Repurchasing the Family Silver: Zambia nationalises its copper mines again

Privatisation and a shift towards free-market economies has been a dominant trend in economies around the world over the last four decades. Across Africa, Structural Adjustment Programmes devised by the World Bank and the IMF led to the privatisation of state-owned enterprises on a large-scale in the 1980s and 1990s. In January 2021, Zambia made a major decision to reverse this trend: it bought back two of the country’s copper mines which were privatised in 2000. The old state-owned Zambia Consolidated Copper Mines (ZCCM) will once again run the mines.

Details on the deal are still vague and much of the discussion so far has concentrated on the financial implications of the heavily indebted Zambian Government, which defaulted on a $42.5m interest payment due in November 2020. In this article, we look at what this might mean for people living and working on the Copperbelt and examine some of the background.

In 2002, the former chairman of ZCCM Francis Kaunda (no relation to Zambia’s former president Kenneth Kaunda) wrote a book about the privatisation process called Selling the Family Silver. The title is a reference to the remarks made by former British Prime Minister Harold Macmillan about privatisation, who likened the process to ‘selling the family silver’, the implication being that once it is sold you cannot get it back. Zambia’s Government has shown that this is not the case!

Profits during colonial times
Zambia is one of the world’s largest copper producers and the second largest producer on the African continent (behind DR Congo). Copper is the mainstay of the country’s economy and has been for almost a century. Copper production and exports have consistently provided most of Zambia’s foreign exchange earnings and central government revenue. There is, however, a very long running debate over how the mining industry should be owned, managed, and linked to wider economic development.

The mines began under private ownership during the colonial period when Zambia was a British colony and these same companies continued to control the industry after independence in 1964. Booming copper prices and suspicion that the companies were repatriating profits rather than re-investing in Zambia led to greater state involvement in the economy. In 1969, the mines were partially nationalised, followed by full nationalisation in 1974. The timing proved to be disastrous. Copper prices crashed in 1974-75 and remained low for decades afterwards, only recovering in the early 2000s after the industry had been privatised.

Prolonged low copper prices caused immense economic difficulties for Zambia and in this context the country had to turn to the World Bank and the IMF for assistance. These institutions effectively forced Zambia, like many other countries, to embark on a privatisation programme in return for financial support. ZCCM was the key asset to privatise. The company’s debt had risen substantially during the 1980s, copper production had declined, and its profits were too low to modernise the mines.

The privatisation process was complex and took several years to complete. Controversially, instead of being sold off as one a single entity, ZCCM was split up and sold to different investors. What became Mopani Copper Mines was bought by the Swiss commodity giant Glencore and the Canadian mining company First Quantum Minerals, who held a minority stake. Glencore has a major presence in the region and owns huge copper and cobalt mines just across the border in DR Congo.

The World Bank hailed Zambia as having ‘the most successful privatisation programme to date and the experience there offers many examples of best practice’. Many Copperbelt residents would disagree with this. Corruption tainted many of the deals and some mines were asset-stripped after being sold. Employment plummeted across the Copperbelt and the 2000s were extremely difficult years for many. Privatisation therefore soon became politically unpopular.

What has the Zambian Government bought?
Mopani Copper Mines consists of what were previously two separate mines: Nkana and Mufulira, located in Kitwe and Mufulira (two cities that are about 40km apart). These mines are almost a century old and comprise underground workings, a smelter, refinery, and engineering workshops. Proven reserves of copper ore total 110Mt, though how much of this can be profitably extracted remains an open question.

The mines have been modernised and expanded under private ownership – including the construction of a new smelter – and employment expanded during the 2000s. Around 11,000 people currently work for Mopani and the purchase of Mopani means that they will now effectively be employed by the Zambian Government.

The number of formal sector jobs on the Copperbelt is low and the Zambian Government is likely to face pressures to increase employment at the state-owned mines. During the period of state ownership, ZCCM maintained high employment at the mines until mounting financial pressures meant they could no longer do so. Many Copperbelt residents remember ZCCM as a provider of well-paying jobs.

