Chambishi Wildcat Strike Over?

Reuters reports that, following talks with management, the 500 striking workers building the Chambishi Smelter have returned to work. The strikers downed tools and blockaded the plant last week in support of demands for better wages and holiday and transport allowances. Information on the talks is very hazy, and it is unclear whether any deals on pay and conditions were reached. Management offered no comment, and the workers are operating outside of any formal union structure. Commodity Online newsletter suggests workers were demanding a 40% pay increase.
The strike highlights the peculiarities of employment practice at Chinese owned plants around Chambishi as well as failures of labour law and union representation on the Copperbelt. A number of these isssues are discussed in greater detail in the 'For Whom the Windfalls?' report.

• A strikingly low number of workers in Chambishi are on formal, permanent contracts.
  
• Most workers are employed on a temporary basis via labour brokering agencies, and work on much lower wages than those performing similar work in unionised workplaces. Protesters this week taregted the local labour office as well as the mine management.
  
• Organising and forcing management to recognise trade unions in workplaces is especially difficult given 1) management attitudes to unions, particularly in Chinese managed mines, and b) the legal framework in place.
  
• Actually striking on a legal, official basis is also almost impossible.
  

Admirably, Zambian miners have not allowed these issues to get in the way of collective action to press for improved pay and conditions - it simply means that most industrial action happens outside of formal union processes, even in unionised mines. Industrial actions at KCM and MCM last year both involved local branches and members of the National Union of Mineworkers (NUM) organising wildcat actions, and head office of the NUM, which was unable to formally endorse or organise the strike, doing some of the negotiating with management.

In the case of Chambishi mine a small number of workers are held on 'old' NUM contracts while all workers employed since NFC-A took over the plant are not. A breakaway union from the NUM, NUMAW, has been trying, in the face of management blockages, to organise the rest of the workforce. The situation was reflected in comments from Albert Mando, NUMAW general secretary, who told Reuters. "The strike has ended, but we are not sure if they have struck a deal."

Chambishi Smelter, which will cost more than $200 million to construct, is part of China's planned $900 million investment in the mining town of Chambishi, which the government has turned into a tax free economic zone to attract Chinese investment.

Congratulations ECZ!

Today we have encouraging early signs that an effective, transparent and toothy regulatory system may be emerging in Zambia. Sadly, the news comes on the back of more evidence that companies have thus far been behaving on the assumption that the regulators have no teeth and that investors are untouchable. That would fit with yesterday's comment by Edward Zulu, Director of the Environmental Council of Zambia (ECZ) that, although Zambia has an effective legal framework, the ECZ has not had the capacity to enforce its own rules. Today we find out from a report in The Post that the ECZ wrote to Mopani Copper Mines following an earlier spill in April 2005, informing them that they were in breach of the terms of their Environmental Impact Assessment. The company seems to have ignored that message and the ECZ appears not to have done anything further to follow up with the company.

However, things may be changing. The Post reports today that not only has the ECZ ordered Mopani Copper Mines (MCM) to suspend operations of its leach plant, it has also charged MCM for polluting the environment and has asked the company to meet all costs relating to repairing any damage caused to human health or the environment.

ECZ communications officer Chama Nyendwa gave The Post significant detail on the spill, the conditions written into MCM's Environmental Impact Assessment, and the aspects of the agreements it had breached.
“On Wednesday 2nd January 2008, there was a spillage of Pregnant Liquor Solution (PLS) from the In Situ leach at the 430 meter level. The PLS ended in the water sumps located at the 830-metre level. The water from these sumps is pumped to the surface where it is treated by Mulonga Water and Sewerage Company for use as domestic water to former mine townships in Mufulira... This discharge was as a result of failure by Mopani to operate the In Situ leaching operations in accordance with the approved Environmental Impact Assessment of the project and conditions contained in the decision letter therein... In the approved EIA, Mopani was to operate with emergency storage to impound all excursions; sufficient online and standby pumping capacity was to be installed underground to handle the solutions. Inspections revealed that the discharge was a result of non-availability of standby pumping system and no emergency ponds to contain spillages.”

Nyendwa stated that ECZ had previously written to MCM reminding them of their responsibility towards preventing pollution following the pollution incident of April 2005 and that ECZ was disappointed that adequate measures had not been put in place to avoid recurrences.

ECZ has charged MCM for polluting the environment in breach of the Environmental Protection and Pollution Control Act (EPPCA) and non-compliance to the commitments that it made after the pollution incident of April 2005. ECZ has further charged MCM for not reporting the pollution incident promptly contrary to part seven section 86 (1) of the EPPCA which states that “a person who inadvertently or accidentally causes or witnesses an act causing pollution of any aspect of the environment shall without delay report to the inspectorate or the police or a local authority.

ECZ shows its teeth - suspends MCM leach plant

Following last week's acid spill, Reuters report that the Environmental Council of Zambia (ECZ) have ordered Mopani Copper Mines (MCM) to suspend operations at its leach plant after failing to meet environmental standards.

ECZ Director Edward Zulu, is quoted as having told state television: "We did write to Mopani yesterday telling them to suspend the leach (plant) project until they implement what is in the environmental impact assessment report." The ban comes only days after the government summoned Mopani officials to explain what authorities described as acid contamination in drinking water pumped to residents in a mining area.

The UN's IRIN Newsletter has also picked up on the story. They quote Zulu arguing, "We are deeply concerned at the manner in which our mining companies are violating environmental laws. Our laws are sufficient but implementation is the biggest problem... Every time an accident happens it is a question of people being negligent, or the machines being manned by unqualified people. We will now be forcing all mining companies to follow the law to the letter, and the penalties might include closures of some erring mines as a deterrent to other would-be offenders."

Contrary to one of my recent posts that suggested the ECZ and KCM came to an 'amicable settlement' over the Kafue River pollution incident, IRIN reports, "KCM had its operating licence suspended for 10 days after the water pollution episode in 2007, and was instructed to install new environmental safety measures. The company reportedly lost $26 million during the suspension period."

Frederick Bantubonse, director of the mining houses representative boby the Chamber of Mines told IRIN, "Inasmuch as we don't condone the pollution of the waters, closing a mine, even for a single day, would not be any good for the country's development. We should just work at ensuring such accidents are minimised, because they are accidents, and no one plans or wishes for an accident to occur." He acknowledged that "The issue of polluting the water is very critical and we need to play a role in fighting it. We are finding it extremely difficult to tackle such problems because of lack of funds."

ECZ says Mufulira residents could sue MCM

The Post reports, "ENVIRONMENTAL Council of Zambia director Edward Zulu has said Mufulira residents affected by water pollution could sue Mopani Copper Mines (MCM) if it is established that the contamination was due to negligence... We need to establish what led to the pump failure. Once we establish it was negligence, we could take direct action first by recommending the improvement of the system slapping penalties on employees involved and if the employees deny being negligent they could be prosecuted and if found liable could face prison sentences of up to three years,” Zulu said.

Readers excited by the emergence of a more aggressive regulator are reminded we saw similar rhetoric following the spill at KCM last year, and then strikingly little action by ECZ which eventually reached an 'amicable settlement' with the ECZ (have a look in the blog archives 30 March 2007 if interested).

Local MP Hon Mukanga suggests popular pressure on the state is the way forward: "We are worried with these investors: they have just come to kill our people. If government does not take any measure against Mopani, I am personally going to sue them,’’ said Mukanga.

In contrast to to Mukanga's focus on MCM, local campaigner Peter Sinkamba of Citizens for a Better Environment, focused on the responsibilities of Mulonga Water and Sewerage Company who, he argues, should have cleaned the contaminated water before supplying it to residents. ‘’If it is to sue, Mulonga should be sued for causing personal injury to people who consumed the water.’’ said Sinkamba.

