Swiss giant Glencore's lack of transparency means no silver lining for Zambia

We’re holding an olympic blog series these couple of weeks focussing on gold, silver and copper mining in resource rich countries as well as on gold, silver and copper mining companies.

Following Switzerland's wins Chris Jordan from Action Aid has blogged about Glencore's Mopani copper mine in Zambia and how secrecy means Zambians are not getting a fair deal for their resources. 

Over the weekend Andy Murray won a stunning gold, trouncing Switzerland’s Rodger Federer. While the Swiss get the consolation of their first silver medal of the games, Zambia remain rooted to the foot of the medal table.

While Zambians may take some consolation in the vast mineral wealth buried under its soils - which could be turned into medals aplenty - the sad fact is that the country simply isn’t getting a fair deal for the metals mined by multinationals.  The Swiss mining and commodity trading giant Glencore, which owns a majority stake in Zambia’s second biggest copper mine, is a case in point.

Despite operating the Mopani mine for over ten years, the operation is yet to declare a profit or pay any corporation tax in Zambia. In a country where two thirds of the population live below the poverty line and just £15 is spent on education for each child a year, the lack of tax revenues has a direct impact on lives of millions of ordinary Zambians.  Teachers aren’t hired, hospitals built or roads maintained.  

Even more outrageous is the evidence, which came to light last year, suggesting that Mopani may have been deliberately cooking the books to reduce its tax bill.  A leaked audit report commissioned by the Zambian government (which Glencore disputes) accused the company of various tax dodges, which would have enabled it to shift profits of Zambia and into the tax haven of Switzerland.

Based on the figures in the report, ActionAid estimated that Zambia could be losing up to £76 million a year.  That amount far exceeds the British aid budget in the country, which stands at £59 million.

The minister for mining believes that his country may be owed as much as $1 billion by mining companies. He was frank in his admission that "Once [the mineral] leaves, where does it go? We don't have a clue". 

The lack of international transparency means that overstretched revenue officials in Zambia struggle to investigate. Speaking at a recent ODI event, the Zambian vice president Guy Scott expressed his frustration with this – and the blind eye turned by many western governments:

“I’ve tried a lot of things (some of which I can’t even tell you) to get into the undergrowth and see what’s happening.  It’s not feasible because you’re not getting cooperation from Western governments and I think it’s something we ought to start pushing on, even though it’s going to take a long time to get progress on.  After all – you get tax evasion on a massive scale in Britain, so what are we supposed to do from Zambia?”

The Zambian government, pushed by energetic campaigners from local civil society, is continuing to try and crack down on tax dodging by companies like Glencore.  But without proper levels of transparency from tax havens like Switzerland, they’ll always be swimming against the tide.

So if we’re serious about enabling African countries to become independent of international aid, we have to crack the veil of secrecy provided by tax havens to multinational companies.  Only then will countries like Zambia be able to compete on a level playing field with the corporate giants in Switzerland.