COPPER’S CURRENT PERFORMANCE SIGNALS POSITIVE ECONOMIC TRAJECTORY

The expectations of having over three (3) million metric tonnes projections for copper’s output capacity or production in the next 10 years is such a welcome idea, given the circumstances that we have reduced some of the risk factors that the mining regime had quite experienced in the last 10 to 15 years where there were some seemingly aggressive policy inconsistencies since 2008, which may have been blamed on market fundamentals as well as policymakers. The red metal (copper) commodity has shown some relatively good performances, as it jumped to 3.3% to settle at $9,507.50 a metric ton on the LME, and this is seen to show a biggest gain recorded so far in just two solid months, hopefully this will be trend to continue seeing going forward, we anticipate that the red metal’s stable prices can support Zambia’s economic fundamentals during the new government’s budget transition period, as it takes down to start stabilizing within the course of first quarter of 2022.

Its indeed regrettably to note that Zambia has changed mining tax regime for about 15 times, which has been very unhealthy for the economy, despite receiving a bad shape in 2016. It is however commonly to state that Zambia’s economy at some points came under a serious stress between the financial period of 2015 and 2016 as external headwinds coupled with domestic pressure played a severe card on our economy. As we saw on how Copper prices were drastically plunged by a margin of more than 20 percent during the same financial period, and this was mainly attributed to a reduced global demand scale that had characterized with our solid commodity partner China.

Even though, the country’s gross domestic product (GDP) grew at 2.8 percent in 2015 and 3.3 percent in 2016 respectively, though it recorded a figure much lower than the average 7.4 percent which was seen between 2004 and 2014, with the application of mineral royalty and there is growing evidence that the proposed MRT did extremely well despite having a projected revenue loss of about K3.2 billion for the planned 2022 fiscus, it is highly anticipated that copper’s continued steady path line of growth trajectory may give us some compensatory benefits from the upward consumptive demands being projected as we will also have a good uptake in terms of productive output based on market assurance in the manufacturing of electric cars.

Mining sector in the Zambian economy is such a huge sectorial undertaking, a key backbone to the nation’s economic structure and has remained to play an essential component in maintaining the health of an overall economy, and this sector has continued to be the central channel for forex, wealth creation and employment opportunities, the forex obtained from mines accounts for slightly over 80 percent of the nation’s traditional exports. Given, the price fluctuations in the copper pricing matrix, I think it will be ideal to quickly roll-out mineral diversifications strategy which has been formulated as it awaits full scale implementations, so that the country can expand her mineral tax revenue base which has steadily declined over the last three years. I think it’s good to note that the new government has undertaken a serious swift and bold actions to settle for withholding tax, VAT, import and export duty, and the mineral royalty tax which is strongly believed to have worked pretty well around 2014, as it was structured as a special mechanism to response to the then global commodity price slump which had taken place in the year 2014.

It will be encouraging for government to remain quite resolute and steadfast to the negotiations of mineral royalties, with a view of ensuring that they don’t take negotiations further down given the circumstances that revenue from copper sales do not hit into our national treasury except for tax receipts and other related financial instruments.

However, with full understanding that the mining exports accounts for a huge chunk of foreign exchange earnings as well as a strong benchmark for Government’s revenue base, it will be inappropriate for government to make further interventions on the fiscal regime for mining sector when the budget does not seem to get enough of mineral royalty and forms of taxable terms which have clearly been pronounced, it will be necessary and ideal case to give a gauging power for growth by ensuring a win-win situation, should the prices on the international market tumbles, as this impacts greatly on price fluctuations which eventually gets to affect many economic areas such as government revenue capacities and expenditures, public investment and related services, also on the country’s national debt portfolio and its effects on the most vulnerable groups in the country.

Today, copper is projected to sustain the demand and will only hope to see a steady upscaling effects from the path lines of supplies, however, with the projected growth seen in copper’s upward demands as we take edge to health normalization stages, Zambia has to put the house in order, by ensuring that all mining management, administrative and productive matters taken into considerations, this should be a matter which supposed to be followed with keen interests as quickly as possible, as we are all aware that some mining houses are seeking legal actions in courts of law, as a foregoing concern, we will need to also manage effectively on the effects of copper price instabilities with proper projections based on national wealth profile and also based on the public investments and services.

We further need to strongly make some necessary policies of promoting rapid economic diversifications within the mining sector, targeting mineral resource or base outside copper so that we can quickly make special response to sectorial dominant challenges being faced with an overall mining industry in the Zambian case, and we equally need to have some possible regulatory framework measures to help in managing risk dimensional factors such as sharp changes in production and prices, and we should also ring fence some of copper’s revenue for the real term strategic social and economic development objectives, though mostly, we have noticed that proceeds of copper tax come only to cushion effects of forex besides supporting fiscal spending avenues.