Zambia’s entire economy is dependent on copper. It has been like this since the country attained independence in October 1964. Copper defines Zambia. Since privatisation in early 90s, the mining sector has attracted Canadian, Chinese, Indian, Australian and American mining companies. At some stage, Zambia was the biggest African producer of copper until the Democratic Republic of the Congo (DRC) overtook it in 2013.
Still, Zambians have consistently monitored the health of the mining sector, knowing its contribution to the overall economy. Thus, when the price of copper goes up, hopes are raised that lives will change and when the price goes down, fears abound of operations scaling down, leading to massive job losses and a decline in contributions to the fiscus. That there already is in place a problematic and inefficient Corporate Social Responsibility (CSR) framework governing the operations of mining companies in affected communities, these fears are legitimate.
By all accounts, the mining sector should have been a saviour of the country’s economy. But, the reality is that whether the price of resources increase or decrease, the people do not benefit. Many Zambians, including the president, Edgar Chagwa Lungu, echo this view. The entire mining sector is structured in such a way that mining companies always take the lion share of profits, leaving behind poor communities and massive environmental damage that mostly affects water and soil quality. Evidence abounds of polluted streams and rivers in the Copperbelt, all polluted by various mining activities.
Today, the prices of copper and cobalt, the minerals in which Zambia has the largest stake, have risen at an unprecedented high rate of $7,000 and $80,000 per tonne respectively. This increase in price of these two minerals is a great opportunity for the economy of Zambia. The big question, therefore, is whether Zambia is prepared to draw maximum benefits from the new boom?
Recently, ourselves, joined by other colleagues, spent a week in Zambia talking to different stakeholders in Lusaka, Ndola and Solwezi. We met with the Minister of Mines and Minerals Development, Richard Musukwa, MP. He is clear on the priority of his government, which he describes as ensuring that mining activities benefit the people of Zambia, and the government, he stresses, will not sleep until this happens. To the ears of Zambian civil society, Musukwa’s words are hollow and point to the empty sloganeering they have become accustomed to. For some civil society organisations in Zambia, therefore, it is quite clear that their government does not have the capacity, let alone political will to turn the resource curse afflicting their country into a blessing. A prevailing view among these civil society organisations is that multinational companies are too powerful for the Zambian government to reign in and demand transparency and accountability. In response to this criticism, the government of Zambia has constituted a special committee to look into the complaints by Zambians, broadly, that the mining industry is not benefiting the country, as it should. While people appreciate the government move, critics argue that the reasons why Zambia is not benefiting are known and the government must simply act to reverse the situation.
Some of the critical issues that the Zambian government must act on include, first, the adjustment of the balance of power between government and mining companies. There is a strong perception that there is an asymmetrical power imbalance, which favours mining companies. They get whatever they want, including rejecting any adjustment government wants to introduce in the mining framework. In many instances, companies use threats of withdrawal of their investment to force the government to back-off from any change that will reduce companies’ profits. Regrettably, this is a manifestation of a government that does not have a vision of what it wants to do with its minerals. Any government with a vision, will not be bullied to the point of abandoning what it believes in. This situation has slowly started to erode confidence in government, especially from mining communities who suffer from mining activities through displacement, pollution and lack of access to sustainable economic opportunities.
Second, the government must ensure it shares in the large profits that are now being made by mining companies with the increase of copper price Mining Companies have been quite about the price increase. They are quietly enjoying the benefits. They are not prepared to open the issues such as payment of a windfall tax, increase of workers’ salaries and increase of their Corporate Social Investment, benefits of which are quickly shelved when price decrease are reported. To prevent the unpredictability, which comes with price fluctuations, the Zambian government must introduce a clause guarding the stability of the fiscal regime in country’s mining law.
Third, we strongly feel there is need for the government to develop a system that will segregate aggregate the production figures especially of Cobalt and Copper. Cobalt is a by-product of Copper. Although Zambia it is not a big cobalt producer, it is difficult to know how much Cobalt companies produce and export. There is a rush for cobalt currently given constrained supply and strong demand for lithium batteries, needed for electric cars. The price of cobalt, if one considers the projection, which car manufacturers are, making, will not come down soon; unless there is over production but this is unlikely. Currently the DRC is the world’s biggest producer. Combined, DRC and Zambia hold 57% of world cobalt reserves. Last year the DRC produced 68,000 tonnes of cobalt. With the cobalt rush and the price increase, the DRC will certainly increase its revenues. But, Zambia’s cobalt production figures are not publicly available. It is necessary for government to ensure mining companies are compelled to divulge the correct figures of cobalt production and pay what is due to government. The DRC has just made cobalt a strategic mineral and has pushed its royalty rate from 2,5% to 10% in the new Mining Code signed last week by president Kabila.
