Zambia needs a more competitive mining tax regime to entice new and existing investors to invest billions of dollars in the mining industry and boost flagging production, says Zambia Chamber of Mines (ZCM) president Nathan Chishimba.

“Zambia Finance Minister Felix Mutati’s Budget Speech, last month, aimed to restore financial stability to the Zambian economy and lay the foundations for long-term economic growth, which depends on investment,” he emphasises.

In a press statement publicising the release of a new report by the chamber, entitled ‘Taxation and Mining Investment in Zambia’, Chishimba says, despite recent welcome changes to the Mineral Royalty Tax (MRT), Zambia’s overall effective mining tax rate remains among the highest in the world.

“How is it that we have ceded our long-held position as Africa’s leading copper producer to the Democratic Republic of Congo (DRC). A key part of the answer has to be investment incentives and policy stability. The DRC’s tax regime is not only more investor friendly than Zambia’s, but has also been much more stable. This has encouraged long-term investment, which has boosted production,” he contends.

Further, Chishimba comments that the importance of new investment in Zambia is all the more timely, as the World Bank has projected that growth in copper production will start to slow from 2019 onwards.

He remarks that, along with a decline in production, there will be a decline in government revenue, mining industry jobs and foreign exchange. “However, production levels can increase if there is a new wave of investment,” Chishimba points out.

The ZCM’s report quotes research showing that mining investment in Zambia benefits not just the mining industry but also the wider economy, through what is known as the ‘multiplier effect’. Chishimba explains that this means mines procure supplies from local businesses, and employees spend their wages in the economy, stimulating more business creation and more employment.

Moreover, he points out that a recent World Bank study on Canadian base metals producer First Quantum Minerals’ Kansanshi mine, in the north-western province town of Solwezi found that for every direct employment opportunity created at the mine, a further five were created in the wider economy.

The report also shows how levels of mining investment and national economic growth are “inextricably linked”. From 1997, investors in the newly reprivatised Zambian mining industry collectively invested more than $12-billion in modernisation, expansion and new greenfield ventures.

Additionally, the report highlights that copper production and national economic growth recovered in 2000 and accelerated in the years thereafter. “Importantly, this growth started before the copper price began to recover in 2004, proving it was the surge in investment which turned around the economic fortunes of the country,” Chishimba notes.

The report goes on to cover the challenges of designing a mining tax regime which encourages continued investment, or at least does not discourage it. The report considers the various phases that a typical mine goes through, from exploration and development to production and closure and the incentives necessary to encourage the development of resources through the various stages.

For example, during the exploration phase, when there is no income, the tax regime should ideally allow mines to defer losses to later years and write them off against future profitability. This incentivises mines to continue beyond exploration to actual mine construction.

“When taking business decisions, mines will respond to the nature of the tax treatment in place,” the report says.

INDUSTRY RESPONSE
A range of industry observers have welcomed the release of the ZCM report. It is free to the public and is available in hard copy, booklet form from the Lusaka office of the ZCM. It can also be accessed in electronic form on the chamber’s educational website: www.miningforzambia.com.

The observers describe it as a “good initiative” which will help to raise awareness of a subject that is of critical importance to the Zambian economy.

Professional services firm KPMG tax partner Mike Phiri says the report should help lead to a better understanding of the link between taxation and mining investment, not just at government and policy level, but also among various stakeholders.

Zambia Private Sector Development Association chairperson Yusuf Dodia remarks that it is a good document which was well constructed and kept short enough for readers to embrace the key messages. He also believes that it is a good mechanism to initiate dialogue on the issue of taxation and the development of the mining sector in Zambia.

On World Bank projections cited in the booklet showing that growth in Zambia’s copper production will start to slow from 2019 onwards, Dodia says that this may be a key departure point, which should compel the government to consider mechanisms for diversification away from copper mining towards other sectors, such as tourism, agriculture, manufacturing and services.

Extractive Industries Transparency Initiative Zambia CE Siforiano Banda comments that there is not enough knowledge among industry players. “There is a need for government and industry stakeholders to always dialogue on matters of policy. If possible, the Ministry of Mines should be giving weekly appraisals to fellow Cabinet Ministers on developments in the sector, so that they are kept abreast and can assist in redirecting the future of the country,” he states.

Mineworkers Union of Zambia general secretary Joseph Chewe states that the ZCM has come up with “another great publication” on taxation and mining investment in Zambia.