The report also states that water is now flowing again through cleaned mains pipes.

Projected ramp-ups in production - a reason to rejoice?

Dear Mine Watch Zambia,

Thank you for the 2008 New Years wishes and reflections, and plenty of recent and informative postings.

I wanted to add my two cents on something you discussed in the posting of 22 Nov 2007. You discussed some comments made by Minister Magande re the how the mines will only be making “maximum profits” in about ten years time, suggesting that collection of taxes will be more important then. Reflecting on Magande’s comments, you rightly point out that it seems strange that he is not associating the higher production (forecast to 1m tonnes by 2010, up from 500k tonnes in 2006) with increases in taxation, asking “the big conceptual question: what is the link between production levels and taxation?”.

I think it is an important relationship to keep in mind in debating the development impacts of private investment into the Zambian mining industry. Of course production levels have a direct link through royalties, but there is also the link between production and corporation tax. The latter exists because companies must invest (in machinery, capital equipment) to generate this extra production. When they do so DAs provide for companies to deduct this investment from profits in the year it is incurred (rather than depreciating the investment over its life span), technically a ‘capital allowance’. Any new investment in production will thus put pressure on the tax base – essentially the DAs imply that productivity-enhancing investments defer tax payments into the future. Of course there is a lag between an investment and a subsequent ramp-up in production capacity, but the point is that very high projected increases in production capacities are not necessarily related to increases in mines’ tax bills in the short term.

This is in particular the case where much new investment is currently underway. You noted in the blog posting (22 Nov 2007) that companies have largely recovered their investments. Although this must be true of their original investments, it would appear many are still investing. For example, KCM has earmarked $1050m in investment in the new smelter at Chingola (about a third of this sum) and the Konkola Deep Mining Project (about two thirds). However of this $1050m, only $300m has been invested to date (Dec 2007). This means that they these investment projects will continue to minimise taxes payable. Similarly, under current projections (including the recently inaugurated West Ore Body project), NFCA only expects to start paying corporation taxes in five years time, due to the aforementioned capital allowances as well as the ability to carry forward losses from one year to the next.

It is understandable that much investment is underway at incumbent as well as new mines, as mining companies seem keen to take advantage of high copper prices. Technically speaking, high copper prices have a direct link with the payback time of an investment (a key consideration when assessing new or add-on investments). This means that in the current climate, companies are more likely to take an investment decision sooner rather than later.

To illustrate, in an interview with the Company Secretary of the new Chambishi Copper Smelter, I asked about the speed at which this project has emerged in the Chambishi Special Economic Zone. He told me that this type of a facility, a very modern blister-producing facility that normally takes four years to complete, but that they are aiming to have it done in two years. In Zambia the Chinese are famous for moving quickly, but I still asked how come they had this urgency? He said “copper prices are high … and we don’t know if they will stay like that”.

Personally I’m hoping that they do “stay like that”. So it is a bit disconcerting to see the oil price push towards the $100-level, given that a rising oil price may eventually trigger a recession (and drop in demand for copper). Of course China and India are driving a significant share of the demand for copper, but on the other hand there are already concerns of over-heating in the Chinese economy… Anyway, let’s all hope for a stable political and economic environment in Zambia for 2008, and that we soon see some concrete public announcements on the progress of DA renegotiations!

Dan Haglund
PhD candidate
University of Bath
dan.haglund@gmail.com

Chambishi's Striking Workers Keep Riot Cops Busy

The Lusaka Times and The Post both report a strike by workers at Chambishi Copper Smelter.

500 workers have downed tools to demand better pay and conditions. Workers protested outside the plant and blocked the road leading to the main gate of the plant. The Lusaka Times reports, "They also barred officials from the Kitwe labour office from entering the plant accusing them of receiving bribes from the management at the plant."

Police in full riot gear have been deployed at the plant. They won't need to have changed or moved too far, having deployed yesterday in Mufulira to pre-empt any unrest following the acid spell by MCM.

In a telephone interview with The Post, company acting chief executive officer Zihun Ting said he hoped the workers would return to work, but showed a limited understanding of the finer points of labour conciliation, arguing, "We are paying them according to the labour laws, and according to the number of hours one works in a month. Those complaining are the ones who are in a habit of absconding from work."

Workers told The Post "We are paid very little money, we are getting between K250,000 and K500,000 per month. What can you do with such a little sum of money?" Workers were renting houses at K250,000 per month. "This is January, we are supposed to send our children to school, but we cannot afford to pay for their school fees. So that is why we have decided to down tools," he said.

MCM spill: 582 affected, ECZ investigating

The Lusaka Times reports today that all those hospitalised by drinking water contaminated by an acid spill from MCM's plant are in a stable condition, that most have been discharged, and that about 582 people were attended to at various clinics and hospitals around Mufulira. Residents in Butondo, Kankoyo, Kantanshi and part of Fairview in the town centre still have no water supply - the company have said they will provide bowsers and re-attach the mains once acidity levels have normalised.

MCM's acting Chief executive officer Emmanuel Mutati apologised for the pollution, but claimed the amount of acid that leaked in to the domestic water supply and that was consumed by most people was negligible

The Lusaka Times reports: "Mr. Mutati was briefing a team that was constituted by Copperbelt Minister Mwansa Mbulakulima to establish what led to the contamination of water in Mufulira. The team comprised of the District Commissioner, Dyford Muulwa, Town Clerk, Charles Mwandila, Mulenga Water and Sewerage Company, Environmental Council of Zambia, and the Mine Safety Department."

The Times of Zambia puts the figure for those affected and describes a 'near riot' calmed by police as residents marched on the civic centre and Mulenga Water and Sewerage Company offices in protest.

The rather less informative version of the story also made the BBC.

More clues on ZCI-Vedanta

South African news site 24.com runs a story today on the ZCI-Vedanta negotiation that has been confusing me for so long. I think it gives us a better idea of what this whole argument is about.

It may well be that the key question is: what price will ZCI shareholders get for their stock if Vedanta exercises its 'right to buy out' ZCI? The story notes, "the arbitrator set August 12 2005, the date on which Vedanta exercised its call option, as the valuation date, I doubt that it [Vedanta] will walk away. The arbitrator's decision has in effect given Vedanta a free ride on the past two-and-a-half years of a generally booming copper market, and regardless of the situation at any particular mine, any established copper producer must surely be worth a whole lot more now than it was then."

This leaves open the question of why the Zambian Government and other parliamentarians should be bothered about which of two private sector entities does better out of this process, but it explains why ZCI shareholders would be lobbying for the sale to happen on the LuSE, where they would expect a much higher price.

Here are the questions I first asked in an earlier blog entry. I still think they're relevant.
"Is ZCI, or the Copperbelt Development Corporation (one of ZCI's main shareholders, and sometimes seemingly called the Copperbelt Development Foundation) worth defending? Why? What does it do to secure the interests of workers and communities on the Copperbelt? Will it keep doing so if sold on the LuSE? If not, should we object to the sale of the shares to anyone?"

Riot threat follows yesterday's acid spill

The Lusaka Times reports in some detail on the technical details of the spill and reactions from the company and local MPs.

The Times of Zambia reports riot police being deployed in three mine townships as residents protest against pollution.

Gazing into a crystal ball - Zambian mining in 2008

Happy New Year everyone! Thanks so much for all the support and interest people have shown in MineWatchZambia in its first year. Here's to more of the same in 2008.

