Maravi

(ASIAPUBLISHINGGROUP) Mined Out In Zambia

MINED OUT IN ZAMBIA

For decades Zambia's copper mines attracted foreign investors. Local miners put up with the atrocious working conditions and pollution because they were promised development. But the financial crisis now threatens to scupper those hopes.

By Jean-Christophe Servant

Peter and Irene, both 30, are engineering graduates of Lusaka university and have been working since 2006 in Chingola, a small Copperbelt town in Zambia in southern Africa (1). The couple are employed by Konkola Copper Mines (KCM), the biggest mining company in a country which earns more than half its gross domestic product from mineral extraction. KCM produces 70% of the country's copper and provides its employees, the children of neoliberalism, with a decent lifestyle: a net salary of 5m kwachas ($876) a month, plus shares they can cash in in 2010. They also enjoy professional status in a sector whose 400,000 employees earn an average monthly income of 3m kwachas ($350) while 68% of the population of 11 million live on less than two dollars a day.

Of course PEter and Irene have to make sacrifices. Irene's job is to look after the chemicals used to treat copper ore, and in 2007 she had to leave her husband and young child to go on a traning course in India. The Indian multinational Vedanta has been the majority shareholder in KCM since 2004. The sale was the latest in a series of privatisations that began in the late 1990s, and in which 257 of Zambia's 280 businesses left the public sector.

Nearly 100,000 people lost their jobs over this period, 40,000 of them from the country's flagship Zambia Consolidated Copper Mines (ZCCM), which was carved up into as many pieces as there were buyers. Vedanta got its hands on the biggest slice when it bought up the Chingola mine.

Irene has nothing but happy memories of her time in India. But when she returned to KCM she foundsome of her Zambian colleagues had been dismissed and replaced with young expatriate Indians "who are no more qualified, but better paid, housed in custom-built accomodation and given a company car". While she was away, Peter ahd to deal with the sudden rise in the price of essential goods, petrol and rent: their three-room flat and kitchen, infested with cockroaches and subject to regular power cuts, now cost them 2m kwachas ($350).

Then, on Christmas Eve last year, the rent fell to 1.7m kwachas ($298) - in tandem with a record fall in the price of copper, which dropped to $2817 a tonne from more than $8675 in July. The spectre of mine closures re-emerged. It was a glum Christmas for the 20,000 or so permanent employees of the mining sector - three times fewer than the state sector had employed at the end of the 1970s. Employers and employees both had to economise to ride out the approaching financial storm: for workers, so they could maintain their comfortable profit margins.

A river of acid

Vedanta's Zambian subsidiary declared a turnover of nearly $122m in the final trimester of 2008 - almost half what they earned in the previous one. First they reduced their contracts with the mainly South African temping agencies, which had flourished after privatisation. Thousands of underpaid and non-unionised workers, who had done the riskiest jobs, were laid off. Vedanta then resorted to other 'sacrifices', in order to maintain maximum input (its goal, written in large letters above the entrance to its Zambian complex). Suppliers had to wait a little longer to be paid - some went out of business. Working hours became longer: "four 12-hour days followed by two days off," according to a local member of the largest union in the sector, the Miners Union of Zambia (MUZ). Even Peter, a model employee, says they are being pushed to the limit: "We have to be on call 24 hours a day. If this carries on, there will be more accidents."

"Who benefited when the price of raw materials went up?" asks the economist James Lungu who teaches at Copperbelt University in Kitewe. "Mining companies and their shareholders. And who is suffering now the price is falling? Miners, their families, and the environment. We are on the verge of a social catastrophe."

It takes 100 tonnes of ore to produce one tonne of copper. On 6 Nobnember 2006 the people living on the banks of the Kafue - which flows down towards Lusaka before joining the Zambezi further south - were confronted with a strange sight: the river had turned turquoise. Vedanta had accidentally discharged its toxic waste into it. Two million inhabitants of Chingola district - 100,000 of whom draw water directly from the river - were deprived of drinking water for at least wo days. Thousands went for hospital checkups after eating fish from the river. Analyses of the Kafue's water showed it contained 38.5mg manganese, 10mg copper and 1mg cobalt per litre: concentrations 1.7 times, 10 times and 10.7 times higher respectively than the limits set by the World Health Organisation. With a ph of 1.5, the Kafue had become a river of acid (2).

