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Octagon Capital Limited Registered Office: Villa 7, Millennium Village, Stand 6953, Birdcage Walk, Long Acres, Lusaka, ZAMBIA Postal Address: Private Bag 442X, Ridgeway, Lusaka, ZAMBIA Resource Nationalism The Zambian Perspective By Mwiza Mbewe1 This paper discusses resource nationalism with specific reference to Zambia. The country has in the recent past displayed tenets of resource nationalism in relation to the mining sector. The paper examines the reasons for resource nationalism on a broader basis and provides cases from different countries. Zambia’s history with resource nationalism is discussed. The paper proposes several measures as a means to minimising the adversarial environment that tends to prevail within the context of resource nationalism. October 2020 1 The author is founder and Chief Executive Officer for Octagon Capital Limited, a boutique advisory and investments firm. He has previously worked for Premier Rating Services Limited, ZCCM Investments Holdings Plc and the Bank of Zambia. The views expressed in this paper are solely his own. 0 Introduction During the month of August 2020, the local and international media was inundated with news that Glencore would sell its entire 73.1% stake in Mopani Copper Mines (MCM) to the Zambian government’s mining investment arm, ZCCM Investments Holdings plc (ZCCM-IH). Glencore decided to withdraw from its investment after the Zambian Mines Minister, Richard Musukwa, announced that ZCCM-IH would increase its shareholding to at least 51% from 10%. The Minister’s announcement was in reaction to MCM’s intention to place mining operations under care-and-maintenance due to the negative effects on operations and incomes arising from the COVID-19 pandemic. Placing the operations under care-and-maintenance implied that approximately 11,000 direct employees would be placed on forced leave. With general elections approaching in August 2021, MCM’s intensions were received with consternation by the Government. The Mines Minister labelled the care-and-maintenance application to Government illegal and threatened to have the company’s mining licence revoked2. Meanwhile on another front, the Government was in the midst of a legal battle with Vedanta Resources which owns 79.4% equity in Konkola Copper Mines plc (KCM). On 21 May 2019, a provisional liquidator for Konkola Copper Mines (KCM) was appointed by Zambia’s High Court after receiving a petition from ZCCM-IH under the corporate insolvency act3. In a Ministerial Statement to Parliament, the Mines Minister stated that the action taken against KCM was necessitated by the operational challenges it was facing as evidenced by the declining mineral production at its various operations and the failure to meet its obligations to employees, contractors and suppliers 4. What is notable is that the liquidation process only commenced after the President’s declaration that the Government planned to cancel the company’s mining licence and to bring in a new investor. Earlier still in 2017, the government through the Zambia Revenue Authority undertook a mining industry tax audit that resulted in Kansanshi Mining plc, which is 80% owned by First Quantum Minerals Limited, being slapped with a $7.9 billion tax bill. The government also announced new fiscal measures for the mining industry that included a new 5% import duty on concentrates, increasing royalties by 1.5% and making them no longer tax-deductible, plus replacing value-added tax with a non-refundable sales tax. Analysts attribute the introduction of these new measures to the ruling party’s decline in political support as well as the country’s dire finances as external debts piled up5. While all the developments mentioned above can be broadly described as ‘resource nationalism’, the KCM development has been defined as outright appropriation and hence ‘nationalisation’, rather than the Government’s preferred term of ‘liquidation’. 2 https://www.mining.com/zambia-government-in-talks-to-increase-stake-in-mopani/ https://africanminingmarket.com/zambian-court-appoints-provisional-liquidator-of-vedantas-konkola-copper-mines/3965/ 4http://www.parliament.gov.zm/sites/default/files/images/publication_docs/MinisterialStatementontheStatusofKCM.pdf 5 https://issafrica.org/iss-today/is-zambia-defaulting-to-nationalisation 3 1 Zambia, of course, has a history with nationalisation of mining companies. In 1969, the then President, Kenneth Kaunda, announced that arrangements had been completed for government acquisition of a controlling interest in each mining company in Zambia6. The consequences arising from the 1969 decisions on nationalisation are well documented. The purpose of this particular discussion is to examine the broader concept of ‘resource nationalism’ and Zambia’s experience. The paper proposes policies for consideration by Zambia, before concluding by linking resource nationalism with sustainable development. Resource Nationalism Explained The literature is in consensus that there is no agreed definition for ‘resource nationalism’ (Monaldi, 2020; Ward, 2009). Rather what is consistent is the understanding that it loosely refers to a situation in which governments seek greater control of or benefits from their country’s natural wealth7. For others, resource nationalism is explicitly conceptualised as “the complete set of strategies that a