The Post reports that Zambia Consolidated Copper Mines – Investment Holdings (ZCCM-IH) has requested the government to extend the Copperbelt Environmental Project (CEP).
The CEP project was supposed to have come to an end this month.
In an interview, ZCCM-IH chief executive director, William Musama confirmed the request for an extension of the project to 2010.
He explained that this was to enable the company exhaust the money for the project.
The government borrowed from World Bank and Nordic Development Bank to finance historical mining environment liabilities arising from past mining operations.
Musama further said the environmental concerns were still of great concern hence the need to extend the project.
“The levels of lead pollution are still of great concern and the period was also too short to address all environmental issues,” he said
Musama however said even the money from the donors was not enough to address all concerns of lead pollution.
He said the approval of the extension would enable them implement a number of projects in former mining towns aimed at mitigating the impact of lead especially in Kabwe and Copperbelt towns.
Musama disclosed that the government had already started the process to extend the CEP project.
Friday, 18 July 2008
Tuesday, 15 July 2008
What role for chiefs?
Cho's Zambian Economist blog has an interesting discussion on the potential role of traditional authorities in the mining sector, following recommendations from the Commonwealth Parliamentarians Assocation that chiefs be more involved in the licensing process. Choo also posts a very useful history of chieftancies in general.
The Times of Zambia run the original story.
Nigerian Parliamentarian, Hycienth Nyakuma, who was in the CPA delegation which toured Konkola Copper Mines (KCM), Mopani Copper Mines (MCM) and the mines in Chambishi, said it was important to put in place legislation for traditional rulers to have authority when giving investors mining rights in areas that fell under their jurisdiction. The team had parliamentarians from South Africa, England, Malawi, Mozambique, Nigeria and Zambia. CPA chairman, Mninwa Mahlangu, said in Solwezi that the multi-million dollar Lumwana project in North-Western Province has proved that Africa can look after itself. Mr Mahlangu, of South Africa, said yesterday after the tour of Lumwana that the mine gave African spirit because it involved many countries.
"The mine has given a stake to African countries; this gives African spirit and flavour and it shows that as Africans we can look after ourselves." He said he was impressed that while big companies tended to bring own workforce, Lumwana Mining Company had created a database of the local people who were given top priority for jobs.
Wildcat strikes at KCM
Further evidence of the chaotic nature of labour relations in Zambia's copper mines. It seems barely a single pay round can proceed without a wildcat strike, police intervention and a round of contested sackingsof rank and file workers operating beyond the control of trade union leaders. The latest trouble has been at Vedanta Resources' Konkola Copper Mines, the largest of all Zambia's mining companies, and the pacesetter for all other pay settlements. Negotiations seem finally to have concluded with the two mining unions with management enforcing a15% deal after a wildcat strike and protests sufficiently serious to close the plant temporarily and lead to the deployment of riot police as workers refused to trust their own union representatives, let alone management.
In another demonstration of the reliance of the companies on the physical force of the Zambian state to maintain order, Miners were temporarily excluded from the plant and their gate passes confiscated. Police officers then picked a number of workers up from their homes at midnight. They were taken to the plant, where they were interrogated.
Africa News reported that although the strike is now over, 12 workers have since been fired.
The Post reports that the status of those workers remains a sticking point for the union and is under discussion with the company. This story includes the greatest details of the complex final settlement.
Afrol News The Daily Mail and the The Times of Zambia cover the same story
MINE Workers Union of Zambia (MUZ) general secretary Oswell Munyenyembe told The Post: “We must protect our members. We do not know whether any one of the workers was charged before any dismissals were issued. One has to be charged first before being dismissed.”
KCM spokesperson Sam Equamo claimed the workers were disciplined because they disrupted operations without giving chance to their union leaders to brief them on what had been negotiated with KCM management. The workers themselves described their treatment as a serious violation of their human rights and urged the government to intervene.
In another demonstration of the reliance of the companies on the physical force of the Zambian state to maintain order, Miners were temporarily excluded from the plant and their gate passes confiscated. Police officers then picked a number of workers up from their homes at midnight. They were taken to the plant, where they were interrogated.
