Special feature: ZAMBIA

Interview Dr. Pius Chilufya Kasolo, CEO - ZCCM Investments Holdings, Zambia

November, 2017

QZambia had one of the world’s fastest growing economies for the ten years up to 2014, with real GDP growth averaging roughly 6.7% per annum, though growth slowed in 2015 and 2016 to just under 3%, due to reduced power generation, depreciation of the kwacha and falling copper prices. But the country is now turning a new page. What is your forecast for Zambia’s economic development this year bearing in mind all these factors are improving substantially?

This links with the 7th National Development Plan (7th NDP), this is a blueprint for the country. One of the key-aspects of this plan is that it departs from the old sectorial-based planning, it is now a lot more integrated and multi-faceted planning. What has happened now is that, in the different sectors, we’re basically looking at growth, with regards to the current strengths. As you know, our biggest sector is mining. The copper price has gone up again and we are trying to see if we can, through the capital we make in mining, diversify and invest in different sectors. Our investment, more-or-less, follows this 7th NDP. The Zambian economy needs to be diversified. Currently, we are a consumption-based economy, we need to change this. Instead of, for example, you coming to sell me orange juice from South Africa, we want to grow our own and then export. So doing, we create jobs, develop technology and allow for growth.

The contribution of mining is massive, we are lucky that the copper prices are doing really well. The best thing we are seeing is the growth of China – there is massive infrastructure expansion in China and they need copper. For example, they are heavily investing in bullet trains and electric vehicles. Both these technologies need a lot of copper. The copper price will continue to rise as these needs grow.

Agriculture is also doing really well. With the expansion of infrastructure and roads, it has opened up a lot of areas where, previously, there was no cultivation. Now, nearly all the parts of the country have been linked. I believe that the future of Zambia is very bright. The economy is truly booming. But, as I said, from the beginning, we want to follow the blueprint of the 7th NDP.

Another serious consideration is job creation. We are currently quite stagnant in terms of job creation, because industrialisation never occurred. We are trying to truly invest in education. At the Maamba Power Plant, we have created 400-500 jobs. We will hopefully, in this, create, through construction, 4,000-5,000 jobs. After construction, there will be 400-500 permanent jobs.

QThe 7th National Development Plan 2017–2021 was approved in June, whereby Zambia’s macroeconomic objectives include accelerating the diversification of the economy, particularly towards tourism, energy, mining, agriculture and agro processing. Under this Plan, emphasis will be on broadening the range of minerals to cover non-traditional mining of gemstones, gold and industrial minerals. What is the potential that lies in Zambia’s mining sector and within those still underdeveloped subsectors?

Traditionally, copper and cobalt have been the primary leaders in the mining industry. What has happened now is that, for example, manganese has grown in consumption and mining. We’ve spent capital on the exploration of manganese. We found reserves in Luapula, which will be mined. We are receiving incredible results of very-high grade manganese reserves. As you would now, Zambia is one of the best places for emerald mining. Our gem fields produce the best colours. We also have a share in an amethyst mine, which is also expanding and we are exporting a lot of it to the world. Faberge, in partnership with Gemfields, have invested heavily in gem mining. We are seeing a gradual shift towards the valuation of gemstones, away from only diamonds. We are seeing a greater appreciation for emeralds, sapphires and rubies by the world. Zambia’s emeralds are really appreciated around the world. Within Zambia, Gemfields is also trying to create a cutting-industry. Meaning that gemstones can be cut within the country.

We are also involved in oil exploration. We are working alongside Nigerian companies, looking for the opportunities that Zambia has to offer in terms of oil. There are so many areas in Zambia that have not been mined. There are areas in the Eastern province where large gold reserves have been found. The market is open for that.

QInvestors may wonder about the safety of their investments in Zambia and the current state of the business climate in the country. How would you describe how conducive the investment environment in the country is and what are some of the competitive opportunities that the country may offer?

I’ve worked all over the world and I still believe that Zambians are the friendliest people. The Zambian population is also highly educated – most people speak English and have gone to fantastic schools and universities. We are also one of the most stable countries in Africa; we have, through the ballot, changed our president six times. We don’t have violence and insecurity. The economic sector of Zambia is also very secure for an investor – we don’t nationalise anything, you can come and invest as much as you want and take your money out again when you want.

When you look at mining, large multi-national companies have invested billions of US dollars. There is confidence in Zambian mining. As with us, the government holds a stake of our company, but we do have many private shareholders. We can see the confidence that people go to borrow money from the banks - US$850 million to set up the power plant. We are currently borrowing US$600 million for the cement plant. The banks have confidence in the economy. There aren’t exchange restrictions in Zambia – you can bring money into the country, invest and take it out whenever you want. For example, in the 2017 World Bank Ease of Doing Business-report, we’re ranked 9th in Africa.

As far as us being land-locked, we do have links with all our neighbours. A smart businessman can easily reach all the markets that he wants to. Less than an hour’s flight from Lusaka, you can reach all the neighbouring markets. The market is vast. We want people to come, for example put up their factories here and then export from here. The opportunities and availability of land is vast. There is a lot of private property that can be bought. Crime is next to zero, ease of doing business is fantastic.

