ZAMBIA : THE ECONOMY, INVESTMENT CLIMATE AND MINING SECTOR Presentation at the Asian Copper Week 19 th -20 th 2014 By Ireen Musonda
INTRODUCTION Zambia Economy PRESENTATION OUTLINE CURRENT ZAMBIA ECONOMIC DEVELOPMENTS GLOBAL IMPACT AND ITS ON THE ZAMBIA ECONOMY THE GENERAL INVESTMENT ENVIRONMENT IN ZAMBIA MINING SECTOR, INVESTMENT & REGULATORY ENVIRONMENT IN ZAMBIA
ZAMBIA Key Facts ANGOLA NAMIBIA DRC TANZANIA ZAMBIA MOZAMBIQUE ZIMBABWE Madagascar BOTSWANA Geographical Location: 8 neighbouring countries (Landlocked/linked) Independence: 1964 Territory (land and water): 752,614 square kilometres consisting of 2.5 % of the area of Africa Population: 14mn (2013 est.) & highly skills Life Expectancy: 44 year (2010) GDP per capita (current): $ 1,675 (2013) Nominal GDP: $12.8bn (2013) Growth sectors: Agriculture, Mining, Transport & communication, Manufacturing, Construction, Energy Natural Resources: Metals: Copper, cobalt, gold,nickel, uranium Minerals: diamonds, gemstones, coal Cash crops: coffee, cotton, flowers, tobacco, vegetables, sugar, maize Currency: Kwacha (ZMW) Capital City: Lusaka Government: Republic Membership in international organisations (Selected) include the UN, WTO, IMF, IAEA, ICSG, African Union (AU), African Development Bank (AfBD) the Common Market for Eastern and Southern Africa (COMESA), Southern Africa Development Community (SADC) SOUTH AFRICA 3
ZAMBIA Key Facts-Political Climate Zambia is a very peaceful Multi-Party Democracy despite five changes in Government Multi-Cultural Society (73 dialects) Rule of Law Separation of powers between the Executive, Legislature and Judiciary An independent press and Judiciary Pro-business Government Anti-Corruption drive
ZAMBIA Key Facts The Economy Selected Macroeconomic Indicators Outturn Average Projections Variable 2006-2013 2014 2015 2016 Real GDP (%) 6.5 6.5 7.3 7.9 Nominal GDP (Million Kwacha) Nominal GDP (Billion US$) 75,251 166,078 189,783 216,645 25,950 28,790 31,908 GDP per Capita(In US$) >1,000 1,847 1,999 2,216 Inflation (end year) 9.1 7 7 5.5 Domestic Borrowing 3.0 2.1 2 1.9 Overall Budget Deficit % of GDP 0.6 5.1 4.4 4.1 Current Account Deficit (% of GDP, including grants) Gross International Reserves (Billion US$) Gross International Reserves (Months of import cover) >1,500-6.0 1.5 2.1 0.8 2,990 3,539 4,188 3.0 3.4 3.6 3.8 Economy is mainly dependent on Copper contributing >10 % to GDP and 70% of Export Earning. Growing subsistent agriculture, Manufacturing, Tourism, construction and Energy Sectors Free-market economic policies The exchange rate is market determined and no foreign exchange controls 100% repatriation of profits, dividends, royalties, etc. developed and liberalized Banking and Financial Services sector Private Sector Development Programme (PSDP)- aimed at improving business environment Investment Promotion and Protection Agreement (IPPA) Investment incentives Member of COMESA/SADC in the spirit of promotion of regional integration
Developments in the Zambia economy Robust and sustained Economic Performance continue to be recorded, aided by stable macroeconomic environment Mining, Agriculture, Construction, Transport & communication & financial sector have been the main growth drivers of the Economy in Zambia 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Trends in GDP Growth 7.9 7.6 7.3 7.3 6.8 6.4 6.4 6.5 5.7 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sector Agriculture, Forestry and Fishing Mining and Quarrying 2008 2009 2010 2011 2012 2013 2.6 7.2 6.6 8.0 6.8-7.4 2.5 20.3 15.2-5.2-2.7 5.9 Manufacturing 1.8 2.2 4.2 8.0 7.2 4.5 Electricity, Gas and Water -1.2 6.8 7.4 8.2 4.1 5.9 Construction 8.7 9.5 8.1 8.9 13.6 11.4 Transport, Storage and Communications 15.8 7.6 14.9 13.7 12.8 12.4 Communications 21.1 19.4 20.0 16.0 18.0 14.9 Financial Institutions and Insurance Real Estate and Business services TOTAL GROSS VALUE ADDED 8.7 5.2 6.0 4.9 12.0 12.2 3.0 2.8 3.0 2.9 3.7 3.1 5.7 6.4 7.6 6.8 7.3 6.4
