Far-reaching reforms to Zambia’s mining regulations are attracting new investment and emphasising the need for greater regional cooperation to speed up the movement of freight between the country and the ports that serve its exporters and importers.From January 1, Zambia reintroduced the full deductibility of Mineral Royalties Tax, and also increased the permitted carry forward of unutilised interest expenses from five to 10 years.It also allows a 50% per year capital allowance deduction for mineral processing equipment. There is zero withholding tax on dividends from mining operations.“Government is reviewing the mining tax regime to create a stable, predictable, and competitive environment.“This will be the most desirable government you have ever worked with,” Zambian commerce, trade and industry minister Chipoka Mulenga told a Webber Wentzel-organised webinar audience.Christopher Vandome, research fellow with the Chatham House Africa Programme, says the results can already be seen.“In a well-choreographed stamp of approval for the changes HH’s administration has brought in, the country’s top copper producer, Canadian-listed First Quantum Minerals (FQ M), announced a new $1.35-billion investment over 20 years in its Kansanshi Mine.“Credible commitment on investment security from government was critical to the decision to move ahead with a much-needed injection of cash for the company’s maturing asset.”Zambian president Hakainde Hichilema is affectionately known as “HH”.In February Fitch Solutions revised its 2022 real GDP growth forecast for Zambia from 3.3% to 3.7%.“Our revision is based on an improving short-term outlook for mining exports, with our mining team now expecting copper production to expand by 5.3% in 2022 (from 2.0% previously).“Real GDP growth slowed from 8.1% y-o-y in Q221 to 3.5% in Q321 (latest available data), due to a pause in business activity during the August elections and the fading of base effects from a 5.1% contraction in Q220.“However, we see growth picking up over 2022 – from an estimated 3.5% in 2021 – as exports and consumer activity strengthen,” says Fitch Solutions.Other companies that have announced investments include Anglo American, which has acquired a majority stake in Arc Minerals, marking Anglo’s first investment in Zambia in 20 years.It gives Anglo control of Arc’s copper and cobalt licences.Anglo is to invest $74 million in exploration within seven years.“Rio Tinto has also stepped up exploration through joint ventures in the country,” says Vandome.“Capital inf lows are testament to the goodwill and optimism that HH has garnered amongst the international investment community.“But maintaining this momentum will depend on progress on domestic policy, improving bureaucratic processes, and streamlining government decision-making,” he warns.Cross-border cooperation on infrastructure will also be vital, he says.“While Zambian railways signed an agreement with Transnet of South Africa in 2018 for the lease of rolling stock, there is a need for wider synergies between national transport agencies for bulk carrying.“The Kazungula Bridge road project is an important example of national ‘buy-in’ through blended financing into regional projects, with Zambia and Botswana both financially contributing to parts of the Jica- and AFDB-financed project,” he says.
