Could you provide a brief overview of KPMG’s presence and positioning in Zambia?

This year, KPMG is celebrating 70 years in the country, our presence dating back to 1954. We offer audit, tax and advisory services across all sectors, including mining, where our tax practice is particularly strong, serving some leading mining houses. Our team is formed of eight partners and directors with  total staff compliment of around 140 , all located in our Lusaka office.. 

Could you help our readers understand the importance of the mining sector for Zambia’s economy?

Most of Zambia’s foreign proceeds are generated from mining activity, which makes the country’s foreign exchange rate highly sensitive to copper output and copper prices. Copper production volumes have been very low due to issues at two of our biggest mines, KCM (Vedanta) and Mopani, but with these issues resolved, their operators are expected to ramp up production to full operational capacity, which should positively impact the country’s economy. In mining towns, such as Chingola, mining may make up to 90% of the economy. 

Zambia is suffering from a severe power crisis. What is the situation today and what is being done to overcome it?

The power deficit is overshadowing the entire economy right now. Zambia is going through rolling blackouts, sometimes with only three hours of grid power access in one day, due to the severe drought impacting our main electricity source, the Kariba Dam hydropower plant. We will probably need two to three very good rainfall seasons to be able to put the dam back into operation. In the meantime, the government is trying to mitigate the adverse impacts by importing power from the SADC power pool, as well as encouraging investment in solar energy plants. ZESCO, our national electricity utility company, made an application to the Energy Regulation Board (ERB) to increase electricity tariffs in order to make them cost-reflective. The proposal was eventually approved after initially being rejected. Whilst this will increase electricity bills, many believe it is better to have access to expensive power than have no power at all. 

What is your economic outlook for 2024 and beyond?

Zambia is projected to grow at 2.4% GDP in 2024, down from initial forecasts of 3.1 or 3.2%. The drought experienced this year did not only impact power availability but also agriculture, forcing Zambia to import more food products and therefore upset the trade balance.  With the measures being put in place this year, we believe things will start improving in 2025 and moving forward. The key point is that we have reached the bottom and the only way is up. I definitely see a bright light at the end of this tunnel, and under the right leadership, we are getting there.

Zambia has gone through multiple regulatory changes that have deterred investors in the past. How attractive is the country today as a mining investment destination?

Over the past decade, Zambia indeed deterred many investors due to multiple policy shifts in the mining tax regime that showed no consistency. However, since 2021 and with a new government in place, we have seen more stability as well as investor-friendly policies like mineral royalties being tax-deductible once again. In the latest Fraser Institute for Mining Attractiveness, Zambia came third as the most attractive jurisdiction for mining in the continent, jumping nine positions from the previous year. Also the resolution of the legal matters with KCM, which had been placed under liquidation by the previous government, have helped reassure investors. 

What are some of the work-in-progress items to improve Zambia’s competitiveness as a mining jurisdiction?

Energy security is certainly a top priority. We cannot achieve 3MT of copper output as envisioned by the President without a reliable source of power. Proper taxation and incentivizing frameworks are also works in progress, but the Minister of Finance avoids making too many changes and too fast, lest they should cause disruption. Also, the geophysical mapping recently signed with Xcalibur is a very important step forward. By the time we have more clarity on the geology and available licenses, the infrastructure needs to also be ready to accommodate more activity. Currently, the railway system is inadequate. On the bright side, the Lobito Corridor should connect the Northwestern province all the way to the Copperbelt, and there are initiatives to rebuild key road arteries, like the expansion of the road from Lusaka to the Copperbelt into a dual carriageway.