By Lionel Williams, Deputy Editor, Mining Review Africa
All sorts of opinions are being bandied about these days as to how quickly and by how much the Zambian mining industry is likely to expand in the short- to medium-term – most of them more positive than not.
“We are optimistic on the outlook for the Zambian mining sector over our forecast period to 2014,” says Business Monitor International (BMI), a leading, independent provider of analysis and forecasts covering 175 countries and 22 industry sectors. “Our forecasts estimate an average annual growth rate of 6.4% for the Zambian mining sector over the forecast period to 2014.”
At the same time Brook Hunt, an independent international consultancy which provides in-depth insight and analysis into all facets of the metals industry, points out that global copper production is improving by only 2.6% a year; output in North America is rising by 1.1% a year; and European production is averaging 0.9% a year.
It would seem, therefore, that Zambia’s production performance places Africa’s top copper producer ahead of the international pack as far as rate of increase is concerned. I must hasten to add, however, that even BMI’s prediction of a 6.4% growth rate for the Zambian mining sector can be considered modest to say the least, if one considers latest developments in the country.
One man with his finger on the pulse of the Zambian mining industry is Frederick Bantubonse, general manager of the Chamber of Mines of Zambia. I had the pleasure of conducting a telephone interview with him recently, and had my eyes opened wide in the process.
Zambian copper production this year is expected to reach about 790,000 tonnes. “But,” he says, “A flood of new foreign investment has started to pour into the country, triggering the doubling of copper production to 1.5 million tonnes within five years, and the distinct possibility of a substantial further increase thereafter.”
This requires two very significant and essential developments, one of which has happened, while the other is still to come.
Already in place is the 2008 abolition of windfall tax, which cut the effective tax rates for the Zambian mining industry from over 80% to around 45%, paving the way for the flurry of new investment we see materialising.
“The one we are still waiting for is the amendment or repeal of the 2008 Mines and Minerals Development Act, which dramatically changed the mining environment for the worse overnight, in order to make the law more investor-friendly again.”
This is due to take place in the new Zambian parliamentary session in February 2012, and in Bantubonse’s words: “It will dispel the remaining fears and uncertainty among foreign investors and open the door even further to new foreign investment in the Zambian mining industry.”
The current spate of new foreign investment in Zambian mining involves at least ten projects which will cost a combined US$15 billion. They are all scheduled to be in production by 2018, and will have a combined output of more than 1.0 million tonnes per annum.
This was basically a result of the abolition of windfall tax. Now, with the prospect of new, investor-friendly legislation coming into force as well, another – and a possibly bigger – surge of foreign investment in the Zambian mining industry can be expected.
And to end off on a further note of optimism and encouragement, Zambia needs have no fear of running out of markets for its increasing copper supplies.
Worldwide demand for copper is expected to achieve 24.82 million tonnes by 2015, propelled by increasing activity in the building and construction, electrical and electronic equipment, consumer goods, and telecommunications sectors. And another significant factor is the growth of the developing Asia-Pacific economies, particularly China and India, which is forecast to maintain its impetus going forward.
Small wonder then that Bantubonse suggests that Zambian copper production, having reached 1.5 million tonnes a year by 2016, could even redouble to 3.0 million tonnes a year in the following ten years.