The Lusaka Times (http://www.lusakatimes.com/?p=2263) reports today that fifty Chinese companies plan to invest over $800 million in a tax free zone in Zambia within the next five years under an agreement to be signed shortly.
Trade and commerce minister Felix Mutati said on Tuesday that Zambia and China would sign an investment deal to allow foreign companies, mainly from China, to start construction at the Multifacility Economic Zone (MFEZ) in Chambishi. An agreement is expected soon for the companies to start setting up in May. Mutati said there was a change in policy, “Initially we had agreed that this should only be a Chinese zone, but they (Chinese) want other foreign firms to come and invest in the multi-facility economic zone... We are looking for a cocktail of companies that will add value to our raw materials to use the Chambishi zone. China is helping to attract other foreign companies on our behalf.”
Preliminary data provided by China indicated that the Chambishi zone would generate in excess of $900 million per year in turnover by firms that would invest in the processing of copper into finished products. Zambian officials have not given details on which Chinese companies would invest in the zone but China Non-Ferrous Metals (Group) Co Ltd. is one of them.
Mutati said the Chambishi zone, which should be fully functional within five years, would initially create 6,000 jobs and offer incentives such as tax relief and easing customs duties on imported equipment and machinery. Zambia’s government would build roads and set up telecommunications, and water facilities in the zone.
It's an interesting moment to make these announcements, and Zambia should certainly be seeking to process more of its copper in country and to create more jobs around the mines in linked industries. At the same time, however, three questions raised by the idea of a multi-facility investment zone are particularly sharp at the moment in Zambia.1) To what extent should Zambia incentivise investment by offering tax breaks, easing customs and building infrastructure. The disastrous 'Development Agreements', signed with mining companies 8 years ago, are currently in the process of being revised. One of the major problems with them, recognised by almost everyone including the Zambian state, is that they offered too many tax incentives and customs exemptions to investors such that the Zambian state did not benefit financially from their presence.
2) If the Zambian state is also going to pay for the construction of the infrastructure needed to make the firms profitable, why should it not sting them for the costs of this provision. Zambian economist has some interesting reflections on this question on his blog today (http://zambian-economist.blogspot.com/2008/03/free-riders.html).
3) How should Zambia regulate the behaviour of investors on labour, environment, health and safety? Again in relation to previous Development Agreements, 'incentives' - in other words exemptions from the normally operative laws of Zambia, mandated by Parliament - have been at the heart of social and political tensions between investors and workers and communities on the Copperbelt. Would the Multi-Facility Zone offer any exemptions in these areas, explicit or implicit (while part of the problem on the Copperbelt has been the poor regulatory framework, as many problems stem from the perceived protection and impunity offered companies breaking labour laws by the Zambian state). Some of these issues are currently receiving renewed attention, but how can we ensure they don't recur in this case?
A) As the Lusaka Times notes in another story (http://www.lusakatimes.com/?p=2259) today, miners at the Chinese Collum Coal Mine (CCM) have continued with their strike action led by the Gemstone and Allied Workers Union of Zambia (GAWUZ) . The strike has entered day five since Friday last week when workers refused to go underground until the Chinese management effect the new salary increment that was signed in September 2007. The GAWUZ President Mr. Nyumbu said after the strike management decided to increase salaries by K1000 which was far below the agreed amount and the workers have rejected it. He also revealed that in their desperation to have the workers get back to work, the Chinese connived with the Sinazeze police to arrested three workers who they alleged to have incited others to go on strike. “The situation is purely a violation of industrial matter the police should not get involved if the workers are peaceful,” he said. Mr. Nyumbu noted that Management was also imposing on the workers to belong to a union that they wanted but they have rejected. That's a clear violation of basic labour rights for workers to select their own trade unions. On Friday the miners said they do not want to belong to the Mine Union of Zambia (MUZ) because they failed to improve their conditions of service with management.
B) The Lusaka Times also picks up on the ongoing strike at Chambishi Smelters, which has resulted in violent confrontations between workers and Chinese management. (http://www.lusakatimes.com/?p=2260) Further detail emerges from a report in the Daily Mail. The comments from readers below each of the Lusaka Times stories are well worth reading to get some sense of the tone and content of the debate on this issue in Zambia.
National Union of Miners and Allied Workers (NUMAW) Branch Secretary, Steven Kabwe described the situation at the plant as serious. The Daily Mail reports that three workers, two Zambian and one Chinese, sustained severe injuries in a riot that erupted following a protracted labour dispute at Chambishi Copper Smelter (CCS) in Kitwe yesterday. The fracas between unionised workers and senior management staff at the Chinese-owned copper smelter under construction lasted several hours and left one Chinese worker without teeth after he was stoned on the mouth. Riot police from Kitwe, Chambishi and Kalulushi were called in to quell the situation.
CCS company secretary, Sun Chuanqi, said the company had not refused to address the workers’ demands and was therefore disappointed by the unrest that turned violent. “The process of negotiation is still going on. We have not refused to meet their demands in any way. We are still negotiating, but I must state that we are disappointed that the workers damaged company property,” Mr Chuanqi said.
Workers rioted and damaged infrastructure worth millions of Kwacha. They set ablaze infrastructure and fought with police for several hours. The damaged property included a tractor, a security checkpoint, a crane, rear gate, Chinese workers’ hostels and a water tanker. The protesting workers attempted to set ablaze a company bus before police contained the situation. The workers blocked all the roads leading into the company premises and demanded that their pay be increased by over K800,000. Workers’ representatives said the K291,000 workers were paid per month was not enough to sustain them and demanded a minimum of K1.2 million for the lowest paid.
The incident demonstrates the degree to which Chinese investors have struggled to secure any kind of social license to operate in the communities theat surround the plant and are reliant on the security, but also the political cover provided by the Zambian state to continue their operations.
Mike Mulongoti who is Minister of Information and Broadcasting Services said in an interview, “They may have genuine reasons, but then it might be difficult to sympathise with them because they have damaged company property. The owners of the company may one day decide to relocate somewhere else and that property will belong to them, the Zambian people,” he said. “As Government, we don’t condone such destructive behaviour.”
Copperbelt permanent secretary Jennifer Musonda who rushed to the scene condemned the workers for damaging company property. Mrs Musonda said management had since asked all the Zambian workers at CCS to stay away from work until investigations to establish what caused the confusion were concluded. She said management would take action against the ringleaders once they were identified as the ones who led the violence. “What has happened is shameful, but as Government, we would like to assure the Chinese people and Government of our continued support and that their investment is protected.”
The editorial of the Government owned Times of Zambia declares itself 'perturbed' by that it describes as an 'orgy of destruction' and finds the workers' actions 'puzzling' is the workers' stance to take the law into their own hands when CCS management and the National Union of Mines and Allied Workers (NUMAW) are ready to renegotiate the disputed working conditions.Reuters also report the same incident. NUMAW Secretary Albert Manda said, "Police have managed to calm the situation, but the workers are still gathered outside the smelter ... They are demanding improved conditions of service and better salaries," said Mando. NUMAW General Secretary declined to state how much workers at Chambishi were paid, but confirmed they were demanding salaries ranging from $325 to $400 per month. A government official close to the negotiations told Reuters workers were now paid about $80 in monthly pay.
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