LUSAKA, June 17, 2015 – Zambia needs to design fiscal policies that ensure fair revenue to the government whilst also encouraging private sector investment. This is the message of a new World Bank analysis of Zambia’s mining sector.
The 5th Zambia Economic Brief titled Making Mining Work for Zambia: The Economic, Environmental and Health Nexus of Zambia’s Copper Mining Economy was released today in Lusaka by the World Bank. The Economic Brief which is issued bi-annually in June and December assesses recent economic developments and outlook in the short to medium term, and analyses a special development topic. Mining is the special topic for the 5th issue. The copper mining industry has significantly contributed to Zambia’s economic boom.
“Mining is an important source of tax revenue, foreign currency, and jobs for the people of Zambia. It is therefore important that decisions made are conducive for sustained growth of the sector and national wealth,” says Kundhavi Kadiresan, the World Bank’s Country Director for Zambia, Zimbabwe and Malawi. She adds that tax regimes ought to also consider the stage at which a mine is in its life cycle and how revenue could be affected by price fluctuations on the global market. “This also requires that Government has adequate capacity to deliver on all these issue and that the mining companies take part and disclose the necessary long term planning information required to undertake the necessary analysis.” adds Kadiresan.
In making mining work for Zambia, the brief also considers issues of environmental and human health. It looks at implications for licenses, regulations, and laws governing mining activities. “It is critical that governance systems mitigate the environmental and health spillovers from mining – especially where local populations are more vulnerable to these impacts due to poverty,” says Martin Lokanc, the Bank’s Mining Specialist and co-author of the Brief.
The Brief also analyses the country’s recent economic developments. Zambia’s economy continues to grow at a rate faster than that of the sub-Saharan Africa region. In 2014, the economy grew at around 5.5- 6.0 percent. Although this was a slight dip, the economy still remained strong. “The main challenge the World Bank sees for Zambia is strengthening fiscal policy so it firmly buoys inclusive growth and poverty reduction,” says Philip Schuler, the Bank’s Senior Country Economist for Zambia and co-author of the Brief. The brief observes that in recent times, government spending has been rising, resulting in budget deficits of at least 6 percent of GDP. The Brief recommends containing the growth of spending on salaries and subsidies to create fiscal space for programs that reduce poverty.
The series of Economic Briefs that the Bank publishes are intended to stimulate dialogue and inform decision making to help Zambia further improve her economy as a lower middle income country.