Fourth, the government must strengthen its revenue collection capacity. The low capacity or lack of it to collect the right and correct taxes from mining companies is due to lack of a clear and efficient system that allow institutions assigned to carry out such functions to execute them with efficiency.
Fifth, the Zambian government must monitor and evaluate the CSR of mining companies to ensure that their contribution supports the transformation of Zambian society. Government must know that it is not a core goal of mining that growth and profit it creates will either reach or enrich indigent communities. Companies claim to be investing millions of dollars in communities but it is not clear where these investments are made because, for us who visit mining communities continuously, we find them poorer than the last time. In reality, mining companies perpetuate poverty and impoverish communities. In Zambia, mining companies are making huge profit but their activities are not shifting structures of poverty. The failure to channel profits into the development of those affected by mining, reveals a perennial practice of exploitation that is hundreds of years old.
Companies are increasing their production for copper to benefit from the high price. It seems that Zambian government is not prepared to draw maximum benefit from this increase. Zambia has been one of the most peaceful and stable countries on the continent. Sadly, this stability has not translated in a better life for the Zambian people. It is clear from the Zambian case that mineral resources endowment can lead to the creation of wealth, but such wealth cannot be automatically created. The Zambian state must assert its sovereignty over the country’s minerals now before it is too late.
SOURCE: www.dailymaverick.co.za
Claude Kabemba and Edward Lange are, respectively, Southern Africa Resource Watch Director and Zambian Co-ordinator
How so when you no longer own the mines, your govt is not taxing them and you are subsidizing their electricity? These things do not work like osmosis, to benefit you need a visionary economic plan to derive the benefits due to you. But with your ba Chimbwi no Plan bali mbweee in power, forget it.
Great article that will awaken the lion in us! Zambia has the potential to become the lion of Africa. 57percent of the cobalt reserves belong to Zambia and DRC combined! This is no joke. Cobalt as mentioned is a vital metal in the construction of electric vehicles, other metals such as manganese and lithium (both being mined in Luapula province) are equally important and are now referred to as “rare earth minerals” these are the most sought after metals today along with platinum. We have been taken for a ride for too long! When some of us say govt should focus only on Mining companies and other big business houses and not the informal sector which is struggling to survive we know what we are saying. These mining firms are making billions in weeks not even months but weeks!
Ctn…It doesn’t take a metallurgist to know that Zambia is also producing thousands of tons of platinum, gold, silver and other precious metals as by-products of electrolysis in the final stages of the copper refining process of the millions of tons the country produces but why don’t we hear of this production? We are only told we produce copper which has become a song to f000l us. This is real robbery of the kind I believe God will punish us for allowing. We have been cheated billions of dollars and yet we have hospitals without medicine, schools without books, towns riddled with potholes! We are lions and deserve to be kings and not slaves to these greedy mine companies and greedy govt leaders! Enough is enough!
Dull PF has already been duped to signed deals and agreements…forget about copper price!!
Since when did Zambia ever benefit from its mineral wealth? Are we not the same accursed as we have always been?
1. The Copper & cobalt goes out of the country but the money does NOT come back because of stup1d leadership
2. We have NOT invested in adding value to copper & cobalt. As long as we have stup1d leadership, we’ll keep exporting copper cathodes like our ancestors exported copper ingots
3. Chinese small scale miners need to be flashed out of the country. They don’t pay taxes, royalties & pay workers slave wages.
Gibranium!!
Well US$80, 000 /ton that’s something. Zambia at it again, abundant mineral resources but its management hmm? . Hope we will use this to pay back huge debts the country is owing IMF… God bless Zambia.
NO IT WON’T IT WILL BE USED FOR CAMPAINING, BUYING MORE SUV’S FOR GOVERNMENT OFFICIALS, LINING MINISTERS POCKETS, PAYING FOR TRIPS FOR MEMBERS OF CABINET, THE LIST GOES ON AND ON AND ON !
When you want to benefit from the RAINS during the rain season you plan and implement your plan.
Otherwise leave the rain season to the wise.
What is Zambia’s plan on minerals in the next five to tens years?
