Zambia’s Mines Suffer drop in Revenue - Chamber of Mines

 

July 24, 2020

 

By DERRICK SILIMINA

THE Zambia Chamber of Mines says the country’s mining companies have suffered an alarming drop in revenue over the three months from February-April 2020, illustrating the financial impact of COVID-19.

According to the World Bank forecast, economic growth in Sub-Saharan Africa will decline from 2.4 percent in 2019 to between minus 2.1 and minus 5.1 percent in 2020 due to the impact of the global pandemic.

Zambia Chamber of Mines Chief Executive Officer Sokwani Chilembo has said the global lockdown in response to the COVID-19 pandemic, and the ensuing economic freeze had disrupted billions of lives and was threatening decades of development progress.

“We have published this Report to kick-start a public debate, and to generate a dialogue with Government—our decision-makers that we are all looking to at this critical moment,” Chilembo said on Thursday at the launch of the Chamber’s policy brief for a post-COVID Zambian economy, entitled The Road to Recovery, at the Mulungushi International Conference Centre in Lusaka.

He stated that the report considers the economic impact of COVID-19, at global and continental levels, and specifically on Zambia adding that the report considers policy interventions, and the particular order in which they must be taken to avoid economic disaster.

Mr Chilembo said the mining companies’ collapse in revenues—falling 30 percent over the period—can be attributed to two main factors such as severe global restrictions on movement which have adversely affected the mining supply chain, and hindered the export of copper as well as the copper price which is down on average by 12 percent over the period when compared to 2019.

“So, while companies have been able to maintain production levels, they have struggled to export and sell their copper, and have received a considerably lower price for the sales they have made,” he said.

Mr Chilembo noted that the fall in mining revenues has led to a corresponding fall in mineral royalty payments which are estimated to have come in at approximately $60-65 million over the three months, rather than the $85-90 million that could have been expected, demonstrating how closely Government revenues mirror the fortunes of the mining industry.

He stressed that given escalating mining costs over recent years, and a drying up of capital, COVID-19 has added unbearable pressure on mining finances.

Mr Chilembo clarified that between 50 percent and 60 percent of the respondents to the Impact Capital Africa (ICA) June survey from the mining and mining services sector, mainly representing smaller operators, believe that their businesses will ultimately fail within the next three to 12 months.

“This finding is of great concern, given the significance of the sector to the wider Zambian economy,” he stated.

Regarding the collapse in mining revenues and royalty collections, Mr Chilembo said the COVID-19 pandemic has evidently had, and will continue to have, a large negative effect on economic activity in Zambia as is clear from the data on mining royalties, government revenues will also fall as activity and trade decline.

He emphasised that despite this, Government had to act to protect lives and livelihoods through the crisis.

In terms of the long-term fiscal position, Mr Chilembo suggested that if Zambia walks the tightrope to recovery, restructuring debt obligations under the Lazard Freres project, with revenue growth facilitated by policy reform and funding assistance, the expected long-term fiscal position should see increased revenue collections and reduced debt costs resulting from the Lazard Freres debt restructure programmes. – Story courtesy of SUMA SYSTEMS.

The Highway to Electric Vehicles

 WORDS BY: Mbuyoti Silimina IMAGES BY September 3, 2020

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An electric vehicle revolution is underway as a more eco-conscious world slowly but steadily moves away from petroleum and diesel-fuelled vehicles to rechargeable ones. Electric vehicles (EVs) offer a zero vehicle emission alternative to the combustion engine, thanks to recent global investments and advances in battery technology.

Auto industry experts anticipate that the next generation of EVs is likely going to deliver new and thrilling experiences. For this reason, a growing number of Chinese brands have set their sights on the African automobile chessboard. From Great Wall Motors to Chery and Fonton, there is a long list of Chinese and other car manufacturers that have launched car and truck assembly lines on the continent with the aim of making breakthroughs in science and technology, as well as producing energy-saving, environmentally friendly and intelligently interconnected automobile products.

