The new proposed changes to the Mineral Royalty Tax (MRT) regime will enhance the collection of mineral revenue by the government rather than compromise it, Chamber of Mines president Nathan Chishimba said today.
Chishimba was reacting to a media statement issued by a consortium of civil society organisations advising government not to implement the new proposed Mineral Royalty Tax regime on the grounds that it is “investor-led” and will “not maximize revenue in times of commodity price booms”.
Chishimba praised the government for the new proposed MRT regime, saying it recognized the need to balance increased tax revenue with continued employment and investment in new mining ventures.
“One cannot separate mining tax revenue from mining investment, because it is the mining investment which ultimately produces the tax revenue,” said Chishimba. “A good tax is one which balances these two competing objectives.”
Commenting on the civil society’s statement that “we need to make the most of what we have while we have it”, Chishimba said this short-term thinking was not necessarily good for the Zambian economy.
“The largest amount of tax revenue is always generated over the longer term, and this can only happen if mining companies are incentivized to invest over the longer term.”
On the view that the new proposed MRT regime will “not maximize revenue collection in times of commodity price booms”, Chishimba said this reflected a misunderstanding of the role of MRT in the overall tax mix.
“MRT is a tax on production, not profit. It is pegged at a relatively low rate, and is not designed to maximize revenues in times of commodity price booms. Governments collect most of their revenue in times of commodity price booms from profit-based tax, which is much higher.”
Chishimba said the government was on the right track with the proposed MRT regime, and urged civil society to view it in the larger perspective of ongoing investment, employment and economic development.
“One has to balance taking as much as one can now with having a thriving industry into the future, and the government has very sensibly recognized this,” said Chishimba.
The Zambia Chamber of Mines welcomes the changes to the new 2015 Mines and Minerals Development (Amendment) Act which was passed by parliament last Friday.
The Chamber maintains its position that the question of having an equitable fiscal regime that promotes the competitiveness of Zambia’s mining sector is not a zero sum choice between Government on the one hand and the mining industry on the other. Rather, it is one of making appropriate and well thought out choices that will result in a vibrant and competitive Zambian economy that promotes overall growth in the long term for Zambia. Given the pivotal importance of the mining industry in promoting long term diversified economic growth, the mining industry supports the forward thinking policy shift by Government, which will no doubt bear fruit in time to come.
We also note that the Government’s decision marks a significant shift in outlook towards the sector, and it can only be of benefit to the industry and the economy in the longer term.
However, given the intense competition we face as a country from other mining jurisdictions in the world, more needs to be done to ensure long-term competitiveness and renewed investment in the mining sector, which is key to securing growth. We are sure that if the country maintains the same momentum as exhibited by the outlook that resulted in the most recent change to the fiscal regime, this should be achievable in the next few years.
We believe the prevailing low price environment continues to present significant challenges for the mining sector over the short to medium term.
The gesture by the Government is a good lifeline that will provide much needed relief. The simplicity, stability, predictability, and ultimately the attractiveness of Zambia’s minerals fiscal policy environment and taxation regime, is vital to providing the assurances these investments require, especially given that copper mining in Zambia is a high cost business.
For the mining industry, this is critical: the instruments used within a taxation regime, and the rates at which taxes are set, together establish the incentives and disincentives a mining company faces in deciding whether and how much to invest, how many workers to employ, and what ore to extract – which in turn can affect the life-span of the mine.
If Zambia is to attract this needed investment its mining taxation levels, particularly Mineral Royalty Tax, must at the very least lie within global norms. Given Zambia’s specific production conditions, many would argue that an even bolder approach is necessary.
Since 2000, on the back of rising copper demand from China, the Zambian copper mining industry has led the nation’s development, spurring GDP growth and helping to achieve annual growth rates of 7% to 10%. The industry has ploughed more than US$14 billion into new mining ventures and trebled the country’s annual mining output to around 800 000 tonnes. This mining growth has been key in taking government tax revenue from less than half a billion Kwacha in 2000 to a peak of K8 billion ten years later.
“We are the basket which holds all the proverbial eggs. Working together we have to create a high-growth, diversified economy which spreads risk and opportunities across the economy creates more jobs and widens the tax base,” said Mr Nathan Chishimba, President of the Zambia Chamber of Mines.
