Zambia generated over K26 million in revenue from four major mining companies with over US$70 million realized from taxes, skills training and social investments in various communities where they operate, says an independent report by an international agency.
The International Council of Mining and Metals (ICMM), in its report titled; “Enhancing mining contribution to the Zambian economy and society”, and commissioned by the Chamber of Mines in Zambia, a consortium of mining companies operating in Zambia, a total of K23, 126 million was collected between March and November last year from Konkola, Mopani, Kansanshi and Lumwana Mines.
The study noted that Zambia is now one of the countries with the highest contributions to tax revenue from mining, estimated at 32 percent of total tax revenue which has doubled from 16 percent in 2008.
The mining sector, which is the country’s lifeblood, accounts for 86 percent of Foreign Direct Investment and 80 percent through exports of the red metal, although there is uncertainty about the data on the total level of production in the country and the sector overall contributions to the Gross Domestic Product (GDP).
“Several international data sources suggest that the official Bank of Zambia figures overstate production levels. With regard to GDP contribution of the sector, the 2013 official data, which is in the process of being revised, understates the GDP contribution of mining.
“The unofficial estimate from the Zambian toolkit application that the sector contributes at least 12 percent it is less than three percent in constant prices and around 8 percent in the current prices,” it said.
The report launched in Lusaka on 10 April this year and graced by Vice President Guy Scott, found that the four mining companies had in 2012 employed 56,300 people, representing 98 percent Zambians. Expatriate employees were lower in other mineral producing countries including leading red metal producer, Chile.
For every job created directly by the mines, between two and four additional jobs are created in Zambia through indirect and induced employment linkages which amounts to an additional 110,000 to 220,000 jobs.
The four mining companies further contributed towards human capital development through investments in skills training and support to trade schools.
In 2012, the four mines had spent in excess US$5 million on skills training. It highlighted various procurement challenges besetting the mining sector, in which several local companies lost out to foreign suppliers of goods and services to the sector, a gap the Government has been fighting to equate.
The four mining companies further spent US$ 3 billion on goods and services each year, with US$ 1.6 billion being on services and US$ 1.4 billion on goods.
“While almost all services are procured from Zambian businesses and provided by Zambian nationals, very few of the goods procured are manufactured in Zambia. Procurement data shows that the majority of goods are procured from Zambian businesses but most are supplied by local agents or subsidiaries of foreign companies that import goods from elsewhere.”
Corporate Social Investment:
The ICMM’s study revealed that the four mining companies jointly contributed a total of US$70 million to the country’s treasury in 2012, representing between 10 and 16 percent of pretax profits for Copperbelt mining companies.
North Western Province-based mining companies’ social investment in various communities is in line with other country case studies as a percentage of pretax profits,” it adds.
The competitive position of the Zambian mining industry is fragile with recent policy changes having put pressure on high cost, low productivity parts of the industry. The report called for a stable policy environment, mutual co-operation among players and consistent application of a regulatory regime to improve the country’s attraction for direct foreign investment.
“A systematic assessment of the adhoc policy measures that have been introduced in Zambia since 2008 could be a first step both in stabilizing and policy environment and in assessing which measures are damaging the competitiveness of the industry without degenerating significant benefits for government.”
On the other hand, the report further noted that the mining sector in Zambia has been characterised by high costs and low productivity, especially in the Copperbelt Province.
Since 2008 several policy changes, such as those to do with foreign exchange have put the industry under additional pressure, making some mines vulnerable to changes in their economic circumstances.
However, despite that, mining activities in Zambia have had an important impact on the host country at both national and local levels where mining activities take place.
At national level, the Zambian economy is dependent on mining, while exhibiting the inverted pyramid pattern of macroeconomic contributions.
“ Some of these contributions have changed dramatically in recent years. This is particularly true for the sector’s contribution to government revenue where large increases have occurred” it says.
In 2012, the report added, almost one-third of all taxes received by government was from the mining sector, representing a dramatic change from earlier years where as recently as 2008, the contribution of tax revenue from mining was around 16 per cent of total tax revenue, making Zambia one of the highest paid countries in mine taxes.
“Zambia is now one of the countries with the highest contributions to the tax base from the mining,” At the local level, mines contribute to the areas in which they operate through two main channels one of which is by commercial activities (employing and training people and procuring goods and services) and through social investments.
It has meanwhile noted that the four companies have been instrumental in generating direct employment for Zambia in the mining sector which accounted for over 52,000 since the privatization of the mining companies from the former Zambia Consolidated Copper Mines (ZCCM).
“Mining plays a vital role in generating employment in an around mining districts. Together the four mining companies, KCM, FQM Kansanhsi, Mopani Copper Mines and Barrick Lumwana employed 56,300 people in 2012, almost of whom were Zambians” the reports notes.