This blog covers news, trends and opinions on health, water and business in Southern Africa with a special bias towards Zambia.
Friday, 11 September 2015
Tuesday, 4 August 2015
Tuesday, 28 July 2015
IDC Zambia to develop at least 600 MW of solar power
Predident Lungu |
By Mutale Kapekele
The infamous load shedding may become a thing of the past or
at least reduce should the development of two 50 MegaWatts solar power PV
projects funded by the International
Finance Corporation (IFC), a member of the World Bank Group, come to fruition.
The IFC has signed a memorandum of understanding with the
Industrial Development Corporation of Zambia to explore development of two 50
MegaWatts solar PV independent power projects in Zambia through the Scaling
Solar program.
The projects would be Zambia’s first utility scale PV
projects, providing competitively priced, clean power that would reduce
Zambia’s dependence on hydro resources and diversify the country’s energy
supply mix.
Zambian President Edgar Chagwa Lungu has directed IDC Zambia
to develop at least 600 MW of solar power in the shortest possible time to
address the current power crisis. IDC Zambia anticipates that the first two
projects, with a combined initial target capacity of 100MW, will create the
opportunity for subsequent expansion and the rapid scale-up in renewable energy
generating capacity in Zambia.
President Lungu, who is also the Board Chair of IDC Zambia,
said, “The Zambian government is resolved to address the current hydro power
shortages caused by low rainfall through active promotion and increased use of
renewable energy technologies.”
Low rainfall over the past year has resulted in a national
power generation deficit of about 560 MW. Scheduled power outages are already
having a negative impact on homes and businesses.
The proposed projects would be situated on separate sites
and developed by different private sector sponsors, based on open and
transparent selections. It is expected
that both projects would engage Zambian partners in the ownership structure.
The commercial structure is expected to follow IFC’s recently-launched Scaling
Solar initiative.
“IFC is developing this partnership with IDC Zambia to
deliver affordable renewable energy that can mitigate the country’s ongoing
energy crisis.” said Oumar Seydi, IFC Director for Eastern and Southern Africa.
“The Scaling Solar program enables us to apply the full range of World Bank
Group services to address Zambia’s challenges quickly and sustainably.”
IDC Zambia and IFC will seek to negotiate a formal advisory
mandate within the next few weeks, under which IFC will be appointed as lead
transaction advisor to IDC Zambia for the development of the projects. Once this mandate is in place, project
development will commence, with requests for prequalification expected to be
issued to prospective developers within three months.
The Industrial Development Corporation of Zambia is domestic
development finance institution wholly owned by the Zambian government,
incorporated in early 2014. IDC Zambia’s mandate is to play a catalytic role in
deepening and supporting Zambia’s industrialization capacity to support job
creation and domestic wealth formation across key economic sectors. The IDC
Zambia plays its role through evaluation, pricing and lowering the investment
risk profile by serving as co-investor alongside private sector investors. IDC
Zambia facilitates provision and raising of long term finance for projects.
Simultaneously IDC Zambia serves as an investment holding company for
state-owned enterprises and new investments that ultimately generates earnings
for the proposed Zambia Sovereign Wealth Fund.
Friday, 24 July 2015
International Conference on Financing Development - The Take Aways
William Mwanza |
William Mwanza, tralac Researcher, highlights seven key issues identified in the Addis Ababa Action Agenda
The Third International Conference on Financing for Development (FFD3) was held in Addis Ababa, Ethiopia, from 13 to 16 July, under the theme “Time for Global Action”. It was the first time the Conference was held on the African continent, after having been held in Monterrey, Mexico in 2002 and Doha, Qatar in 2008.
As noted in a previous discussion note (click here to read more), the Conference was held in the midst of some significant risks in the global economy. At the time the Conference was being held, efforts towards solving the Greek debt crisis continued in Europe, the Chinese Government reigned in with measures to halt steep losses on its stock market, and the price of brent crude oil had decreased by 10%, with forecasts of further decreases into 2016.