“As we are seeing in the current crisis, Zambia should not be relying only on mining for its future,”Mr Chishimba said.
We commend the government for this new spirit of dialogue and cooperation, and we look forward to continuing to work together to solve these and future challenges.
The Zambia Chamber of Mines has urged Zambians to download its report on Mineral Royalty Tax, after strong endorsement by leading business personalities, who said the report would promote greater understanding of a complex issue which affects them.
The report , A guide to understanding Mineral Royalty Tax (MRT), has already been distributed widely, and is available on the Chamber’s website at www.mines.org.zm
Stakeholders who have welcomed its publication, saying it will help to promote informed comment, include Osbert Sikazwe, Dean of the School of Mines at the University of Zambia; Maybin Nsupila, CEO of the Zambia Association of Manufacturers (ZAM); Yusuf Dodia, Chairman of the Private Sector Development Association (PSDA); prominent Lusaka businessman Mark O’Donnell; and Jackson Sikamo, country manager for Chibuluma Copper Mines.
Osbert Sikazwe, Dean of the School of Mines, said: “The report will help the public to understand the wider operations of the mining sector, and to appreciate the challenges faced by the industry. It will also help people to understand how policy is formulated to enhance the growth of the industry.”
Maybin Nsupila, CEO of the Zambia Association of Manufacturers (ZAM), said any measure intended to promote debate and understanding of MRT is welcome. “The discourse by many people has been on the physical contributions the sector makes to the country’s economic growth, without understanding how the linkages ultimately benefit the country. The MRT report will give people a broader and more informed perspective.”
Yusuf Dodia, Chairman of the Private Sector Development Association (PSDA), said: “Mining plays a pivotal role in economic growth. While there have been challenges on policy as well as tax changes, there has been little or no understanding of the challenges faced by the industry. The MRT report will widen debate and promote a more informed view.”
Jackson Sikamo, country manager for Chibuluma Mines, a division of Metorex, said: “The report will help all stakeholders to appreciate what MRT is, and what its implications on fiscal policy are. It will to better-informed dialogue and debate, which are necessary for the country to come up with equitable taxation policies.”
Prominent Lusaka businessman, and Chairman of Union Gold Investment, Mark O’Donnell, welcomed the release of the report, given the competition Zambia faces from other commodity-producing countries. These include the Democratic Republic of Congo, which has “maximized the benefits realised from the mining sector, spurred by various incentives which have increased foreign direct investment”.
Chenai Mukumba, international centre coordinator for Consumer Unity and Trust Society (Cuts), described the release of the report as timely. “The initiative will help ease the misunderstanding among various players, especially the citizenry, who lack information yet are the ultimate beneficiaries of the mineral wealth.”
Peter Sinkamba, Development Planner/Environmental Protection Activist on the Copperbelt, said: “The MRT report will help to strengthen citizens’ awareness, and promote dialogue on challenges, contributions and shortcomings on policy formulation that might stifle the effective contributions of the mining and copper sector to the country’s growth.”
Zambia Chamber of Mines
This week the Chamber of Mines issued a report entitled “A guide to understanding Mineral Royalty Tax (MRT)”, and made it available free of charge at our offices, and as a download on our website.
It comes barely three weeks after the government announced its intention to unveil a new, more accommodating MRT regime based on a sliding scale which varies with the copper price. We welcomed this news, and commended the government for trying to create a more responsive tax regime, that takes some account of the unprecedented pressures currently facingthe industry.
So why is the industry releasing this booklet? Well, the answer is simple. MRT is a hot topic of public debate, but few people really understand the concept, or how it actually works.
This had led to the expression of opinions that although sincerely held, are nevertheless damagingly inaccurate. For instance, it is commonly expressed that any reduction in taxation rate is, firstly, a result of undue arm twisting by the mining industry, and secondly, will have a negative impact on Zambia’s development (i.e. the Government will have to borrow more, to fill the gap). These are truly harmful fallacies that betray a lack of economic (and political) understanding, and frame the relationship between the industry and government as an adversarial ‘zero sum’ game, where one must lose if the other is to gain.
Understandably, people feel strongly about our nation’s resource endowment, but the combination of strong emotion and limited information is a recipe for disaster.
