By Dr. E. D. Wala Chabala –
If shared value is predicated on the fact that companies can create economic value by creating societal value, then the mining industry in Zambia is very far from practising shared value.
Take for instance the case of procurement of manufactured inputs by the mining industry. It is reported that of $1.7 billion spent on procuring manufactured inputs in one year by seven mining companies in Zambia, only $100 million was spent with local Zambian manufacturers.
That is just over 5 per cent of  total ammount spent. On the other hand, 60 per cent of that amount ($1 billion) was spent with traders, be they Zambian or not, who imported manufactured products from other source in the global market.
Furthermore, another $600 million (35 per cent) of manufactured inputs were imported directly by the mining companies themselves.
This means that up to 95 per cent of the manufactured inputs that were used by the seven mining companies that were studied in the year under review were imported into the country.
And this is probably true of the entire mining industry.
Another way of putting this is that the mining companies that were studied supported manufacturing businesses and jobs in value addition in foreign countries to the value of $1.6 billion in one year, which is more than 7 per cent of the Zambian Gross Domestic Product (GDP).
For the whole mining industry, this would be closer to 10 per cent of Zambian GDP, and over many years, this would add up to billions of dollars equivalent to the nation’s GDP. From a shared value perspective, there are a lot of challenges with this scenario.
First and foremost, other than the jobs that are lost to the Zambian economy and the boost that this money  would have had on the economy if localised, there are also far much broader consequences that arise.
Take for instance the fact that these imported manufactured inputs had to be transported thousands of kilometres to get to the mining operations. Significant impact is exerted on the environment by this act.
The energy that is consumed in the process of transporting these imported inputs goes directly to unnecessarily contribute to global warming.
The wear and tear on roads where the manufactured inputs are brought in by road also ends up contributing to environmental degradation in due course.
While it could be argued by the mining companies that logistics and impact on global environment is not their core business, modern business practices, embracing shared value, require that companies take a much more global perspective as they undertake their businesses.
There is an example of a retail company in the US that cut 160 million kilometres from its trucking routes and in the process saved $200 million in one year.
A British retailer is implementing measures to stop purchasing of supplies from one hemisphere to ship to another and in the process is expected to save £175 million annually.
So, if the mining industry in Zambia was to embrace shared value, it would consider putting in place measures and business strategies that would have a much more global perspective.
They would consider how the importation of the manufactured inputs contribute to the global degradation of the environment and therefore seek to contribute to remedying this situation by supporting the local manufacturing industry.
By sourcing the manufactured inputs locally, the mining industry would also contribute to fostering greater logistical efficiencies and establish collaborations with local suppliers such that some of these manufacturing activities could actually be undertaken in the vicinity of the mining operations and thus contribute to cluster development.
Of course there are the added benefits that jobs would be created locally and the boost in the manufacturing sector would contribute to improving the prosperity of the nation.
Indeed, if the figures quoted above for annual spend of only a number of mining companies is anything to go by, then by the whole industry resorting to sourcing its manufactured inputs locally, this would create economies of scale in the manufacturing sector which would in turn bring about production and manufacturing efficiencies and in turn contribute to achievement of quality standards and certifications suitable for the mining industry.
This is partly the kind of impact shared value would achieve if practiced in the procurement of manufactured inputs by the mining industry in Zambia.
There is therefore no reason why the mining industry cannot deliberately pursue localising as much economic benefits in its supply chain as possible.
An example from the oil and gas company in Mozambique shows that even before the company could establish its operations, it retained an international economic development organisation to assist it to localise its supply chain.
This company elected to invest in local content development at the start of its project, before any specific policy or law stipulated levels for local content.
This company has gone further and identified potential suppliers and provided them with training so that they are ready to participate in the local supply chain for the company.
In fact, the mining industry could take a leaf from the oil and gas industry overall where most of the operations on the continent acknowledge that they can play a more substantial role in contributing to boosting local economies through equity ownership, taxation, supplier development, and employment and training.
Social programmes which mostly comprise corporate social responsibility (CSR) for most mining companiesare but only a small portion of the overall activities undertaken in local economies by oil and gas operations.