Africa News reported that although the strike is now over, 12 workers have since been fired.
The Post reports that the status of those workers remains a sticking point for the union and is under discussion with the company. This story includes the greatest details of the complex final settlement.
Afrol News The Daily Mail and the The Times of Zambia cover the same story
MINE Workers Union of Zambia (MUZ) general secretary Oswell Munyenyembe told The Post: “We must protect our members. We do not know whether any one of the workers was charged before any dismissals were issued. One has to be charged first before being dismissed.”
KCM spokesperson Sam Equamo claimed the workers were disciplined because they disrupted operations without giving chance to their union leaders to brief them on what had been negotiated with KCM management. The workers themselves described their treatment as a serious violation of their human rights and urged the government to intervene.
Local Trust Funds
Sorry for some delays in posting recently. Here's an interesting article from The Post covering both the proposal for local trust funds and a discussion on licensing delays - I assume that is what the reference to giving companies a year to comply is to.
DEPUTY mines minister Maxwell Mwale has said the government will soon establish trust funds that will make mining companies contribute funds towards the sustainability of local communities.
And the ministry of mines has granted a grace period of one year for the implementation of the new mines and minerals development Act that came into effect on 1 April 2008 in order to allow stakeholders to comply with new requirements.
Mwale said the trust funds would be controlled and managed by the communities themselves.
"We are in the process of establishing community trust funds where mining companies will contribute towards the sustainability of the communities in which the mines operate from and these trust funds will be administered by the communities themselves," he said.
Mwale also said the government was currently improving laboratory facilities at the Mines Safety Department (MSD) in order to enhance efficiency and higher standards.
And director of mines in the Ministry of Mines Gerhad Kangamba stated that the new Act became law on April 1, 2008 but the government granted a transition period of one year from April 2008 to March 2009.
"During the transition period all holders of mining rights and non-mining rights and firms operating mineral analysis, geological or mining consultancies are expected to fully comply with the requirements of the new law," Kangamba stated. "And all holders of renewed licences that do not conform to the Act should resubmit fresh applications to comply with the new law by 1 April, 2009."
Amongst other provisions, the new Act would require that all holders of gemstone licences, mining licences and mineral processing licences obtain annual operating permits from the MSD, meaning that an entity could not operate even if it has a mining licence.
Also all mining rights for industrial minerals shall only be granted to citizens of Zambia and citizen-owned companies.
Other requirements would be that all small scale mining licences, including gemstone and prospecting permits shall only be granted to Zambian citizens and citizen-owned companies.
It is expected that all mining and non-mining rights granted under the repealed Act of 1995 shall cease to be valid by April 2009.
Friday, 4 July 2008
Chinese 'push factors' and the EITI in Zambia
Dear readers,
I wanted to add some comments on some recent MWZ postings.
FIRST POINT – Chinese government involvement with SOEs and individuals in Zambia
My first point is regarding Chinese investment in Zambia, and the question of support from the Chinese government. In the blog from 24 May 2008, Alastair asks the question of which push factors are at play behind Chinese investment into Zambia, citing an article by Richard Behar in Fastcopany.com where the author cites interviews with two Chinese brothers who claim that ‘if we invest a certain amount abroad, we can qualify for a zero-interest loan’. I just returned from China where I have tried to get to the bottom of this ‘state-financing’ question through interviews with representatives of the Chinese Ministry of Commerce, CITIC Group (one of the large state-owned banks). I’ve also spoken to a private entrepreneur I was lucky to meet in Kitwe last year when he was there to try to buy copper ore to export to China. All these people have been very clear that no, private companies cannot get below-market (preferential) loans.