I thought this would be as good a moment as any to reflect on a few issues still trotting along in the debate and to speculate on what might happen in the year to come. If I had one wish for the site, it would be that more of you got involved in the discussion by posting comments on the blog, so do let me know what you have thought of the site, and what could be improved over the next year. Just hit 'comment' at the bottom of this post.

My overwhelming feeling is that since the 'For Whom the Windfalls?' report was published last year, everything has changed, and yet nothing has changed. In January Professor John Lungu and I debated the Deputy Minister of Mines at the launch event for the report at the Pamodzi Hotel in Lusaka. What struck me at the time was his relaxed acceptance of the report's criticisms of the impacts of privatisation, and his sense of bewilderment that anyone could really expect the Government to do anything to change the situation.

Since then, I think the tone of the debate in Zambia has changed significantly, with excellent work by trade unions pressing with some success for wage rises in most of the mines, opposition MPs in Parliament piling pressure on the Finance Minister and more good research by civil society groups putting pressure particularly on Vedanta. I hope these developments have contributed to a real sense in the Government, IMF, World Bank and even the companies themselves that they are under pressure to deliver real benefits to workers, communities and the national economy, and that there is an angry public constituency out there waiting to see what happens.

So, everything's changed. But, erm, nothing has.

• We had the false dawn of the revision of the Mines and Minerals Act, which changed the terms of future contracts with mining companies, but not the existing ones. Perhaps it's regrettable that this discussion has taken up so much air-time (including in this blog) with so few concrete developments. The focus of discussions about mining is almost exclusively on the ongoing renegotiation of mineral royalties with the companies holding Development Agreements. This leaves under-discussed questions about Zambia's anti-union labour framework, casualisation in the mines and the inadequacy of health and safety and environmental regulation and practice in the mining houses. A hundred deadlines have been and gone for real news on the re-negotiation. You've got to expect something to happen soon. I wouldn't want to put a date on it. But I will predict a figure: 3% or possibly, even less. I'd like to see a lot more.
  
• There have been regretable and avoidable deaths all through the year in the major mines, but thankfully no major disasters. Stories of accidental environmental pollution continue on a drip-drip (sorry) basis - the MCM story today being justy the latest. At least as serious is the non-emergence of clean technologies at the smelters. Anyone who's tried to take a deep breath in Kankoyo township in Mufulira knows this issue is more than past its sell-by date. There has been talk of significant extra investment in the Mines Safety Department and the Environmental Council of Zambia to encourage the two bodies to grow some teeth. I don't know what's come of this. Maybe in the next year we can all pray for the emergence of an effective regulatory regime for Zambia's mining sector!
  
• The long-running row over ZCI-KCM shares. I blogged about this a month ago, asking readers to help me out understanding what the Government or anyone else's persepctives were on this issue. No comments came! Anyway, MiningMX report today that this issue will be settled by April. "A dispute that started in September 2005 over the value of ZCI’s holding in KCM was resolved in July last year in a ruling by an arbitrator. A bank is now valuing that stake. The arbitrator has decided ZCI’s stake in KCM should be valued as of the date – 12 August 2005 - on which the call option was exercised by Vedanta.
  The bank undertaking the difficult valuation has said it will release its findings in mid-January this year instead of mid-December as originally thought."

This blog came out of research I did on the impacts of the privatisation of ZCCM. As a result I have focused almost exclusively on the seven former-ZCCM copper mines. These are still the biggest actors in the mining sector in Zambia. However, there are a number of significant developments that could shift the focus of the debate a little over the next year.
Among them:

• The huge new Lumwana Mine. There are already 2,500 people working on the construction, and perhaps a little like the original development of the Copperbelt, we are seeing a sociological experiment as whole new towns emerging in the bush to support what is being pushed as Africa's biggest mine, producing four different precious metals. It has been scheduled for some time to come on stream in mid-2008.
• The promise of big new Russian investments in the mining sector. Mr K has left comments on this blog suggesting we should fear the Russians. I don't have a view on this. What do others think? Any better reason to fear the Russians than the other options?
• Huge price rises for cobalt. See recent editions of Resource Investor which argues that this is a trend likely to last. In the last two years, "cobalt first doubled and then plateaued. Now in the last six months of 2007 cobalt prices have gone up another 50% above the base established during the plateau period The total increase in price of cobalt over the last two years has, as of now, been 300%; thus cobalt has been a far better investment during the last two years than either gold or platinum."
• Prospects in uranium too - uranium is enjoying high prices as the debate on global warming increases interest in nuclear energy. According to the Minister of Mines, quoted in Reuters : "A statutory instrument (legislation) will be signed before the end of December. Once we publish the law, we will begin to process applications and ask (more) mining companies to apply for licences,"
• The re-opening of lead mining in Kabwe. The city was listed last year by the Blacksmith Institute as one of the ten most polluted places on earth, as a result of the old mine, and the truly horrible impacts of lead on the human body. This really is a powerful case for the Environmental Council to get its act together.
  

So, readers, what do you expect to happen in 2008? Let's have the debate. Maybe I'll give a prize this time next year for the most accurate prediction.

Have a great year!

Alastair

Scores hospitalised after MCM acid spill

This from the The Post today.

"Scores of people have been rushed to different hospitals in Mufulira district after drinking water suspected to have been contaminated by sulphuric acid from Mopani Copper Mines (MCM)."

Management at Mulonga Water and Sewerage Company are quoted reporting Ph levels in the water at 6.1. Local clinics and hospitals are said to be treating over 100 residents, mostly from Kantashi Mine township, who had drunk contaminated water and were suffering vomiting and diarrhoea. No fatalities have been reported.

The case will present another test for the Environmental Council of Zambia and the Ministry of Mines who are widely held to have flunked their responsibilities to effectively regulate Konkola Copper Mines (KCM) after they were involved in serious pollution of the Kafue River last year. Local residents are now suing KCM, and The Post reports similar actions may follow against MCM.

Chingola residents sue KCM over pollution

This article straight out of The Post yesterday. There's nothing really to add to the story.

"ABOUT 2000 Chingola residents have sued Konkola Copper Mines (KCM) over the pollution of the Kafue River, complaining that they have suffered from eye and skin diseases as a result of using the contaminated water.

The residents have also sued Environmental Council of Zambia (ECZ) and Chingola Municipal Council as second and third defendants respectively.

James Nyasulu explained on behalf of the other residents that on November 6, 2006, KCM negligently and wrongfully caused to be released into the Kafue River mining effluents containing concentrations of copper, manganese and cobalt thereby contaminating the water supply for the whole Chingola.

Nyasulu further explained that the negligence was due to the failure to ensure safety checks on pipes, acid levels, maintenance of all necessary equipment related to the securing of a clean environment and the prevention of spillage.

He added that ECZ contributed to this negligence by failing to carryout its statutory duties of inspection, supervision and ensuring that KCM maintained its pipes.

Nyasulu pointed out that Chingola Municipal Council also contributed to the negligence by not ensuring that KCM complied with the safety standards of the local council.

He averred that the council failed to warn the residents of the dangers of drinking contaminated water.

Nyasulu complained that as a result of the negligence of KCM, ECZ and Chingola Council, the residents have suffered from diarrhoea, eye infections, and severe skin conditions as well as other latent effects that only manifest in the long-term such as brain damage, kidney failure and respiratory diseases.

He lamented that the damage inflicted on the residents was not different from the damage done to the people during chemical warfare with little or no regard to their health, welfare and lifestyle.

The residents are claiming damages from KCM, ECZ and Chingola Municipal Council and are asking the court to make ECZ and the council to perform its statutory duties to the residents by prosecuting KCM.

They are also claiming compensation for the pain they have suffered and want the court to order KCM to issue quarterly statements of maintenance and safety levels of its acid pipes."

