AS PREPARED FOR DELIVERY
Good morning! I am honored to be here at this important event, once again surrounded by fellow champions of accountable and transparent government. Your tireless efforts are a testament to your commitment to Zambia’s development, prosperity, and democratic governance. And the theme of this year’s conference couldn’t be more central to the fight against corruption, as Zambia’s brighter future depends on its ability to use its natural resources transparently and accountably for the benefit of all Zambians.
Mining Sector
As we are in the Copperbelt, let’s start with mining: Generating more than 75 percent of the country’s export earnings and 40 percent of the government’s revenue, the mining sector is the bedrock of Zambia’s potential for economic growth.
Let me tell you a parable of two mining companies.
The first mining company is focused on its own short-term gains. It pays off officials to “lose” the existing license of a rival firm, holds on to licenses without using them, and mines under exploration licenses. It contaminates the environment and exploits local laborers – violating both environmental regulations and mining safety and labor standards. It doesn’t register its outputs or exports and doesn’t pay taxes or royalties. To ensure that it’s never held accountable for its actions, the company undermines institutions and fuels corruption.
The second mining company recognizes that it can earn profits through good business practices. It is accountable to responsible shareholders and has access to groundbreaking technology. Thanks to its strong corporate values, it consistently demonstrates commitment to local beneficiation and corporate social responsibility – not only because it must, but because it recognizes that doing so is good for long-term, non-exploitative business. Its in-country leadership team is heavily Zambian, it prioritizes procuring goods and services from Zambian companies, it invests in its neighboring communities, and it is partnering with the Zambian government, reporting fully and on time, and paying taxes.
You don’t need me to tell you which of these companies will bring more genuine benefits to Zambia and its people.
These two fictional mines probably sound awfully familiar because both the short-term, shifty company and the long-term partner company are based on countless stories and examples that we have gleaned from contacts in the mining sector, and that I’ve even heard just in the past day being up here in the Copperbelt.
Battling corruption and malfeasance in extractive sectors is a challenge all countries face. Zambia’s Financial Intelligence Center has cited mining as one of the primary sectors for illicit financial flows, which it estimates has cost Zambia $500 million in tax revenue during the first nine months of this year alone.
On the positive side, there are clear, pragmatic steps the government and private sector can take – and that Zambia’s partners will support – to strengthen transparency and accountability across the entire minerals value chain.
Let’s take a look at licensing. The mining cadaster’s practice of publishing issued licenses via its online portal significantly increases transparency, but greater transparency in the process by which applications are reviewed and approved, transparency in license transfer decisions, and further elimination of opportunities for individual human interventions in processes would only make the mining sector stronger. I have heard credible stories about license holders checking the online portal map only to see that another entity has assumed ownership of their license.
We have heard concerns from mining sector stakeholders about the government’s decision to move away from the Flex Cadastre online platform, which is widely considered the global gold standard for transparent cadaster management. The government has provided assurances that the new system will provide yet even greater transparency and tighter controls over processes, while meeting Zambian legal requirements. I think we are all eager to see the new system, with its improved transparency and accountability functionality, when the Ministry of Mines launches it on Thursday.
Zambian citizens – as well as their partners – are paying close attention to the fact that too many mining companies are evading their tax obligations. As the Government of Zambia responds to a drought crisis and other fiscal pressures, it is only right that it should hold companies accountable to submit their legally required production and financial reports, and to pay what they owe. We hear loud and clear from transparent and accountable mining companies that they welcome this and that this is a core expectation in a partnership with an investment destination to ensure that the citizens of a country receive tangible and meaningful benefit from the resources they possess, while operating under a consistent and predictable regulatory and oversight framework. Cooperation with the Zambia Extractives Industry Transparency Initiative (ZEITI) to publicly release information about companies’ production and revenues would be one positive piece of the transparency puzzle.
The U.S. government is proud to support and partner with the Zambia Revenue Authority to strengthen its ability to audit mining companies’ financial reports. As a next step to enforcing compliance, holding companies accountable will also require credible consequences for offenders.
For example, our partners in the Government of Zambia have recently taken steps to enforce existing regulations regarding exploration licenses. The Ministry of Mines revoked about 2,600 inactive licenses, freeing up territory for more serious investors and signaling the government’s intention to enforce its existing laws.
In another commendable example, the Zambian Environmental Management Agency (ZEMA) cancelled a company’s licensing letter for failure to adhere to numerous environmental requirements at its mine in Lower Zambezi National Park. While Zambian law does not prohibit mining in protected areas, enforcing environmental regulations is critical to protecting Zambia’s natural resources.
If investors are serious and reputable, they have nothing to fear when governments enforce the rules and implement best practices. In fact, rule of law increases the confidence of responsible and accountable investors by demonstrating policy consistency and enforcement, as well as by limiting the predatory effects of unscrupulous companies in exploiting Zambian workers and resources and tarnishing the reputations of the accountable actors.
