Switzerland is Zambia’s largest Importer of Copper
Yesterday, on Tuesday 22 August 2017, the Lusaka Times published a gloomy article reading, “Close to 5,000 miners to lose jobs as Mopani refuses to pay more for electricity.” Without appearing to be expert in matters of mining and tariffs, there are basic things that anyone can comment on if only to help improve the situation and save loss of jobs for so many Zambians. As an outsider, we know very little about the truth of the matter and perhaps even how to fix the problem. But one thing that we know for sure is that Mopani and its Swiss owners are very important to the Zambian economy. In case you did not know, we present the key export markets of Zambia’s copper and find that out of the total exports of copper to the world of about $ 4 billion in 2016 (We don’t have figures for 2017), Switzerland accounted for 55%, meaning it is the most important market for the country with China coming second with 19% (Figure 1).
Switzerland has overtaken China as Zambia’s export market
In the last 2-3 years Switzerland overtook China as Zambia’s largest importer of copper. In 2010, China imported $1.9 billion compared to Switzerland’s $1.6 billion but in 2016, as can be seen, Switzerland imported $2.2 billion compared to $917.0 million (Figure 2). On the production side, we are also told, “Mopani is one of the largest investors in Zambia’s mining sector, having committed over USD$ 4 billion since 2000. Since 2014, Mopani has invested over USD$1 billion in site expansions and upgrades to extend the life of mine by a further 25-30 years.
The 80/20 Rule or Pareto Principle must apply to the Swiss Company
Management uses the 80/20 rule which states that if 80% of the company’s profits or revenue comes from 20% effort, then it is important for the company to focus its attention and reward the factors that are contributing to most income. All investors are important and must be treated equally but the last thing you want to do is frustrate the lifeblood. In this case, as said earlier, since Mopani contributes over 50% share to the country’s exports of copper, the goose that lays the golden eggs, all efforts must be made to ensure that the company remains free and happy to continue to operate and generate the revenue. As the main export revenue for the country comes from Mopani, it is not the company you want 5,000 workers to be laid off.
It is also not the company that you want to operate without predictability and consistence of the contracts reached between it and the other Zambian companies like Copper belt Energy Corporation. The company needs special efforts from Government to ensure it operates with full energy supply. When differences occur, you want to ensure that they are immediately resolved so that there is continued operation of the mine. From the article I read, all Mopani is asking for is respect for contracts signed. Private companies do not like operating without predictability and respect for contracts. That is why countries ensure that the World Trade Organization administers tariffs on imports making them predictable by binding them so that there is no frequent change. But even public companies and individuals operate better in a country where contracts are respected. Zambia must always remember that it is competing with other countries for investment and companies will go where rules and contracts are honoured.
We hope the problem can be solved as soon as possible so that there is loss of revenue from exports of copper which is so important for lubricating the country’s economic squeaks and groans. Again, as non-experts and given that most contractual documents in Zambia are opaque to the public, we don’t exactly who between the two parties is right. But if it is a question of contract, then respect must be given to what was agreed. Often, the problem in Zambia is that contracts with foreign companies are a preserve of a few Government officials who commit Zambians without their consent. In future, we must involve experts in managing and signing contracts. Managing tariffs too is not easy hence requires expertise and delicate balance between investors’ needs and those of the public.
By Economic. Governance