In spite of these prevalent risks in the global economy and in spite of initial failure to agree on a text in the drafting rounds of the outcome document, delegates to the Conference were able to agree on and adopt the Addis Ababa Action Agenda (AAAA). The framing of this outcome document is a noticeable departure from the ‘consensus’ reached in Monterrey, the ‘declaration’ issued in Doha, and the ‘Addis Ababa Accord’ as it was termed in the drafting sessions prior to the Conference. It signals the recognition and call for vigilance on the part of all UN Members so as to address challenges being faced in the global economy and in human development, with the main aim of delivering on the sustainable development goals (SDGs) to be agreed in September.
In line with this focus, Member countries recommitted themselves on a number of issues agreed in previous Conferences, as well as in new areas that are evolving and pertinent to the global development agenda. At the outset of the AAAA, a number of important issues for the global framework for financing development in the post-2015 era are highlighted, including delivering on social protection and essential public services; scaling up efforts to end hunger and malnutrition; promoting inclusive and sustainable industrialization; generating full and productive employment and decent work for all; protecting ecosystems; and promoting peaceful and inclusive societies. Of quite some significance to note was the welcoming of new initiatives for investment in infrastructure including the Asian Infrastructure Investment Bank, the Global Infrastructure Hub, the New Development Bank, the Asia Pacific Project Preparation Facility, the Global Infrastructure Facility, and the Africa50 Infrastructure Fund, as well as an increase in the capital of the Inter-American Investment Corporation. This was coupled with a call for the establishment of a global infrastructure forum, which would build on existing multilateral collaboration mechanisms and led by multilateral development banks (MDBs).
Prior to the Conference, these MDBs – including the African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, World Bank Group – and the International Monetary Fund had committed to extend more than $400 billion over the next three years towards financing the SDGs.
While it is not possible to detail all the specific issues covered in the AAAA, some aspects in the respective action areas of the AAAA are worth highlighting as follows:
1. Domestic public resources
As ultimately the most important source of national development, Members reiterated their commitment to strengthening mobilization and effective use of domestic public resources. Fairness, transparency, efficiency and effectiveness of tax systems, and the curbing of illicit financial flows were particularly emphasised. In this regard, Members adopted the Addis Tax Initiative declaration, through which they committed to step up technical cooperation in tax/domestic revenue mobilisation; enhance domestic revenue mobilisation so as to spur development; and to ensure policy coherence.
2. Domestic and international private business and finance
The role of the private sector in driving sustainable development in the post-2015 era was encapsulated in a call for businesses to apply their creativity and innovation in solving sustainable development challenges and to bring about more sustainable production and consumption patterns. The importance of remittances as a source of finance was acknowledged and a commitment was made to ensure that remittance corridors do not require charges higher than 5% by 2030. New sources of financing such as philanthropic giving and development-oriented venture capital funds were welcomed. Members resolved to adopt and implement investment promotion regimes for LDCs; committed to provide technical support for project preparation (particularly noting the AU’s Programme for Infrastructure Development in this regard); and also committed to substantially increase the share of renewable energy. In this regard, they welcomed the Secretary General’s Sustainable Energy For All initiative, Power Africa, NEPAD Africa Power Vision and the Global Renewable Energy Islands Network.
3. International development cooperation
Members noted an increase in official development assistance (ODA) since Monterrey and were particularly encouraged by few countries that have met or surpassed their commitment of providing 0.7% of their gross national income (GNI) as ODA and 0.15% to 0.20% of GNI as ODA to LDCs. However, they expressed concern that many countries still fall short of their commitments and reiterated that this fulfilment remains crucial. They welcomed the decision of the EU to collectively achieve its overall ODA targets within the timeframe of the post-2015 agenda, and its commitment to LDCs in the short term. Members recognized the increase in the importance of South-South cooperation and viewed it as a complement and not a substitute to North-South cooperation. They welcomed the Lima call for climate action and were encouraged by the commitment to reach an ambitious agreement in Paris in 2015. They also welcomed the initial resource mobilization process of the Green Climate Fund, encouraged MDBs to channel resources towards long-term infrastructure and green bonds among other areas, and also acknowledged the role of the Global Environment Facility in mainstreaming environmental concerns into development efforts.