Cradle-to-grave welfare system
ZCCM was not only a mining company. The company provided a cradle-to-grave welfare system and provided subsidised housing with water and electricity, ran hospitals, schools, sports facilities and social clubs for mineworkers and their families. Many people on the Copperbelt remember this and have nostalgic memories of the ZCCM period as a kind of ‘golden age’.

Relations between the industry and communities around the mines has changed greatly since then. Service provision like water and sanitation were handed over to municipal councils during privatisation and mine housing was sold off to their occupants. Service provision generally reduced markedly. For instance, the number of hospitals on the Copperbelt declined from 10 to 6 after privatisation.

The private companies that took over the industry did not intend to provide services on the same level. Mining companies, including Mopani, do support some educational facilities and provision of utilities, but this is on a much smaller scale than during the ZCCM era.

The ‘return’ of ZCCM is likely to raise expectations among Copperbelt residents that the government will again take on service provision as they did in the past. This is unlikely, as the Zambian Government is facing growing pressure from its creditors, and because it has only repurchased the mines themselves, not the former mine housing.

Air pollution and water contamination
Only a small minority of residents in Kitwe and Mufulira actually work at the mines. The mines are still large employers but are situated in sizeable urban centres. Over 500,000 people live in Kitwe and around 200,000 people live in Mufulira. Therefore, what happens to the mines has great consequences for many more people than the 11,000 workers on the mines. The greatest impact of the mines on the daily lives of local residents is their impact on the local environment. For locals, particularly those residing closest to mine sites, the physical evidence of air pollution and water contamination resulting from mining operations is a daily reminder of this.

The government’s decision to purchase Mopani Mines positions them as both operator and regulator of the industry. This is likely to raise local expectations regarding the government’s ability to ‘end’ pollution, but also creates incentives for government to ignore environmental concerns to reduce costs and boost copper production.

Under previous state ownership, ZCCM spearheaded environmental protection and rehabilitation with almost no support from central government. Environmental regulation and management were not prioritised by the government; environmental issues on the Copperbelt are generally poorly addressed, both under state and private ownership. The government has been unable to complete the rehabilitation process for all the historic environmental liabilities for which they accepted responsibility during privatisation. Huge slag dumps, known locally as ‘black mountains’, loom over parts of the Kitwe and Mufulira, and continue to pose an environmental hazard to those living around them.

Glencore did implement some improvements in environmental protection. Following years of public concern and protests about air pollution, the company undertook an upgrade of the mine smelter in order to reduce sulphur dioxide commissions. A sulphuric acid plant was constructed in 2015, which reportedly captures up to 93% of the sulphur dioxide produced in the mine. This is a positive advancement in environmental protection, although locals argue that ‘acid poisoning’ from the plants fumes is still present.

The Zambian Government now also has responsibility for the extensive infrastructure for storing hazardous waste produced by the industry. This requires continuous and careful monitoring. Mufulira Mine is the site of Zambia’s worst ever mining disaster, which occurred in 1970 when a tailings dam collapsed and flooded the underground mine, killing 89 miners.

Production first
However, as a result of deals reached during the privatisation process, Glencore has virtually no liability for the environmental consequences of mining during its ownership of the mines. The Zambian Government has assumed responsibility for recent and historic pollution around the mines. Tackling environmental problems will require skilled staff, adequate financial support, and legislative reform, and there is no indication that the Zambian Government will do this. Instead, it is very likely that the government will focus first on production.

The announcement by the Minister of Mines Richard Musukwa on 19 January 2020 that Mopani Copper Mines had been purchased made no reference to any environmental plans for the mines. Instead, the Minister emphasized how the recent infrastructural developments will ‘boost production to 150,000 tonnes per annum, which inevitably means more people will be employed, more business made available to the business community and the government stands to benefit from the tax that will be paid over time because of these positive projects’. This clearly highlights where the government’s priorities lie and suggests that environmental pollution will remain a daily reality for Copperbelt residents regardless of who owns the mines.