Also, it seems that the only Chinese banks that provide below market financing or investment guarantees for overseas projects are what people refer to as the Chinese ‘policy banks’, of which there are three: Exim Bank, China Development Bank, and the Rural Development Bank. The latter two have historically been focused on providing credit to domestic projects (although CDB is now looking to start funding projects abroad), leaving Exim Bank as the main policy bank to provide concessional financing for overseas projects. It thus seems that we should be cautious in assessing the Chinese government’s role in financing/subsidising private ventures abroad, in the sense that with exception of Exim Bank, other Chinese banks, albeit state-owned, do not provide below-market financing. And with regards to private investors, interviews here in China suggests that this ‘push factor’ is completely absent.
Regarding political protection and support given by Chinese diplomats, again, I think that dynamic does exist with the SOEs (am less sure about the privateers). My interviewees say that yes, if there is a conflict, the company may go to the Chinese Embassy, to ask the Ambassador to speak to relevant government officials. Whether this happens more (or in a different way) compared to the way e.g. the French oil company Elf Aquitaine in DRC would ask the French Ambassador for help in discussing sensitive issues with government is open to question. However, we can probably safely say that any state-owned company is likely to make *more* use of this diplomatic channel of influence.
Moving away from the Chinese state for a moment and just looking at the relationships between SOE-employees and ‘private’ Chinese e.g. in Zambia, I have personally been interested in whether the two groups interact much, whether the SOE representatives may somehow broker relationships or support the smaller guys, and whether there are emerging networks of overseas Chinese in countries such as Zambia. My friend the copper traders noted that, yes, the Chinese in Zambia do know each other, congregate at Chinese restaurants in Kitwe and so on, but he emphasised that they (in his experience) do not talk much about business. The main reason he gave was that Chinese private entrepreneurs in Zambia are generally in direct competition with each other, and this cut-throat competition (which comes out very strongly as well when visiting mainland China) means that business contacts/connections are generally not what the talk about. They may, however, talk to each other about administrative stuff, how to go about getting a business visa extension, who has a vehicle for sale, and share some experiences in working with Zambians. Finally, he also said that now, following the new fiscal regime which places a 15% tax on the export of copper ore, most Chinese ore traders (and there used to be, according to him, “so many” of them) have gone home – apparently his profit margin was only about 10%, so this business is no longer profitable.
SECOND POINT – EITI and the potential for a ‘local development fund’
Regarding the EITI discussed in the blog dated 25 of May, where a Daily Mail article is cited in which Minister Mwanza talks about GRZ having asked the World Bank to do a scoping study. I wanted to clarify something: this scoping report was carried out during the fall of 2007, partly by WB staff and partly by a researcher at the Copperbelt University. According to the latter, mining companies were in general very positive towards it, something which also comes out in the scoping report... The GRZ told the WB in early 2008 that they had agreed to make the report public, but I have not seen anything in the press about ‘launching’ this report to a wider public. Still, the WB told me that this document is now public, so here it is (have tried to upload it with this blog posting).
Regarding the possibility of earmarking some of the taxes for local development, the idea of establishing a ‘Local Development Fund’ was on the agenda throughout the second half of 2007, and several mining companies frequently told me that such a set up would be seen as something the GRZ could ‘give back’ to the mining companies (who had argued that ‘yes we are very willing to renegotiate, but that it should be a two-way process’). Mining companies, through a CoM submission on the 2007 budget, even proposed a structure: 60% to central government, 20% to local government, and 20% directly allocated to community development. However I don’t know what the GRZ’s response was, or what the current status is, though I suspect that the conversation has halted on the back of adversarial relations.
THIRD POINT – Labour standards and contractors
Finally, I wanted to add my two cents to the criticisms of NFC Africa’s labour standards, for instance raised in Mr Behar’s Fastcompany.com article linked to on this blog. To maintain perspective, let us not forget that even if NFC Africa pays the lowest salaries of the big mining houses, it is not the case that people on K4-800k per month do not exist at KCM or MCM! There are contractors, for example Mpelembe Drilling and Prosec, who are very active at KCM and MCM but who pay their workers similar wages to what NFC Africa pays. When I was in Zambia in the fall of 2007, about half of the 16,000 people working on MCM’s premises were contractors, so in absolute terms the number of people with unacceptably poor conditions of service may be greater at KCM and MCM compared to NFC Africa! This does of course not absolve anybody from failing to provide descent working conditions, but I think it does put the singling-out of the Chinese into perspective.
