Zambians unite to condemn mining companies

The editorials of Zambia's two main newspapers, The Post and the Times of Zambia today both discuss the threat made by representatives of the major mining houses that they will take legal action to try and block reforms of the mining sector. Both roundly condemn the investors. Since one is an independent newspaper that often acts as the most vibrant and diverse outlet for free thinkers in Zambia, and the other is a government propaganda organ, their agreement is an unusual event. Various papers also report endorsements of the Government's position. The lead story in The Post drew quotes from Michael Sata, firebrand leader of the opposition Patriotic Front, and a range of other prominent Zambians, including business consultant Trevor Simumba and Joyce Nonde, President of the Federation of Free Trade Unions of Zambia (FFTUZ). The Times of Zambia interviewed the President of the Mineworkers Union of Zambia (MUZ) Rayford Mbulu, University of Zambia (UNZA) head of mining engineering department Mathias Mpande. An interview with Professor John Lungu, co-author of the For Whom the Windfalls? is reported in the Daily Mail.

The unity of opinion from all these diverse voices suggests how badly the mining companies have misjudged the political mood in the country. Reader responses on other websites including rumbustuous exchanges on The Lusaka Times site suggests blogger opinion is heavily in favour of the Government and against the mining companies. The strength of public opinion on the issue is likely to both embolden the Government and make it near impossible for them to compromise or perform any sort of u-turn. The companies' strategy looks to me to have been something like the following:
1) Negotiating at privatisation to take on as few social and environmental responsibilities on the Copperbelt as possible, maximising profits, minimising contributions to the Zambian people, exchequer, workers and wider economy.
2) Acting surprised when local residents, workers and newly unemployed workers protested the new situation of insecure employment, unpaid pensions and increased pollution.
3) Suggesting that the Government sort it out, and that it wasn't their problem.
4) Offering overblown PR about limited 'social responsibility' activities, like sponsoring football teams that in many other countries would be thought of as advertising.
5) Once the Government suggested, before, during and after the 2006 election that they should re-negotiate mineral royalties, that they weren't interested in talking since they held contracts (with a few notable exceptions, particularly Derek Webbstock at LCM, who has always shown an understanding of Zambian public opinion and politics).
6) Saying, once the new regime was announced as a unilateral Government initiative: 'we are ready to negotiate' in the context of also saying 'we'll sue', thereby drawing down on their own heads the anger of the media and a range of social constituencies - an anger that itself means the Government now can't compromise.

In other words, their entire strategy has backfired on them appallingly. Shareholders writing on this and other websites to criticise the Government's approach should think carefully about how the managers of the companies they control have behaved from the original privatisation process onwards, and what contribution they have made to the outcome they are so aggreived at now.

So, what have the actors said, in detail?

• "We don't consult tax payers. The position in the mine stands," Finance Minister Magande told The Times. He told The Post: “Government is mandated by the Constitution to implement laws to govern the affairs of the country and everyone should abide by those laws. If any one defaults on tax, the relevant law enforcement agency will take up the matter... Our laws apply to everyone in the country so if they decide to go to court, we won’t stop them but we are going to meet them in court. You mean as government we should not allow you (Zambians) to benefit equitably from the resource that your forefathers safeguarded for you?” “The assertions by mining companies that government should have used instruments within the development agreements should not arise because government has done away with those agreements, maybe the questions you should be asking is, when is government going to implement the law?”
  

• Perhaps the most interesting of the points made is by Dr Mpande, who told The Times that the Development Agreements (DAs) that the Government had entered into with the mines after privatisation were illegal. He said that at the time the agreements were entered into, the Mines and Minerals Act did not have provisions for such agreements. Dr Mpande who is a former deputy Mines minister, said the amendment to the Mines and Minerals Act to facilitate DAs was only done when it was observed that the law had been contravened. He said the Act was amended after the DAs had already been signed, a move that was illegal. "There was an amendment to cover the illegality. This was a fraud to the Zambian people," he said.
• MUZ President Mr Mbulu told The Times, "The Government has made a right decision. The communities where these companies have been operating from have not benefited from the mines. This is a timely decision," he said. He said Liberia recently concluded the negotiations without taking legal action while Uganda, Tanzania, Nigeria, Guinea and the Democratic Republic of Congo (DRC) were in the process of re-negotiating.
  
• Michael Sata told The Post “This government should be as bold as Dr Kenneth Kaunda. We don’t need to nationalise the mines but if they don’t want to pay, they must get out of the country. We shall go to Chile and get people who know how to run the mines,” Sata said. “We shall back government and fight them and make sure that if they don’t pay tax, it will be impossible for them to run the mines.... They know that they have contributed enough to the MMD and if they threaten to take legal action, they feel some cowards in government will back down,” said Sata. “Why should they refuse when unborn babies are subsidising them? Who are they?”
• Simumba said the mines should not play games because the government had powers to do anything within the constitutional mandate regarding the mining sector. “The mines should not behave funny and play games. Besides, they do not follow regulations regarding pollution and the mines should know that they operate on the basis of licences and failing to comply may result in withdrawal of those licences.”
  
• Joyce Nonde said “For the past 15 years, Zambians have not been happy with the operations of the mines and the mines should not continue being rude and pompous by embarrassing the government through legal threats because they pay taxes in their home countries,” said Nonde.
• Professor Lungu said, “What Government has done is commendable, these taxes cannot be postponed, the new taxes are in line with the international practice…times have changed... As a result of the inadequate resources from income tax, Government was forced to borrow from bilateral and multilateral institutions to finance development programmes... Individual workers have been paying more than the corporations. Why should Government borrow when the money can be sourced locally?" Professor Lungu also poinbted out that the revitalisation of the mining sector has so far been dependent on Zambian Government support for the industry. “The investments that the Government has pumped into the mines through tax exemptions since the privatisation era could equal the investment that the mines have put in,” he said.“The decision to increase the mine taxes is commendable, brave and right because if Government did not get enough tax from its principal resources, where can the money come from?" Prof Lungu said he did not expect the mine owners to think of leaving because they had invested a lot and that they were not being threatened by nationalisation.
• The Post editorial, headlined, 'Brook no nonsense from the mines' describes the mine investors as "fortune seekers who have come with no other intention but to rape our nation. The behaviour of these corporations doesn’t seem to have changed in any way from that of the British South African Company ... the world is changing, and they shouldn’t think what is happening in Venezuela and other Latin American countries will not happen here. There is a new global awakening. We haven’t yet fully caught up with it but this awareness is coming. They can’t continue to blackmail our government whenever it wants to do something that is in the interest of the people and the country.... It is good that our government is starting to wake up and do that which needs to be done to ensure that our people benefit from the natural resources of their country. And on this score, the government deserves the support of all; the support of the unions, the entire civil society and of all our politicians. These taxes, which are very modest in our view, should not be reduced in any way. The government should continue to have the power to set and collect taxes as it deems fit. The government should treat the mining corporations like all other businesses operating in the country and should brook no nonsense from them. Those who want to go can go. They certainly can be replaced."

• The Times of Zambia editorial notes the wide range of people speaking out to support the Government and says: "we can only add to the chorus that Government stands firm in its resolve to ensure that Zambians benefited from the abundant natural resources.Our appeal would be to the mining companies to see sense. Taking Government to court is not the best solution to the problem. The fact is the situation has changed and the Development Agreements disadvantaged Zambians. This is the message that the mining companies should take to their shareholders whom we feel will have no objection, but abide by the new Government demand."