host state uses to increase control over natural resource wealth at the expense of foreign participation and investment.”8 Resource nationalism is generally understood to undergo through a cycle. The way it works is that when resource prices are low, governments seek private investors to explore, identify and develop oil, gas and minerals projects. This is because the governments have limited financing for such undertakings compared to large mining companies. However, once prices for the resources begin to rise, the governments seek to benefit from the higher prices by adjusting taxes to higher levels or outright ownership of the projects. When the resource prices decline, the governments then reduce their taxes or sell their shareholdings to private companies, while waiting for an uptick in the future which would induce them to once again increase their interests (Monaldi, 2020; Pryke, 2017; Ward, 2009). While the upsurge in resource prices appears to be the primary factor for resource nationalism, it is certainly not the only consideration. The government must have a stronger bargaining position for negotiation. The stronger bargaining position generally arises for projects where there has been significant sunk cost with decreased geographical risk as the project progresses. In such a situation, it is unlikely that the investor would withdraw from the venture. These two factors, together with rising resource prices effectively makes the initial development contract between the government and the mining company obsolete; and hence the instigations for renegotiation of previous development agreements (Monaldi, 2020). The lack of institutional government capacity to deal with revenue collections from a privatised natural resource sector also provides fertile grounds for resource nationalism. 6 Mwanakatwe, John, M. (1994); End of Kaunda Era, Multimedia Zambia, Lusaka, Zambia, P.60 https://africanbusinessmagazine.com/sectors/commodities/whats-so-bad-about-resource-nationalism/ 8 Monaldi, F.J. (2020); The Cyclical Phenomenon of Resource Nationalism in Latin America, Oxford University Press, USA, Page 3 7 2 The understanding is that there is an inherent expectation by the government and its people of the benefits that are to accrue from the mining of resources. These benefits are assumed to be equal whether they are obtained through taxes or whether they are obtained through direct ownership of the mining projects. In the event that the tax system lacks capacity to collect the supposed appropriate level of benefits from the mines, then nationalisation becomes the option to obtain what is deemed to be the fitting national return (Ward, 2017). The motivation for nationalisation is even more probable in an environment where there is fierce political competition, low government revenues and a dependence on extractive industries. Political credibility is often obtained by targeting foreign interests in the national resources with the usual reasoning that the national wealth can now be used to fighting poverty within the country. Examples include Mexico’s nationalisation of the oil industry in 1938, Iran’s nationalisation of the Anglo-Iranian Oil Company in 1951 and more recently the same type of events in Venezuela, Bolivia and Ecuador (Sainsbury, 2018). It must be noted that the policies for resource nationalism go beyond nationalisation. Other forms of resource nationalism include higher royalties and taxes, increased government free-carry participation, requirements for in-country beneficiation and retention of profits, and participation of local employees and businesses in the value chains of the resources9. Large mining companies with projects across the continents tend to denigrate resource nationalism as the enemy of trade, investment, and energy security. Governments have in turn defended their resource nationalism policies arguing that they simply want to ensure that the foreign businesses do not unfairly benefit from their resources. If anything, the countries contend that while companies seek to position themselves as victims, the reality is that many mineral producing countries, especially in Africa, have signed deals that disproportionately favour the mining conglomerates10. What is interesting is that often times, resource nationalism is associated with less developed countries in Africa, Asia and Latin America. However, it is actually also employed by developed countries. The policy statements are made to sound palatable and politically correct but when considered in a comprehensive context as italicised below, the negative connation of resource nationalism becomes more pronounced: • • To protect or promote domestic industry (at the expense of foreign competition); To lower costs for the domestic market (via market distortion for a specific product); and 9 Toroskaninen, K. and Olan’g, S. (2019); Governments, Companies find a bit of Common Ground in Resource Nationalism at Indaba https://resourcegovernance.org/blog/governments-companies-find-bit-common-ground-resource-nationalism-indaba 10 https://africanbusinessmagazine.com/sectors/commodities/whats-so-bad-about-resource-nationalism/ 3 • To create a competitive advantage for exports (at the expense of domestic production in the countries with open markets). Instances of the many forms of resource nationalism by different countries across continents abound. The cases are