There’s a clear sense of optimism in government circles about the future of the mining industry, particularly around the stability of the regulatory and fiscal regime, a stronger copper price and increased production, which the government projects will reach 850 000 tonnes by end-2017.

However, this optimism is not entirely shared by the industry itself, because of challenges around issues such as power, skills, bureaucratic delays and the lack of a clear development vision for the country.

That was a central conclusion to be drawn from the multiple speakers who addressed this year’s 7th Zambian International Mining and Energy Conference, held at Mulungushi International Conference Centre in Lusaka on 22-23 June 2017.

Government optimism is tempered by several industry concerns

“Our mining houses have survived a tough three years, and I see a promising, bright outlook,” said Mines Minister Chris Yaluma in his opening address.

Echoing the Minister’s tone in her keynote address, Zambia’s Vice-President, Inonge Mutukwa Wina, said she would like to see mining’s contribution to Gross Domestic Product (GDP) go from its current 12% to as much as 40%.

“The mining sector is an important source of revenue for government, and an important source of both direct and indirect employment,” she said. “It is an indisputable fact that for the foreseeable future, mining will continue to play an important role in Zambia’s economic development.”

However, as key industry figures started addressing the conference, it soon became clear that the general mood of optimism had to be tempered by a number of structural challenges. The first of these was power.

In their presentations, senior officials from government and ZESCO continually made the point that the answer to increased investment in the power sector was higher tariffs; but the view from the industry was more nuanced.

First Quantum Minerals (FQM) Commercial Manager, John Dean, acknowledged that customers – including the mines – should be paying “the right price for power”, otherwise ZESCO would not be able to operate, pay its suppliers or invest for the future. However, he suggested that the right approach for the economy is not simply to keep raising tariffs, but rather to ensure that tariffs should be no higher than they need to be.

Dean said the industry was not against paying tariffs that reflect the cost of an efficient, well-managed service. It was therefore important to know what that current cost of service is, and how efficiently and transparently power is generated – particularly when compared to international benchmarks. This was why the findings of the Cost of Service study, expected to be completed within the next year, were so important.

Elaborating on the industry’s concerns, Dean said: “As a mining house, we have three concerns around power – availability, affordability and consistency”.

Availability: the lack of full power since mid-2015, because of load-shedding, means Zambia has produced less copper, he said. Affordability: tariff increases had to be seen in the context of power accounting for up to 25% of a mine’s operating costs. Consistency: voltage spikes or dips trip an entire plant, Dean said, stopping production for up to 7 hours until the system is stable again.

Two further challenges highlighted at the conference were skills and the efficiency of government departments.

FQM Country Manager, General Kingsley Chinkuli expressed concern about the challenges and delays in granting work permits to expatriates with specific high-end skills and experience. “No one will invest in a country where it is not possible to obtain such work permits. Along with other countries, we’re all fishing in the same pond. If we don’t make these people feel welcome here, we won’t be able to attract the skills we need.”

General Chinkuli also highlighted the long time it takes for government to issue land-titles for investors looking to construct hotels, shops, workshops and other businesses in the North-Western province town of Kalumbila, where FQM’s Sentinel Mine is located. Describing it as a limiting factor to the diversification of the economy, he said: “We have 74 investors lined up waiting to invest more than $100 million. It’s been four years. They are still waiting.”

Steven Din, CEO of Konkola Copper Mines, used his address to highlight the need for a clear strategic development vision to help deliver growth and prosperity.

“I have spent most of my adult life working in West, Central and Southern Africa, working in nations at various stages of development,” he said. “The experience has taught me three lessons. One: countries with a clear vision of the direction they are headed in develop the fastest. Two: no country attains inclusive growth and sustainable development without proper collaboration between a broad range of stakeholders. And three: the best way to achieve this collaboration is through a well-articulated development vision.”

He ended his talk by quoting the African proverb: If you want to walk fast, walk alone; but if you want to walk far, walk together.

The call for dialogue and cooperation between all stakeholders – particularly between government and the mining industry – was a constant theme throughout the conference, echoed repeatedly by ministers, officials, the Chamber of Mines and representatives from the mining industry.

 

Minister Yaluma emphatically reassured the industry: “There won’t be any changing of the goalposts. I can guarantee we won’t do anything to catch you unawares.”

This welcome spirit of dialogue notwithstanding, it was not lost on the casual observer at the conference that the government and the mining industry appeared to have markedly different impressions of how well things are going. The breezy optimism of government contrasted markedly with the concerns expressed by the industry. It was almost as if the two parties were – in public, at any rate – living in completely different worlds and talking past each other.

Even the government’s projection that copper production will reach 850 000 tonnes by the end of 2017 is higher than the industry’s more conservative estimate of around 800 000 tonnes.

This suggests a need for a focused annual platform where leaders of all stakeholder groups can exchange views on the issues that are most pressing and relevant to mining in Zambia. Unfortunately, this year’s ZIMEC conference was poorly focused, and very thinly attended – some sessions had barely 30 delegates in attendance; and there did not seem to be many senior representatives from the full spectrum of stakeholders. A delegate from overseas, speaking privately, said he would have expected there to be more mining developers and government officials present.

So, it is perhaps not surprising that the conference message was so divergent: a tale of two industries.

SEE ALSO: How to unlock mining investment in Zambia

Main image and secondary image courtesy of Hope Mkunte

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