Overview of Extractive Industries

The Copperbelt has some of the largest copper and cobalt deposits in the world, and Zambia was among the top global copper producers in the 1970s. The mines were nationalised in the early 1970s and annual production levels began falling. Decades of underinvestment and ageing infrastructure steadily increased production costs beyond those of most global competitors, making the profitability of Zambian mines vulnerable to the international slump in base metal prices that began in the late 1990s. Konkola Copper Mines and Mopani Copper Mines - Zambia's two largest producers - began to undertake massive rehabilitation works in 2004 to increase their copper output, the results of which have started to come on stream.

Foreign investment in the sector has totalled around US$4bn since 2000 and the Government is continuing to award exploration licences. In addition, artisans have mined precious and semi-precious gems (emeralds, amethyst, aquamarine and tourmaline among others) for many years.

Status of EITI Implementation

Zambia is an EITI candidate country.

On 30 March 2012, Zambia luanched its 2009 EITI Report in Lusaka, disclosing the payments from mining companies to the government in 2009. The government received more than US$500 million from the mining sector. The figures in the report are broken down by the 28 companies that have reported payments. The reported revenue is up almost 50% from the 2008 report, when 16 companies reported their payments. This growth is markedly higher than 6% growth in Zambia's overall economy, but much of it is due to the includsion of Pay As You Earn figures for the first time in the 2009 report. Copper output has contributed to much of this increase, due to higher copper prices and foreign investment. The report also covered US$32,000 of corporate social responsibility payments from companies.

The Zambian validation report was received in May 2011. On 16 August, the international EITI Board declared that Zambia had made “meaningful progress” in its implementation of the EITI. The Board agreed that indicators 9, 11, 13, 14, and 15 were unmet, and agreed the following corrective actions were needed in order for Zambia to achieve compliance:

1. The MSG should undertake an improved scoping and clarification of the receipts/payments to be included in future EITI reconciliations including a clear definition of “material payments and revenues” and incorporate this definition into the reporting templates for the second EITI Report (indicator 9). This should specifically address the question of the reporting of oil and gas signature bonuses, and the reporting procedures for ZCCM-IH.
2. The second EITI Report should clearly demonstrate that all entities that make or receive material payments are participating in the reporting process (requirement 11).
3. As per the Indicator Assessment Tool for Indicator 13, the government and MSG should take steps to ensure that government disclosures to the reconciler are based on audited accounts to international standards and agree a strategy for addressing these issues in accordance with the requirements as specified in Validation IAT 13.
4. In accordance with the agreed definition of materiality (see point 1, above), the MSG should ensure that all material oil, gas and mining payments by companies to government are disclosed to the reconciler and incorporated into the second EITI Report (indicator 14).
5. In accordance with the agreed definition of materiality (see point 1, above), the MSG should ensure that all material oil, gas and mining revenues received by the government are disclosed to the reconciler and incorporated into the second EITI Report (indicator 15).

The Board also recommended that:

1. the MSG should agree a comprehensive (time-bound and costed) work plan that: (1) covers the publication and dissemination of the second EITI report and steps toward regular and timely EITI reporting thereafter; (2) addresses on the recommendations from the first reconciliation report and from the validator; and (3) addresses the corrective actions highlighted above;
2. a review of the governance arrangements of the ZEC to ensure its smooth on-going functioning is undertaken; and
3. the procurement procedures and ZEC oversight should be strengthened for future reporting cycles.

In accordance with the transition procedures, the Board agreed that Zambia will have its candidacy renewed for 18 months (i.e. until 15 February 2013) by the end of which it must have completed a Validation that demonstrates compliance with the 2011 edition of the EITI rules.

In February 2011 the Zambian Minister of Mines and Mineral Development, HE Maxwell M.B. Mwale, launched Zambia’s first EITI report that discloses payments made by the major mining companies to government for 2008. The report shows that mining companies reported having paid US$463 million in 2008. The reconciliation effort showed a net total of unresolved discrepancies of about US$66 million. The unresolved discrepancies relate mainly to VAT and customs duties, but also to corporate income tax. The report closes with recommendations for future reports.

The Zambian EITI Reports are available at the Zambia EITI website [direct link].

Governance of EITI Implementation

The Government has established a Zambia EITI Council representing 5 members of government, companies and civil society each. The council is chaired by the Secretary to the Treasury. The inaugural meeting of the Council was held in February 2009. The champion is Mr Likolo Ndalamei, the Secretary to the Treasury.

Likolo [dot] Ndalamei [at] mofnp [dot] gov [dot] zm, +260 211 253 512 or +260 979 169 020.

Zambia EITI National Coordinator

Sifariano Banda

Head of Zambia EITI National Secretariat

Ministry of Mines and Mineral Development

siforiano2010 [at] gmail [dot] com.

Companies operating*

Mining companies: First Quantum Minerals, Glencore international, Metorex Ltd., China Non Ferrous Metals Corporation, Equinox Minerals, Vedanta (India), Albidon, Enya Holdings, African Energy Resources

* EITI supporting company

* Note: Company list based on EITI research and is not conclusive

For further information, please contact Eddie Rich at the EITI International Secretariat.