Zambia Miners Panic, Even As Copper Export Ban Lifted

Zambia Miners Panic, Even As Copper Export Ban Lifted

By NICHOLAS BARIYO (Wall Street Journal)

Zambian copper miners have hit a panic button after the country’s newly elected leader stepped up efforts to deliver on populist campaign promises such as increasing mine taxes and controlling mineral exports.

Veteran politician, Michael Sata, popularly known as King Cobra because of his vicious rhetoric, proved that his bite can be as lethal as his bark after he slapped a ban on copper exports as well as other minerals such as cobalt, gold and nickel this week, in a bid to improve transparency and boost revenue collections.

The development sent shockwaves down the spines of miners such as Vedanta Resources, First Quantum Minerals, and Glencore International. With miners failing to export as much as 2,000 metric tons of copper daily since the ban was announced on Tuesday, the Chamber of Mines, which represents all the operators in the country, sought urgent talks with government.

Although the ban was lifted Thursday, the damage has already been inflicted and may not easily be undone.

Analysts expect Mr. Sata, a strong critic of Chinese investments in the mining sector, to continue with his populist campaign, in which he is seeking to tighten the state’s control on the copper mining sector that accounts for more than 75% of its foreign revenue earnings.

Just days after his election triumph, he made it clear to the Chinese, who have invested more than $2 billion in the past few years, that they must respect Zambian labor laws in addition to reducing expatriates and improving the conditions of service for the Zambian miners.

A miners’ strike suddenly erupted at the Chinese-owned Chambishi Copper Mine on the Copperbelt on Wednesday after Zambian miners demanded improved pay just two weeks after Mr. Sata’s election. The miners have since declined to heed to calls from their union leaders to resume work to allow for the commencement of labor talks, which had been slated to start next month.

Since Mr. Sata started he has appointed two former union leaders, Fackson Shamenda and Rayford Mbulu as his labor minister and deputy labor minister respectively. He has ordered the ministry to revise the minimum wage, in a move analysts say is aiming to clip the wings of the Chinese, who pay the lower wages in the sector.

Mr. Sata’s campaign manifesto was premised on calls for incentives to labor-intensive mining projects as opposed to capital intensive projects, a move that could threaten major capital intensive projects being implemented by companies like Vedanta, Vale, and Chine Nonferrous as well as First Quantum.

Vedanta’s unit Konkola Copper Mines was quick to re assure investors on Thursday that it is committed to its investments in Zambia despite the uncertainty. The company has pumped as much as $2 billion in expansion projects in the country since 2006.

Analysts are expecting the worst, though, as Mr. Sata is expected to continue efforts to meet political debts to the unions.

Courtesy of the Wall Street Journal

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