4. International trade as an engine for development
Members recognised the approval of the Bali Package in 2013 as an important achievement but recognized that multilateral trade negotiations require additional effort. They called on members to fully and expeditiously implement all decisions of the Package. They reaffirmed their commitment to strengthening the multilateral trading system, while noting that Africa’s trade remains low in spite of progress by other developing countries. Members committed to strengthening regional cooperation and regional trade agreements as important catalysts for reducing trade barriers and enabling companies to integrate into regional and global value chains. They urged an increase in support for projects that foster regional integration, with particular attention to the process in Africa. Members committed to strive to allocate an increasing proportion of Aid for Trade to LDCs. They also committed to endeavour to craft trade and investment agreements with appropriate safeguards so as to not constrain domestic policies and regulation in the public interest. In this regard, they requested the UN Conference on Trade and Development (UNCTAD) to continue existing consultations with Member States on investment agreements.
5. Debt and debt sustainability
Members noted that there has been strengthened macroeconomic and public resource management over the years, which has led to a significant decrease in the vulnerability of most countries to sovereign debt distress. However, it was noted with concern that many countries still remain vulnerable to debt crises, while some countries – LDCs, small island developing states, and some developed – remain in the midst of crises. They called for the urgent solution to such crises, and reiterated the need for debtors and creditors to work together to prevent and resolve unsustainable debt situations. They welcomed the IMF-World Bank debt sustainability analysis framework and recognized the applicable requirements of IMF debt limits policy and/or the World Bank non-concessional borrowing policy. They also reaffirmed the importance of effective debt restructurings, which should restore public debt sustainability while preserving access to financing resources under favourable conditions. These were seen as important for enhancing the ability of countries to achieve the SDGs.
6. Addressing systemic issues
Members noted that they have become increasingly aware of the need to take account of economic, social and environmental challenges. They committed to take measures that enhance global economic governance with the aim of attaining a stronger, more coherent, inclusive and representative international architecture for sustainable development while respecting the mandates of respective organizations. They reiterated the importance of international coordination and policy coherence in the reform of the global financial system so as to continue building resilience and reducing vulnerability to international financial crises. Members also recommitted to increasing the voice and participation of developing countries in international economic decision-making and norm-setting bodies and strongly urged the earliest ratification of the 2010 reforms proposed in the IMF. They looked forward to the upcoming review of special drawing rights by the IMF and called on it to provide adequate financing to developing countries. Members also committed to cooperate on international migration with full respect for human rights and to combat money-laundering, corruption and financing of terrorism.
7. Science, technology, innovation and capacity-building
Members noted how new innovations and technologies are powerful drivers of economic growth and sustainable development. They committed to promote ICT infrastructure and to design and implement policies that will incentivize the creation of new technologies, research in and support for innovation in developing countries, and increase investment and industrial diversification. They decided to establish a technology facilitation mechanism which will comprise a multi-stakeholder forum, a UN inter-agency task team and an online platform. Members also looked forward to progress on a proposed Technology Bank and innovation capacity-building mechanism for LDCs.
In conclusion to the AAAA, members noted the importance of high quality data for policy making at all levels. They committed to enhance capacity-building in this regard to developing countries. They also resolved to integrate a dedicated follow-up and review process of the financing for development outcomes with that of the post-2015 framework. They encouraged the Secretary General to convene an inter-agency task force that would build on the MDGs Gap Task Force, and would report annually on progress in implementing the financing for development outcomes within the context of the post-2015 agenda.