How good is the good news about mining?

Reuters report that massive new Chinese investments are on the way to the recently created 'economic investment zone' around Chambishi. The zone was announced as one of a small number of such projects being established by China across Africa at the Sino-African summit earlier this year. It is scheduled to start operating next year and Reuters reports claims it will attract US$900 million in new investments in mining, smelting and, significantly, manufacturing. An official (it doesn't say Zambian or Chinese) reports that the investment will generate a massive 60,000 jobs.

Alongside that, University of Zambia economist Dr Francis Chigunta argues in The Post that on the back of high copper prices Zambia will hit the Government's prediction for the year of 7% GDP growth .

One might, then, have expected the Government to be crowing. However, a couple of signals suggest that both the President and Finance Minister are increasingly aware that growth has thus far been relatively jobless and has had a limited, occasionally negative, impact on Zambian workers and communities.

Chinese investment on the Copperbelt has been extremely controversial, and the offer of further tax concessions in the economic zones raised fears about the state's willingness to offer Chinese firms the right to operate outside normal legal constraints. No-one has ever been prosecuted following incidents when protesting miners were shot in Chambishi last year, or when workers were killed in an industrial accident at a Chinese explosives factory. Reuters report however that President Mwanawasa publicly recognised the problems in the current relationship, telling Luo Tao, the head of China Nonferrous Metal Mining Group Company Limited (CNMC), which owns NFC-A's Chambishi mine, "I want to assure you that we will continue supporting your investments in Zambia. But when incidents of Zambians being disadvantaged come to the fore, we will find it difficult to defend your record." Reuters continue, "Mwanawasa said he was happy with assurances by CNMC to adhere to Zambian labour laws and safety standards at Chambishi mine." The For Whom the Windfalls? report suggests that, at least at the end of 2006, in terms of labour law, safety standards and immigration law, this was not the case. Any investment agreements made with new investors should be subject to public scrutiny to ensure that this situation does not repeat itself.

Another article in The Post reports that Finance Minister, "Magande said he sometimes felt ashamed to face Zambians because of poverty... Magande said it would be difficult for the ordinary Zambian to feel the impact of the economic growth if the monies in various ministries were not used properly. He said although the country had reached a single digit inflation rate, people on the ground were still poor... Magande said even if the government increased the tax base in the mining sector as proposed by some stakeholders, it would still be difficult to improve people’s lives unless the financial monitoring system was improved."

"Even if"? I thought there was supposed to be a team working on this renegotiation! Well, I am sure there is, but... well, we'll see.

Clarification of last post on quarterly reports

Sorry, I am not sure the last post 'Are the mines submitting reports?' is entirely clear. The point is that the companies should always have been submitting quarterly reports. They are required to do so by their Development Agreements, and if they have not been doing so are in clear breach of the terms of the contract - a factor that should be helpful to the Zambian negotiators seeking to re-open discussions on the Agreements.
For example take a look at Clause 10 of the original KCM Agreement, on page 31 of the .pdf loaded on this site. (This is the original Anglo contract for taking over KCM - we don't have Vedanta's contract - but most of the agreements are cut and paste jobs, so I would be confident similar provisions are in each of them).

Have the mines been submitting reports?

An article appears in today's Post newspaper, titled 'Govt starts quarterly meetings with Chamber of Mines'

It quotes Mines Minister Dr Kalombo Mwansa, who says that the main reason for new quarterly meetings with the Chamber (a trade association representing all of the major mining companies except NFC-A) is so that mining companies to can start submitting quarterly reports to the Ministry. “The purpose of these meetings is to keep the Ministry of Mines and Minerals Development informed on what is going on in the sector through the submission of quarterly reports by mining companies,” Dr Mwansa said.

Intriguing. While researching the 'For Whom the Windfalls?' report, I asked at the Ministry if it would be possible to access the reports. I was not granted access. In discussions with mine exectutives, some argued that the companies were already sufficiently regulated since they had to make these reports to Government.

The phrasing of The Post article, "start submitting" reports just made me wonder if the report was wrong to focus on full disclosure of all existing documentation. Maybe it never existed anyway? Whichever way, the demand for full disclosure should remain. Let's insist the companies submit detailed reports to the Ministry and that copies are lodged in Parliament. The reports should include, at a minimum, detail on how the companies are complying with labour, health and safety and environmental legislation, alongside detailed figures for investment, production, revenue, profit and taxes paid.

Does Vedanta pay dividends?

The following statement appears in Vedanta’s response to the SCIAF/Christian Aid/ACTSA campaign (you can download Vedanta's letter and the NGO's reply to Vedanta from a previous entry in this blog titled 'Vedanta responds...'): “The report implies that Vedanta is taking money away from Zambia, which would be factually incorrect. No substantial dividends have been paid out from KCM since Vedanta made its initial investment.”

While trying to understand better the ZCI-Vedanta share issue (see next post down titled 'Help clear my confusion...'), I came across this in the 2007 Annual Report for ZCI: “Although production levels at Konkola Copper Mines (“KCM”) remain below their targeted levels, KCM returned excellent results for the year, with a net profit figure of USD 301 million (2006: USD 114 million). The effect of the sustained strong international copper price continues to have an extremely positive influence on KCM’s performance. I am also delighted to announce that KCM declared an inaugural interim dividend during the 2006/2007 financial year of USD 5.74 million, of which ZCI received USD 1.6 million in November 2006. Indications are that KCM will shortly confirm the declaration of a final dividend in the same amount and we hope that this is a positive indication of what KCM’s shareholders may continue to expect in the new financial year.”

I guess it depends what you take ‘substantial’ to mean.

Help clear my confusion over Vedanta, ZCI and Anglo?

One issue that I have failed to understand in thinking and writing about the Zambian mining industry is the status of shares in Konkola Copper Mines (KCM) owned by a company called Zambia Copper Investments (ZCI). The issue is much in the news, particularly on the wires for metals investors, and while it's perfectly possible to get a surface level explanation of what's happening from various reports, such as the latest on Mineweb here, the general lack of analysis leaves me baffled as to why different actors are taking different positions. Put very briefly, Vedanta are trying to buy up shares in KCM controlled by ZCI, the Government and various MPs have been objecting. Then today The Post (you need a subscription) report that Anglo-American are publicly refuting President Mwanawasa's suggestion that they are interested in coming back to Zambia.

Maybe these things aren't connected and maybe I am the only one who doesn't understand what's going on?

Andrew Sardanis' book 'A Venture in Africa' seems to tell a large part of the story, but the free Amazon browser cuts short just as we get to the intersting bit, and I think he is basically arguing the whole thing is murky! I've ordered a copy and will report back on what it says if this conversation gets going. If anyone has contact details for Mr Sardanis, I'd be interested to try and include him in the conversation.

Anyway, here's a summary of my muddled thoughts - much of the history here might be wrong or completely irrelevant. Anyone who can clarify any of it is very welcome to add something to comments, or to write a guest entry for the blog to replace this one.

