MCM workers' protest disrupts Sam Nujoma visit

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The Post reports that a strike by workers at the massive Mopani Copper Mines (MCM) in protest at the failure of wage negotiations to significantly improve salaries has disrupted a meeting between plant management and former Namibian President Sam Nujoma. Having recently retired, the former leader of the SWAPO liberation movement is studying for a degree and the trip to the mines, heavily reported by Zambian and international media, is part of his course. The Post reports, "The Kitwe protest started when Nujoma was in a meeting with Mopani officials which resulted in the cancelling of the meeting and he was whisked away by police."

Workers at both of Mopani's biggest plants, in Kitwe and Mufulira have downed tools to demand a 40% pay increment. MCM employs just below 9,000 permanent workers alongside roughly the same number via sub-contracted firms. Leaders of the two mining unions claim that a 40% hike would reflect the rising cost of living and the mega-profits being made by Mopani as a result of the spike in world copper prices. Management have offered just 16%. Last year workers received a pay rise of 29.5%. Bitterness is also driven by a 25% salary increase recently awarded to senior staff and payments to Peruvian contract drillers at fifteen times the level paid to Zambian workers. As noted in yesterdays blog, Mopani's operating profit for 2005-2006 leapt to $28 million.

As the 'For Whom the Windfalls?' report reveals, although Mopani is one of the better-paying of the Zambian copper mines, it's lowest paid workers currently earn below what the JCTR 'basic needs basket' considers a minimal baseline for survival, in terms of the needs of a worker and their family for food, clothing and basic social services. In an interview with the researchers for the report, MCM Chief Executive Tim Hendeson claimed last year that, ""We've never lost a day to a strike. We haven't been stoned like the Indians. Our neighbours have had far rougher patches than we have." Soon after that interview the company faced a strike by contract workers at the site. Permanent staff have now followed suit.

Mining income to state just $71 million over 5 years

The Times of Zambia report that a question in Parliament has revealed that the Zambian State received just $71 Million in tax from mining companies over the period 2002-2006. This is a statistic that the researchers of 'For Whom the Windfalls?' were unable to access despite repeated questions to the Zambia Revenue Authority and Bank of Zambia.

The fact that Mines and Minerals Deputy Minister Maxwell Mwale was forced to produce the data in response to a question from MP Stephen Katuka (UPND) suggests that opposition parties, strengthened by the 2006 elections may start to put systematic pressure on the Government during any renegotiation of Development Agreements. As discussed by civil society activists during the launch meeting for 'For Whom the Windfalls?', both Government transparency about profits, tax take and other statistics, and social and political pressure on the state for a radical renegotiation would no doubt be extremely helpful to Government in securing the most beneficial renegotiation possible.

The Times report goes on to give considerable further detail: "The MP also wanted to know how much profit the mining companies made in the same period, to which the Mr Mwale said $652,296,093 was made as profit for the companies. The minister said the revenue the Government realised was in form of company tax, withholding tax, dividends and through mineral royalties. He explained that the low levels of company tax in the earlier years was attributed to carry-over losses agreed upon in the development agreements between the Government and mining companies to enable mining firms recover the heavy start-up costs. In 2006, most mining companies had started making positive declarations, hence higher tax figures. Mr Mwale said during 2002-05, there was an increase in the recapitalisation of the mining sector to take advantage of the up-turn in metal prices in the global market. The recapitalisation was tax deductible and, therefore, resulted in significant reduction in company tax. Mining companies did not make profits in 2002 due to various reasons, among them, the fact that the mines had just been privatised and a lot of rehabilitation was in progress and that there were low operating efficiencies and low copper prices."

Interestingly, other opposition MPs pressed the Government on renegotiations of the Mineral Royalty rate and adopted a considerably more aggressive position than the Government's current policy - to raise the level for new investors from the world's lowest - 0.6% to the world average, 3.0%, and to renegotiate with the existing companies towards a similar figure. The Times report, "Mr Katuka wondered why the Government could not increase the mineral royalty tax to about 10 per cent, and Mines Minister Kalombo Mwansa said the Government had already done so but over a longer period this would be considered."

The Times report continues, "The deputy minister also informed the House that Konkola Copper Mines (KCM) made a profit of $113 million during the 2005-06 financial year while Mopani made about $28 million. He was responding to a question by Kantanshi MP Yamfwa Mukanga (PF) who wanted to know how much profit was made by privatised mines on the Copperbelt during the 2005-06 financial year, mine by mine. Mr Mwale said Luanshya Copper Mines made a loss of about $1 million, while Chibuluma Mine made a profit of about $12 million and Chambishi had $385,000 due to cobalt price fall. On how much of the profit was ploughed back into the community mine by mine, the minister said KCM gave about $4 million, Mopani $2 million, Luanshya $361,000, Chibuluma $1 million, Chambishi $966,000 and NFCU$22,000. Lusaka Central MP Guy Scott (PF) wondered whether the special unit under the Ministry of Mines to monitor profits still existed, to which Dr Mwansa said a post-privatisation unit was in place to undertake such a task."

