Workers underground in the Henderson shaft at the Mufulira mine, operated by Mopani Copper Mines, in Zambia. (Photo: Zinyange Auntony / Bloomberg via Getty Images) 
On 16 September 2024 Zambia’s Minister of Mines and Minerals Development, Paul Kabuswe, signed an MOU with the Geological Survey of Finland to provide third-party quality and accuracy assurance for a nationwide geological survey, the tender for which has gone to Spanish firm Xcaliber.
It is the latest international agreement to rejuvenate the nation’s copper industry, with previous agreements including partners from China, the EU, India, the UAE, the UK and the US.
Domestic constituents and external partners have so far demonstrated patience with the administration’s wider economic reform agenda. The complexity of its debt renegotiations means there will not be a single “mission accomplished” moment.
Incremental progress will prove longer-lasting than rapid unsupported change, even if the positive effects of the reforms are outweighed by the impacts of the drought, and advances should ease lending for commercial entities and free up the administration’s time and attention for other areas.
However, global expectations that Zambia can spearhead Africa’s green mineral transformation may be ahead of current economic realities on the ground. The commencement of debt servicing will reduce available funds from the treasury. More than halfway into the electoral cycle, President Hakainde Hichilema’s government knows it must now show delivery.
Reforming institutional governance of the mining sector was supposed to be the next step of the privatisation project and in unlocking investment. But good intentions have been blighted by the scale of the challenge. Each step must confront deep vested political and bureaucratic interests, appease increasingly populist citizens and reshape the government machine to deal with large-scale investment-driven growth.
Halting regulatory advancement
The Hichilema government has repeatedly asserted its commitment to a private sector-led mining industry. Like other African countries seeking to capitalise on their resource endowments, it faces the challenge of overseeing institutions that support and appropriately regulate private investment while simultaneously ensuring that citizens benefit from the potential wealth.
The presidential delivery unit (PDU) is at the forefront of pushing for and managing change, with support at a senior political level, especially towards the nation’s highly ambitious three million tonnes of copper output target.
However, a reform process that was intended to support the industry and its contribution to growth has become mired by competing interests and poor communication that have resuscitated old debates on resource nationalist policies and could seriously threaten the industry.
Three pieces of legislation encapsulate this regulatory upheaval.
Two new Bills – the Minerals Regulation Commission Bill and the Geological Minerals and Development Bill are a replacement of existing mining law. From the outset, the legislation was contested, with different international advisers and partner countries advising both for and against the reform, with some advocating for a restructured ministry instead.
As much as governments are tempted to instigate new policies, Zambia needs to demonstrate consistency and move beyond its reputation for repeated regulatory change. The government has pushed ahead with the legislative change, which divides the responsibilities of the state as a participant in the industry from those of a regulator.
The new Minerals Regulation Commission Bill will set up an independent commission to govern the industry. This is intended to separate the role of the commission as a referee from the state as an active industry player.
A new Geological Minerals and Development Bill, which will be introduced in the new parliamentary session, will replace the existing Act to legislate the explorative and mining role of the department.
Strong industry criticism
The way this change has been pushed through has been met with intense criticism from the industry. Throughout the negotiations political and bureaucratic stakeholders have sought to shape the new framework in their favour, often with changes being made to drafts at short notice ahead of discussion forums, giving other stakeholders little time to read them. Last-minute additions providing for ministerial discretion in dispute resolution could potentially lead to political abuse.
The industry asserts that this will put off investors, as will proposals for a 30% production share, especially in a context where there are several exploration projects in the country, but no pipeline of new productive operations.
The government insists that the terminology of free carry – shareholding without financial contribution – is a misnomer. They argue that the mineral rights that they provide as the sovereign have an intrinsic value, and so that is their investment. However, such value contribution is not working capital and financial investors will look elsewhere to put their money to work.
While security of tenure for investors is protected in law, the bureaucratic desire to retain control remains strong and government partnership looks to be a prerequisite to access mineral rights that sit with the sovereign.
In August, the president withheld consent for the Bill creating the mineral commission. His supporters characterised the move as him acquiescing to industry viewpoints.
Legislators and the ministry argue that the two Bills are mutually reinforcing and so ought to progress together. Where people see gaps in one, they will find their answers in the other. The industry disagrees and remains sceptical of creeping state involvement.
Local content requirements
This breakdown in communication is further seen in the confusion surrounding the third regulatory change – the development of a statutory instrument (SI) on local content. While local content requirements currently sit under wider economic governance Acts, the new SI will be specific to the mining sector. An initial draft of the SI stated that the starting threshold would be for a 25% local content requirement. Following consultations, including with manufacturing bodies, this was increased to 30%, with the ambition for this to progressively increase over time, having already been amended from the initial intention to have all procurement contracts under one million dollars reserved for Zambian companies.
Yet the recently launched Green Mineral Strategy puts the required local content threshold at least at 35%, yet elsewhere in the document stipulates a target of 5% in 2025. This has caused significant confusion and further scepticism of the reform process.
Legislation alone will not provide for the scale of local industry and manufacturing required to service the mining industry. Most top-tier mining firms have some form of local content policy, and the intention of providing economic opportunities beyond the gate is tightly wrapped into their social licence practices. Greater attention must be paid by the government to supporting the development of local industry, rather than simply legislating to the benefit of a few existing suppliers.
Turning Zambia into a truly private sector-driven economy requires substantial change to existing business practices and state functions. Some change is a matter of implementing more robust systems. Government-wide digitisation of data management and payments is apparently already improving corruption. But state tenders and licensing have been central to the economy, and relinquishing this control requires concerted effort and senior political will.
Inconsistency and poor communication are exacerbating the division over legislative intentions. Concerned advisers are warning of investment drying up.
At the policy research and implementation level, there is no shortage of international assistance and goodwill. Consultancies and research organisations offer well-framed policy recommendations to varying degrees of usefulness. But they need to better understand and appreciate the realities on the ground and scope for change. Lasting progress needs to be owned and promoted by Zambians.
Reformation was supposed to show a shift in mindset and the development of a constructive institutional framework a quarter of a century after privatisation, in a nation that exemplified both the social benefits and economic costs of nationalised mining.
The cumulative effect of the policy changes in favour of the state are rattling an industry that is still in relative infancy in the country. Despite an often-slow pace of progress, Zambia’s broader domestic reform agenda is challenging vested interests. This needs to extend into its most important economic sector.
Genuinely reshaping governance of the mining industry to reflect political rhetoric on privatisation will require increased coordination between the presidency, ministries, and implementing bodies and needs to be backed by a holistic vision of where the economy and mining sector should be. DM
Christopher Vandome is a senior research fellow at Chatham House.