Constructive debate and criticism requires a minimum degree of shared knowledge. How can you and I argue the respective merits of two football teams, unless we have a shared understanding of how the game is played?
To date, the mining industry has not done enough to engage with the public, to impart information and education on the key industry and wider economic issues facing Zambia.
This booklet is therefore part of a wider programme of initiatives to provide insight and information to the Zambian public on the key issues. We started this process in December, when we held a media conference on the current commodity crisis and its impact on the Zambian mining industry. There are further initiatives planned for the months to come on all mining issues, not just tax. We believe this will lead to a higher level of debate and public awareness, which can only be a good thing.
As is often said, mining is a long-term game. In the right environment, mining operations can be productive over many decades. The ‘right’ environment is a combination of stable and good governance, supportive investment, strong operational management and a prosperous, peaceable society. The long-term needs and interests of the mining industry are therefore entwinned with those of Zambian society.
We firmly believe that the diversification of Zambia’s economy beyond copper mining – a long-term imperative for our society – can only be achieved if the mining industry is nurtured, so that it may be a strong springboard for future growth, rather than a piggy bank to be drawn on until empty.
For Zambia and its mining industry to prosper in the long-term, certain steps must be addressed now. There is an urgent need for new investment in the mining industry, to improve or expand existing mining operations, and to open up new reserves.
A number of major investments have been on hold since 2012; unless these are urgently encouraged, the industry will commence an inevitable and irresistable decline, the effects of which will be felt from around 2019 and for many years thereafter.
This decline can only be arrested if there is radical improvement in the stakeholder relationship which feeds in to the creation of stable, good mining policy and governance structures.
This is not just a responsbility of government. For our part, we recognise that there is a need for far greater transparency, and regular stakeholder engagement, than has hiterto been the case. This booklet is just one proof of our intent.
Mr Nathan Chishimba is President of the Chamber of Mines of Zambia.
‘A Guide to Understanding Mineral Royalty Tax (MRT)’ can be downloaded from the Chamber of Mines website at:
Download Guide here. In a bid to improve public understanding of mining taxation, and promote informed comment, the Chamber of Mines today released a report entitled “A guide to understanding Mineral Royalty Tax (MRT)”.
The short, 15-page report is available free of charge from the Chamber of Mines as a downloadable PDF on its website www.mines.org.zm
Commenting on the release of the report, Chamber of Mines president Nathan Chishimba said: “We have recently commended the Government for annoucing the introduction of a sliding scale system for the determination of MRT rates, linked to the prevailing copper price. In order for the public to really appreciate the significance of this move, we believe the whole subject of mining taxation, and MRT in particular, needs to be better explained.
In recent years, MRT has been a hot topic. We wish to set out the cold facts, to give Zambians an understanding of a critical issue affecting the mining industry, and the wider context of taxation and investment in which the issue is situated.”
He added: “The publication of this report signals a more proactive approach by the industry in educating the public about important strategic issues. It is a natural follow-up to the media conference we held in December last year to explain the current crisis facing the global copper-mining sector. In the weeks and months ahead, there will be more such initiatives as the industry continues to engage constructively with stakeholders and the broader public.”
“A guide to understanding Mineral Royalty Tax (MRT)” has been designed to be accessible to a lay audience, and deals with the subject broadly rather than in complex detail. It covers the present situation in Zambia, explains the motivations and mechanics of MRT, and gives an outside view of our mining-tax system by the IMF and World Bank, and ends with some thoughts on the future of the mining industry.
Among the key learning points of the report are the following:
The report also considers Zambia’s approach to MRT in comparison with other mining jurisdictions.
Issued by: Talent Ng’andwe
Zambia Chamber of Mines
The Zambia Chamber of Mines, kindly advises all its stakeholders invited to the first ever National Mining Dialogue Conference that the event has been postponed.
The new dates for the conference will be communicated. The Chamber regrets the inconvenience caused and appreciates the positive response received from all stakeholders.