“The first one, on the MRT, was simple and easy to understand. It was good of the chamber to release such informative and educative booklets, as they help to close knowledge gaps and inform the Zambian public,” he enthuses.

Chewe adds that there is a need for such information-sharing mechanisms to continue so that government and policymakers arrive at policymaking and tax regimes from a “well-informed” background.

Msoni Mtwalo, who is deputy national coordinator for Publish What You Pay, an international body that promotes transparency in the extractive sector, says that the booklet is “quite useful” as it gives an overview of the mining sector from the industry’s perspective.

However, he remarks that it will likely prove less useful to people outside the sector, as it does not break down the implication of the various mining taxes and does not state the basis on which the royalties cited are calculated.

Nonetheless, on the question of whether there was sufficient understanding of the topic at government and policy level, Mtwalo says there “definitely is not”, as he points out that, if there were, Zambia would not have had six different tax regimes over the past eight years!

Source: MININGWEEKLY.COM

Lusaka — Born in 1979 in Kaoma district in the western part of Zambia, Likonge Makai, an energy systems expert, did not know that one day she would be a source of light to many families in Zambia.

Today Likonge prides herself in providing the most efficient and affordable source of energy to households under her nongovernmental organization called LiChi’s Community Solution (LSC).

LCS was formed in November 2014, and had two projects; one sponsored by Institute of Electrical and Electronics Engineers Smart Village through Kilowatts for Humanity in Filibaba, Chingola and the other by IEEE Smart Village itself in Shikwakala, Lukulu. The projects came into implementation in September and November, 2015 respectively. It has impacted to over 600 people (85 households) by providing lighting in their homes and schools.

Likonge says the direct impact has been that school going children are able to read in the night and over 150 people (19 households) are able to listen to radio and watch Television. LCS has so far employed two workers from Filibaba and sponsors a grade 10 pupil at Ipafu Secondary School. At its first anniversary recurrently the filibaba energy kiosk had produced nearly 500 kilowatt of electricity which has also charged 1500 cell phones.

‘Our recent significant works are in Mimbula and Ipafu rural areas on the Copper belt province of Zambia where we have built the first solar energy kiosk targeting a population of over 1200 people, comprised of 25 households, 6 churches, and a community school with 165 pupils’, says energy systems expert Likonge.

According to the Energy Regulation Board, as at January 2016, Zambia was experiencing a power deficit of approximately 1,000 megawatts and 760 MW in April 2016. With the energy deficits that Zambia is grappling with, many experts are looking to ways of finding lasting and sustainable alternative sources of energy to supplement hydro power. The country has over the last few years suffered from massive load shading which has resulted in loss of business thereby by affecting the economy and everyday live hood.

Likonge, an only child from her parents once never dreamt of becoming an electrical engineer later on an energy expert. Her passion was to become a Veterinary doctor because of her uncle whom she lived with in the early years of her life.

‘Due to my father’s death in February 1989, I relocated to Katete district, Zambia (Eastern Province) under the care of my father’s brother a Veterinary Doctor. It was then that I was separated from my mother until 2006. Vulamkoko, in Katete District was a pre-urban community centre with a clinic, agriculture and Primary school in the centre surrounded by villages and farm settlements. We were staying at the Agriculture cape with no electricity and depended on paraffin for lighting and wood fuel for cooking. I loved the interaction between the rural communities and educational, agriculture and health workers that I started thinking of following my uncle’s footsteps to become a Veterinary doctor one day ‘says Likonge.

This however was not to be. Likonge’s fate changed once again after her uncle died in a road accident, three years after staying with him in Katete. Her uncle’s death came two months before she wrote her Grade 7 exams. She was forced to relocate to Ndola district on the Copper belt Province to stay with another of her dad’s young brother. Fortunately Likonge continued with her education and finished her secondary education with flying colours.

Being an ‘A’ grade student, Likonge qualified to attend university at both the public universities in the country. She enrolled with the copper belt university where she had applied to study either Business Administration, Production Management or Rural and Urban Planning. But her destiny was already written and in instead of been accepted in either of the three programmes, her acceptance letter came indicating Electrical /Electronics. In 2004 Likonge obtained a Bachelor of Engineering in Electrical/Electronic Degree specialising in Power Systems.

