By Tara Carman
It’s morning in a remote community in northwestern Zambia. There is only one major road through town and it’s packed, not so much with cars but with a teeming mass of humanity. Everyone — from the women in brightly coloured dresses navigating their way among the many roadside stands selling everything from fruit to cellphone air time to the groups of children in their immaculate school uniforms — is moving. They do not linger on street corners making idle conversation, but purposefully make their way along the dusty roadside, the red earth clinging to their shoes. Lining the main road are a large Shoprite, a major South African grocery store chain, and the newest infrastructure to grace the modest town, street lights, installed just a couple of months ago. A little further down the road is a five-star hotel.
Welcome to the Solwezi of 2010. A decade ago, this was a sleepy provincial capital of about 100,000 people that few outside the country had ever heard of. Today, the population has quadrupled and it has become one of the most important economic centres in the country. Largely, this is due to the Kansanshi copper-gold mine down the road, which is 80-per-cent owned by Vancouver-based First Quantum Minerals.
The mine is the biggest copper producer by output in the country, and minerals — mainly copper– account for 70 per cent of Zambia’s exports. The mine, which produced 36 per cent of Zambia’s copper last year, has brought relatively well-paying jobs and economic development to the area and paid for things like smoother roads and classroom blocks that the local government could not afford to provide. But with it came mass migration, overcrowding and vastly increased rates of HIV and AIDS. And a regional watchdog group accuses this mine and others like it of sharing only a modest proportion of the income from the vast mineral reserves with the people whose land it came from.
The mine is one of the oldest in Africa, dating back to the fourth century. Locals simply picked up ore off the ground and used traditional smelting practices to extract the copper to make ‘nsanshis’ or copper crosses, said Godfrey Msiska, public relations manager at Kansanshi Mining, Plc. The word kansanshi, translated from the Kaonde language of northwestern Zambia, means small copper cross.
Post-independence, Kansanshi was operated by the state-owned Zambia Consolidated Copper Mines, which still maintains a 20-per-cent stake in the mine. ZCCM lost a lot of money trying to make the mine viable and it was privatized in 1997. Several companies tried and failed to make it profitable before First Quantum purchased it in 2001. The mine started operations in 2005 and last year produced 245,000 tonnes of copper, the most of any mine in the country, and about 3,110 grams of gold. First Quantum, which focuses on Africa and also operates mines in the Democratic Republic of the Congo and Mauritania, reported a first-quarter net profit of $146.2 million US and $1.81 per share, compared with $10.9 million and 16 cents per share for the same period in 2009.
The main pit of the Kansanshi mine is a gaping, oval gash in the rusty orange earth two kilometres long, just under a kilometre wide and 160 metres deep. Nearby, there is a second pit and Kansanshi is hoping to eventually combine the two to make one open-pit mine six km long and 290 metres deep, senior geologist Alexander Shaw said.
The mine employs about 3,600 people, 95 per cent of whom are Zambian like public relations manager Msiska. Foreigners like Shaw, who is South African and Plant Manager Alan Delaney, who is British, make up less than five per cent of Kansanshi’s workforce.
Kansanshi pays the highest wages of any mine in the country, offers generous bonuses and each employee is able to support a family on the salary, Msiska said. Businesses in the area also benefit both directly and indirectly from the mine’s presence, he said, adding that the company also puts millions into community infrastructure like water boreholes, classroom blocks, improved roads and local employment projects. People are appreciative, Msiska said.
But relations between the mine’s management and the local workforce are not seamless. Theft is a problem on company property, Delaney said, noting that the people who steal constitute a very small proportion of the mine’s workforce and are mostly employed by subcontractors.
“They steal anything and everything. Diesel, equipment small and large, copper cathode,” Delaney said. Some of the valves used on site are worth $20,000 to $30,000 and procurement people at other mines will purchase them from thieves. Even items like shoes and protective equipment regularly turn up at local markets, he added. “There’s a lot of organized shenanagins that go on. Theft, it’s a big industry.”
Thieves will even pay schoolchildren to steal ore and at one point a local principal was having trouble keeping them in class, Delaney said. People in the community are poor and external criminal syndicates who honed their skills in the more established Copperbelt mines over the years conspire to make theft one of a limited suite of potentially lucrative economic activities in the area, he added.
