Zambia was the first country on the African continent to produce copper and its economy has historically been heavily dependent on the mining of copper and cobalt. Once a middle-income country, Zambia began to slide into poverty in the 1970s when copper prices declined on the world market. The copper industry is a major provider of employment in the country and the current high copper prices on the international market after a three-decade slump have led Zambians to believe that there will be a marked improvement in their conditions too. The country’s economic prospects have also been transformed by debt relief.
But the Zambian government has not received an adequate share of the huge profits gained from copper mining. This is evident from the nature of the contracts that the Zambian government has entered into with the new investors in the copper mining industry. It remains to be seen also whether even the small profits will be passed on to the people of Zambia. According to the statistics presented to parliament in February 2007 by the Minister of Mines and Minerals Development, government revenue from copper as a proportion of the value of copper extracted from the Zambian mines is small. Zambia needs to receive a bigger share if the revenue from copper is to contribute to the development of the country.
This view is supported by the studies undertaken by Christian Aid in January 2007. Zambia received about US$752 million in various taxes from foreign investors holding largescale mining licences for the period 2002–06. Experts in the industry estimate that the government could in fact have earned about US$70 million from the total sales of approximately US$3 billion from the copper mining industry in 2006 alone. However, the amount received may not be enough to enable the Zambian government to make an immediate and significant impact on poverty (estimated to be over 60 percent) or to provide social services.
The prevailing question, therefore, is whether the Zambian people are being adequately rewarded from this boom in the copper price. The price of copper is as much as US$7.75
per tonne2 on the London Metal Exchange, up from xxx in 19xxx.
This paper attempts to answer the above question and highlights issues that limit Zambia’s ability to fully benefit from the copper boom. It examines the incentives given to the new mine owners, their willingness to comply with domestic laws on pollution control and employment regulations, and the Zambian government’s ability (or rather inability) to enforce the provisions of development agreements.
|Resource Insight Issue 3 - Copper Boom in Zambia: Boom for Whom?||223.42 KB|