There is a clear sense of optimism in Zambia’s government circles about the future of the mining industry, particularly regarding the stability of the regulatory and fiscal regime, a stronger copper price and increased production, which the government projects will reach 850 000 t in 2017 from 740 000 t in 2016.

However, this optimism is not entirely shared by the industry, because of challenges around issues such as power, skills, bureaucratic delays and the lack of a clear development vision for the country.

That was a central conclusion to be drawn from the multiple speakers who addressed this year’s Zambian International Mining and Energy Conference and Exhibition, which was recently held in Lusaka, Zambia.

“Our mining houses have survived a tough three years and I see a promising, bright [future],” said Zambia Mining Minister Chris Yaluma in his opening address.

Echoing the Minister’s tone in her keynote address, Zambia VP Inonge Mutukwa Wina said she would like to see mining’s contribution to gross domestic product increase from its current 12% to as much as 40%.

“The mining sector is an important source of revenue for government, and an important source of both direct and indirect employment,” she said. Further, Wina remarked that it was an “indisputable fact” that, for the foreseeable future, mining would continue to play an important role in Zambia’s economic development.

However, as key industry figures started addressing the conference, it soon became clear that the general mood of optimism had to be tempered in the face of a number of structural challenges. The first of these was power.

In their presentations, senior officials from government and Zambian State-owned power utility Zesco continually argued that the answer to increased investment in the power sector was higher tariffs; but the view from the industry was more nuanced.

Canadian base metals producer First Quantum Minerals (FQM) commercial manager John Dean acknowledged that customers, including the mines, should pay “the right price for power”, otherwise Zesco would not be able to operate, pay its suppliers or invest for the future.

However, he suggested that the right approach for the economy was not simply to keep raising tariffs but rather to ensure that tariffs should be no higher than necessary.

Dean said the industry was not against paying tariffs that reflect the cost of an efficient, well-managed service, but stated that it was therefore important to know what the current cost of service was and how efficiently and transparently power was being generated, particularly when compared to international benchmarks.

Elaborating on the industry’s concerns, Dean commented that, as a mining house, FQM had three concerns pertaining to power, namely availability, affordability and consistency.

Regarding availability, he noted that the lack of full power since mid-2015, owing to load-shedding, meant Zambia had produced less copper. Concerning affordability, Dean stated that tariff increases had to be seen in the context of power accounting for up to 25% of a mine’s operating costs. Additionally, in the context of consistency, he highlighted that voltage spikes or dips had tripped entire plants, thereby stopping production for up to seven hours before the system was stabilised.

Two further challenges highlighted at the conference were skills and the efficiency of government departments.

FQM country manager General Kingsley Chinkuli expressed concern about the challenges and delays in granting work permits to expatriates with specific high-end skills and experience.

“No one will invest in a country where it is not possible to obtain such work permits. Along with other countries, we are all fishing in the same pond. “If we do not make these people feel welcome here, we will not be able to attract the skills we need,” he emphasised.

Chinkuli also highlighted the time it took government to issue land titles for investors looking to construct hotels, shops, workshops and other businesses in the North-Western province town of Kalumbila, where FQM’s Sentinel copper mine is located.

Describing it as a limiting factor to the diversification of the economy, he pointed out that the company had 74 investors lined up waiting to invest more than $100-million. “It has been four years and they are still waiting,” Chinkuli lamented.

Integrated copper producer Konkola Copper Mines (KCM) CEO Steven Din used his address to highlight the need for a clear strategic development vision to help deliver growth and prosperity.

“I have spent most of my adult life working in West, Central and Southern Africa, working in [countries] at various stages of development. The experience has taught me three lessons.

“Firstly, countries with a clear vision of the direction [in which] they are heading develop fastest. “Secondly, no country attains inclusive growth and sustainable development without proper collaboration between a broad range of stakeholders and, thirdly, the best way to achieve this collaboration is through a well-articulated development vision,” he remarked.
Meanwhile, Yaluma emphatically reassured the mining industry that there would not be any changing of the goalposts. “I can guarantee we will not do anything to catch you unawares.”

The Zambia Chamber of Mines (ZCM) said that, while it welcomed the spirit of dialogue, it was not lost on the casual observer at the conference that government and the mining industry appeared to have “markedly different” impressions of how well things were progressing.

“The breezy optimism of government contrasted markedly with the concerns expressed by the industry. It was almost as if the two parties were – in public, at any rate – living in completely different worlds and talking past each other,” the ZCM stated.

The chamber noted that even government’s projection that copper production would reach 850 000 t by the end of 2017 was higher than the industry’s more conservative estimate of about 800 000 t.

ZCM contended that this suggested a need for a focused annual platform where leaders of all stakeholder groups could exchange views on the issues that were most pressing and relevant to mining in Zambia.