us NAPSA especially those of us who retired in 2012 to 2014 we have a problem with NAPSA because what they promised us never happened. For example when we were given those small amounts from NAPSA, we were promised by the branch manager here in Mpika who said this money we are giving you is just a form of advance to cope with life as we are preparing your terminal benefits”.

He said that “when TAZARA remits the remaining amount, which its supposed to remit to NAPSA, then they will compute the monthly pension benefits. And when they start releasing the monthly pension, they will now start knocking out what they had given us or what they gave us last time. And when that was over, that’s when we were going to start enjoying the full monthly pension”, he said.

There is an urgent need for the government to clear the air on outstanding pension benefits for its former employees to restore a functional and self sustaining state pension fund. Responses from from ZSIC and Napsa were still being awaited by ZBT by press time.

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The confirmation that the treasury had released

Mining

The Association of Mine suppliers and Contractors – AMSC has expressed disappointment at Glencore owned Mopani Copper Mines – MCM decision to offer one-month contracts to all its contractors and suppliers following its insistence to place the mines under care and maintenance.

Placing the mines on care and maintenance is in effect considered as a closure as only few staff are retained leading to massive job losses. Mopani is the anchor company for two major mining towns in Zambia. One is Kitwe which is the second largest city in Zambia by population and the other is mufulira, both on the Copperbelt province.

Mine Suppliers Association president Augustine Mubanga disclosed to the Zambian Business Times – ZBT in an exclusive interview that Mopani had on July 20, 2019 written to the association suggesting to offer one month contracts to all its suppliers and contractors, pending the outcome of the appeal process against government’s second rejection for the mining firm to put its operations under care and maintenance.

Recently, Mopani received a notice from the Mines Development Department that it has rejected its proposal to suspend its operations pursuant to Section 37(2) of the Mines and Minerals Development Act (2015) (MMDA) and place its mines in Kitwe and Mufulira on Care and Maintenance.

AMSC president has bemoaned the impact that Mopani’s move will have on business as a result of terminating contracts adding that those employed by contractors will suffer the consequences as work will not be provided hence has urged the mining firm to become a good corporate citizen that will create confidence amongst its stakeholders as issues of trust are based on confidence levels created in the industry.

Mubanga added that government will also lose revenue from the collection of tax through mineral experts, contractors and suppliers and that employees will be affected most on family level.

“We are in business and long term planning is key, Mopani cannot just make decisions with short notice because this will affect our members who will not even be privileged to approach the Bank or financial institution because they will not lend you money based on monthly operations,” He said.

He said, given that copper prices on the market have started appreciating to about K6,500 per ton, it should motivate the firm to get into mining saying some boarders which closed due the Corona virus pandemic have as well opened, hence movement of goods is now facilitated.

Mubanga has since charged that Mopani should come clean about its consistent decision to close the mines saying the recent abrupt decisions can only be attributed to other unknown reasons and not the ones disclosed earlier.

Glencore, Mopani parent company was earlier in the year challenged to hand over the mining license if it had no interest in running the mine. The mine had also threatened to close the mine some time back after electricity tariffs were increased across board. The mine has also not made available its cost of copper mining per ton to help the market better appreciate its challenges in relation to copper market prices.

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The Association of Mine suppliers and Contractors

Sport

The Zambia Basketball Federation – ZBF has disclosed that they have lost out about K800,000 in gate taking and other auxiliary revenues due to Covid 19 restrictions.

Speaking in an exclusive interview with Zambian Business Times – ZBT, ZBF General Secretary Rodrick Ndhlovu reiterated that approximately K800, 000 has been lost in terms of gate takings.

“We could have started the league by end of March and this is July, so we have lost revenue for about four months, which is close to about K800, 000 in gate-taking revenue. Apart from that, we have lost affiliation fees from Associate members”, he said.

Ndhlovu also disclosed that the federation has also come up with a strategic plan to help the players stay fit and train on daily and weekly basis,

“We have put up some sort of mitigating plan to keep the players fit through our Technical Coordinator with his Technical Team and the National team coaches, who put up a plan with the players and gave them training regimes on what should be done on a weekly basis. And they have a monitoring mechanism to see to it that the players are sticking to those plans”, he said.

