Page last updated at 12:23 GMT, Friday, 6 March 2009

Zambian miners hit by copper slump

By Steve Schifferes
BBC News economics reporter at Luanshya Copper Mine, Zambia

The BBC's Komla Dumor walks around the deserted Luanshya copper mine.

The global recession has arrived in Zambia's Copper Belt.

And the town of Luanshya has been hardest hit with the complete shutdown of the huge copper mine that dominates the landscape.

Over 3000 miners, directly employed and on contracts, lost their jobs at the end of January after the owners announced that the mine was no longer economically viable.

The shutdown has had a devastating effect on the 60,000 residents of the town, who nearly all depend on the mine for their livelihood.

Shock

William Banda worked at the mine for 22 years
William Banda worked at the mine for 22 years

And it has hit William Banda, who has worked as a loader in the mine for 22 years, particularly hard.

He says the mine closure came as a complete shock. With the loss of all his income, he has had to send two of his four daughters away to relatives to be looked after.

At 46 years old, he does not think he can get another unskilled mining job, as other copper mines are also laying off workers.

Low income countries are more exposed to the current economic downturn than previously, as they are more integrated in the world economy
International Monetary Fund

He would like to start his own small business, but says he has no way a getting a small loan of several thousand dollars that he would need as working capital.

The head of the local mining union, Stanislas Mwimbe, says the closure will have a devastating effect on the community and will leave many people in deep poverty - some of whom may be forced to turn to crime.

Copper-bottomed economy

Copper mining is the most important industry in Zambia, accounting for 90% of Zambia's exports and directly employing 50,000 workers.

CRUNCH TIME FOR AFRICA
Children in Zambia
World leaders will meet next month in London to discuss measures to tackle the downturn. Click here for our in-depth guide to the G20 summit.
Only one African country will be represented at summit.
This week BBC World News and World Service Radio will be examining how Africa is coping with the crisis, with reports from around the continent

But the price of copper has slumped on global markets, falling from a high of nearly $9,000 per ton last year to just over $3000 per ton now.

The International Monetary Fund (IMF) says that, because of its dependence on copper, Zambia is one of the poor countries that 'highly vulnerable to the adverse effects associated with the global recession."

After talks with the government, the IMF said that "the mining sector has been hard-hit by the sharp fall in copper prices" and warned of further pressure on Zambia's currency, the kwacha, which has fallen sharply against the dollar.

The IMF said that it "stands ready to provide additional balance of payments support" to maintain 'orderly foreign exchange market conditions."

Political row

The closure of Luanshya copper mine has become a major political issue in Zambia, with the opposition and the miners union accusing the company of bad faith, and criticising the privatisation of the mines in the l990s.

Mines minister Maxwell Mwale hopes for foreign investment
When some see a disaster, others see an opportunity.
Minister of Mines Maxwell Mwale

Rayford Mbulu, the president of the Mineworkers Union of Zambia, says the government must take a majority stake in the mining industry if necessary to ensure that mines stay open.

And he accuses the companies of being faithless to the country by taking out their profits in the good times and not putting aside funds for the hard times.

In a BBC interview, Zambia's Minister of Mines, Maxwell Mwale said that he was hopeful that other global mining companies would come in to replace those investors who had left the industry

"When some see a disaster, others see an opportunity," he says.

"We see inquires from Russian companies, Chinese companies, Canadian companies, and South African companies. Despite what may obtain elsewhere, there are other people who are looking for investment opportunities and they are very welcome," he adds.

He said that the government would consider taking a larger stake in the mining industry in order to have a stronger voice in the running of the mines, but will not take a majority stake.

And he added that Zambia, unlike America, could not afford to bail out the industry:

"We don't have that kind of money."

Zambia has already been forced to abandon its windfall tax on copper mining, which was set to add $450m per year to its anti-poverty budget, and is likely to further budgetary pressures.

Currency swings

The collapse of the kwacha, down 36% against the dollar so far, has spread the economic pain even more widely.

Many Zambians in rural areas depend on roadside markets for income
Many Zambians in rural areas depend on roadside markets for income

One person whose business has taken a tumble is the Webster Mulamba, who has been selling used cars on the streets of Lusaka for the last eight years.

He imports Toyotas from Japan via South Africa, paying in dollars.

He says the fall of the currency has added $1000 to the cost of a typical used car, such as a Toyota Corolla, and dramatically affected sales.

"Cars used to be affordable" he says.

"But with the extra costs vehicles are becoming too expensive. Now our business has been cut in half".

The reduction in loans by local banks has also made it harder for his customers to buy cars.

Although Zambia has enjoyed strong economic growth in recent years, it is still one of the world's poorest countries, with 60% of the population living below the $2 per day poverty line.

Now, the collapse of the copper price could risk some of those gains.

The IMF warns that "commodity prices are unlikely to recover while the global economy remains weak" and says that "low income countries are more exposed to the current economic downturn than previously, as they are more integrated in the world economy."



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SEE ALSO
Country profile: Zambia
03 Nov 08 |  Country profiles

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