Zambian President Edgar Lungu, aims to secure majority stakes in certain strategic mines for Zambians to benefit from country’s mineral wealth beyond taxes.
The Zambian government stated that it would acquire Mopani Copper Mines Limited which is a firm jointly operated by companies in Switzerland and Canada, of which the government owns only 10% of the firm.
The deal is valued at $1.5 billion and only minimum relevant information about it has been made public.
Speculative opinions and theories of how the government’s decision will affect the county’s quest to win a crucially needed International Monetary Fund (IMF) bailout loan are swirling over the government.
According to an economist Professor Oliver Saasa, the loan financing the Mopani deal will be serviced via future sales.
The Professor states that Zambia aims to repay the loan by giving Glencore creditors 3% of the mine’s revenue that would perspire over the next 3 year period, after which the creditors will receive between 10% and 17.5%.
Mining consultant Ron Smit said that developments are likely to stall if large companies slow down on big investments because of Mopani Copper Mines’ fate.
The Zambian government confirms that the deal is built upon a mutual agreement, however Lusaka suggests it will not bear the heavy load of repaying back the loan.
The permanent secretary at Zambia’s finance ministry, Mukuli Chikuba, in a written statement said that the $1.5 billion debt owed by Mopani to Glencore is not guaranteed by the government and will therefore not be considered as part of government debt.
About more than 73,000 people are employed in Zambia’s mining industry therefore representing 2.4% of the workforce in the Southern African nation of a close amount of 18 million people.
National lockdowns and other restrictions implemented in order to cope with the Covid-19 pandemic, caused Zambia’s economy to contract at an estimation of 1.2% and inflation reached an average of 15.7% in 2020, climbed higher to 22.2% in February 2021.
The gold mining sector too seems to have attracted the government’s attention as Lusaka reportedly plans to start buying gold directly from miners to bolster foreign reserves, reason being that the economy recovery will boost up.
According to the Zambia Extractive Industries Transparency Initiative (EITI), about 28% of government revenues are sourced from the mining sector and makes up 77% of Zambia’s total exports.
Several experts and opinion leaders are warning the government to take into consideration the negative effects that the deal may bring to a country facing hard fiscal challenges, and the liquidity obstacles it could also bring upon the copper mining firm.