Night ban costs mines, Govt US$9 million a week

Mon, 20 Feb 2017 10:14:15 +0000

By SHEILA SAKUPWANYA

THE implementation of the Statutory Instrument 76 (SI) whose aim is to curb road traffic accidents in the country has cost both the Government and the mining sector an average of US$9 million in revenue and royalties per week.

This development has forced the mining sector to review operational and investment budgets including the realigning of their labour force through retrenchments, airfreighting their cargo to various smelting and export destinations so as to remain sustainable amidst unpredictable metal prices and short-changed policies.

For example, Sentinel Mine owned by First Quantum Minerals Limited, in the North Western Province, downsized the number of trucks by 26 percent as they are unable to complete a cycle delivering copper concentrates and returning to the Sentinel Mine before the cut-off time.

This immediate effect of SI 76 saw a 35 percent reduction in the copper concentrate being moved from Sentinel Mine. Ultimately this meant that the revenue stream in the immediate aftermath of SI 76, was equally reduced by about 35 percent. The obvious knock-on effect of this reduction in Sentinel’s revenue stream is this subsequent loss of revenue by the Zambian government in terms of mineral royalties and corporate income tax.

Furthermore, Barrack Lumwana Mine in North Western Province used to transport 1,337 tonnes of copper concentrate per day prior to SI 76’s enactment, but this has reduced to 783 tonnes per day, resulting in significant revenue losses to the company and the Treasury. Sales have dropped to 60 percent of what it was just prior to SI 76 taking effect. This translates to revenue loss of over $6,000,000 per week and royal loss to GRZ of over $300,000 per week at a copper price of $2.60/lb of copper.

In a statement released to Daily Nation recently, Chamber of Mines Acting Chief Executive Officer Talent Ng’andwe said the Chamber of Mines was concerned that the SI 76 has greatly disrupted the mining sector by affecting the delivery of key commodities to the mines as a result of the ban on night travel.

“It has become much harder for the mines to plan repair works and to effectively manage stock as there is lack of certainty relating to delivery of goods. More often than not the mining companies and freight truck operators are being forced to airfreight goods at a great expense as road delivery times are now unpredictable due to SI 76,” Mr N’gandwe said.

He said the disrupted road supply chain has led to longer shutdowns for repair operations and had increased the cost of doing business as some deliveries had to be airfreighted, adding that the execution of the SI 76 would not effectively achieve road safety as it led to overload of freight trucks and passenger-carrying vehicles would be on the road at the same time.

“This risk is made even greater by the fact that passenger-carrying public vehicles would equally be starting off at 05:00hours. We are of the considered view that road safety is enhanced by reducing the interaction between freight trucks and passenger carrying vehicles,” he said.

Meanwhile, economist Professor Oliver Saasa has expressed concern over the implementation of SI 76 which restricts movement of business and private vehicles at night, saying it had slowed down the economy and may affect the projected economic growth for 2017.

“This is an unfortunate development that only tries to address a tiny fraction of a much larger and sophisticated problem and to the extent that it slows down economic activities. It is not the sort of a thing that when you look at the projects by Government this year in terms of growth projection, it is definitely going to have a dent on the expected growth.

‘‘Besides business trucks worldwide are trained to move in the night to avoid being subjected to the heavy traffic of domestic vehicles during the day. “Immediately you stop them, you are creating another problem during the day, it not only slows traffic which leads to slow economic growth but also increasing (traffic) volumes which can also lead to accidents during the day,” he said.

Prof Saasa observed that the SI 76 had inconvenienced the informal traders on whom 75 percent of the economy relied who were used to travelling in the night for their merchandise and drove back to their destinations the following day.

He emphasized that the solution to curb accidents which led to the introduction of the SI was to focus on the state of the roads and develop dual carriage ways to decongest the roads.

“The solution is that the state of the roads must be given serious attention, not only on the tar but also on signage. So we don’t have to start running away from the challenge that we know can be resolved elsewhere than shutting business at night,” he said.

It is high time the Government in collaboration with the relevant authority made the Road Traffic Act 11 of 2002 clear because it does not provide a helpful nor clear definition of what constitutes a Public Service Vehicle (PSV), hence the misinterpretation of the definition to include commercial freight trucks such as those vehicles which transport copper concentrates as well as refined and finished copper across Zambia which constitute the economic mainstay of the country.

It is for this reason that Government should support investments like the North-Western Railway line spearheaded by the former vice president Enock Kavindele that have the potential to offer effective and sustainable solutions for the transportation of goods in the mining industry in Zambia.

Speaking when he flagged off 20 Land Rover 110s at Alliance Motors showroom recently, Mr Kavindele said it had become necessary to rush the project because the Government had come with two Statutory Instruments which had banned the movement of copper concentrates at night.

“This means that the operations of the mines is being affected but we believe that once we launch the rail we should be able to overcome their transportation challenges,” Mr Kavindele said.

The North-West Railway line project would cost US$1.2 billion and has so far gobbled US$5.6 million and is expected to create about 800 jobs at construction level alone with a lot other subsidiary jobs when its construction begins.  Although measures to control road traffic accidents in the country are welcome, the Government should always consult the relevant stakeholders such as the mines so that the implemented policies do not affect the economy unnecessarily.

The latest Extractive Industries Transparency International  (EITI) report covering the fiscal year 2015 shows that Foreign Direct Investment  has further reduced to 1.06 percent and if economic policy inconsistency is not addressed urgently, the combined effect of the measures threatens the viability of the mining sector, making it extremely vulnerable in the current volatile commodity cycle.

And this will negatively affect the Zambian economy which largely
depends on the export of copper.