As Africa’s second-largest producer of copper, Zambia is highly dependent on mining, which accounted for 77% of total export earnings and 28% of government revenues in 2019. Zambia’s mining taxation policies have undergone numerous changes over the past decades. In 2018, the government changed its minerals tax regime for the 10th time in 16 years to maximise revenues and foreign investment. There has been public debate on establishing an optimal and stable fiscal regime.
In this context, Zambia EITI (ZEITI) has been using the EITI process and data disclosures to inform discussions on the mining fiscal regime and benefit sharing. ZEITI has also been working to inform regulatory reform and improving the underlying procedures for monitoring production and export data.
ZEITI facilitated training for government officers and other stakeholders on analysing financial statements and financial models in March 2021.
ZEITI disclosures helped to identify gaps in the licensing procedures and criteria. Zambia’s Supreme Audit Institution drew on these findings in its risk assessment, subsequently auditing whether licenses were awarded in line with the mining legislation, and whether licensees then adhered to their obligations. The audit identified a range of opportunities to strengthen the licensing process, including assessment of applications, compliance in quarterly reporting by companies and oversight of export licenses.
To strengthen the quality of disclosures and improve the contribution of the extractive sector to domestic resource mobilisation, ZEITI participated in a study that assessed the underlying systems for monitoring production and export data in 2019.
Zambia’s mining sector is based on a tax-royalty fiscal regime (concessionary system). The sector has undergone numerous changes over the past years. In 2014, the government increased mining royalty rates and temporarily removed the 30% corporate income tax for mining companies with the aim of incentivising production and generating revenue. However, this “royalty only” regime led to increased production costs for companies, made revenue collection more complex for revenue authorities and ultimately did not boost revenue generation. As a result, the government amended the tax regime in 2015; royalty rate was lowered to 9% and a corporate income tax of 30% was reintroduced. In December 2018, the government announced another raise of 1.5% on mineral royalties which came into force on 1 January 2019. The fiscal regime remains an issue of public debate.
The mining industry is mainly regulated by the Ministry of Mines and Minerals Development, the Cadastre Department and the Zambia Revenue Authority.
Licenses and contracts
The Zambian mining sector is structured as a licence system. The Mines and Minerals Development Act determines how mineral rights are issued, the types of rights and their conditions, which are granted by the Director of Mines Development Department.
Zambia has two cadastre offices; one at the central level (to process applications for mining rights) and one at the provincial level (to forward applications to the central office). Prospecting licenses are normally granted by the Geological Survey Department, but auctioning may be undertaken in areas where known mineral resources exist. The Ministry of Mines and Minerals Development maintains an online mining cadastre.
Oil and gas rights are issued by the Minister of Mines and Mineral Development under the Petroleum Act. Licences are issued through competitive bidding.
While no legal framework exists to mandate contract/license disclosure, some extractive licenses, concessions and development agreements are publicly available through the Resource Contracts Portal.
In 2017, the Government of Zambia amended the Companies Act to include beneficial ownership disclosure. The legislation provides for the disclosure of beneficial owners and the creation of a beneficial ownership register hosted by the Patents and Companies Registration Agency (PACRA). In 2019, the government developed regulations for implementing the legislation.
In 2021, Zambia joined the Opening Extractives Programme, a global programme aiming to transform the availability and use of beneficial ownership data. PACRA is currently working on developing a beneficial ownership register and strengthening the quality of beneficial ownership data. Legal and beneficial ownership data is available from PACRA upon payment of an administrative fee.
Zambia’s legal and fiscal regime provides for extractive revenues to be transferred to the consolidated national budget. There are no earmarked subnational transfers or funds within the national budgeting process.
EITI reporting has been used by civil society organisations to influence legal reform on taxes levied by local districts, and to advocate for accountability in subnational level revenue flows.
Zambia EITI is administered by the Zambia Multi-Stakeholder Group (MSG), also known as the Zambia EITI Council (ZEC). The MSG is hosted by the Ministry of Mines and Minerals Development and chaired by the Secretary to the Treasury.