With over 20 million passenger vehicles manufactured in 2019 and a 3.2-percent year-on-year growth, China remains the world’s largest car manufacturer. Over the years Chinese automakers have been picking up speed, according to statistics from the China Association of Automobile Manufacturers (CAAM).

Game changer

Global oil prices have dropped dramatically in recent months. The long-term reasons for the freefall are increased US shale oil production and greater use of renewable fuels around the world. More recently, the coronavirus pandemic has also contributed to prices dropping even lower. The Organization of Petroleum Exporting Countries (OPEC) has been trying to cut production to prop up prices, but the effort is increasingly problematic.

For many, this is an exciting opportunity to move to electric vehicles and to enjoy a vastly different driving and ownership experience. With electricity supplies increasingly being delivered from renewable sources, electric cars offer environmental benefits over traditional fuel-burning engines too. This is increasingly being recognized by governments around the world with the availability of a wide range of incentives to reduce purchase costs and car taxation issues.

As the yearning for EVs increases, experts say it is high time Zambia sets up an EV battery manufacturing plant, a move that has massive potential to create jobs and other support sectors. This is relevant to Zambia because electric vehicle batteries require cobalt, which is a by-product of copper, something which Zambia possesses in abundance.

Recently, a lawmaker and former energy minister, Kapembwa Simbao, moved a motion in parliament that urged the government to phase out gasoline-driven vehicles and replace them with electric ones by 2030.

“This motion is driven by the fact that there has been a paradigm shift in the transport sector that will seriously affect the way we do business in the future. Before our own eyes, we are witnessing a shift from fossil, diesel and petrol-driven vehicles to electric driven vehicles,” Simbao stated.

It is no secret that in about 30 years’ time fossil fuels will run out, with oil reserves dwindling due to the rising global population that has continued to induce a growing demand for energy. The growing demand has repercussions for our future. It is estimated that oil will run out by 2052, while gas is expected to be depleted by 2060, and coal is predicted to last till 2090, according to the Millennium Alliance for Humanity and the Biosphere (MAHB), a global civil society organization that addresses the interconnections among the greatest threats to human well-being.

Environmentalists also argue that as people become more environmentally conscious, it is high time Zambia walks the talk by investing in battery technology for EVs on the continent. Lusaka based economist Mambo Haamaundu believes that there are a lot of areas where the country can do very well but hasn’t applied itself properly.

“We wish we can exploit this opportunity and see how we can utilize copper and its bi-product [cobalt] in enhancing our future economic prospects. Even the wiring of vehicles needs copper and this is the way to go as a technology for electric cars is ripe,” Haamaundu told Nkwazi.

The economic and environmental benefits of EVs plus the fact that fossil fuels will inevitably run out, there is a strong case for many people in the country to transition to EVs.

However, this begs the question, does Zambia have the ability to invest in an industry where it can utilize its raw materials to manufacture or assemble products needed in this yawning market?

EVs can fuel job creation

The success of Toyota Motor Corporation in Africa and Zambia in particular has shown how firms with the right product and strategic pricing can influence socio-economic growth in any society they operate in. This has, in turn, created more jobs and businesses such as car dealerships, car hire companies, and intercity transport services that have sprung up.

In most Zambian towns, busy streets are awash with Toyota vehicles, a sign that shows how the giant Japanese vehicle manufacturer has over the years been transforming the lives of local entrepreneurs and other residents.

“As we approach 2050, our aim is to develop sustainably together with society. In order to do this, we intend to reduce the environmental burden attributed to automobiles to as close to zero as possible, while also contributing positively to the earth and its societies,” Toyota Motor Corporation President Akio Toyoda recently said.

Japhet Banda, 42, is a car broker working along Lusaka’s Independence Avenue who shared his views with me. “The technology of electric vehicles is welcome and once implemented, our sector will really benefit in terms of job creation through support service industries of batteries and reduction of import duty on vehicles,” Banda stated.

Undeniably, sometimes what people need is a little head-start, not a handout and the electric vehicle industry can be a game-changer in terms of Zambia’s socio-economic emancipation.