The Race to exploit Critical Minerals amidst governance concerns in Zambia
Zambia has been mining for over a century, with copper being the predominant mineral export and a significant export earner for the country’s economy (Sikamo, J., Mwanza, A., & Mweemba, C.. (2016). Copper mining in Zambia – history and future.). Over the years, the country has attempted to diversify the economy away from mining as well as add value to its exports, which are principally exported in raw form. This stems from the historical instability of copper prices, characterised by peaks and troughs that have had disruptive impacts on the economy2. However, in the wake of the energy transition, copper mining may continue to be the bedrock of Zambia’s economy.
In addition to being Africa’s second-largest copper producer, after the Democratic Republic of Congo (DRC), Zambia also has deposits of other ‘transition minerals’: cobalt, nickel, manganese and recently discovered lithium (Zambia Extractives Industries Transparency Initiative for the year ended 31 December 2020). Despite Zambia’s minerals endowments and its century long track record in mining, it is arguable that mining has done very little to ensure inclusive and sustainable growth.
Simultaneous problem fixing and intensified mining
The new administration elected in 2021 has committed to changing the narrative and has made substantive commitments to realise the potential of the mining sector. In the last two years, the government has introduced targeted incentives and reforms to spur mining investment and production.
In the Mines and Minerals Development Act specifically, a restructuring of the mineral royalty regime would result in net revenue losses of approximately 140 million US dollars, with the larger aim to boost mineral production and investment (2023 National Budget Speech delivered on 30 September 2022 by the Minister of Finance and National Planning, Republic of Zambia). Despite the revenue loss, the government contends that this will make the copper industry attractive for foreign direct investment by creating a more conducive business environment.
During the same period, the Ministry of Mines launched the National Mineral Resources Development Policy, which aspires to address persistent challenges in the sector pertaining to geological mapping and exploration, licensing, artisanal and small-scale mining and environmental management, among others. The government is also in the process of introducing legislative reforms to establish a commission to regulate mineral resources. The Minerals Commission, once established, would be responsible for mining licensing and monitoring of mining rights, among other responsibilities.
Some of these measures, particularly pertaining to tax incentives, have been met with skepticism. Notwithstanding, a number of governance risks persist, for example: a lack of comprehensively geologically mapped data, a weak Public Private Partnership model, opacity in the awarding of mining licences and a largely informal Artisanal and Small-scale mining sub sector. These challenges undermine the government’s aspirations for the sector, particularly with the projected increased demand for critical minerals for which the country’s mining regime, in its current form, is ill-prepared.
The Critical Minerals rush – the new gold rush?
Zambia still grapples with several challenges in its extractives sector. The Ministry of Mines and Minerals Development had to suspend mining licence issuance in February 2022 for eight months after purported corruption and speculative behaviour in the awarding of mining licences. The suspension affected exploration and mining licensing projects for all minerals that were to be approved and granted at the time and did not affect existing projects. Mining licence issuance only resumed in November 2022 with a backlog of over 2000 licence applications.
In the same year (2022), the government announced its plans to increase copper production with a target of 3 million tons annually by the year 2030. This will be a colossal feat given that current copper production averages about 800,000 tons annually and would entail ramping up copper production, expanding copper mines as well as opening new copper mining projects.
As a result of this push to increase production and leverage the projected boom in demand for critical minerals, the country is ‘open for business’ as reiterated by the Republican President as well as the Minister of Mines and Minerals Development during the Annual Mining Indabas held in Cape Town in 2022 and 2023 respectively.
Of note and in spite of the challenges faced in the mining sector, the Minister of Mines whilst addressing a Ministerial Symposium during the 2023 Mining Indaba worryingly stated that Africa should focus on exploring its mineral wealth as opposed to wasting time on negotiations.
Minister of Mines and Minerals Development.
A boom in Critical Mineral investments
Zambia has seen substantial interest coupled with an increase in mining investment over the last year owing to renewed confidence by investors in the new administration’s reforms to enhance the business environment. Markedly these investments are in the exploration and extraction of minerals key to the energy transition, and include:
- the expansion of an existing copper mine in the Northwestern province worth 1.25 billion US Dollars that was approved in 2022.