You cannot say much if you have the habit of getting kickbacks. In this situation, the investor benefits, the receiver of kickbacks benefits and the country and the majority suffer
This economy needs a complete overhaul. The current economic trajectory is a disaster in the making. Decorating our country with malls filled with south African products and opening shoprites in the compounds will take us nowhere.
This is not a topic you can have any meaningfull discussions with PF.Talk about Public Order Act,2021 elections ,who to blame for electoral violence or even treason,not these serious issues.Unfotunately this is a topic for those in power after 2021,not our PF,it is beyond them.
In Mwanawasa’s time the rise in copper prices brought a corresponding improvement in the economy,not now,,you can even be arrested by Kampyongo for engaging in such a debate.
Indeed, PF are only intrested in getting campain funds from the same mining companies and sign anything.
Like the mopane 40 year electric tariff deal resigned in 2015 at the heat of elections where mopane signed a deal with PF where they pay fixed electric tariffs for 40 years…..we can only speculate why PF would do such a thing…
You can’t rely on CSR you drive the wheels of community development, it’s just another bowl of alms. There’s no Law that compels mining or any company to plough back into communities they operate and by which degree. Most of the cobalt leaves Zambia as blister copper or dandashi as the jerabos will refer to it. Chambeshi Mine produces radioactive Cobalt 60 which I think fetches more. There’s scanty information about emeralds. Everything can’t be left to Govt alone. How about the Labour Movement? Their members work at these mines and have first hand information about these crooked mining companies. In fact most mining engineers and Thief Accountants are Zambians but they have chosen to be collaborators in this crime.
The Labour Movement held colonial mining companies accountable long before the birth of politics. Lawrence Katilungu, Dauti Yamba, Godwin Mbikusita Lewanika were vibrant Union leaders long before political parties were born. Today’s union leaders are always appealing for help from Govt, it can’t do everything! Unionists are the worst culprits. What about the opposition? When Chikwanda wanted to leverage on taxes Hichilema called in an evil tax. His godfather Olusegun Obasanjo expressed similar sentiments not long ago. How about the NGOs that claim to have an oversight interest in mining activities? They’re all appealing to Govt to do this and that. The Chamber of Mines comprises Zambians who have worked in the mine their whole life but what have they done for the country? SHAME IS ALL…
Cobalt prices has always been higher. Zambian mines do not produce cobalt, but there focus has been copper. Most mines in Zambia do not have cobalt mineral content except baluba at 0.5 maximum. Congo is the one with cobalt starts from 3% upwards. 0.5% cobalt content is very low thats why mining companies focuses on copper and improve on upgranding percentage. Its easier said as articulated in the article, but pratically its not feasible and even if Zambian mining firms had to concentrate on cobalt recovery, what tonnage will they recover???
Zambians we are good at talking and articulate issues academically, but practically nothing. There are alot of Zambians with mining lincese just sitting idle, but i have never seen a Zambian with productive mining employing University graduates…
True that, Skipper. The other reality is Zambia only produces maximum 3,000 tons anually whereas Congo does a whopping 68,000 tons. Anyone can do the maths, while Congo will have exports in the range of $5.5bn, we can only do $240m. How much royalties can we derive from that??? If we concentrated on fish farming, hit 600,000 tons exports at $1,800 that’s already $1bn-better deal!!!
@Skipper. Try to check your figures properly. When I was working for one of the Copper mines, our cobalt grades were as high as 5%. I am afraid the 0.5% you’re mentioning for Baluba is very small. I remember at some point we had to concentrate on mining low grade copper because it was containing high grade Cobalt. In short at that point, there wasn’t really a lot of interest in the copper but the Cobalt. It’s just that the Capitalists owning the mines will not want to mention that they’re actually interested in the Cobalt. they will continue telling us that Copper prices are low and that they are not making any profit but they know that what really gives them money is the Cobalt.
The geological truth is we have little cobalt deposit in Zambia, most of the mines is copper-gold. The major deposit is at Chambishi near Kitwe. While in DRC from Lubumbashi to Mtshatsha after Kolwezi you get cobalt deposits.
@Vincent Mwale, its you to check your numbers. I doubt you were near to any figures when you worked at the mines. 5% cobalt??. You are joking!!. 0.5% is good-grade cobalt, or at least a grade that sounds typical of an average grade you would get at a copper-cobalt mine. Yes, there are higher grades in Congo but @ Skipper you are also not correct to say that cobalt is only at Baluba. Nchanga Open Pit (now closed?) survived on cobalt for many years. Which mine did you work for by the way Vincent?.
