Primax Consultancy and Research

05/04/2023

CAREER LIFE
You graduate with a Diploma then you are told you need at least a Degree to be considered. 3 years later you get a Degree and only to be told you now need a Masters to be considered. You enroll for a Masters and graduate 2years later only to be its now a Doctorate.
Life continues on the basis of existence and existence thrives on knowledge gained through learning while you build a skill through training. When you stop learning then you cease to exist and your space is taken.

24/07/2022

Research identifies the problem and attempts to seek to find solutions. Modern research borders on business and behavioural change.

20/07/2022

Research is the greatest solution to Society 's problems

03/06/2022

ECONOMICS OF COPPER
Raw form
1. Tonne of copper fetches around $10,000 (K175,000) in raw form
2. The mining company may declare a 20% profit which is $2000 (K35,000)
3. The Zambian government collects a 30% tax and K10,500 goes to Treasury

Added value
1. Suppose we make electric cables and a 50mm 1 metre cable requires 3.72 grams of copper
2. 1 tonne of copper can make 268 metres of cable
3. A cable per metre is $3.30 and 268 metres yields $88,709 (K1,552,419.35)

In summary
1. Export in raw and get K10,500
2. Add value and get K1,552,419.35
3. The net loss is (K1,541,919.35)

We are practically giving away our minerals.

09/02/2022

MONTHLY FUEL PRICE ADJUSTMENTS
1. Fuel is one commodity we do not produce but import and very critical to the operation of the economy.

2. It's price is determined by the purchase price from suppliers which is in USD, transport, Mark- up on the wholesaler and oil marketing companies such as Puma, Total, Engen among others

3. This means that the real price will adjust according to the performance of exchange rates which fluctuate daily. There are two prices i.e. actual and real price. Actual price is the price that you would buy the commodity while the real price is one that takes into account of all costs for example last year the actual price was around K16.5 and the real price at K24

4. Government has adopted a 30 days price review mechanism from 90 days which has merits and demerits.

5. The merits include the use of a real price such government does not have to look for extra resources to add on bulk purchase when the purchase cost increases as users would pay for it. Our policy is that fuel can only be adjusted when costs fluctuations deviates from the 2.5% margin or tolerance limit which means if the exchange rate appreciates, transport, purchase price reduces the quantity of kwacha government needs to buy dollars to pay for fuel to a level of 2.5%, then fuel is reduced or on the contrary increased accordingly. We all benefit immediately than waiting for 90 days to review the price.

6. It would also make sense that oil contracts run for 30 days or 90 days with a clause to adjust prices when fundamentals change. Previously, the public would complain that prices on the world market would reduce but in Zambia we wouldn't feel the impact because of running contracts. At one time crude oil was being given for free during the covid situation.

7. The downside of monthly price adjustments are instability of prices in the economy and cost of frequent adjustment of prices on Oil marketing companies. Man hours need to be allocated for this exercise monthly. Further, the public expect transport fares and freight to adjust accordingly however, stakeholders serve own interests such that they would be more willing to increased than to reduce monthly as government adjusts prices.

8. Ultimately, in the fluid economy like ours a monthly adjustment policy works better and outweighs the demerits of a 90 days policy.

Markstone Similimo
Economist

08/02/2022

08/02/2022

It is clear that employees are heavily taxed than businesses. An employee pays up to 37.5% while businesses around 20% to 35%.

13/12/2021

$3 BILLION MINERAL ROYALTIES LOSS VISA VIS IMF $1.4 BILLION

1. Mineral Royalty payable or paid is a non-deductible levy for computing company income tax when arriving at the gains and profits of a person carrying on mining operations.

2. Mineral royalty tax in Zambia is currently at 5-6% of the normal value or gross value depending on the mineral in question and a total of about $182 million is collected monthly

3. Extractive industries contribute 77% of exports, 10% GDP and 2% employment in Zambia.

4. Zambia has had changed it's mining tax regime 12 times in the last 20 years which is not good for business. Major changes happen after elections such as in 2011, windfall tax was abolished and introduced mineral royalty tax and increased it to 6% from 4% and in 2022 budget mineral royalty has been abolished which will result into a loss of $3 billion in the next 3 years.