One might think that companies would see it in their interest to ensure contractor workers are adequately paid, as strikes over terms and conditions might affect the companies operations… However, those who favour this argument should bear in mind that the threat of disruption due to work stoppage is not so great when a mining operation is in development, as mining managers have scope to accelerate/re-shuffle development activities if these stop for a while due to industrial action. When the mine is in production, however, it is a different story, as any work stoppage then has direct implications for profits. However, and conveniently for mining companies, contractors are mainly used during the development non-core phase, which can explain why they see little value in forcing higher standards upon their contractors (and thus higher costs upon themselves).
Personally I think a big reason for why the Chinese might be more exploitative of Zambian workers relates to the time preferences of Chinese investors. When an investor (big or small) comes to Zambia, if they are there for the short-term, they will not be averse to sowing seeds of future discontent. And there seems to be very high turnover of the smaller Chinese moms-and-pops traders on the Copperbelt, as well as for NFC Africa. At the latter firm, company managers are generally there for a three-year period before going back to China, with a Zambian employee complaining that he is constantly “having to train a new Chinese manager”.
Any alternative takes on this would be welcome! Thanks for a great blog.
Dan Haglund
University of Bath
dan.haglund@gmail.com EITI%20Scoping%20Report%20-%20November%202007-1.doc
I wanted to add some comments on some recent MWZ postings.
FIRST POINT – Chinese government involvement with SOEs and individuals in Zambia
My first point is regarding Chinese investment in Zambia, and the question of support from the Chinese government. In the blog from 24 May 2008, Alastair asks the question of which push factors are at play behind Chinese investment into Zambia, citing an article by Richard Behar in Fastcopany.com where the author cites interviews with two Chinese brothers who claim that ‘if we invest a certain amount abroad, we can qualify for a zero-interest loan’. I just returned from China where I have tried to get to the bottom of this ‘state-financing’ question through interviews with representatives of the Chinese Ministry of Commerce, CITIC Group (one of the large state-owned banks). I’ve also spoken to a private entrepreneur I was lucky to meet in Kitwe last year when he was there to try to buy copper ore to export to China. All these people have been very clear that no, private companies cannot get below-market (preferential) loans.
Also, it seems that the only Chinese banks that provide below market financing or investment guarantees for overseas projects are what people refer to as the Chinese ‘policy banks’, of which there are three: Exim Bank, China Development Bank, and the Rural Development Bank. The latter two have historically been focused on providing credit to domestic projects (although CDB is now looking to start funding projects abroad), leaving Exim Bank as the main policy bank to provide concessional financing for overseas projects. It thus seems that we should be cautious in assessing the Chinese government’s role in financing/subsidising private ventures abroad, in the sense that with exception of Exim Bank, other Chinese banks, albeit state-owned, do not provide below-market financing. And with regards to private investors, interviews here in China suggests that this ‘push factor’ is completely absent.
Regarding political protection and support given by Chinese diplomats, again, I think that dynamic does exist with the SOEs (am less sure about the privateers). My interviewees say that yes, if there is a conflict, the company may go to the Chinese Embassy, to ask the Ambassador to speak to relevant government officials. Whether this happens more (or in a different way) compared to the way e.g. the French oil company Elf Aquitaine in DRC would ask the French Ambassador for help in discussing sensitive issues with government is open to question. However, we can probably safely say that any state-owned company is likely to make *more* use of this diplomatic channel of influence.