Developments in the Zambia economy Zambia s trade performance has been buoyant with exports increasing more than two fold and NTEs more than four times in the last 6 years 12,000.0 10,000.0 8,000.0 6,000.0 4,000.0 2,000.0 - Trends in Exports( US$ million) 10,410.0 9,242.0 8,512.3 7,261.7 6,915.7 7,049.0 6,529.8 6,071.7 4,880.2 4,242.8 3,343.1 3,361.0 4,004.0 2,712.2 1,596.6 876.2 899.7 1,190.0 2008 2009 2010 2011 2012 2013 Zambia s exports are mainly metal and Non-Traditional Exports have increased over 200% in the last 6 years. Metal exporting earnings have been rising from US$ 4,004.0 million 2008 to US$$7,049.0. In 2013 Non traditional Exports (NTEs) earning rose to US$3,3610.0 million from us $876.2 million.
Developments in the Zambia economy Robust in investments continue to spur economic growth in the Country Sector Shares of FDIs over the last five years 12,000 10,000 Trends in FDIs in US$ million 10,884 10,100 % SHARE OF ACTUALIZED FDI SECTOR IN 2011 Transport and Construction, 3.7 Communications, 0 Real Estate, 4.1 Others, 0 Tourism, 1.3 Agriculture, 3 Wholesale & Retail, 7.3 8,000 6,000 4,809 4,600 5,059 Bank & non-bank financial institutions, 6.8 4,000 2,000-2,010 1,729 1,600 1,850 939 1,109 695 2008 2009 2010 2011 2012 2013 Manufacturing, - 17 Mining, 90.8 Actual Pledges
Zambia Impact of Global Economy Development Three aspect that may have impact on the Zambia Economy. Sluggish Global Economy and low demand Low commodity prices-copper prices Low Oil prices however have a positive impact Quantitative Easing in the USA and net effect from Japan & Euro Zone-: Reduction in Capital Inflows (FDIs) Performance of the Eurobond may be affected Effect of the Ebola- threat on attracting investors or tourism
Zambia Investment opportunities Investment opportunities are in the : Agriculture sector Mining Tourism Energy Manufacturing
Zambia General Investment Environment Legislation and investment incentives are provided for under the Zambia Development Agency Act. Some of priority sectors/ products as provided for under ZDA Act: Agricultural value addition (Floriculture, Horticulture, Processed foods) Textile sector Manufacturing of the copper, iron & steel, cobalt and other engineering products, Fertilizer production, Cement production Timber processing Leather production and processing Energy-Building of Mini-hydro power stations and alternative sources f energy Education and skills training Mining
Finance and Banking: Well developed banking and Financial Services sector- being supported by Financial Sector Development Plan Support infrastructure Zambia Investment opportunities Roads: opening of the country through link Zambia 8000 inter mine roads Rail: Copperbelt to RSA, Kapiri Mposhi to Tanzania Air Transport: 4 international Airports and several Airstrips Energy: mainly is Hydro power stations (Zambia has 40% of water bodies in southern Africa). Zambia has also abundant coal deposits for thermal power. Potential 6,000Mw available generation 2,000MW, and Currently demand peak 1500-1700MWh Current Power Projects- Kafue lower750mw, Itezhi tezhi 120MW, Maamba Thermal 300Mw and several mini hydro power stations)
MINING IN ZAMBIA
Mining has been the main source of expoert earning
Zambia Minerals and Geology Zambia has vast mineral resources which include copper, cobalt, iron, manganese, nickel, uranium, gold platinum group metals, gemstones and coal among others. Exploration activities in Luapula, Copperbelt, North Western and in Central Provinces.
