Lusaka – Falling copper prices, concerns about security of tenure of investments and the effects of COVID-19 have raised concerns that Zambia’s economy may contract significantly in 2020.
Zambia is Africa’s second-largest copper producer after the DRC, and seventh biggest in the world.
Production of the red metal slowed down 30 percent in the first quarter of 2020 as demand falls due to depressed global industrial activity attributable to the outbreak of the new coronavirus.
The depressed industrial productivity across the world has seen copper prices slumping 12 percent compared to a year earlier.
Zambia’s Chamber of Mines said this has resulted in copper earnings reaching US$60 million in the quarter ending March 2020 against US$90 million earned in the same period last year.
“So, despite maintaining production, Zambian mining companies have struggled to export and sell their copper, and have received a considerably lower price for the sales they have made,” Chamber of Mines chief executive Sokwani Chilembo told The Southern Times.
Other headwinds that have buffeted Zambia’s mining in recent weeks include unresolved value added tax refunds estimated at around US$1.2 billion, fiscal policy uncertainty and concerns on the security of tenure on investments.
There is also trepidation about low copper content in recent years at key mines, and a revision of mineral royalties that companies said resulted in unforeseen revenue losses.
Chamber of Mines boss Chilembo said these factors had created anxiety in the sector, and some miners were seriously considering placing their units under care and maintenance.
“Furthermore, in this extraordinary period we are living through, it is impossible to accurately forecast where we will be even a few months from now. When will we be out of the woods? No-one can tell.
"We hope that some of the revenue pressures may ease in the months to come. But we are unlikely to be entirely free of them for at least 12 months, and quite probably longer,” Chilembo said.
Zambia Chamber of Mines president Goodwell Mateyo recently urged the government to resolve the matter of the unpaid VAT refunds, saying the delays were “chocking the sector”.
With investors sending worrying signals about their level of participation in the sector, the Zambian government is making moves to enter mining in a bigger way as a means of guaranteeing more revenue for the state.
The government – through ZCCM IH - is considering how it can increase its stake in mining companies from 10-20 percent to at least 30 percent, with particular interest being shown in Toronto-listed First Quantum Minerals Ltd.
ZCCM IH chief executive Mabvuto Chipata last week said this would in no way threaten private involvement in mining, and the government would continue to work towards providing a solid investment environment.