KEY REFORMS FOR THE

ACTUALIZATION OF THE
3 MILLION METRIC TONNES
OF COPPER IN A DECADE

BY SYDN EY MW A MBA
P M R C E X E CUTIVE DIRECTO R
ABOUT PMRC
n The Policy Monitoring and Research Centre (PMRC) is a public policy think tank that was
established in 2012 to promote public understanding through research and education.
n Our role is to encourage and facilitate debate on social and economic policy issues critical to
national development.
n PMRC’s vision is “Unlocking Zambia’s Potential” through evidence-based policy research
analysis and reform proposals.
n Our core analytical thematic areas include; Economic Development, Good Governance,
Natural Resources and the Environment, and Social Development and Livelihoods.
n In order to achieve some of these stated aims, PMRC conducts various studies that inform
policy recommendations to Government and other stakeholders.
n PMRC conducted a study to identify viable reform options and proposals crucial for realising
Zambia’s goal of achieving an annual incremental copper production of 3 million metric
tonnes in a decade.
n The study involved interviews with a total of 11 stakeholders, including Government ministries,
academia, policy think tanks, mining associations, and mining businesses.

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INTRODUCTION
n The mining sector remains the bedrock of Zambia’s economy. The sector is a major
contributor to foreign direct investment and tax revenues contributing a significant
portion to total government revenue (World Bank, 2016)
n In the 2022 budget, Government announced aspirations to ramp up copper production
from 830,000 metric tonnes to 3 million metric tonnes in a decade (National Budget
Speech, 2022).
n Ramping up production from the current production entails increasing the production
of copper by at least three times - from the current 830 million metric tonnes to 3 million
metric tonnes, or an average of 250,000 metric tonnes incrementally realised each year.

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WHAT 3 MILLION METRIC TONNES MEAN?
n The 3 million metric tonnes of copper in a decade entails an incremental production of
250,000 tonnes annually.
n The table below shows how copper production must increase annually from 2022 to
2031:
YEAR PRODUCTION
2021 830,157
2022 1,080,157
2023 1,330,157
2024 1,580,157
2025 1,830,157
2026 2,080,157
2027 2,330,157
2028 2,580,157
2029 2,830,157
2030 3,080,157
2031 3,330,157

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OBSTACLES TO ACHIEVING SUCCESS
1. Unstable and inconsistent Mining Tax Regime
n The last 10 years has been characterised by unstable, uncompetitive, and unpredictable
tax regimes.
n Coupled with the unstable tax regime, mining houses have indicated that current tax
rates are higher than other jurisdictions, which makes it difficult to attract both local
and foreign investment.

2. Delayed VAT Refunds

n Most mines working capital has been held up due to non-payment of VAT refunds.
This has contributed to the slow pace of development in the industry.

3. High cost of Capital

nThe high cost of capital in Zambia has been detrimental to all businesses, including
mining. This challenge has been more pronounced for indigenous Zambians aiming
to enter the mining sector. Small mineral deposits could be readily exploited by local
companies, but obtaining start-up capital has always been a significant hurdle.

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 nAccording to the study participants, Zambia has a high-risk premium of 11.32%, up from
10% in the pre-COVID-19 era. The increase in the risk premium is associated with the
2020 Euro Bond default.
4. Inadequate local sources of financing for mining projects
n Mining operations require substantial capital inflows, and sources of this kind of capital
are not available on the local market.
n Provisions in the banking and Financial Act of 2017 limit how much credit a facility/
person/entity can acquire.
n Mining houses who participated in the study indicated this provision has impacted
funding for most of the mining projects, as most mines have to source funding from
outside the country.
5. High cost of energy
n Power costs are a huge component of a mine’s production costs.
n Subjecting electricity to being non-deductible for VAT purposes reduces the VAT
refundable and a mine’s ability to boost production with its working capital.
n Government limits input VAT on electricity. Under the current tax regime, 20% of the
total VAT on electricity and 10% of diesel are non-deductible for VAT purposes.