We know some companies seek to evade their tax and royalty obligations, which robs Zambian citizens of resources that it needs to invest in long-term economic and social development. The Auditor General’s 2023 Report revealed that 259 mining companies that did not file mineral royalty declarations were still able to obtain export permits for critical minerals worth more than 14 billion kwacha – or USD 530 million. Requiring these royalty declarations as a condition for obtaining export permits – and doing so digitally without the opportunity for human intervention – could be another simple and discrete adjustment to ensure that Zambians get greater tangible benefit from their resources.
Non-Mining Natural Resources: National Parks, Landscapes, Wildlife, Timber
Of course, Zambia’s natural heritage goes far beyond the minerals found underground. It is also in the things that grow, the abundant wildlife, and most of all in Zambia’s people. All of these things are precious in their own right, but they are also the foundation of Zambia’s potential for sustainable economic growth.
Tourism already accounts for roughly nine percent of GDP. Global conservationists seek to invest in Zambia and support its biodiversity. For example, U.S. companies and organizations alone have invested nearly $82 million to protect and strengthen the landscape of Kafue National Park and surrounding game management areas.
It is well known that great quantities of Zambia’s hardwood timber are sold illicitly overseas. Whereas Zambians cutting down Mukula and other hardwoods are paid only a few kwacha for their part in the illicit timber trade, transnational criminal organizations sell the wood overseas for millions of dollars.
A lack of enforcement of protected areas has sadly resulted in Zambia having one of the top five rates of deforestation in the world, with some estimates showing that the country loses up to 300,000 hectares per year.
One practical step that Zambia can take to combat this problem is to strengthen law enforcement agencies and accountability institutions, including the Department of National Parks and Wildlife, ACC, NPA, DEC, and FIC. Zambia’s budget is tight, but properly resourced, these agencies have the potential to stop billions in illicit financial flows and capture greater revenue for the Zambian people to fund education, health care, infrastructure, and other public services. Let me put it another way: investing in law enforcement and accountability institutions would pay for itself by yielding many multiples more additional revenue to the government than it would cost.
Cross-cutting Issues
The bottom line is that corruption and exploitation go hand in hand, whether we’re talking about minerals, forests, wildlife, or people.
On the other hand, taking concrete steps to increase transparency and accountability in key systems will help protect the Zambian people’s natural heritage and their children’s future.
In addition to the issues I’ve already mentioned, here are a few other significant steps that Zambia can take to increase transparency in ways that will create positive impacts across the public and private sectors.
Increasing transparency and compliance of beneficial ownership: looking at the people and/or businesses that benefit financially from public procurements. By producing public information on who owns, manages, and derives benefits from companies, the Zambian government can reduce conflicts of interest and improve public procurements. Corruption thrives in the darkness of secrecy, but withers in the light of transparency.
I understand that beneficial ownership registration compliance currently stands at only 30 percent. We hope that the government’s actions to amend the Companies Act will contribute to increased beneficial ownership transparency.
I applaud the Zambian government for having laws and regulations that require beneficial ownership declarations, but compliance by companies remains paltry. The Patents and Companies Registration Agency (PACRA) is working to increase transparency of private sector ownership and manage the beneficial ownership register. Herein, again, greater enforcement and accountability can help remedy this rich pool of avenues for corruption that some of the non-compliant companies exploit. The U.S. government is pleased to support their work to raise awareness and improve registration compliance.
Another need is for legislative and regulatory reforms that empower accountability institutions and allow them to function independently. The government launched the National Anti-Corruption Policy in April. Implementing the reforms included in that policy and amending the Anti-Corruption Act will improve the functioning of the ACC and other accountability institutions, and will also help attract qualified experts with the integrity needed to run them.
And last but not least, a free and independent press enables informed and constructive public debate and helps hold those in power accountable. A free media environment is also crucial – particularly investigative journalism – to exposing corruption practices if and when they occur. It is therefore imperative that journalists be allowed to report freely without fear of harassment, intimidation, and arrest.
Conclusion
The vibrant future that the Zambian people deserve depends on Zambia’s ability to spur sustainable economic growth, which in turn depends on the country’s ability to attract reputable and accountable private sector investment.
We know – and the Zambian people know – that corruption hampers economic progress, robs governments of resources meant for public services, undermines development of infrastructure and agricultural initiatives, discourages investors, erodes public trust in institutions, and robs Zambians of their natural heritage.
Ultimately, Zambians must demand concrete, decisive action from their institutions and elected leaders to root out corruption at all levels and insist on transparency and accountability. The United States is among the many partners that stand ready to support the Zambian people in this endeavor. The time for change is past due – let’s work together to build a more prosperous and equitable Zambia for all.
Thank you.
