MACIG Connect Series
C&B Engineering speaks to GBR of the challenges facing the processing industry in Zambia.
C&B Engineering began operations in 1991. What is your role in the mining sector and how have you seen the industry evolve?
C&B Engineering is a mechanical engineering company specializing in process engineering. Like many other local engineering firms, we have been active in the copper/cobalt processing stream by providing the miners with plants and equipment for leaching, concentrating, smelting and refining of the minerals. We have found ourselves supporting the mining companies through contractual works despite the stiff competition from foreign based companies that are preferred by the mine owners. The mining sector has witnessed several phases of transformation from public to private ownership with the privatization and eventually new players have joined in. There are now a lot more large scale mining companies mining copper.
How far has Zambia come in terms of extracting the full worth of its mineral resources through value adding initiatives?
We have sadly continued to witness the extent of smuggling that is occurring in the mining sector. By virtue of being in the analytical services field, we believe that refining of all mineral resources should be done locally. It is important that we are looking at local content legislation as a country because Zambia is losing out a lot of its mineral potential. Depending on the location of the mine, much of the copper waste has a lot of gold content, for example. The Copperbelt also has a lot of other minerals such as cobalt, zinc and selenium to name a few that can be exported as finished products if processed. Some operators deliberately leave cobalt in the copper mix to extract in their countries of origin.
How has the processing sector been impacted by illegal mining activities?
There are a number of smaller processing plants run largely by Chinese operators. These dubious entities present a challenge because they are set up in garages or the back of a farm where they are not properly monitored. A lecturer at Copperbelt University (CBU) conducted a survey to deduce the number of small processing plants owned by the Chinese, and found that there are over 30-40, with Kitwe having the most number. These are not sophisticated plants and buy ore from all sources.
In the export of copper, the Zambia Revenue Authority (ZRA) has been relying on documentation presented by the mining companies but, by incorporating an analytical services department, ZRA will be able to determine the exact copper content of the material exported. Copper is exported based on the level of impurities to determine the amount of tax that can be billed. From ore, concentrates, blisters, anodes to cathodes, further processing could bring in more tax for the government.
What are the most significant challenges facing local players interested in entering the processing sector?
Technology has evolved so much so that now one can set up a plant for US$2-3 million and produce quite significant amounts of ore. The greatest challenge is access to capital — not necessarily capital to set up a processing plant, but the operating cost. Several Zambian individuals and organizations have exploration and mineral rights, the challenge is the amount of ore that can be mined due to lack of plant and machinery. Even for oxide ore, one still has to go 20-30 meters below ground and that can take a few million dollars just to remove that dirt. Previously the Development Bank of Zambia (DBZ) would never fund such kind of projects. With the recapitalization of DBZ and the introduction of the Industrial Development Corporation (IDC) it is believed that local players could access US$5-10 million based on the results of a pre-feasibility study.
As a Zambian company, where do you see inefficiencies in your business relationships with international players that could be improved upon?
As a Zambian entity, we are a little more expensive for good reasons. Zambia is land locked and very far from the ports, anyone interested in operating in this country should deal with the local capacity. South Africa is not a manufacturing country but a transit point for most industrialized countries. There are handling charges when companies choose to go through South Africa merely to repackage the products before dispatching to the rest of Africa. There is no need for something to land in Johannesburg before coming to Zambia. The days when South Africa was considered as Africa are gone.
What challenges in terms of logistics need to be overcome in order to make shipping into Zambia a more efficient option?
Despite the fact that Zambians like to call the country land-linked, it is landlocked. Any manufacturer based at a port city such as Dar es Salaam or Durban has a significant advantage in terms of the cost of sea freight when compared with a manufacturer in Kitwe. In a time when the government is removing subsidies in the energy sector, where will our comparative advantage be over a manufacturer that is by the seaport?
Zambia should attract cargo freighters to introduce direct flights to the various airports in Zambia from Asia, America and Europe.
Where do you see the future of local Zambian service providers such as yourself?
Zambian service providers have experience in mining and the country has exported a lot of human resources. The government believes that ZCCM-IH would be sufficiently representative of Zambians in the mining sector, but that is a dream. There needs to be serious ownership by actual Zambians in the mining sector. Legislations and policies such as the “local content” strategy will help achieve the wish of Zambians to manage and own their natural resources.