GOVERNMENT’s takeover of Mopani Copper Mines and Konkola Copper Mines will not increase the mining companies’ copper productivity because the move is politically-motivated and will deter the much-needed fresh capital to expand operations, says UPND chairman for economics Dr Situmbeko Musokotwane.
And Dr Musokotwane, who is also Liuwa UPND member of parliament, says a UPND administration will target to raise Zambia’s total copper production to hit three million metric tonnes by 2036 made possible by progressive measures designed to ramp up production.
In a detailed economic analysis assessing government’s takeover of KCM and Mopani, Dr Musokotwane stated that copper productivity at the two mining companies will not be raised even after complete State control.
“How do the take overs at Mopani and KCM fit in? Are the take-overs viable routes towards increased production? Unfortunately, not. How do the events at Mopani and KCM fit into the grand scheme of boosting production? Unfortunately, the measures by the PF government can be said to be motivated more by politics. It is about creating an impression that privatisation of the mining industry under the MMD government is responsible for the problems in the sector today and that, therefore, some reversals are required. Yet under MMD, unlike under PF, copper output was rising steadily almost every year. Foreign exchange was in good supply and the exchange rate was very stable. The cost of living was low,” Dr Musokotwane, a former finance minister, wrote in his analysis.
“The strategic objectives of the government in taking over some mines is unclear and confusing. For KCM, they announced more than a year ago that they are putting the company under liquidation. In addition, they said they are looking for a new investor to take over the company. However, to-date, matters relating to the ownership of the company still remain under litigation. Mopani Copper Mines on the other hand has been bought by the government-controlled company ZCCM IH. Here, as in the case of KCM, the government says it is looking for a strategic equity partner who can infuse the capital required to increase production.”
He stressed that serious mining investors would not risk investing their funds in the two companies that were embroiled in legal disputes or were debt-ridden.
“The chances of success for both companies to attract fresh money under current circumstances are low. For KCM, the immediate problem is the on-going ligation processes. It is unlikely that a serious investor can risk their money buying a company whose ownership remains in dispute before courts of law. The prospects of finding an investor for Mopani are not easy either. This arises from a huge debt of US $1.5 billion owed to the former owner, Glencore, which has been assumed by the company in exchange for ownership,” he argued.
“A private investor is unlikely to buy into a company that is so heavily indebted unless the Zambian government assumes the whole or a part of the US $1.5 billion debt. An excessively indebted Zambian government can hardly afford to assume the debt. For now, both Mopani Copper Mines and KCM are unlikely to attract new money to expand production due to the circumstances mentioned above. Without new money infusion in both companies, their future sustainability, let alone ability to expand production, is questionable.”
And Dr Musokotwane, who is also a UPND member of the party’s reshuffled National Management Committee (NMC), stated that a UPND administration would target to raise Zambia’s total copper production to hit three million metric tonnes by 2036 made possible by progressive measures designed to ramp up production.
According to Dr Musokotwane, a raft of measures, which include steps to strengthen locals’ participation in the mining sector by being active and competitive suppliers, would stimulate copper productivity.
“When UPND takes over government, the following will be undertaken: As a matter of top and urgent priority, the government will sit together with mining companies and labour to iron out all major points of concern from all parties and agree on a common important agenda of stabilising the industry and then growing it; work with the stakeholders to raise copper output to three million tonnes per year from the current 800,000 MT within 15 years through investments in existing mines and the opening up of new ones. This will be the biggest boost ever witnessed by the Zambian economy with thousands of both direct and indirect jobs created,” stated Dr Musokotwane.
“Massive copper production will require expansion in related services such as haulage. The government will take steps to strengthen locals to be active and competitive suppliers of such services. Local transporters (trucks and railways) and other service providers must be the primary beneficiaries arising from expanded output. UPND is aware that mining technology has moved on and it will keep on changing, most likely by shifting away from labour intensive to capital intensive methods. The UPND government will therefore, while strongly promoting jobs in core mining, equally do the same for mining related jobs.”
Zambia’s overall copper production jumped to over 882,000 tonnes last year from 796,432 tonnes produced in 2019, mainly buoyed by FQM’s Sentinel Copper Mine and its Solwezi-based Kansanshi mining unit who produced a combined record-breaking 486,190 tonnes.
KCM posted 63,027 tonnes last year, marginally up from 61,171 tonnes in 2019 making the now government-controlled mining company the country’s fourth top copper producer, while Mopani on the other hand, posted 34,479 tonnes last year, up from 30,078 tonnes produced in 2019 making it the country’s seventh top copper producer behind CNMC Luanshya and NFCA who both registered 56,612 and 48,883 tonnes, respectively.
But data shows that last year’s copper output still lags behind the Democratic Republic of Congo’s (DRC) impressive 1.55 million tonnes that country’s mines produced last year.
Additionally, copper mining productivity drastically slumped during the period mining companies were nationally owned from 1968 to 2000.
Since 2000, however, copper productivity soared under private ownership.
Dr Musokotwane’s analysis was dubbed: Mopani, KCM, the Mining Industry and the future of the Zambian Economy.