http://www.washingtonpost.com/wp-dyn/content/article/2009/03/24/AR2009032403204.html
Zambia's Copperbelt Reels From Global Crisis
Downturn in Commodities Trade Leads to Devastating Mine Closures
By Karin Brulliard
Washington Post Foreign Service
Wednesday, March 25, 2009; A01
LUANSHYA, Zambia -- The global economic meltdown swept into this company
town and took down the copper mine in January. It left in its wake a
crisis measured in unsold tomatoes at the market, empty stomachs and
desperate people lined up outside Chishimba Kambwili's pink house each
morning.
"This town is fully dependent on the mine," Kambwili, the town's
parliamentary representative, said before handing $9 of his own money to
one visitor who said that laid-off miners no longer buy her sugary
fritters, that the landlord was about to kick her out and that she had
six mouths to feed. "The majority of people are now wallowing in abject
poverty."
Mines here in Zambia's Copperbelt region drive this poor nation's
economy, but a plunge in global trade has slashed demand for the copper
used to construct electronics and houses in the United States and Asia.
That is prompting mines here to slow and shut, limiting tens of
thousands of Zambians' access to schooling, health care and regular meals.
Africa's resource-fueled economies have grown steadily in recent years,
improving the lives of millions of people. Now, as prices drop for
Botswana's diamonds, Chad's oil and Tanzania's cotton, a crisis that
began in the rich world is threatening to drive millions more into
poverty, according to the World Bank, and raising the specter of unrest.
For laid-off mine electrician Lucas Ngoma, feeding a family of eight has
come to mean bartering a DVD player for a sack of dried fish.
"We used to eat three meals a day. Now we do one," said Ngoma, 45. "We
will be rationing. One fish can be shared."
Of the 26 countries the International Monetary Fund has flagged as
"highly vulnerable" to the shocks of the global crisis, half are in
Africa. The fund has scaled back its 2009 growth forecast for the
continent from 6.7 percent to 3.25 percent.
The problem is not just a collapse in commodities prices. Foreign
investment is receding in countries such as South Africa and Kenya.
Remittances are dropping in Liberia. Aid flows from economically
stressed donor countries might retreat. Much will depend on how quickly
advanced economies recover, according to experts and African leaders,
who warn that a prolonged downturn could stir turmoil.
"We must ensure that Africa is not left out," Dominique Strauss-Kahn,
the IMF's managing director, told African finance ministers at a
conference this month. "This is not only about protecting economic
growth and household incomes -- it is also about containing the risk of
civil unrest, perhaps even of war. It is about people and their futures."
Among the hardest-hit African nations is copper-rich Zambia, which
derives about two-thirds of its export earnings from the metal. The
industry boomed as the price of copper soared to more than $8,000 a ton
last summer, helping drive Zambia's 5.8 percent growth rate for 2008. By
December, when the price had fallen more than 60 percent, the mines,
which had spent billions in recent years on exploration and new
technologies, began operating at losses. In recent days, the price has
been about $3,900 per ton.
The nation's currency, the kwacha, has tumbled more than 70 percent
against the dollar since last summer. Zambia's government predicts 5
percent growth this year, a rate economists say would be miraculous.
Most forecast growth of 2.5 to 3.5 percent.
Scrambling to deal with the crunch, Zambia is seeking a $200 million
emergency loan from the IMF. It has extended a carrot to mining houses
by scrapping a major tax on their profits. To curb dependence on copper,
the finance minister has proposed boosting funds for agriculture,
tourism and infrastructure -- key, experts say, to developing industries
in a landlocked nation with few paved roads and a dismal power system.
But the timing might be all wrong, some say.
"You cannot diversify under a crisis of this nature," said Oliver Saasa,
a consultant and former economics professor at the University of Zambia
in Lusaka, the capital. "In Zambia, we will depend on what happens
elsewhere."
According to unions, mines have shed nearly 10,000 permanent workers and
thousands of contractors and suppliers, and more layoffs are in the
pipeline. Those numbers are significant in a nation with a formal
workforce estimated at 400,000, 10 percent of which is employed in mining.
Government officials have said they are pressuring limping mines to
surrender their assets to the state and can quickly find new owners, a
claim industry executives and economists doubt given the global credit
crunch. Officials said one firm interested in the Luanshya mine is NFC
Africa, a Chinese company that runs one Zambian mine. That is a wildly
unpopular option among many miners and officials, who complain that the
firm pays poorly and provides unsafe working conditions.
"But in terms of us as the government bailing out the mines," Maxwell
Mwale, minister of mines and minerals development, said in an interview,
"we have no capacity."
In this northern province, copper is the lifeblood. Nearly all mines
provide schools and hospitals for miners and their families, and
salaries of at least $200 a month provide something resembling a living.
The mines were privatized in the late 1990s, and their expansion since
then has had a ripple effect. Guesthouses sprang up to lodge visiting
executives from Canada and India. Grocery stores and bars serving miners
mushroomed. Though little wealth trickled down, state data indicate that
steady economic growth has coincided with reduced poverty in urban areas.
Now, copper is driving things the other way. The Mining Mirror newspaper
is in danger of folding because of plummeting ad revenue. Copperbelt
soccer teams have lost sponsorships from the mining houses, and the
massive Konkola Copper Mines has stopped paying the salary for the coach
of the national team. Traffic on the roads has slowed, and goods are
expiring on store shelves.
Lizzy Sifaya, the owner of a cleaning company with contracts at many of
the mines, said she has had to lay off nearly 80 percent of her 350
employees as mines cut costs. One large mine, she said, told her to
forget cleaning the offices and "focus on the toilets."
Over the past year, malnutrition among children younger than 5 has
jumped 15 to 20 percent in urban areas, including Copperbelt towns, said
Pablo Recalde, country director for the World Food Program.
Luanshya Copper Mines, one of Zambia's smallest, shut down in January,
and 1,720 miners were let go. The maximum severance pay was 10 months'
salary, money that in many cases was immediately devoured by bank loans,
said Stanslas Mwimbe, a Luanshya representative for the Mineworkers
Union of Zambia. Though few in town worked there, Kambwili, the
parliamentary representative, estimated that the mine supported 90
percent of Luanshya's 180,000 residents.
The mine still allows miners' families to use its school and clinic free
of charge. But in interviews, several residents who did not work there
-- but whose businesses thrived on miners' consumption -- said they were
unable to pay for health care or public school fees.
Kambwili said he thinks the frustration will soon explode if the mine
does not reopen.
"There's always a limit for people to be patient," said Kambwili, who
last month led 1,000 Luanshya residents in a protest against the mine
closure. "They will have to fight for what belongs to them."
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