1) When the mining sector was first developed on the Copperbelt, it was developed by private companies, including Anglo-American who developed the mines at Konkola.
2) When the mines were nationalised Anglo's assets were taken over by the state (and eventually consolidated with other companies into a massive parastatal - ZCCM).
3) But, even in the ZCCM era, Anglo maintined a minority share in the Konkola division, and pre-emptive rights. In other words, if the state chose to privatise, Anglo would have first refusal to buy back their old assets.
3) When privatisation happened in 2000, Anglo-American did indeed buy back KCM, under the terms of the then-secret Development Agreement, now published on this website. They did so through a newly developed investment vehicle in which they were the majority shareholder - namely Zambia Copper Investments (ZCI). ZCI was a majority shareholder but other shares were also held by the Zambian Government in a rump company ZCCM-IH, the Commonwealth Development Corporation and by the World Bank's investment arm IFC. Anglo was also not the only shareholder in ZCI - they controlled 50%, while 33% was held by Sicovam, another South African-listed company.
4) Anglo soon concluded they could not make money in Zambian copper mining - a horrendous miscalculation on their part, the copper price was about to explode again - and in 2002 KCM passed back to the Zambian Government in the form of ZCCM and to a new foundation, the Copperbelt Development Corporation, set up according to Anglo, to meet its corporate social responsibilities. IFC and CDC also exited the scene.
5) Vedanta then took over the holding in 2004, buying 51% of shares for what Andrew Sardanis reports was $44million. 20.6% of the shares were still held by ZCCM-IH, and 28.4% by ZCI. Anglo are not a significant shareholder in ZCI any longer. The biggest shareholders are the Copperbelt Development Foundation (44%) and Sicovam who still hold 33%, and seem to have a base of French activist shareholders who are highly opposed to the sale of ZCI's to Vedanta. They have occassionally emailed me since this blog was set up, but language and translation problems have made our conversations rather difficult.
6) Vedanta seem to have had (possibly written into their Development Agreement (do they have one or did they just inherit Anglo's terms and conditions?) we don't have a copy for this website, but this is another reason why we need more transparency) a similar pre-emptive right to take on the remaining ZCI shares under certain conditions. I don't know what they are.
7) Since 2005 it seems Vedanta have wanted to take up this 'right', but had disagreed with the ZCI board and shareholders over the valuation of the company. Over the past few months an independent evaluator seemed to have smoothed over the disagreement. Mineweb quote Tom Kamwendo, ZCI chairman: "ZCI's shares in KCM are being offered to Vedanta rather than being sold via the Lusaka Stock Exchange or sold in any other way because that is the provision of the legal agreement that was reached at the time Vedanta was acquiring its current 51% shareholding in KCM." Mineweb continues: "Kamwendo's comments followed an announcement a fortnight ago from Vedanta chairman Anil Agarwal that the two parties had resolved their differences over the valuation of ZCI's shares in KCM and that an independent valuation was in progress. And with a willing buyer, willing seller situation apparently prevailing, the deal was as good as done."
8) Last week it seemed that Vedanta would go ahead and take on ZCI’s 28.4 percent interest in KCM as per an earlier agreement, giving them a 79.4% stake in the company.
9) The announcement caused strife in the Zambian Parliament, with various MPs suggesting that ZCI should be sold on the Lusaka Stocke Exchange (LuSE)
10) The Zambian government then wrote to Vedanta advising that it should waive its 'call option'. Mineweb reports: "Zambia's mines minister Kalombo Mwansa says the government would be comfortable if the Indian-controlled diversified miner maintained its current 51% stake. He added that Vedanta has not yet responded to the state's letter. "We have written them [Vedanta] over the matter of taking over the ZCI shares. As government, we are of the view that they stick to what they have [in KCM] and we are urging them not to exercise the call option. Our understanding is that the ZCI shares should be listed on the Lusaka Stock Exchange [the local bourse] or any other alternative measure that will benefit and empower Zambians."

What I don't understand is what we should make of all this. Is ZCI, or the Copperbelt Development Corporation worth defending? Why? What does it do to secure the interests of workers and communities on the Copperbelt? Will it keep doing so if sold on the LuSE? If not, should we object to the sale of the company to anyone?

I confess my ignorance, but can imagine three possible rationales, both for concerns expressed by MPs, and the Government's stance:
1) as a company that has caused a degree of embarrasment to the Zambian Government, the state simply doesn't want Vedanta to hold an even higher share in the country's biggest single company.
2) the state and opposition MPs like Sakwiba Sikota (quoted here in The Post last week) want to play up the 'citizen's empowerment' theme which has marked some of Government's response to concerns about foreign investment. Basically this means businesses will be owned by rich Zambians, not rich foreigners. If we are worried about workers and communities, is there any reason to think rich Zambians will have their interests at heart more than rich Indians and Brits? Saki seems to think so.
3) the LuSE is a struggling entity with few companies listed on it. It would be good for LuSE as an institution to deal with such a big sale.
4) there is some other economic reason, like the current independent valuations do not offer as high a price as might be acheived on the open market. I am not clear what difference this would make to the Zambian state as it seems to be a transaction between private companies.

Apologies for a long, rambling entry full, quite possibly of inaccuracies. Views, explanations etc. are, perhaps more than ever, very welcome.

Vedanta responds to 'Undermining Development'

Reflecting the momentum that the campaign around mining in Zambia has gained over the last few months, Vedanta has been forced to respond to Undermining Development?, a report from SCIAF, Christian Aid and ACTSA, which we released on this website after its recent launch. You can read Vedanta's response here, and a reply to the company can be read here.

New KCM procurement system

A Times of Zambia editorial on 30 November welcomes a new procurement policy at Konkola Copper Mines (KCM), Zambia's biggest mining company.

The Times reports that KCM has shortlisted 30 local firms to supply spares and other consumables. All the privatised mining companies have been subject to significant criticism for ignoring the supply arrangements in place when they took over and favouring suppliers from outside Zambia, often from their home countries instead. Much economic activity in the Copperbelt region depended on ‘forwards and backwards linkages’ to the mines. As reported in this blog some months ago, a new system adopted by Mopani Copper Mines (MCM) apparently in an attempt to temper criticism was not welcomed by local suppliers as it was seen as introducing complex and expensive registration conditions that disadvantaged local producers.

In KCM’s case the editorial notes: “The example shown by KCM is one that in its variation could be replicated by various corporates doing business in Zambia.” It goes on, “The refrain in the past has been that local suppliers and manufacturers have not been up to scratch in meeting the volumes, let alone the standards, to supply firms that have international status. This is undoubtedly true, technically speaking. However, as is in every situation where hurdles are encountered, there are always ways to surmount such obstacles. One way would be to offer some of the local suppliers scaled down ranges of goods to be supplied at reduced volumes. They would then have to graduate slowly as they build up capacities. On the part of the suppliers themselves they could pool resources to enable them set up bigger manufacturing bases to achieve volumes.”

KCM's 'Doing Business With Us' section of their website doesn't seem to include any information on the new process, and if / when I hear any more about it, I will post again her.

Let’s hope the project works well. Comments, as always, welcome.

Magande to scrap Development Agreements in 2008?

The Zambian Government claimed today that negotiations with multinational copper mining companies are making significant progress and should be completed in 2008. A resolution of the long-running row may involve a comprehensive deal covering not only the question of mineral royalties but also the wider fiscal and regulatory environment in which the companies operate. A complete reworking of these deals could even result in the scrapping of Development Agreements, such that the companies are brought fully within the Zambian legal framework.

The Times of Zambia (a state-sponsored paper) reports today that Finance Minister Magande has announced a new tax regime will be contained in his 2008 national budget statement. Public pressure and opposition party criticism about the speed of the process, the scope of the talks, and the composition of the negotiating team all appear to have had an impact.

