Zambia is done for now with taking over mining companies

Downtown Lusaka, Zambia. Credit: Wikipedia

Zambia isn’t looking to take over more mining companies, nor is the government planning to nationalize the industry, according to Finance Minister Bwalya Ng’andu.

The government has acquired Glencore Plc’s and Vedanta Ltd.’s local operations in the past two years. Remarks by President Edgar Lungu in December that Africa’s second-biggest copper producer wanted to take “significant stakes” in unspecified mines led to fears of a fresh wave of nationalization.

“We are at this point in time not looking at any other specific mining operations that we want to go into a relationship with,” Ng’andu said in an interview on Thursday in Lusaka, the capital. “In some quarters the president’s statement was misunderstood to mean that Zambia is contemplating taking over other mining firms by force or nationalizing mining companies. We are not in that business at all.”

The minister’s comments may ease concerns among investors in companies including First Quantum Minerals Ltd. and Barrick Gold Corp., which operate the southern African nation’s biggest copper mines. It also follows a series of clashes between mining companies and government over taxes, retrenchments and electricity pricing.

Zambia last century had a painful experience with mine nationalization, which bled the treasury and saw production plummet, ultimately leading to the state reversing the policy in the 1990s. Output more than tripled after the operations were privatized. Copper prices that dropped during nationalization and rose after mines were sold also played a role, according to economists including Grieve Chelwa at the Institute on Race and Political Economy at The New School in New York.

Past lessons

The country has learned lessons, Ng’andu said. The government can also use examples from other nations including Chile, where the state plays a significant role in copper mining, he said.

“We have to make sure we run these as proper businesses without interference in their operations,” Ng’andu said.

Zambia will also get a better understanding of mining taxation and royalties from running operations like those previously owned by Glencore.

“We never seem to get it right,” he said. “We feel we are not getting sufficient return from the exploitation of our resources.”

(By Taonga Clifford Mitimingi and Matthew Hill)

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