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Wednesday, 4 July 2007

A Human Approach to the "Mining Debate"

"They came to make profit, not to look after the lives of the people who were giving them profit"
Those are the powerful words of Justina Mumba as reported by BBC News. Justina lost her beloved son Thomas two years ago, with 45 workmates in a blast at a subsidiary mine in Chambishi. Her words underscore the human side to the mining debate that has so often been ignored in the deliberations over the size of the mining royalties.

Its very easy in all this to forget that there's a human aspect to every debate, especially this one, and the dangers of ignoring it may lead to poor policy conclusions. As Alfred Marshall said "when an economist reasons rapidly and with a light heart, he is apt to make mistakes at every turn of his work". To avoid such mistakes its crucial that the mining debate considers those who it impacts on most. These are the mining workers and the local community.

Mining after all is done by real people - real Zambian men and women who are working daily to bring back the resurgence in mining activity that Zambia is now experiencing. A Marshallian heart like approach to the mining debate therefore requires first and foremost a recognition that any solution must seek to deliver a favourable outcome to the Zambian miner and the local community. And that community embody not just the people but the culture and wider environment.

The issue of the mining royalties or renegotiation of contracts cannot therefore be dealt with in isolation from other issues such as poor working conditions and lower wages of miners. That approach is heartless and crucially carries a number of dangers for Zambia:

  • First, in the absence of stronger legislation in this area (as suggested in the BBC report), an arbitrary higher tax on mining activities for example could lead to the mining companies extracting revenues through other means. Most notably through lower wages or spend less on safety or cause more damage to the environment.
  • Secondly, lack of effective protection of workers rights and poor wages may lead to greater discontent at the work place, which could eventually lead to the disruption in mining activities. This could in turn lead to lower productivity and damage in Zambia's international reputation as an ideal place to invest.
  • Finally, the lack of better working conditions and poor wages for workers reduces the public acceptability of investment. People simply aren't able to believe that the mining activities serves any purpose other than to enrich the foreign companies.

Given these dangers its therefore imperative that the Government approach to the renegotiation of the the mining contracts takes a more holistic approach. I have termed this the "human approach" to the mining debate. It should not just focus on the revenue that country needs to get from the mining companies, but should be an overall package that would seek deliver a fair outcome for workers and the surrounding local community.

A human approach to the mining debate seeks to ensure that people who are most affected by mining operations are the focus of the renegotiations and relegates to second place, the pursuit of revenue for central Government. This is essentially a three staged approach :

Stage 1 : Identify all the key areas that Government is seeking a fair outcome on. I have identified three broad areas, although they could be others. These are : the welfare and pay conditions of the mining workers, the environment, and the local economy.
Stage 2 : Identify a range of solutions that the mining companies can implement to ensure that the areas identified in stage one are properly addressed. The ultimate aim here is to match the "failures" of the current system with appropriate and level headed solutions. For example, for the pay conditions of the workers the Government could suggested the "stock/share options" approach as suggested on this blog combined with a higher minimum wage. On the issue of the environment raised by WECSZ, the approach should be based on regulations and not financial as others have argued. Finally on the issue of local economy, the Government could reach an agreement with the mining companies where by a framework is agreed on how they could leverage private sector investment into local infrastructure. This would then be enshrined into law to apply to all new mines. These are just a few of the examples of how the three issues of the workers, the environment and local economy can be tackled. Other examples could also be explored.

Stage 3 : Having reached agreement on Stage 2 the Government can then renegotiate on extracting revenue from the mining companies if deemed necessary.



The current flaw
in the Government approach is that it starts at Stage 3 and much of the discussion has focused on revenue, without sufficient attention paid to those that are immediately affected by the mines. The "human approach" outlined is an improvement on the Government approach because it ensures that those who are most affected by mining operations are put central to gaining the benefits from its expansion. These are mostly the workers and the rest of the local population. Delivering economic gains to them and in an efficient way should come before the struggle for revenue. Let us empower the workers in the mines through innovative solutions and let us ensure the local economy have the appropriate funding for much needed infrastructure such as local roads, housing and schools.

We need a much smarter and more human approach to the mining debate and not just a revenue hungry approach. More money to central Government alone will not improve local economies, and it won't certainly translate into better pay and working conditions for workers. A human approach could deliver these things.

4 comments:

  1. i some times ask myself if am normal in my thinking,concerning people economics.

    i find most economists take "assumptions" in trying to deal with problems.

    one good theory i have is house prices are determined or influenced by profits to be made by BANKS. they own the money that construction companies use,they own the money that i will use to pay for the mortagage,and own money that the person with two or more houses has put down as collateral.

    coming back to the mining debate,
    the only way the government will solve this issue is sign contracts that empower the people.
    how demand high salaries to be paid to mine workers,this will spin high business in buying power,taxes(paye),assurance etc.

    other than that i see a loop with no winning,it's a mine with emotions involved in production.can someone quantify the cost of an happy workforce in a multimillion project?its problems for gov. and owners,who is going to compromise?

    ReplyDelete
  2. greetings. my name's Terna, more about me be i'm assistant producer for Free Speech Radio News, a daily half-hour newscast in the US (fsrn.org) as well as a contributor to a weekly programme of news and analysis on CKUT 90.3 fm Montreal (loosely associated with addax.wordpress.com)

    Free Speech is produced by a network of 300-odd reporters around the world - i would love to email you about contributing to our programme.

    if you're interested, please write me at features@fsrn.org

    thanks
    terna

    ReplyDelete
  3. I really liked the shares idea. It would be a good way to have more Zambian ownership of the mines.

    If the Chambishi explosion accident happened in America there would be a wrongful death lawsuit. Something like that could cost over a $100 mil. It's sad that losing money makes companies be more careful than losing lives...

    The unions are already working to improve the pay situation. It would be good to strengthen them. I get scared that mining strikes often turn violent on both sides. Last year at Chambishi strikers were shot! That's terrible...

    When the mines were privatized, in the 90's the situation was really bad. The mines were falling apart. The government had a huge deficit and huge debt. The price of copper was down. As a result the mines were sold very cheaply and the tax incentives were enormous.

    [also corruption, of course...]

    Right now the situation is a lot better so there is more room to negotiate. I think that for new mines the goverment should hold on to a stake.

    Maybe keep 20% or maybe sell just enough shares to raise the initial capital. Preferably sell shares on the Lusaka stock exchange.

    BTW. I disagree on the revenue situation. It was important to raise the mineral tax right away.

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  4. "BTW : I disagree on the revenue situation. It was important to raise the mineral tax right away." - error27

    I think its just a matter of emphasis. The extraction of rent from the mines is important for Central Government for budgetory reasons and to redistribute wealth accross the nations so those that don't have mines can also benefit.

    However, that assumes that Central Government is responsible and is able to do its job properly. In a country such as ours with poor institutions and poor checks and balances, giving central Government more money hardly improves anything. Yes we need to finance our budget, but there are more ways to ensure that we get a win-win situation from the mines. This is why I think it should be third priority. The central Government have a right to that rent, but their emphasis should be to see the plight of workers is addressed and also for the mines to give back to the local community.

    I like Solwezi
    what is doing. The locals appear to be taking the initiative with Kansanshi mines.

    ReplyDelete

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