Reimagining Zambia’s Natural Resource Development in the Critical Minerals Era

By Savior Mwambwa

Zambia sits on roughly 6% of the world’s copper reserves (estimated at 20 million tonnes) and produces over 800,000 tonnes annually. Recent developments in our mining sector – both the IDC-Mercuria trading joint venture announcement and broader discussions about the country’s mineral development strategy – demand keen attention. These discussions encompass critical aspects like state ownership, local content, and beneficiation, all of which are vital for Zambia’s future.

Having spent two decades researching and studying Africa’s resource sector, I’m witnessing a fascinating convergence of factors that could reshape Zambia’s mining landscape. Global copper demand is projected to double to 50 million tonnes annually by 2035, fueled by the green energy transition. Yet, a sobering reality persists: despite being Africa’s second-largest copper producer, Zambia captures less than 30% of the value chain revenue from its copper, according to recent World Bank estimates.

The IDC-Mercuria initiative holds promise. Partnering with a global trading giant like Mercuria, which handles over 2.5 million tonnes of base metals annually, could enhance Zambia’s market access and trading expertise. However, history offers cautionary tales. Similar ventures, such as Ghana’s attempts at cocoa trading or Nigeria’s early oil trading initiatives, have yielded mixed results.

Trading, however, is just one piece of the puzzle. The critical question is: how can Zambia fundamentally transform its relationship with its mineral wealth? This leads me to examine more comprehensive approaches, particularly the developmental state model, successfully implemented in East Asia.

Consider these contrasts: South Korea’s POSCO, a state-backed steel manufacturer established in 1968, is now the world’s fifth-largest steel producer. Chile’s state copper company CODELCO not only mines but has fostered a sophisticated copper manufacturing sector, contributing roughly 10% of Chile’s GDP. Meanwhile, Zambia’s manufacturing sector contributes just 7.5% to GDP, despite its vast copper resources.

Today, significant opportunities beckon, demanding a reassessment of our approach. The electric vehicle (EV) sector exemplifies this. Global demand for copper wiring is expected to grow by 250% by 2030. A single electric vehicle uses approximately 83 kg of copper, compared to 23 kg in a conventional car. Yet, most of Zambia’s copper is exported as cathodes, forfeiting the 3-4x value multiplication achievable through further processing.

There are glimmers of hope. The Multi-Facility Economic Zone (MFEZ) in Chambishi, though still nascent, demonstrates potential. It has attracted over $800 million in investment and created 8,700 jobs. Imagine replicating this model with a focus on copper-based manufacturing and critical minerals processing.

However, challenges remain. Zambia’s electricity supply deficit and infrastructure gaps need urgent attention. The skills gap is equally concerning. This is where strategic state intervention becomes crucial. Malaysia’s Penang Skills Development Centre, a public-private partnership that has trained over 200,000 workers for the electronics industry, provides a compelling example. Zambia could adapt this model for mining and mineral processing, building on existing institutions like the School of Mines at the University of Zambia.

The current geopolitical context presents unique opportunities. China currently processes 72% of the world’s copper. With the EU’s Critical Raw Materials Act and the US Inflation Reduction Act (IRA) emphasizing supply chain diversification, Zambia has unprecedented leverage to negotiate better terms for technology transfer and industrial development.

Furthermore, regional cooperation is key. The Democratic Republic of Congo and Zambia collectively hold 39% of global cobalt reserves but process less than 5%. By developing joint processing capabilities, they could exert significant influence on global supply chains. This collaborative approach should extend to other regional partners, creating a powerful bloc in the critical minerals market.

Beyond regional cooperation, investing in technological innovation is crucial. This includes supporting research and development in areas like advanced mineral processing techniques, battery technology, and renewable energy integration. Embracing automation and digitalization in the mining sector can enhance efficiency and sustainability.

Recent positive steps include the launch of the Zambia Mining Cadastre Portal for transparency and the implementation of a production-based tax regime. However, bolder moves are needed. The success of Botswana’s partnership with De Beers, which has evolved from simple revenue sharing to diamond processing and trading, offers valuable lessons.

Looking ahead, I see three critical priorities:

1. Strategic Infrastructure Development: Fast-track investments in power generation and prioritize projects like the Lobito Corridor rail project for enhanced regional integration.
2. Skills Development: Expand technical training programs, aiming to train 10,000 specialists in mineral processing and manufacturing over the next five years.
3. Value Chain Integration: Establish at least two new special economic zones focused on copper-based manufacturing by 2030.

The numbers are compelling. If Zambia could capture just 20% more of the copper value chain, it could add an estimated $2 billion annually to its economy. With the global copper market projected to reach $342.1 billion by 2027, the opportunity cost of inaction is immense.

The IDC-Mercuria joint venture is a useful step, but it’s not the end goal. Real transformation requires a comprehensive approach that combines strategic trading with industrial development, skills building, infrastructure investment, regional cooperation, and technological innovation.

Now is the time for this transformative approach. Let’s move to action and Zambia can be Kuchalo indeed!!