Lusaka, Zambia: Copper still reigns as economic king

Kedrick Chisamu

Copper mining is the heartbeat of Zambia’s economy and the main anchor for the government’s ambitious 2030 vision, which seeks to diversify the economy into tourism, manufacturing and agriculture. But earnings from the resource remain a source of emotive debate in the country.

Many Zambians have, until recently, thought of copper as their principal natural asset, because its earnings paid for the construction of infrastructure like hospitals, schools and roads when it reigned as the country’s undisputed ‘economic king’ in the 1970s. The message is still conveyed in the school curriculum taught throughout Africa’s leading copper-producing country.

After a free-fall in production – partly because of lower global metals prices two decades ago, as well as poor management of the mines and lack of capitalisation – Zambia is once again seeing a rebound in its copper output. A total of 697,860 tonnes were produced in 2009, close to the 750,000 tonnes highs of the 1970s. This followed a rally in prices and fresh investments in the industry during the past eight years, after production had slumped to below 200,000 tonnes in 2000. Mines that were due to be shut down over the next few years have had their life extended as a result of the discovery of more resources and the use of new mining technology, the government says.

The rebound in production at the mines, which now employ about 35,000 people, has come with renewed confidence that many more young Zambians could be sponsored to study at universities and schools using copper revenues, as was the case when the mines were run by the stateowned Zambia Consolidated Copper Mines (ZCCM) – which employed 58,000 workers when output was at its previous peak. Many citizens are unhappy that such benefits do not appear to be a focus of the new mine investors.

Trade unions, the opposition political parties and mining analysts argue that the country is getting a raw deal from the proceeds of its prized asset. They accuse investors of only being interested in making huge profits and of neglecting the communities in which they mine the resource.

While the Chamber of Mines of Zambia (CMZ), which represents the interests of foreign mine owners, springs to the defence of the companies, Finance and National Planning Minister Situmbeko Musokotwane has also been urging restraint. “You have to be patient that you allow investments to come, make it stabilise and then the tax revenue will come. I am absolutely sure the tax revenues will come up,” he said.

The government too, is facing mounting criticism over the generous tax incentives provided to mining firms, including tax breaks of between 5 and 17 years. Some analysts also blame the government for lower-than-expected increases in the mineral royalty (which rose from 0.6 percent to 3 percent) and corporate tax (which was raised by 5 percent to 30 percent), as well as for scrapping a controversial 25 percent windfall tax this year, barely 12 months after its introduction following a rally in metals prices in 2008.

When the country holds presidential, parliamentary and local government elections in 2011, opposition parties can be expected to play on popular emotions in Copperbelt Province by reminding them of how much of a raw deal they are getting from their resource. Politically, the region is under the control of the main opposition Patriotic Front. The party won all but three Copperbelt constituencies during the 2006 elections when its leader, Michael Sata, campaigned on a platform of promising changes to mining laws to ensure people benefitted from their resource.

Robert Sichinga, a prominent Lusaka economist and former legislator, said memories are still fresh in people’s minds as to just how much benefit accrued to miners and Zambians as a whole during the ZCCM era. He said the lack of major new investments by foreign mine owners in social amenities, education and health facilities is one of the biggest failures of privatization and will continue to push the government onto the defensive over accusations that citizens are deriving little benefits from the mines. “The windfall tax was good because you would use the price that is obtaining on the market to determine your tax revenue and that is not the case now, that’s where there has been a major failure,” he added.

Sichinga thinks that tax revenue projections for 2010 are far too low to help with the government’s economic diversification plans. “Mineral royalty at 3 percent is a give-away. The government could have put it at 5 percent and, as it is now, the mines are not paying [reasonable] taxes and the government is only getting pay-as-youearn [personal income tax contributions] towards taxes,” he said.

The CMZ general manager Frederick Bantubonse takes a different view: “It is not for the mining sector to determine if the revenues and incomes are sufficient. What we want is for the mining sector to grow. What is required of the mining companies is to be good corporate citizens, the rest is for the government.”

Finance minister Musokotwane believes that most accusations directed at the government are not based on informed views. “Right now $5 billion has gone into the mining industry, [and] there is no way the government could have raised that type of money to go into mining investments. This year we are expected to do close to the highs of copper produced in the 1970s, because we allowed private capital to come into mining,” he said, pointing out that foreign investment in mining also created auxiliary industries supplying goods and services to the mines, thereby creating more jobs.

Trade unions, however, still consider the privatisation of the mines a major loss even if jobs were at stake under state ownership of the mines. “We are a lot worse now than we were under ZCCM,” said Rayford Mbulu, president of the Mine Workers Union of Zambia. “There is not much being done to invest in communities, our roads are not being repaired, the mines are not investing in education or health and jobs are at stake because some big mining companies are outsourcing workers using employment agents, almost making us ineffective. We are in a situation where even the union may be weakened.” He agreed with Sichinga that there is a need for some form of regulation to circumscribe what the foreign mine owners can and cannot do.

Despite the arguments over mining revenue and other benefits that should accrue to citizens, analysts agree that the copper industry remains critical to plans to increase growth, create jobs and lift many people out of poverty.

About the author:

Freelance Zambian journalist


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