‘Mantšali Phakoana
The current arrangement under which the government gets up to 60 percent of profits from the country’s diamond mining sector yet it owns minority shareholding of between 25-30 percent is grossly unfair to mines, natural resources minister, Mohlomi Moleko, has said.
In addition to dividends, some of this revenue is generated to government through employees’ earnings, tax and levies contributions.
Moleko made the controversial remark which was immediately slammed as unpatriotic, at an open public debate on Lesotho’s mining compliance and economic impact in Maseru this week.
The event was attended by mine representatives, legislators, the private sector, and other stakeholders.
Moleko said Basotho should be grateful to mining investors because they were doing a lot for the country.
“For instance, the government owns a 30 percent stake in the country’s biggest mine – Letšeng Diamond (owned by Gem Diamonds) yet it collects more than 60 percent of the mine’s profits,” he noted.
A 2022 performance report by the Chamber of Mines released in May this year indicated that the four major mines operating in Lesotho injected M5.1 billion into the country’s economy in 2022. These are Storm Mountain Diamonds, Letšeng Diamond Mine, Mothae and Liqhobong.
According to the report, a total of M3.6 billion was spent on procurement of goods and services during the same period. Out of this, M2.9 billion went towards local purchases, representing 81 percent of total expenditure. The reminder catered for imports in the form of procuring, servicing and repairing of equipment.
An additional M414 million was contributed to the government fiscus through employees’ earnings. This together, with tax and levies contributions, saw the government receiving a total of M1.1 billion.
“This is an unfair deal to the investors but more beneficial to a country whose only contribution is its natural resources, not cash,” Moleko said.
He indicated that it was unfortunate that the mining, water and energy sectors are criticised in some quarters despite being the biggest revenue contributors in Lesotho.
He further pointed out that the government and Basotho had failed to find partners and invest in Letšeng when it had ceased operations after the then owners, De Beers Mining, left the country.
This came at a time when the prices of diamonds fell on the global market.
“As the minister responsible for mining, water and energy sectors, I find it very unfortunate that these sectors are most criticised and fought by communities despite them being the largest revenue generators and economy contributors in the country.
“Basotho had the opportunity to partner and invest in the mine while it was unoccupied. Even the government then could have raised money to run it, but because of the complexity and risks of mining, they failed.
“A fair deal would have been for the government and the mines to have an equal share of the profits,” Moleko argued, drawing sharp criticising from the participants.
Moleko further claimed that the Income Tax Amendment Bill, 2022, which seeks to end a zero-rated tax was unfair to the mines.
Even though he did not delve into the details of the Bill because there was a pending court case where mines have challenged the Bill, Moleko reiterated that the proposed law was not good for Lesotho.
Participants suggested that the government establishes a Mineral Development Fund to ensure a certain percentage of royalties from the sale of diamonds are used for the development of communities affected.
Basotho National Party (BNP) leader and member of parliament, Machesetsa Mofomobe, fired a broadside at the minister’s statement, accusing him of putting the interests of mining companies ahead of the nation’s.
“I would have expected to hear a better tone from you, a patriotic one, not you talking like the mines. The diamonds are our resources; that is where we should derive benefits.
“As a minister, you are supposed to be aware that the Lesotho Revenue Authority (now Revenue Services Lesotho) previously advised the government to revise tax regimes like the VAT Amendment Bill because they had realised some loopholes,” Mofomobe said.
“Some of the inadequacies were that the exportation of diamonds were zero-rated, hence the taxman advised that they be exempted since the country was losing billions because of the zero-rated tax regime,” he added.
Speaking at the same occasion, Transformation Resource Centre (TRC) director Tsikoane Peshoane warned Moleko to stay away from pricing discussions between mines and airline companies.
Peshoane added that he was concerned that it had been two months since his human rights organisation wrote to Moleko asking for a meeting to discuss the compensation policy and royalties, but to no avail.
He said there was need to revisit the percentage of royalties to communities affected by the mines’ operations.
“Unless we are committed to bringing structural changes in the legal frame work, this exercise is a futile one. The policy will not make any difference, what we will be doing will remain permanently to be defensive,” he cautioned.
The Public Accounts Committee (PAC) has in the past expressed concern that some major government co-owned companies were failing to pay dividends and evading tax because of laxity by authorities to enforce the law.
This after the PAC had reported massive graft, not only in many government departments but also private companies in which the Lesotho government holds shares. In 2021, then acting Auditor General, Monica Besetsa had also expressed disappointment over the monitoring of dividends received by government. Her remarks came after she found out that dividends for the year 2019/20 were less by M151-million compared to the previous years.
