Be categorical on drive to increase stake in mines – Govt urged

The Chamber of Mines in Zambia has asked Government through the ministry of mines to be more clear and categorical on earlier announced intentions that the state intends to increase stake or shareholding in mining companies in Zambia to avoid scaring away investors.

Speaking during a panel discussion at the just ended 2021 Mining Indaba, which the Zambian Business Times-ZBT attended, Lubambe Mine representative Nick Bowen said the statement that Zambia wanted to take significant stakes in unspecified mines led to fears of nationalization and slowing down of investments in the sector.

Bowen said if the country is to attract [foreign direct] investments, messages like these needed to be clear and categorical as the international investors follow what is happening and what is being said.

“Government needs to be clear on its intentions on mines, the statement that it wanted to hold more stake in mining companies does not specify what really Government wants to do. Zambia needs to attract more Investments now that copper price projection are favorable so that the country can be poised to continue to benefit from the green revolution”.

“If the government wants to attract investments into the country, it needs to come out clear, we need to be accurate with the information we are putting across,” he said. He said there is need to be mindful of what message is being put across as that changes the perception about Zambia and investments may come in depending on that.

However, Finance Minister of Finance Dr Bwalya Ng’andu had explained that Zambia is not looking to take over more mining companies, nor is the government planning to nationalize the industry.

The Zambian government has recently acquired 100% of Glencore’s Mopani Copper Mines and Vedanta’s Konkola Copper Mines – KCM local operations in the past two years. The take over of KCM was however through ZCCM IH liquidation process, after complaints by local contractors and suppliers of not being paid for extended periods of time.

A check by ZBT however found that the minister of Finance had categorically stated that the statement of increasing mining stake was only related to Mopani and KCM. “We are at this point in time not looking at any other specific mining operations that we want to go into a relationship with,” Dr. Ng’andu had earlier stated.

The Minister said, “In some quarters the president’s statement was misunderstood to mean that Zambia is contemplating taking over other mining firms by force or nationalizing mining companies. We are not in that business at all.”

Dr Ng’undu pointed out that government cannot engage in nationalization of mines because it has learnt lessons from other copper mining countries. “We have to make sure we run these as proper businesses without interference in their operations,” he said.

The Finance Minister further stated that Zambia will also get a better understanding of mining taxation and royalties from running operations like those previously owned by Glencore such as Mopani. Govt will not just be a spectator but also an industry participant through ZCCM IH.

The Chamber of Mines however stated that there is need to be more clear and categorical by specifically stating what and where these intensions to increase stake in Mines end. Mining is a long term business and the need to clearly state if the acquisition of more stake in Mines have ended with KCM and Mopani should be made clear.

The Chamber of Mines in Zambia has

Rising copper prices to reboot economy – Veep

Vice President Inonge Wina has stated that the steadily rising copper prices on the international market is a good indicator for Zambia’s mining industry and plays an important role in the equation of rebooting Zambia’s economy.

Copper prices on the London Metal Exchange have hit record highs of over US$9,500 per tonne. Experts indicate that this copper rally may continue as motor companies are now focusing on electric cars which are expected to back the growing demand.

The veep said the movements in economic indicators are important for the economy as they signal what adjustments that are needed to be made in order to reboot the economy back to the path of growth as indicated in the economic recovery plan.

She was speaking at the 2021 Mining Indaba which the Zambian Business Times-ZBT is attending. “It is gratifying to note that one of the key economic indicators ‘the price of copper on the international market has continued to register a steady growth.

“This is certainly a good indication for the industry and plays an important role in the equation of rebooting our economy to growth,” she said. The veep acknowledged that a positive working relationship between Government and the mining industry players and stakeholders was critical in promoting a sustainable, diversified and export orientated industry.

She signaled Government’s determination to resolve policy and regulatory issues that investors have been raising regarding investment in the mining sector. She stated that the mining firms had constantly complained of being over taxed, thereby making their investment unattractive.

The two days indaba is being held under the theme “Building for the Future: reflecting on Zambia’s Mining Taxation Policy Towards Sustainable Investment in the sector.

Mining taxation policy and the tax administration has been a topical issue in Zambia’s policy debate since the privatisation of the mines. “At the heart of this is the question of how the Zambian Government can maximise revenues from its extractive sector without compromising the profitability of mining firms,” she stated.

She further stressed the importance of mining firms contributing their fair share to the treasury through equitable taxes.”Our vision is to develop the mining industry into a catalytic, transformative and innovative developmental industry by growing the existing mining activities, formalising Artisanal small scale mining and promoting new investments in order to set Zambia in a pole position to benefit from the new and emergent green energy wave,” she added.

And ZRA Commissioner General Kingsley Chanda stated that their is need for striking a balance and not just have a one way debate on taxes rate reduction and tax refunds. There are some mines which have operated in Zambia for over 15 to 20 years, but have never declared a profit.

“If these Mining entities who have never declared a profit but continue mining are not taxed via top line mineral royalty tax, then it may lead to a situation were they exit the country, deplete the copper deposits and not contribute anything to the treasury and people of Zambia” Chanda stated.

Vice President Inonge Wina has stated that

Zambia – Angola oil pipeline deal nears closure

Zambia is expected to sign a Memorandum of Understanding (MoU) with Angolan that will facilitate for the commencement of a feasibility study on the establishment of the Angola-Zambia Oil Pipeline.

