Mozambique Extractive Industry: Government owes large sums to Vale Mozambique SA in VAT rebates

The government in fact owes large sums to Vale in unpaid Value Added Tax (VAT) rebates. According to an investigation undertaken by the anti-corruption NGO, the Centre for Public Integrity (CIP), the government owes a total of 4.3 billion meticais (about 141.5 million dollars) in VAT rebates.

Most of this sum – 3.4 billion meticais – is owed to just four large companies, namely Vale, the Anglo-Australian mining company Rio Tinto, Texas-based Anadarko (which has discovered huge natural gas deposits in the far north), and Mozambique Leaf Tobacco.

Gutemberg said that, if the government were to pay the VAT rebates, that would come as a considerable relief to the company. The VAT rebates used to be paid every month, he said, but so far this year Vale has received nothing which led the company to demand an explanation.

Gutemberg said that work is now underway on reconciling the accounts. “I think this is a very sensitive point”, he said, “but we were surprised with the delay in paying the VAT rebates”.

The government tried to put the rebates into the amended budget submitted to the country’s parliament, the Assembly of the Republic earlier this month, but the Assembly rejected the government’s proposal. The government wanted to spend 3.05 billion meticais on VAT rebates, but the Assembly simply took this money (derived from windfall capital gains tax payments), and redistributed it among the “priority sectors” – infrastructure, public transport, education, health and agriculture.

As for the nearby mine at Benga, sold last month by the Anglo-Australian company Rio Tinto to the consortium International Coal Ventures Pvt Ltd of India (ICVL) for a mere 50 million dollars, it too is running at a heavy loss.

According to Anil Chaudhary, financial director of the Steel Authority of India, the lead company in ICVL, the cost of production at Benga is 165-166 dollars a tonne, and the average sales price is 130 dollars a tonne.

So the company makes a loss of 35 dollars for every tonne mined.

ICVL seems prepared to tolerate such losses, because the expanding Indian steep industry is entirely dependent on imported coking coal.

Indian steel mills are thus a guaranteed market for Benga coal.(AllAfrica)