Zambians look to societal and industrial change

Zambian_copper_mineCopper and cobalt production accounted for 64 per cent of Zambian exports in 2008. (Image source: BlueSalo)Zambia’s new presidential regime has continued to seek to address social and industrial issues by implementing radical fiscal measures and industrial initiatives

Recent assessments by Exclusive Analysis Ltd indicate that, as President Sata seeks to increase social spending and address strikers’ concerns, there will be contract reviews, capital controls and the continued prospect of increased taxes in 2012.

The Zambian economy is dominated by copper and cobalt production, which accounted for 64 per cent of exports in 2008.

In March 2012, the country’s government announced that the ban on issuance and renewal of mining and non-mining licences, excluding minerals processing, would be lifted.

The ban was put into effect in October 2011 to give the Ministry of Mines time to implement a more efficient licensing system and to tackle issues of irregularities, bureaucracy, corruption and a lack of transparency.

The government noted that a new computerised system would replace the old system, which would allow for problems of licence conflicts to be rectified.

The lifting of the ban came at the same time as the release of the Extractive Industries Transparency Initiative report for the 2009 financial year, which tracks industry payments to the government and notes a discrepancy in the amount of US$5.9 million between what the industry claims was transferred and the amount actually received by the government.

Although the lifting of the ban and efforts to improve transparency and accountability in the sector will be welcomed by the Association of Zambian Mineral Exploration Companies, its timing coincides with a drive by the government to ensure companies release financial data and pay relevant fees and taxes on time and in full.

The government has previously indicated it would use the processing of the backlog of renewals and new issuances to audit the industry more strictly, and is likely to review and potentially revoke non-compliant licences.

Companies that fail to comply with regulations are likely to have their licences cancelled.

Mining companies operating in Zambia will be free to transfer ownership and apply for and renew licences, but it is clear the government wishes to monitor and regulate the industry more closely, particularly where issues of transfers to the government are at stake.

The existing risk of uncertainty over final amendments to mining laws under the new Patriotic Front government is likely to continue, but stricter implementation of current and future amended laws is likely.

Companies are likely to experience stricter application of existing regulations and more thorough auditing procedures of production levels and tax compliance.

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