The devastating effects of Covid-19 on Zambia’s mining sector can be felt by the drop in total revenues collected in the past three months, the government reported on Friday.
Sokwani Chilembo the Chief Executive Officer of Zambia Chamber of Mines said on Thursday that the country’s mineral revenues had suffered a whopping 30% drop in the past three months.
He said the mining companies’ collapse in revenues can be attributed to two main factors such as severe global restrictions on movement which have adversely affected the mining supply chain, and hindered the export of copper as well as the copper price which is down on average by 12% over the period when compared to 2019.
“So, while companies have been able to maintain production levels, they have struggled to export and sell their copper, and have received a considerably lower price for the sales they have made,” he said.
Chilembo noted that the fall in mining revenues has led to a corresponding fall in mineral royalty payments which are estimated to have come in at approximately $60-65 million over the three months, rather than the $85-90 million that could have been expected, demonstrating how closely Government revenues mirror the fortunes of the mining industry.
Regarding the collapse in mining revenues and royalty collections, Chilembo said COVID-19 pandemic has evidently had a large negative effect on economic activity in Zambia as is clear from the data on mining royalties, government revenues will also fall as activity and trade decline.
He stressed that given escalating mining costs over recent years, and a drying up of capital, COVID-19 has added unbearable pressure on mining finances.
Chilembo clarified that between 50 percent and 60 percent of the respondents to the Impact Capital Africa (ICA) June survey from the mining and mining services sector, mainly representing smaller operators, believe that their businesses will ultimately fail within the next three to 12 months.
“This finding is of great concern, given the significance of the sector to the wider Zambian economy,” he stated.
According to the World Bank forecast, economic growth in Sub-Saharan Africa will decline from 2.4 percent in 2019 to between minus 2.1 and minus 5.1 percent in 2020 due to the impact of the global pandemic.