Job Cuts in Zambia’s Mining Industry Causing Aggravation

Job cuts caused by the financial meltdown are not uncommon. But in Zambia, mining companies are cutting some jobs and holding others hostage in an attempt to overturn higher taxes and payment of higher royalty fees. And they’re citing the economic crisis for the job cuts, and threats of more job cuts have become common.

Zambia’s rich copper and cobalt reserves – as well as other minerals such as iron ore, manganese, and soon uranium – are primarily owned by companies composed of investor groups.

In April 2008, Zambia government passed mineral royalty increases to 3% from 0.6%. The corporate tax rate increased from 25% to 30%. Since, foreign-based mining companies such as Canada’s First Quantum Minerals, India’s Vedanta Resouces, and others claim the country must revert to old development pacts when the Zambian Consolidated Copper Mines was divested, or further retrenchments will occur. The royalty and tax issue will be taken up in the courts.

The Chamber of Mines denied it was “arm-twisting” the government over jobs, and said dropping copper prices and the world recession was having an impact. The Zambia Congress of Trade Unions challenged the mining companies to stop using the economic crisis as the excuse for retrenchments. First Quantum, which holds huge cooper assets at Bwana Mkubwa and Kansanshi, and Chinese-based Chambisi Metals, owner of the biggest cobalt mine in Zambia, have recently sacked workers and cited the economic crisis.

President Rupiah Panda, who took over for Levy Mwanawasa following his August death and was elected on 30 October, called on investors with mining stakes to engage in meaningful dialogue with the government and unions in order to prevent retrenchments. Mining investors have tentatively agreed to sit and talk. Meanwhile, Mines and Minerals Development Minister Maxwell Mwale has called for calm in the fierce public debate, falling just short of accusing certain mine industry players of creating panic.

Central to the issue, however, is the question: should massive profits made in the recent past, when copper and mineral prices were at historic highs, have any bearing on jobs now? And Zambians ask: should it not be a matter of social responsibility to keep workers employed even in hard times? Now it is up to the Panda government to strike a social commitment deal with the many stakeholders that hold equity in the country’s rich mineral grounds.