In July, 2006 Likonge started working for Zambia’s second biggest copper producer Mopani Copper Mines plc, as Senior Assistance Engineer – Electrical. In 2007 Likonge resigned and joined another mining company called Konkola Copper Mine plc which is Zambia’s biggest producer of cooper where she is currently working as Project Support Office – Administrator at Technical Department, Corporate in Chingola (Copperbelt Province.

‘I joined Konkola Copper Mines plc (KCM), Zambia’s biggest copper producer, Chililabombwe district in January 2008 as Senior Assistant Engineer – Electrical, same entry position at Mopani and after working for a year was promoted as Sectional Engineer Projects – Electrical. The main project I was made to design and implement was Power Reliability Project that was designed to provide reliable power supply to the mine without any interruption under any given conditions considering Konkola Integrated Business Unit (KIBU) being the wettest mine in Zambia pumping out an average 350,000 cubic meters of water per day.

“The main objective for PRP was to replace the oil circuit breakers with the vacuum circuit breakers for 15 off 11kv and 3.3kv substations, however other support projects were identified and implemented which included the procurement, supply, installation, testing and commission of 16 off HT motors, 4 off Capacitors, rehabilitating and revamping special tool room with various special tools/instruments for electrical and instrumentation and staff training. I was also in charge of the 24Mw power plant project from inception and did the scope of work, land survey, procurement and installations for the setup of the 24 megawatts Diesel Generator Plant now called, Vedanta Power Plant,’ noted Likonge.

It was because of the of high electricity consumption by mining activities leading to low access of electricity for household sector that Likonge draw the motivation to study for her masters in energy systems in Nepal Nepal at Kathmandu University under NORAD’s scholarship. Her research interests included effective, affordable and efficiency energy to allow even the poorest people in remote rural areas Zambia to have access to clean and sustainable energy.

‘Upon completion of my masters I returned to my home country and reinstated in KCM as Head Engineer for Energy Management in October, 2014. I became in Charger of Motor repair Services and a 24Mw Vedanta Power Plant. I did not only initiate and implement the project, I was given to run it’ in additional to Konkola energy management.

‘In August 2015, I was transferred to Konkola Concentrator as Assistance Engineering Superintendent Electrical at the same time curried on championing the project for power cost saving initiatives associated with compressors, pumps, ventilation, winder, concentrator, without affecting production to reduce energy consumption power Maximum Demand for Konkola unit. I only spent close to a year at Konkola Concentrator and applied for internal Job advert that I attended and successfully was selected as Project Support Office – Administrator for KCM Projects. Been on this job from June 2016 to date’, added Likonge

With all this experience, Likonge thought it wise to work with rural communities that do not have grid power supply, by helping them have access to electricity. Through her NGO LIChi community solutions, a project supported by IEEE Smart Village, she is empowering rural communities through cohesive linkages with renewable sources of energy to advance quality education, creation of sustainable rural enterprises, health and environmental sustainability.

Apart from providing lighting, over 9 phones are charged every day at the energy kiosk in Filibaba at a rate of 2 ZMK (0.20 USD) per phone. The energy kiosk innovation gives rural Ipafu community access to 15,768 kWh/year. The energy Kiosk also supply household groceries to help the community not to travel the distance of over 23km to go and buy groceries.

‘The short term objective is to provide an estimated clean, renewable energy annually from the energy kiosk, Solar Home Lighting Kits (SHLKs) and Solar Home Systems (SHS) supplied to the communities in the hope of impacting more than 5,000 people by the end of 2017. Under our works in rural Mimbula area we have built information communication technology at a primary school with 324 pupils to be solar powered and provide solar power to 400 people (15 households). We have started the first solar reticulation and bio-digester drier fish hatchery in Chingola district with 125 rural women trained and women out grower scheme using bio-slurry as manure to improve crop yield is under construction’, Likonge noted.

As a member of the Institute of Electrical and Electronic Engineers (IEEE), Engineers Institute of Zambia (EIZ), Energy Regulation Board (ERB), Women in Power (WiP), IEEE Smart Village, Kilowatts for Humanity (CSI) and Chitemwiko Foundation, Likonge mother of twins, feels she is part of the solution to Zambia energy deficit.

“In the past, my passion was to work with rural communities to improve their lives and was inspired by my late uncle, the Vet Doctor. My dream to work with the community is now being achieved and am walking it. It is a male dominated area but I feel comfortable knowing that am as good as them.’ Said Likonge.

