Undermining Development in Zambia

1. Undermining Development in Zambia Simon Chase Action for Southern Africa

2. Outline • Context: Copper mining in Zambia • Vedanta Resources in Zambia • Taxation issues • Environmental issues • Labour issues

3. Context: Copper Mining in Zambia • Copper is lifeblood to Zambian economy • Zambia is extremely poor: 68% of people live under poverty datum line • Mining companies have very favourable secretive contracts with government which undermine development efforts in Zambia • Government is very weak to impose taxes or labour/environmental legislation

4. Vedanta in Zambia • Konkola Copper Mines (KCM), Zambia’s largest copper producing mine, is majority-owned by Vedanta Resources. • Vedanta acquired majority share in KCM from Anglo American in 2004. • Vedanta have presided over an extremely poor record on: • environmental damage • infringements on internationally accepted labour standards • and has continued to pay very little tax to the national government.

5. On taxation • Vedanta through KCM was paying the Zambian government with royalty fees of just 0.6 per cent instead of the 5 to 10 per cent industry average in developing countries.  • In 2006/07 meant the Zambian government would have received mineral royalties of only US$6.1 million from KCM, while company extracted copper ore worth over US$1 billion. • In 2007, KCM made a net profit of US$310 million which is more than Zambia spent on healthcare.

6. On taxation (2) • In 2008, Zambian government introduced new tax regime. • Vedanta publicly accepted but privately pressured for reform. • With economic crisis, companies publicly pressured government who eventually changed policy. • Less money on education + health

7. On Environmental damage • Vedanta has been involved in serious incidents of environmental mismanagement that have compromised the health of local people. • The most common and serious problems are: • sulphur dioxide emissions from its smelters – eg. Nkama smelter. • heavy-metal effluents being released into drinking water– eg. Pollution of Kafue river.

8. Kafue river spill • KCM secretive about what chemicals were spilt • KCM management found to be ‘grossly negligent’ • ECZ recommended that KCM be prosecuted under Environmental and Pollution Control Act • Local communities had to wait for drinking water; received no compensation

9. Kafue resident: “We are scared. Now we are dead because of KCM. We may have problems in the future. We do not know what is in our bodies. We drank because we were thirsty. But the taste was bitter. It was like chloroquine. Most people are sick. Most people can’t even stand up.”

10. Nkana smelter pollution • Nkana smelter emitting harmful levels of SO2 • Emissions are in violation of Zambia’s own environmental laws • 25 times more than the level recommended by World Health Organisation

11. On labour issues • KCM’s employment practices which have been described as ‘draconian’ • some sub-contracted labourers claiming they are paid as little as £37 per month (violation of national minimum wage) • Other labour issues include: • Massive contract labour force – poor benefits/security • Unpaid overtime (breach of Employment Act) • Health and safety issues – better under Anglo American • This year Vedanta made wide scale job cuts (2,000 employees) A few months before, KCM’s CEO said the mine would not cut jobs.

12. President of the Mineworkers Union, Zambia “(Sub-contracted workers at KCM) are (employed in) very inhumane conditions – these conditions are basically intended to maximize profit by putting capital above labour”.