The Zambian government may consider introducing finance-aiding initiatives to help reduce mining job losses after numerous companies announced their decision to stop production in the country as a result of weak copper prices and a power supply shortage.
Threatening licence revocation is one possibility which would force mining companies to curtail planned job cuts; thereby avoiding a potential political backlash ahead of 2016 national elections.
Although such a threat would be a major concern, the government is unlikely to proceed with actual licence revocation given the broader economic repercussions such a move would have.
In fact, it will likely attempt to incentivise firms to simply minimise the extent of operational suspension and thereby reduce the impact on government revenue. Such incentives may include waivers on key import or export duties or discounted power purchases.
This is unlikely to significantly affect group-level decisions by miners however.
Anglo-Swiss mining company Glencore recently announced that it is suspending operations at its Katanga copper mine in the Democratic Republic of Congo (DRC) and its Mopani copper mine in Zambia for 18 months to undertake upgrade works aimed at lowering operating costs. Mopani accounted for 15% of Zambia’s copper output in 2014 and employs 20 000 mineworkers.
CNMC Luanshya Copper Mines also recently stated it would suspend operations at its Baluba mine in Zambia. Vedanta Resources Plc’s Konkola Copper Mines unit announced on 4 September that it was placing the Nchanga mine on care and maintenance.
In light of severe power shortages in recent months as dam levels fell, leading to a 560 MW generating shortfall, mines were compelled to cut usage by 10−15%. Policy uncertainty, fiscal in particular, has also been a key grievance within the sector. Between January and June, royalty rates for open-cast and underground mining were amended three times.