provided below: 1. In the early 1970s, the resource networks between Japanese steel and Australian mining industries were largely under Japanese control. These networks ensured that Japan’s need for low-cost minerals supply was ensured. Meanwhile, the Australians felt that their industry and economy were not attaining satisfactory returns. In 1973, the Australian government adopted a series of aggressive state interventions aimed at reducing Japanese control and increasing the share of value generated in the Australian production networks. By the early 1980s, the measures were deemed successful (Wilson, 2013) 2. In 2010, as commodity prices rose and governments struggled with low returns and reduced corporate activity due to the global financial crisis, Australia proposed the Resources Super Profits Tax (RSPT). The RSPT which failed was replaced by the Minerals Resources Rent Tax (MRRT) which was also later repealed (Grimley, 2015). 3. From 2005, increased Chinese investments in the Australian iron ore and coal mining sectors raised concern with regard to the state-owned and strategic nature of the investors. As a result, in February 2008 the Australian government declared its intention to more closely screen foreign direct investment from state-owned entities. This action was seen as a defensive move against state-owned Chinese companies (Wilson, 2011). 4. In the United States of America, the Washington State and local officials restrict the export of coal to China and elsewhere on the basis of climate change impacts despite the United Nations Framework Convention on Climate Change calling for an open international economic system that would lead to development in all parties (Banks, 2015). 5. China produces 80% of the rare earth elements global output and controls 85% of the processing capacity. This means some of the rare earths mined outside of China have to be sent to China for processing. The Chinese have thus started to reorganise the industry so as to have more control of the industry. This has caused prices for rare earths to rise (Cobb, 2020). 4 6. In 2018, the Tanzanian President oversaw the export ban of copper, silver, iron and nickel ore in a bid to promote local value-added industries (African Business Magazine, 4 June 2018). 7. In the Democratic Republic of Congo, some resources were declared strategic assets, particularly cobalt which is a key ingredient in electric car and smart phone batteries (African Business Magazine, 4 June 2018). 8. In 1994, after apartheid ended, the South African government introduced regulations requiring local black-owned businesses participation in the development of mines (Tobita and Takahashi, 2018). 9. In 2012, Botswana insisted on the domestic sorting and processing of diamonds. In addition, all diamonds are sold through the Diamond Trading Corporation Botswana (Grynberg, R, 2013) From the foregoing, it is evident that the resource nationalism policies are undertaken for purposes of national interest. However, it is important to note that resource nationalism can impose costs on the country that has initiated the nationalism in the first place. These costs include: • • • Retaliatory resource nationalism by other countries. This may negatively affect the processing and use of specific resources which are of necessity in the country that initiated restrictions; Increased investment risks on account of the instability in minerals and metals market. This inhibits foreign investment in the long term; and, It can make mines and reserves in other countries more attractive due to rising prices which eventually go down in the medium term. In view of the foregoing, it is important for the national leadership to undertake a comprehensive evaluation of the potential costs to the domestic economy before commencing resource nationalism policies. What may appear as a domestic issue for the country to resolve within its jurisdiction may actually cost the country more than the expected benefits. Zambia’s experience with resource nationalism attests to this notion. Resource Nationalism in Zambia In 1969, the President of Zambia, Kenneth Kaunda announced that the country would acquire 51% shareholding in the two main copper producing companies: Roan Selection Trust and Anglo-American Corporation. The President justified Government’s decision on the basis that the two companies had ceased to undertake meaningful mining developments after the country obtained its independence. In their defence, the two companies contended that the royalty system impeded their capacity to undertake new developments. The Government did not accept this defence because the royalties 5 remained unchanged from those paid to the British South Africa Company when it controlled the mineral rights before independence and during which period the same companies developed the existing mines (Sardanis, 2003). The acquisition of majority shareholding in the mining companies was part of an already existing framework developed to expand the state’s presence into enterprise. The government’s main objective was that of improving the conditions of the rural poor and reducing unemployment in the urban areas. However, the objectives were not achieved as the largely foreign-owned private sector which was expected to take the leading role in the economic development did not do so. Meanwhile the indigenous private sector’s growth was slow