It was against this background that Hichilema laid out his vision for the sector at the 2022 Investing in African Mining Indaba (see Box 2), and consultation with industry stakeholders has already resulted in significant policy measures. These include the removal of the contentious ‘double taxation’ policy whereby mining companies paid corporate tax on top of royalties; scrutiny of the cadastre system – an online database for managing mining licences – to root out corruption including an audit of mining rights and a review of the application process; and restriction of licences to address the problem of long-term speculative licence holders preventing new exploration.
This policy approach has proved successful so far. In May 2022, First Quantum Minerals announced a new $1.35 billion dollar investment over 20 years in its Kansanshi mine, along with a partnership on an ambitious solar and wind energy project to power its operations. Other top-tier firms have also announced investments through joint ventures and exploration after years of hesitancy with international and regional firms, including those from South Africa. Maintaining this momentum will depend on further progress on domestic policy, improving bureaucratic processes, streamlining government decision-making, and finding solutions to major legacy issues from the previous regime involving complex legal disputes between the state and major industry players over allegations of tax avoidance and environmental damage.
Despite the positive reaction of international investors to the government’s change of direction, two major legacy issues from the previous regime remain. The 85 per cent state-owned mining holding company ZCCM-IH is embroiled in a legal dispute with Vedanta Resources over the enforced liquidation of copper producer Konkola Copper Mines plc (KCM). Vedanta is keen to re-operationalize the company under new terms and conditions being negotiated with the government, including on environmental and community engagement terms. In September 2022, the court case between Vedanta and the government was suspended to pave the way for dialogue. The second major legacy issue is that Zambia took on $1.5 billion in debt to buy Mopani Copper Mines plc from Glencore in January 2021. Glencore’s Mopani operation became the subject of severe international criticism for tax avoidance and environmental damage. In 2020, the Supreme Court of Zambia fined Mopani Copper Mines $13 million for non-payment of tax. The case has been cited by those placing pressure on the government to reconsider the bad terms of the sale of Mopani to ZCCM and the ongoing payments that ZCCM is paying to Glencore. In a separate case in 2016, Mopani Copper Mines was ordered by the High Court of Zambia to pay compensation of ZMW 400,000 (£30,000) in damages to the widower of Beatrice Miti, a politician who died after inhaling sulphur dioxide released by the mine. Lawyers for Glencore contested the claim, citing an environmental indemnity agreement signed with the Zambian government in 2000. Upon appeal, the supreme court ruled that the original amount was too modest and increased the award of damages to ZMW 1 million ($48,000), ‘in view of the aggravating circumstances in this case where the entire community was put at risk, more so that the pollution went on for a long time and it was within the capacity of the Appellant to control the amount of gases which were being emitted into the ambient air’. Both KCM and Mopani require new investment and significant efforts to secure ‘social licences’ to operate in two contexts where communities have complex historical relationships with mines and those running them.
These disputes highlight the paramount importance of ensuring that agreements with international firms provide for fair allocation of the benefits and costs of extraction, with firms taking responsibility. Waivers on environmental or social protection legislation hurt both the government and private firms, which may be acting in line with agreements but nonetheless lose their ‘social licence’ to operate. These cases also demonstrate the importance of the institutions and norms that govern the sector – including an independent judiciary, property rights, the rule of law and transparency.
The government must act soon if it is to maintain international goodwill. There is an opportunity for Zambia to demonstrate regional leadership on mining best practice in terms of the domestic policy environment, participation in the global organizations that govern the industry and implementation of international standards. The conversation on widening economic benefits is particularly pressing in the context of an industry that is increasingly less labour intensive and seeing rapid growth in the use of mechanical and digital equipment.
However, legislation to promote local content – activities to develop domestic industrial infrastructure and local skills – currently in progress in Zambia, needs to be carefully crafted to ensure that it creates broad opportunities and does not just benefit a narrow group of politically connected middlemen. New policy documents released in November 2022 provide for a wide-ranging review of legislation and existing practices. A first step would be the development of a national mining vision – in line with the UNECA African Mining Vision (AMV) – through an inclusive process with firms, communities and other social stakeholders. Furthermore, developing such a vision should also pressure UNECA to update the continental AMV. Encouraging regional states to join the Extractive Industries Transparency Initiative (EITI), and implementing the UN Human Rights Council’s Voluntary Principles on Security and Human Rights (VPs), could put Zambia in the driving seat of broader regional mining reform.
Hichilema’s promise of a transparent, predictable and fair regulatory environment has created a hopeful buzz among investors. Working alongside foreign partners to deliver national economic benefit, including through training and procurement, is critical to moving the country away from perceived threats of resource nationalism. But partners need to demonstrate value generation for Zambians, and not operate on purely extractive terms that offer short-term wins.
Agriculture and tourism
International partners are crucial to Zambia’s commercial agriculture and the Farmer Input Support Programme. As with other areas of economic activity, there is a need for a policy environment that benefits ordinary Zambians as well as international investors. On account of being the country’s largest employer, the agricultural sector remains critical to achieving the government’s ambitions of economic growth and job creation.
On account of being the country’s largest employer, the agricultural sector remains critical to achieving the government’s ambitions of economic growth and job creation.