The Vedanta employee who admitted the company's responsibility was sacked on the spot. The multinational threatened to withdraw advertising from the state-owned daily Times of Zambia if the incident was reported. But the editors stood firm, and the scandal erupted. On the orders of the Environmental Council of Zambia, a public body charged with maintaining standards, Vedanta called a brief halt to its mining activities in Chingola. The company was indignant at losing $2.5m Then business started up again. The price of copper continued to rise, and with it, the pollution.

An unauthorised visit to the massive Vedanta site during the rainy season revealed a vision from Dante's Inferno: 3km from the mines, the pollution control dam was overflowing, spewing copper-coloured water, reeking of acid, into a tributary of the Kafue. "Of course we pollute," said an employee, "but all the mines do." "It was worse in the ZCMM's days," retorted Sampa Chita, director of KCM's social responsibility programme. "We are fed up being blamed. You cannot run a mine without causing pollution."

Vedanta is the only mineral extraction company in Zambia to have a department devoted to "the community". In her empty office, devoid of even a computer, Chita estimated her budget, with some hesitation, at "$12 or $13m". The money is used to fight malaria and HIV/Aids, fund orphanages, pay university fees, dig wells and support the local cricket team - but not the football team. Chita refused to say if this is because Indians prefer cricket to football. But now, for the first time it it's 60-year history, the Chingola copper mines' football team, Nchanga Rangers, has been relegated to the second division.

Chita claimed not to know what her company's profits are. When pressed, she admitted only that her department's budget is tiny given the scale of the problems. "ZCCM had a social outlook - perhaps too social," she added. "We are more focused on results. But is it wrong to want to make money? MInes need a lot of investment, and investors want to make a profit. You have to be realistic." Three months after taking over 51% of KCM's shares in 2004, Vedanta had already made a profit of $25m.

A LACK OF TRANSPARANCY

Lungu is co-author of an astounding report on the privatisation of the copper mines (3). The sale was orchestrated by the International Financinal Institutions (IFIs) - including the World Bank and the International Monetary Fund - under the government of President Frederick Chiluba (4). "ZCCM's privatisation was carried out with a complete lack of transparancy, no debate in parliament, and with one-sided contracts which few of us have ever seen," explained Lungu. "It has never profited the inhabitants of the Copperbelt. Nor its environment."

His view is shared up by Edith Nawakwi, Zambia's former Finance Minister, who oversaw the privatisations. Her testimony says a lot about the behaviour of the IFIs: "We were told by advisers, who included the IMF and World Bank, that not in my lifetime would the price of copper change. All the production models that could be employed were showing that, for the next 20 years, Zambian copper would not make a profit. Conversely, if we privatised, we would be able to access debt relief, and this was a huge carrot in front of us - like waving medicine in front of a dying woman. We had not option to go ahead" (5).

In recent years international media attention has focused on the social responsibility of Chines companies in the Copperbelt. More than 40 years after building the Tanzam railway, linking Zambia to the Tanzanian port of Dar es Salaam, China had made a comeback. The nationalist third worldist ideology of the past (6) has given way to a more pragmatic approach. Beijing is now the third biggest investor in sub-Saharan Africa. But the initial good feelings engendered by China's "win-win" discourse faded in April 2005, when the Chinese dynamite factory (BGRIMM) (7) near Chambishi exploded, killing 52 people. The factory had been contracted out by Non-Ferrous Company-Africa (NCFA), itself a subsidiary of the China Non-Ferrous Metal Industry's Foreign Engineering and Construction Company. Anti-Chinese sentiment hit the roof. The Chinese president Hu Jintao, on an official visit in February 2007, even had to cancel a tour of the mining belt.

Employees of the Chinese mining companies are denied union rights and their conditions are probably worse than for tose working for Canadian, Swiss or South African multinationals. But for all that, Sam Mulafulafu, head of the Catholic Charity Caritas Zambia, says: "It is important to remember it wasn't the Chinese companies who privatised copper." The new globalised Zambia is pursued by companies from every corner of the globe, but in the Bench Marks Foundation, based in South Africa, notes that many of these multinationals apply muchlower standards in terms of health, security and respect for the environment in Zambia than they do in the developed countries where they are based (8).

In January 2008 acid waste from Chingola's mines reached the ground water at Mufulira, around 40km away. More than 800 people in the township adjoining the Mopani Copper Mines (MCM) complained of diarrhoea, abdominal pain and vomiting. The mine is co-owned by teh Swill group Glencore and the Canadian company First Quantum, and the joint venture wasset up with the help of the European Investment Bank.