The Times reports that Magande:

• Emphasised that the team was wholly composed of Zambian top civil servants, rather than being out-sourced to international consultants. This directly contradicts a report of 24 October 2007 when The Times reported, “Government has established a team of seven international mining experts and senior Government officials to study how best the negotiations of development agreements with the mining sector can be done, Finance and National Planning Minister, Ng'andu Magande has said.” Given the disastrous role of foreign advisors in the original privatisation negotiations, that announcement brought strong criticism inside and outside parliament.
• Confirmed that the discussion will go well beyond just mineral royalties, to consider the wider tax regime within which the companies operate. This would be a significant victory for campaigners since both companies and the Government have in the recent past said the only thing on the table was the level of mineral royalties paid. Mineral royalties are just amongst a range of taxes paid, and evaded, by the companies.
• Suggested that it is not just finance that is under discussion, but the wider regulatory environment in which the companies operate that needs to be considered.This is a major breakthrough and could mean that the core demands of the 'For Whom the Windfalls?' report are on the table. The report noted, "The Government seems to believe that the local population will come on board if the companies pay a little more tax and engage in a few more charitable activities. No doubt both of these things should happen, and probably will as government and companies attempt to respond to the 2006 election. However, evidence gathered for this report suggests that well-founded popular complaints about the mining industry are based on bread and butter issues: poverty wages, insecure terms and conditions, resistance to the legal right of trade unions to organise, inadequate support for retrenched and retired workers and a failure of attention to safety measures and environmental protection by the mining companies. The companies have shown little interest in solving these problems since each of them results from purposeful cost-cutting policies undertaken to maximise profits and dividends to shareholders. This implies that, alongside collecting more tax and encouraging more corporate social responsibility, the Government may need to break free of an obsession with ‘investor-friendly policies’ and use their regulatory and legal powers to prioritise the need and rights of workers and communities."

Magande is quoted as saying that the team involved have discovered that the Zambian fiscal regime had the lowest effective tax rate in the mining sector in the world with a total of 31.8 per cent followed by Peru with 39.7 per cent. "Through this work that the team has undertaken, it has become apparent that there is need for further reform for both the fiscal and regulatory regime if the people of Zambia have to equitably benefit from their natural resources… I can comfortably state that a lot of work has already been done by the team towards developing an optimal fiscal and regulatory regime for the sector. I should therefore be able to give a comprehensive statement in the 2008 budget address on the outcome of the work of the team," he said.

Magande also recognised that a comprehensive new deal on these topics might render the current and future development agreements irrelevant - presumably meaning that the kind of exemptions to national laws contained in the Development Agreements - exemptions that breach the OECD convention on investment - might be permanently rescinded so that the companies find themselves operating at last, under laws and standards established by the sovereign parliament of Zambia.

Hooray! Am I missing something in the small print? Does anyone know when the 2008 budget address might occur? Comments welcome.

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Talks, delays and the prospect of unilateral action

The slow pace of talks between the Zambian Government and multinational mining companies to review tax concessions granted to the companies is fueling public and political debate on alternatives.

Zambian opposition politicians, academics and the independent media are evidently losing patience with the absence of progress in discussions that are expected to result in the over-riding of 'stability clauses' written into the Development Agreements signed between Government and companies at privatisation. On November 16 an angry editorial in The Post newspaper was entitled 'Mismanaging our mineral resources'. The article's analysis of the Government's recently announced Medium Term Expenditure Framework (MTEF) will deepen concerns raised by an interview with Finance Minister Magande in a recent BBC radio documentary that the Government is not expecting increases in mineral royalties to kick in until 2010 (or not for another ten years, depending on how you read Magande's comments - see 'comments' after the last blog for a discussion). As The Post reports, "In 2007, royalties were budgeted for at K77.34 billion and projected by end of December 2007 at K72.76 billion. In 2008, royalties have been projected at K72 billion while K79 billion is for 2009 and K86 billion is the projection for 2010. Looking at the MTEF projections, it is obvious that the government is not expecting much more royalties even with the expected re-negotiations with the mining companies."

Expressions of concern about the slow pace of negotiations also emanated from University of Zambia (UNZA) Professor Oliver Saasa who told The Post, “Government should give regular updates on the re-negotiation process. We want to know what is happening.”

Opposition FFD President and former Finance Minister Edith Nawakwi has proposed (and again here) that the Government's negotiating team be wound up and that increased mineral royalties should be unilaterally imposed by passing legislation in Parliament. Nawakwi won support from other opposition figures. UPND Copperbelt Province chairman Joe Kalusa invited the entire cabinet in place at the time of negotiations "to explain to us why they bowed down to the pressure of the International Monetary Fund and the World Bank for us to privatise the mines and later on offer unimaginable incentives to investors.” Kalusa said the government should increase royalties in the same way that domestic and other taxes are raised whenever required. “When government thinks of increasing domestic taxes, I don’t think we are consulted. All we hear is an announcement during the presentation of the budget that some taxes have been revised. Why then should mineral royalties require experts to convene and discuss this whole thing?” Kalusa asked. “Is it because it is mainly the foreign investors involved in this that they want to use the other procedures of adjusting taxes than what government uses on its people?”

University of Zambia development studies lecturer, Dr Francis Chigunta backed the calls, as reported by the Post here."Dr Chigunta suggested that a reasonable amount of pressure be put on government so that a proposal for a change in mineral royalties is presented to Parliament before the current sitting adjourns. “It doesn’t make sense for experts to be engaged for this renegotiation process when we have got a Parliament that makes laws. I totally agree with what Forum for Democracy and Development president Edith Nawakwi said with regard to taking a proposal to Parliament for an increment to royalties,” Dr Chigunta said. “Our country should learn from what other countries such as Chile did for them to get higher mineral royalties.”"

As discussed in the 'For Whom the Windfalls?' report, unilateral action by Government is a clear red line for most of the companies. Even those mine managers who recognised negotiation was inevitable also threatened legal action if the Government attempted to act unilaterally. Doing so would also upset Zambia's donors. While the World Bank and IMF have both recognised the need for a renegotiation of the contracts they facilitated in the first place, imposing change on the companies remains a big no-no. Quite what kind of legal action companies would be able to take in the face of Zambia's sovereign Parliament legislating to override contracts is perhaps unclear - I would welcome comments. Zambia is a member of the World Bank's International Centre for the Settlement of Investment disputes. Other countries, including Bolivia who are currently trying to renegotiate resource extraction contracts in a rather more radical manner than is being proposed in Zambia have left the mechanism.

Privatisation, resistance and party politics

I have an article published in the current edition of British academic journal, African Affairs. 'Of Cabbages and King Cobra: Populist Politics and Zambia's 2006 election' by Miles Larmer and Alastair Fraser can be downloaded free in academic institutions that hold a license for the journal. Otherwise, I am afraid people will have to pay. It is here: http://afraf.oxfordjournals.org/cgi/content/abstract/106/425/611
The article is not all about mining, but it argues that recent relief of 92 percent of Zambia's international debt, along with the renewed profitability of the copper mining industry, have created conditions for the re-emergence of a nationalist-developmental political framework. This, and the political impact of the rise of the Patriotic Front are considered.
I would be interested in people's reactions, criticisms and comments.

Magande to BBC - tax in ten years time!

An excellent 23 minute BBC World Service radio documentary on the Zambian copper mining industry is now available online. It can be downloaded as an MP3 here:
http://downloads.bbc.co.uk/podcasts/worldservice/docarchive/docarchive_20071116-1224.mp3
or listened to directly here:
http://www.bbc.co.uk/worldservice/programmes/documentary_2.shtml

It features interviews with For Whom the Windfalls? co-author Professor John Lungu, former Finance Minister Edith Nawakwi, current Finance Minister N'gandu Magande, IMF Country Director Birgir Arneson, anonymous mineworkers, the Chief Financial Officer of Luanshya Copper Mines and Professor Paul Collier from Oxford University.

