Zambia: A New Frontier in Mining and Energy
On 25 July 2013, Southern Africa Zambia Chamber of Commerce and Industry (SAZACCI), in collaboration with Africa Exchange, hosted a successful Business Symposium on Zambia’s energy and mining sector, addressing the opportunities for investors. The Business symposium attracted an audience of more than 150 potential investors. It was held at the Wanooka Place Auditorium at KPMG’s Head office in Johannesburg, South Africa.
Mining: a key driver of the Zambian economy
An investment strategy which aims at creating:
- An enabling Mining Policy,
- A mining legal Framework,
- Mining Fiscal Regimes.
Chilumbu communicated that there is a need to implement mining law in a way that strikes a balance between the needs of the country and that of investors. He emphasised that the Mining Act is in line with the global perspective and international best practices, such as reporting standard and promotion of transparency in the industry, and that it was not intended to over regulate mining industry the.
A review of the Mining Act
He went on to highlight the mining rights that may be granted under the Mining Act, namely:
- A Prospecting Licence
- A large-scale mining licence
- A large sale Gemstone licence
- A prospecting permit
- A small-scale mining licence
- An Artisans Mining right etc.
Mr Chilumbu also addressed the current Mining Act of 2008 which it is currently under review by both the government, mining houses, and exploration companies. The aim of this review is to address the concerns raised by stakeholders. He said that,
the government has in recent past granted oil and Gas exploration blocks to private companies as well as the establishment of the Petroleum trust fund.”
Investment in energy
Mr Silvester Hibajene, Director of Strategy and Regulation from Copperbelt Energy Corporation (CEC), had an opening sentiment of: “energy is to the economy what blood is to the human body”. He went on to explain that Zambia has a power-generation deficit, which includes SADC. The 2027 SADC vision for energy was highlighted, and the SADC budget (estimated at $173 billion) for power-generating projects was discussed. The financial investment injection, set to run over 15 years, was categorised into three phases:
- Short term financial injection of $62 billion budgeted for 2012 -2017.
- Medium term financial injection of 39 billion from 2017 -2022.
- Long term financial injection of $72 billion from 2022 -2017.
Mr Hibajene suggested that Zambia’s power demand is rising rapidly due to the economic growth and the increase in mining activities. He estimated that over the next five years, Zambia needs to double its generation capacity in order to meet demands. In his address, Hibajene proposed that majority of the additional power will be from hydro. He further communicated that government alone cannot address the power shortage nor bridge the power-gap, and that Private Sector participation is key. According to Hibajene, there is strong policy and regulatory support for power investments.
Encouraging Private Sector involvement
Mr Habajene said that, “the Energy Regulation Board (ERB) gives investment endorsement for power sector investments prior to project implementation”. This assures investors of an operating licence once the power plant is built. It includes an approved tariff which is essential to ensuring that the investment earns a reasonable return. A Public Private Partnership (PPP) Unit desk has been setup in the Ministry of Finance which enhances the institutional framework for infrastructure projects.
He also pointed out that a number of private companies are now active in the power sector in Zambia through various PPP led projects are at various stages of development which included:
- Lunsemfwa Hydro Power Company (LHPC)
- Lunzua Power Authority (Kalungwishi project)
- Copperbelt Energy Corporation (CEC)
- Itezhi tezhi
- Sioma Falls
- Kariba North Bank Extension
- Kafue Gorge Lower
- Ndola (HFO)
Mrs Naomi Sidono, Community Mobilisation Officer from Rural Electrification Authority (REA-Zambia), addressed the opportunities and potential for public private partnerships (PPP) in developing mini hydropower plants. She said that Zambia has the potential to generate 6 000 MW in relation to the 1850 MW currently generated. Considering that Zambia holds around 40% of southern Africa’s water resources, Zambia’s potential in hydro Energy is immense. Sidono said REA-Zambia has identified 29 potential mini-hydro projects and feasibility studies have already been conducted. In order to encourage PPPs among the energy sector, REA-Zambia has offered up to 100% capital support to private companies developing energy generation capacity within Zambia.
Only 3.1% of Zambia’s rural population have access to electricity, the government is trying to change these trends and ensure that the rural population have access to electricity with the intention to improve their livelihood through stainable development. The objective of REA-Zambia is to increase the current rate to 51% by 2030, as set out in their Rural Electrification Master Plan (REMP). It is estimated that $11 billion is needed to achieve the stated objective.
Mr Jason Kazilimani, a Senior Partner from KPMG Zambia, addressed and enforced the investment incentives offered by Zambia Development Agency (ZDA), citing Zambia’s political stability and solid economic growth of 7.5% increase in GDP. He further confirmed that (according to the IMF) Zambia’s GDP has reached $23.1-billion in 2013, and that Zambia is among the top-ten fastest growing economies globally.
Kazilimani also highlighted the investment incentives, available to both local and foreign investors, that the Zambian government has put in place under the Zambia Development Agency Act. Namely:
- Duty free importation of all capital equipment. Tax holidays are offered:
- Years 1 – 5 of profitability: 0% tax
- Years 6 – 10 of profitability: 17.5% tax
- Years 11 and above: Full tax (35%)
Mr Michael Phiri, KPMG Zambia, highlighted the peaceful political trends Zambia has experience in the past 50 years with five different Presidents and three different political parties. Mr Phiri further highlighted that Zambia has more than 30 million MT of known coal reserves in its southern region, hence the need to invest in coal for power generation.
The role of business
In conclusion Mr Evance Chanda, the Executive Director for Southern Africa Zambian Chamber of Commerce and industry (SAZACCI), applauded and thanked all the speakers and delegates for attending the Zambian Business Symposium. Mr Chanda particularly thanked the former Vice president Mr Kavindele for speaking at the forum and sharing a unique business message for those who are willing to do business in Zambia.
Mr Chanda announced the highly-anticipated planned trade mission to Zambia, encouraging the delegates to take advantage of it and to see the investment opportunities in the Copperbelt Zambia. The anticipated trade mission is scheduled for 23- 26 September 2013. Mr Chanda concluded by affirming that our role as business people, is to lead and implement government bilateral agreements.