Financial services provider Stanbic Bank Zambia, warns that, while pushing for economic diversification is important, there is also a need to ensure the country’s mineral wealth and the mining sector are not neglected.
In a release published this week, following the latest Stanbic Anakazi Online Conversations webinar, Stanbic Bank Zambia client coverage, mining and metals manager Namakuka Sichone noted that mining’s significance to the local economy need not be overshadowed by the country’s diversification agenda.
Zambia’s mining sector is an important pillar of the economy. It holds 10% of the world’s copper reserves and is the second-largest copper producer in Africa and the eighth-largest globally. It is also one of the world’s largest cobalt producers and hosts the world’s largest emerald mine.
Government has, in recent years, prioritised economic diversification to move away from over-dependence on the extractive industry in line with Vision 2030 and the Seventh National Development Plan.
Sichone says that, in as much as Zambia should strive to reduce its over-dependence on the extractive industry on account of its high volatility in the context of fluctuating mineral prices, there is a need for government and other stakeholders to increase their investment in the sector if the country is to enjoy maximum benefit from its vast mineral wealth and reach its development targets.
“As Zambia’s biggest bank by assets, we have a responsibility to help drive the economy forward through strategic financial support in key growth sectors. While we understand and unequivocally support the country’s diversification agenda, we realise that mining remains an essential pillar to the economy.”
In the last decade, Stanbic Bank has invested over $3-billion in the extractive industry, with the aim of stimulating growth in all areas, such as mining investment, supply chain and community development.
Zambia Chamber of Mines president Goodwell Mateyo says that, for Zambia to realise its development goals, there is an urgent need to translate the country’s mineral resources into wealth to complement investment in other growth sectors.
He notes that the world is on the verge of a Fourth Industrial Revolution that will spark fresh interest in Zambia’s mineral resources.
However, Mateyo also warns that Zambia could miss out if investments in the extractive industry are delayed.
“Due to the industry’s long-term nature, we need to start implementing measures to prop it up as soon as possible if we are to benefit from the Fourth Industrial Revolution, which is just on the horizon.
"Mining investments have a long maturity period; taking years, sometimes decades before an investor can see a return.”
He points out that Zambia has the mineral reserves, but needs adequate investment to turn those reserves into tangible wealth. “But to stimulate investment, we need to have a conducive economic environment, which has unfortunately been hit hard by the current pandemic.”
As such, he suggests that the Zambian government could increase its support for the sector through value-added tax (VAT) refunds to see it through this difficult time.
“This support does not need to be in form of money paid out from the treasury, as we understand the economy is strained right now. But if firms can offset the VAT refunds owed to them through tax, that would go a long way in helping them remain viable through these uncertain times.”
Mateyo also notes that, if Zambia fails to invest in the country's economic mainstay now, the consequences could stretch beyond missing out on the next commodity boom to also potentially crippling the economy entirely.
“But if we take the extractive sector along on our diversification journey, our country’s future is very bright – all we have to do is get over the current hurdles and ensure we start growing tomorrow’s mining sector today.”