Much of it covers territory well-trodden in the report and in this blog, and most of it needs no additional commentary - Maurice Walsh asks the right questions and where the answers get evasive, well, draw your own conclusions. For me, the highlights:

1) Nawakwi discussing the atmosphere surrounding the original negotiation without providing any new evidence of how the negotiations actually proceded:
"Whatever has happened to this country, I think the 1990s were the worst. Zambia was really negotiating these agreements with a gun to our head."

2) Arneson trying unconvincingly to distance the IMF from any responsibility for the negotiations (he wasn't in post when the deals were negotiated):
Arneson: "It is clear that, by the late 1990s, the mining sector in Zambia was in a very, very sorry state. Clearly the authorities felt that they had to provide very generous terms in order to attract the investment. Whether the terms were exactly the right ones, that is of course debatable. There was no provision for example in the Development Agreements that allowed the Government to share in conditions like we have now where copper prices are many fold what they used to be. But I think that is sort of beating a dead horse to belabour that point too much."
Walsh: "But it's worth reflecting on that point because isn't it extraordinary that nobody thought of that at the time."
Arneson: "It would be best practice. It is best practice to put such provisions and we would strongly recommend that the Government puts such provisions into all new development agreements."
Walsh: "You weren't here but the institution you represent advised the Government in one way ten years ago and is suggesting that it does the opposite now. Isn't this the kind of thing that gives the IMF a bad name."
Arneson: "I don't think the IMF was involved in the design of the Development Agreements."
Walsh: "It was very heavily involved with the Zambian Government at the time and was very much pushing the privatisation. In fact the Government would have relied on the IMF for advice."
Arneson: "Well, we certainly supported the privatisation process. There was no alternative. The mines would have closed had they not been privatised."
Walsh: "Granted. But it surely must have occurred to somebody at the time, what if the copper price rises - it seems very straightforward."
Arneson: "What you are saying makes eminent sense and I simply cannot speak for what happened in the late 1990s."

3) Magande making a fairly bizarre argument for delaying re-negotiation.
Walsh: "Under pressure during the (election) campaign, the Government committed itself to renegotiating the deals. But it has taken a year for the Finance Ministry to get a team together to talk to the mining companies... despite the public outcry, the Minister for Finance N'gandu Magande is still councelling patience."
Magande: "Copper investors have been investing in the last three or four years. Investing means now sinking new shafts, buying new equipment, to make sure that they start producing copper. While the price has been going up we have not achieved the production levels that we actually had in the 1980s. So while people might say that the copper price has been going up the production levels have not increased as much as the price. Because the investors are still investing to make the mines productive."
Walsh: "People feel though that you've been too accomodating to the mining companies..."
Magande: "...We have not been lenient to the mines."
Walsh: "But nobody we've spoken to thinks that the mining companies are getting a hard deal. Everybody thinks that they've got a license to print money."
Magande: "Everybody excluding those that know the facts. Out of the mining companies that are now saying they might be able to produce 1 million tonnes of copper by 2010, many of them are the ones that are investing their money, borrowed from outside, or made from other operations outside. When they are investing the money you don't expect that they are making the maximum profit. Maximum profit for most of these companies could be made 10 years from now. That is when we should be saying, look, these people have already recovered their investment, that is when they will be making full profits. That is when we can get worried about that."
Walsh: So your messagge to the people on the Copperbelt is "wait, and your money will arrive, some time in the future?"
Magande: The people on the Copperbelt I am not saying wait, because out of the money that the mines are investing, the mining companies need people to drill the shafts, they need people to put up the shafts, they need people to do all sorts of contracts. So the people on the Copperbelt, they should be involved right now. So the people don't have to wait like Government is waiting."

How should we respond to Magande? Well, firstly a basic factual criticism. Many companies have already recouped their full investments - most mines are already highly profitable.

Secondly, what is this notion of 'maximum profits', and what is the basis of delaying taxation until the mines are achieving it? We know that Vedanta, for one are already making massive profits, if not maximum ones. First Quantum Minerals have just reported third quarter operating profits at Kansanshi Mine in Solwezi are up 19% to $546 million!

But the big conceptual question: what is the link between production levels and taxation? Magande's view appears to me a purely ideological one that puts all faith in a deregulated market to deliver the best outcomes. He seems to believe that taxing companies would lead them to re-invest less of their profits, and thus in the long-term create fewer jobs. The other way of looking at it is that companies will stay in Zambia, and will borrow to cover investments if they expect to benefit in the future, so long as they expect the price to show some stability - taxing will reduce their profits, but have marginal effects on their investment decisions - it is a royalty rate, remember of just 3.0% that is being discussed. Price variations massively outweigh such a consideration in calculating profits. Another way of thinking about it is that 'production' in mining describes the pace of removal of a non-renewable resource from the nation's stock of natural capital - the longer you wait to tax production, the less there is in the end to tax. As Paul Collier puts it: "I think the argument of patience during a commodity boom is actually misplaced. There is no guarantee that copper prices will stay at their present levels. So it may well be now or never. The taxation has to be now.... very clearly in the last few years the big international story has been the world commodity booms. Handling those commodity booms to make sure that history does not repeat itself is the big international development story. If history repeats itself, the biggest opportunity that we've ever had for these countries to transform themselves out of poverty will be missed."

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Debating Undermining Development?

The Post again reported on the new Undermining Development? report on Friday.

The article, “IMF, World Bank pressured govt to privatise mines – Nawakwi” quotes extensively from the interview prepared for the research with former Finance Minister Edith Nawakwi. Nawakwi, who is now leader of the opposition Forum for Democracy and Development told the authors, “We were told by advisers, who included the International Monetary Fund and the World Bank, that not in my life time would the price of copper change. They put production models on the table and told us that there (was) no copper in Nchanga Mine, Mufulira was supposed to have five years life left and 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 no option (but to go ahead).”

This article, and the report itself have provoked very interesting discussions on the excellent ‘Zambian economist’ blog, – read particularly the comments at the end of the post. Cho, the blog’s author, criticizes Nawakwi for not resisting more aggressively donor pressures on Zambia, “The 'devil made me do it' has never got anyone off a crime. For indeed it appears that we came under pressure from young graduates at the IMF and World Bank who spent one week in Zambia and flashed a few models on the table and we crumbled.” The discussion raises important questions about the degree of dependence of Zambia on foreign aid donors, the relationship between dependence and ‘post-colonial’ mentalities, the competence of the civil service, and the potential role of corruption in the signing of the Development Agreements. It doesn’t reach many conclusions, but the contributors are asking some interesting questions. Should we say that the World Bank ‘forced’ Zambia to sell the mines? Or is the relationship between donors and aid recipient Governments more complex than that? What is or was the relationship between the World Bank and IMF and particular mining houses? Did they (do they) actively collaborate? Why? Were the Bank and Fund ‘on Zambia’s side’, trying to get the best deal for the country from the sale? Or were they so ideologically committed to the need to sell that their interests and those of the companies co-incided? What difference does Government part-ownership of the mines (through ZCCM-IH) make? And what about the role of the World Bank, whose ‘finance arm’ IFC is also a shareholder in some of the privatised entities? One discussant adds a link to a Post article on a March 2006 exchange in Parliament between current Finance Minister Magande and Nawakwi - “Nawakwi had no choice over mines tax incentives – Magande”. Nawakwi is quoted as saying, "The conditions were near to blackmail. Mining houses demanded blood out of the Zambian people."

I am not sure anyone has really written a convincing account of those negotiations. As a number of commentators in the discussion note, official secrecy about the negotiations and the contracts has hardly been helpful in this field. The same blog includes a lengthy discussion on the original Undermining Development? report with a discussion amongst a range of Zambian economists about how best to move forward. The many points would take too long to summarise. Read it yourself here.

What’s Magande reading?