He also stressed that the Federation will follow the guidelines put by government as it’s for everyone’s benefit. The Federation Internationale de Basketball – FIBA, which is ZBF mother body, has also advised the federation to follow the guideline made by the local Authorities.

“As you may be aware, no one can operate outside government guidelines. With this COVID 19 situation, no one can supersede Country and Local Government guidelines. Meaning at FIBA, our mother body will say if you have start our league, you have to work hand in hand with your country and local government, as they say, we can recover economically and sport wise but we can’t recover lost lives”, he said.

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The Zambia Basketball Federation - ZBF has

Lifestyle

A Zambian micro-finance startup, Lupiya Loans, has raised a US$1 million funding from Enygma Ventures, a US based venture capitalist that was looking to invest into Sub-Saharan African startups.

Lupiya loans was short listed among other applicants and raised $1 million funding to help it continue to scale and roll out its services that ensure Zambians, especially women are able to participate in the economy through its financial inclusion strategy.

Lupiya loans Chief Executive Officer – CEO Evelyn Kaingu told the Zambian Business Times – ZBT in an exclusive interview that the company has so far attracted over 1,000 customers, shared in a ratio of 60% women to 40% men and is since glad that more women are accessing its products.

She said that the company which is now going into its third year of operation had prepared to look for outside funding in order to begin to scale up its operations and has set out to seek as many opportunities that would be available for it’s kind of business.

“We are a fintech start up that provides micro loans to individuals, small businesses and specifically women micro entrepreneurs. Our goal is to provide financial opportunity for many Zambians who do not have access to financial services to progress economically. We leverage technology to streamline our processes and continuously allow us to build more affordable products to target more market segments,” She said.

Kaingu has since urged small businesses to leverage social capital saying this can be obtained from family, friends, colleagues or networks with people engaged in platforms such as village banking. She said village banking has become an impactful platform to raise capital, hence effort should go towards setting up a business into a professional entity and trust worthy persona even with very little resources.

She added that the company remains excited about its future particularly its financial inclusion strategy to help a lot of Zambian have access to more financial services. “We look forward to working with SME’s and providing them with tailor made financing options, we are also yet to roll out a couple of new products via mobile money,” She concluded.

Zambian start ups have faced numerous challenges especially when it comes to raising capital but Lupiya has provided the much needed example. Village banking is now a big phenomenon in Zambia and participants can use it to initiate their ideas into a start up business which can then seek venture capital to scale. For more, email info@zambianbusinesstimes.com

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A Zambian micro-finance startup, Lupiya Loans, has

Companies

Tanzania Zambia Railway Authority (Tazara), was one company that got a huge chunk from the released K30 million meant for former Tazara, Zamtel and Zambia Railways (former Railway system of Zambia) workers released. Tazara got allocated K14 million from the total amount released, but even that is not enough to cater all the outstanding unpaid retirement benefits.

In a statement made available to the Zambian Business Times – ZBT on 20 July, 2020, Workers Union of Tazara (WUTAZ) General Secretary Julius Banda has asked for government to be more consistent in releasing funds as the money released only caters for about 9% of the total required amount. Only 334 former employees qualify to get the full pension from the guidance that has been shared.

This money is only 9% of the required amount to clear all the ex-workers, we appeal to government to be more consistent in the releasing of funds towards retirees. Beneficiaries that qualified for the full pension under the guidance given are only 334. However, Banda stated that despite the money being too little compared to the number of beneficiaries, it is a step in the right direction.

“All we are appealing is consistency and perhaps look at increasing on the amounts released so that the retirees’ and ex-workers end the suffering they are enduring as these moneys are long overdue”, he said.

In addition, he said that former workers that are to receive their funds through National Pension Scheme Authority (NAPSA) where given the go ahead to start claiming. But as for those workers under the Zambia State Insurance Corporation – Zisc Life Limited, a guideline on how they will make payments has not been communicated.

