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Saturday, 31 July 2010

A cautious revival

An interesting report on Chinese investment in Luanshya and the mixture of cynicism and hope that engulfs the urban dwellers (HT : Kafue)

Navigating its way over the remaining shreds of baize, the snooker ball hit the side of the table with a gentle thud. The table was majestic once, with its heavy, intricately carved legs that are now gathering dust.

"I'm sure it worked a long time ago, but it's no longer used," said Marion Malisawa, the young barman as he grabbed the ball and tossed it into a corner, where it came to rest in the remains of a rusty wire cage.

Years have passed since anyone played snooker at the Roan Antelope Horse and Pony Club in Luanshya, a town in Zambia's Copperbelt.

"A lot of things have changed," said Stephen Mumba, the club's security guard of 21 years, who still makes his daily rounds.

"But before? You know the story? Lots of people came here to eat and drink -- every Friday fish and chips and roast pork every Saturday. There were show-jumping competitions, people were pitching tents. It was a nice place."

Another chance to thrive
While the old mining town has lost much of its lustre, it has now been given another chance to thrive. A huge cash injection from a Chinese consortium into the once-thriving mine has given the locals hope of a better future.

Twenty years ago Luanshya, the city that owes its existence to Zambia's oldest copper mine, was still booming.

As early as the 1970s the Copperbelt boasted an indigenous urban middle class. Workers mined copper during the day and relaxed afterwards at the cricket club or the golf club. Their children went to subsidised schools and universities. Trees lined the streets of "Luanshya, the garden city", as it was then tagged.

After independence from Britain in 1964, Zambia was run as a socialist state. The copper mines fell under the auspices of Zambia Consolidated Copper Mines (ZCCM), a largely state-owned conglomerate. Profitable mines were used to cross-subsidise those that ran at a loss. The objective back then was to keep going, keep mining, keep jobs. And throughout the Copperbelt, the ZCCM was the biggest employer by far, providing a welfare system unprecedented in the region.

Patience Mususa, who is working on her PhD in social anthropology at the University of Cape Town and is currently based in Cambridge, grew up on the Copperbelt. Her father worked on the mines.

She still has a "nostalgic image of a pretty orderly town, where you had subsidised education, excellent healthcare, recreational facilities and a whole lot of things that people don't usually characterise with life in Southern Africa".

1970s brought change
This life began to change in the mid-1970s when the price of copper on the world market started to fall and the state-led economy couldn't keep up.

The World Bank and International Monetary Fund pressured the government to privatise the mines. It was the end of the ZCCM and the industry was unbundled. Profitable mines were snapped up by international investors and the not-so-profitable ones were marked for closure.

The first one to privatise was Luanshya, which was sold in 1997 to a group of Indian investors. In the process thousands of workers lost their jobs. Three years later the company was liquidated.

When the mine eventually re-opened in 2004, under new ownership and on the back of rising copper prices, locals say that profits went straight to shareholders in Kazakhstan and Israel instead of back into the community. The residents of Luanshya barely noticed a difference in their lives. Their city continued to decay.

And then, in 2008, came the global financial crisis. The mine's owner waited until the price of copper fell to $3 000 a tonne and then closed up shop. The mine went under care and maintenance, essentially ceasing to operate, shedding almost all the remaining 2 500 jobs. The 164 000 residents of Luanshya, a town with no other job opportunities to speak of, were left with nothing.

After months of anxious waiting at a time when no other foreign investor seriously considered buying, the Chinese mining group Nonferrous Metals (CNMC) put $40-million on the table, promising to invest hundreds of millions more. And, what's more, their promises quickly materialised.

"People in Luanshya drove 20 minutes to the main road to watch this big truck go by that carried extra heavy mining equipment," Mususa said. "This is what investors are meant to do ... and you don't do this if you plan to leave any time soon."

Locals remain cautious
The locals remained cautious. They were well aware of how controversial Chinese investors were in the region, as well as their somewhat dubious track record in the country.

In the neighbouring town of Chambishi, for instance, where the Chinese have been mining copper and cobalt for several years, the locals might have found jobs and the communities around the mine might survive, but they hardly thrive.

Residents will tell you that no matter how profitable the business, there is no trickle-down effect here. Profits from the mine go straight to China.

The Zambian government takes a different view. In Lusaka the Chinese are courted. Given the politicians' experience with the privatisation of mines, they are painfully aware that short-sighted, profit-focused international consortiums -- that keep investments in the mines low and leave quickly when the going gets rough -- can take down the whole industry, and the Zambian economy, with it. And with more than half the population living on less than $2 a day and only 10% of the workforce in formal employment, the country's fate is intrinsically tied to the copper industry, which accounts for 75% of Zambia's foreign exchange earnings.

But local opposition parties, labour unions and NGOs are at odds with the government initiatives and the Chinese. They have criticised Chinese mine owners for bad working conditions, low wages and substandard safety standards and practices.

In Chambishi 46 Zambian workers died in 2005 in an accident at a Chinese explosives factory. They were buried beside the road to the mine gate.

The incident was widely reported in the Zambian media at the time and it wasn’t the only one, said Chibamba Kanyama, a respected local business analyst. He said that "many of the hazards in mining have been associated with Chinese investors".

Once, he said, coal miners in another part of the country were sent underground without proper safety gear and hardly any ventilation.

"That coal mine has been closed twice now by government," said Kanyama. "These are basic things. You hardly find these kinds of problems at the experienced, old mining companies we have had in Zambia."

But in Luanshya things seem to be going well so far.

'They are not profit-driven'
According to Hamilton Musenga, who has a 24-year professional history in the labour unions and has been working with miners in Luanshya, the new owners have employed more people than the previous investor. And, he said, they have increased wages, in some cases fourfold, to $300 to $400 a month.

