How much deeper can Zambia dig?

02/02/2016

Adam Smith International speaks exclusively to the director of the Mines Development Department (MDD), in the Ministry of Mines and Minerals Department in Zambia, about how the government is addressing the global crisis.

Does the mining sector still see itself as a major player given the mining industry’s global decline?

Our strategic vision remains the same: long term sustainability. We have been mining for more than 100 years, and would like to mine for another century! Our known reserves are running out, so investment in exploration is a key priority.

Additionally, we want to raise the sector’s overall contribution to GDP from 11% to 30%. In supporting the sector’s growth, we want the mining industry to be seen as a key driver of social and economic development to raise the standard of living in Zambia.

Some have called the downturn an opportunity to pause, reset and proactively improve the sector’s institutions and frameworks, what are your views on this?

We see this period as an opportunity to reassess our position. Take Mopani copper mine for example, even though they’ve reduced their workforce by more than 4,000 people and cut down operations, they’ve also excavated deep shafts so when prices rebound their production costs will be lower. We are using this time to revise the legislative frameworks to better withstand low prices. We are also modernising the MDD, through the EU-funded mineral production monitoring support programme and the mineral value chain project. We’re also assessing our organisational structures to see that we have the right numbers to enforce regulations. When this downturn ends, I think we will be much better positioned.

One of the biggest areas hit by the fall in commodity prices for the Zambian economy is employment. What is the government doing to address this?

We will provide land to the miners who have been declared redundant. Three large tracts of land have been identified, which will be subdivided into reasonable farm plots, and allocated to retrenched miners. Low commodity prices are global and the industry is unpredictable, so the opportunity for miners to diversify their skills and sustain their livelihoods by farming will also support the agricultural sector.

We understand that for women and young people, finding employment outside of mining will be difficult, which is why we are investing in gender programmes to provide small loans to female entrepreneurs. Further adding to our focus on the development of small businesses and trade, there is also a youth empowerment fund to stimulate the growth of small and medium enterprises (SMEs).

Zambia’s mining sector is often compared to that of its neighbours. How does Zambia remain competitive?

One thing we boast about is our political stability — our neighbours want to emulate that. We try as much as possible to have a competitive fiscal and taxation regime, and so we plan and benchmark in a regional context in order to provide a successful model for others to follow. Our Mines and Minerals Act for 2015 ensures we are competitive.

The way Botswana has managed its mineral resources is frankly, wonderful. The government gets their fair share from the diamonds produced. Everything is accounted for and the citizens of Botswana benefit. The mining industry should be adding value locally to contribute to national economic growth.

Mining is interlinked with energy and water, how are you working with other sectors to address the issues the industry is facing?

Cheap national power is declining and hindered by the major water crisis — water levels are life-threateningly low. This is raising the costs for both the private sector and government to keep mines in business so for the short term we are importing power.

At the root of this could be climate change and it’s clear we need to do more — not only in Zambia, but other countries in southern Africa. We need to revise our emission standards upwards and invest in improving our technology so that we meet international standards.

The mining industry is aware of the impact of our business, so every mining company deposits money into the environmental protection fund, so that even if a company goes into liquidation, there are funds available. We are digging into these issues more seriously.