Mining sector key to economy
ZAMBIA has a history of mining and has a large known resource base of copper, emeralds and other mineral deposits. The country also has a good potential for further discoveries.
Mining accounts for 12 percent of the gross domestic product (GDP), which is a monetary measure of the market value of all final goods and services produced in a period [quarterly or yearly] of time while total export value stood at 70 percent in May.
Latest data from Central Statistical Office (CSO) shows that in the traditional export earnings increased by 42.6 percent from about K5.13 billion in April 2018 to over K7.30 billion in May 2018.
The share of traditional exports recorded an average of 77.2 percent in revenue earnings between May 2018 and April 2018.
During the period under review, the volume of copper exports decreased by 0.7 percentage point from 80,081.2 metric tonnes in April 2018 to 79,514.6 metric tonnes in May 2018.
Currently, copper prices on the London Metal Exchange (LME), is trading at almost US$7,000 per tonne.
The mining sector is also a significant source of government revenue and formal employment, both directly and indirectly.
Therefore, it is important to continue to attract investment in the sector for the country’s growth, particularly because it constitutes 62 percent of foreign direct investment.
One such effort is the recently held 8th Zambia International Mining and Energy Conference and Exhibition (ZIMEC), where stakeholders, including investors, government agencies and civil society organisations, have continued to meet to find ways of making the minerals fully contribute in revenue and the national industrial agenda.
While, the mining sector players understand Government’s drive of industrialisation, Chibuluma Mines chairman Jackson Sikamo warned the new focus on value-addition must be built on the firm foundation of a growing the extractive sector.
Mr Sikamo, who is also the country manager, wants Government to put in place attractive investment policies to encourage the kind of high-cost, high-risk exploration programmes, which eventually lead to greenfield mining ventures.
“In the absence of a pipeline of exploration programmes, our production at some point will start tapering off,” he said in his contribution to the theme: Invest in Zambia – Generating Value, Diversity and Growth through Collaboration.
It is in tandem that when mining investment is sustained and is high, growth in the sector is inevitable.
“There is growth in the broader economy in jobs, new businesses and the overall prosperity of the population,” Mr Sikamo said.
Undoubtedly, when mining investment declines, it is not just the mining sector that is affected but also the entire economy.
In his address during the gathering, First Quantum Minerals (FQM) head of government affairs John Gladston advised Zambia to strive to remain competitive while maintaining policy stability.
Like any business environment, the mining sector’s growth hinges on policy stability to ultimately, attract investment – Zambia can further regain its reputation as Africa’s largest copper producer.
Importantly, Zambia needs a competitive cost-reflective electricity tariff structure to reflect the true cost of power production and raising the bar for alternative energy sources to expand mining operations by various companies, which have invested in the country.
Mr Gladston also notes a cost-reflective tariff structure is key to allowing businesses to plan in long term.
“FQM, through our subsidiaries, has invested over US$100 million in uprating power [600 megawatts] from Lusaka to north western of Zambia to reduce surges on its Kalumbila-Trident-Kansanshi mine operations,” he said.
Knowing that mining requires huge investment, Mr Gladston is of the view that long-term private partnerships between relevant partners to assure investors of a sustained and durable investment.
With assurance on the security of tenure, the sector is surely expected to grow and remain the mainstay of the economy that benefits all Zambia.
And Chamber of Mines president Nathan Chishimba commends the continued investments by various member companies.
“We welcome the ramping up of FQM’s Sentinel Mine to full production, and the progress of Mopani’s US$1.1billion modernisation programme and said that these are green shoots.
“Those green shoots should encourage the government to do more to make sure they grow into big branches and forests going forward,” Mr Chishimba said.
Anchored on theme Zambia’s attractiveness as a mining destination cannot be over emphasised as delegates heard how the country is endowed with incredible mineral wealth, yet international investors were not “beating down the door” to develop these resources.
But Government is not sitting idle to harness the opportunities that lay in the mining sector, as the Chamber of Mines president observed.
“Some policies made in recent past such as power tariff reviews, statutory instrument 7 of 2018 which compels mining companies and other producers to move cargo by rail, and policy changes that needed the input of sector players as being a recipe for misunderstanding with other partners willing to assist grow the economy,” he says.
In response, Ministry of Energy Permanent Secretary Emelda Chola noted that the cost of service study, aimed at determining the real cost of production of electricity in relation to its cost in Zambia will be unveiled in August this year.
Brigadier-General Chola said stakeholders tasked with refining the report have made tremendous progress in finalising the study and by end of August it will be ready for consideration by various interest groups.
“The report is almost ready, the team is working round the clock to ensure that it is finalised by August,” Brig. Gen Chola said.
Recently, mining companies had their tariffs reviewed to US$0.9 cents a kilowatt hour from an average US$0.6 cents a kilowatt hour after the country revised tariffs by 75 percent, done in two phases May 15 and September 1, 2017.
The mining sector in Zambia for the past 100 years shows a clear historical link between levels of mining investment and wider economic development.
By Kelvin Chongo, Lusaka,Zambia Daily Mail,10th July 2018.