Policy effectiveness and China’s investment in the Zambian mining sector

This briefing describes some of the challenges facing the efforts of Zambian policymakers to secure sustainable benefits from the exploitation of the country’s mineral resources – which generate about two-thirds of the country’s foreign exchange, yet their contribution to national development remains contested for various reasons. It explores the investor-friendly financial terms set by the Zambian government when the mining sector was privatised, the entry into the sector of Chinese companies, and the strain their distinctive mode of operation has put on the regulatory regime.

The authors state that the government must recognise that its regulatory policy has failed to keep pace with the changing needs of its expanding mining sector. The challenge is to do both in the context of the growing number of Chinese investors who often enjoy close relations with the presidency, through which they may seek to circumvent the regulatory agencies entirely. This threatens to undermine policy effectiveness of a fragile regulatory framework that is heavily reliant on self-reporting, consultations and consensus among the mining companies.

The paper makes the following recommendations:

• African governments that receive inward investment from both Western and Eastern countries need to acknowledge how the difference in business culture and political relationships affects practice and consequently regulation
  
• Regulation in Zambia’s mining sector currently relies on self-reporting and consensus, which are increasingly inappropriate to the growing diversity in investors’ business practice and operational standards, and should therefore be reformed
  
• The government should leverage existing policy frameworks to develop local industry so as to accommodate the expanding needs of Chinese investors
  
• By mandating and enforcing the public reporting requirements of the mines, civil society could assist government to hold firms accountable.