VP Scott challenges Zambians on value-addition

Lusaka – Zambians will only become real owners of the mining sector if local value addition to minerals is improved, Vice President Guy Scott has observed.
Speaking during the just-ended third Zambia International Mining and Energy Conference and Exhibition in Lusaka, VP Scott said that the government was elected to see to it that locals benefit from mining activities.
“Our interest is to provide an enabling environment where people become full beneficiaries of the minerals by having access to jobs, fair payments of taxation and this can only be done through local content initiative whereby Zambians start playing a key role in adding value to minerals,” he said.
“When I was growing up in the Copperbelt, we used to see massive factories producing this or that for the mines but now everything is imported, including simple things like gum poles and mill balls. We want to see Zambian value addition; whether foreign-owned company or not, manufacturing should be done locally.”
The deputy president stressed that Zambians were capable of manufacturing high quality products as could be seen by many local people that had been “poached” to work overseas.
“Recently, I was in India and found a cadre of skilled Zambian miners doing a lot of work which can be done here, so for us to become real owners of the mines, and to become full beneficiaries, we need to see local content initiatives,”  he added.
“Of course, we are doing something as government; this can be seen with the various projects being undertaken by Zesco to enhance power supply and also the roads infrastructural projects as well as construction of skills training centres.”
In addition, VP Scott said the government was committed to ensuring a good working relationship with the private sector.
“We are losing out billions through illicit financial flows, we want to know real owners of these offshore companies and the G8 Summit is timely and we are in line with the expected outcomes of improving transparency and increased access to revenue,” he said.
“Some people are not saying the truth; it is not exchange controls but tax scrutiny. The money is not ours but it is our entitlement as tax beneficiaries. And it is not true that changes to the BoZ Act will take economy backwards but we are going forward and we are not blind to the fact that the private sector are drivers of economic growth,” he said.
Speaking during the Mining and Energy summit, Mopani Copper Mines chief executive, Danny Callow, said there was a need to address infrastructure development, which is a fundamental requirement for successful mining operations.
Callow noted that the mining sector was growing rapidly and its growth comes with a huge demand for infrastructure development.
Global production of copper is estimated to reach 20 million tonnes by 2020.
Zambia's copper production alone is expected to reach 1.5 million tonnes by 2016 when a number of current projects being developed by the mines come on line.
“This phenomenal growth in copper production will only be sustained by a sustainable source of reliable and affordable energy and associated infrastructure, such as roads, railways and water and sewerage treatment,” Callow said.
Mopani Copper Mines, owned by Glencore Xstrata Plc, seeks to raise its annual copper outturn to 170 000 tonnes from the current 120 000 tonnes within five years after investing in new projects and upgrades.
He added that Zambia, the continent’s top copper producer, needs private investments to raise its annual copper production.
Callow said his company had invested about US$2 billion in capital projects in Zambia and expected to continue operating in the country for a long time. He also noted that there was a lot of debate surrounding profitability of the mining sector in Zambia.
“However, not many understand the predicament that we find ourselves in.
“It is common knowledge that many of the mines in Zambia are deep underground mines, many dating back to the 1930s and in many cases still employing 1930s technology to produce copper,” Callow said.
“The cost of producing copper from this type of operation cannot be compared to a modern open-cast operation. Deep level underground mining costs tend to be in the region of three times higher than modern, large-scale operations.”
More than 80 percent of Mopani’s production is from mines pre-dating the 1950s.
He said tax contributions to the government  remains a thorny issue. “We are glad with the coming of extractive industry transparency initiative (EITI), the people will be able to understand more on issues of mining taxation through increased transparency,” Callow said.
During the five-year period between 2007 and 2012, Mopani contributed over KR2.3 billion (US$420 million) in taxes to government. Over the same period, the company paid about KR40m (US$7m) to the Kitwe and Mufulira local authorities in property rates, he said.
In 2000, when Mopani took over, the labour force was 10 000 and has nearly doubled from about to nearly 18 000 employees, which accounts for about 35 percent of the total labour force in the Zambian mining sector.
The Mining and Energy Conference and Exhibition (ZIMEC 2013) was an opportunity for investors to realise the country's mining potential and the challenges the industry faces.

July 2013
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