Strategies to future-proof Zambia’s mining industry

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Strategies to future-proof Zambia’s mining industry - A stable and resilient minerals royalty tax is crucial for the country to take advantage of the growing global demand for copper

As the world looks to transition away from fossil fuels, and governments around the world increase investment in low-carbon energy, the security of the supply of critical minerals is top of mind. To meet global net-zero and decarbonisation targets, countries will require stable and significantly larger supplies of minerals and metals critical for the energy transition.

Historically, the price of copper has been volatile, however, the current increased demand for critical minerals, driven by the increasing investments in green technologies, suggests the current increase in prices will be sustained for some time. Indeed, global demand for copper outstrips the supply.

Reforms by the Hichilema administration must focus on ensuring a stable, attractive investment environment to kickstart the mining industry and connect it to other sectors of the economy, as a matter of urgency. Moreover, the comparatively low copper-ore quality in Zambia means extraction and processing requires greater capital investment by mining companies. As such, a profit-based MRT presents opportunities for Zambia to capitalise on the growing demand for copper.

However, the implementation of Extractives Industries Transparency Initiative processes in Zambia reduces the risk of abuse and increases transparency. The government will also need to resolve conflicts with the private sector, in particular finding a private sector partner for the Mopani mine and resolving the conflict with Vedanta over the seizure and liquidation of the Konkola Copper Mines.

Vincent Obisie-Orlu is a researcher in the natural resource governance programme at Good Governance Africa. The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian. Meeting this demand requires greater investment from mining companies, which they will only make if there are favourable and stable conditions for the long-term capital investments particular to the mining industry. Moreover, the tightening of monetary policy globally is expected to weaken global economic outlooks and temporarily place downward pressure on the price of copper in the short term.

Zambia has changed its minerals royalty tax and minerals taxation regimes ten times in the sixteen years prior to 2019, according to a report by the Southern African Resource Watch. This is in contrast to the Natural Resource Governance Institute’s recommendation that Zambia should implement a stable MRT which is resilient to changes in the copper price.

 

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