Introduction

After the country’s first-ever Mining Insaka celebrating a century of mining in Zambia, the mining sector is buzzing with discussions about the proposed changes to the mining legislative framework under the anticipated Minerals Regulation Commission Bill (the “Bill”). Opinions on these changes vary widely; some view them with apprehension, while others see opportunities for growth. This article provides a brief comparative analysis of the key changes proposed by the Bill in comparison to the existing Mines and Minerals Development Act No. 11 of 2015 (the “Mines Act”) in Zambia. If enacted, the Bill will repeal and replace the Mines Act. Our focus is to briefly identify the implications for stakeholders, and compliance obligations arising from these legislative changes.

Key provisions of the Minerals Regulation Commission Bill

1. ESTABLISHMENT OF THE MINERALS REGULATION COMMISSION

• Bill: The Bill establishes the Minerals Regulation Commission (the “Commission”) as a body corporate with perpetual succession, meaning it can sue and be sued independently. The Bill also empowers the Commission to exercise a broad range of regulatory functions, moving away from the powers that are currently exercised by the Minister of Mines and the relevant Directors at the Ministry of Mines. The move seeks to improve efficiency in the operations at the Ministry of Mines, so that the Commission can be tasked solely with implementing the provisions of the Mines Act, whilst the Ministry officials such as the Minister of Mines can now focus more on administrative and policy making functions.
• Mines Act: The existing framework provides for the Mining Licence Committee (MLC), which lacks corporate status, and shares the duties under the Mines Act with the Minister of Mines and the relevant Directors. 

2. ELIGIBILITY FOR MINING RIGHTS – TAX CLEARANCE

• Bill: Section 12 sets forth stringent eligibility criteria for companies wishing to obtain or retain mining rights. Companies can be disqualified if they are in liquidation (except in certain reconstruction cases); not incorporated under the Companies Act of No. 10 of 2017; lack a registered office in Zambia, do not possess a valid tax clearance certificate from the Zambia Revenue Authority, or if their directors/shareholders have recent bankruptcies or fraud convictions. Importantly, any licenses granted to or held by disqualified individuals or entities are rendered void.

• Mines Act: The current Mines Act whilst also maintaining the other requirements as under the Bill, however does not include a requirement for a tax clearance certificate as part of the eligibility requirement to hold a mining right. The purpose of this section in the Bill is to not only ensure that all licence holders are complaint with all the relevant taxes but also that failure to hold a valid tax clearance certificate from Zambia Revenue Authority will result in the company being disqualified from obtaining, or continuing to hold a mining right. A general tax clearance certificate is valid for a period of one year. Therefore, every licence holder must ensure that it possesses a valid tax clearance certificate for each year it holds the licence.

3. PRIORITY OF APPLICATIONS

• Mines Act: Under the current Mines Act, applications for mining rights are disposed of on a principle of first-come, first served.
• Bill: Section 13 retains the first-come, first-served principle for application processing but introduces a clause allowing the Commission to prioritize applications under specific,  yet-to-be-defined conditions. This could lead to concerns about transparency and fairness if not properly regulated.

4. GOVERNMENT INTEREST IN MINING RIGHTS

• Bill: Section 15 empowers the Minister of Finance, in consultation  with the Minister of Mines, to acquire interests in greenfield exploration areas before granting licenses. If minerals are discovered, the Minister is required to maintain that interest when a mining license is granted. This could result in the government holding a “free carry interest” in mining ventures. This provision has understandably caused concern among stakeholders who are advocating for this provision to be removed from the Bill. 
• Mines Act: While it allows government acquisition of rights, there is no explicit requirement or mandate for government involvement in private investments.

5. LOCAL CONTENT REQUIREMENTS

Bill: Section 22 mandates that mining companies must employ and train Zambian citizens and promote local content in their operations. In this regard, a draft statutory instrument, the Citizen Economic Empowerment Regulations, seeks to ensure that local companies are involved, requiring a minimum of 25% of annual budgets for core mining goods to be allocated to local suppliers. The challenge with this statutory instrument is local companies may not have the technical and readily available financial capacity to meet the contractual demands of mining companies, and consequently, the enactment of the statutory instrument could lead to a disruption in service to the mines.
Mines Act: Emphasizes preferential treatment for Zambian materials and employment. However, the Mines Act does not specifically provide for a minimum amount that must bespecifically preserved by mining houses for engagement of local contractors. 

6. LIMITATION ON NUMBER OF MINING RIGHTS

• Bill: Section 88 limits individuals to holding no more than five mining rights, contingent upon compliance with existing rights and sufficient financial resources. This aims to prevent excessive concentration of mining rights in the hands of a few.
• Mines Act: Places restrictions based on the total area held, specifying that a company and its subsidiaries cannot accumulate more than 999,996 hectares.

7. SHAREHOLDER LIABILITY FOR CORPORATE OFFENCES

• Bill: Section 89 introduces a significant change by explicitly holding directors, managers, shareholders, and partners liable for corporate offences committed with their knowledge or consent. This shift lifts the corporate veil, ensuring accountability at the shareholder level.
• Mines Act: Places liability on any person contributing to anoffence, including primarily for directors and management, without explicitly extending it to shareholders, which could limit accountability in corporate governance.

Conclusion

The Minerals Regulation Commission Bill introduces several critical changes to Zambia’s mining regulatory framework. Key provisions enhance government oversight, impose stricter eligibility requirements, and promote local content while introducing explicit liability for shareholders. Stakeholders, especially investors, should carefully evaluate these changes, considering both the compliance burdens and potential benefits that could arise from a more structured regulatory environment. Clarity and transparency in the implementation of these provisions will be essential to foster investor confidence and ensure the sustainable development of the mining sector in Zambia. If you have any questions on how the Bill will affect you, please reach out to the authors.