Mining in Zambia:
Africa’s safe haven
Zambia has long been regarded as the
safest place in sub-Saharan Africa in which
to invest and operate. It seems set to remain
so in the years ahead, despite the
headwinds that currently beset mining in
general, as well as problems speci c to the
country itself. Rod James reports.
Mining is a major contributor to Zambia's
economy. Copper is responsible for around
80% of the foreign earnings, and despite
the metal's low prices, BMI Research
forecast a real GDP growth of 6.0% in
Zambia over 2015. BMI's report, published
in July, concludes that private and
government consumption are likely to
remain key drivers of that growth, and a
resilient domestic demand, coupled with a
stable in ationary environment, will help
offset any export weakness.
Challenges to come
However, the report also makes clear that
Zambia will face some challenges along the
way. e country's "current account" will
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| May - June 2016
end 2015 signi cantly further in the red,
having almost doubled to $711m, as the
de cit as a proportion of GDP grows to
3.3%, up from 1.5% the previous year.
ough this will drop to 2.4% in 2016, it
will not be in the black for another two
years. e sharp decrease in global prices
for copper, which has seen it trading close
to its support level, has been a signi cant
factor in this, and so too has falling
production. But of late, the Zambian
mining sector has had two quite different
concerns altogether - politics and power.
Mineral policy
e country's president, Edward Lungu,
won a narrow victory in January 2015,
having stood on a populist manifesto
which supported earlier moves to scrap
corporate income taxes but force royalties
of 8% on underground mines and 20% on
open-cast operations. e threatened hike
in royalties brought widespread warnings
of closures and huge job losses before the
| FMDZ
standoff was eventually broken by the
reinstatement of income tax and a major
reduction in royalty rates - though both at
slightly higher rates than before.
Some have speculated that the next
presidential election, due in 2016, might
see taxation and mineral policy again
feature strongly in the campaign as it has
elsewhere across the continent, with
governments attempting to get a greater
share in their natural resources. However,
Zambia perhaps more than most is
unlikely to want to bite the hand that feeds
it. Mining accounts for 12% of GDP and
10% of employment, and according to
industry gures, from 1997 to 2013 it drew
$12.6bn of foreign investment, helping to
turn the country into one of Africa's top
performing economies.
Common sense prevails
"Zambia is keen to encourage more
mining, and with the sector key to the
economy the government can ill afford to