The success of the mining sector has been one of the major catalysts for Zambia’s economic growth in recent years, with the industry responsible for up to 80 percent of foreign exchange earnings.

Zambia’s vast mineral wealth, which comprises some 10 percent of the world’s copper reserves and enormous energy resources, have brought many economic benefits over the years. The lucrative copper and cobalt mines made the country one of the most prosperous in southern Africa during the 1960s and 1970s. However, plummeting copper prices in the mid-1970s coupled with a decline in new investment due to the then government’s socialist policies saw copper production begin to decline.

Political change in 1991 led to a thorough restructuring of the mining sector. Privatisation of the formerly state owned mines, along with the sustained high demand for copper and soaring international commodity prices, has led to increased private-sector led investment in the mining industry and expansion in mineral production.

 

This investment has involved not only the establishment of new mines and the recapitalisation of existing ones, but has attracted additional investments in mineral exploration, with very promising results. More than US $2 billion was invested in existing and new plants between 2002 and 2006. With some 45 percent of the country yet to be geologically surveyed, huge investment opportunities are available in the sector.

Growth in the mining industry has brought about benefits such as substantial increases in employment and income from both mining and mining-related activities. Formal employment in the sector increased from around 35 000 in 2001 to over 50 000 in 2006. At the same time, copper output has also increased tremendously, rising from around 300 000 metric tonnes in 2001 to 515 618 metric tonnes in 2006.

While mining has indeed brought benefits to Zambia in the form of foreign exchange earnings, the 0.6 percent which has been paid by mining companies in mineral royalties is way below the global norm of 3 percent. In recognition of high copper prices and the generally more favourable investment climate, government has thus revised the mining sector fiscal regime to be more consistent with international standards.

This new framework will see a greater contribution by the mining sector to the social and economic welfare of the people of Zambia. At the same time, an appropriate return on investment will be secured for mining companies. The additional revenues arising from the new mining tax regime will be set aside and a clear and transparent mechanism for their utilisation established. Transparency will also be ensured in the accounting and utilisation of mineral revenues and the rights of all those investing in the mining sector protected.

Mining investment accolades

In 2007 Zambia scooped the International Country Award for Outstanding Achievement for a country that has shown the most improvement in terms of attractiveness to mineral investors during the 2006/07 period.