Friday, 9 November 2007

"UNDERMINING ZAMBIA"

By Gershom Ndhlovu

As most Zambians with internet access may be aware, a document entitled “Undermining Zambia” is doing the rounds on the web regarding the activities of privatised mines.
In it, former Finance Minister Edith Nawakwi admits that the government was arm-twisted into selling the mines by the IMF.
Christian Aid, one of the report’s authors, has drafted a letter for members of the public to send to the owners of KCM to change the way they operate.
In the introduction to the letter which Christian Aid urges people to e-mail to UK-based Vedanta Resources, it says Zambia’s copper riches, ought to be helping lift people out of poverty. Yet it (Zambia) remains one of the poorest countries on earth, while foreign companies reap the benefits instead.
Below is the template of the letter which can be accessed at http://www.christianaid.org.uk/stoppoverty/powercorruption/actions/zambia.aspx.
“Dear Mr Dhanpal Jhaveri,
As the majority-owner of KCM - Zambia’s largest copper company - Vedanta Resources has an important role to play in the economic and social wellbeing of one of the poorest countries on earth.
I would urge you to read and implement the recommendations of the recent report Undermining Development? published by SCIAF, ACTSA and Christian Aid, and supported by a wide range of Zambian organisations, that will improve staff conditions and allow the Zambian government to improve the country’s infrastructure, thus making a real difference to the lives of people gripped by poverty. On contract renegotiation:
 Pay a fairer, increased amount of revenue to the Zambian government. As part of this, pay mineral royalties of at least 3%.
 Make public the amounts paid to the Zambian government and all documents related to the development agreements. On the environment / local communities:
 Keep pollutant levels within World Health Organisation guidelines
 Publish details of pollutant levels from KCM activities. On working conditions:
 Pay KCM employees and sub-contracted workers a wage that is sufficient to support a family, and sufficient to provide a pension that can support them after retirement.
 Improve terms, conditions and health & safety for KCM employees and sub-contracted workers and ensure that these are implemented by contract firms.
Look forward to hearing from you.”
UK-based Zambian economist, Chola Mukanga, writing on his New Zambia blog, like many other Zambians, is not impressed with Nawakwi’s excuse on the whole mining privatisation process.
Writes Mukanga: “Edith Nawakwi, trying to shift the blame to the IMF, but only succeeding in making herself sound incompetent.
“The 'devil made me do it' has never got anyone off a crime. For indeed it appears that we came under pressure from young graduates at the IMF and World Bank who spent one week in Zambia and flashed a few models on the table and we crumbled.”
Meanwhile in neighbouring DR Congo, Bloomberg reports that a government panel in that country will recommend 61 of the nation’s agreements with mining companies, including Freeport-McMoRan Copper & Gold Inc, be renegotiated or cancelled, the group’s chairman said.The commission will recommend that 38 contracts be changed, including those of Freeport and Nikanor plc, Alexis Mikandji, chairman of the commission for the review of mining contracts, said recently.
The panel also recommends that 23 contracts should be cancelled altogether.
The DRC, which has about 10% of the world’s copper reserves and a third of its cobalt, established the panel in April to review all mining deals, with the aim of amending those deemed unfair to the state.
It is a shame, really, that citizens of resource rich countries like Zambia and its neighbour, DR Congo should wallow in poverty and underdevelopment at the expense of investors and local politicians who do not give a hoot about them.
At least Congolese president Joseph Kabila is moving in the right direction in the way mineral resources are exploited in his country.
Zambia, with the same mineral composition as DRC, should do the same as a matter of urgency. Mistakes have been made in the past, but that does not mean they cannot be corrected.

6 comments:

Nice E said...

I couldn't agree more with your observation. Much as the "Undermining Zambia" report, as well as Mr Michael Sata's recent presentation on China are factual, it seems there's an increasing and worrying trend for Zambians in general to cry out to or blame foreigners for their problems at home. Just like Mr Sata, Edith Nawakwi and co are dissociating themselves from their incompetent and mostly corrupt practices that led to this situation in the first place. These people were at the helm of a corrupt government not long ago that refused to sell the mines for a song but later sold them for far less! Shouldn't Zambians have put pressure on their own government for answers?
Fact is, it is much easier for Zambians and NGOs to pressurise foreign companies originating from democratic countries, than it is to pressurise the Zambian government itself! I am yet to see a petition to the Zambian government for any of the genuine grievances people have against the government.
On the issue of crying to foreigners, not long ago Zambian authorities and NGOs lobbied the G8 night and day for debt cancellation. I won't go into how Zambia got into this debt in the first place, but the amount of energy that was put into this debt cancellation lobbying was unprecedented, which was a good thing. However, I would just like to see the same sort of effort go into fighting corruption and issues of governance as well.
Let us remember that the ultimate resposibilty to develop the lives of a country's citizens lies NOT with NGOs, but with the respective government. And as one saying goes, a nation gets the leadership it deserves!

