Zambia’s Mines have Suffered an Alarming drop in Revenue
Monday, August 3rd, 2020
THE Zambia Chamber of Mines says the country’s mining companies have suffered an alarming drop in revenue over the three months from February-April 2020, illustrating the financial impact of COVID-19.
According to the World Bank forecast, economic growth in Sub-Saharan Africa will decline from 2.4 percent in 2019 to between minus 2.1 and minus 5.1 percent in 2020 due to the impact of the global pandemic.
Zambia Chamber of Mines Chief Executive Officer Sokwani Chilembo has said the global lockdown in response to the COVID-19 pandemic, and the ensuing economic freeze had disrupted billions of lives and was threatening decades of development progress.
“We have published this Report to kick-start a public debate, and to generate a dialogue with Government—our decision-makers that we are all looking to at this critical moment,” Chilembo said on Thursday at the launch of the Chamber’s policy brief for a post-COVID Zambian economy, entitled The Road to Recovery, at the Mulungushi International Conference Centre in Lusaka.
He stated that the report considers the economic impact of COVID-19, at global and continental levels, and specifically on Zambia adding that the report considers policy interventions, and the particular order in which they must be taken to avoid economic disaster.
Mr Chilembo said the mining companies’ collapse in revenues—falling 30 percent over the period—can be attributed to two main factors such as severe global restrictions on movement which have adversely affected the mining supply chain, and hindered the export of copper as well as the copper price which is down on average by 12 percent over the period when compared to 2019.
“So, while companies have been able to maintain production levels, they have struggled to export and sell their copper, and have received a considerably lower price for the sales they have made,” he said.
Mr Chilembo noted that the fall in mining revenues has led to a corresponding fall in mineral royalty payments which are estimated to have come in at approximately $60-65 million over the three months, rather than the $85-90 million that could have been expected, demonstrating how closely Government revenues mirror the fortunes of the mining industry.
He stressed that given escalating mining costs over recent years, and a drying up of capital, COVID-19 has added unbearable pressure on mining finances.
Mr Chilembo clarified that between 50 percent and 60 percent of the respondents to the Impact Capital Africa (ICA) June survey from the mining and mining services sector, mainly representing smaller operators, believe that their businesses will ultimately fail within the next three to 12 months.
“This finding is of great concern, given the significance of the sector to the wider Zambian economy,” he stated.
Regarding the collapse in mining revenues and royalty collections, Mr Chilembo said the COVID-19 pandemic has evidently had, and will continue to have, a large negative effect on economic activity in Zambia as is clear from the data on mining royalties, government revenues will also fall as activity and trade decline.
He emphasised that despite this, Government had to act to protect lives and livelihoods through the crisis.
In terms of the long-term fiscal position, Mr Chilembo suggested that if Zambia walks the tightrope to recovery, restructuring debt obligations under the Lazard Freres project, with revenue growth facilitated by policy reform and funding assistance, the expected long-term fiscal position should see increased revenue collections and reduced debt costs resulting from the Lazard Freres debt restructure programmes. – Story courtesy of SUMA SYSTEMS.