For further information contact the office:
At the Second Special Cabinet Meeting held on Monday,15th February, 2016 at Mulungushi International Conference Centre, Cabinet made the following decisions:
Under this Item, Cabinet approved the proposed tax measures which are aimed at sustaining operations in the mining industry, securing jobs for the citizens as well as collecting more tax revenue in times of relatively high copper prices. The specific measures to be introduced are as follows:
(i) varied mineral royalty rate for copper based on the prevailing copper price;
Cabinet also approved the suspension of the ten (10) percent export duty on ores and concentrates for which there are no processing facilities in Zambia and to remove the variable profit tax on income from mining operations but maintain the corporate income tax at 30 percent.
This review in the taxation regime is deemed necessary to sustain continuous operation of existing mining companies and avert the continuation of suspension of mining operations and job losses.
Under this Item, Cabinet approved the establishment of a Leaders Contributory Pension Fund for the President and other Constitutional Office Holders and other leaders, with the following attributes:
The contributory fund will cover the President, Vice-President, Speaker of the National Assembly, Chief Justice, Judges, Ministers, Deputy Ministers, Members of Parliament, Secretary to the Cabinet, Deputy Secretary to the Cabinet, Attorney General, Auditor General, Solicitor General, Secretary to the Treasury, Special Assistants to the President, Investigator General, Director for Public Prosecution, Director General Anti-Corruption Commission, Commissioner Drug Enforcement Commission, Permanent Secretaries, Defence and Service Chiefs, Chief Executive Officers of Grant Aided Institutions and Directors on Contract, as indicated in the Report attached to the Memorandum.
Under this Item, Cabinet approved the contraction of a loan from the African Development Bank amounting to US$ 30,000,000 to support the implementation of the Skills Development and Entrepreneurship Project – Supporting Women and Youth.
The need for this loan arises from the fact that Government is unable to finance the Project from tax and non-tax sources. The loan is an Enhanced Variable Spread Loan (EVSL) which is highly concessional with an interest rate of approximately 1.02 percent (Floating Base Rate of 0.480 + Funding Margin Cost of (-0.06) + Applicable Lending Rate of 0.60), a repayment period of 15 years and a grace period of 5 years. Additionally, the loan has no charges.
Under this Item, Cabinet approved the contraction of a loan from the Export-Import Bank of United States of America amounting to US$ 73 million to support the implementation of the Design, Manufacturing and Supply of 144 Prefabricated Modular Steel Bridges Project which is intended to improve access countrywide, particularly in rural areas and spur development.
There is need to contract the loan in order to provide the resources required for the implementation of the project. The loan has an interest rate of six months LIBOR (85bps) plus Margin of 1.50 percent per annum, commitment fee of 0.125 percent, a repayment period of 8 years and a grace period of 2 years. These terms, particularly the interest rate and fees are favourable compared to the terms currently prevailing on the market. Further, the loan provides 100 percent financing with no strenuous advance payment commitments from the Treasury.
Under this Item, Cabinet approved the contraction of an additional loan from China Development Bank amounting to US$ 29.5 million to complete the Mansa-Luwingu Road Project as Government is unable to finance the project from tax and non – tax sources. There is need, therefore, to contract the additional loan in order to provide the resources required for the completion of the project. This is an additional loan with an interest rate of US$ 6 Months Libor Plus Margin of 4.5 % per annum, Commitment Fee of 0.5%, Front-End fee of 0.5, a repayment period of 10 years and a grace period of 3 years.
Under this Item, Cabinet approved the contraction of a loan from the African Development Bank amounting to US$ 50 million to support the implementation of the Lusaka Sanitation Programme – Climate Resilient Sustainable Infrastructure Project. The loan will help increase access to sustainable sanitation services to Lusaka’s residents and strengthen Lusaka Water and Sewerage Company’s capacity to manage sanitation services. Government is unable to finance the Project from tax and non – tax sources. Thus, there is need to contract the loan in order to provide the resources required for the implementation of the project.
The loan has an interest rate of approximately 1.02%, a repayment period of 15 years and a grace period of 5 years. This loan is highly concessional with favorable terms and provides 100 percent financing with no requirement for advance payment commitments from the Treasury.
Under this Item, Cabinet approved the contraction of a loan from the African Development Bank amounting to US$ 45 million to support the implementation of the Cashew Infrastructure Development Project (CIDP). The loan will contribute towards poverty reduction as well as improved household incomes.