On the whole the FFD3 was a successful Conference. Reflecting the amount of diplomatic efforts that went into the process, the outcome document that was adopted at its conclusion was measured in its approach to discussing specific threats to global economic cooperation and sustainable development, but comprehensive in the scope of matters covered and specific commitments that are pertinent to the process. Although concluded in difficult circumstances, it sets a platform for the adoption of the sustainable development goals in September, and for concerted efforts in attaining them thereafter.
Zambia Successfully Issues US$ 1.25 Billion Eurobond
NEW
YORK, Thursday, July 23, 2015 –
Zambia on Thursday successfully issued the targeted amount of US$1.25 billion
Eurobond for infrastructure development.
The Zambian team and representatives of Joint Lead Managers, Duetsche Bank and Barclays after Zambia successfully issued a US$1.25 billion Eurobond. PHOTO | CHIBAULA D. SILWAMBA | ZAMBIA UN MISSION |
The Eurobond, with a coupon rate of 8.97 per
cent, has an eleven-year average life with repayments in 2025, 2026 and 2027.
This issuance is in line with prudent debt
management practices of the Government of the Republic of Zambia that will
ensure a sustainable debt redemption profile.
The bond issuance that is in excess of two
times oversubscribed, demonstrates investor confidence in the economic
governance of country.
Finance Deputy Minister Honourable Christopher
Mvunga, who led the Zambian delegation, said this success demonstrates
confidence that the international financial community has in the leadership of
His Excellency, Mr. Edgar Chagwa Lungu and the Patriotic Front (PF) Government.
“As the case has been in the past, the funds
will be used in infrastructure related projects in the area of road, energy,
education, health, water and transport sectors in order to better the lives of
the Zambian people,” Mr. Mvunga said.
The Minister emphasized that the Government would
strictly adhere to the programmed use of the resources.
“The
fiscal consolidation measures outlined to the investors in the presentations
will strictly be adhered to,” he said.
Mr. Mvunga said this was an opportune time for
Zambia to issue bonds given the anticipated rising interest cost in the
international markets in the near future.
Despite a challenging capital markets
environment arising from global economic uncertainties, Zambia’s bond issue was
met with high demand from international investors allowing the country to lock-in
a competitive interest rate.
The Zambian delegation met over 60 fund
managers during the five-day road show in the United Kingdom and the United
States of America.
Mr. Mvunga committed that going forward, Zambia
will conduct annual investor meetings to ensure transparent communication of
the performance of the economy.
The delegation included the
Secretary to the Treasury Fredson Yamba, Special Assistant to the President
(Project Monitoring and Implementation) Lucky Mulusa, Permanent Secretary
(Budget) Pamela Kabamba, the Deputy Governor of the Bank of Zambia (Operations)
Bwalya Ng’andu and senior Government officials from the Ministry of Finance and
the Bank of Zambia.
Issued by:
CHIBAULA D.
SILWAMBA (Mr.)
First
Secretary for Press and Public Relations
Permanent Mission of the Republic of Zambia to the
United Nations
www.zambiaun.com
Mobile: +16462405430, Email: chibaula@zambiaun.com
Tuesday, 21 July 2015
SDGs present valuable opportunities for Zambia – Mvunga
By Mutale Kapekele
Finance deputy minister, Christopher Mvunga, says the timing
of Sustainable Development Goals presents a valuable opportunity for Zambia to synchronize
them in the Seventh Development Plan, which will take effect from 2017 to 2021
and is currently being formulated.
Christopher Mvunga - Picture by Chibaula Silwamba |
Mvunga was speaking when he delivered Zambia’s statement at
the 2015 Annual Ministerial Review (AMR) meeting, a segment of the UN Economic
and Social Council (ECOSOC) High-Level Political Forum on Sustainable
Development at UN Headquarters in New York last week.
The SDGs – a proposed set of targets relating to future
international development – will be adopted by Heads of State and Government to
replace MDGs at the latter’s expiration during the UN Summit for the adoption
of the Post-2015 Development Agenda to be held from 25 to 27 September 2015 in
New York.