ZAMBIA 2014 World Copper Reserves ( Million Tonnes) Other Countries Kazakhstan Canada Zambia Democratic Republic of Congo Poland Indonesia Russia China Mexico United States of America Peru Australia Chile 7 10 20 20 26 28 30 30 38 39 70 90 87 190 0 50 100 150 200
ZAMBIA % share of World Copper Reserves (source:usgs) Kazakhstan, 1.0 Democratic Republic of Congo, 2.9 Canada, 1.5 Zambia, 2.9 Poland, 3.8 Indonesia, 4.1 Other Countries, 13.0 Chile, 27.5 Russia, 4.4 China, 4.4 Australia, 12.6 Mexico, 5.5 Peru, 10.1 United States of America, 5.7
ZAMBIA World Top Ten Copper Producing Countries ( 000Tons) 6,000 5,700 5,000 4,000 3,000 2,000 1,650 1,300 1,220 1,000 990 930 900 830 630 480 - Chile China Peru United States of America Australia Russia Democratic Republic of Congo Zambia Canada Mexico
Zambia Mining in Zambia Copper Production (Mt) 1,200,000 1,000,000 959,000 800,000 698,000 767,000 722,000 790,000 781,000 600,000 569,000 750,000 522,000 831,000 400,000 200,000-2008 2009 2010 2011 2012 2013 2014 Q3 2014P 2015P 2016P
Zambia Major player in the Mining industry Mine Name Location Main shareholding Government Stake(%) Type of mine Minerals Mine life (Years) Konkola Copper Mine Copperbelt Vendata/ZCCM-IH 20.6 Underground/Open Cast Copper 35 Mopani Mine Copperbelt Glencore/First quantum 10 Underground/Open Cast Copper 25 Kansanshi N/Western First Quantum 20 Open cast Copper/Gold Lumwana N/Western Barrick Gold Open cast copper 35 Luanshya- Baluba/Mulyashi Copperbelt CNMC 10 underground - baluba/open cast Mulyashi Copper 10 Chibuluma Copperbelt Metorex-Jinchuan Group 15 underground copper 10 Chambeshi NFC Copperbelt China NFM 15 underground Copper 25 Lubambe Copperbelt Rainbow/Vale/ZCCM -IH 20 underground 28 sino Metal Leach Copperbelt CNFC Procesing Tailing copper
Zambia Major player in the Mining industry Processing plants Name Capacity Location Owners Chambeshi Copper Smelter 250,000Copperbelt CCS Chambeshi Metal 55,000Copperbelt ENRC
Name Location Operators Mining in Zambia New Projects Expected Production /annum (Tonnes) Operations Beginning Type operations Mine Life Cost (US $Billion) Kalumbila-Trident Project N/Western First Quatum >250,000 2015 open cast 25 1.8 Lackthorn Resources Central Province >35,000 Underground 11 0.358 KCM-Upper ore body project Copperbelt Vendata >200,000 2014 Underground 35 0.075 Kansanshi smelter N/Western FQM >400,000 2016 Smelter NFCA Copperbelt China NFMC >40,000 2017 underground 25 0.085 Mopani Synclinorium Ore body Copperbelt Glencore/F QM >140,00 2015 underground 25 0.325
ZAMBIA Mining Regulatory Framework The legislation that governs exploration & mining in Zambia is the Mines & mineral Act of 2008 providing guiding principle for: Transparency for checks & balances and accountability in the administration of mining rights. Ensure security of tenure & non-compulsory of acquisition of mining assets Safeguard the environment
Zambia: Mining Fiscal Regime Changes are aimed at increasing transparency in the sector through monitoring of the country s mineral value chain & achieve a more equitable distribution of minerals. Tax type Rate % Comment Current Mining Tax Regime Corporate Tax 30 Mineral Royalty 6 charged on all types of mineral levied on dividend, interest 7 payments 15 Witholding Tax to affiliate or subcontractors, 20 royalties & management fees Variable Profit taxable on income which is above 8% of 15 Tax gross income Export Tax 10 on unprocessed or semi processed ores Changes in Mining Tax Regime (2015) 8 for underground operations as final tax Mineral Royalty 20 for open cast operations as final tax 30 On income earned from tolling on income earned from processing of Corporate purchases ores, concentrates & semi Income Tax 30 processed minerals currently taxed from mining operations Note: the new mining tax regime will apply to mining of industrial minerals
Mining in Zambia Investment opportunities in the mining Prospecting/Exploration Investment in Green field mines Expansion of existing mining activities Beneficiation/value addition Copper refinery/smelting
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