and thus unable to take on the mantle of development and job creation. The Government thus saw the acquisition of controlling stakes in the foreign-owned companies as the only means to modify the behaviour of the leading foreign-owned companies (Craig, 1999). Before resorting to majority ownership of the mines, the government had tried other measures which it hoped would encourage investment in Zambia. One such measure was limiting the proportion of net profit that could be declared and remitted externally as dividends. The idea was that holding excess cash in the banks would compel the companies to seek other investments with better returns within the country. However, the companies responded by maintaining their large cash balances of undistributed profits in their bank accounts and adjusting their accounting policies to enable higher dividend potential pay-outs (Craig, 1999). Beyond the investment objective, the acquisition of majority shares also had a political undertone, particularly with regard to the employment policies of the mining companies. The employment policies in the mining sector were designed to favour white employees with generous salaries, lavish accommodation and social facilities, education and training for their children, and most important of all, job reservation. Meanwhile, the African employees remained untrained, unskilled and underpaid. This policy ensured that the indigenous people were kept on the lowest rungs of the employment ladder while the plum jobs were reserved for the European mineworkers (Sardinis, 2014). The nationalisation of the mining companies was therefore intended to correct the systemic employment imbalances that existed in the industry. The correction included same levels of wages and employment opportunities for indigenous and foreign workers. In 1974, this culminated in the appointment of David Phiri as Managing Director for the former Roan Selection Trust and Wilson Chakulya for the former Anglo-American Corporation (Kaunda, 2002). The story of Zambia’s nationalisation of the mines and the subsequent failure of operations over the years is often cited as the lesson against nationalisation of the mining industry. The Zambian copper mining industry’s downward spiral started in the mid1970s as copper prices collapsed, management focussed on production to ensure 6 employment and social services rather than production for profit, and substantial payment of dividends to the state hindered its ability to re-invest in production infrastructure (Limpitlaw, 2011). By 1990, the UNIP government adopted a limited programme of privatisation as the country grappled with the underperforming nationalised economy. With specific reference to the mines, the idea envisaged was for the state-owned Zambia Consolidated Copper Mines Limited (ZCCM) to continue operating, subject to some structural remedies having been undertaken while private companies would be issued with licences for new exploration and exploitation of minerals (Kaunda, 2002). In 1991, Zambia evolved into a multi-party dispensation and the privatisation concept gained more impetus. However, for the mining industry the actual privatisation of ZCCM took a while as there were several key considerations to be made. These included the company’s bearing on the whole economy as the largest foreign exchange earner and largest contributor to tax revenues, the historically-known political weight of the mining towns’ populations, and the debates as regards the mode of entry for the new mining investors. By the time the privatisation process for the mines was being completed in 2004, copper prices had dropped to US$2,500 per tonne thus weakening the Government’s negotiation abilities. This was in effect the downturn in the resource nationalism cycle. Within four years, prices jumped to US$8,500 per tonne and bolstered the upturn in the resource nationalism cycle for Zambia. Rather than nationalisation, the new policies included the cancellation of all development agreements through a new Mines and Minerals Act, an increase in corporate tax to 35% from 25%, an increase in mineral royalty tax to 3% from 0.6% and the introduction of a windfall tax. The mining companies objected to these changes with claims that the effective tax rate ranged from 64% to 96% for high cost mines and from 57% to 64% for low cost mines, much higher than the intended Government effective tax rate of 47% (Ng’ambi, 2015). Soon enough, the global financial crisis of 2008 led to a fall in copper prices. This together with the threats by the mining companies to commence massive job reductions, and general elections approaching in 2011 led to the MMD government withdrawing the windfall tax policy. In 2011, a new administration was ushered into government. The Patriotic Front government won the elections on the back of a pro-poor campaign. It was therefore inevitable that there would be need for significant funding to achieve the stated objectives; the easiest target being mineral royalties. The mining companies responded with threats to suspend operations and projects. 