The State, Corporations, or the People: Who Benefits from Mining in Zambia?

Abstract

The expectations that Zambia’s vast endowment in mineral resources would drive economic transformation and propel the country to higher levels of living standards remain elusive. The country is still confronted with chronic macroeconomic trade and fiscal imbalances, a heavy debt burden, shortage of foreign exchange reserves with attendant pressures on the value of the national currency. The contribution of mineral exploitation to employment, government revenue, foreign exchange earnings, economic growth and poverty reduction remains suboptimal. Yet, the sector continues to attract substantial attention from foreign investors and remains dominated by foreign corporations. So, if the people of Zambia are not reaping adequate benefits from mineral resource exploitation, then who is capturing the rents? This paper provides a review of the history, industrial organization and management of the mining sector, and explores the factors that have constrained the performance of the sector with an emphasis on the role of the ownership structure, the fiscal regime, exposure to external shocks, and lack of transformational orientation of the sector. The paper draws some policy suggestions for the improvement of the performance of the mining sector going forward.

This paper is a product of a research project funded by a grant from the 2021 Andrew Carnegie Fellowship from Carnegie Corporation of New York, which is very much appreciated by the Principal Investigator (Léonce Ndikumana). The project examines domestic and global drivers of capital flight from Africa focusing on natural-resource rich countries using Cameroon, Ghana, and Zambia as case studies. Other working papers under the project can be found here: https://peri.umass.edu/research-areas/african-development-policy