5. A windfall tax is a tax levied by governments against certain industries when economic conditions allow those industries to experience above-average

6. A windfall tax is non-deductible meaning say a mining company makes $10 million in revenue and all expenses deducted, they will pay $500,000 in royalties at 5% remaining with $9.5 million. Under normal circumstances, ZRA should charge tax $9.5 million but under the current tax regime ZRA still charge $10 million.

7. Mines felt this as a double tax and hampered investment in the sector and without investment there is no growth.

8. In the 2022 budget mineral royalty tax has been removed which will result into the loss in revenue. This is to encourage investment in the sector and achieve a 3 million metric tonne per year in future. The move would result into collection of $3 billion in tax collection in years to come compared to the $182 million per month currently.

9. The argument has been why go for $1.4 billion to IMF when you are giving up $3 billion in mineral royalty tax loss. IMF and mineral royalty tax issue are seperate considering the prevailing economic situation. IMF is not about the money but benefits which it comes with providing the fiscal space and economic growth. Mineral royalty tax issue is aimed at encouraging investment and collecting more tax in future.

Markstone Similimo
Research Economist

06/12/2021

PENDING REMOVAL OF SUBSIDIES

1. A subsidy is simply an amount government puts on the production cost or selling price of a product to lower it's price for the citizens (Non-technical definition)

2. The Zambian government mainly subsidises electricity, fuel and fertilizer and seeds. The cost of subsiding fuel is $21 million per month where as electricity ZESCO buys from Independent Power Producers at 11 cents or $0.11 per Kilowatt (K1.96)and sells to us at 7 cents or $0.07 (K1.26). ZESCO does not produce all electricity at it's installed facilities but also buys from the Private sector. Fertilizer l don't have the figures

3. ZESCO incures losses which central government sometimes need to cover up.

4. $21 million is enough to be opening a production plant every quarter to employ not less 300 people and increase the tax base.

5. The removal of these subsidises will automatically increase the cost of living as Zambians shall be required to pay cost reflective prices as modern business sense demands.

MY PROPOSALS
The removal should be done in a phased manner upon thorough assessments as follows
1.0. Fuel
1.1. Fuel: Establish the cost of inefficiencies in transportation and corruption of fuel and knock out from the current subsidy

1.2. Establish a producer and consumer relationship on the purchase of fuel whereas government is a consumer. What is happening is Government buys from A who buys from B and B buys from the producer C.

1.3. Upgrade Indeni from a seperator to a refinery and explore the appropriateness of crude oil in Angola and perhaps advance exploration in Western Province

2.0. Electricity
2.1. We need to establish the losses in transmission and knock them out from the subsidy

2.2. Provide 200kw at affordable price to cushion low income class and move to cost reflective tarrifs

2.3. Government to reduce taxes on gas stoves and gas to reduce the consumption of electricity by domestic consumers and move the electricity to commercial. Mines are the largest users of electricity yet also benefits from subsidises and arm twist government when it comes to taxes.

3.0. Fertilizer
3.1.The farmer input support program (FISP) to only run for 3 years and be abolished. The farmers should be helped to graduate from this assistance through rigorous monitoring and evaluation. Moreover, maize which receives support is in most cases a loss venture.

3.2. Assess the efficiency of Nitrogen Chemicals of Zambia producing fertilizer and modernize it where the cost of producing will be lower than importing.

Markstone Similimo
Research Economist

07/10/2021

PAY ATTENTION TO GOVERNMENT PRONOUNCEMENTS

1. It is very clear that the President desires everyone to be independent economically and not rely on the government job. There has never been a President who encouraged civil servants to have side hustles while balancing to ensure service provision does not suffer in public service.

2. When certain pronouncements are done by the President, minister or government officials, we need to ask ourselves how we fit in. For instance, yesterday the European Investment Bank partnered with ZANACO in the K635 million agriculture support. We need to ask ourselves how we can tap into that money to expand or start agricultural activities

3. Mr President Hakainde Hichilema , what we need is a corrupt free country and civil service or system that awards on merit with efficiency. We desire a tax system that is not punitive but promotes growth and sustainability. Let's broaden taxes and eventually lower the tax burden on the few.

4. Those who need business Proposals, we can do it professionally for you at Primax Consultancy and Research . We customize it to your business needs..