Mwila lwando says there is need to create a level playing field in the Mining sector. Before you read his opinion, watch this weekly video round-up of the events and people making and shaping the news in the mining industry- powered by Creamer Media’s Resources Watch:
Every Country has one industry that creates spiral effects for other industries to flourish. For Mauritius, it is Tourism; for Tanzania, it is trading; while for some other African countries it is mining.
Mining in Africa has contributed to an increase in cement production, an increase in the power usage- calling for an improved delivery, capacity and usage of more efficient energy forms such as solar Geysers, Gas stoves, Energy saving bulb and many more.
The mining sector, no doubt, has boosted activities in our economy. Our Airports have become boisterous with investors, hotels where they stay benefit and of course, the tourism doors are thrown wide open to the visitors.
In the 70s, the African Mining industry was leading with countries like Zambia and Zaire, now Congo, being sort after for copper. But this sector saw a deep from late 80s to the 90s. During this period came the Structural Adjustment Programmes (SAP) and privatization, which shifted all prices of minerals to their lowest, coupled with unfavourable political environment where dictators ruled in most African countries.
The 21st century with its tech bubble has ignited a huge demand for copper and similar minerals across industries. This rush for resources is shaking up world economic super powers because it means depending on emerging markets and countries ourside the G8.
The rush for resources in Africa is graducally translating into unprecedented levels of investment from local and international companies. Local and foreign companies supporting the mines have equally increased – making an average of $800million per country per annum, according to Ernst and Young 2011 Mine report.
The Mines production is steadily increasing year after year. Africa is gradually taking the lead and becoming the mineral producing continent and also the biggest natural resource reserve for minerals- be it Oil, Gold Copper etc – with metals production mines seeing the highest growth at 15% in year ending 2011 in Zambia.
Despite all of these, Governments seem to be neglecting the Gemstone industry of copper alone, with many other minerals such as Emeralds. Perhaps this is as a result of lack of Information on their production and finding specific mines dedicated to these minerals. Yet if many of these minerals are mined and exported, these funds can enrich the rest of the Economy.
Meanwhile, there are many mines operating as obscure entities (Small Scale Mines) that can contribute to the GDP if the mining industry was properly regulated and incentives given fairly to promote mining of other more valuable minerals like emeralds, zinc and many more.
It reminds me of my chemistry days, where there was so much debate about other minerals in Zambia that can contribute to our GDP.
We have a huge resource base for mining growth, which if properly harnessed and managed would take Africa to greater heights of development.
However the biggest challenge is that this sector is not being fairly encouraged by Government. The government are giving foreign investors TAX exemptions on Custom Duty, Excise Duty, and VAT in respect of all machinery and equipment required for all exploration or Mining activity, while the Local companies are given little or no incentives to develop mines and increase capacity.
It is imperative to remember that profits for foreign owned mines are externalised and sales are based on forward contracts. Hence, in Africa funds mainly used in the economy are basically to sustain the day to day operations of these Mines, which is different if we gave the same incentives to local mines. This means profits will be in reinvested in Africa.
It is equally hard to know the real value of exports as Audits have shown in recent past that there’s no proper way of knowing the actual production figures, from these mines hence we are better off empowering our own people to develop the continent.
Mining is far from benefiting our Citizens despite the huge production levels. The biggest Country earner is Angola with Mining contributing 69.1% to the GDP while the least is Zambia with 1.3%. Yet it has been recorded that with the biggest growth percentage of 15%, and the rest of Africa having an average between 30-47% these ratios leave much to be desired.
Not to sound too celebratory of the Mining industry. The negative impact of these mineral explorations should not be overlooked, despite the benefits they bring.
The question is, do our regulators have the Clout to regulate these mines if they find that they are not operating bythe set global standard of doing business? Or has the amount of investment brought in by these people made our regulators numb?
In Zambia, the Zambia Consolidated Copper Mines (ZCCM) era, ran schools, hospitals, sports facilities, maintained the garbage system around the areas they operated in. But in my opinion, this is not enough.
In relation to developing the area they operate in, we need mining companies to give 70% of their procurement costs for goods and services to African local companies and 30% to foreign owned Companies and that is only if Local suppliers or contractors fail to do it. However this would have to be enforced by our regulators, and would reduce the dependency on the mines to contribute heavily to the Government coffers through Tax. Government will have a wide Tax base, considering the Mining industry monthly expenditure is estimated at $3 billion as at Dec 2010. This will in turn create an awesome multiplier effect to the economy as these locals will not only support mining but have extra disposable income to invest in other sectors of the economy.
Also, they should explore minerals independently and add a tax price to them to create meaningful value. There are other minerals that will accelerate Africa’s growth if properly explored. For example, the Metal demand globally is increasing, driven by China and India which are now the Technology production Hub.
In conclusion, I would like to buttress the need for regulators to look into the plight of the people and create a level playing field for foreigners and locals.