“For NAPSA, the retiree where asked to start claiming especially those that retired between 2010 and 2013. However, ZSIC has not yet availed us a road map on how they will start to pay, he said.

The issue of unpaid pension and retirement benefits seems to be a black hole for the government as there seems to be no clear roadmap on how this liability can be extinguished and handed over fully to be managed by specific pension funds. There is need to come up with a holistic solution and return the government pension system normalcy.

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Tanzania Zambia Railway Authority (Tazara), was one

Markets

The Energy Regulatory Board – ERB has disclosed that notable progress has been made on the Electricity Cost of Service Study being undertaken by Energy Market and Regulatory Consultant – EMRC despite the covid 19 pandemic. EMRC has do far successfully completed and submitted the Inception Report which outlines the roadmap for the study.

Energy Minister Matthew Nkhuwa had in December last year launched the Electricity Cost of Service study which will among other reports indicate the cost of electricity, undertake the load forecast and develop the system expansion plan to meet the future demand in an efficient and effective manner.

ERB Public Relations Manager Kwali Mfuni told the Zambian Business Times – ZBT in an exclusive interview that two stakeholder consultation workshops have so far been conducted in Lusaka and Kitwe and that draft reports on the second and third tasks have also been submitted.

She said the study which is set to be conducted within a period of one year has been made possible with financing from the African Development Bank – AfDB which will establish the cost of generating, transmitting and distributing power in the most efficient manner and translating the costs into the unit cost of energy for each customer category.

Mfuni said among the drafts submitted, one is the review of the market structure and conduct of the power sector including the Legal and Regulatory Framework while the other is the electricity load forecast. She added that it is worth noticing that EMRC is expected to submit reports on 12 tasks prior to completion of the Cost of Service Study and currently they have successfully submitted one report, while two reports are still in draft form.

“So far, ERB is happy with the stakeholder co-operation and wishes to commend institutions that have provided inputs towards the study specifically, the Bank of Zambia, Zambia Statistics Agency, Metrological Department, Department of Energy, ZESCO, Copperbelt Energy Corporation – CEC, Zambia Chamber of Mines, Rural Electrification Authority – REA, Maamba Collieries and the North-Western Energy Corporation,” She said.

EMRC is a UK based consultancy firm and was engaged at a total cost of about US$600,000. The Electricity cost of service study is expected to provide a paper on which future electricity policies and plans will be formulated. Tarriffs which are mostly cost reflective are also going to be analyzed with recommendations proposed.

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The Energy Regulatory Board – ERB has

Agribusiness

The Industrial Development Corporation – IDC has disclosed that it will invest K17 million (about US$1 million) to revamp the Mununshi Banana Estate in Mwense, Luapula province.

The estate went under shortly after being privatized to a local investor who is said to have had limited experience in management of Agro firms. Zambia currently has a banana deficit estimated at about 11,000 tons per annum which provides immediate advantages for local production.

IDC Chief Executive Officer – CEO Mateyo Kaluba disclosed to the Zambian Business Times – ZBT in an exclusive interview that the company is in the process of planting the first 50 hectors of banana’s and has so far directly employed about 40 people who are currently on the ground to execute work.

He said IDC decided to undertake this project due to the country’s serious deficit in Banana production of about 10,800 metric tonnes per annum, hence saw it fit to invest in bananas as part of the corporation’s agriculture portfolio push. Banana being a perennial crop has another advantage in that it takes on average 9 to 12 months from sowing to harvesting.

He added that expected production target per year for the revamp estate is 6,500 tons and that the corporation intends to push the hactares of bananas cultivation to 330 hactares and reach 730 ha in the next 3 years. The revamp Mununshi scheme will also offer an out grower scheme for people in the surrounding areas to enable the company be self-reliant and expand production creating business and employment opportunities for the local community.

“We are also going to take advantage of the export market particularly the Democratic Republic of Congo – DRC which is nearby and we are in the process of recruiting a qualified management team for what will now be called the Mununshi Fruit Company that will in the near future, see the company diversify into production of other fruits like Avocados. So, once the company is up and running, the new management team will begin to identify other fruits with high demand for both the local and export markets given that management skill, expertise and infrastructure will already be provided,” He said.

