• This is so because Zambia’s economy is dependent on mining and the level of mining contribution to poverty alleviation should be more significant to stimulate economic activities.
By MAIMBOLWA MULIKELELA
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ALTHOUGH growth of the mining industry in Zambia has continued to grab headlines, its contribution to poverty reduction has not yet been recognised.
This is so because Zambia’s economy is dependent on mining and the level of mining contribution to poverty alleviation should be more significant to stimulate economic activities.
However, it is important to note that mining can contribute to poverty reduction in a variety of ways, mostly directly, through generating income and creating opportunity for growth for lateral or downstream businesses.
It also contributes indirectly, through investments enabling better social services and catalysing improvements in physical infrastructure.
To this effect, the International Council on Mining and Metals (ICMM) in its latest report on ‘enhancing mining’s contribution to the Zambian economy and society’ highlights that Zambia is now one of the countries with the highest contributions to tax revenue from mining.
But has this in any way helped to bring down the poverty numbers, especially in communities where mining takes place.
Industry experts argue that the mining contribution to poverty reduction has been significant in the sense that the mines have created thousands of employment opportunities for the locals and have supported various suppliers thereby generating business linkages.
This has helped change the lives of many people in the mining areas as they now have increased income to spend and educate their children.
As a result, four mining companies namely; Kansanshi Mine, Barrick Lumwana Mine, Konkola Copper Mine (KCM) and Mopani Copper Mine employed 56,300 people in 2012.
It was estimated that for every job created directly by the mines, between two and four additional jobs are generated in Zambia through indirect and induced employment linkages, which amounts to an additional 110,000 to 220,000 jobs.
The report indicated that mines also support the human capital development through investment in training, adding that four mines in the period under review spent more than $5 million on training.
Further the report pointed out that the sector accounts for 86 per cent of the Foreign Direct Investment (FDI) and 80 per cent of exports, both contributions having gone up in the recent years.
In the period under review, it was discovered that the four companies spent $3 billion on goods and services each year, of which $1.6 billion was on services and $1.4 billion on goods.
Mines, Energy and Water Development Minister Christopher Yaluma pointed out that despite the mining industry creating employment for the Zambian people as well as supporting various programmes in their community; much has not been done to help alleviate poverty.
Mr Yaluma said: “The poverty levels are still high….yes the mining has not done much to contribute to poverty reduction and I know they have the potential to create wealth for the people of Zambia.”
As a result, the Government was reviewing the Mines and Minerals Development Act to bring it in line with the current trends in the economy and Mr Yaluma said this would encourage among other things the participation of Zambians in the extraction of minerals.
He said the policy once in place would support job creation, participation of Zambians in the value chain and assist those who need help to establish mines.
Doing so, would help the country achieve the much desired growth that would be able to sustain economic development consequently alleviate
poverty in the country.
On the other hand, a local analyst David Punabantu said mining companies should reserve about 20 per cent of their shares to the community were they operate as they are using resources from that area that are diminishing.
Thus when the mining companies start to make a profit and start paying dividends, the funds can be allocated to set projects within those communities especially in value addition processes to work in building an industrial base while also dealing with the environmental issues that mining causes, such as deforestation and water quality.
This approach will let the community decide on what they want, while the mine focuses on its core business of mining.
Added to this, Mr Punabantu said it was important for the mining industry to invest more in human capital development and trade schools because these were a recipe for economic growth.
“Mining companies have the contacts to help communities set up businesses or attract businesses to the areas such as computer assembly, microwave assembly among others, and these should be encouraged with incentives by the State given to the mines if such firms get established and set up jobs,” he said.
Mr Punabantu said on the issue of mineral royalties, a certain percentage should be ploughed back to the community in sustainable projects. There are good examples in South Africa and Sun City is one of them with the platinum mining.
Mining projects should go hand-in-hand with forestation projects, for example if a mine is setting up an open pit mine it should also have programmes attached to it to re-afforest a certain amount of hectare of land per year, or build fifty fish ponds per year for the community which will help reduce poverty, while providing sustainable development.
It is not just a question of relocating people to new areas, buying them houses or paying them off as the environment that will help in reducing poverty also has to be secured from negative environmental practices.
Mr Punabantu said the communities need self-sustaining projects relevant to the challenges they are currently facing with a focus that these projects will impact positively on the future to reduce poverty.
But the Chamber of Mines of Zambia (CMZ) chief executive officer Maureen Jangulo Dlamini said the mining companies were working closely with the local communities, local agencies and broad range of partners with shared interest such as development agencies to alleviate poverty.
Ms Dlamini pointed out that the mining companies in Northwestern province are piloting initiative to improve the capacity of the locals by procuring products that are produced in Zambia, even at a small scale.
The initiative gives preference to sourcing from suppliers in the surrounding chiefdoms, then the rest of North-Western Province and finally the rest of Zambia.
It aims to close the capacity gaps of local suppliers through the use of external partners who will provide both training and financial support.
The programme will facilitate access to finance for Small and Medium Entrepreneurs (SMEs) that have capacity but lack access to equipment.
“Would-be suppliers will be given a small contract and be introduced to financiers. Their chosen financiers should offer lower interest rates than other financial institutions thus addressing one of the key constraints faced by SMEs and will also offer technical support to small businesses,” she said.
Another large initiative is the Agri-foods Innovators programme, for which some mining company has set up a revolving fund.
This programme promotes the use of small-scale irrigation systems to support agricultural activities to take place throughout the year and not only on a seasonal basis.
It aims to promote agriculture as a business rather than at a subsistence level.
“An NGO (Microfin) implements the project by providing training and loans to farmers and the Zambian Cultural Research Institute carries out high-value crop research and provides subsidised seeds to the initiative,” Ms Dlamini said.
The technical interventions have improved agricultural yields but the programme goes a step further by ensuring that farmers have a ready market for their produce.
The mine buys all of its fruit and vegetables from farmers in the surrounding areas. She said that it must also be noted that if more people are employed, poverty levels in the country will be reduced.
Mining companies make contributions to local economic development by creating direct, indirect and induced employment.
Ms Dlamini explained that in both the Copperbelt and North-Western provinces, the mines are by far the most important formal sector
employers.
Direct mining employment including staff and contractors at the four mining companies has increased in recent years reflecting increased capital investment and production.
According to the latest report on Zambia ”Enhancing Mining’s contribution to the Zambian Economy and Society”, the four mining companies spent just under $70 million in social investment in 2012.
It was observed that mines spend a lot on social investments but with mixed results and residual suspicion from local communities.
Therefore, mining companies could better align their social investment programmes with district level development plans and poverty reduction strategies.
This will, however, require sufficient capacity at local government level, which is currently lacking.
Any large-scale mining operation has the potential to significantly and positively increase the capabilities of the poor as a group in a particular region in which the mining operation is located.
In the medium term, training provided for miners and other skilled employees is likely to have positive spill-over effects on the surrounding workforce and community.