Death in the mines a tragically routine occurence

While discussions continue about strengthening safety and labour regulations in Zambia's copper mines, workers continue to die at a distressing rate. There have been at least two more fatalities and several serious injuries in industrial accidents on the Copperbelt in the past few weeks, with one miner killed at KCM and one at Kansanshi.

Budget announcement - a renegotiation or a smokescreen?

In his budget announcement for 2007, Finance Minister Magande finally unveiled much-trailed increases in Zambia’s mineral royalty rates. Many in Zambia have been anxious to see a bigger share of the mega-profits being made by mining companies reclaimed by the state and used to fund development.

The announcement might have been expected to spark celebrations then as Magande increased the mineral royalty tax from the current 0.6% to the world average of 3%, cut the length of tax holidays for foreign investors, and leveled company tax for foreign owned mining firms at the same level as applies to domestic companies.

However, as the report ‘For Whom the Windfalls?’ warned was likely, the announcement was not quite what it appeared at first. A few days after the announcement, the Government conceded that the new rules would not apply to the companies that currently own the major mines concessions in Zambia, and would apply only to future investors. As IRIN report in a detailed news item (ZAMBIA: Mineral tax increase holds no benefit for citizens), Magande conceded: "The new tax revisions won't affect existing mining companies ... the difficulty we have is that all mining operations have legally binding development agreements. Most of them are actually expanding their operations on the basis of the [existing] development agreements, which contain 0.6 percent as mineral royalties."

All of the major known deposits in Zambia are already being mined for huge profits, are unlikely to change hands while this remains the case, and many will be exhausted by the time the agreements under which they were sold have expired. The budget will not of itself change the facts on the ground – the remains of the country’s most precious resource continue to leave Zambia with minimal benefit to citizens.

Nonetheless, the Government still claims that the existing Development Agreements will also be renegotiated in due time. The phony war of the budget is over. The real battle over renegotiating existing flawed agreements remains in the future.

Chambishi Miners scare off Chinese President

The Chinese President recently completed a whirlwind tour of Africa, including a visit to Zambia. While in the country he announced that the area around the Chinese owned Chambishi mine, the many problems of which are discussed in the report, will be one of the new ‘special economic zones’ for China in Africa. This is considered a reward to Zambia for the proximity of its relationship with China.

The BBC report investment worth $800m is likely to pour in.

"This will go a long way in boosting economic development in our country," Mr Mwanawasa told a joint news conference. Nonetheless, despite the controversy surrounding the treatment of previous investors, the Chinese companies will again be able to operate in the zone with special incentives not available to domestic investors. The BBC report that Chinese firms will not have to pay import or value added taxes. This may not be the full extent of exemptions to Zambian law granted the companies. Time and negotiation of future investment agreements will tell.

While the Zambian Government are thrilled to be amongst China’s favourites, the communities and workers in Chambishi clearly have other ideas about what the investment is likely to bring. As this report in the UK newspaper, The Telegraph, describes, President Hu was forced to call off a planned visit to Chambishi for fear of violent protests. The article notes,

“The smooth red carpet rolled out across Africa last week for Hu Jintao, the Chinese president, did not quite reach the gates of Zambia's Chambishi copper mine. His plans to make an official visit yesterday to the plant, which re-opened under Chinese state ownership eight years ago, fell victim to a hitch he rarely encounters at home: the not-so-grateful worker. Tipped off that miners were threatening protests about poor pay and conditions, Mr Hu changed his schedule, leaving the podium - specially built for the occasion - ungraced with his presence.”

The Telegraph article also quotes from ‘For Whom the Windfalls?’ and includes some nice pictures taken around Chambishi.

Media responses to the report launch

The day after the report was launched, the editorial of The Times of Zambia, the country’s main state-controlled newspaper was dedicated to the discussion of mining, and was very positive about the report.

The article, 'Zambia: Watch the Mining Sector', says, “We appeal to all stakeholders to take this magnificent piece of work seriously.”

Flattering as that may be, the editorial read as though Government and civil society were in agreement on the current situation and appropriate policy responses. “Mines Deputy Minister Maxwell Mwale outlined this in Lusaka yesterday when the Zambia Copper Mining Industry research report was made public at Pamodzi Hotel. The minister was categorical when he stated that no Zambian employee should be engaged on a casual contract since there were positive gains that the mining sector was currently enjoying. Indeed there is not reason why some Zambians should be engaged on a daily basis at a time when copper and other minerals are selling at record high prices on the world market.”

Well, we can agree about that. But the Deputy Minister announced no new policies and appeared broadly satisfied with progress in the sector. Clearly there are reasons why casualisation continues apace on the Copperbelt – not least the weakness of both current legislation and implementation - both responsibilities of his Department.

The Post newspaper also included a lengthy news review of the launch meeting. In an article titled, 'Zambia's mineral royalties' that appeared on February 6th, the Post quoted both authors and the report itself at length.

Report Online

At long last the report is finally up online. Go here to download it.

Apologies for the lengthy delay. This was caused by technical problems.