Several speakers at the High-Level Political Forum called on
Member States to place greater emphasis on national planning institutions and
processes that could efficiently coordinate development programs.
Mvunga said the new global development agenda for
sustainable development should fully address the specific needs of all
countries in special situations such as Landlocked Developing Countries (LLDCs)
and Least Developed Countries (LDCs).
The Deputy Minister said SDGs accorded Zambia, and other
countries, a great opportunity to decisively deal with the “unfinished
business” carried over from the Millennium Development Goals (MDGs).
Mvunga said Zambia’s transition to the domestication of SDGs
would be based on multi-sectorial engagement of stakeholders, recognition of
the goals as universally applicable and promotion of partnerships in a transformative
manner.
He said Zambia’s development plans were premised on
promoting a sound macroeconomic management as a pre-requisite to attracting
investment, expansion of employment opportunities and creating fiscal space to
support infrastructure and human capital development.
Mvunga said the current sound macroeconomic environment, and
existing policy framework gives Zambia an avenue to translate growth into
tangible human development outcomes in an integrated manner.
As part of the Annual Ministerial Review, four countries –
Zambia, Kyrgyzstan, Mongolia and Philippines – will make National Voluntary
Presentations on their progress in implementing the internationally agreed
development goals, including the MDGs, and the transformation to the Post-2015
Development Agenda.
Zambia UN Mission Chargé D'Affaires Christine Kalamwina,
ministry of finance director of national planning Chola Chabala and principal
planner Pamela Kauseni accompanied the deputy minister to the meetings. Ahead
of the National Voluntary Presentation, Mr. Mvunga separately met and exchanged
views with US Mission to UN Acting Representative to the Economic Social
Council (ECOSOC) Ambassador Richard Erdman and Swedish Mission to UN diplomat
Daniel Pettersson.
Sweden and US will review Zambia’s presentation.
This is according to a statement made available
by First Secretary for Press at the Zambian Mission at the United Nations,
Chibaula Sil
OECD, UNDP to boost tax collection in developing countries
By Mutale Kapekele
A new initiative that will help developing countries like
Zambia to bolster domestic revenues by strengthening their tax audit capacities
has been launched by the Organization for Economic Cooperation and Development
(OECD) and the United Nations Development Programme (UNDP).
The Tax Inspectors Without Borders (TIWB) project, which
will help countries mobilize domestic revenue in support of the post-2015
Sustainable Development Agenda (SDGs), was announced on July 13 at the third
International Conference on Financing for Development in Addis Ababa.
Debt redden Zambia is one of the beneficiaries of the TIWB,
which will facilitate targeted tax audit assistance in developing countries
worldwide. Tax audit experts will work alongside local officials of developing
country tax administrations to help strengthen tax audit capacities, including
issues concerning international tax matters.
A number of pilot projects and international tax workshops
are already underway, including in Albania, Ghana and Senegal. Evidence
gathered from real time cases in Colombia indicate a significant increase in
tax revenue, from USD 3.3 million in 2011 to USD 33.2 million in 2014, thanks
to tax audit advice and guidance.
“The challenges faced by developing countries are being
acknowledged internationally and we are delighted to mobilize the best experts
worldwide in a practical contribution to domestic resource mobilization,” OECD
Secretary-General Angel GurrĂa said during a launch event in Addis Ababa. “The
new partnership between the OECD and UNDP on Tax Inspectors Without Borders
will significantly extend the global reach of existing efforts to build audit
capacity while sending a strong message of international support to developing
countries.”
And UNDP Administrator Helen Clark said "effective
domestic resource mobilization is at the core of financing for sustainable
development but efforts to raise domestic resources are often constrained by
tax evasion and avoidance, and by illicit financial flows.”