The loan has an interest rate of approximately 1.020%, a repayment period of 15 years and a grace period of 5 years. It is highly concessional with favorable terms and provides 100 percent financing with no requirement for advance payment commitments from the Treasury.
National Road Fund Agency.
Under this Item, Cabinet approved the appointment of members to serve on the National Road Fund Agency Board. The appointment is in accordance with the National Road Fund Agency Act No. 13 of 2002.
You may wish to note that the National Road Fund Agency has operated without a Board since the expiry of the tenure of office of the last Board in June 2013. It is therefore, necessary to make this appointment to ensure that there is provision of oversight and policy guidance to the Agency management.
Under this Item, Cabinet approved in principle to introduce Bills in Parliament in order to give effect to provisions of the Constitution of Zambia Act, 2015, and the Constitution (Amendment) Act, 2015 which require the enactment of legislation.
Under this Item, Cabinet approved the appointment members to serve on the Mining Licensing Committee in accordance with the provisions of the Mines and Minerals Development Act of 2015.
The Mines and Minerals Development Act of 2008 was repealed and replaced with the Mines and Minerals Development Act of 2015. The 2015 Act provides for the establishment of the Mining Licensing Committee to be responsible for various functions. It is hoped that the aappointment of the Committee will lead to expeditious granting of mining rights and non-mining rights in a transparent and inclusive manner to ensure benefits from the exploitation of mineral resources. The tenure of office for the nominees is for a period of three (3) years.
Amounts) (Amendments) Orders, 2014 and 2015
Under this Item, Cabinet approved in principle the amending of the Loans and Guarantees (Maximum Amounts) (Amendments) Orders, 2014 and 2015 in order to increase the:
It is necessary to increase the maximum amounts of both external and domestic loans that can be raised under the Act in order to allow the Minister of Finance to access both external and domestic loans amounting to K10.5 billion to bridge the financing gap in 2016 Budget and to provide development resources in the medium term. There is also need to bring the outstanding amount into conformity with the legal thresholds following the increase in the debt as a result of depreciation of the Kwacha by more than 40 percent since the beginning of 2015.
Cabinet also took note of the following:
Under this Item, Cabinet took note of the information that at the invitation of the Zambian Government, a team from the International Monetary Fund (IMF) visited Zambia from 11th to 20th November 2015. The team discussed recent macroeconomic developments which all seem to have deteriorated as well as the outlook for the Zambian economy in the medium term. The IMF team indicated that they stand ready to assist the Zambian Government in any way they can and are due to come to Zambia in March for a further review. It should be noted that the discussions were held in a cordial and frank manner, reflecting the change in the tendency by the IMF to prescribe policy to member countries, as well as the improvement in the analytical skills within the Government system.
Under this Item, Cabinet took note of the information that a total of 15,000 hectares of land in the Luswishi Farm Block in Lufwanyama District has been allocated to three prospective investors, namely Xantium Dairies Zambia Limited, Luswishi Investment Zambia Limited and Hybrid Poultry Farms Zambia Limited, who have been allocated 5,000 hectares each.
Xantium Dairies Zambia Limited will invest a total of US$ 18.9 million over 5 years in a dairy farm with 11,000 dairy cattle and a UHT milk processing plant. The Company will create 700 jobs and will operate an out grower scheme of not less than 250 smallholder farmers.
Luswishi Investments Zambia Limited will invest a total of US$ 20 million over 5 years with the capacity to produce 30,000 metric tonnes of wheat per annum and create 500 jobs. The investor will be engaged in mixed farming of a soya/wheat rotation, livestock production, fruit tree and vegetable growing and a milling plant.
Hybrid Poultry Farms (Zambia) Limited will invest a total of US$ 42 million in developing 6 breeding farms over 5 years, produce 21,840,000 eggs and 16,380,000 day old chicks annually and grow cereals for production of stock feed. The Company will create 350 jobs and will operate an out grower scheme. Currently, there is an investor called Global Plantations Limited (GPL), which was allocated 5,000 hectares of land in 2013, and most of it is cleared. The Company is producing sunflower, soya beans and irrigated wheat and have installed a 200,000 metric tonnes capacity oil processing facility in Ndola.
