Chibuluma Mine
Chibuluma Mine

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

1992 2015
Zambia 36 Swaziland 36
Swaziland 29 DRC 17
Zimbabwe 29 Mauritius 16
Malawi 24 Madagascar 14
Mauritius 23 South Africa 13
South Africa 22 Zimbabwe 13
Mozambique 16 Lesotho 10
Namibia 16 Mozambique 10
Madagascar 11 Malawi 9
Lesotho 9 Namibia 9
Tanzania 9 Zambia 8
Seychelles 8 Seychelles 6
Botswana 6 Botswana 6
DRC 5 Tanzania 6
Angola 4 Angola 5

Source: Unctadstat

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.

Conclusion

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

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7 COMMENTS

  1. Kids are taught in school that copper is a wasting asset meaning one day they will wake up to find there’s no copper. Despite the govt being equipped with this knowledge but it does nothing to invest in other sources of money generating programs, and in this case manufacturing is the obvious choice. When copper finally says goodbye, catastrophe of unimaginable proportions will befall Zambia. This is a country endowed with natural wealth but which it has failed to harness. Agriculture and associated industries alone could be major forex earners if the govt had brains. The little brains that the govt has is dedicated to petty politics and stealing.

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  2. You send childrenntp china and they will be brainwashed, indoctrinated whatever you wznt to call it. Our problem is purs we have invested wrongly, we have pliticians telling we can become like western world. Open your eyes look around, we are africa, we are in poverty, we have invested in the wrong programs to go down the industrialzation path, do damn roads make electricity, we are landlocked, our transport costs are exhorbitznt, everyone wants to “topup” eat,,chew, too much corruption. No planned path, too much policy on the run. Political prostitutes not loyaly to their party or philosphy as long as they eat. Loom in a mirror and see why we dont progress. Where are our young politicians with degrees, we can do it ourselves if we prioritize

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  3. why always copper….because that is what we have. Yes it is a finite resource but we have had hiw many years znd whatvhave we done. This js the zambian way. Change oir culture and you will change our fortunes. Pipo go to work and invariably dont do anything til after lunch. 12 til 14 hrs then try to do it all by 16.30. Meetings, MOU’s Agreements, Idabas but nothing comes from thdm . Everybody gets a bit for the sitting so there is no incentive to actually do sometbing. A meeting is at 10am pipo roll up at 11 or ehen they feel like it ” i’m coming’ so christmas. We are not professional. Public service and business has bad work ethic villagers toil all day to get what 60kr per bag.bs honest we are a joke

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  4. Dununa reverse i thought was back ti unip. Think about it all ministers in positions of prominence are MMD.
    With due respect to HE ECL he is ill advised amd is virtually a figurehead fir those behind the scenes . All this nonsense that is happenening on his watch will come to haunt the true pf . When politicking comes in earnest in 2021 maybe pf wpnt look so good but mmd will campaign with their own pipo within the pf. How can a pplitical party have the opposition leader as their minister of finance. Pf beware 2021 not from upnd but from mmd

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  5. Sir economic governance are you aware that the rise of vietnum manufacturing sector is due to the same free market policies you have shot down.Vietnum has seen a rise in the manufacturing sector due to the spill over from China’s growing wages.Hence Bangledish and Vietnum are being seen as vital satelight areas coupled with their cheap labour for manufacturing hub which of majority are from China.

    Thank you for bringing up,we need to grow our manufacturing sector,which will be possible by imploring up workable policies to entice it growth.Proper road network,proper railline connecting to Darasalam port for easy access of raw materials and other goods is one way we can improve competency.

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  6. We’ve been talking about it for a very long time now. I believe we’re in the middle of the biblical seven years of plenty and we don’t have much time left for pondering how to implement sustainable economic policies.

    By now, we should slowly be stock-piling our reserves and setting up factories for manufacturing Copper products in all areas across the country.

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