7 As the dispute raged on, the country went through an unexpected turn with the death of the national President. By-elections were held in 2015 and soon after the mineral royalties were revised to lower levels. In the following year, elections for a presidential full-term were held and the PF administration continued in office. There appeared a semblance of stability for a while. However, with the next round of elections fast approaching in 2021, rising national debt levels, and clear challenges as regards the capacity of the fiscal envelope to meet the nation’s expectations, the evidence points to rising cases of resource nationalism as evidenced by the actions against the mines owned by First Quantum Minerals Limited, Vedanta Resources and Glencore. Drawing from lessons of the past, Zambia’s experience shows that a mine asset that is run down is very expensive and difficult to get back on track. The new mine owners after privatisation are said to have invested total of US$1.4 billion from time of purchase to 2004. However, the industry as a whole was only able to restore annual production to 400,000 tonnes, way below the 700,000 tonnes that was achieved in 1969 upon nationalisation (Limpitlaw, 2011). Given these lessons, it is important that the government undertakes a critical self-analysis as regards its application of resource nationalism policies. There must be due consideration with respect to the short, medium and long-term effects to the sector and economy as a whole. The next section thus delves into future policy considerations for Zambia with respect to resource nationalism. Policy Considerations and Implications In a posting dated 21 March 2019, Maplecroft, a research firm specialising in global risk analytics, country risk insight and advisory services, stated that a total of 30 countries witnessed a significant increase in resource nationalism over the previous year. The posting noted that outright expropriation is less of a risk than it used be and indirect forms of resource nationalism are now the most common means; the indirect forms being increasing tax pressures, changing contractual terms, and stronger local content requirements. These alongside a worsening of the regulatory climate are said to be raising the risk environment for corporate resource extractors. A telling statement in the posting was the declaration that host governments use the indirect measures to wrestle revenues away from oil, gas and mining operators across the continents11. The reference to ‘wrestling revenues away’ aptly confirmed that what lies at the core of the tension surrounding resource nationalism is the distribution and sharing of revenues. As highlighted in the previous section, Zambia is a prime example of the tug-of-war for 11 https://www.maplecroft.com/insights/analysis/resource-nationalism-rises-30-countries (italics added for emphasis) 8 revenues that occurs between the Government and the mining companies. The Government validates its demands for a fair share of the revenues on the basis that while the country is the second largest copper producer in Africa, the majority of its population still lives below the poverty line12. The granting of huge tax concessions to the mining industry has been identified as the reason for the relatively lower tax collections from the Zambian mining industry. To illustrate the relatively lower tax collections, a comparative between Chile and Zambia is provided for the boom period of 2004 to 2007. For Chile, copper contributed 20.7% to 31.1% to total fiscal revenues while in Zambia copper’s contribution to total fiscal revenues was 1% or below (Meller and Simpasa, 2011). Given the status of Zambia as a developing country, the lower levels of fiscal revenue contributions by the mining companies indicate a clear absence of interest to contribute to the development of the country. In late-September 2020, it was reported that First Quantum Minerals and EMR Capital were halting their $2 billion expansion plans on account a royalty tax introduced in 2019. According to the mining companies, the new royalty has made the projects unviable. The revenue-based royalty increases from a minimum of 5.5% to 7.5% when copper prices are at $6,000 to $7,000 a tonne. The royalty rises further to 10% when copper prices top $10,000. The miners contend that this is double taxation since the royalty is not deductible from profits and they also pay corporate income tax13. The Finance Minister’s response is that the country does not get enough from its mineral resources. He is however willing to consider the mining companies’ grievances regarding the royalty. Any compromise on the part of the Government should be quite an achievement by the mining companies, given the country’s debt overhang reportedly around $18.5 billion and a debt-to-GDP ratio of 104%, way above the IMF and World Bank threshold of 35%14. In the interim, the mining companies’ decision to halt their expansion programmes is a clear threat to projected government revenues for the medium-to-long term. More definitively, the threat negatively affects government’s means to settling the national debts and funding of its infrastructure projects to which it is contractually committed. This adversarial scenario of the Government versus the mining companies obviously hinders the future revenue plans for both. However, the striking distinction here is that the mining companies are willing to suspend or halt progress until the situation changes to suit their preferred outcome or they could even invest elsewhere. It therefore weighs more on the government than the mining companies to seek grounds for compromise and revenue enhancement for both parties. 