Clark explained that the Tax Inspectors Without Borders
programme is an “innovative and practical way of supporting developing
countries to mobilize more domestic resources for development.” She added that
with its country level presence and local knowledge, UNDP is well-placed to
partner with the OECD and the best audit experts to scale-up this important
work.
A dedicated central organizing unit, the TIWB Secretariat, supported
by an oversight board of stakeholders, will operate as a clearing house to
match the demand for auditing assistance with appropriate expertise. The
Secretariat, composed of OECD and UNDP staff and based at the OECD in Paris,
will facilitate full-time or periodic deployment of experts.
A TIWB Toolkit sets out guidelines for establishing TIWB programme
and protecting against potential confidentiality and conflict of interest
concerns.
Monday, 20 July 2015
African infrastructure investment top priority for continent - Prof Jeffrey Sachs
Prof Sachs |
Closing Africa’s infrastructure gap is a top priority in
order to put the continent on a path for double digit growth and sustainable
development. This is according to world-renowned professor of economics,
Jeffrey Sachs.
Last week, Zambia joined thousands of delegates who
assembled in Addis Ababa, Ethiopia to set the new financing architecture for a
new global partnership. The event themed “Unlocking Public and Private Capital
for African Infrastructure” was organized by the New Partnership for Africa’s
Development (NEPAD) Agency and Sustainable Development Solutions Network
(SDSN).
“There is no choice, Africa needs 10 per cent per year of
economic growth in the next 15 years,” Professor Sachs said. The only way to
achieve this, according to him, was to focus on large-scale investments in
trans-national infrastructure projects in power, roads, broadband, and other
core regional infrastructure needs.
Sachs, director of the SDSN and Special Advisor to UN
Secretary-General Ban Ki-moon on the Millennium Development Goals, spoke on the
side-lines of the Third Financing for Development Conference in Addis Ababa,
Ethiopia. Thousands of delegates have descended on Addis Ababa to set the new
financing architecture for a new global partnership.
For Africa to realize the 2030 timeframe, Sachs, urged the
global community to rally around the NEPAD agenda, as the continent’s strategy
for implementing cross-border infrastructure projects. “We need to help support NEPAD achieve its
goals”, he said.
Africa needs more of such projects |
The NEPAD Agency has identified Africa’s most important
infrastructure needs within the context of the Programme for Infrastructure
Development in Africa (PIDA), which provides the framework to implement 51
priority programs and projects in the sectors of energy, transport, broadband
and trans boundary water.
Speaking on the issue of how to crowd in investment, Sachs
encouraged African economies to forge partnerships with East Asia, tap into
capital markets and strengthen continental bodies such as the NEPAD Agency and
African Development Bank.
Chief Executive Officer of the NEPAD Agency, Dr. Ibrahim
Mayaki, highlighted that Africa’s challenge was not a lack of resources, but a
lack of bankable projects. “We need to invest in the capacity to invest”. It is
about proposing structured projects, he said.
Mayaki mentioned the complementary instruments that have
been developed to build the necessary capacity for early-stage project preparation
and the Africa50 Fund to finance the implementation of PIDA and other regional
infrastructure projects.
Mayaki also underscored the important role of Regional
Economic Communities in providing the enabling environment for project
implementation, through harmonized policies and regulatory frameworks.
The best way for Africa to achieve its infrastructure goals
was to tap into a Global Infrastructure Investment Platform (GIIP), he said.
The objective of GIIP was to put forward an ambitious proposal that would allow
long-term investors to ramp up their infrastructure asset holdings, with an
allocation target of up to 10 percent of assets under management over a 15 year
horizon.
The event brought together leading representatives from the
private and public sector, as well as global think tanks.
The NEPAD Agency, SDSN, UN Conference on Trade and
Development (UNCTAD) and Washington-based think tank Brookings Institution,
agreed to set up a working group that will move Africa’s regional
infrastructure financing agenda forward.
Illicit Financial Flows: How money is syphoned out of Zambia
By Mutale Kapekele
‘The mines do not pay enough tax. Multinationals are
hemorrhaging money from the economy.’ Those are comments we hear every day.
