Formerly AEL, AECL Mining Explosives Plc is known for producing and supplying explosives in Zambia. Additionally, the company’s products and services in the form of manufacturing facilities and explosives are relevant to Central Africa. With a focus on surface and underground mining, where the explosives are used. Malawi, Tanzania and the Democratic Republic of Congo are some of the countries housing companies benefiting from the products of AECL.
According to the African Financials website, AECL is in the mining industry. The explosives produced by the company are for mining firms that usually deal in copper and cobalt. The company is listed on the Lusaka Stock Exchange (LuSE). It is therefore of significant benefit to Zambia. Its payment of tax and job creation benefits the country. Moreover, as the country seeks to diversify the economy, AECL is one of the mining companies whose response to the green economy or any economic measure is critical.
Regarding the recent financial performance, AECL had an increase in revenue in 2020 of 21.9%, which produced a figure of ZMW798,498 million. There was a decrease in higher margin exports. Among other impediments was local market disruptions due to COVID-19 and the deterioration of the Zambian Kwacha compared to the US dollar. “The majority of customers are invoiced in US dollar, which inflated the Zambian Kwacha value of sales. The US dollar equivalent revenue reduced by 14.5 % from the previous year (a reduction of US dollar 7,341), while the deterioration of the Zambian Kwacha compared to the US dollar was 42.5% on average,” recorded the Africa Financial website.
The company reached a net profit after taxation of ZMW111,662 million (2019: ZMW71,239 million), an increase of 56.7% from the prior year. The situation responded to the deterioration of the Zambian Kwacha in relation to the US dollar. Simultaneously, there was turmoil in the global market.
With a new government in place, the economic outlook is being analyzed against economic factors. President Hichilema made the country’s crisis a factor in the campaigns saying, “At the core of my politics is a belief that Zambia has the potential to become a successful middle income country.” In a June 2021 interview about what steps to take if elected president to deal with the debt crisis he responded, “We want to focus on restructuring the debt. That starts with us putting a moratorium on borrowing. Secondly, we will stop access to credit facilities for consumption. Revenues will be focused on investment expenditure and productive sectors that will be more inclined to create jobs.”
Furthermore, the UPND manifesto 2021-2026 states, “In 2021 we will firmly implement credible policies to lower the fiscal deficit, restore market confidence, bring stability to the economy, enable a speedy recovery in economic growth and ensure debt management and sustainability.”
“We are glad that the markets are reacting positively following our election,” stated Kevin Daly of Aberdeen Standard Investments.
The Zambia External Bondholder committee predicted that a win for Hichilema would see a rally in Zambian assets. Denoting that a competitive Zambia globally, would provide investors with the right incentives. A booming mining industry would benefit AECI. Coupled with fair business and a friendly policy environmentally atmosphere. President Hichilema was quoted, “We need investment which will require an attractive and consistent environment…” The president of the Zambia Chamber of Mines (ZCM), Godwin Beene even said at the time, “The president elect has reset the tone to one of rebuilding confidence and spurring growth. The industry is very positive that with this common good approach to the way forward than we have ever seen before.”
ZCM Mining newsletter Issue No 2 September 2021 on page 6 in an article titled, “Editorial: Strategic Steps Forward for Mining in Zambia” explains the impact of a policy environment among many factors. For instance, post 2003 the investments in mining slowed due to increased taxes meant to cushion budget deficits. In this regard, the government must engage mining companies to discuss prevailing mining regulations to ensure both parties are fairly treated. It is on this tide that AECL needs to ride. The sole purpose is to avoid feeling dissatisfied with government policies, as it happened before leading to slowed investments. Mining firms have a role to engage the government accordingly.
However, the new government has a manifesto that is a bit thin on detail. For this reason, AECL and other companies need to take advantage of collaborative platforms to argue their case. That is in terms of fair trade and mutual benefit.
For a company like AECL, the mining industry’s boom is critical for its growth. In such a case, the benefit is also conferred on the economy, by for instance providing more jobs or reduced prices of goods and services. Slowed investments in mining would hinder its growth and impact negatively on the economy. For example, jobs could be lost and the economy would not benefit many financially. In a dynamic world in which a disease such as COVID-19 is a threat,it is imperative to prepare for the future. Both in tackling the disease and providing cushions against market failures. The company must take advantage of the collaborative platform that the new government is creating to lead the mining industry in fair and innovative regulations meant to uplift the economy by promoting more investments in Zambian mining.
