Why always copper?
The welcome billboard to Chibuluma Mines reads, “Zambia’s model mine.” We agree. But this model mine may be no more in the near future and we wonder what reading will replace this delightful message to visitors of Chibuluma. It also reads, “We expect responsibility, integrity, honesty and constructive participation from all employees, etc…..” Again, this responsibility will go with the wind as integrity, honesty and participation of all employees. What a shame that time will be when the work place will be a white ghost and children of all those who work there will no longer be economically strong in their families.
Unfortunately, that will be the reality when the last copper deposits are no longer available. No one wants to let go yet, time is nearing when we all may have to bite the bullet. The report in the Lusaka Times of Saturday 19 August 2017, “Chibuluma Mines PLc envisages shutting down its mine by 2022 unless new copper deposits are found” should send chills down every Zambian’s spine. What will Zambia do when all this piece of good fortune that we have had for many hears finally slips away from our country? In 2022 it may be Chibuluma mine, but that warning shot extends to other mines thriving now. It shows that others are not invincible. Neither are they exempted.
We have been warned before. There are many others who have the same. The threats facing Zambia’s dependence on copper may be many but two are distinct and real. The first is the price of copper determined not by the seller but the buyer which, for a long time tormented the country whenever they were down. In the last five years, they came again to inflict further harassment that consigned exports from about $11 billion in 2013 to half in 2016, in particular copper exports from $7 to 4 billion (Figure 1). $ 4 billion is too low to feed Zambians. The second threat is the alarm bell coming from Chibuluma, when the deposits are no longer present.
Unfortunately, the only way to go is the most difficult: Manufacturing
Exporting copper is not the most difficult way to earn a living. It is one of the easiest and also less rewarding. But we have all fed from it therefore is it an important economic activity. But there is a more difficult way to go economically which, however is also the most difficult but quite surmountable too as others have shown. Manufacturing has a higher propensity to create more jobs, provide more income and reduce poverty as countries in Asia, including Viet Nam have shown. I will always use the example of Viet Nam when discussing manufacturing because this is a country, almost wiped out economically due to the war but has overtaken Africa in exports of manufactured goods. If there is one economic activity in which Dr. Kaunda, as President succeeded, it was the increase in manufacturing in the economy. The leader may have had his own weaknesses but his manufacturing strategy, in my opinion is beyond reproach. Kaunda is criticized by some for introducing nationalization of the copper mines and other sectors which were obviously unprofitable. But there is paradox here that we need to discuss. It was during Kaunda’s rule that Zambia’s manufacturing sector in the economy ever flourished.
According to statistics, in 1992, Zambia recorded the highest manufacturing value added in GDP in SADC ranking number one. Of course that is different with manufacturing value added in absolute values. In other words, that doesn’t mean that Zambia has the biggest manufacturing value added in dollar values. Obviously, South Africa with $ 27 billion has and had the highest in 1992 when Zambia’s was only $ 1 million. But Zambia’s ranking in SADC’s manufacturing value added today of number eleven is disapprovingly low. In the last two decades, the country failed to maintain its leadership in SADC of 1992. As we meet in SADC this week, it is important to bear such statistics in mind and to remember that we must be in it to compete and to strive to be number one.
Table 1: Zambia leading SADC in Manufacturing Value Added in GDP in Percentages
Let me explain the same point using trends from 1970 to 2015 so you can see the annual performance of manufacturing. During the period 1970 to 1992 Zambia recorded its highest manufacturing value added in GDP (marked in blue in the graph below), rising from 15 to 32% (Figure 2). The question is: how did we allow this share to drop to 8% in 2015? The answer to this question can be best provided by critics of Kaunda’s nationalization policy who saw something wrong then yet today the most powerful economy in the world is advocating “America first.” If we had maintained this share, the sector would perhaps have grown markedly. There is a close relationship between this and Africa’s insatiable appetite for continental free trade area which will see Zambia surrender some of its economic sovereignty to the continental perhaps with little or no value.
There is another point. It is the period of free market economy that coerced Zambia to privatize and move Government away from running the economy that brought the manufacturing sector to its current low level in the economy, down from 32% in 1992 to 8% in 2015 as Figure 2 shows. So, although in absolute values manufacturing value added in the economy has been rising, $1.0 billion in 1992 to $1.7 billion in 2015, its role in the economy is very insignificant and is not regionally or globally competitive. These values are too low to expect transformation of the economy into value chains and networks, create jobs and reduce poverty.
In concluding, difficult as it is, we must change our mindset and try to diversify and add more and more value to our exports. Let us open a Manufacturing Embassy in Viet Nam and inform the host country that we are here for nothing else but to learn how you successfully made it. No politics, no trade, no social activities in the embassy but only to match-make between Zambian entrepreneurs and their Viet Nam counterparts. Let us send young children to Viet Nam and China to learn industrial and production processes, innovation and how to do manufacturing the same way we had some Zambians during Kaunda’s time who were manufacturing cooking oil, batteries, Livingstone motor assembly fiat cars, mango drinks, textiles and clothing, Kapiri Glass, bicycles etc. If these workers had continued up to today, they would have specialized using the experience curve.
Finally, Zambia without copper will be miserable. Imagine the whole copper belt without copper. The belt will be left alone as will the buildings and underground mines will be white or black ghosts. Foreign companies that depend on the mines will no longer be in the country. It will be difficult to trot to the IMF to borrow without collateral. Zambia’s partners in SADC will ridicule us. Public services will suffer. Poverty will be more difficult to address. Business will suffer. Foreign embassies will no longer be funded. We will walk face down. We will lose regional and global competiveness. Politicians will be humbled. You can add your own list of problems. That is why, we must start thinking differently.
By Economic Governance