According to Zambia’s Energy Regulation Authority, demand for power in Zambia and been growing steadily over the past few years to around 1, 300 Megawatts . on the other hand generation capacity has remained fairly stagnant. Only 25 % of Zambia population has access to electricity and the level of access in rural areas is less that 5 %. ERB records that currently Zambia’s source of electric energy is 96 percent hydro, 2.1 percent thermal, 1.7 renewable comprising of solar and small hyrodrosolar potential stand at 6 to 8 hours per day while coal power at over 300 MW by end of 2016.

Source: allAfrica

London copper was on track for its biggest weekly rally in over 35 years on Friday as hopes of U.S. infrastructure spending on Donald Trump’s election win and firming demand from China drag metals out of a years-long bear market.

Copper was trading up 3 percent in late Asian trade, rising for a seventh straight session and up more than 15 percent for the week, on track for its biggest weekly rise since 1980, according to Reuters data.

Copper has been pushed higher by a surge in China steel and coal prices, as well as a view emerging before Trump’s surprise electoral victory that the metal’s outlook for 2017 will be rosier than thought. Trump’s comments in his acceptance speech on increased infrastructure spending fueled further buying.

After looking set to end the year flat just three weeks ago, London Metal Exchange copper prices have rallied by a quarter to more than $5,800 a ton, the highest since July 2015.

“I think we’re out of a bear market and into a bull market for copper. I turned bullish about a month ago,” said UBS analyst Daniel Morgan in Sydney.

The pace of gains has been amplified by momentum-based fund buying, much of it from China, after prices this week smashed through a key chart resistance that has tracked copper’s downtrend over the past five years, traders said.

“When you break such a downtrend, especially on a weekly chart that has been in place for years, it’s significant,” said a trader in Singapore.

Demand for copper from China, the world’s biggest users, has turned out stronger than expected after a first-quarter credit infusion that stoked its property and construction sectors.

“Views on China improved compared with expectations at the start of the year as demand surprised to the upside,” Citi said this month, putting industry estimates of Chinese demand in 2016 at 5-7 percent, from 0-3 percent at the start of the year.

Copper demand from China’s power grid sector, which accounts for nearly half its consumption, surged 33 percent in the first eight months of the year.

Analysts are also revising down expectations of mine supply for 2017, after January’s price slump to six-year lows forced some high-cost mines to shut, and with new supply from Peru largely complete.

“Consensus estimates suggest little copper oversupply in 2016 to overhang the market next year,” Citi said, supporting the surge in the copper price.

“It represents a shift in expectations around where the market sees demand over the course of 2017,” said strategist Daniel Hynes of ANZ in Sydney. “Fundamentals have not been as bad as the market has priced in.”

Source: Reuters

THE World Bank is expected to roll out a US$65 million mining and environmental remediation improvement project aimed at reducing environmental health risks in four mining towns.

Under the project, the World Bank is targeting Kitwe, Mufulira, Chingola and Kabwe.

Both World Bank country manager Ina Ruthenberg and senior mining specialist Martin Lokanc disclosed yesterday that the project that targets at mitigating mining pollution is next month expected to be presented to the World Bank Group for proposal approval.

“The World Bank through the previous Copperbelt Project supported the clean-up of polluted mining areas and helped strengthen environmental governance. We are taking up this agenda again following a request by the government because we all believe it is a major challenge for Zambia and impacts many livelihoods,” Ms Ruthenberg.
She said once implemented, the project will result in the treatment and nutritional supplements for over 30,000 children in Kabwe who have been impacted by lead pollution.

Lead impacts the cognitive capacity and thus is particularly harmful to children.

The project will also reduce the impact of sulphur dioxide on soil quality and improve agricultural productivity, a move that is expected to benefit about 1,000 farmers in Mufulira.

“Overall this project shall demonstrate how environmental clean-up can be designed and replicated,” she said.
Mr Lokanc also explained that the five-year project will, among other interventions be securing tailing dumps as they pose as a risk to the environment and personal safety.

Meanwhile, the World Bank with the support from German Development Cooperation and other stakeholders has launched a Zambia Mining Investment and Governance Review report aimed at strengthening the mining sector’s governance, investment environment and development impact.

Mr Lokanc also said the mining sector in Zambia is of significant national importance and makes an important contribution to the national economy.

“Given the significant resource potential and long life of mines, the sector is likely to remain important for the significant future. Investment has slowed down, partly due to prices,” he said.

Source: Daily Mail