It is true that ‘common’ Zambians pay more in tax than some
of the big organizations. This is mainly due what the world has come to know as
illicit financial flows.
By definition, illicit financial flows, in economics, refers
to a form of illegal capital flight and occurs when money is illegally earned,
transferred, or spent. This money is intended to disappear from any record in
the country of origin, and earnings on the stock of illicit financial flows
outside of a country generally do not return to the country of origin.
According to a new report from an African Union and Economic
Commission for Africa panel chaired by former South African President Thabo
Mbeki, more than US$50 billion is estimated to leave the African continent due
to corporate tax evasion, corruption, and criminality.
The outflow dwarfs the amount of official development
assistance entering the continent. The problem is coupled by aggressive profit
shifting tactics utilized by multinational corporations to avoid taxes in the
resource rich countries where they operate.
And according to the Global Financial Integrity (GFI) research,
US$991.2 billion was funneled out of developing and emerging economies through
crime, corruption and tax evasion in 2012 alone.
In Zambia, reports by ActionAid published in 2011 and 2013
examined the tax practices of two of the world’s largest food and beverages
multinationals. The results left bitter tastes in the mouths of many Zambians.
ActionAid zoomed in on Zambia Sugar, a subsidiary of the
Associated British Foods (ABF) group, which produces staple brands like Silver
Spoon sugar, Kingsmill bread, Ryvita and Patak’s, and also owns clothing chain
Primark.
ActionAid’s investigation found that ABF’s Zambian
subsidiary used an array of transactions that have seen over a third of the
company’s pre-tax profits – over US$13.8million (Zambian Kwacha 62 billion) a
year – paid out of Zambia, into and via tax haven sister companies in Ireland,
Mauritius and the Netherlands.
“Some of these transactions reduce Zambia Sugar’s taxable
profits, while the structure of others avoids the Zambian taxes ordinarily
levied on treaty between Zambia and Ireland, which prevents the Zambian
government from charging any of the tax that would normally be levied on the
interest payments made on these loans. Order a tax-free takeaway: Zambia Sugar
is able to send profits back to its parent company, Illovo Sugar Ltd, nearly
tax-free by re-shuffling the ownership of the company through a string of
Irish, Mauritian and Dutch holding companies, taking advantage of tax treaty
loopholes and tax haven regimes to cancel tax on its dividend payments.”
A similar report produced two years earlier, revealed how
SABMiller, the world’s second largest beer producer, whose brands include
Grolsch, Peroni and Miller, and African beers Castle and Stone Lager, was
siphoning profits out of Zambia and other developing countries and parking them
offshore.
SABMiller’s companies in Zambia include National Breweries,
the producers of Shake Shake and the Zambian Breweries, the brand owners of
Mosi Larger among other products.
The two institutions rejected ActionAid's interpretation of
their business structures and denied that involvement in aggressive tax
planning in any part of their operations.
According to the Global Financial Intelligence, despite
growing awareness, developing countries lose more money through illicit
financial flows (IFF) than they gain through aid and foreign direct investment.
GFI reports that IFFs are continuing to grow at an alarming rate of 9.4 percent
a year.
Raymond Baker, GFI says IFFs continue to grow because it
remains so easy to do. “We have not turned the tide on the ease with which
money can be shifted out of developing countries.”
There are lots of ways to get money out of a country undetected
but the easiest is through trade misinvoicing, which is the overpricing of
imports and the underpricing of exports – and accounts for “77 percent of all
illicit financial flows.”
“Suppose you live in Cameroon,” says Baker, “and want to get
money out. As an importer, you ask your supplier abroad to increase the price
by 20 percent and invoice you for 120 percent. When you pay, that extra 20
percent is put into an account for you.”
The practice works in exactly the same way for exports: an
exporter sells a product for less than it’s worth (50 percent) so that the
balance of its true value (the remaining 50 percent) is paid into a foreign
private account instead.
