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Programme promoted accountability and transparency in mining production and revenue collection with support from EU

SOLWEZI, ZAMBIA – The Mineral Production Monitoring Support Project (MPMSP), which has come to a close after four years of operation, has been praised as a key milestone in the quest for greater accountability in the mining sector. The multi-million-euro project funded by the European Union was launched in 2015 to enhance tax collection from mining through effective regulation and monitoring of mineral production in Zambia. Zambia’s extractive industry accounts for about 70 percent of total exports and contributed an average of 11 percent of GDP in the last five years. Data from the Extractive Industries Transparency Initiative (EITI) shows that mining accounts for more than a quarter of government’s income, contributing K10.72 billion – over US$1 billion – in 2016.

One of the project’s biggest accomplishments is laying to rest unfounded reports in some section of the media claiming Zambia lost more than $3 billion each year through tax evasion, undeclared mineral production and illegal exports from mining firms. General Kingsley Chinkuli, country manager at First Quantum Minerals (FQM), which is Zambia’s largest taxpayer, said the MPMSP was beneficial to Zambia’s mining industry because it promoted the highest levels of accountability and transparency from all stakeholders, for the benefit of the mining industry and wider society.
He said: “The mining sector remains one of the most important pillars of Zambia’s economic growth. But for the country to achieve sustained growth of its economy – and by extension the mining industry – all stakeholders need to ensure mining firms and the rest of Zambia benefit from the country’s natural resources. “The project, among other things, reduces the possibility of mining firms underpaying tax on mineral production, while decreasing the risk of being overcharged on mineral royalties. Promoting transparency and accountability is a vital ingredient in achieving this quest, and therein lies the importance of the MPMSP.”
The €5.37 million project also focused on building capacity within the Ministry of Mines and Mineral Development to re-establish a physical presence on the ground and improve monitoring and inspection programmes in the mines during exploration, extraction, processing and export.

It also involved data management, verification and sharing via a ministry-based monitoring system. Previously, government relied solely on information provided by the mining companies themselves for production statistics and other relevant industry data. The MPMSP played a leading role in renovating the Geological Survey Department’s (GSD) outdated laboratories. The chemistry and gemmological labs were fitted with modern equipment worth more than K2.85 million (£271,000) to improve efficiency. The GSD and regional mining bureaux received Portable XRF units to boost accuracy and efficiency in testing and evaluation of various mineral samples from private mining firms. This has made issuance of evaluation reports required for export permit application faster.

Copper at FQM's Kansanshi smelter.

Copper at FQM’s Kansanshi smelter.

An improved reporting format dubbed “Form 34” for monthly production by the mines was designed with assistance from the project to facilitate submission of more detailed production and sale of minerals by mines. General Chinkuli noted: “Form 34 has helped create more accurate quantification of the country’s copper production and bring to light instances when mines have under-declared their production. It has also been useful in instances when mines have been over-charged. The system has helped arms of government determine royalties payable with greater accuracy.

Following the significant strides made by the MPMSP in creating an environment that favours transparency and improved accountability in the mining sector, speculation about undeclared minerals, taxes owed by mining firms and VAT refunds owed to them by the Zambia Revenue Authority (ZRA) will soon be a thing of the past as data from the sector is readily available.”
In 2016, FQM accounted for 41 percent (K4.2 billion) of the industry’ tax payments amounting to K10.3 billion. This revenue was realised largely from production of more than 725,359 tonnes of copper – 53 percent (386,394) of which was produced by FQM, according to the latest EITI.

The Mineral Production Monitoring Support Project formed part of a broader European Union programme supporting Public Finance Management, Accountability and Statistics under the 10th European Development Fund (EDF). Launched in 2015, the project was implemented by a consortium led by Adam Smith International Ltd in partnership with Ecorys (UK), its subsidiary PMTC Zambia Ltd, and the Revenue Development Foundation (RDF).