Accidents like these increase what two young Zambian researchers call the "ecological debt". Economist Nachilala Nkombo and legal expert Brenda Mofya say the environment has been sacrificed on the altar of privatisation: "Unlike the finacial debt, the ecological debt is far larger than Zambia's $7bn financial debt was at its peak" (9).

The mining townships of Mufulira are stark reminders of this ecological debt. One of the worst is Kankoyo, home to 30,000 people, and a canker on an otherwise fertile and verdant landscape. Only two things grow here: avocado trees and cactus. Open sewers, dillapidated shacks with tin roofs corroded by acid rain, abandoned pharmacies, grocers shops with broken windows - the local population maintain these vestiges of the ZCCM's social programme as best they can.

THEY DON'T LISTEN TO US

Kankoya also lies downwind of the smoke spewing out of MCM's blast furnace: on some days the township is smothered in a choking fog. Every year nearly 700,000 tonnes of sulphur dioxide is released into the air. Cholera is common. And unrest grows as unemployment rises. MCM's armed guards sit on plastic chairs on top of the slag heaps, watching out for illegal miners searching for minerals among the waste.

A heavy contaminated air envelops the former hospital where Percy Chanda, MP for Mufulira district and member of the opposition party, Patriotic Front, has his office. "I am not against foreign companies, we need them," he said. "But the way they have behaved on the Copperbelt is very regrettable. Tey don't listen to us. Imagine if you came to my house, and I made you a meal. You would probably offer to help me with the dishses. But here they just sit still at the table, without lifting a finger, waiting for the next course." A former miner, Chanda remembers "the good old days" of ZCCM: a state within a state that looked after every aspect of workers' lives from birth to death. Everything from housing, education and healthcare, to evening classes and sports clubs was run by ZCCM - they would even change your light bulbs, people used to joke.

Chanda was still a miner when Zambia - caught between ZCCM's losses of $713,000 a day and the offer of debt relief - accepted the advice of the IFIs. At that time copper was worth $2500 a tonne (actually it was between $1000 and 2000 per tonne - MrK). A militant member of the mining union during the post-privatisation cutbacks, Chanda finally hung up his miners hat in 2006 when he became an MP: "I have never been able to find out anything about the agreement that was reached on privatisation. Nor about what profits have been made since. I feel I am banging my head against a brick wall."

When copper prices began to rise, Chanda tried to negotiate a pay rise for miners. "They told us we couldn't benefit from the price rise, because they had sold their copper in advance at the previous year's prices. Now they tell us they have to lay us off because of the price drop. But they are still selling at September's priceswhen they were at their peak! But you know it's not safe being in hostile territory, surrounded by your enemies. One of these days they'll regret what they did to us."

EVERYTHING IS FOR SALE

The financial storm has hit the Luanshya copper Mines (LCM), an Israeli-Swiss joint venture registered in the Netherlands, which has just sacked its 1,300 permanent staff. LCM's director, Derek Webbstock, says business will resume when the price of copper goes back up. The atmosphere is gloomy in the mining town. Around 60 policemen have been sent to guard the entrance to the complex, but LCM has already sent its mining equipment - sawhorses and piping cut up into pieces - to South Africa by lorry. Nothing is wasted - it can all be reused and sold.

It is rumoured the Chinese may take over the mine. At the mini-market, customers count their pennies, and worry about Christmas. The local union representative, Boniface Kabwe, has four children. The abruptness of the closure knocked him sideways. "In October some miners tried to borrow money from the local bank, but they were told they didn't have enough security. The bank seemed to know the mine would close before the government did! In fact [the government] was the last to know."

Up to now relations between LCM and the local population have been reasonable. Unlike other mining companies, LCM had kept the road to Luanshya in good repair. In fact the town was voted the cleanest in the Copperbelt last year, in a competition dating back to ZCCM days. Two-thirds of the local council's revenue - more than 1.2bn kwachas ($210,000) in the last six months of last year - came from local taxes paid by LCM. "They told us recently that they had enough funds to stay open despite the financial crisis," says Mutakela Kayonde, a Luanshya town planning official. "It's not just the miners who are affected by the closure. With eight people to a household, it's the whole community." Like an increasing number of people in the Copperbelt, including local correspondents from the national press, Kayonde is beginning to wonder what's going on. Has the collapse in the price of copper given business another opportunity to blackmail Zambia's government?

