MM August 2016 Final

5 / 76

COMMENT
August 2016 MODERN MINING 3
Given the sporadic suggestions in
this country that our mining in-
dustry should be nationalised, it’s
worth recalling what state owner-
ship did to Zambia’s copper min-
ing industry over a roughly 25-year period
starting in the early 1970s– and how the return
of the mines to private hands in the late 1990s
has re-energised and transformed mining in
that country.
Some hard facts and figures on the damage
done by nationalisation and the subsequent
recovery of the Zambian mining industry as a
result of privatisation are given in a recent paper
– published in the Journal of The Southern
African Institute of Mining & Metallurgy –
by Jackson Sikamo, Alex Mwanza and Cade
Mweemba entitled ‘Copper mining in Zambia
– history and future’.
All three authors are in the employ of
Chibuluma Mines and Sikamo, in particular,
is prominent in Zambian mining circles. He is
Chairman of Chibuluma Mines (and Country
Manager for its owner, Metorex, now part of
the Jinchuan Group) and served in 2014/15 as
President of the Zambia Chamber of Mines.
According to the paper, Zambia’s for-
mal commercial copper mining industry
– launched in 1908 when a small mine was
established at Kansanshi – was responsible for
12 % of global copper production in the 1960s,
propelling Zambia into the middle-income
country bracket with a GDP bigger than South
Korea. The peak of production came in 1969
when the country’s mines – all then owned by
RST and Anglo American – produced 720 000
tons of copper.
The nationalisation process was imple-
mented between 1969 and 1973 and the mines
remained in the Zambian government’s hands
(from 1982 via ZCCM) until the 1990s. The
effects were generally catastrophic. The govern-
ment used revenue from the mines to fund its
national development agenda, with the result
that the mines themselves suffered severe
under-capitalisation.
As the authors write, “There was little invest-
ment in technological upgrades, despite the
increasing difficulties in mining and processing
as mining proceeded deeper and the mineral
grades leaner and more complex. Inevitably,
production output declined while production
costs were soaring. Employment levels reduced
as the mines downsized their labour forces.”
Under nationalisation, roughly 2 000 jobs
in mining were shed on average each year and
production declined to about a third of what
it was in 1969, reaching a low of a quarter of a
million tons in 2000.
The authors point out that not all the ills
of the Zambian copper mining industry in the
1980s and 90s can be directly attributed to
nationalisation, as the copper price declined
substantially from the highs of the 1960s over
this period. They also note that one of the ben-
efits of nationalisation was an emphasis on the
training of Zambians.
“Gradually, the gap left by the white set-
tlers in areas of skilled manpower was greatly
reduced. The mining skill level of Zambia
improved so much that later, when the mines
were re-privatised, the new owners did not
need to employ many expatriates,” they write.
The decision to privatise the mines was
taken in the early 1990s and was implemented
between 1996 and 2000. Despite some stum-
bles, it has generally been highly successful.
“The new mine owners invested massively in
the mines and there was a sudden economic
upturn, not only on the Copperbelt but in the
country as a whole, with the mining indus-
try as a pivotal contributor,” say the authors.
“Investments went into new machinery, new
mining methods, and new mineral processing
and metal extraction technologies. There were
also massive greenfield projects at Kansanshi
and Lumwana, both in the North West Province
of Zambia, which brought newer technologies
into the industry.”
By 2013 production had reached a level of
763 000 tons per annum, surpassing the record
set in 1969, and total direct mining employ-
ment had risen to 90 000 from a low of 22 000
in 2000. Critics of the privatisation programme,
of course, would argue that all the benefits of
the process have mainly gone to companies
domiciled outside of Zambia but the figures pre-
sented by the authors don’t support this view.
If one just takes tax revenues, for example,
taxes paid by the mines constituted just 1 to
2 % of total tax revenues during the final years
of public ownership of the mines. By 2011 the
position was transformed with the mining con-
tribution to the total tax base rising to 35 %.
Readers can probably get a copy of this
very interesting paper from the SAIMM but
a shorter route might be to go to the website
which has a link
to download it. This website, incidentally, has
only recently been established and is an ini-
tiative of the Zambia Chamber of Mines. It is
designed to promote mining in Zambia and is
well worth a look.
Arthur Tassell
“The newmine
owners invested
massively in the
mines and there
was a sudden
economic upturn,
not only on the
Copperbelt but
in the country as
a whole, with the
mining industry
as a pivotal
contributor.”
SAIMM paper outlines how privatisation
has re-energised Zambian mining