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(BBC) Zambia targets copper fortune

Zambia targets copper fortune
By Paul Moss
BBC World Tonight, Zambia

Andrew Hickman sits at his desk and passes over a copy of his company's latest annual report. The tax has been imposed in breach of internationally binding agreements Andrew Hickman, First Quantum Minerals

You do not have to be an accountant to get the basic message: First Quantum Minerals are doing well out of Zambia's copper. It is no great surprise. Demand from China has pushed the price of copper to record levels; it is four times what it was just a few years ago. And with the copper mines' productivity up as well, money is rolling in.

"Since privatisation," Mr Hickman says, "several billion dollars of private investment has gone into Zambia's copper mines.

"It is still a poor country, but people are more prosperous than they were 10 years ago, and that's largely down to new investment in the mining industry."

Uneconomic mining

But the Zambian Government is not convinced that the mining companies have brought enough wealth into the country.

This is one of the poorest in the world, with high unemployment, and low life expectancy.

So last April, to fund its programme of poverty reduction, the Government introduced a series of new and higher taxes on the international companies that come here to mine.

"The tax has been imposed in breach of internationally binding agreements," insists Mr Hickman, "and to a large extent, it's making the mines uneconomic."

Unfit for humans

That may be, but it is wildly popular.


This water is contaminated and mosquitoes breed here, causing malaria

Mwenda Immanuel, trade union activist and volunteer for debt forgiveness campaigners Jubilee

President Levy Mwanawasa's decision to introduce the tax last April was supported by politicians of every ideological hue.

And for those working on poverty reduction, it seems self-evident that the money generated by Zambia's natural resources should be used to make life better for all its citizens.

Mwenda Immanuel, trade union activist and volunteer for debt forgiveness campaigners Jubilee, arranges a trip to the shanty town of Kantolomba, just a few miles from Quantum's copper processing plant.

Many of the people here are clearly malnourished, their homes decrepit and overcrowded. Pigs are bathing in a muddy pool that serves as a water-source for locals.

"This water is contaminated and mosquitoes breed here, causing malaria," Mr Immanuel says emphatically.

"There is no healthcare. The mining companies have to pay more tax to pay for clinics, schools. The Government needs the money for development."

Changed conditions

Mr Immanuel's view is backed by the man regarded by many as the father of Zambia.

Kenneth Kaunda nationalised the mines when he was President. The later decision to reverse this is one he bemoans, and he is convinced that if mining companies are to profit from Zambia's copper, their tax contribution should increase.

"Copper is changing in value, and therefore everything must change," he insists.

"Are we expected to say that what we agreed upon yesterday is valid today?"

Countered with the suggestion that, yes, that is how a contract works, and that if Zambia abrogates the deal, other mining companies will be put off investing here, he merely laughs.

"India wants copper, China wants copper - there's a wide market," he says.

Spooked investors

But others in Zambia are not so sanguine.

The Chamber of Mines has warned it is not only mining companies that will be put off, but that all foreign investors will see the country as high risk if the new tax is imposed as promised.

They also say that copper mines require constant upkeep and upgrading, and that this process will be put in jeopardy as well, if the mining companies are more heavily taxed.

But the Zambian government shows no sign of backing down right now.

And some observers believe its actions as just one sign of a more general movement now spreading through Africa.

"I'm seeing this in Malawi, in Uganda," says Robert Mtong, a political campaigner and seasoned observer of how foreign companies operate in Africa.

"People are asking 'where is the money that belongs to us?' In the Niger Delta in Nigeria, people are asking, 'where is the money that comes from the oil?'

"It's early days yet, but a wind of change is blowing, and it will blow more and more."

Labels: ANDREW HICKMAN, FIRST QUANTUM MINING, WINDFALL TAX

posted by MrK @ 8:03 AM