[ACCI-CAVIE] With billions of dollars’ worth of African gas, gold, copper and cobalt to hit the markets in 2022, industry players are focused on the next big deals. The election of a new government in Zambia in August 2021 has led to optimism that the country is the stand-out player in African minerals exploration for 2022.

“All eyes are on Zambia,” says Peter Major, director of mining at Mergence Corporate Solutions in South Africa. Major spoke in Cape Town in October as he prepared for a mining investment trip to Zambia. In the new president, Hakainde Hichilema, he says, the country has “a real businessman” in charge.

As well as copper, whose industrial mining in Zambia dates back to the 1930s, the country has significant potential in gold, manganese, emeralds and coal, Major says. There has been a historic lack of exploration since the post-independence nationalisation of the mines, he says. Over the past five years, in particular, there has been “no motivation to prospect”.

A working cadastral system gives Zambia a crucial advantage over Ghana and the Democratic Republic of Congo, Major points out. But the question mark over the Hichilema administration is how it will handle its review of existing mining licences. “We need to see some people coming out of the other side of the pipeline,” Major says. Once that starts happening, he predicts, there will be a “stampede” to explore and mine in Zambia.

According to Irmgard Erasmus, a senior financial economist at Oxford Economics in Cape Town, Hichilema and his minister of mines, Paul Kabuswe, are likely to take a “more pragmatic, market-orientated approach” in dealing with mining companies, in contrast to the “hard-handed and interventionist stance” under the former president, Edgar Lungu. The Zambia Chamber of Mines has welcomed plans to reform the tax code, saying this will mark a break from the old “cash-grab mentality”.

Strike while the copper is hot

Mining was the only sector of the Zambian economy to decline in the second quarter of 2021, when copper production dropped 9%, hurt by the impact of Covid-19 and the first-quarter rainy season. This meant the country was unable to fully capitalise on the high copper prices, which peaked in May, according to economist Yvonne Mhango at Renaissance Capital.

Erasmus predicts that copper prices going forward will see a moderate but sustained decline, amplified by monetary policy normalisation in the US and the risk of a Chinese slowdown driven by stresses in the country’s property sector. These headwinds, Erasmus argues, will ensure that Hichilema will remain “mindful of the urgency to strengthen copper output”.

Major contrasts the Zambian outlook with that in South Africa. He is critical of President Cyril Ramaphosa’s cautious approach. Hichilema has shown a willingness to purge figures associated with the old regime, Major says: “Purging is necessary. But Ramaphosa does not purge. He promotes. South Africa needs a radical change in governance. Zambia is showing South Africa the way.” By David Whitehouse