Moving away from the Chinese state for a moment and just looking at the relationships between SOE-employees and ‘private’ Chinese e.g. in Zambia, I have personally been interested in whether the two groups interact much, whether the SOE representatives may somehow broker relationships or support the smaller guys, and whether there are emerging networks of overseas Chinese in countries such as Zambia. My friend the copper traders noted that, yes, the Chinese in Zambia do know each other, congregate at Chinese restaurants in Kitwe and so on, but he emphasised that they (in his experience) do not talk much about business. The main reason he gave was that Chinese private entrepreneurs in Zambia are generally in direct competition with each other, and this cut-throat competition (which comes out very strongly as well when visiting mainland China) means that business contacts/connections are generally not what the talk about. They may, however, talk to each other about administrative stuff, how to go about getting a business visa extension, who has a vehicle for sale, and share some experiences in working with Zambians. Finally, he also said that now, following the new fiscal regime which places a 15% tax on the export of copper ore, most Chinese ore traders (and there used to be, according to him, “so many” of them) have gone home – apparently his profit margin was only about 10%, so this business is no longer profitable.
SECOND POINT – EITI and the potential for a ‘local development fund’
Regarding the EITI discussed in the blog dated 25 of May, where a Daily Mail article is cited in which Minister Mwanza talks about GRZ having asked the World Bank to do a scoping study. I wanted to clarify something: this scoping report was carried out during the fall of 2007, partly by WB staff and partly by a researcher at the Copperbelt University. According to the latter, mining companies were in general very positive towards it, something which also comes out in the scoping report... The GRZ told the WB in early 2008 that they had agreed to make the report public, but I have not seen anything in the press about ‘launching’ this report to a wider public. Still, the WB told me that this document is now public, so here it is (have tried to upload it with this blog posting).
Regarding the possibility of earmarking some of the taxes for local development, the idea of establishing a ‘Local Development Fund’ was on the agenda throughout the second half of 2007, and several mining companies frequently told me that such a set up would be seen as something the GRZ could ‘give back’ to the mining companies (who had argued that ‘yes we are very willing to renegotiate, but that it should be a two-way process’). Mining companies, through a CoM submission on the 2007 budget, even proposed a structure: 60% to central government, 20% to local government, and 20% directly allocated to community development. However I don’t know what the GRZ’s response was, or what the current status is, though I suspect that the conversation has halted on the back of adversarial relations.
THIRD POINT – Labour standards and contractors
Finally, I wanted to add my two cents to the criticisms of NFC Africa’s labour standards, for instance raised in Mr Behar’s Fastcompany.com article linked to on this blog. To maintain perspective, let us not forget that even if NFC Africa pays the lowest salaries of the big mining houses, it is not the case that people on K4-800k per month do not exist at KCM or MCM! There are contractors, for example Mpelembe Drilling and Prosec, who are very active at KCM and MCM but who pay their workers similar wages to what NFC Africa pays. When I was in Zambia in the fall of 2007, about half of the 16,000 people working on MCM’s premises were contractors, so in absolute terms the number of people with unacceptably poor conditions of service may be greater at KCM and MCM compared to NFC Africa! This does of course not absolve anybody from failing to provide descent working conditions, but I think it does put the singling-out of the Chinese into perspective.
One might think that companies would see it in their interest to ensure contractor workers are adequately paid, as strikes over terms and conditions might affect the companies operations… However, those who favour this argument should bear in mind that the threat of disruption due to work stoppage is not so great when a mining operation is in development, as mining managers have scope to accelerate/re-shuffle development activities if these stop for a while due to industrial action. When the mine is in production, however, it is a different story, as any work stoppage then has direct implications for profits. However, and conveniently for mining companies, contractors are mainly used during the development non-core phase, which can explain why they see little value in forcing higher standards upon their contractors (and thus higher costs upon themselves).
Personally I think a big reason for why the Chinese might be more exploitative of Zambian workers relates to the time preferences of Chinese investors. When an investor (big or small) comes to Zambia, if they are there for the short-term, they will not be averse to sowing seeds of future discontent. And there seems to be very high turnover of the smaller Chinese moms-and-pops traders on the Copperbelt, as well as for NFC Africa. At the latter firm, company managers are generally there for a three-year period before going back to China, with a Zambian employee complaining that he is constantly “having to train a new Chinese manager”.
Any alternative takes on this would be welcome! Thanks for a great blog.
Dan Haglund
University of Bath
dan.haglund@gmail.com EITI%20Scoping%20Report%20-%20November%202007-1.doc
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