Mopani: a deal for political survival and third term Featured
Our strategic objective as a socialist party is public ownership of the key means of production.
But achieving this in a world economy dominated by capitalism is not an easy undertaking. It calls for a tenacious, intelligent struggle. And it is this struggle that defines the process of “socialist construction”. It is a process because it is not a one off act or transaction. It’s not a single act of nationalisation and the following day you have a socialist society in Zambia.
The last 60 years of observing nationalisation in the world have taught us something, has made us a bit more wiser about what works and what doesn’t. It has taught us to be cautious and patient.
Moreover, it is said that there are many ways to skin a cat. Similarly, there are many ways to achieve our public ownership of the key means of production without engaging in very complex and unnecessary business and political deals.
Accordingly, the Socialist Party will not nationalise these troubled copper mines with limited economic lives remaining – ranging from 8 to 40 years.
And what is under exploitation now is just about a third of our mining potential – we still have two-thirds of our mining potential to exploit.
Without belittling anyone, we simply don’t have the capacity to run these financially troubled and technologically complicated mines. We don’t have enough mineral scientists, mining engineers, mining economists, lawyers with adequate mining knowledge, the financial expertise to mobilise capital for our mines and market the minerals we have mined.
What the Socialist Party in government will do is to ensure that it collects fair taxes from the mines to pump into education, health and peasant agriculture. And also make the transnational mining corporations pay for the training of our people in various mining skills. With such well trained people we will be able to exploit the remaining two-thirds of our mining potential on our own or under more beneficial joint ventures with others.
We will certainly not do what this government of the Patriotic Front and Mr Edgar Lungu is doing. What is the benefit to our people of the Mopani deal?
The main issue at Mopani has been the cost of production which is around $4,000 per tonne and the high costs of running the mine – ranging between $40m and $60m per month. In the face of low commodity prices, the mine has some challenges. In an attempt to reduce the cost of production, Mopani recently sunk three new shafts – two in Kitwe and one in Mufurila – at a cost of $4.5 billion. They were supposed to invest a further $450 million to take the shaft a bit further down just before government indicated that they would do away with VAT and instead introduce sales tax. Unlike in North Western Province where they do not need to sink a shaft, at Mopani you need a shaft of between 1.5 km to 2 km in order to maximise value for money. The previous shaft was sunk in 1975.
Mopani has copper reserves of between 38 to 40 years before activities come to a close. However, that needs about $1.5 to $2 billion investment in mine development. Why would we commit 80 per cent of our future copper production to pay off this debt when we will need between $40m and $60m on a monthly basis to run by this mine? Which banker is going to give us a credit facility under these circumstances?
We think this Patriotic Front government of Mr Lungu has messed up big time on this issue. They know that they do not have the ability to run this asset to the optimal levels that could bring a reversal of mining fortunes to Kitwe and Mufulira. In a worse case scenario, we would rather have Glencore place the asset under care and maintenance, knowing very well that as copper prices continue to improve, they would eventually begin operations within 8 months. Now, we have lost a credible investor and we are likely to see a decline in production from the mine, like we have seen with KCM, notwithstanding the type of investors we had there. Even if ZCCM-IH manage to run the operation successfully with a strategic partner, they will be constrained to expand production as they have the yoke of paying off the debt of purchase price for at least a decade.
Clearly, the decision to sale Mopani was based on political survival instincts of Mr Lungu and his colleagues in the Patriotic Front government. Understandably, they were scared of the consequences losing 15,000 jobs in an election year. This decision has nothing to do with
any strategic business formula – it’s all about political survival and a third term of office for Mr Lungu.