The Post reports that Finance and National Planning Minister Ng’andu Magande said government had only received K300 billion from mineral royalties and company tax as of August this year. “Questions have been raised as to whether the concessions are still justifiable. We have seen an unprecedented increase in the international metal prices. Therefore, the basis on which these concessions were given no longer exist which is why our renegotiating team is retreating to find the best way in arriving at a status that benefits both the mining companies and the people of Zambia.”

Well, we have heard something similar from Magande before. What would be really appreciated would be an open discussion of the negotiating objectives of the Government’s team. Why not make this a national debate (or join the debate on Minewatch!) about what Zambia should be aiming to get out of copper-mining contracts, rather than simply claiming the team will ‘retreat’ to discuss it themselves?

Lubinda reads Minewatch?

The Post reports that outspoken Patriotic Front MP Given Lubinda, Chairman of the Parliamentary Committee on Economic Affairs and Labour, has asked the government to revise taxation of the mines immediately. Lubinda said recent admissions by Paul Collier, a former director of the Development Research Group at the World Bank, that the development agreements signed by Zambia with copper mining companies were a disgrace should give the government impetus to demand a better deal. Collier’s comments were recently reported by Minewatcher. Given, are you reading? Welcome!

Lubinda complained about an invasion by unscrupulous investors. “Some of these sham investors operate in all other activities than the ones for which they applied investment and immigration permits." He called for the establishment of regulations that stimulate backward and forward linkages between foreign and local enterprises. “There is no reason why the government should give lucrative investment terms to foreign investors than to local investors,” Lubinda said. “This is one of the reasons why foreign investors import overalls that are manufactured locally even by our women in their backyards. It is worth noting that quite a number of the consumer products that we import from China are actually manufactured by small entrepreneurs in the backyards of their homes.” Lubinda said his committee was impressed with the rapid investments being made at Konkola Deep Mining Project in Chingola. “With the new developments, KCM will require additional labour,” he said. “Your committee urges the government to insist that KCM and any other investors who import skills put in place a deliberate programme for locals to take over these positions.”

World Bank reads Undermining Development?

The new Undermining Development? report seems to be reaching the places other reports don’t. In an article titled, 'World Bank endorses revision of mining agreements, on November 2nd, The Post reports that the World Bank fully supports the Zambian government’s efforts to renegotiate the development agreements. New country manager Kapil Kapoor is quoted: “We fully support government’s efforts to revise mining agreements. Zambia should be able to benefit more from high commodity prices and use the earnings to improve other sectors of the economy,” Kapoor said. “This country should take a leaf from Botswana, which has over the last few years utilized its diamond revenues to improve other economic sectors.” The Botswana comparison comes straight from the Undermining Development? report.

Chinese open second mine at Chambishi

Chinese state-owned mining companies officially launched a second copper mine at Chambishi on Saturday. The West Orebody Project will be run by the same company, NFC-A as runs the existing mine. Total investment for the project is US$100 million. Construction is expected to take three years, and once operational, the mine will will provide 1,500 new job opportunities for the local people.

Xinhua new agency reports that Zambian Vice President Rupiah Banda attended the opening ceremony in Kitwe, as did Chinese Ambassador Li Qiangmin, chief executive officer (CEO) of Zambia-China Economic and Trade Cooperation Zone (ZCCZ) Tao Xinghu and CEO of NFC-A Luo Xingeng. All pressed the idea of a win-win relationship between Zambia and China. However, after struggles over working conditions, and particularly over casualisation and union-busting by NFC-A, described in the For Whom the Windfalls? report, minewatchers will want to keep a close eye on whether the project uses local or Chinese labour, management, parts and suppliers, and on the terms of employment in the mine.

More UK media coverage

An excellent article by Nick Mathiason in Sunday's Observer newspaper, reports both on social conditions in mine townships and on the new Undermining Deverlopment? report. The article, titled 'Zambia's new bid to cash in on copper' quotes For Whom the Windfalls? author Professor John Lungu amongst others. It suggests that the re-negotiation process has started, but that Government representatives feel they have nothing but moral pressure to strengthen their hand in the talks. As discussed previously in this blog, that approach appears to underestimate the degree to which the companies themselves are already in breach of their existing contracts.

A detailed story on the Undermining Development? newsletter is also featured in the Ekklesia newsletter.

Zambian campaign moves up a notch

The For Whom the Windfalls? report has recently been re-published in Zambia, and the campaign re-launched, with public forums held on :
- Tuesday 23rd October at Edinburgh Hotel, Kitwe,
- Thursday 25th October at Savoy Hotel, Ndola
- Friday 26th October at Protea Hotel, Chingola

The meetings also saw the launch of a new baseline study by CCJDP-Ndola, the Zambian Congress of Trade Unions, Mineworkers Union of Zambia and DeCOP. This research was led by Dr Mitulo Silengo. I hope to post a copy of this research on the site soon. Further plans for regional and international conferences on the Copperbelt and in Lusaka are in the pipeline.

Ex-World Bank Director Paul Collier supports re-negotiation

Speaking at the Battle of Ideas last weekend, Paul Collier, former Director of the Development Research group at the World Bank and more recently senior advisor to the Blair Commission on Africa, argued that the Development Agreements signed by Zambia with copper mining companies were a disgrace, and should be re-negotiated. Collier who has recently attracted attention with his book, 'The Bottom Billion' blamed his former employers at the World Bank for posting their most junior economists as advisors on the privatisation. Collier claimed that he is actively campaigning on this issue. I will try to follow up to see what that means, and will post on this blog if I get a reply.

UK Campaign makes immediate splash

The new Undermining Development? report has made an immediate splash in the UK media. A long and highly sympathetic piece: ‘Zambia does the work. But who makes the money?’ appeared in The Glasgow Herald on Saturday 26^th October.
Have a look at the interesting comments sent in by readers in response to the article as well.

Tribute to Teelo Ross, 'For Whom the Windfalls?' designer

It is with sadness that I have to report the sudden and tragic death last week of Teelo Ross, who was killed in a traffic accident in Lusaka.

Teelo designed and managed the production of the For Whom the Windfalls? report. He was a lover of life before he was an artist, and an artist before he was a graphic designer (he was one of Lusaka's finest graphic designers, as anyone who has seen his striking and cheeky billboard adverts for Chilanga Cement or The Post newspaper will know). That meant he was a perfectionist about how the report looked, and he did a beautiful job of making it come to life with his images and lay-out.

He also cared deeply about the subject of the report, having been born in Ndola. As we sat up late trying to make a ridiculously tight production deadline for the report (we failed, as anyone at the bookless book-launch in the Pamodzi will know!), Teelo shared with me his anger at the current state of the places he knew when he was younger, and the conditions in which his friends on the Copperbelt lived and worked.
I will miss him. A tribute site to Teelo on the Facebook website is here.

Alastair

Undermining Development

Readers will be interested to learn that the Scottish Catholic International Aid Fund (SCIAF), Christian Aid and Action for Southern Africa (ACTSA), with the support of Zambian civil society, have just published a major report – Undermining Development? – on why Zambia fails to derive the benefits that it should from its enormous copper reserves. The focus of the report is KCM, Zambia’s biggest copper company – majority-owned by a UK-based company, Vedanta Resources. The report finds disturbing evidence of contracts signed under pressure from international donors, environmental agreements that allow multinationals to bypass local laws, and workers who receive little reward for gruelling hours of physical labour.

MineWatchZambia has made the reports available for download. The full report is available, along with an executive summary. We will let you know soon where hard copies of the report can be obtained from.

This is the beginning of a major campaign for SCIAF: click here for more information about the 'e-action' they are organising to follow up on their report.