Zambian Exploration And Mining Risks Are Set To Increase

If the Minerals Regulation Commission Bill is not amended, Zambia will revert to long-term policy instability and mining investment stagnation

If the Minerals Regulation Commission Bill is passed into law in its current form, the signal to the mining investment community – local and global – will be clear: Zambia is neither policy stable nor is it done with expropriating mining investors’ assets. This will drive up the perception of investment risk in Zambia, and therefore the cost of capital for every business in the country, and will deliver a fatal blow to the Government’s ambitious strategy of increasing copper production to 3 million tonnes.

Our members believe that with a handful of key changes to specific sections, the impact of this Bill could be dramatically different. A law that will deter mining investment as it is currently drafted could be one that spurs it – giving effect to the government’s strategy.

Industry calculations show that more than half of the targeted increase in annual copper production will have to come from ‘greenfield’ sites – those mineral deposits that have not yet been discovered. If this is to happen, Zambia will need to radically increase mining exploration and the investment required to fund this high-risk activity. If we are truly interested in driving investment into our economy, we must signal clearly that investors’ property rights will be respected at all costs.

Unfortunately, due to the omission of detail on the management of the mining cadastre, the prospect of forced ‘free carry’ acquisitions by the State of stakes in new ventures, and the introduction of sweeping procedural discretions including the power to usurp the universal ‘first come first serve’ license application standard, this Bill will seriously undermine property rights. Here, and in other provisions, the Bill grants unaccountable and arbitrary discretionary decision-making powers to individual regulators, which present obvious future corruption risks. This is at a time when there are already alarming and inexplicable actions by the Mining Cadastre to reallocate or carve up licenses.

The regulatory framework for mining is in need of reform, and logic dictates that all reforms should give effect to the overarching strategic goal of radically increasing production capacity. Furthermore, reforms must be transparent in stating desired outcomes so that investors can plan accordingly, and laws must be drafted precisely and clearly to achieve bureaucratic and regulatory efficiency.

It is not too late to think again. The Bill could be resuscitated and made fit for purpose with only a handful of key amendments to the law. These we have set out in writing in our various submissions to Parliament. Otherwise, the process of fixing these provisions once enacted – and once the harmful impact has been felt – will require numerous amendments to the law.

This will see Zambia reverting to its globally least stable copper mining jurisdiction status, reversing the fragile gains of the past three years.

Issued by the Association of Zambian Mineral Exploration Companies (AZMEC) and
the Zambia Chamber of Mines (ZCM)