By: Creamer media

A draft statutory instrument states that the government should “hold not less than 15% non-dilutable free-carried interest shareholding in a mining company in any mining operation relating to a critical mineral.” It would enable the state to increase its interest to at least 40% by forfeiting dividends and making tax concessions, rather than paying for it in cash.

The proposal — if approved — would spook mining companies which have pledged about $10-billion of investments to boost copper output in Africa’s second-biggest producer of the metal. It would also run counter to President Hakainde Hichilema’s efforts to paint Zambia as an attractive investment destination and damage his ambition to more than triple copper output in coming years.

“From the view of the presidency, it’s not something that will be brought to fruition, because we do not support it,” Jito Kayumba, Hichilema’s special assistant for finance and investment, said in an interview in Johannesburg last week. “Government has no desire to take a free carry or any consideration, without there being any financial consideration.”

The draft regulations — which Kayumba said were drawn up by the mines ministry — also seek to declare cobalt, nickel and manganese among others as critical minerals, and give the state the preemptive right to buy all domestically sold output.

Hapenga Kabeta, permanent secretary at the ministry, said engagements within the government and the private sector were ongoing. The ministry will refine the regulations once that process is concluded and aims to finalize them by year-end, he said by phone Wednesday.

“Those are merely ideas,” he said of the proposed free carry.

Hichilema, who took office in 2021, has prioritized unblocking stalled projects after his predecessors frequently changed the tax regime and clashed with operators. The nation is on track to produce a record volume of copper this year, just as prices soar.

Zambians are due to vote in general elections in August, with frustration over a drought-induced power crisis denting the government’s popularity among households that have to make do with three hours of electrical supply daily.

Zambia’s Minerals Regulation Act of 2024 allows the mines minister to introduce rules outlining the extent of state participation in critical or strategic minerals production.