Capturing Mineral Revenues in Zambia: Past Trends and Future Prospects06 Aug 2013
Produced by: UNDP, EU-UN Global Partnership on Land, Natural Resources and Conflict
Zambia has been exporting copper for more than a century. The country’s mining sector has undergone significant changes during this period. It was under private hands during the colonial era; under public ownership after independence; and then back under private hands during the wave of liberalization in the 1990s. Under both ownership modalities, the revenue accruing to the public purse has been in a long-term decline. Limited revenue generation under state ownership has often been attributed to poor management of the mines, exacerbated by the decline in copper prices. Under private ownership, meagre revenue streams— even during favourable market conditions—resulted from tax policies that provided overly generous terms to companies as well as practices of transfer pricing. A new legislation was passed in 2008 to capture a greater share of revenues. This paper presents an estimate of revenues that could have been generated, had the reforms been implemented earlier. It also provides estimates for the higher levels of revenue that the new fiscal regime is expected to generate in the future. If the reforms had been applied earlier, an additional 3.7 percent of GDP in revenue would have been raised. Our calculations show that, from 2013 to 2025, on average, 5 percent to 7 percent of GDP can be raised from mining operations.