Editorial Comment: A single account, a single objective

29 Jun, 2014 - 06:06 0 Views

The Sunday Mail

Mining has been driving economic growth in Africa for decades and the spectacular progress much of the continent has been making in the 21st century is directly attributable to the ever- growing demand for raw materials by the two largest countries in terms of population, China and India.
These Asian giants are moving towards taking their rightful positions in the global economy, and they have an immense appetite for resources.

Zimbabwe has benefited from this growth, with platinum production moving from zero to a major industry, with the discovery of the huge diamond fields of Marange, with the continuing production of gold, and with the potential growth in mining more traditional minerals such as coal, iron and non-ferrous metals.

But the benefit has not been as great as expected.
One problem has been that no one really knows just how much Zimbabwe makes from mining, and just how much the State, in the sense that the State is the people of Zimbabwe, can expect as its share of this growing wealth.

Wild estimates, little more than guesses, abound along with suspicion that not all mineral wealth is accounted for and that too much of what is earned is sticking to fingers of miners and their backers instead of the proper share being paid to the State.

Now Government is moving decisively to untangle the mess of up to six agencies and ministries collecting State revenue from mining.
A single account, under the control of the hard-hearted staff of the Zimbabwe Revenue Authority, will hold all the money raised from royalties, licences, taxes, dividends, marketing commissions and the like.

And we expect that Zimra, with its powers to investigate accounts of all entities, legal persons, companies and corporations, will be able to calculate just what everyone involved in mining is supposed to pay and ensure that they will pay on time.

For the first time everyone will know just what wealth mining is producing and just what percentage of that wealth is collected by the State.
Certain advantages are immediately obvious.

Government wants to use its mining income to fund capital projects, basically the development of infrastructure, which is a fundamental function of any administration.

This makes sense.
Ordinary taxes, from sustainable economic activity, can then be devoted to running the country, paying civil servants and maintaining what we have.

The income from non-renewable resources, and minerals can be used to build the infrastructure — economic and social — that we need to make the sustainable economy grow without serious limits.

This is the money we need to build power stations, upgrade our road network, construct dams, ensure our children have schools and training colleges, and see to it that our ill people have hospitals.

With all of those things in place, Government can watch the sustainable economy grow and, through reasonable taxes, have enough income to maintain all the services required at fair cost.

Much of the required capital development can be accelerated if the Government can assure those who lend development funds at very low interest rates that we can in fact pay back these special loans.

A single account makes it easy to see how much of the income can be securitised, that is used to fund long-term projects, and what can only be used in the good years.

In addition, Government’s economic planners in general, and the Finance Minister in particular, can be far more flexible in how they tax mining income.

Several countries, with Australia in the lead, have found accurate figures very useful in this regard, having basic royalty and tax rates that apply in all years, along with automatic extra royalties in the very profitable years and special tax concessions to keep the mines alive in recessions.

Considering that criticism of the present system, and allegations of mismanagement of mining income, have come from right across the political spectrum we cannot see any problem with Parliament unanimously approving the basic concept.

Share This: