Until it met its recent Waterloo, induced by the global commodities price slump, mining has been Zambia’s convenient cash cow – generating the bulk of the country’s revenue for various development initiatives in close to a decade. Mining-driven economic growth has even earned the country an upgrade from low-income to middle income status – joining the privileged group of Botswana, South Africa and Namibia. By African standards, this is an equivalent of developed country status.
Now, there is an about-face in fortunes – mining production has fallen to low level, which means the cash cow can’t produce as it did before. But it is the government’s response to this situation that is a big concern to mining companies.
Prior to the commodities slump, when all was hale and hearty, the government was flirting with introducing punitive taxes to milk more revenue. After the Zambian Chamber of Mines lobbied on behalf of its members (mining companies), the move was shelved. There was a celebratory mood in the industry, but it has turned out to be temporary and premature.
Oddly, the commodities slump which has driven profitable mines to the brink of closure appears to have revived the government to introduce measures which are worsening the industry’s woes.
As if overlooking its own failure to boost power supply, which has slowed down production in mining and other industries, the Zambian government seems to be overburdening the mining companies with more barriers. So far, tax breaks and other measures to cushion the industry have not been introduced.
Worse still, mines are being barred from adopting measures that would ensure their sustainability. When Glencore proposed a measure to shed some of its staff the country’s ministry of mining rejected the decision, yet cannot offer an alternative solution that would ensure that the company remains a sustainable business.
The Zambian Chamber of Mines has even decried the paucity of measures to urgently address the mining crisis in the country’s 2016 Budget, specifically singling out the lack of decisive and urgent action. The organisation, though, says it is committed to supporting the government in efforts to turn the sector around.
Unless decisive and urgent actions are embraced, Zambia’s current policy route could kill the goose that lays the golden egg that is the mining sector.