Q Another focus is to industrialize Zambia by partnering with the private sector in order to open the country up to new industries and also forging strategic partnerships for the private sector to take up majority equity in SOEs. You also stated that from your point of view, you want to bring capital and grow businesses through PPPs. What PPP, partnership or investment opportunities would you like to highlight to our affluent readership?

What we are greatly looking at is, firstly, value-added developments and investments. For example, consider copper – we will export copper as a raw material, add value to it by being able to make it into cables, pipes, roads – thereby adding value to it. Another example is manganese, if one refines manganese into sulphite, you can use it in fertiliser, in animal feed and it can be used in lithium batteries. We are also moving into the glass industry. We have made an offer to buy a company that manufactures bottles. In Zambia, all the glass is imported. However, we have beautiful sand deposits near Kapiri. We hope to manufacture glass-based products. This is diversification – using raw materials and adding value to them. Through this, we create jobs. We want to raise value from our investments. For example, the dividends we get from the mines, we want to invest into Zambia.

We are also very interested in high-tech agriculture. We are specialising in beef, pork and other highly technical farms. We have also moved into real estate. We own a number of buildings here in Lusaka and have also started buying properties in the Copperbelt. There is a massive shortage of student accommodation in Zambia and the Minister of Education wants us to assist with this. We will be building hostels for students – we will not only be making profit, but will be providing accommodation to students.

Our vision as a company is to grow the company, get money for the shareholders, and, in three to four years, maybe double or triple our company’s size. This is quite attainable. We want to build the company and create value for the shareholders.

Q In ZCCM-IH’s “Beyond 2016: ZCCM-IH Going Forward” presentation you highlight having a strong brand as a priority, anchored on a proactive communication strategy. How is ZCCM-IH communicating all it has to offer to the international community?

Our PR team is highly educated, very skilled and very motivated. For example, we have created a fantastic, very interactive website. We want to have very high standards in terms of our brand. Secondly, for the community, we are busy with a project ‘Clean water for Zambia’. We are going around the communities and working towards clean water for the people. We put up boreholes, pumps and so doing, change the lives of people. We are uplifting communities. We are investing heavily in this clean water project. We are also investing heavily in the provision of medical equipment. We are buying and donating equipment – such as beds, scanners, ambulances and incubators to the hospitals.

Q Zambia and the UK have long enjoyed healthy and mutually beneficial relations and business links are constantly growing with encouragement from both parties to further explore business opportunities. UK Minister for Africa Rory Stewart said during his recent visit that Zambia has been an important friend and partner for the UK for many decades and that he is looking forward to working closer with Zambia. ZCCM-IH has also a secondary listing in the London Stock Exchange. What is your overview on the relations of both nations and where would you like to see a stronger cooperation?

I always tell people that we are, more-or-less, a mirror of the United Kingdom. We, as a country, have been very influenced by the English mentality and English way of doing business. The UK education system has had a massive impact on the Zambian education system. Most of us are educated with the Cambridge syllabus. We recently had a meeting with Boris Johnson and a group of British investors. We are still a part of the Commonwealth. The Commonwealth has certain business practices and business ethics that it’s members must abide by. We abide by these same standards. As far as technology is concerned, the United Kingdom is one of the leading players in many technologically advanced fields. In terms of, for example, aerospace, we need a new airline in Zambia. There is a need for this. The UK can also be a strong partner for us in terms of infrastructure development. There was a lapse in trade – a gap – within this space, China took-over from the UK as Zambia’s main trade partner. We do have a strong relationship with China, but we relate closer with the UK. We do associate, historically and culturally, more with the British. We would love for the British to bring back their education systems to the country. The British, for example, have trade schools or polytechnic colleges. We need these kinds of institutions in Zambia.

Q As a final question, you are bringing over 20 years’ experience in the mining sector all over Africa, having joined ZCCM-IH in 2014. How is your previous experience helping you to face the challenges you have now and what is the ultimate goal you would like to achieve before leaving office?

We have developed the company into being a very profitable and efficient holdings company. We have now established it as a strong company with many investment opportunities. I am very proud of the fact that we have truly diversified the company, leading to a lot of job creation. If you look at the Maamba Power Station, I travelled the world looking for investors. I am proud of the fact that we raised US$850 million. I want to be proud to say that I have set up a cement factory, where we create thousands of jobs. I want to be able to say that we have built thousands of boreholes, thereby saving thousands of children from dying. I want to be remembered for what I have done in Zambia, for the country and for the people. I decided that I want to come and give back to what the country gave to me. I need to pay back to my country, saying, thank you country, can I come and work for you. With power plants, cement plants, glass factories, technologically advanced farms, we can truly develop the country. I have been able to use my international experience and managerial skills for the benefit of the company and the country. Leaders have to be compassionate – it makes you feel happy knowing that you have created jobs. Knowing that, for example, we can allow for access to clean water, we are changing lives, this makes it definitely worth it. That is the responsibility of government, also. We need to industrialise Zambia, this will lead to more money among the people, caring for their families and increasing the wealth of the country.