Mining’s status as one of the main pillars of Zambia’s economy can hardly be overemphasised.
After government, the extractive industry is the country’s largest employer. The sector’s contribution towards employment extends beyond its direct workforce to include contractors in the mining value chain and other businesses down-stream.
The industry plays a crucial role in stimulating development in the areas of its operation, as new roads, housing projects and utilities are built to service the mines and surrounding communities, contributing to the overall development of the country.
However, for the country’s mineral resources to maintain this impact, mining companies must invest for the future, invest in capital projects, and invest in the very latest technology to remain competitive.
That is why the world’s mining executives, along with government experts and financiers converged on Cape Town this week for the industry’s most important annual gathering – the Mining Indaba.
I am joined by colleagues there from both Stanbic Bank Zambia and our parent group Standard Bank to network with industry leaders and gain further insight into what they need from us as a bank.
There is need for stakeholders to put in place measures that will not only ensure the survival of the mining sector but also increase its contribution to national GDP by facilitating its growth as a viable business.
And as anyone in business knows, growing an enterprise requires fresh capital injections both for asset investment and general operational expenses. Mining companies by the nature of their size need this in much larger quantities than most businesses.
Crucially, that investment is not only large, but also long term, hence the need for a steadfast financial partner that will work hand-in-hand with the sector and understands the challenges, cyclical nature of the business, and the need for stable funding.
Both government and private sector firms have invested heavily in Zambia’s mining sector to help maintain stability and sustainable growth. Financial partners must be prepared to support the mining sector during times of good fortune as well as during the downturns in whatever format these may present themselves. To this end, financial partners need to critically assess and select the miningcos that they would have a high probability of standing next to through the cycles.
Stanbic Bank Zambia has in the last decade invested more than US$3 billion in the mining sector’s growth – illustrating the value placed on the industry by the bank. It is the sector key to driving Zambia’s growth. However, growth in the mining sector is typically a source of both excitement and stress as the age-old debate on whether mines are contributing enough to the treasury often follows any upturn in the sector.
A taxing situation
In 2018, government announced an upward adjustment in mining taxes in the 2019 national budget. This was heavily criticised by some mining companies that felt the new taxes would render their operation unviable economically.
While the mines claimed they would need to scale back expansion projects and cut their labour force to save costs and remain operational, government insisted there was no evidence the new taxes would cripple mining operations.
The uncertainty of how the new tax system would affect mining operations demonstrated there was still a lot of work to be done in promoting higher levels of transparency and deeper engagement among all stakeholders in the industry. Critical for this sector is a consistent, long-term tax regime, as frequent changes are disruptive to an industry that requires long term planning and investment.
This is what makes events like the 2020 Investment in African Mining Indaba so important. Such forums create a platform for mining companies, policy makers, value chain players and other stakeholders to discuss issues affecting the sector helping improve transparency and trust as a result of improved collaboration and engagement.
As a major player in Zambia’s mining sector, Stanbic Bank participates in such platforms to maintain its contact with key stakeholders in the extractive industry.
By remaining in frequent contact with industry players, we can keep our business strategy in line with the sector’s needs which enables us to deliver the best services through customised solutions and products contributing to the industry’s growth and economic development.
Stronger local capacity imperative
For the value of mining to have a meaningful impact on Zambia, there is need for local communities to take a leading role in shaping and growing the sector and spread its benefits to the rest of the country.
Stanbic Bank has over the years directed resources to help intensify the extractive industry’s multiplier effect through innovative, efficient and unique services at personal, SME and corporate levels. As a responsible citizen it is also key for us to partner with miningcos that have clearly outlined sustainability policies around social upliftment and environmental protection.
The bank has partnered various value chain players to develop strategies that make it easier for them to identify and harness business opportunities in mining.
Through this support, suppliers - especially those in mining towns - can increase their capacity to fulfil contractual obligations hence creating more opportunities for investment that eventually trickledown to the community.
Annually, the bank holds its annual Stanbic Mining and Economic Roadshow which is a multi-stakeholder and multisectoral roadshow designed engage the main stakeholders in the industry and supporting industries.
During the event, Stanbic sends its sector experts to Zambia’s mining towns to participate in discussions on issues affecting the industry as well as help create modalities to strengthen the relationship between mining companies, suppliers, government agencies and communities. Its an opportunity for the bank and our group partners to see what is happening on the ground, engage with our clients and impart our views and forecasts of the state of the sector in the context of the wider global economic environment.
Mining has the potential to leave Zambia with a skilled labour force to propel the country’s development and the goal is to help ensure mining remains a viable business in Zambia and that the public benefit from the country’s mineral wealth.
We can achieve this only through intensive training and education both at the grassroot and professional level. As a country, we ought to do more to expose our young people to the opportunities in mining and the value chain to make the sector’s growth and contribution to the economy sustainable.
It is up to everyone to help push this agenda for the good of the country.
As a bank that proudly calls Zambia our home, Stanbic Bank will continue to provide support to the sector at all levels. The bank is committed to developing new ways to help stimulate growth in the mining industry by pushing the boundaries of innovation to deliver quality sector-specific solutions for industry players.