Ailing President Edgar Lungu sharply differed with Finance Minister Alexander of revisions on the mineral royalty taxes.
Highly placed sources at the Ministry of Finance and State House have revealed that Chikwanda was against any revision to the controversial mineral royalties because the PF government was totally bankrupt and there were no other revenue measures.
“Actually as things stand now, either Chikwanda may quit on his own or he maybe fired by Lungu anytime over the directive which Lungu unilaterally took with Deputy Finance Minister Christopher Mvunga who is Rupiah Banda’s drunkard boy favoured to over from Chikwanda. That’s why you saw that the announcement was made by State House itself instead of Chikwanda or the Ministry of Finance officials,” sources revealed.
Sources said Lungu may only delay or fear to fire Chikwanda purely for fear of the Bemba vote as he (Chikwanda) is regarded as the ‘God Father’ of the PF rule.
Lungu is also under pressure from the Rupiah Banda camp that wants to instal Mvunga as Finance Minister so that he gives them contracts.
Under pressure from mining companies, Lungu yesterday abandoned Sata and Chikwanda’s mining tax regimes and offered them the following options.
Option (a) Status quo but negotiate interim fiscal arrangements for operations that are most affected on a case-by-case basis;
Option (b) Identifying potential legal or regulatory modifications to the existing 2015 fiscal regime that could be readily passed and implemented;
Option (c) Defer implementation of the 2015 fiscal regime; and,
Option (d) Temporary re-instate the 2014 fiscal regime as a more amicable regime is negotiated.
Lungu also directed that the ministers use the current legislation and administrative procedures to ensure that mines that are facing severe challenges are assisted.
He called on all individuals and corporate citizens to comply with the existing tax laws.
But Chikwanda argued that none of the options were particularly good for the economy and Lungu with only a few months before elections.
Sources said Lungu’s measures are even worse given the poor fiscal position and PF’s spending commitments that have not been filled.
“Option A is tricky to implement because many mining companies may claim that they are facing funding challenges. There may also be legal challenges. The law does not appear to offer the sort of discrimination among mining companies that Option A envisages. In fact Option A would be the equivalent of returning to the Development Agreements that Zambians fought hard to get rid of.
Option B seems to be the easier of the four options. This could take the form of simply reducing the scale of the changes. It may be politically easier to sell this option as long as publicly it does not look like Lungu has abandoned what he promised voters.
The problem with Option B is that it may lead to a substantial reduction in projected government revenue that is so critical for funding PF’s infrastructural drive.
This option may mean abandoning some of the spending plans for 2016 onwards, more immediately emergency borrowing to fund the rest of the 2015 budget.
Option C has the same problems as Option B only worse.