23rd October 2023
A Path to Debt Resilience
How Zambia’s former ruling party planned to address national debt obligations
In 2020, Zambia found itself grappling with a severe debt crisis primarily caused by the pandemic. The PF led government were not content to merely seek forms of respite or debt relief from creditors. They had a long- term vision of economic resilience. Here we outline measures that were planned and proposed by the former ruling party to address Zambia’s debt crisis and how other developing nations have succeeded using similar strategies, often reducing their reliance on international institutions like the IMF and World Bank.
Mining Industry Reforms
The PF government aimed to ensure that mining houses paid their fair share of taxes. This approach was inspired by the success of countries like Chile, where comprehensive mining reforms significantly increased government revenue. If and when implemented, this measure would have generated substantial tax revenue, helping the country to service its debt and reduce the debt burden on Zambia. In fact, this strategy was already bearing fruit. As at 2021, the nation was gaining up to $ 500 million in mining revenue per annum. Sadly these gains have been reversed by the UPND government through the provision of tax holidays to the mines. Mining tax revenue has drastically reduced placing strain on our national coffers.
Mining industry reforms also included Joint Ventures in copper mines. Ownership of the Mopani and KCM copper mines with strategic partners was sought. This was ensured revenue beyond mere tax obligations and securing our natural resources for future generations. Countries like Peru and Mongolia have successfully ventured into state participation in mining, reaping the rewards of increased control and revenue. Mongolia provides an intriguing case study of how joint ventures in the mining sector can contribute to economic development and fiscal stability. One of the most prominent examples is the Oyu Tolgoi mines, one of the worlds largest copper mines. The development of this mine was made possible through a partnership between the Mongolian government and Rio Tinto, a multinational mining corporation. In this joint venture, Mongolia retained a significant stake in the mines, with the government owning 34% of the project. This ensured that Mongolia benefited directly from the profits generated by the mine.
The joint venture led to significant investments in local infrastructure, including roads, power supply and water resources.
Peru is another example of a nation that has successfully engaged in joint ventures in the mining industry particularly in the case of the Las Bambas copper mine. This mine, operated by MMG Limited is a significant copper producer and highlights the advantages of state participation in mining.
State ownership would not only benefit Zambia but also strengthen the governments hand in negotiations with international creditors.
Agriculture and Food security
Increasing support for farmers and transforming Zambia into a net exporter of maize was another key component of the strategy. The PF government embarked on steady and increased support to small scale farmers through the FISP program that provided cheap seed and fertilizer. In turn the farmers played their role in ensuring the nation was food secure and began making inroads in exporting to neighboring countries.
Zambia could further learn from countries like Brazil and Argentina which have become major players in the global food market.
Brazil has implemented programs to support small-scale farmers. For instance. The National Program for Strengthening Family Agriculture provides credit, technical assistance and access to markets for smallholders.
With the right policies, Zambia’s agriculture sector could potentially thrive, leading to economic growth and reduced debt.
Energy Independence and Exports
Zambia aimed to leverage its investments in energy from 2011-21 to become a net exporter of electricity in the region. This billion -dollar investment during this period, with further projects to come on stream has left us with an energy surplus, that will ensure we become key energy players in the years to come.
Ethiopia’s remarkable success in hydropower and energy exports serves as an inspiration. Ethiopia has pursued energy export agreements with neighboring countries. Excess energy generated from hydropower is being sold to Sudan, Djibouti and Kenya. This not only generates revenue but also fosters regional economic integration.
The country has also developed local expertise in dam construction, operation and maintenance. This not only saves costs but also ensures the sustainability of hydropower projects.
Artisanal Support for Mines
The PF planned to support local artisanal miners to play a bigger role in the mining industry. This included the provision of a ready market for their produce through the purchase by ZCCM-IH, Expanding provisions of licenses as well as promotion of joint ventures. Tanzania’s experience with artisanal mining showcases the potential for job creation and increased income for local communities. This initiative could foster economic growth at the grassroots level.
Tanzania’s approach to artisanal mining shows that with proper regulation, community engagement and taxation, small scale mining can be a significant contributor to the national economy and a driver for local development. By drawing inspiration from Tanzania’s success, Zambia was on a similar path, developing frameworks to support artisanal miners, stimulate local economies and promote sustainable mining practices.
Transition to a 24hr Economy
To accelerate economic growth, the plan was to turn Zambia into a 24hr economy. This idea takes inspiration from Singapore’s transformation into a global financial hub. Extending operating hours and creating a favorable environment for businesses will attract bot local and foreign investment and drive economic growth.
Zambia deserves better
Edwin Lifwekelo
PF acting media director.