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ZAMBIA: Copper loses it shine and Copperbelt its jobs

20 Feb 2009 16:22:42 GMT
Source: IRIN

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LUANSHYA, 20 February 2009 (IRIN) - The sharp fall in international copper prices is leading to huge job losses and deepening poverty in Zambia's economic heartland, Copperbelt Province.

Luanshya Copper Mine, a joint venture of the Swiss-based International Mineral Resources and Bein Stein Group Resources of Israel, closed its operation in December 2008, resulting in 1,700 retrenchments.

"I am suffering very much. I got my [termination] package of around 15 million Kwacha [about US$3,000], but then I had a bank loan. It was supposed to run for three years, according to the agreement; they [bankers] deducted everything at once from the package and I remained with nothing. In fact, I still owe the bank," Geoffrey Mwape, a former Luanshya employee, told IRIN.

"Life is very hard. I have to pay bills and rentals. I am living like I don't know what tomorrow will bring, as if I was not in employment. My children have been sent back from school [because I cannot pay the fees]."

Copper is a key metal in the electronics and building industries, but the global economic slump in the demand for commodities has seen international copper prices tumble from record highs of nearly $9,000mt between 2005 and 2007 to about $3,000mt at present. In response, labour forces are being reduced, expansion projects put on ice and mining operations closed.

The Bwana Mukubwa and Luanshya Copper mines now have only maintenance staff, while the owners of Luanshya have also shut down their Chambishi copper smelter and suspended their $354 million Mulyashi mine project.

"What is happening is a very sad scenario - we can't have a situation where investors are just pulling out at their will and government is not doing anything; it's not right and it should not be condoned," said Chishimba Kambwili, the parliamentary representative for Luanshya who recently staged a one-man protest against mine closures outside State House, Zambia's presidential residence in the capital, Lusaka.

"Our people are suffering, where is the government? They are being made paupers, where is the government? They can't take their children to school; they can't feed their families, where is the government?" he asked.

Copper accounts for 80 percent of Zambia's foreign earnings and since 2003 has been the main driver of an annual economic growth rate of five percent.

In 2008 the government introduced a windfall tax to increase revenue from copper, and upped the mineral royalty tax from 0.6 percent to the global norm of 3 percent, all which was expected to raise $415 million in revenues in 2009.

But analysts told IRIN the target would be unattainable after finance minister Situmbeko Musokotwane scrapped the windfall tax and suspended import duty on machinery in the 2009 national budget to "reduce the operating costs of mining companies".

"Measures taken to cancel windfall taxes are positive but they are not enough to sustain the operations of the already turbulent industry," Frederick Bantubonse, general manger of the Zambia Chamber of Mines, told IRIN.

"To begin with, the introduction of these windfall taxes last year [2008] eroded investor confidence and most projects were either deferred or cancelled altogether, so this means less and less revenue for the country," he said.

Copperbelt is no stranger to unemployment: copper prices stagnated throughout the 1990s, and the latest round of job losses is expected to rekindle memories of those days.

Mopani Copper Mines recently announced it would retrench up to 1,000 of its 16,000 employees by the end of February 2009, and the country's biggest mine, Konkola Copper Mines (KCM), owned by the London-listed Vedanta Resources, this week retrenched 700 of its workforce of 15,000 after shutting down its smelting plant.

Many retrenched miners have resorted to informal trading to make a living. "I can't venture into farming now because I have no money to buy [agricultural] inputs and besides, I have lived my life as a miner," said Emmanuel Sampa, who has worked at three mines, the last being Luanshya.

"My children have passed [grade seven and nine examinations] but I have no money to take them to school. Last week, I went and closed my two [bank] accounts because maintaining them is very costly now," he said.

"I am selling my TV and sofa so that my children can go to school - I bought the TV at 1.2 million kwacha [$220}, but am selling it for 500,000 kwacha [$90]."

Zambia's mines were major employers in recent years when the copper price enjoyed a renaissance, encouraging expansion of the mining industry and creating jobs.

About two-thirds of Zambia's 11.7 million people live on a $1 or less a day, and only 500,000 formal jobs exist in the country, according to the Central Statistical Office.

"It's a problem how people are surviving, because it is not just people who were working for the mines that are losing jobs. Many companies that depended on the mines, like those in the construction and supplying business, are now folding because there is no more business for them," Peter Kahokola, a civic leader in Copperbelt, told IRIN.

"What this means is that the councils [municipalities] throughout the province are finding it very difficult to operate - the councils depend on these companies for survival through rates and other taxes. Now, most council workers have to go for two months without pay. We have started seeing a lot of crime because people want to survive."

The curtailed resources have also limited the capacity of local authorities to effectively provide public services: bad roads, heaps of rubbish and unreliable water supplies are now a common feature in towns across the region.

"Things are really bad; in most of these towns, including Luanshya, the mine hospitals and clinics were completely free for miners and even surrounding communities in some cases," Kahokola said.

"Now, it is mandatory that we should all pay 25 percent of the medical bills, so people are failing to go to the hospital because they simply have no money to pay, and we may see a lot of deaths over the next few months if the situation is left unchecked."

Zambia's president, Rupiah Banda, recently announced that the government would take over mines facing operational difficulties, but maintained the state would not consider nationalising all mines unless the private sector failed to sustain their operations.

Zambia is Africa's largest copper producer. At the peak of production in the 1980s, the country produced about 750,000mt of finished copper annually, before output dropped to 200,000mt in the 1990s. Current production is about 600,000mt annually, and a government projection of 1 million metric tonnes in 2010 is viewed as unlikely.

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