@Chitapankwa Allepo Trump and @Vincent Mwale, both of you could be correct. However, that is only if you are saying that 0.5% is the cobalt grade for the ore and 5% is referring to the grade of concentrate generated after flotation or employing a different mode of treatment of the ore such as Density Media Separation. During the ZCCM days, Nchanga Division used to produce concentrates containing both copper and cobalt. These were classified as Low grade (less than 3% Co); Medium grade (3-5%); and High grade (above 6% up to 8%). Luanshya mine used to generate Baluba concentrates which were then trammed to either Nkana or Chambishi Cobalt Plants at 3% cobalt. Baluba concentrate was mostly required as it came with the side benefit of high sulphur content which was necessary to sustain…
…Continued
roaster operating conditions at the two cobalt plants.
Cobalt, be it in DRC or anywhere else, is produced as a by-product, either during the extraction of copper or Nickel. It does not occur on its own. In Zambia, cobalt is slightly expensive to exploit than in the DRC due to the nature of its occurrence. In Zambia it has to be extracted from underground mining and treated via the relatively expensive route of concentrator-smelting-refining whereas in the DRC, it has to be mined from open pits and treated via the cheaper mode of leaching-solvent extraction- electrowinning.
The lack of or little derivation of tangible benefits (CSR) from the rising cobalt price is complicated. It cannot be pinned on the inertia or incompetence of the current government. It emanates from…
….
….the privatization process which was done in haste. The golden share of the GRZ through ZCCM in Zambian mines is at most 18-20% only. In the DRC the minimum is 35% and comes free of cost!
With the unbundling of the ZCCM, Nchanga mine which was the major source of cobalt ended up with the shopkeepers (Vedanta). Glencore AG (commodity traders) bought off Mopani Copper Mines Plc which had Nkana cobalt plant (one of only two cobalt plants in the country). Glencore also owns a number of mining facilities in the DRC which produces significant amounts of copper and cobalt. In fact Glencore now owns two thirds of the world’s cobalt reserves!
5 years ago, the price of cobalt was quite low and unattractive relative to copper. Both Glencore and Vedanta reconfigured their strategies to focus…
….on copper production. Nkana Cobalt plant and the Katanga Copper Company at Luilu were shutdown largely due to shortage of power and also to alleviate the cost of production. Ironically, this inadvertently contributed to the price boost.
With the advent of the electric vehicles coupled with the uncertainty of the political situation in the DRC, there has been an upturn in the price of cobalt. World cobalt consumption figures show that demand for cobalt will increase by a whopping 800%. It is also shown that, of the total quantity of cobalt produced, 70% is gobbled up by the chemical industry and hence required in the form of a salt or compound. The remainder 30% is what is required in the form of metal for the aeronautical industry and the medical industry. With this background, most…
…facilities in the DRC have ramped up production of cobalt compounds which is cheaper than the metal itself. Nkana Cobalt plant remains mothballed to date. Chambishi cobalt plant has no captive ore hence it treats oxide materials from the DRC. At the peak of its powers, ZCCM used to produce 25000 tonnes of cobalt metal from the two plants!
That the Zambian state must assert its sovereignty over the country’s minerals now is a fallacy. Government must utilize taxes collected to introduce and implement long term sustainable tax on mining that works for both parties – mining investors and the citizens. Institutions must be strengthened to monitor export of minerals such that there is no under declaration and transfer pricing.
Unfortunately, expecting mining companies to develop the country through CSR is a flawed expectation. By definition, any CSR project can only be an inititiave by the companies themselves. CSR only begins where law ends. So if we real want benefits from the mines, only the law will deliver
The reality is Zambian parties will do anything to stay in power……they will sign anything put in front of them for campain funds. In developed countries we have lobby groups but what they can squeeze out of a government is limited because public equiries can be started if any deal looks unfair to the country……but in Zambia anything and everything is for negotiation….espcially to the run up to 2021 , all the foreign bussiness know PF will sign any deal for campain funds to stay in power…..they can even concession off Kafue river.
