Zambia reforms mining laws

May 29, 2017

By Jeff Kapembwa

LUSAKA – Africa’s second leading copper producer Zambia is confident it will leapfrog the Democratic Republic of Congo (DRC) to the number one spot.

This follows the country’s review of laws considered to be stifling increased production.

The US Geological Survey (USGS) has ranked Zambia seventh in the world at 711,000 tonnes produced last year, compared to DRC, which mined 990 metric tonnes.

This is the first time in six years that DRC in central Africa has seen a drop in copper production on account of Glencore who partially suspended production at its Katanga mining operations September last year. Gencore is one of DRC’s key producers of the red metal.

Zambian Mines Minister Christopher Yaluma said despite challenges facing the country, it aims to reclaim it Africa’s top copper producer status it held until 2013.

Zambia experienced challenges, among others mineral royalty taxation, instability in policy formulation which affected copper production at the some of the mining companies and delays in reviewing the mines and minerals act of 2015 to allow for initiatives, increased explorations by new and existing mine owners.

The Mineral Royalty Tax introduced last year will help the government achieve its mining revenue targets of 850,000 tonnes forecasted to be attained this year, Yaluma said.

The Mines and Minerals Development Bill of 2015, which contained the provisions for the revised 2015 mining fiscal regime, passed through Parliament in July, 2015, following changes Cabinet approved in April of that year.

The changes of that regime saw Mineral Royalty Tax (MRT) for open cast mines pegged at nine percent, brought down from the previous 20 percent, and six percent for underground mining operations.

The mine tax system also re-introduced a 30 percent corporate income tax on income earned from mining operations, while corporate income tax on income earned from mineral processing at 35 percent, which took effect July 2015.

Following extensive consultations from the time the latest fiscal regime was introduced and implemented last year, Yaluma added that  government anticipates to hit its mining tax revenue targets this year.

The DRC maintains a healthy lead over its southern counterpart, with its output for 2017 certain to continue climbing in view of rebounding copper prices on the international market, which Minister Yaluma argues will not be attained without Zambia competing for the slot where it belongs.

“Zambia, will regain its number one position from Congo.  One of the things that hit us to backslide in second position was electricity constraint; then we had some problems with our own [mining] fiscal regime but we have realized the implications and we are redressing them.

“We are now dialoguing with the Chamber of Mines regularly; whatever we feel like a change in policy, we are sitting down so that we don’t do something which will upset the industry.”

Zambia has been rated among the top four copper producers globally, since the early 1970s, despite the country having been mining a paltry 270,000 metric tons of the red metal then, where it remained until recent years when it waned.  Zambia’s copper mining recorded spurns decades since the early 1930s.

Zambia’s revision of mineral royalties of between six to nine percent for open pit mining and a maximum of 30 percent for underground mining for all mining operations in the copper rich southern African state raised eyebrows among producers, many that feared for their security of tenure on their investments, ultimately dragging their production which affected targets for 2014.

Accordingly, while copper prices have been on the downward trend for some time, losing roughly 26 percent in 2015 with the red metal having gained back some ground since the start of 2016, but is still sitting well below the $3-per-pound mark, largely due to a decrease in demand growth from top consumer China, Chile has remained top with six million tons of production produced last year.

But Yaluma, defends the shortcomings arguing: “Watch out, Democratic Republic of Congo (DRC) – we’re catching up and will soon regain our top spot as Africa’s leading copper producer.”

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