12 https://theconversation.com/is-africas-resource-nationalism-just-big-business-as-usual-41647 https://www.bloomberg.com/news/articles/2020-09-30/zambian-royalty-spat-halts-2-billion-of-copper-mine-investment 14https://www.lusakatimes.com/2020/09/30/we-are-18-5-billion-dollars-in-debt-our-debt-to-gdp-position-is-104-finance-minister/ 13 9 The problem for the Government is best defined as the lack of progressive increase in corporate tax collections from the mining companies when resource prices rise. The imposition of higher mineral royalties speaks volumes on the Government’s supposition that the mining companies very likely manipulate their financial statements so as to have lower profits and hence pay lower corporate taxes. To resolve this problem, the Zambian Government must institute a mining tax framework which will facilitate for proportional increases in government revenues when the mining companies enjoy abnormal profits due to higher resource prices. The framework must be balanced with the Government’s desire for extended investments and should not hinder the companies’ abilities to meet their financial obligations to their lenders. With such a framework, the Government has a long-term interest in the gainful financial performance of the mining industry as they in essence bear a substantial risk should the mining industry perform poorly. It is therefore important that there be considerable transparency between the two parties in determining the appropriate framework. The new tax framework should remove the need for stability clauses in the development agreements. The stability clauses become irrelevant on the basis that all benefits from rising resource prices should ideally be shared proportionally between the government and the industry. The formulation of development agreements, however, does not fall out. The development agreements’ relevance continues with regard to outlining the rules of engagement for non-fiscal commitments by both the government and by the investor. The development agreements should continue to outline government’s role to ease exploration, development, and operations as well as trade and investment. The issue boils down to the mining companies insisting that the taxes paid should result in the government undertaking infrastructural investment that facilitates the mine company’s activities as well as benefits the surrounding communities. This does not absolve the mining company from undertaking corporate social responsibilities but there should be a clear distinction between the government’s socio-economic responsibility and that of the mining companies’ choice for community responsibility. Given Zambia’s landlocked status and Maplecroft’s recent statement that the country is a high-risk destination for resource extraction investments,15 the country must develop and market a medium-to-long term programme that comprehensively details Zambia’s competitive advantages for energy, transportation, communication and skills availability for all significant sectors of the economy. For the mining sector, a comprehensive geological map is required as it minimises the exploration risk and is therefore of significant value for the industry’s promotion. As at 2016, only 61% of the country had been geologically mapped, leaving a large portion of 39% unmapped (Kasumba and Chifwepa, 2016). In terms of labour resource, the government must have a deliberate 15 https://www.maplecroft.com/insights/analysis/africas-rising-resource-nationalism-ups-stakes-for-miners/ 10 investment in advanced educational and skills programmes with the understanding that mining entities now employ far fewer people with advanced skills compared to experiences of the past. Undoubtedly, the government investments will require significant financing which the private mining companies alone cannot fulfil through their tax payments. As with most governments, the Zambian government does have a proclivity to accuse the mining companies of lacking transparency. ZCCM-IH, the government’s investment arm in mining, should therefore be used as the model for government’s intrinsic understanding of the country’s mining industry for taxation determination. To do this, the company must evolve from a minority shareholder in the existing mining companies to an owner, developer, and operator of full-scale mining operations. With its detailed geological map, the government should reserve geological areas that exhibit low-risk with high rents potential for ZCCM-IH while leaving areas that have high geological uncertainties and require large investments for private developers. The rationale is that private investors have greater access to funding and also have predetermined risk capital, a luxury which ZCCM-IH cannot afford. Other than serving as a model for tax determination, the ownership, development and running of mining projects by ZCCM-IH will present the government an opportunity for direct enhancement of its revenues when resource prices rise; revenues which can be used for new investments and the creation of jobs, enhanced and efficient mining programs for greater profitability, beneficiation and diversification programmes, and mentorship programmes with respect to quality control and marketing for artisanal and small-scale miners. All in all, what is proposed for the mining sector is a hybrid system which allows private companies to compete with the Government-owned