There are few people who know the Luanshya mine like Robert Kamanga does. He is deputy chief executive of CNMC-Luanshya Copper Mines plc and one of only two Zambians among the six top managers.

Kamanga has spent his working life here. He has worked for the ZCCM and all the subsequent owners, including the Chinese who took over last year. He agreed to be interviewed in his capacity as a "citizen of Luanshya".
A mixed report
When the Chinese entered the copper industry, he said, they focused on marginal mines. At the time the Luanshya mine was earmarked for closure.

"They are not driven by profit, at least initially," he said. "They are just looking for metal. China is a big country, hungry for copper."

Like many others, Kamanga is full of hope. He is convinced that the Chinese mean business and are serious about investing. Five months after restarting mining operations, they had already spent $40-million on equipment and the rehabilitation of the plants, and CNMC president Luo Tao had promised to bring production at the mine back to full capacity.

But what struck Kamanga about his new bosses is their philosophy and work ethics.

For decades Zambians had watched Western expatriates living the high life, feeling they had arrived "in paradise", with salaries "seven to 10 times" those of their local colleagues. The Chinese, he said, did things differently, paying themselves hardly more than they paid the Zambians and living in humble communal quarters, with several of them, managers included, sharing a house.

'That's the difference'
"The first thing Western managers want is a swimming pool and a big house," Kamanga said. "The Chinese guys will pitch a tent. The manager will be down on the shop floor, take off his tie, roll up his sleeves and work with everybody else. That’s the difference."

In nearby Chambishi, the grounds of Zambia's biggest copper mine and also home to Bolo Mining, a relatively small Chinese company specialising in the leeching of copper, producing 500 tonnes of cathode, thin sheets of highly pure copper, a year; 90% of this goes directly to China.

"Back to the mother country," said Zhang Zuo Rong, assistant to the general manager of Bolo Mining.

Zhang invited me into his sparse office to explain how Chinese investors managed to stick around when others were busy pulling out in a panic. When the global financial crisis hit, he said, several Chinese companies in the area met and are actively encouraged by the Chinese government to stay put.

"Government had given big loans to Chinese companies, so we stayed."

And already things were getting better, said Zhang: "It is about perseverance. We believe in something and it will come. There can't be trouble all the time. Things fluctuate, just like the price of copper."

Some locals have worked around the big mining companies, forging their own connections with China. In Luanshya, Zambian businesswomen are importing goods directly from China to their doorsteps.

These women tend to come from middle-class backgrounds and initially used savings, loans and down-payments from local shopowners to get going. Some of the traders board the plane to Hong Kong or Beijing with less than $3 000 in their pocket and come back with anything from matches, clothes and cellphones to beauty products and plumbing equipment. And while many have failed, some have been spectacularly successful in creating an income for themselves and their families that is not dependent on the copper mines.

The majority of residents in Luanshya, though, are too destitute to escape the vicious cycle of poverty. For them, the past decades have been nothing short of a roller-coaster ride, with their livelihoods being at the mercy of the short-term economic interests of overseas shareholders. As a result the Copperbelt has seen a phenomenon that is rare in Southern Africa: a former urban middle class returning to subsistence farming, even with today's copper price being almost four times higher than it was in the "golden 1970s".

Violet Sakala, a mother of six and the wife of a former mine worker, is one of many who have been forced to move to the steadily growing squatter camp on the outskirts of Luanshya called D-Compound. Half an hour after sunset much of it is enveloped by darkness. People live in small huts without electricity or running water. Until two years ago the Sakalas stayed in a proper house in town, with hot water, electricity and inside bathrooms.

"But when my husband was retrenched two years ago, we couldn't afford the rent any more," Sakala said. "Now we have to get water from a well and do our washing outside. It really is not easy."

While her husband spends the days in the rural areas tending to the family's small mealie field, some of his former colleagues are trying a different strategy.

Every day they gather in town, outside the gate of the mining office, waiting for work. They are all skilled and experienced workers, civil engineers among them. They are frustrated and at their wits' end.

One of them, Charles Muhamba, described the situation: "We are literally doing nothing, just waiting for something, anything. And at the end of the day you go home, literally with nothing, and you don't eat.

"Once the president came here and the police told us the president didn't want to see us here. So they chased us away."

The other men nod and murmur in agreement, some with their eyes cast down on the grey pavement. The shame they experience is tangible, a shame that fills Muhamba's eyes with desperate rage as he goes on: "I can't even send my five-year-old son to grade one, because you have to pay for everything. I speak very good English, but where do I take my English? Should I eat my English?"

For a few seconds the group erupts in laughter. It is a strange mixture of cynicism and hope that keeps them going. They have been coming here for more than one-and-a-half years now, every day, clinging to the faint hope that the mine gates might open for them and that they will be given their jobs back by the Chinese. They refuse to give up. After all, things cannot always get worse. They fluctuate -- just like the price of copper.

Trading With China

Elizabeth Mulenga (45) was one of the first women in Luanshya who took up long-distance trading with China.

She started out with cell phones after hearing that they were "cheapest at the source -- in China," she says. That's when she first flew to Hong Kong. Chinese contacts met her upon arrival, organised translators, transport and hotel rooms. Later she travelled to different parts of the country and, on subsequent trips to Thailand, later to Italy, Belgium and France.

"We ladies work as a team," she says, leaning back in her chair with a satisfied smile. Often, four or five of them put their money together and send one to China with the order for the rest of the group. Things went well until all three of the Mulenga children went to university at the same time.

Now the ambitious mother is broke, but she already has a plan: inside her house she has started rearing chickens; with the profits she plans to open a bakery and, once the cash flows again, she will be ready for her next inter-continental business trip.

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