Zambia's copper industry has dealt with electricity shortages and falling commodity prices in recent years, but looks poised to rebound thanks to new transportation infrastructure and the rise of coal.

Zambia, like many other African nations, is blessed with vast natural resources under its surface. The landlocked nation is home to the world's highest-grade deposits of copper, and in 2016 it was the seventh-largest producer of the metal. While the economy has diversified in recent years, copper still makes up 80% of the nation's exports. It stands to reason, then, that Zambia's mining sector is one of the country's most critical industries. Decreases in global demand have slowed Zambia's economy as a whole, but plans for new infrastructure and the government's willingness to work with foreign investors have industry participants optimistic about the future of Zambia's mining sector.


Zambia's mining landscape dates back to 1995, when the Zambian government passed the Mines and Minerals Act. This bill simplified investment and licensing processes, reduced tax burdens, and opened the sector up to international investors, paving the way for a wave of mine privatization in the late 1990s and early 2000s. In the early years of the 21st century, strong demand for raw materials led to a commodities boom, helping Zambia's economy grow more than 6% per year over a period of a decade that saw the sector attract more that USD8 billion in investment and grow in size from 27,000 employees in 2000 to 80,000 in 2013. The 2008 financial crisis led to a fall in the GDP growth rate, but commodity prices quickly reached new highs, resulting in growth of an impressive 10.3% in 2010. Since then, however, falling Chinese demand and a host of other correlating economic issues have slowed the country's growth and put the industry in the unenviable position of producing more to earn less; mining production rose from 708,259 tons in 2014 to 710, 860 tons in 2015, but a 23% drop in prices mean that revenue fell 9%.


Copper is easily Zambia's largest mining output, but the nation has significant cobalt, coal, and gold deposits as well. Coal, in particular, is seen as having significant growth potential, as production rose from 103,439 tons in 2015 to 126,050 tons in 2016. This 21.9% increase came largely due to the reopening of the Chinese-owned Column Coal Mine in Southern Zambia, which was closed from 2013 to August 2015 due to safety law violations. Government officials expect production to continue increasing thanks to rising demand from a thermal power plant being constructed by Maamba Collieries Limited, Zambia's largest coal mine. The 150MW plant, currently under construction, would use low-grade coal to generate the steam that powers the turbines; currently, more than 70% of low-grade coal is left unused, becoming an environmental hazard. With the plant expected to become operational in June 2018, optimistic projections indicate that coal production could grow tenfold within a few years. Ashwin Devineni, Resident Director of Maamba Collieries Ltd, believes the societal benefits of the plant will help coal grow tremendously in the near future. “Zambia has coal, and it will benefit from utilizing it," he told TBY. “There is a fair bit of scope to increase coal-generated power operations in Zambia… The government of the Republic of Zambia, through the Ministry of Energy, remains committed to give the go ahead on this expansion, since it will have a positive impact on domestic power generation levels."


Electricity infrastructure improvements might be needed to keep Zambia's mines running, but additional transportation infrastructure is also needed to ensure that mining firms can send their production where it is needed. Zambia has a robust road infrastructure, but the country's rail infrastructure is still underdeveloped. This is of particular concern due to Zambia's status as a landlocked country; currently, most mining companies transport their metals to the Port of Durban in South Africa via road, but industry participants understand that transportation by rail would be faster and allow for greater revenues. To this end, Zambia has entered negotiations with South Africa, the Democratic Republic of Congo, and Zimbabwe to develop a joint rail network that will allow the region's landlocked countries to more easily and efficiently access South African ports. A proposed 580km line, called the North West Rail, is expected to cost USD1.2 billion and create more than 8,000 jobs during construction. Zambia obtained more than USD500 million from South African contractor Grindrod in 2015, and construction is expected to begin shortly. Zambian officials hope to have the rail line operation within 36 months. Upon completion, mining firms in Zambia's North-Western Providence will have new access to the Angolan port of Lobito, allowing for faster and more efficient transport. The North-West Line is far from the only transportation infrastructure project underway. In November 2016, the Zambian government signed a USD2.3 billion contract with the China Civil Engineering Construction Corporation to construct a 388km railroad through central and eastern Zambia. Once completed, the line will link Zambia and Malawi by rail, forming new networks for international trade and giving Zambian mining firms a new route to the sea. The collaboration with a Chinese firm is particularly noteworthy considering China's status as the primary source of exports for the mining industry and a leading source of foreign investment. In 2016, Chinese investment in Zambia grew by USD295 million, and the nation has public stated its intentions to strengthen its relationships on the continent. Projects such as these bode well for the long-term future of the industry.


While everybody agrees that Zambia's mining sector is central to the country's economy, there are differing opinions on whether the nation has been receiving an appropriate share of the sector's revenues. Under the investment promotion agreements that were part of privatization agreements signed in the late 90s, Zambian-based mining firms are granted a host of tax breaks that have led to disputes over whether their tax payments reflect their income. Data on mining-related tax revenues differs, but one report from the Zambia Extractives Industries Transparency Initiative found that the mining sector contributed ZMK2.2 billion in 2014, or a little over a quarter of all domestic revenue. This comes from a combination of VAT, pay-as-you-earn taxes, and mineral royalties. The mining industry's tax bill is also in question with regard to energy prices, where copper miners are currently locked in a dispute with the government over electricity tariffs. During the midst of the electricity shortages in 2014, the Zambian government increased power prices for mining operators by almost 30%. Mine operators, citing previously agreed-upon contracts, asked a court to rule on the legality of the increase, and the two sides have been in court ever since. A final ruling is expected to come in early 2017, and energy companies have projected that the mining industry would need to pay USD276 million in back fees if it loses. Zambia's clear and open tax structure helped fuel its commodities boom, but shifting global circumstances will likely require reform.