- A hundred and fifty (150) million US Dollar investment in copper and cobalt minerals exploration and development on the Copperbelt province that will utilize innovative technological advancements in artificial intelligence (AI) and machine learning in the discovery of minerals. The mining project is being undertaken by a Silicon Valley start-up backed by prominent billionaires.
- The opening of the largest Nickel Mine in Africa in the Northwestern province. The project was launched in 2022 and is worth an approximate investment of 250 million US Dollars.
- The signing of a memorandum of understanding with the Democratic Republic of Congo for the processing and manufacturing of electric vehicle batteries in 2022. The initiative is aimed at ensuring value addition for the two resource-rich countries and has received support from the US Department of State with the three parties signing a memorandum of understanding (MoU) in December 2022.
With the ambitious target set for 3 million tonnes of copper production by 2030, the government has developed a strategy specifically for copper production which entails an unprecedented expansion and increase in critical mineral projects.
The government is also keen on enhancing value addition in the mining sector by pursuing similar partnerships and initiatives such as the one with the DRC on EV batteries. Moreover, it remains to be seen if the government will impose some forms of restrictions or bans on the exportation of critical mineral ores akin to other neighbouring countries such as DRC, Namibia and Zimbabwe.
Corruption risks for transition minerals earmarked for ASM
Unlike copper and cobalt mining which is largely formalised and large-scale, mining of other minerals including manganese and lithium has seemingly been relegated to the artisanal and small-scale mining sub sector (The National Mineral Resources Development Policy 2022, Ministry of Mines and Minerals Development, Republic of Zambia). For a while, successive governments have indicated plans to formalise the sector, with the current government in the process of developing a model for formalisation. However, the artisanal and small-scale mining (ASM) sub sector remains highly informal, which presents its own challenges and exacerbates the governance risks amidst the energy transition. For the most part manganese and lithium exploration and extraction, which are fairly new frontiers for Zambia’s mining sector, present unique challenges of their own.
Zambia’s manganese production has been steadily increasing. Despite a slump in 2019 and 2020, manganese production doubled over a ten-year period, from approximately 65,000 tonnes in 2012 to over 130,000 tonnes in 2021. Zambia also reportedly exported manganese ore valued at 34 million US Dollars in 2021, which made it the twelfth largest exporter in the world.
Even with its potential, the extraction of manganese leaves much to be desired specifically for host mining communities. Extraction of manganese has been typified with illegal mining symptomatic of the inadequacies of the Ministry of Mines to properly regulate and oversee the ASM sub-sector.
Manganese mining has also raised concerns pertaining to environmental and social consequences due to the extraction methods used by artisanal, small scale and illegal miners. Further, the lack of transparency in the issuing and awarding of mining rights has resulted in host communities’ loss of land rights and displacements due to the tenuous land rights and tenure in rural areas, thereby disrupting livelihoods (Mkandawire R.; An Investigation of Political Conflict in Land Acquisition in Zambia: A Case Study of Mansa District of Luapula Province of Zambia. MSc. Diss., (University of Zambia, 2019)).
In early 2023, reports of the discovery of lithium in the southern part of the country triggered an influx of people to the area looking to monetise the opportunity. This was a seemingly unexpected discovery as the government now plans to include lithium ore in the country’s Mineral Analysis database, in addition to determining the quantities being mined in the area. Being a newly found ore for the country, it is unclear if the government will develop a specific strategy pertaining to licensing of lithium projects, valuation of the ore for exportation, or value addition initiatives.
In the meantime, civil society, including Transparency International (TI) Zambia remain cautious given the mammoth task the government is facing to appease investors in the sector, as well as to ensure transparency. Civil society actors have also recommended for the government to develop a specific strategy for the exploration and extraction of critical minerals.
As one of the chapters implementing the Accountable Mining programme, TI Zambia undertook a Mining Awards Corruption Risk Assessment (MACRA) in 2018 which highlighted corruption risks pertaining to licensing, contracting and permitting, beneficial ownership, environmental and social impact assessments as well as community consultation and participation.
Most of these governance risks persist and are yet to be adequately addressed. The major concern at present is that the government’s dual approach to remedy the risks and challenges whilst increasing investment and production in the sector amidst the transition could undermine reforms aimed at enhancing governance in the sector.