By
Yohane Mbeeya Moono
Zambia is a nation endowed with a lot of natural resources and chief among them is that the Country is rich in Mineral Resources. The mining sector has long cede the claim as the major economic contributor to the Gross Domestic Product value of Zambia. The Country has identified sectors such as Agriculture and Tourism as potential challenges to the mining sector and began to diversify from being a Mining dependent country but to a country that approaches economic development holistically.
The New Zambian government through the Ministry of Finance and National Planning during the 2022 National Budget presentation did announce the move to give Mining Tax Breaks. The Ministry said the move would reduce the Budget deficit from slightly over 10% to about 6.7 %. This is due to the fact that Zambia’s economy was buckling under the rapidly growing external debt burden which was incurred by the government to build Infrastructure around the country. A Mining Tax Break or a Tax Holiday is a governmental incentive that temporarily reduces or eliminates taxes for consumers or businesses. A Tax Holiday or Mining Tax Break is aimed at encouraging Economic Activities and Foster Growth. The Government identified the mining sector as the sector to start the process of economic growth by giving Tax Holidays to the Investors in the sector to spur growth. In the Budget presentation,the government targeted a 3% Gross Domestic Product Value growth.
The move to give Tax Holidays to the Investors in the Mining sector seems to be paying dividends as noted from the events in the Sector. Kansanshi Mine owned by First Quantum Minerals said through their new Chief Executive Officer that Change is in the Air. The mining giant identified Nickel Mining as the New Frontier for the mining company with it’s investment coming online in the next 12 months. And the Nickel Mine would be one of the leading mines in the World. The Mining Firm also announced that investment worth $1.35 Billion Dollars was approved for it’s Kansanshi Mine in North Western Province. This move is good for the targeted growth of the economy and for increased economic activities. This also means that more jobs are coming for the Zambian Nationals, Zambian Contractors to be given contracts in the approved investment in the Nickel Mine and this in turn will lead to an increased revenue base for the Government and the Nation as a whole. This investment should be a catalyst to spur growth for the Small and Medium-sized Enterprises in the Mining Sector. The Government should also ensure that Zambian Contractors are given the Preferrential 40% allocation in Contracts during the Development phase of the Nickel Mine.
Anglo America another investor in the mining sector who had long left the country announced that they will begin exploration for minerals in Zambia through the ARC Minerals. This is another positive move which is as a result of the Mining Tax Break given to would be investors in the mining sector.
Additionally the country needs more investment in the mining sector and investment friendly policies for the country to achieve it’s projections of tripling Copper production from the current 800, 000 tonnes annually to 3 million tonnes annually within the 10 year period. This can only possible if country because firm yet investor friendly in order to encourage more investment in Copper and Cobalt Production.
With the increased demand on the international market for mineral products such Copper, Cobalt and Manganese, the Zambia government wants the Zambian people to be major beneficiaries of the mineral wealth endowed in the country. Against this background, Africa’s two largest producer of Copper and Cobalt, Zambia and the Democratic Republic of Congo signed a Battery Electric Vehicle Value Chain Agreement which aimed at the Two countries benefiting from the process of Electric Vehicle Production. The Two Countries account for over 70% of the World’s Cobalt.
Furthermore, the Zambia government is also courting the Chinese government which at the moment is the largest producer in the Electric Vehicle Production. This would help spur more economic growth in the country as the country would be an active player in the Electric Vehicle Value Chain. The need to combat and arrest the negative effects of Climate Change through the use of Clean Energy puts the Mineral Wealth endowed in Zambia at great demand. Therefore, control the value of the production of Electric Vehicles would help the country boost her economy.
The Mining Tax Break may just be the catalyst that Zambia needed to unlock her Mineral Resource potential and realize maximum benefits to spur the country to unprecedented economic growth. The country may lose considerable amount of money but overall the projected Revenue and investment that the country stands to receive outweighs the loss the country stands to incur.
The Mining Tax Break is seemingly the Breathe of Fresh Air that Zambia need to put her economic performance back on the positive track. Surely the Mining sector is ceding the claim of being the major economic contributor to the Gross Domestic Product Value of Zambia.
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