THAT Mopani Copper Mines (MCM) produced 87, 618 metric tonnes of copper last year from which it raised US$853 million compared to 2020 when it mined 93,106 tonnes and made US$558 million, is testimony that copper mining will continue being the hen which lays the country’s golden eggs. From the disclosure by MCM chief executive officer Charles Sakanya on Thursday, copper is an asset promising this country huge returns considering the technological advancements in terms of the motor industry and information and communications technology developments. Increasing revenue by 53 percent against a reduced output of six percent points to the viability of the mining sector. Better still, MCM has used these funds prudently in empowering the local economy via settling local debt of US$40 million against a long-standing balance of US$68 million.
Most businesses were initially shunning working with MCM after Glencore left because they all thought it was the end of the mine. MCM has demonstrated the potential for return on investment. It is also a sure sign that mining is still attractive in Zambia and a lot can be done to make extractive industries contribute much more meaningfully to economic development.
The country must position itself to exploit high demand and attractive prices of copper, particularly in view of the automotive industry transitioning to electric vehicles (EVs). Glencore ended its involvement in copper mining in Zambia by agreeing to the sale of its interests in MCM in 2021 for just US$1 to mining company ZCCM Investment Holdings. The transaction was regarded as a reputational damage for Zambia, which lost a blue-chip mining company as an investor in the country.
But MCM’s performance since the departure of Swiss-based Glencore has been outstanding. In 2021, the company exceeded its target of producing 75,000 tonnes of copper and instead excavated 87,618 tonnes of the mineral. By exceeding, MCM has demonstrated that there are enough skill sets among Zambians to run mines efficiently and profitably. The Zambianisation of 48 senior jobs by MCM is not a mean achievement. Expatriates contribute to pressure on the country’s exchange market as they externalise most of their earnings, thereby increasing forex demand and eroding the value of the Zambian Kwacha. Mr Sakanya said this year, MCM needs US$160 million to complete some of its projects, which are key to increasing copper production.
The US$160 million offers local banks to contribute to the success story of MCM, a wholly-owned ZCCM-IH mining firm.
The previous owners, Glencore, were seemingly denying Zambians and the local banking financial system of the much-needed liquidity for investment. Multinationals engage in a lot of transfer pricing and other tax avoidance schemes. The fact that Mopani plans to raise finances for projects from the local banking system also goes to confirm several benefits which will accrue to our financial markets. If so much money can be made available by local banks to syndicate financing at a single mine, banks must be encouraged to also innovatively finance other economic undertakings, especially where competitive advantages exist, in order to diversify the economy from extractive and wasting sectors. The K2 billion Zambia Revenue Authority owes MCM in Value Added Tax (VAT) refunds is a source of worry. Tax reforms should be speeded up to avoid productive companies being out of pocket for extended periods of time and stifling their production and eventually the contributions to economic development Given the favourable copper prices and the Government’s fragile cash-flow situation, it might be an opportunity for capable Zambians to organise a consortium or joint venture and take over the running of the mine. Indeed, Mopani appears to be driving at becoming a success story. All it needs is Government’s support But the US$1.5 billion debt to Glencore has to be reviewed or renegotiated, if legally possible, so that the mine can redirect resources to is operations. The author is editorials editor at the Zambia Daily Mail.