Zambia’s President says greater State role in mines will help economy recover

Zambian President Edgar Lungu said on Thursday the State must own a majority stake in selected mines to benefit the country beyond taxes, while also allowing private investors to operate in the sector.

Africa’s second-biggest copper producer, Zambia is seeking to increase its control over the mining sector – the country’s main generator of hard currency – as it tries to find a way out of a debt crisis after it defaulted last month.

“Owning a stake in some strategic mines gives the state the leverage required to utilise the defined mineral resources to benefit the nation,” Lungu said at an event to launch an economic recovery plan.

“I must mention that this is not nationalisation of the mines, on the contrary, it is the state acquiring majority stakes in selected mines while allowing private investors to also participate in the sector,” Lungu said.

The southern African country became Africa’s first pandemic-era sovereign default last month after it failed to pay a coupon on one of its dollar-denominated bonds.

Zambia had been wrestling with growing public debt even before the novel coronavirus outbreak forced lockdowns around the world and hit demand for raw materials. Its debt-to-GDP ratio is nearly 140%.

As part of its move towards direct ownership of the mining sector, Zambia’s mining investment arm ZCCM-IH is in talks with Glencore to acquire its majority stake in Mopani Copper Mines, after the government butted heads with the Swiss-based company over a temporary shutdown of the mine due to Covid-19.

Zambia has also said it would buy gold directly from miners to bolster its foreign reserves after gold prices surged. Lungu said on Thursday that the state must harness the potential of gold and encourage investment in the precious metal.

Lungu promised to provide a stable fiscal regime for the extractive sector to promote more investment in exploration, seeking to reassure investors who have been critical of the expanding role of the state in the sector.

Mining companies with operations in Zambia apart from Glencore include First Quantum Minerals, Barrick, and Eurasian Resources Group.