As these flows by their very nature are intended to be kept
secret, GFI combs through balance of payments data that governments submit
every year with the International Monetary Fund. They also look for gaps in
trade statistics: “If Cameroon says it exported US$100m to France but France
says it imported $300m, then exports have been underpriced by US$200m,”
explains Baker.
Advising its clients on how to avoid transfer pricing audits
by the Zambia Revenue Authority, the accounting firm PricewaterhouseCoopers
(PWC) gave three examples of business practices which were likely to be
questioned.
These included procurement of management and financial
services from related parties (companies in the same global group) and also
buying goods from related companies.
On management services PWC advised companies to watch out if
their “management services were provided from a low tax jurisdiction such as Mauritius
or Bermuda. PWC also advised that the ZRA raises a red flag on “loss making
companies, management fees based on turnover of the local company, or a
fully-fledged local operation that does not warrant provision of management
services, lack of evidentiary support of provision of management services and
lack of evidence of benefit derived by the local company from such services.”
On procurement of goods, PWC advised that ZRA pounced on
companies whose goods recorded “loss gross margins as compared to industry
averages, purchase of goods from low tax jurisdictions, loss making or bulk of
cost of sales made up of related party purchases. The other red flag mentioned
was the “absence of evidence of the arrangements between the vendor and
purchaser such as written agreements and transfer pricing documentation.”
For financial assistance, PWC advised companies to avoid
“thinly capitalizing local companies, contracting related part high interest
loans rates as compared to the market, financial assistance provided from a low
tax jurisdiction and high guarantee fees as compared to the market.” The other
advice point was “absence of evidence of the arrangements and transfer pricing
documentation.
“Where your company has cross border transactions with
related parties, it is highly recommended that you begin the process of
compiling transfer pricing documentation in preparation for audits by the ZRA,”
advised PWC.
From the advice provided by PWC, it is clear that there are
legal loopholes that can be employed to avoid ZRA audits. The same is true when
it comes to avoiding tax.
Avoiding tax using legal provisions is not a crime in Zambia
but the practice is immoral and deprives the country of the much needed
resources for economic growth.
Zambia is not the only affected country as IFFs have a
global face. This is a complex issue that will take a long time to end and
everyone should stand up to those involved.
Conservation Farming Pays
http://conservationagriculture.org/uploads/pdf/Conservation_Farming_Pays_-_Grey_Mweemba.pdf
Friday, 17 July 2015
Government stops import permits for poultry products without PAZ nod
By Mutale Kapekele
Given Lubinda |
The ministry of agriculture will not issue any import
permits for poultry products without consulting the Poultry Association of
Zambia (PAZ), Given Lubinda has directed.
Lubinda, who is agriculture minister, made the directive
during the official opening of the 2015 PAZ Annual General Meeting that took
place on Friday 19th June in Lusaka.
He said poultry imports will not develop the country and
that it will destroy local industry. Lubinda tasked the PAZ to monitor any
suspicious imports of poultry products and alert the ministry for action.
On the importation of Mechanically Deboned Meat (MDM),
Lubinda informed members of PAZ that his ministry will engage the ministry of
finance and Zambia Revenue Authority (ZRA) to develop specific codes for
identifying MDM and avoid confusing the commodity for chicken.
He also disclosed that his ministry was currently engaging
with chain stores to buy poultry locally in order to protect local farmers.
Speaking earlier, Zambia National Farmers Union president,
Dr Evelyn Nguleka and appealed to the Government to address the issue of cheap
poultry import, which said had the potential to destroy the local poultry
industry.
On the issue of poultry statistics, the Lubinda urged
players in the poultry sector to ensure that they provided the Government with
transparent and accurate statistics in order to inform policy formulation.
The Minister also announced that his ministry was working on
the Livestock Development Bill with poultry regulations as well as import
protocols.
Subscribe to:
Posts (Atom)