Agriculture and agri-processing have been identified by authorities as key areas for investment. There is a considerable opportunity for the private sector, although the Zambian establishment still regards the state as the most important driver and supporter of rural transformation and livelihoods. The state provides subsidies under the Farmer Input Support Programme to those unable to get finance elsewhere, and the Food Reserve Agency (FRA) provides further support by purchasing maize at a guaranteed price, buying upwards of one-third of the national harvest. These programmes have failed to reduce poverty or improve productivity.
Agriculture has been a major focus of development actors, including multilateral organizations, the IFIs and bilateral donors. Zambia’s international partnerships in agriculture reflect the nature of broader bilateral relations, and include state-to-state cooperation with Russia, while Western interventions have been channelled mostly into human development and private sector support. There is also cooperation with Brazil, Japan, South Korea, Türkiye and Saudi Arabia, with the latter having an ambition to import 1 million goats a year from Zambia.
This range of partners provides Zambia with a significant opportunity for economic diversification. However, there is a need for better coordination of external actors engaging in the sector, as well as greater recognition of the offerings of less dominant players. There is a sense in Lusaka among the press, civil society and international observers that debt relief negotiations have dominated the Hichilema administration’s foreign relations bandwidth to the detriment of other sectors, including agriculture.
Infrastructure underdevelopment remains a major challenge to growth, economic diversification and human development in Zambia. Much of Zambia’s transport and utility networks are ageing, and power outages and erratic water supply are common. The country’s Seventh National Development Plan (7NDP) 2017–21, focused on infrastructure development to improve transport, water management, energy and IT, in line with Zambia’s long-term Vision 2030. For example, the Link Zambia 8000 project set out to pave 8,201 kilometres of road, at an estimated cost of $5.6 billion, to improve transport connections.
The cost of infrastructure has historically been funded through debt. When the Patriotic Front came to power in 2011, Zambia had a relatively healthy macroeconomic position, resulting from nearly a decade of high growth. However, this growth had only marginally improved living conditions. Unemployment and unrest were growing, especially among the urban youth. The Patriotic Front government instigated a programme of infrastructure development to both drive growth and cement its political position, which accelerated when President Lungu came to office in 2015. As mentioned earlier, infrastructure spending became a significant feature of his winning campaign for the 2016 national election. But these investments had limited impact. Projects were not systematically prioritized, and in many cases, contracts were awarded without a proper tendering process. Furthermore, a lack of transparency has fuelled concerns that the government has overpaid for infrastructure built by Chinese state-owned firms. According to one study, Zambia paid twice the African average for road construction on a per-kilometre basis.
There have been some successes in infrastructure expansion to support wider industrialization, especially in the energy sector. The expansion of hydropower generation initially contributed to Zambia becoming a net exporter of energy, selling power to South Africa and Zimbabwe. However, recent droughts have led to power shortages and load-shedding, which has highlighted the need for more diversified energy generation to provide systemic resilience. To expand generating capacity, Zambia has sought to work with multiple partners. In January 2023, Hichilema announced that ZESCO had signed an agreement with the United Arab Emirates’ renewable energy company Masdar to develop solar projects worth $2 billion. The project will proceed with an initial phased installation of 500 megawatts (MW), but with scope to generate up to 2,000 MW. The Russian State Atomic Energy Corporation (ROSATOM) and the government of Zambia signed a contract for the construction of a Zambia Center for Nuclear Science and Technology (CNST) in 2018, representing the first joint project between the two countries in the field of nuclear technology. Russia has also pledged to develop a technology education centre.
Corruption remains a major concern for investors, especially in infrastructure. It is estimated that corruption is causing Zambia to lose between ZMW 713 billion and ZMW 1.4 trillion ($143 million–$285 million) in the construction sector, or 10–20 per cent of the value of construction contracts. According to the Overseas Development Institute, the main weakness of China’s financing model is that it relies heavily on Chinese companies to develop projects together with host country officials. This creates strong incentives for kickbacks and inflated project costs.
While recognizing the importance of infrastructure for national development, the Hichilema administration has sought to rein in excess spending as part of its debt restructuring and negotiations. In August 2022, Zambia cancelled $1.6 billion in agreed but not disbursed Chinese loans, mostly from China EXIM Bank and the Industrial and Commercial Bank of China. As a result, the government halted work on a major highway, which was to link the capital to the country’s Copperbelt province, and digital projects, such as Smart Zambia phase II and digital terrestrial television. However, popular demand for improved services will not go away, nor will the temptation to use external financing to deliver them, particularly as Zambian politics heats up before the next general election in 2026. With limited fiscal space for government spending on infrastructure due to the huge debt burden, ensuring better sectoral governance will be a key priority for the Hichilema administration. In the 2023 budget, the minister of finance announced targeted tax incentives to catalyse increased private sector participation in public infrastructure development through public–private partnerships, ahead of the proposed repeal and replacement of the Zambian public–private partnership act.
Defence and security
Zambia is broadly a peaceful country, with few internal security threats, a low risk of terrorism and no non-state armed groups. However, the closing down of political space under the Patriotic Front administration led to a rise in public protests across the country, including a wave of violent demonstration following the 2016 election. During the later years of the Lungu administration, public protests met with increasingly heavy-handed responses from the security services. Popular demonstrations have notably focused on external political interference, especially the relationship between the Lungu administration and China.
Zambia’s military history is characterized by its position as a front-line state against racist white-authoritarian regimes to the south – a key factor in its need for developing a substantial air defence capacity – as well as its contribution to regional peacekeeping operations, including in neighbouring DRC. Zambia is also an important contributor of uniformed personnel to UN peacekeeping missions.