Dr Sixtus C. MulengaFounder & Executive ChairmanMusamu Resources LtdZambia

Annual Democracy Forum 2014: Fostering Democracy and Development Through Sound Management of Natural ResourcesGaborone International Conventional CentreGaborone, Botswana24 - 25 November 2014Organised by the International IDEA and the Government of the Republic of Botswana

SESSION 3

ZAMBIA MINING INDUSTRY : A PRIVATE SECTOR PERSPECTIVE

– DEMOCRATIZING DEVELOPMENT THROUGH SHARED RESPONSIBILITY FOR SOUND NATURAL RESOURCES MANAGEMENT

1. Over view of the Zambia Mining Industry Development 2. Framework For Democratizing Development Through Shared Responsibility For Sound Natural Resources Management 3. Achievements and Challenges

4. Suggestions For The Way Forward

PRESENTATION OUTLINE

The Mining Industry in Zambia is over 100 years old, mining primarily; copper, cobalt, lead, zinc, coal, manganese, industrial minerals and gemstones (mainly emeralds and amethyst). The Industry has gone a full circle of ownership:

Pre – Independence Era -1890 to 1964 (74yrs)

Private Sector Ownership – Active participation mainly by

British Citizens

Post Independence Era – 1964 to 2014 (50yrs) State Ownership – mainly state controlled.

27 years; 1973 to 2000.

Private Sector Ownership – mainly free-market led and participation of both local and foreign investors.

14 years to date; 2000 to 2014.

Framework For Democratizing Development Through Shared Responsibility For Sound Natural Resources Management - Zambia Mining Industry

Political Stability – Zambia has been a haven of peace since independence;

Multiparty Democracy – Zambia has changed Ruling Political Party Governments; three times since independence; UNIP for 27 yrs, MMD for 20 yrs and PF current for 3 yrs;

Good Governance and solid Legal Framework – Rule of Law; Investor –friendly Fiscal, Environmental and Legal Regime; Private sector driven economy; Extractive Industry Transparency Initiative – Zambia became an EITI

Compliant Country in 2012 - the first country to become so in Central, Eastern and Southern Africa ;

Mining Companies invest heavily in Corporate Social Responsibility (CSR); Investment in manpower development – most operations are manned by

Zambians; Clarity in the roles played in the sector between government and mining

companies; and Empowering of local citizenry in the ownership of mines either through

Issuance of Mining Permits, and buying of shares in listed companies on the Lusaka Stock Exchange.

ACHIEVEMENTS & CHALLENGES OF MINING INDUSTRY

KEY ACHIEVEMENTS INCLUDE:

Having developed a world class mining industry and being one of the top producers of copper , cobalt and Emeralds in the world;

Having developed a world class local manpower skill base; Mining Industry being sustained as the major driver of Zambian

economy and base for economic diversification; Copperbelt Province – Traditional mining province Northwestern Province – New frontier Southern Province – New frontier

Mining Industry being the largest private sector employer in the country;

Mining Industry Corporate Social Responsibility including;

Education, Health, Local Business Development, Community Programmes and Sport & Recreation.

Source: International Copper Study Group from 1996 onwards (Copper Bulletin March 2012 & April 2013; Yearbook 2006; Statistical Yearbook 2008), US Geological Survey Annual Mineral Reports 1963-1995

Copper production

National ownership Private ownershipPrivate ownership

Share of global production(Percentage.)

Copper production(Tonnes.)

Mining’s contribution to government tax revenues

Source: Zambia Revenue Authority, 2014– includes revised data and latest 2013. This data is not in report

Government revenue(Kw million)

.

A MULTISTAKEHOLDER GROUP COMPOSED OF EQUAL REPRESENTATION FROM THE

MINING INDUSTRY, GOVERNMENT AND CIVIL SOCIETY. A TOTAL COUNCIL MEMBERSHIP OF 18. CHAIRMAN SHIP = GOVERNMENT & VICE CHAIRMANSHIP = CIVIL SOCIETY. FULL TIME EITI SECRETARIAT IN THE MINISTRY OF MINES.

ZAMBIA EITI COUNCIL

MINING COMPANIES(6 Members)

CIVIL SOCIETY ORGANISATIONS

(6 Members)

GOVERNMENT(6 MEMBERS)

.AN EITI PUBLIC BILLBOARD SHOWING AMOUNT OF

TAX PAID BY MINING COMPANIES TO GOVERNMENT

Overview: Macroeconomic contributions of mining

Foreign Direct Investment

Exports

Government Revenue

Gross Domestic Product

DirectEmployment

Zambia2012

Typical share in low and middle income mineral-driven countries

86% 60 – 90%

80% 30 – 60%

>25% 3 – 20%

>10% 3 – 10%

1.7% 1%

>

>

>

>

Source: ICMM MPD Toolkit analysis

>

Key Challenges : Procurement of goods and services

Mining industry procurement

(2012 data extrapolated from sample, to represent total industry procurement; US$ million)

Zambian producedImports

bought from Zambian companies

Direct imports

Source: Four mining companies data and OPM calculations

Imports bought from Zambian companies

Suggestions For The Way Forward Encourage and nurture growth of local entrepreneurs in the Mining Industry so as to create a local

base of industrialists that can own mines and work side by side with international mining companies, so as to create a firm base for growing and sustaining the mining industry;

Promote local manufacturing of inputs on the upstream side of the Mining Supply Chain and downstream value addition, so as to expand local employment base, reduce unit cost of production and maximise value derived from mineral resource endowment.

Governments and Private Sector should continue working together as partners in enhancing and consolidating growth in the mining sector;

Governments to continue maintaining investor friendly policies necessary for attracting both Domestic and Foreign Investment in the sector and Mining companies to ensure that they practice tenets of good corporate citizenry;

Governments and mining companies to consolidate the framework that ensures that the benefits of mining investment is visible and transformational in the local communities in which the mining companies operate and in the national economy at large;

Mining companies to continue embracing best global practices in CSR and Community engagement to ensure that there is meaningful and tangible development in the local areas they operate in and have social licence to operate.

Governments to expand the EITI Framework to further embed Economic Democracy in the country. Have clarity of roles played by both governments and mining companies in growing and sustaining the

mining industry to ensure achievement of sustained wealth creation for both the countries and the shareholders.

ALBIDON LIMITED |

THANK YOU