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 n Most large mines have been required to set up their transformers to be connected to
the main grid, incurring additional costs. Furthermore, mining houses need to employ
their own engineers and technicians to operate and maintain these transformers,
resulting in additional operational expenses.
6. Lack of high resolution, detailed and updated geological information
n The scarcity of up-to-date geological data remains a hindrance to the mining industry’s
expansion. Currently, only around 55% of the country has undergone geological
mapping, and the existing information is outdated and lacks high resolution.
n Many of the mining organisations involved in the study pointed to insufficient funding
to the Ministry of Mines and Minerals Development as the primary cause of the absence
of high-quality mineral information in the nation.
n In 2024, Government plans to conduct a comprehensive high-resolution geophysical
survey across Zambia. This will be done on the Copperbelt, Lusaka, North-Western,
Southern, and Western Provinces, along with selected areas in Central Province.
n This investment will facilitate for the establishment of new mines as well as inform
mining expansion projects towards the actualization of the 3 million metric tonnes of
copper.

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PROPOSED REFORMS FOR THE ACTUALIZATION OF THE 3 MILLION
METRIC TONNES OF COPPER IN A DECADE
i. Revision of the Legal Framework for Public-Private Partnerships: To leverage public-
private partnership (PPP) financing for developmental projects, the Public-Private
Partnership Act No. 14 of 2009 needs to be revised, among other things, strengthen the
framework for managing fiscal risks, such as fiscal commitments and potential contingent
liabilities. Despite the promise of PPP models, Zambia is currently behind when it comes
to securing and completing PPP projects, which presents a missed opportunity. The
PPP model of development is a key option in the undertaking of mining explorations,
and infrastructure needed to support the 3 million metric tonnes in a decade such as
roads and railways as well as the energy sector.
ii. Strengthening Regulatory Oversight: Introducing the Minerals Regulation Commission:
The need for enhanced regulatory oversight in the mining sector has become increasingly
evident. Government’s intention to introduce a bill aimed at operationalising the Minerals
Regulation Commission is a positive move in this regard. The commission will play a
pivotal role in addressing critical issues such as; production reporting, mineral content
analysis, curbing illegal mining activities, and combating the illicit trade of minerals.
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iii. Education reforms:
n There is a need to embark on educational reforms that promote skills and competencies
needed in the mining sector to reduce on the importation of skills.
n In addition, the Government can consider incentivising education services that match
industry needs in order to enhance transferable competencies to other sectors like
agriculture, construction, and manufacturing.
iv. Debt restructuring:
As indicated in the challenges, Zambia has a high-risk premium which has made borrowing
on the international market very expensive. However, now that Zambia has an International
Monetary Fund (IMF) package as well as a Memorandum of Understanding with the Official
Creditor Committee, investors are sure to have much more confidence about investing in
the sector. What remains is for Zambia to engage with its private creditors which will further
enhance the Country’s economic outlook. This action, together with the IMF facility and
on-going debt restructuring efforts offer an opportunity for lowering the risk premium to
acceptable levels. A key lesson can be drawn from Ghana. When Ghana accessed its IMF
facility, it offered a letter of comfort to investors which subsequently assisted in lowering
the risk premium of the country.

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v. Development of a 3 million metric tonnes of copper in a decade masterplan:
To realize the goal of producing 3 million metric tonnes of copper in a decade, it is
imperative to create a master plan. This plan should explicitly outline critical requirements,
limiting factors, success indicators, institutional framework, and cost requirements for all
components. Relying solely on changes to the legal and policy framework will not suffice,
as achieving these goals demands a clear roadmap and delineation of responsibilities for
all stakeholders in the copper production value chain.

vi. Develop a legal framework that governs the small and artisanal miners:
The contribution of artisanal and small-scale mining (ASM) to Zambia’s annual copper
production has grown substantially, from approximately 5,000 metric tonnes per annum
in 2017 to 26,000 metric tonnes per annum in 2021. There is further potential for this
subsector to increase its contribution. To harness this potential, the government must
encourage the formalization of ASM and boost their role in achieving the 3 million metric
tonne target. This can be accomplished by establishing a specific legal framework that
supports ASM development. Such a framework will enhance licensing and formalisation
processes, improve access to geological information, facilitate capital and equipment
procurement, and foster better dialogue within the subsector.

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vii. Adoption of technological innovations in the sector:
The adoption of technological innovations in Zambia’s copper mining sector is an urgent
necessity, particularly for mines dealing with depleting resources while striving to remain
sustainable and competitive at minimal costs. Embracing these technological innovations
will assist Zambian mines in reducing expenses, increasing production, and enhancing
mineral recovery. This transformation is vital as the country aims to achieve a 3 million
metric tonne production target.

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THANK YOU