Economic democracy | Southern Africa

Zambia’s mines need to deliver for the country, not just their investors
In a low-income country like Zambia, democracy is as much about governing the economy as it is about electoral politics.

Smelter control room of Mopani Copper Mines, Mufulira, Zambia
Smelter control room in Mopani Copper Mines, Mufulira, Zambia, 2011 [Photo: photosmith2011/Flickr]

“If the current government gives KCM back to Vedanta that would be the end of Hichilema’s political career, at least on the Copperbelt”.

This is what Winston, a miner in Zambia’s Copperbelt region, told me when I interviewed him in May last year. I have been doing academic research on the experiences of Zambian underground miners like him since 2016.

The roots of Winston’s startling comment can be traced back to 2019, when the Zambian state liquidated Konkola Copper Mines (KCM). The company, in which British-Indian multinational Vedanta held a majority share, faced a flurry of serious allegations, from extensive environmental damage to failing to carry out promised investments, pay contractors and repay loans. Vedanta challenged the liquidation in Zambia’s courts, and the case remained live in the run-up to the country’s August 2021 presidential elections, which swept Hakainde Hichilema of the United Party for National Development (UPND) to the presidency.

The election of Hichilema saw a shift in the government’s position, prompted by a letter sent from Vedanta to the Minister of Mines in May 2022, promising to, among other enticements, invest $1 billion in the mine and increase workers’ salaries by 20%. Soon after, Hichilema announced that Vedanta and the Zambian government had agreed to suspend litigation, paving the way for an arbitration hearing expected to be held in January 2023. According to Winston, “going for arbitration is as good as giving KCM back to Vedanta”. He is far from alone in his bitter opposition to Vedanta’s return. At the time of writing, it is not known if the arbitration process went ahead and with what outcomes – neither Vedanta nor the Zambian government have released any recent statement on the matter.

The controversy over Vedanta and KCM is playing out amid a wider context in which the vast majority of Zambians have failed to benefit – either economically or in terms of democratic governance – from their mines. The wholesale privatisation of the sector – formerly under majority ownership from the state – that took place in the second half of the 1990s is largely responsible for this state of affairs. The conditions attached to these deals favoured foreign companies, while disempowering the state, unions, workers and citizens.

A number of questions arise in response to this dysfunctional landscape: What exactly do Zambians get out of mining, and how can they get more? What are the consequences of the democratic deficit caused by the government caving in to corporate demands? And can voters and unions exert sufficient influence to ensure better outcomes for all?

Privatisation, nationalisation, reprivatisation

Zambia is rich in mineral resources. Its mining industry has long centred around copper, as the country has some of the world’s highest-grade deposits of the metal, making it the seventh largest copper producer globally. Copper is widely used in electrical wires and cables, and is also key in emerging green technologies such as electric vehicles and solar cells. The country has small exploitable reserves of other green tech minerals in high demand, such as cobalt, nickel and manganese.

From the inception of large-scale mining in Zambia in the 1920s up until the end of the 1960s, the country’s mines were owned by two foreign companies: Anglo-American Corporation (AAC) and Roan Selection Trust (RST). While AAC and RST made significant profits in the context of the post-World War II mining boom that lasted up to the 1960s, most of these proceeds flowed out of Zambia.

When Zambia achieved independence in 1969, the president of the newly birthed state, Kenneth Kaunda, pushed ahead with a 51% nationalisation of the country’s mines. In the first decade of independence, the Zambian government used the revenues gained from mines to build roads, hospitals, universities and schools. In 1982, the government merged all the mines to form Zambia Consolidated Copper Mines (ZCCM). ZCCM provided social benefits for workers and their families, including free housing, healthcare, water and electricity, subsidised education, and burial costs for the dead – a substantial safety net that proved crucial for many people to get through the years of economic crisis that marred the 1980s.

At the same time, however, global copper prices dropped from the mid-1970s onwards, eventually forcing Zambia to dismantle and privatise ZCCM in the late 1990s under pressure from international financial institutions and donors. To attract investment in the mines, the government offered tax breaks and weakened environmental and labour laws, introducing casualisation and undermining the unions.

