FQM defiant, vows to trim workforce in protest of sales tax
By Staff Reporter
In what sounds like blackmail on the government, Solwezi-based First Quantum Minerals (FQM) has vowed to go ahead and reduce production at its Sentinel Mine immediately the newly introduced sales tax takes effect on April 1 next year.
Home affairs minister Stephen Kampyongo on Tuesday threatened to revoke work permits for expatriate mine workers if the mining companies carry out their threats of cutting over 21,000 jobs for Zambians due to the new tax hikes.
In the 2019 budget which parliament approved last week, the government introduced sales tax on the mines to replace value added tax.
But most mining companies in the country have threatened to downsize on their workforce.
In a staff memorandum later yesterday, Director of Operations Matt Pascall said the reduction in production would inevitably result in job cuts.
‘’Our major costs are: taxes; electricity; maintenance spares; reagents and consumables (diesel); and wages and salaries. We have very little control of the cost of taxes, electricity and diesel as these are set by the government – furthermore all of these have been subject to steady increases over the past 7 years, even where such increases are in contradiction to signed agreements,” Pascall stated.
‘’Once the new tax measures take effect it will no longer be economically viable to continue to run Sentinel’s operations at full capacity. It is with deep regret that the reduction in operational output will also lead to a reduction in employee headcount.
Pascall stated that following the announcement of next year’s budget, Kalumbila Minerals Limited conducted a thorough analysis of the budget’s impact on thesentinel mine.
He claimed a low grade of ore at Sentinel Mine at 0.5% copper, the lowest being mined in Zambia.
“Some of the comment has been that reducing employee numbers should be a last resort after all other avenues of cost reduction have been exhausted. We would like to assure all our employees that this is exactly the position taken by KML,” stated Pascall.
“However, the imposition of General Sales Tax on 1st April, which is likely to increase our costs by at least 20% on procured items, will necessitate the full manpower reduction to be in place by that date. Unfortunately, despite all efforts (not only by FQM but also the whole of the mining industry) to objectively and transparently inform decision makers on the inevitable consequences of the proposed measures, our message seems not to have been heard, and the tax changes have been implemented.”
Kampyongo said it is unfair that the mine companies want to ‘arm twist’ the government.
Mining companies have threatened to lay off more than 21,000 miners due to the new tax regime, which they claim was restrictive.
Kampyongo who sounded emotional on a Hot FM radio programme said, “government has economic experts who analyse the tax systems before implementation” but when the interviewer tried to clarify if this would chase away investors, Kampyongo interjected saying “no! let me speak, people need to know the truth because the mining companies are not telling the truth”.
