The introduction of a Local Content Statutory Instrument (SI) in Zambia has the potential to transform the economy, but only if it is crafted with a balanced and inclusive approach.
Local content is a commendable initiative, but its success depends on building a cooperative framework where mining companies, local businesses, and government policies align to create mutual benefits.
Local content is not just about requiring mining companies to buy from local traders. It is a complex and multifaceted idea that includes in-country value addition, skill development, and fostering competitiveness in local industries.
This demands the full engagement of all stakeholders, including government regulators, mining companies, financial institutions, and local businesses. Merely legislating mines to purchase from local suppliers without addressing underlying challenges will not yield the desired outcomes. For example, many local businesses lack the capacity to meet industry demands due to financial constraints, inadequate infrastructure, or insufficient technical expertise.
Zambia must prioritize in-country value addition rather than focusing solely on regulating purchases. Encouraging industries that supply mining consumables, such as chemicals or machinery, to set up manufacturing plants locally can create jobs, reduce import dependency, and build a stronger industrial base. The Australian model provides a valuable lesson in this regard. Australia incentivizes value addition by offering tax credits to companies that produce value-added products.
Those that fail to invest in value addition simply forgo the credit, costing taxpayers nothing. This approach encourages compliance without fostering antagonism and ensures that economic benefits far outweigh the cost of the incentive.
Zambia can adopt a similar approach, focusing on offering mining companies tangible rewards for compliance rather than relying on punitive measures. A system that emphasizes collaboration rather than conflict is more likely to yield meaningful results.
Mining companies could receive tax benefits or other incentives for engaging local suppliers or participating in skills development programs. Those that fail to meet local content targets would lose out on these benefits, naturally encouraging them to align with the policy’s goals.
At the same time, local businesses must be empowered to rise to the occasion. A significant barrier for many is access to affordable financing. Without the financial resources to scale operations, improve product quality, or meet industry demands, local suppliers cannot effectively compete with international firms. The government must work with banks and lending institutions to establish affordable credit schemes tailored to businesses in the mining supply chain.
Mining companies often prioritize efficiency and quality, so local businesses must strive to meet these expectations. This means not only improving standards but also offering competitive pricing to establish themselves as reliable partners.
A well-designed Local Content SI can drive transformative change in Zambia’s economy, stimulating job creation, reducing import dependency, and promoting industrial growth. However, these benefits will only materialize if the policy is crafted with foresight and flexibility. A one-sided policy risks alienating key players, while a balanced approach that dangles a carrot instead of wielding a stick ensures buy-in from all stakeholders.
The key to success lies in fostering collaboration and treating mining companies as allies rather than adversaries. When implemented thoughtfully, a Local Content SI can become a cornerstone of Zambia’s economic development, creating a win-win scenario for the mining sector, local businesses, and the nation as a whole.
Daimone Siulapwa is a political analyst and a strong advocate Citizen Economic Empowerment. He is the founder and editor-in-chief of The Voice Newspaper in Zambia and serves as the current Chairman of the SMEs Association of Zambia.