Why Chinese envoy Zhou Yuxiao is right

By Simon Manda

‘Chines ambassador Zhou Yuxiao says his country should not be blamed for the problems being faced in Zambia’s mining sector’ (The Post Newspaper 15th August 2012). Although I do not agree with the broader characterisation of the mining problematic projected by the ambassador in the Post Newspaper, I do [fortunately or perhaps unfortunately], I do agree on this specific one and in my humble opinion significant submission: China should not be blamed for the problems faced in the Zambia’s mining sector.

The Post Newspaper once argued: ‘Zambia is the tip of the tail of the global world dog. When the dog is happy we find ourselves merrily flicking side to side; when the dog is miserable, we find ourselves coiled up in a dark and smelly place’ [as cited in Fraser and Larmer 2010]. This characterisation is well-meaning and not far from the truth in this Zambia. Thus, in this feature, I argue that mining issues and decisions in Zambia have [fortunately or unfortunately] emerged as part and parcel of the political rhetoric side-lining the legally constituted structures such as the ZDA, ZEMA, ECZ et cetera however controversial they might be. I contend that as long as mining decisions continue to emerge from state house [or hoping from Copperbelt to state house partly under the hypocrisy of courtesy-calls’] side-lining the legally constituted structures, mining challenges and most importantly the trouble of regulation will persist. If these institutions are excruciatingly missing, then there appears an urgent need to construct new ones and the current government should facilitate that. In the absence of the so called windfall tax, a comprehensive and sustainable mining strategy needs to therefore be crafted.

Mining in Zambia is a highly politicised and contentious issue. Local communities’ expectations are high, yet quick to be deflated. The government is powerless to put in place sufficient regulatory framework to control mining corporations. Is it not glaringly obvious that the conventional approach towards extractive industry at least in Zambia has lamentably failed? Two aspects are observed in the post-privatisation period in Zambia: rapid expansion and growing diversity. According to the Human Rights Watch (2011), ‘by the end of 2010 China’s investment in Zambia was around US$2 billion, placing Zambia third for Chinese investment after South Africa and UK.’ Besides currently being eighth largest copper producer, with recent growth it is predicted that by 2014 Zambia would enter the top five. Yet in 2007 Zambia collected just 3% of the US$4.7 billion earned by copper and cobalt exports. By 2010, mining contribution to the national treasury dropped to less than a third since 1990s.

First Quantum’s net earnings exploded from $4.6 million in 2003 to $152.8 million in 2005 (First Quantum Annual Report, 2005). Similarly, KCM operating profit increased from $52.7 million (2005) to $206.3 million (2006) (Vedanta Resources Plc Annual Report, 2006). This has probably already surged upwards. The Chamber of Mines at one time bragged that by 2005 the companies were putting in over $350 million a year. Besides new investments production rebounded to 500,000 tons by 2007; with the Chamber of Mines further predicting that production will be as high as 800,000 tons in 2009. Embarrassingly this impressive production in Zambia has not translated into collection of significant revenue from mining projects. In fact, as Alistair Fraser (2007) notes the Zambian government has incurred losses in tax revenues through the subsidies given to the private mining companies. It has also been reported that Zambia has had the lowest mining taxes compared with other mineral-rich countries in Africa and the whole world. For example, where Chile earned a total of $8 billion from royalties in the 2005/2006 financial year, Zambia only earned $10 million (K35 billion) (Chirwa, 2008). Despite all this, mining companies in Zambia have been consistent on resisting government proposals arguing that the measures will make mining financially unsustainable. What this evidences is the deep seated struggles to regulate and implicitly claw back substantial benefits from this sector. And China to be specific is in a way far from this problematic.

Zambia’s confusion can be evidenced through advocating policies that oscillate between extreme deregulation and state interference, and between increasing taxes and lowering them. The nature of governance [highlighting the logic of ‘spoils politics’] has also provided fertile ground for thriving corruption leading to a political culture of interventionism. In fact, it is difficult to appreciate legitimate mining institutions. Although this is not necessarily bad, it creates a fertile base for the hideous face of corruption. As a matter of fact, to a larger extent the trade unions, tribal authorities and government agencies themselves that framed life on the Zambian Copperbelt have become but shadows of their former selves losing their vital connections with society.

This has led to ‘de facto policy’ undermining formal regulations as seen in the emergency of the so called ‘courtesy call politics’ where major foreign companies are expected to visit the president [at times chiefs] to brief him on their investment plans (Hugland 2010). This Government intimate involvement in the mining through mediation or contractual agreements which are mostly elusive has ensured that local people/demands are ignored in decision making thereby deepening regulation miscarriages and creation of a chaotic entity in Zambia.

 

As a result, ‘the exploitation of these resources by MNCs has resulted in social-economic inequality, deterioration in labour and employment standards, environmental degradation and exclusion of the majority of the people from accessing social services.’ Although the government has somehow created fertile ground for mining companies in Zambia, the direct outcome has been impoverishment for locals. While TNCs make enormous profits from Zambian Copperbelt for instance, local communities now survive on ‘re-mining’ the tailings dumps left behind by historical mining operations; they have been dispossessed of their livelihood base.

The only outstanding legacy of mining houses in Zambia include: creation of ghost towns; problems of rock waste dumps and abandoned pits; acid mine drainage; socio-economic problems of resettled communities; water stress; social disruption; capital flight; displacement of communities; resettlement/relocation problems; low compensation; land use conflicts; loss of biodiversity; environmental degradation; increased diseases; pollution of water bodies; cyanide spillages; destruction of sacred/cultural sites; and human rights abuses. This in Zambia is compounded by the current appalling labour laws which are among other things excruciatingly weak on the engagement of expatriate staff by new investors and the differences between their incomes and those of local staff. In fact, more seriously the weak environmental standards in way assist mining companies to externalise environmental cost, which helps companies to maximise profits. The apologetic approach to mining regulation in Zambia has surely failed to yield desired results. What am saying is that let us craft a sustainable mining regime that will stand the test of time. Putting the blame of China is somehow devoid of truth.

The Author, Manda Simon is a Lecturer at UNZA’s  Department of Development Studies.

He can be contacted using [email protected]

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