DEFYING TARGET
While the Zambian government had targeted to raise production to about 900 000 t in 2015, production dropped to 708 259 t at the close of last year
Photo by: Bloomberg
Whereas copper production in Zambia did not reach the set target in 2014, the 2015 production target is also unlikely to be met, delegates at the fifth Zambia International Mining and Energy Conference and Exhibition (Zimec) forecast.
Zimec, which focuses on the state, challenges, successes and outlook of Zambia’s mining and energy sectors, took place in Lusaka, from June 18 to 19. The conference highlighted issues regarding the sectors’ responsibility and contribution to sustainable growth and development of the country’s economy, legislative changes, power constraints and mining production.
“In 2014, the government had targeted to raise production to about 900 000 t in 2015, from 754 916 t recorded in 2013. However, production dropped to 708 259 t at the close of last year,” the Zimec organising committee AME Trade states in the post-Zimec conference report.
The committee notes that global copper supply is currently about 18.7-million tonnes a year, with supply that continues to increase and, in the near future will likely increase further, owing to projected increase in demand.
“Nevertheless, growth is questioned by political and regulatory uncertainty, as well as reduced access to capital after the financial crisis,” the report notes.
The decline in production is further attributed to an impasse surrounding the fiscal and regulatory regime.
Although the government has made significant changes to the mining tax regime, with four adjustments in seven years, this has created fiscal instability, which creates contention. These include the mineral royalty tax and the value-added tax (VAT) regulations that required mining companies to follow a stringent procedure before claiming VAT refunds.
Issues also include the VAT refunds, amounting to several million dollars, which government owed mining companies and which prevented these companies from reinvesting the funds, as well as the high corporate tax of 30%.
However, recommendations proposed at the conference include government’s focus on dealing with uncertainty and stabilising the tax regime to increase competitiveness, an increased dialogue between mining companies and the government to resolve issues of contention, as well as a focus on solutions to manage the high costs of production, the report states.
Content Focus
The integration of the local Zambian economy into the mining supply chain was another focus area of the conference.
Zambia has 30 companies engaged in mining activities dealing in ore and concentrate, lime, cement, gemstones and metals from 1 888 companies with mining rights, the organisers’ report states.
Moreover, the mining supply chain has more than 2 000 supply and contractor companies servicing the mining companies. “It is estimated that mines are currently spending between $2.5-billion and $4-billion on various investments, yet only 4% is spent on local products,” the conference organising committee points out in the report.
Discussion of jobs and local manufacturing companies supplying goods and services through supply linkages, for example, were therefore highlighted at the event.
Recommendations from the conference include that mining firms need to maximise local content and value-add through capacity building as part of mining companies’ corporate social responsibility, the report notes.
CSR activity must be relevant and appropriate to alleviate poverty or create employment and wealth. “That is, CSR must concentrate on education, local business development, and alternative livelihoods, such as support to food production,” the report states.
Further, the country needs to ensure that local companies are internationally competitive, the organisers’ committee points out, noting that currently, most inputs needed by miners come from countries with competitive business environments, which makes Zambia unattractive as it has high taxes, as well as transport and power difficulties.
The recommendation that local companies need to start small and supply products and services in which they have capability, was also highlighted.
The Zimec conference had been called at a time when the mining industry was facing several challenges with regard to metal prices and legislative deadlocks, highlighted Chamber of Mines of Zambia VP Mathew Banda, noting that “this conference [provides] an opportunity for players to interact with each other in an open manner”.