MrK said...

Gershom,

I would like to make a few comments.

1) The 3%. It is a little more than the 0.6%, but it is still ridiculously low and won't make much of a difference. Considering that their gross profit margins are around 60% (as in case of Equinox), 3% is not a big deal. Now if that was 30%, it would still leave the mining companies with half of the profits. It would also be helpful if the mining companies were obligated to get a minimum number of workers locally, and the same for suppliers. That way, most of their 40% in costs could be spend locally and would stimulate the economy.

2) The environmental and labour conditions should go without question.

3) Sue the IMF for loss of income. Thinking of the billions of dollars that have been lost, they should take some of the billions of dollars in gold and compensate Zambia for the terrible advice and coercion they exercised toward the then government of Zambia.

4) Gershom, what do you make of all the claims that these agreements cannot be renegotiated? Who are the people were making these claims?

Nice E said...

A few of thoughts on "MRK's" comments:

1) Yes, bring back "Zambianisation", as in put quota limits on jobs going to foreigners. The Middle Eastern countries are good at such.

3)Sue the IMF? I think that's a very long shot, realistically a non-starter. Zed would probably lose more in that lawsuit. Claiming 'coercion' is one thing, while proving it would be quite another. I partly blame the "yes bwana" mentality. People are more likely to take the advise of IMF 'interns' than local experts.

4) Make public the terms of these deals. Hasten the Freedom of Information Act!

MrK said...

Nice E,

- Why is it not possible to sue the IMF?

What are the terrible things that would happen if Zambia sued the IMF?

- Freedom of Information

There should be not only complete openness about the mining agreements, but also about the present renegotiation process.

If you've read Magande and Shakafuswa's recent comments in The Post, they are now relying on a Norwegian delegation to do the negotiations for them?

I hope the government understands that if they come up with another boondoggle, no one is going to accept the outcome of this 'renegotiation'.

This is the problem with secrecy - there is an inherent lack of consensus. They are hoping for a positive concensus after the fact, which is terrible.

There should be absolutely nothing secret about the newley renegotiated deals.

You would hope they had learned that particular lesson by now, but obviously they haven't.

A single press interview is not enough. And what is there to lose, if everything is above board?

Nice E said...

MRK,

Well, it is possible to sue the IMF, as I said earlier, but it would be very difficult to win that lawsuit, in my view. One 'terrible thing' that would happen if Zambia sued the IMF is that Zambia would probably lose millions of $$s in legal costs and the case would possibly end up in futility.

To back my claim, if the case against FTJ and his accomplices is anything to go by, then Zambia's track record of taking on the big guys is not that good. That particular case has probably cost more than the Zambian govt is trying to claim from the accused!

And, much like Estate Agencies are there for the seller while making the buyer feel like he's getting a bargain, the IMF is primarily there to safeguard the interest of the lenders and investors they represent. There's a book out there called "Confessions of an Economic Hit Man". I don't easily entertain conspiracy theories for their sake, but the author of this book gives a believable account of what some of the people in such organisations as IMF and the World Bank are like, and most importantly who's interests they're really looking after.

The way forward in my view is that Zambia needs to accept first and foremost that mistakes were made in negotiating mining deals, then learn whatever lessons from that and then map a strategy for renegotiating deals, etc. What I find utterly unacceptable (as pointed out in the my original comments), is that the very people whose past incompetence (and corruption) Zambia is paying heavily for today, are dissociating themselves from the problems they created and claiming they have the solutions!

MrK said...

What I find utterly unacceptable (as pointed out in the my original comments), is that the very people whose past incompetence (and corruption) Zambia is paying heavily for today, are dissociating themselves from the problems they created and claiming they have the solutions!

That is just morally reprehensive. What is really detrimental to the country, is that the people who were involved with those deals, are now involved in the renegotiations themselves.

Edith Nawakwi was the finance minister at the time, but Ngandu Magande was an 'advisor'. He should recuse himself, and leave it to the mining minister.

And why are Norwegians involved, when Zambia has more than enough professionals to do the job itself?

And again, why the secrecy - the people can be cheated out of their natural resources again?