ZAMBIA risks losing much-needed foreign direct investment, along with associated employment and wealth creation, if roadblocks are not addressed, the country’s largest mining company has warned.
The high cost of business and a difficult enabling environment are contributing to the country’s loss of competitiveness and prompting companies to consider investing elsewhere, said First Quantum Minerals Director of Operations Matt Pascall during a presentation at the Zambia International Mining and Energy Conference in Lusaka on 23rd June, 2016.
“Zambia needs massive job creation to absorb its ever-growing population. Real jobs can only be created by private sector investment. This investment needs to be encouraged and enabled in mining, commercial farming, industry, tourism and other sectors. For this, the country needs to reintroduce stable, predictable and competitive taxes. It also needs to reduce the unnecessary and restrictive bureaucracy, and improve the supply and price of electricity,” said Mr Pascall.
Focusing on the risks and rewards of investing in the country, he set out some of the challenges faced by First Quantum Minerals, which has invested more than US$6 billion in its Kansanshi mine in Solwezi and Sentinel mine at Kalumbila and is the country’s largest tax payer.
On the positive side he highlighted the impact of the mining sector on the nation’s economic growth and job creation since privatisation, along with more than US$3 billion of tax payments paid by Kansanshi alone in addition to the infrastructure development and community development projects funded by the mine in education, health and farming.
That benefit was at risk, however. Citing a recent change in legislation that has stalled production at the mine’s US$2 million sawmill, Mr Pascall explained that the timber cleared as it expands its mining footprint may now have to be burned rather than processed into timber and made into furniture at the company’s Sentinel mine because of delays in obtaining a licence to process and export the timber. The 120 workers at the new sawmill also face losing their jobs as a result of the problem.
Mr Pascall also explained how First Quantum had spent US$95 million to install more than 600km of electricity power line to the mine but that despite completion in September 2015 the supply had yet to be switched on by ZESCO.
Meanwhile, the price of electricity of the company presented a further risk to business, with the company seeing its electricity bills increase from 5 percent to 20 percent of its total costs, despite transmission costs being met by the mine.
Changes in mining tax legislation had further contributed to uncertainty for investors such as FQM, discouraging further investment, he added.
“First Quantum is a significant contributor to Zambia’s economy and to the prosperity of the nation and its people. Reducing the costs, challenges and risks to our business would go a long way to instilling the confidence we need to invest further and continue to generate those benefits by helping to unlock Zambia’s mineral resources,” said Mr Pascall.