Spotlight: Zambia's difficult journey towards transparency

Anwar Ravat is the Operations Adviser for Mining at the World Bank country office, Zambia.

A few weeks ago Zambia reached EITI Compliant status, a significant milestone for transparency in Zambia’s mineral extraction sector - as well as for multi-stakeholder collaboration and building civil society “voice”.

Endowed by nature with significant mineral wealth, yet with fluctuating fortunes

Zambia has long been known for its mineral wealth (copper, cobalt and gold) and gemstones. Small, surface deposits of various metals were worked even in in past centuries, although it was in the 1930s that successful, large-scale copper industry take root. Copper mining quickly became the mainstay of the nation’s revenues and laid the foundation of Zambia’s development, in the colonial times and in the initial period after Zambia’s emergence as an independence state in 1964.

But it is the changing fortunes the industry over these past several decades, and how this roller coaster ride has affected ordinary people, that is the remarkable aspect of this history, as this article recaps.

A healthy and growing mining sector...

The last two ZEITI Reports well-document the recent track record of Zambia’s mining industry. Indeed, responding to the attractive investment climate for mining created by Government, a whole “new Copperbelt” has emerged in North West Zambia from nothing. New and expanded mines (via foreign investment flows of around US$5 billion over the past decade) and buoyant world copper prices (around ranging US$7,500 now per metric tonne) have meant that copper output now stands at just below 800,000 m/t. By 2015, output is expected to grow to around 1.3 million m/t which would place Zambia among the top 5-6 producers globally. By all these measure, this performance is no small feat.

...but it was not always so

Zambia’s mining inheritance in 1964 was one of a privately-owned mining industry, and favorable copper prices (around US$3000 - $4000 per m/t), and total output in the 500,000 - 600,000 m/t range. In 1969, the year mining industry was taken into state-ownership and was brought progressively into Zambian hands. The consolidated, state-owned ZCCM that emerged expanded social and community benefits from its operations, and began sustained investment in building Zambian skills in many technical and managerial areas. Indeed the positive results of this effort are to be seen in the many ZCCM alumni now holding senior positions across Zambia today.

Unfortunately, economic realities could not be kept at bay, especially falling copper prices (hovering in the US1,400-$2,000 m/t range), meaning that in later years ZCCM was producing and selling copper at below its cost of production. Inadequate funds for investment by the state meant production kept falling, resulting in even lower revenues and even lower investment and so on, until production bottomed at just over 250,000 m/t in 1999-2000. By then, ZCCM was accruing financial losses of around US$1 million a day – in effect, a tax upon the rest of economy instead of a contribution to it.

A painful transition, causing misgivings about the mining sector

In the late 1990s to early 2000s Zambia went through a painful transition. The privatization of ZCCM and all that ensued is well-documented. These choices were fiercely debated at the time, and were not easy choices to make either way. By any measure, the prolonged downturn and the resultant pain was widely felt, not least the severe job losses as mines scaled-back; loss of housing, medical and other social benefits for miners and communities in the Copperbelt; etc.

It is clear that mining remains an emotive topic, and misgivings remain - notwithstanding the excellent rebound in Zambia’s mining industry and growing investment in CSR activities by industry. Much of this is fueled by perceived low level of tax payments by companies (seen as resulting from overly-generous mining development agreements and of inadequate oversight by Government of mining operations and of tax compliance). Further, Zambians see Zambia’s poverty levels remain stubbornly high and wonder whether the perceived low benefits from mining or its environmental cost are a price worth paying. Above all may be the sense that Zambians just do not know enough about the mining sector.

EITI in Zambia, a first step towards transparency

It was just these misperceptions, as well Government commitment to transparency, that led the latter to come together with Zambian stakeholders in 2007 to begin looking into the benefits of adopting EITI. With support by World Bank and development partners, a Scoping Report was completed in 2008 with wide consultation, which recommended adopting ZEITI which Zambia stakeholder then did by signed-up for EITI candidacy in 2009. ZEITI multi-stakeholder structures and ZEITI implementation followed with the production of the first ZEITI Reports, then a second (with much better quality and content) and now a third Reports now in progress.

An even-greater role for ZEITI in years to come

In the context described, ZEITI is just the start. More and more financial and sector information, and debate around this, can concretely help understanding of the sector and its contribution to people’s lives. Open debate about the benefits from mining and the revenues generates - informed by facts tabled by ZEITI - can be the best guarantor of consistent support for, and understanding of, Zambia’s mining sector among citizens. Hence, ZEITI has a key part to play in Zambia.