When asked whether the Mununshi Fruit Company will not take away market from existing private banana farmers, Mateyo told ZBT that the corporation will instead compliment what local farmers are already doing for both commercial and small and emerging farmers. The Mununshi Fruit Company will initially focus on plugging the deficit and intends to grow and contribute to making the country become self-suficent and later pursue export markets.

“We intend to export to the DRC especially that it has new entry routes and roads around the area to facilitate foreign trade, we have roads now between Luapula province and the northern Province from Kasama, so we expect that it will open up a serious export market for us and bring in additional foreign exchange,” He added.

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The Industrial Development Corporation – IDC has

Markets

The Zambia Statistics Agency – Zamstats has disclosed that the rebasing of Zambia’s Gross Domestic Product – GDP is still on the table as the Agency and other stakeholders are currently working on sourcing more funds to enable the agency undertake an integrated GDP rebasing approach.

The country is currently grappling with what some experts have described as adverse debt and debt service ratios due to among others, the long period of time taken to rebase or recompute the country GDP numbers. Zambia’s last GDP rebasing was done when now current largest copper miner – First Quantum Minerals was in its development stage, which is now the largest copper producer.

Zambias debt is where it is now, and solutions are needed to re-profile and find a path to debt sustainability. Even as the ministry of Finance has employed Lazard Freres as liability & Liquidity management advisors, periodic rebasing the GDP is a low hanging fruit that can be immediately be executed.

If for instance the GDP is rebased upwards, some of the adverse ratios that the Ministry of Finance and Zambia is grappling with such as Debt to GDP ratios, Debt servicing to GDP ratios and even the performance of revenue collection such as tax collection as a percentage of GDP would be enhanced.

As announced in the 2019 budget speech, government planned to commence the exercise of rebasing GDP in 2019 and complete the exercise by 2020, but Finance Minister Dr. Bwalya Nga’ndu said during an oral answer session in parliament on August 1, 2019 that the process of rebasing the country’s GDP was going to be postponed due to lack of resources.

And Zamstats Assistant Director Economics and Financial Statistics Joseph Tembo has said that the team is still waiting on donors who pledged to assist with the execution of the process saying currently, no much development has been recorded as Covid-19 pandemic has also contributed to the slowing down of the process.

Zamstats told the Zambian Business Times – ZBT in an exclusive interview last year’s that the agency had estimated the budget for GDP rebasing at US$2 to US$5 million, however the cost is likely to reduce depending on the resources available and the number of donors to come on board.

“We are currently in the process of engaging donors through the new normal as Covid –19 has disturbed a lot of things, so we need to revisit our plans and begin to engage stakeholder’s on the way forward because as things stand right now, we do not even know when these donors will make their donations because we have not engaged them hence we’ve opted to resume discussions in the new normal,” He said.

Meanwhile, he disclosed that African Development Bank is one of the donors that have shown interest in funding part of the phases of the project but that discussions have not matured hence still engaging with other parties. Tembo added that Zamstats in collaboration with Ministry of Planning and Development may consider using the Census to get the required information to rebase the GDP.

He however stated that it should be noted that things may not be possible considering that census is conducted on households while GDP rebasing deals with enterprises.

The rebasing of GDP is ideally supposed to be done every after 5 years in a bid to account for changes that have occurred in an economy over time. The rebasing provides government with information on the size and the composition of the economy, however Zambia last rebased its GDP in 2010 and the results clearly revealed that it was understated by 25%.

Experts have estimated that from 2010 to current year 2020, the Zambian economy has comparatively expanded and the GDP should definitely have followed the same trend. Regular GDP rebasing has gained prominence with some advanced economies rebasing their economies even annually, it is an important exercise that should not wait for donor funding.

The country GDP number used in coming up with key performance, debt and various other country ratios that are used by multilateral lenders and development finance organizations.

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The Zambia Statistics Agency – Zamstats has