Under this Item, Cabinet took note of the information from the Ministers of Energy and Water Development, Labour and Social Security, Local Government and Housing, Home Affairs and Lands, Natural Resources and Environmental Protection on the issues that came out of the consultative meetings held with the Tanker Drivers’ Union and Petroleum Transporters Association of Zambia. The meetings were aimed at finding solutions to the Tanker Drivers demands.
Hon. Chishimba Kambwili, MP
Minister of Information and Broadcasting Services
(Chief Government Spokesperson)
The Mining Industry Association of Southern Africa (MIASA), an association of Chambers of mines in the SADC Region, represents Chambers of mines from Botswana, the DRC, Madagascar, Namibia, South Africa, Tanzania, Zambia and Zimbabwe. MIASA attended and participated in the Ministerial Symposium held on 7 February 2016 at the Mining indaba in Cape Town.
The symposium with African Ministers on promoting Africa as a preferred investment destination for mining takes place at a time when the mining industry in the whole of the SADC region and Africa at large is experiencing headwinds of significant proportions that require governments and the private sector to be pulling in the same direction to weather the storm and mitigate the negative impacts of the current downturn. Without such cooperation between governments and the private sector, the industry will slide further into decline to the detriment of socio-economic growth in the region with massive job losses which are a threat to social stability.
MIASA notes with concern, the large scale retrenchments in the region as a consequence of depressed commodity prices on international markets. In the SADC region alone, the mining industry has lost approximately 70,000 jobs across all commodities and considering a multiplier effect of 7, this translates to total jobs lost amounting to 490,000. This means up to 5 million people have been deprived of their daily subsistence considering that each employee supports between seven to ten dependants. To make matters worse, a further
50 000 employees face the risk of losing their jobs if something drastic is not done urgently.
In order to turn the situation for the better and ensure that Africa and in particular the SADC region is attractive for mining investment, governments need to maintain consistency in policy, to only introduce policies that are well researched and above all, in consultations with the private sector. MIASA calls for governments to cooperate and share experiences of what works and what doesn’t.
There is no need to re-invent the wheel. Four jurisdictions in the SADC region are currently reviewing mining legislation. Any legislation change makes investors nervous for as long as there is no finality and consultation on that legislation.
MIASA notes that the mining industry has had no significant investment in recent years with no major exploration projects for mining. Ministers of mining need to assist the mining industry by reducing the level of bureaucracy and creating an environment that will make it easy for new and emerging miners to enter the industry. Governments can also create certainty by avoiding changing policy at short intervals.
External investors also need certainty on security of tenure to ensure long term investment in mining industry. The industry is always ready to engage with governments in the SADC region to come with solutions that will help the industry to survive the downturn and position itself to reap mutual benefits in the next super-cycle.
THE United States of America (USA) and other foreign diplomats accredited to Zambia have backed calls for a long-term strategic consensus in the mining sector anchored on diversification to steer economic growth to new heights.
This is in response to the call made by the Zambia Chamber of Mines (ZCM) president Nathan Chishimba last week, for a deliberate drive by the Government, the industry and other stakeholders, to find conditions which will lead to a high-growth mining industry and a diversified economy.
US Ambassador to Zambia Eric Schultz applauded the initiative by ZCM to better educate the public on the importance of the mining sector to the country’s economy while encouraging diversification.
“A crisis sometimes offers an opportunity to make a lasting change. The slump in copper prices, electricity shortage and issues with a depreciating Kwacha have hampered Zambia’s growth.
“Copper will eventually rebound and will remain an important part of the Zambian economy going forward but, as the mining companies are themselves saying, now is the time for the country to diversify away from an over-reliance on a single commodity and its cycles of boom and bust,” he said.
This is contained in a statement released by the ZCM office in Lusaka yesterday.
Canadian High Commissioner to Zambia Alex Andre Leveque said he also welcomed the diversification initiative, both in the mining industry and the wider economy, as this would benefit all Zambians.
Acting British High Commissioner to Zambia Lucy Joyce said mining was clearly an important industry in the country and its economic development.
“I understand that this initiative recognises the importance of increasing transparency between the mining industry, the Government, civil society and the public; we welcome this and hope stakeholders will engage constructively,” she said.
