Kalumbila Town was designated a Multi-Facility Economic Zone (MFEZ) on 16 September 2022, in order to fast-track economic development in North-Western Province. Naturally, Zambians will want to understand who will benefit from this decision. Mining For Zambia asked the superintendent of the Kalumbila Town Development Corporation and two Zambian business owners to explain what an MFEZ is and, ultimately, what it will do for businesspeople and Zambia’s economy.
What is a Multi-Facility Economic Zone (MFEZ)?
An MFEZ is a specifically designated area or ‘zone’ in which Government – through the Zambia Development Agency (ZDA) – encourages businesses to set up in a particular location by offering them certain incentives. One of the key incentives for companies setting up in the Kalumbila MFEZ (which covers the whole of Kalumbila town) is the opportunity to keep all profits on products that they export for their first ten years in operation. Another is the removal of any duties on capital equipment and machinery that companies may need to import, for the first five years. Although the regulations that govern different MFEZs within Zambia vary, the overarching goal is to make it more attractive for companies to move or open new branches there. The Kalumbila MFEZ, in particular, will incentivise value addition – or, put differently, it will encourage companies to add value of some kind to a product before it is exported or consumed locally, as opposed to having companies simply import finished goods before reselling them in Zambia.
Are FQM’s Trident Project mines part of the Kalumbila MFEZ?
No. Michael Kabungo, superintendent of the Kalumbila Town Development Corporation, explains: “The whole of Kalumbila Town will be part of the MFEZ, and the town is outside of FQM’s Sentinel mine. That was a strategic decision because then it enables investors to own property within the town, unlike if the MFEZ was on the land that falls within the mine’s licence. The Kalumbila MFEZ is being managed by the KTDC [Kalumbila Town Development Corporation].”
Being under the KTDC’s management bodes well for the MFEZ. This is the corporation that is overseeing the development of Kalumbila from nothing but scrub and open space into a well-planned town with excellent living standards that has made it an increasingly popular place to live, thanks to a multi-million-dollar investment into the town’s infrastructure by FQM.
Why does Government want to attract companies to a particular area?
Business owner Josephine Makondo sums it up: “The main reasons that MFEZs have been encouraged in Zambia are to foster an attractive business environment – while making it an attractive foreign investment destination – to promote exports, and to enhance domestic trade and job creation.”
Does this mean that mining companies will get tax breaks?
Mr Kabungo explains: “KTDC requested that Government [through the Zambian Development Agency] consider designating the Kalumbila area as a multi facility economic zone to speed up development by offering incentives – not for the mine, but for would-be business investors. These incentives do not apply to the mine which falls outside the approved MFEZ, but to businesses that come into the area including suppliers to the mines who qualify.”
KTDC has defined the three main outcomes of the MFEZ as:
1. Encouraging new entrepreneurs in North-Western Province and existing local businesses in Solwezi, Lusaka and the Copperbelt to establish new ventures in North-Western Province – and the Kalumbila area in particular.
2. Attracting Foreign Direct Investment (FDI) into Zambia
3. Creating significant additional jobs for Zambians over and above those achievable by the Trident Project mines. Thousands of jobs are expected to be created in the Kalumbila MFEZ before the end of the decade as investment from local and international businesses spurs growth and development which, in turn, creates strong economic multiplier effects.
Value addition in action
Lawrence Makumbi, who has been a supplier of mining equipment and services (among them, construction and maintenance) since Sentinel mine opened, recently added water purification treatments to the list of services his company, Investreck, provides to the mines in North-Western Province and Copperbelt Province. He plans to build a plant in the MFEZ where he will manufacture the water purification products that his company currently imports from South Africa.
“Most of the stuff that we use at the mines comes from South Africa, or it’s imported from somewhere into South Africa and then we bring it up here [to North-Western Province]. Now I’d like to get to the point where, instead of buying finished products, I buy raw materials and start making this stuff here. Value addition is what I want to go into now.”
The new business will need to secure investment, for building a factory and purchasing equipment. “I know the process for making the products I currently supply. Once I get financing, I will build the factory and the infrastructure I need, import the raw materials, add value, and grow the business from here. When I set up the plant, it will lead to between 50 and 120 permanent new jobs.”
Once Mr Makumbi’s application to set up in the MFEZ is approved by KTDC, all that’s left to do is find the investment, and start adding value.
The location of the Kalumbila MFEZ is key to its success
Mr Kabungo explains: “The MFEZ is strategically located, in that most of Zambia’s mining activities are now shifting from Copperbelt Province into North-Western Province. The top three mines in Zambia are now within 150 kilometres of each other; you have Lumwana Copper Mine which is about 60 kilometres from Kalumbila, and then Kansanshi, which is about 150 kilometres from Kalumbila. But, because there isn’t anything that could be called a dedicated industrial area, these mines get most of their supplies through Copperbelt Province. It’s also strategically located in close proximity to mineral explorations in the Mwinilunga area, which will potentially give birth to more mines.”
Companies in the Kalumbila MFEZ will attract customers from further afield, too
Just 150 kilometres or so from Kalumbila, over the border, is Kolwezi, a high grade copper-mining city in the DRC. “There is talk of the road leading from Kolwezi to the Zambian border being upgraded before long. The reasoning is simple: most of the mining supplies go through Lubumbashi [in the DRC], but – because of the threat of instability in the country – companies would rather have their supplies travelling over a longer distance from the Zambian side,” say Mr Kabungo. “We’re also very close to the Angolan border, so we’re likely to see increased trade between Zambia and Angola. In terms of spurring development within the region, this is a pivotal position in which to locate an MFEZ.”
Mr Kabungo gives us an overview: “KTDC is currently in detailed negotiations with six different manufacturers to set up production within the Kalumbila MFEZ, in a designated 97-hectare industrial area. Several Zambian and international businesses signed Memoranda of Understanding (MoUs), which looked set to make investments in excess of ZMW 988 million into the zone. Now that the MFEZ has been declared, KTDC is reengaging these companies. Naturally, we expect the initial investments to target companies that support mining – offering everything from surveying, drilling, consulting, logistics and lab analysis – but, over time, we’ll see organic development in other sectors.”
Before long, the KTDC hopes to see the creation of a mining service cluster that is competitive enough to enable North-Western Province to become the ‘Copper Mining Capital of Africa’. Mining is a sector with economic multiplier effects that extend into virtually every sector, and the potential for growth and development that the Kalumbila MFEZ will set in motion is tremendous. Mr Makumbi is optimistic. “When I set up the water purification plant, there will be spillovers,” he says. “Transporters will need to come in, companies providing containers for the chemicals, PPE suppliers, hardware suppliers, stationery suppliers, printers for our labels – all of those are spillover jobs that will go to Zambian suppliers.”
He also has an eye on the bigger picture: “There will be more jobs created, there’ll be more money in circulation – and more workers means more taxes for Government. It also means more money for me and the people that are working for me, and I’ll invest the profits into other projects around the country. If I can set up in the MFEZ, I can actually grow my business. The potential to grow is huge. We just need to be given the opportunity.”
See also: Investment today, multiplied tomorrow