Spaka like lilo. This article is not about politics. Its about mining cobalt. Don’t just respond for the sake of responding. It seems you know nothing about mining hence you are the people misleading ordinary Zambians. Talk with facts. You like condeming investors, but on the other hand same investors are creating employment to Zambians. A mine is built in the bush. Look at kalumbila which is US$2billion investment in the typical bush and you cant go in the bush yourself, even if you were given US2billion, the first thing you will do is build yourself the mansion, buy your wife most latest car, take your children overseas for school, have 15 girlfriends and even your friends wife. The money investors are using building mines are loans, but they are using it to build mines, employ…
Reading this article, I see intimations by the writer for re-nationalisation of the mines, albeit in a different format, as means for Zambia to benefit. This backwards-and-forth narrative between privatisation and nationalisation reminds me of the famous story about A MAN, A BOY AND THEIR DONKEY ON A JOURNEY.
… A man and his son were once going with their donkey to market. As they were walking along by his side a countryman passed them and said, “You morons, what is a donkey for but to ride upon?” So the man put the boy on the donkey, and they went on their way.
But soon they passed a group of men, one of whom said, “See that lazy youngster, he lets his father walk while he rides.”
So the man ordered his boy to get off, and got on himself. But they hadn’t gone far when they…
…. when they passed two women, one of whom said to the other, “Shame on that lazy lout to let his poor little son trudge along.”
Well, the man didn’t know what to do, but at last he took his boy up before him on the donkey. By this time they had come to the town, and the passersby began to jeer and point at them. The man stopped and asked what they were scoffing at.
The men said, “Aren’t you ashamed of yourself for overloading that poor donkey of yours — you and your hulking son?”
The man and boy got off and tried to think what to do. They thought and they thought, until at last they cut down a pole, tied the donkey’s feet to it, and raised the pole and the donkey to their shoulders. They went along amid the laughter of all who met them until they came to a bridge,…
…… a bridge, when the donkey, getting one of his feet loose, kicked out and caused the boy to drop his end of the pole.
In the struggle the donkey fell over the bridge, and his forefeet being tied together, he was drowned
The moral of this story on this subject is simply that by feeding into this false narrative of prosperity by exporting and Taxing its minerals, instead of focusing on value-addition, ZAMBIA RISKS LOSING ITS DONKEY. Pure and simple.
Zambia must learn from countries like Qatar, Botswana and Norway (I deliberately pick from different continents to show similar governance behaviors); they are acutely aware of their wasting assets in form of mineral wealth so they have and continue to invest their earnings in sustainable ways that ensure continuity of economic gain potentially well beyond the lifespan of the resource. We seem to have a mindset that just squanders and spends for as long as the earnings are rolling in. Saudi Arabia is currently scrambling as the focus shifts from oil to resources that will promote renewables (yea, Cobalt, rare earths, Lithium etc. are inputs but also have a sliding/closing window).
“Zambia’s economy is entirely dependent on copper”. My foot!! What do we benefit? Taxes only. Just imagine how rich we would be if we were running those mines on our own! With hundreds of degrees being conferred on our people every year but failing to run the mines. It is just equipment that we needed and we could have done so by borrowing from IMF to buy that equipment. Development in this country will always remain a pipedream. Even the muzungus who bought the mines must have laughed at us when buying.Shame on us!
Twala again….
The only benefits we get are emissions, pollution of streams and rivers.Just check out this video ***(youtube Stealing Africa)
Thats the problem with Zambian learn,t u all expose your foolishness openly. Those foreigners are seeing how swallow u are about the subject ad will capitalise on it. Just from wht all hv written, u all showing tht u hv little knowledge abt it. Team up ad fight capitalism, for our benefit, dont jst provide labour, those mines were ours, but some foolish politicians sold thm for a peanut ad all the money we can’t point tht we did or built tht, its a shsme. Better we kept thm.
There are massive downstream benefits to mining from employment to taxation. It’s down to government to utilise that tax in a sensible manner that benefits the countries people. It’s also down to government to introduce long term sustainable tax on mining that works for private companies while giving the country a fair share of revenue. The export of minerals must be monitored to prevent under declaration and transfer pricing. Governments should never run mines or any other business.
Gents slow down. you don’t need nationalization in order to benefit from cobalt. most of the people writing about this topic have no idea what they are talking about. I like David N articulation of the cobalt issue. to start with, there is no commercial cobalt production in Zambia as at now. The closest we can get is from the Nkana cobalt plant if they start production soon. The infrastructure is already there though very old. it was shut down due to environmental issues, if you remember the famous centre or sulphur dioxide affecting the nearby communities coupled with with a slump in commodity prices on the world market. To make it simple, we have the potential to produce cobalt in Zambia but that dream can only be realized if we reopen the defunct mines that have cobalt reserves. Nkana…