enterprise in the exploration, development and operation of mining entities. It is proposed that the Government enterprise be allowed an advantage in the geological locations to ease exploration and development but the government should still commit to all parties with regard to the development agenda that ease operations and logistics; and hence create a competitive advantage for the mining sector as well as other sectors of the economy. Drawing from the lessons of Chile once again: From producing the same annual quantities of Copper as Zambia in the 1960s, Chile is now the largest copper producer in the world as both the state-owned mining company and the private investors have expanded output. It is also worth noting that in Chile, the participation of copper in the export basket declined to 35% by 2002; an indication of the success in diversification of the economy (Meller and Simpasa, 2011). Acknowledging that mining is a wasting asset and the continuation of operations depend on the level of resource prices is cardinal. In the event of falling prices, it is not uncommon 11 for mining companies to place the operations under care-and-maintenance with the entire workforce on unpaid leave for long periods. Having become reliant on wages, to expect that the workers will simply find their own means of livelihood is a clear recipe for tension with the local populace. The Zambian Government therefore needs to create environments for diversification as and when the mining asset wastes away or during periods of care-and-maintenance. Furthermore, the Government and the investor need to recognise that incursions into frontier areas are generally considered to be an intrusion by the local community. Both the Government and the foreign mining investor will promote the project on the basis of development and the provision of jobs without due consideration to the notion that the people are self-employed in whatever has kept them economically engaged for decades, if not centuries. The commencement of a mining project can therefore literally mean the destruction of traditional livelihoods. The compensation by the mining companies is generally through the construction of ‘modern’ structures, resettlement to other areas which were not of original interest, and the promise of wages from jobs. In the long term, the negative effects of pollution and environmental degradation may completely hinder the capacity to return to the traditional means of livelihood. It is therefore imperative that before any mining project can commence, issues of sustainable development are addressed. Conclusion The United Nations defines sustainable development as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (Emas, 2015). This definition highlights the responsibility which government’s must bear as they consider permitting investors to extract resources from their peoples’ lands. The responsibility can be well-defined by answering several questions: 1. Does the resource extracted enhance the lives of the domestic community or that of foreign communities eg cobalt for electric car batteries? 2. To what extent do revenues from the extraction benefit future generations eg the creation of Sovereign Wealth Funds (SWFs)? 3. Is the resource extractor committed to protecting the land and the traditional means of livelihood from the harmful effects of resource extraction eg social and environmental enabling for hunting, fishing, herding and farming? 4. Is the resource extractor committed to leaving a sustainable socio-economic system than the one found eg enhanced and diversified opportunities for the populace? These questions basically provide for a cost-benefit analysis so as to determine whether the mining project should go ahead or not. The principle here, although not fully addressed, is to conceptualise the project in a comprehensive framework for sustainable 12 development. Where questions arise or the answers are incomplete, it means that the project is not viable from a sustainable developmental perspective. The programme can therefore be suspended for the future generation who may be in a better position to manage it. This works in the same manner as managing SWFs for the future generations except in this case, the resource is left for the future generation to extract and determine its use. This is also comparable to mining companies’ suspension or halting of projects because it is not financially viable in the interim. It must be noted that natural resource extraction and nationalism extend beyond the traditional minerals such as copper. For Zambia, this has been demonstrated by the rise in demand for Pterocarpus Chrysothrix tree species (locally known as Mukula), increased interest for gold extraction, and the chronic demand from the neighbouring countries for maize produced in Zambia. In all the three cases, the government authorities have demonstrated forms of resource nationalism through banning of trade, strategic reserves enforcement and seizure of illegal exports. The underlying theme for all cases has been that the government does not obtain the appropriate revenues from the trading of these natural resources. Given the government’s obvious need for extensive and sustainable funding for its development agenda, it is cardinal that it establishes a national framework for resource nationalism. 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