Zambia Association of Manufacturers (ZAM) chief executive officer Maybin Nsupila said the diversification of the mining sector and the wider economy was vital given the numerous challenges faced by the country in recent years.
Mr Nsupila said the fluctuations of the metal market had a great impact on the country’s foreign exchange earnings, while taking its toll on the growth of major sectors such as manufacturing.
“Total dependence on copper at the expense of other sectors has resulted in little growth in the economy, and there is an urgent need to diversify,” Mr Nsupila said.
Other stakeholders supporting the cause were Centre for Policy Trade and Development executive director Isabel Mukelabai, University of Zambia (UNZA) School of Mines Dean Osbert Sikazwe and prominent business executives Mark O’Donnell and John Kasanga.
Story By James Kunda (Times of Zambia).
Reeling from the worst crisis it has faced this century, and losing millions of dollars a month in a depressed copper-price environment, the Zambian mining industry is to push for a long-term strategic consensus to promote the growth not just of the mining industry, but of the entire country.
“As an industry, we carry the weight of an entire nation on our shoulders in terms of investment, jobs and foreign exchange earnings,” said Chamber of Mines President, Mr Nathan Chishimba, speaking at a media conference in Lusaka on Wednesday 16th December.
Since 2000, on the back of rising copper demand from China, the Zambian copper mining industry has led the nation’s development, spurring GDP growth and helping to achieve annual growth rates of 7% to 10%. The industry has ploughed more than US $10 billion into new mining ventures, trebled the country’s annual mining output to around 800 000 tonnes and increased employment fourfold to more than 80 000. This mining growth has been key in taking government tax revenue from less than half a billion Kwacha in 2000 to a peak of K8 billion ten years later.
“We are the basket which holds all the proverbial eggs. Working together we have to create a high-growth, diversified economy which spreads risk and opportunities across the economy, creates more jobs and widens the tax base,” said Chishimba. “As we are seeing in the current crisis, Zambia should not be relying only on mining for its future.”
As a measure of the industry’s unity of purpose, the Zambian Chamber of Mines media conference was attended by senior executives of First Quantum Minerals (FQM), Konkola Copper Mines (KCM), Mopani and Barrick Lumwana and other senior industry figures. These are Zambia’s four largest copper mining companies, accounting for around 70% of the country’s annual output.
The objective, according to Chishimba, was to provide context and understanding for the slump facing Zambian and global copper miners after a reduction in demand in the past five years from China, the world’s largest consumer of copper (45% of world production). It has led to a five-year slide in the copper price, which is around 60% off its 2011 peak – triggering production cutbacks and layoffs in all of the world’s major copper-mining nations, from Zambia, Congo and Chile to Australia, Canada and the United States.
The conference also heard that the Zambian mining industry faced specific local constraints such as a debilitating power shortage that has reduced production capacity, increased costs and, in certain cases, forced the closure of operations, with the loss of many jobs.
“We suffer from both production challenges, such as old mines, deep ore bodies, low grades, low productivity, and regulatory challenges – for example, a constantly changing policy and tax environment. The effect is twofold: our copper is expensive to produce, and investors are reluctant to start new mines or expand existing ones.”
On the long-term prospects for the global mining industry, Chishimba said there had always been demand for copper on the back of industrialisation and modernisation of the world economy, and nothing suggests that this is about to change. However, for Zambia to benefit from that continued demand, the Zambian mining industry needs to become more competitive.
“There are new, low cost mines coming on stream in other countries that can thrive in this low price environment. Unless Zambia takes action now to address our challenges, so that we can compete with these other countries, our future as a copper producing nation is in peril,” he said.
Chishimba said the challenge is for both the industry and the country to learn the lessons of the past and present.
“This national crisis poses long-term questions over Zambia’s economic development, which cannot be avoided. We all need to come together and agree the conditions which best promote the growth both of the mines and the broader economy. As an industry, we are ready to create dialogue on this vital strategic issue on which the future of our nation depends.”
Mr Chishimba concluded by saying that the Chamber of Mines, with the full weight of support of its members, would engage with stakeholders on this topic in the coming year. It is the industry’s intention to host an ‘All Zambia’ conference next year, as part of the drive to reach long-term consensus on economic diversification.
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