Last spring the Zambian government finally decided to review its mining contracts. It raised corporate tax from 25% to 30% and tax on profits [turnover/revenue - MrK] went up from a miserable 0.6% to 3%. The World Bank - forced to recognise how modest the Zambian treasury's share had been upto then - supported the measure. Zambia was getting nothing out of the exploitation of its copper reserves, while the multinationals were making a handsome profit. The mining companies had even set up sophisticated systems to avoid paying taxes by channelling their profits through offshore companies in islands like Mauritius. In 2006 Zambia earned $133m from copper exports estimated to be worth $3bn.

Mining companies made $3bn from copper extraction last year. But of the $421mn that should have found its way into Zambian state coffers, only $200mn was actually collected. Even though Zambia has some of the lowest taxes in Southern Africa, the multinationals contested them, threatening to take their disagreements to a commercial court - in their home countries. That was before the risk of redundancies, on the back of falling prices, offered them a new way to put pressure on the Zambian government.

It seems they have achieved their objective. After winning a narrow victory at the end of October 2008, following the death of his predecessor Levy Mwanawasa (10), President Rupiah Banda announced that his government was having discussions with the mining companies - on cutting taxes: "We must ensure that we do not kill the goose that lays the golden egg. There is little point in taking in a few million dollars in tax if thousands of jobs are lost as a result" (11).

Fred M'Membe runs the main Zambian opposition daily The Post, which started up in Chiluba's day. Sporting a South African communist party cap, and going around in a Hummer 4x4, he is now one of the wealthiest and most powerful men in the country, both from his editorials and his stake in the new Zambian economy. "Our government opened the doors wide to foreign businesses, but didn't leave itself the possibility to close them again. The economic policy of a country cannot be dictated by agreements made with private businesses," said the business magnate. "It's true privatisation did create a certain amount of hope. But now the Hollywood movie is over and reality has hit with the global financial crisis. The only solution is for the state to move back into the mining sector. Cooperatives or nationalisation, it doesn't matter. People should be first to profit from the mines."

Kabwe's zinc and lead deposits used to be the richest in Africa. After almost a century of exploitation by the South African giant Anglo-American they were finally abandoned, almost exhausted, in the mid-1990s. Now, despite a campaign to clean up the site funded by the World Bank, this town of 300,000 inhabitants is one of the ten most polluted industrial towns on the planet, according to the Blacksmith institute (12). The average level of lead in the blood of children is reported to be between 5 and 10 times higher than the limit set by the US Environmental Protection Agency.

(1) Their names have been changed.
(2) pH is a measure of how acid or alkaline a solution is. An acid solution has a PH of below seven. [PH goes from 14 or very alkaline/salty, to 1 or extremely acidic - MrK]
(3) Alastair Fraser and John Lungu, "From Whom the Windfalls? Winners and Losers in the Privatisation of Zambia's copper mines", Report for Civil Society Trade Network of Zambia, Lusaka, January 2007
(4) Frederick Chiluba was Zambia's second head of state, between 1991 and 2001. He has been charged with embezzling $500,000 of public funds, and his trial is due to resume this year. [He has just been acquitted of these charges, with others pending unless the present President restores his immunity - MrK]
(5) See "Undermining Development? Copper Mining in Zambia", a joint report by ACTSA, Christian Aid and SCIAF, October 2007.
(6) In the late 1960s President Kenneth Kaunda encouraged the nationalist guerillas fighting white rule in Rhodesia, who were financed by China and the Soviet Union. He nonetheless maintained good relations with the West.
(7) The Beijing General Research Institute of Mining and Metallurgy.
(8) "Mining Companies neglecting social responsibilities," ?22 September 2008.
(9) Ecological Debt owed to African countries, a case of the Zambian mineral extraction industry," September 2008. This report should be available shortly at Afrodad.
(10) The Zambian president Levy Mwanawasa, who was re-elected in 2006, died 19 August 2008 in a Paris hospital. The opposition candidate Michael Sata, popular in the Copperbelt, again lost his bid to be president in the election of October 2008. Now much less critical of Chinese businesses than in 2006, he told me he planned to stand for a fourth time in 2011.
(11) "Zambia may cut mining taxes, President says", Reuters, 16 January 2009
(12) Blacksmith institute.

Labels: FRED M'MEMBE, MINING AGREEMENTS, PRIVATISATION

posted by MrK @ 11:06 PM