The more than two decades of privatisation that followed saw a chaotic dismantling of workers’ benefits, low tax contributions as mines enjoyed tax holidays, and a collapse in the number of permanent mine employees from 60,000 in 1994 to 28,000 in 2018, with a concomitant rise in casualised labour – 46,000 workers in 2018 had temporary contracts. Mining companies have been using labour retrenchment as their go-to response to fluctuations in global copper prices.

Demands for greater government ownership vs. more of the same

The Vedanta case points to fundamental weaknesses in Zambia’s governance systems, which have often allowed international mining companies to do as they please under the ideological cover of free market economics. For example, whenever the government has sought to increase mine taxes, mining companies have responded by threatening to retrench workers, forcing the government to back down. Given this, many in Zambia are now calling for increased government ownership of the country’s mines.

This view is not, however, shared by the current government, which has maintained its faith in free market orthodoxy. One of the first measures of Hichilema’s presidency has been to reduce corporate income tax rate from 35 to 30 percent. In August 2022, the country has also successfully negotiated a USD1.3bn loan with the IMF. The deal brought in badly needed monetary resources to tackle a major debt crisis – admittedly the making of the previous government’s mismanagement and corruption – but came with hefty conditionalities, including wide-ranging cuts to subsidies and increase in the VAT base that will worsen the living conditions of ordinary citizens, who are already grappling with increasing levels of poverty, precarity and unemployment caused by the Covid-19 pandemic downturn.

Corporate control and democratic deficits

Since the country’s return to multiparty democracy in 1991, Zambia has witnessed three peaceful transfers of power. This has positioned Zambia in the public eye as a rare example of an African country in which democracy – understood as political freedom and the right to vote – has flourished.

For any notion of democracy to be meaningful, however, it must address matters of redistribution and economic justice. If a government simply caves into corporate demands as a matter of course, then there cannot be any real democracy for those it supposedly represents. In Zambia’s case, this democratic deficit has disempowered the state, unions, workers and citizens, with foreign mining companies given free rein to undermine labour rights, minimise their tax contributions and harm the environment.

Another case where foreign companies got the upper hand is the recent change of ownership of Mopani Copper Mines. The majority share held by Swiss-based multinational giant Glencore was purchased by the Zambian state in early 2021 for an exorbitant USD1.5bn, disbursed as a loan in exchange for which Glencore retains buying rights over the mine’s copper.

The debt burden is unsustainable and it is unclear how the mine can attract new investment under such conditions. The current government’s aversion to nationalisation is not helping, effectively making Mopani a missed opportunity to explore viable alternatives to the dominance of foreign capital in the most strategic sectors of the economy.

Possibilities for change

The Copperbelt vote remains a key factor in Zambian politics, it is the bellwether of the political mood in the country. The former ruling party, Patriotic Front, grew out of the Copperbelt and won the 2011 elections because of it. By contrast, when these regions decided to switch their support to Hichilema in 2021, he won the presidency and took the UPND into power. This shows there is potential for voters to influence the government when it comes to adopting mining policies that favour Zambia’s majority.

If change is to take place, however, there needs to be a more widespread understanding among the public of the strategic economic position of the country’s mines and the pitfalls of foreign ownership in a context of weak regulatory frameworks and limited state intervention. Allegations of politicians – both those in power and those in opposition – colluding with foreign mining companies must be taken seriously and properly investigated.

More generally, Zambia’s citizens must have the confidence, via the ballot box and other democratic means, to hold the government accountable. The unions also have an important role to play in supporting popular articulation of mining-related issues. Only then can the democratic deficit currently in painful evidence be closed.

James Musonda is Senior Researcher in Energy Policy at the Institute for Economic Justice, Johannesburg. He holds a PhD in Politics and Social Sciences from University of Liège, Belgium. His doctoral work is an ethnography of mining communities on the Zambian Copperbelt. He won the 2021 Terence Ranger Prize for the academic article “Modernity on credit: the experience of underground miners on the Zambian Copperbelt”. James is a former trade unionist and continues to be an advocate for social justice in Zambia and beyond.

The views expressed in this article are those of the author and do not necessarily reflect Democracy in Action’s editorial stance, or the position of the Institute for Economic Justice or any other institution or association.