In February’s segment I wrote a little bit about the history of Zambia, and I touched on nationalization. I wanted to return to that point in today’s reflection on Zambia.
Now, public opinion maintains that Kaunda’s decision to nationalize the copper mines was more political than economic. He was advised on multiple fronts that the nationalization of the mines would not be a good idea for the country. He even spoke to such an idea after independence. However, Zambia’s membership in the Non-Aligned political group, close relations to other socialistic governments, and KK’s experience visiting Chile, appear to have been the primary drivers of the nationalization (Fraser et al, 2010). Kaunda had remarked the year before during other nationalizations that the mines were too big, and could not be nationalized in the public interest. This changed. Time in its article from 1969 remarks that,
“… [Zambia] remains uncomfortably dependent upon white-dominated Rhodesia for trade and electric power. The cost of living is soaring and abrasive tensions between Zambia’s blacks and whites (who constitute 1.5% of the population), are on the rise. Recognizing the importance of the mines to his country, Kaunda met two years ago with Chile’s President Eduardo Frei to discuss an arrangement to help maintain world copper prices and quotas. Although no price-fixing agreement resulted from their talks, Frei’s nationalization of the Chilean copper industry, beginning in 1967, probably stimulated Kaunda to take a similar step in Zambia.” (Mining: Nationalization in Zambia, 1969)
The damage done to the economy and mines during nationalization was immense. These losses were also compounded by the costs and loss of markets from the late 60s through the 90s as Zambia began a political and economic fight against apartheid countries to the south. Although today the threat of apartheid is over, with its end in 1990, the cost of Zambia’s political support became clear. Zambia’s position against colonialism and apartheid is estimated to have cost over US $19 billion. Furthermore, Zambia’s apartheid debt is estimated at about US $5.34 billion (ACTSA, 2005). These costs over the years from independence to the end of apartheid have acted as a monumental and mammoth drain on Zambia’s economy, although their social impact is without question.
From the 90s with the end of Apartheid came a second shift in the Zambian economy, Zambia privatized its mines and with the reversal of the nationalization the costs could finally be tallied. Although the privatization process was messy, and the effect was significantly less positive than forecasted, it was still a move in the right direction. Nationalization of the mining sector had cost an estimated 50% decline in per capita earning from 1974-1994 and left Zambia the twenty-fifth poorest country in the world in the 1990s (Fraser et al, 2006). Zambia then began to recover, but the pressures for structural adjustment, liberalization, and privatization from the World Bank and IMF proved disastrous. Privatization was rushed, and the cost in policy and regulatory control to the state was insurmountable (Haglund, 2010). Zambia found herself crippled again.
We still see the effects of these actions in issues today. More than ever when we look at how copper became Zambia’s curse, we can look back at the exogenous and endogenous factors which left Zambia without a position to stand on. Although privatization helped to cover the massive losses generated by the industry in its failing years, and greatly increased copper mining output and profitability, spurring economic growth (CIA, 2016), it also left many of the environmental, social, and political needs of those who had given their life’s work to the mining sector unmet. This was due to the nature of the privatization deals known as Development Agreements (DAs). In terms of environmental and social damages, the development agreements signed by the companies during privatization left the state responsible for cleanup, and care of these workers, but stripped the rents and eviscerated the tax structure meaning that Zambian could not continue benefit programs (Fraser et al, 2010). The lessons learned from nationalization, political utilization of the ZCCM income for ideologically motivated projects, despite economic costs, and from rushed privatization help us understand how copper became a burden and a curse to the country, instead of the promised boom and bounty it should be. Today, Zambia does not have the political or legal ability to control or profit from this resource, and without assistance will remain a victim of the international commodity market, poor tax and rent control structures, and inability to sit at the table when negotiating with large transnational private interests.
Sources:
Action for Southern Africa (ACTSA), (2005). On the front line: Zambia indebted for her anti-apartheid stance. htpp://actsa.org/Debt/zambiafrontline.htm, accessed 20 July 2005.
CIA world Factbook
Fraser, A., and Lungu, J., (2006). For Whom the Windfalls? Winners and losers in the privatisation of the Zambia’s copper mines. http://www.revenuewatch.org/documents/windfalls_20070307.pdf, accessed on 10 September 2007.
Fraser, A. and Larmer, M. (2010). Zambia, mining, and neoliberalism. New York: Palgrave Macmillan.
Haglund, D. (2010). From Boom to Bust: Diversity and Regulation in Zambia’s Privatized Copper Sector. In: A. Fraser and M. Larmer, ed., Zambia, Mining, and Neoliberalism Boom and Bust on the Globalized Copperbelt, 1st ed. New York: Palgrave Macmillan, pp.91-126.
Mining: Nationalization in Zambia. (1969). Time, (Vol. 94 #8).
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