WHY FQM’S $1.35 BILLION INVESTMENT IS GOOD FOR ZAMBIA
Earlier this month First Quantum Minerals (FQM) announced a mammoth US$1.35 billion package of new projects, with US$1.25 billion to be invested in expansion of our Kansanshi operations in Solwezi – known as the ‘S3’ project – and a final US$100 million to start the $250 million Enterprise nickel project in Kalumbila.
The announcement was hailed as a game-changer for the nation, and the first step on the road towards the Government’s New Dawn for Zambia’s mining sector, in which it has set out its vision for the country to produce 3 million tonnes of copper a year by 2030.
Zambia produced just over 800,000 tonnes of copper in 2021, of which First Quantum contributed more than half: 202,000 tonnes from Kansanshi mine and 233,000 from its Sentinel mine in Kalumbila.
The S3 project at Kansanshi will extend the life of the mine by another 20 years and increase production by around 25 percent to around 250,000 tonnes a year.
The news was met with an overwhelmingly positive response. Existing and potential employees were excited to the future of their careers; local businesspeople began planning for more business; and communities in North-Western Province welcomed the promise of further development in education, healthcare and livelihoods. The government also has a new benchmark in tax revenue that will help it meet the needs of our growing population.
Extraordinarily, this huge positive news still found critics, however.
Some questioned whether the investment would really benefit Zambia.
Others saw conspiracies where there are none.
And yet others erroneously claimed the investment was linked to special tax concessions.
Most of the money will be spent abroad said another.
The truth is equally sensational.
First Quantum’s expansion plans mean more jobs; they mean more taxes; and they mean more local business opportunities.
The S3 project will add approximately 800 permanent jobs, and a further 1,800 during the construction phase. Crucially, it also safeguards the futures of the 8,500 people already employed at Kansanshi.
Meanwhile the Enterprise nickel project will employ approximately 700 full-time staff.
On tax, First Quantum is already Zambia’s largest taxpayer. We paid $850 million in tax to the Zambian government in 2020. The new S3 project will assure future tax revenues – we expect a 20% increase in tax payments by 2030, as opposed to a 50% decrease without S3.
And no, FQM did not receive any tax concessions. We have, however, made commitments in respect of procurement and community spending as part of the plan.
The only amounts to be paid to FQM are the VAT refunds due to it, extended over a 10-year-plus payback schedule in order to help Zambia with its fiscal crunch.
Corporation tax is paid on profits, while mineral royalty tax is paid on revenue. As a commercial entity, First Quantum is driven to make profit – a return on our capital investment – for its investors, and those profits are taxed. If we didn’t make more money than we invested, we would not be good at our business, and it is that value that we add that is shared between the nation that provides the natural resources and the investors who provide the capital to unlock those resources.
There was no backdoor deal. Agreements and process involved were very transparent, involving six ministries and some 40 people from government.
No special concessions were asked for or received. We expect government to offer the same commitments to anyone who is willing to invest large capital sums in Zambia.
My question to these critics is simple: would Zambia be better off if First Quantum did not invest US$1.35 billion – roughly equivalent to the entire government budget for education and farmer input support in 2022?