Mines of any kind are by definition environmentally destructive and Kansanshi is no different, but environmental manager Richard Zyambo said the mine is taking steps to mitigate its impact on the Earth. They have installed scrubbers in the smokestacks that pump 800 kilograms per day of sulphur dioxide into the atmosphere; without them it would be 2,000 kg/day. There are also carbon emissions from the equipment and vehicles used on the premises.
The hazardous waste dump is on mine property, nowhere near the community. Zyambo said the water that goes to the tailings ponds is filtered and recycled back through the plant; what remains in the ponds is slurry combined with chemicals used to extract copper, and these chemicals tend to break down in the heat. The mine has sunk boreholes around the tailings dumps to ensure that the groundwater does not become contaminated and monitors the streams around the mine, reporting every month to the local water authority. Kansanshi also contracts local companies to recycle used oil and batteries.
Zyambo is particularly proud of the jatropha tree-planting project he helped establish. The company wanted to give the community an alternative to cutting down trees to make charcoal for use as a cooking fuel. So Kansanshi purchased seeds for jatropha trees as well as a collection of seedlings in a nursery and donated them to the community. The trees take two to three years to mature and then produce seeds. Oil from the seeds can be refined to provide biodiesel for equipment or to power vehicles, a form of renewable energy. Kansanshi has ordered a machine to press the seeds, which the company plans to purchase from the community. The cake-like residue from the pressing can be made into bricks for use as cooking fuel.
The plantation itself is a vast expanse of leafy green trees down a windy side road a few kilometres from the mine, surrounded by a tall electric fence. Two women and a man sit against tree trunks removing the black seeds from their husks, the rustling canopy above them providing some welcome relief from the hot midday sun. They are reluctant to talk about their work, or how much they get paid. Emmanuel Chihili, the man in charge of the Kansanshi Foundation, which funded the plantation, said he does not know how much they earn for their work because an outside contractor is now running the project.
Overcrowding a concern
The most inescapable and visible impact the mine has had on the community of Solwezi is overcrowding. Solwezi is the regional hub for not only the Kansanshi mine, but also the Lumwana copper mine 65 km away, owned by Equinox Minerals, which has offices in Perth, Australia, and Toronto.
Overcrowding is especially evident at Kabwela School, built by the mine in 2008, where headteacher Lubelenga Wisamba is the only instructor for its 418 children, aged six to 17. The school is located a couple of kilometres down a barely visible dirt road lined with tall grass and thatched huts. There are three classrooms with simple wooden desks and blackboards, a few dozen dusty library books and no water or electricity, though there is a borehole nearby. Wisamba commutes 20 km each way to teach there, but the school is having trouble attracting more teachers because there is nowhere to house them.
Housing is a major concern in the community. While there are a handful of modern-style bungalows, most people live in modest brick dwellings with corrugated iron roofs, which are sometimes held in place by large rocks.
The lack of housing is Kansanshi employee Rabson Mwakabanga’s biggest beef about the conditions of employment. Unlike the mines in the Copperbelt where he used to work, Kansanshi does not provide him housing, only a housing allowance which he said is not enough. Landlords rent out dwellings at a “very exorbitant price,” he said. “Most people end up staying in a shantytown complex.” And sometimes, the landlords will turn the situation to their advantage in other ways. Kansanshi business development manager Annie Kazhingu, who grew up in the region, fought hard for the mine to fund construction of a girls’ dormitory and Solwezi Technical High School because landlords were demanding sexual favours from the girls in return for affordable accommodation.
The orphanage is another Solwezi institution that is far too crowded. Many of the children lost their parents to AIDS, which has taken off in the region since the mine began operations. Kansanshi built separate dormitories at the orphanage for boys and girls and helps fund public education campaigns about the disease. Kazhingu goes on the radio twice a week — once in English and once in Kaonde — to talk about health, the environment and news from the mine. Often, she talks about malaria prevention and the importance of using bed nets and getting homes sprayed. Malaria is the country’s biggest killer, responsible for about 40 per cent of deaths.
Kazhingu and Msiska oversee the mine’s relations with the community. Kazhingu, who speaks the local language, discusses with elders what the community would like to see and city council is also consulted. Chihili, the head of the Kansanshi Foundation, is a former mayor of Solwezi.
Kansanshi recently purchased a refrigeration unit for the local morgue and Msiska says funds have been approved to build the town a new hospital. “We don’t impose things on the community. We go and consult with them, take what it is that they want, how they want it done and then we work as partners,” said Msiska, who noted on several occasions that his company is Zambia’s biggest taxpayer.
