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

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24 COMMENTS

  1. Mr.Author, I think the FIGURES YOU ARE GIVING are DISTORTED FACTS that have led to ZAMBIA EARNING LESS FROM ITS COPPER EXPORTS!! This figures can LEAD US TO CONCLUDE THAT MOPANI SELLS COPPER TO ITS SISTER COMPANIES IN SWITZERLAND AT LOW PRICES,WHO THEN SELL TO CHINA and OTHERS AT NORMAL MARKET PRICES!! THE REAL FACT THAT THE WORLD KNOWS IS THAT THE MAJOR CONSUMER OF THAT COPPER AND MANY INDUSTRIAL MINERALS IS CHINA, responsible for the commodities price boom!! SWITZERLAND CANNOT CONSUME THE VOLUMES OF COPPER YOU PEDDLING AROUND!! That is why all these foreign investors FOUGHT SIs 32 and 55 that could have minimized the cheating on real value of exports and catch those cheating on reporting of profits and corporate tax!!

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  2. No ways every one must pay their fair share. Muzungu anione thinking wont develop Zambia. Other mises are paying. It is not everyday day that the Swis will be buying Zambia’s Copper so every one must be treated equally. 80/20 can not apply. So do you want Zambia to be subsidising Mopani with its meager resources. Dont think with your stomach its not everyone who benefits from Mopani like you. The bottom line here is cost reflective tariffs. You cant sale a product at a loss.

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  3. Nauseating article. Tell your Mopani that it has to pay the same price other mines are paying. Mopani is not special period. Shame on you.

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  4. Exactly my sentiments as a non-mining expert from a purely commonsense perspective. I am just wondering why government officials are so hell-bent on demonizing Mopani and not also looking at CEC. Don’t Energy and Ministers – Mabumba and Yaluma – know that CEC may also have ulterior motives for cutting power supply to Mopani -to bring the country’s economy to its knees to benefit the PF government’s detractors? Do ministers like Mabumba and Yaluma know that Hanson Sindowe, the Executive Chairman of CEC and its largest shareholder, is one of the major financiers of the UPND? If in doubt, why don’t they inspect the shareholding structure of CEC at PACRA?

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  5. The author must have his head seriously examined. He guy doesn’t even know the real reason why Switzerland imports more of copper than any other country though they don’t even use it.
    Does this guy ever heard of the thing called LME and stock pilling? In this day and age you can’t continue being enslaved by imperialist in the name of keeping jobs it’s a gimmick which can’t work today. Copper is fetching a whooping $6700 per tonne from $4000 per tonne in the past three years. So why can’t they pay for the ingredients necessary to process it? The 80/20 rule cannot be applied in this case because it’s misplaced. Mapani knows very well how much it costs to produce 1kWh of electricity and they must thankful Zambia has given them the copper mining license.

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    • Well done Malinso,
      I’ve carried out financial modelling of copper mining operations in South America, DR Congo, Saudi Arabia and Kazakhstan. I build in sensitivities into my power calculations, increasing the cost of power by as much as 250%! It is a fact of life. In Papua New Guinea, mines generate their own power, and still make an exorbitant profit!

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  6. IF Mopani is not making any money let them leave it’s as simple as that…We have educated dunderheads in Zambia who are writing these useless articles with no substance in them so as to intimidate the Government and hence continue assisting these foreign countries who are looting African countries in general and Zambia in particular by not paying what is due….

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  7. Mr Swiss based copper trader and Author how do you reconcile an investment to increase the lifespan of the mine for 20 to 35 years and a “predictable” electricity tariff structure of 40 years?

    In as much as the tariff contract is binding it was unethical to enter into such a contract. Even if it’s predictably the cost of energy cannot be constant for the next 40 years!

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  8. Switzerland “buys” our copper just on paper to evade taxes and other commodity controls. The export documentation shows that the destination is Switzerland but the actual deliveries are China and other countries.Even if they stopped buying our copper the demand patterns will never change.

    The demand for copper is never and will never be influenced by Switzerland who don’t have corresponding factories to use the metal.

    This is a very smart cheating scheme by Mopani thieves.

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  9. Mr Author, you say Lifeblood Mopani needs special treatment. It is this weakness that allow this mine to be like a government not investor. What is our gain if we get little tax from them and then use it on paying for their electricity. It means now that households will be paying for mines electricity since them have agreed to paying new tariffs.
    Mr Author, you said you do not have alot of information about the mines and that is true. You do not have information Mopani was caught dodging taxes but rejected the payment and auditors report.
    Mr Author find put the mine that pays the highest taxes and come inform us not the highest exporter.

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  10. Mopani is the biggest corporate fraudster in Zambia. A drain on the people of Zambia.

    They must obey our laws for them to continue mining here. What’s the point of being the largest exporter in Zambia when we get a smidge of those exports? They must pay for their operation costs, no subsidies at the cost of poor Zambians.

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  11. @4 “facts”, and you buffoon, when are we going to be proud of Zambians participating and running businesses? Leave true patriot Hanson Sindowe alone. Hanson funding UPNDonkeys?, you must be a buffoon to think that Hanson makes so much money and does not even need it himself!

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  12. And the buffoon author, he can’t even ask himself how large the Swiss economy or how many large copper consuming industries are in Switzerland? Since when did Switzerland venture into copper processing industries? I know they make or used to make good watches, but does this buffoon think watch making requires so much copper? The statistics that he has quoted should instead lead him to probe why our copper is “exported” to Switzerland and what proportion of the revenue finds its way back to Zambia. Come on buffoons, there are too many of you for my liking.

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  13. Mopani should not black mail the govt based on that copper consumption statistics, CEC is equally in business, they need survival and growth, otherwise Mopani must produce their own electricity top power their mining operations.

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  14. Very interesting comments indeed.!
    I’m made to think now,that most of us know enough truth about these fraudulent mopani harvesters.
    All mining houses have agreed to pay the bills so my question is, “what is so special about mopani?”
    Has anybody ever seen that documentary about mopani called “Poverty in Zambia”?

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  15. If you are at home and you wish to get to town,there are many choices, you either catch a bus/taxi or walk, if you board a taxi and pay the fare,will you say the taxi driver is useless?
    I don’t think so because that taxi driver is the middleman of your getting into town, CEC owns the infrastructure on the Copperbelt and is the middleman of Power supply to the mines.
    I think we should all be proud of this truly, purely Zambian owned successful and viable Cec than to demonise it.

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  16. Oh sorry,Mopani should either walk or pay the fare, or even buy their own vehicle if they so wish

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  17. This is nonsense. How can you give special treatment to Mopani Copper mines to pay less electricity tariffs and yet the poor Zambian is being subjected to high tariffs? These are the same mines who have refused to pay windfall tax and only pay you 3% mineral royalty.

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