The long-held plans for the Angola-Zambia Oil Pipeline are still in play as the Ministry of Energy is currently finalizing the MoU that will pave way for technocrats to undertake a feasibility study to ascertain the viability, cost, duration and capacity of the proposed pipeline.

Speaking in an exclusive interview with the Zambian Business Times – ZBT, Energy Minister Mathew Nkhuwa said the signing of the MoU will take place in [May 2021] within the next two weeks.

“Well, we are currently to finalizing the MoU so that we can sign with our Angolan counterpart, suffice to say that, the MoU signing might be done virtually or we will have to travel to Angola depending on the Covid-19 situation.

“The MoU is to allow technocrats to start working on the feasibility study to come up with the costings, duration and capacity of the pipeline,” he said.

Zambia currently imports all its petroleum requirements, mainly from the Middle East, through the port of Dar-es-Salaam in Tanzania. Other refined petroleum products are imported via Mozambique, Tanzania and South Africa.

Nkhuwa said the coming into play of the oil pipeline would help to reduce of burden of importing fuel. He noted that transporting fuel from Tanzania and other neighboring countries using trucks was expensive, hence its envisaged that using the pipeline from Angola would be much cheaper.

“To transport fuel from say Tanzania using trucks is expensive, so if we are going to use the pipeline, the price will be cheaper. As the Government, that is what we are looking at and also we will have two sources of transporting fuel, the existing Tazama pipeline and the Angola-Zambia oil pipeline in case we have a problem on one, the other one remains working,” Nkhuwa told ZBT.

He said, “for example in May this year, the single storage point where they offload fuel from in Dar-es-Salaam is going to be under maintenance, so if it is under maintenance for one month then we will have only Beira in Mozambique.

Nkhuwa explained that if there is an alternative line, it makes life easier for the Government to be able to facilitate supply fuel to the country.

He said the Angola-Zambia oil pipeline will act as a source of security of supply and the pipeline is cheaper than trucking the fuel from Dar-es-Salaam. “The demand for fuel is forever increasing, so we must make sure that we are on top of demand otherwise if do not do anything, we will find that we will not be able to supply.

“At one time, just the Tazama Pipeline alone was enough to supply fuel to the whole country, but now it only supplies 40 percent of the total current demand and the other fuel has to be trucked it,” he said.

Nkhuwa said Government will still continue trucking in fuel because it does not want to push the truckers out of business. “We have the truckers that are in business, so if we remove them completely, we will kill them. We do not want to push them out of business, so they will still be bringing in fuel.

“The pipeline will be up to some depot where we will be putting in the tanks, and from the tanks, then it has to be moved by the truckers to their respective filling stations. So we will still need to depend on one another,” he added.

He said the pipeline will definitely make it easier to transport fuel and lighten the burden of fuel procurement and logistics once in place. Petroleum remains one of Zambia’s main import commodities. A trade deal with Angola would make result in huge economic benefits to both countries as Zambia can supply Agro and food products at a lower rate while Angola can likewise supply fuel With reduced logistical costs.

Zambia neighbour to the west, Angola has huge petroleum reserves and is currently Africa’s second largest producer to Nigeria. The two countries had some historical differences which were mostly caused by colonial legacies. The two countries have been working through to mend fences and be able to meaningfully trade with each other.

Zambia is expected to sign a Memorandum

Mines to pay all tax obligations in US dollars

All large scale mining companies in Zambia will effective June 2021 be required to pay all their tax obligations directly to the Bank of Zambia (BoZ) in US dollars.

BoZ has revealed that following the initial decision to collect mineral royalty in US dollars, the central bank was able to use the proceeds effectively, which resulted in the reduced decrease in the international foreign exchange reserves.

Speaking in an exclusive interview with the Zambian Business Times – ZBT, BOZ Assistant Director for Communication Besnat Mwanza stated that this measure was in addition to the earlier requirement in September 2018 for mining companies to pay mineral royalty tax directly in US dollars.

“This move was intended to shore up foreign reserves. In 2020, mining companies paid a total of US$468 million directly to the Central Bank,” she said. Government will effective 30 June 2021 require mining companies to pay the remaining tax obligations directly to BOZ in US dollars.

Mwanza said the earlier move to collect mineral royalty taxes in US dollars from the mines contributed to slowing down the rate of decline of gross international reserves. She told ZBT that, to augment reserves, BoZ also purchases foreign exchange from the market when conditions allow.

At the end of December 2020, gross international reserves declined by about US$118 million to US$1.2 billion equivalent to 2.4 months of import cover from US$1.3 billion at the end of September equivalent to 2.3 months of import cover.

The decline was largely on account of foreign exchange interventions and debt service. Mwanza said the amount of foreign exchange used in interventions in the fourth quarter of 2020 was about US$340 million while US$51.2 million was spent on debt service.

BoZ explained that “Foreign exchange interventions were largely supported by selling back some of the US dollar proceeds of mining taxes into the market,” she added.

Analysts expect this move to shore up US dollar inflows into the Zambian economy in the short to medium term, as international copper prices continue to remain buoyant at over US$9,500 per tone.

Zambia’s battle to gain control and manage its currency, that Kwacha, remains one of the biggest huddles that every consecutive finance minister faces. Despite the country exporting large quantities of copper, the economic system has struggled to tame its appetite for imported goods, which has resulted in perpetual depreciation of the local unit.

All large scale mining companies in Zambia