In fact, First Quantum is embroiled in a dispute with the Zambian government, claiming it is owed more than $200 million US in tax refunds. The previous administration imposed a windfall tax on mining companies, taxing revenues rather than profits in an effort to increase its share of the mineral wealth being dug out of the ground by foreign companies. It also raised the corporate tax rate to 30 per cent from 25 per cent and the royalty tax to three per cent from 0.6 per cent. Mining companies had strongly opposed the changes and the current administration of President Rupiah Banda eliminated the windfall tax as well as some other measures that companies objected to. Zambia’s Finance Minister, Situmbeko Musokotwane, said the windfall tax was unfair because older mines in particular have high production costs.
“To tax them on revenue before they’ve had a chance to take out their expenses, invariably it means that their net tax becomes extremely high,” he said. “If you have a tax regime that scares away investment, either in terms of opening mines or in terms of frustrating the current ones which are old, then this becomes very bad for employment opportunities.”
About 4.5 million Zambians are eligible to work, Musokotwane said, and about 600,000 are formally employed. There are many more who are informally employed as domestics or roadside vendors, for example, but their earnings are extremely low. Investment and employment from foreign companies provide safer, better-paying jobs than would otherwise be available, he said.
The Banda administration did not, however, return the corporate and royalty tax rates to their previous levels. Many companies, including First Quantum, are disputing these tax increases based on development agreements they signed when they undertook operations, Musokotwane said.
Msiska from Kansanshi Mining confirmed this, saying the company has so far paid $207.9 million more in taxes than it should have under the terms of the development agreement, which entitles the company to “full and fair compensation for any loss, damages or costs (including interest) incurred by the company by reason of the government’s failure to comply with the tax stability guarantees set out in the Development Agreements,” he said by e-mail.
Peter Sinkamba, executive director of the Zambian mining watchdog group Citizens for a Better Environment, said it would be far better if mines like Kansanshi abandoned such disputes, paid a fair amount in taxes and let the government provide things like hospitals and classroom blocks.
The 30-per-cent corporate tax rate only applies if a company is posting profits, which many mining companies were not in 2009, Sinkamba pointed out. Often, companies will use social spending to try to claim tax exemptions, which results in a “double-edged sword” as the government loses money and stops spending altogether in the mining areas because they assume companies will step into the void, he said, adding that having a private firm provide many of the services that are usually the domain of government sets a dangerous precedent because the mine’s primary loyalty is to its shareholders.
Furthermore, the government is allowing mining companies to “rape” the country of its minerals without adequately investing for the needs of future generations, Sinkamba said. “Look at the social investments in those areas. It’s peanuts,” he said.
Sinkamba proposes an alternative model of profit-sharing based on an arrangement in South Africa between a platinum mining company and the community in which it operates. The community, rather than the central government, negotiated the agreement with the company and receives the royalties. It used the money to buy shares in the company, and local leaders used the money to make long-term investments to benefit future generations, a model Zambia would do well to follow, Sinkamba said.
First Quantum’s continuing tax squabble with Zambia is, however, small potatoes compared to its dispute with the government of the neighbouring, and considerably less stable, Democratic Republic of the Congo. The Congolese government stripped First Quantum’s rights from its Kolwezi tailings project last year and recently annulled the company’s rights at the Frontier and Lonshi copper mines following a court challenge by the country’s state-owned miner.
The Zambian economy is highly dependent on volatile copper prices and can quickly go into a tailspin when copper prices drop, as they did last year. Musokotwane is aware of this and says the government is trying to support other industries such as tourism and manufacturing to act as a buffer. But for a landlocked country within shooting distance of economic powerhouse South Africa and to a lesser extent, Botswana, it is difficult to compete for the tourists and the investment. Mostly, Musokotwane says, the government of Zambia does not want to depend on aid. “Zambia is working very hard to attract investment from all over the world,” he said. “We understand very clearly that the way to fighting poverty is investment. We believe that you do not fight poverty just by being recipients of aid.”
Meanwhile, back in Solwezi, things are looking pretty good for miner Rabson Mwakabanga and his family. “Prior to [the mine, Solwezi] used to be bush,” he said. Now, business is booming. My family has benefited,” he said.
“There is a future, unlike in the Copperbelt, where it’s diminishing. It is growing,” he said, referring to a recent projection that the mine will be operational for another 20 years.
What happens to Solwezi when the mine shuts down is anybody’s guess.