Immediately after Michael Sata’s election as President of Zambia on 22 September, global copper prices fell to their lowest point in almost a year, hitting US$7,500 per tonne, amid fears that debt problems in Europe would slow global growth. Government projections, however, show that annual copper exports should reach 1 million tonnes by 2012 and 1.5 mn. tn. by 2015. Asian investors have not been spooked by President Sata’s hot pre-campaign rhetoric and are instead bolstered by the prospects for copper production in the coming years. In early October, Standard Bank signed a $500 mn. bridge financing deal with India’s Vedanta Resources, the operators of the Konkola Copper Mines (see map). Standard said that it is also working on a $700 mn. loan to finance new investments.

Chinese state-owned mining companies are also undeterred. Jinchuan Group – majority-owned by the Gansu provincial government – is forging ahead with its purchase of South Africa’s Metorex, which has copper and cobalt projects in Zambia and Congo-Kinshasa. Jinchuan outbid Brazil’s Vale in June and should take over the Chibuluma Mine and other properties in the Copperbelt once the companies finalise the terms. Non-Ferrous China Africa Mining, one of Zambia’s largest investors, announced in September that it will spend more than $800 mn. on developing the southeast ore body of its Chambishi licence and create 5,000 jobs. Work at NFCA’s Mulyanshi mine was held up for several days earlier last month, when 1,200 workers struck over pay and allowances.

In an early policy statement, Mines Minister Wilbur Simusa declared that the government is not earning enough money from the mining sector. Minister Simusa proposed that individual mining agreements and the overall taxation framework be reviewed. President Sata has also decreed that exports will have to be cleared by the Bank of Zambia so that the government can monitor the level of trade to assess taxes more thoroughly. The Zambia Revenue Authority is already hard at work on claimed tax arrears, which some companies are disputing. Sata’s government also plans to resurrect the development agreements that were torn up after former President Rupiah Banda imposed a mining windfall tax in 2008. The tax was abolished the following year.

No more snakebite

Michael Sata, aka ‘King Cobra’, and his party, the Patriotic Front (PF), drew on public sentiment against China as a major issue in their failed 2006 and 2008 electoral campaigns, but lately Sata has abandoned some of his most controversial positions. In earlier campaigns, he had promised to switch recognition from China to Taiwan if he won. This year he sidestepped the issue, saying that ‘China and Taiwan are getting on well’ and that Zambia’s strong ties with China would continue. Chinese Foreign Ministry Spokesman Hong Lei denied Beijing had provided funds to Sata’s campaign. In any case, it is unlikely that Taiwan President Ma Ying-jeou, committed to his ‘diplomatic truce’ with China, would have any interest in resuming relations.

Perhaps Sata has decided that without investment from Beijing the government would face too many problems in keeping the electoral promises he has made on jobs and economic growth. More than 300 Chinese companies employ about 25,000 Zambians and state-owned Chinese companies have billions of dollars in new investment on the books. While Chinese investment has contributed more than $2 bn. to the economy, that is just a fraction of the value of the mining and infrastructure projects backed by China’s Zhonghui Mining Group (see map). Billions of dollars in new investment are also expected from Brazil’s Vale at Konkola North and from Canada’s First Quantum at the Trident and Kansanshi projects.

Sata’s more recent arguments against Chinese investment have centred on respect for Zambia’s labour laws, which previous governments have failed to enforce, and making sure that Asian investment benefits ordinary Zambians. After meeting China’s Ambassador Zhou Yuxiao in late September, Sata questioned China’s ‘win-win’ strategy and repeated that Chinese investment should benefit Zambians, too. Nonetheless, Chinese President Hu Jintao has already invited Sata to make a state visit to Beijing.

After the abrupt sacking of Bank of Zambia Governor Caleb Fundanga, the new President chose Rosewin Wandi to head the Anti-Corruption Commission with the mandate to examine all deals signed by previous governments. Sata’s plans to investigate corruption at the Zambia Electricity Supply Corporation could also slow down the development of several Asian-backed dams developed under President Banda’s government.

 Hard work v happy-go-lucky

Joseph Katema, a Patriotic Front MP from Chingola in the Copperbelt, claims that corruption in the formerly governing Movement for Multiparty Democracy led to impunity for Chinese investors. The PF has long criticised Chinese aid as being too closely linked to the MMD regime. They point to the fact that pressure was placed on workers at the Chinese-built Ndola stadium and the Lusaka General Hospital to hurry up and finish before the September elections.

Behaviour within the mining industry began to change as soon as Sata’s victory was announced, according to workers at the Chambishi Copper Mine in Chingola. They reported that their monthly paycheques showed a more than 75% pay rise. Nevertheless, Labour Minister Fackson Shamenda is now working on a national minimum wage policy, which has won strong backing from many of Sata’s young supporters.

Sata has previously praised Zimbabwe President Robert Mugabe’s indigenisation policies and Mining Minister Simusa has made it clear that one priority for the government will be the increase of Zambian ownership and management of mines. However, any radical changes could be stymied by an opposition-dominated parliament. The results of the 20 September legislative polls left the PF with 60 seats to the MMD’s 55 in the 150-seat National Assembly. Sata’s failed electoral alliance with Hakainde Hichilema’s United Party for National Development means that the UPND’s 28 votes are unlikely to fall on Sata’s side.

Zambia’s election was reported in the United States and European media as a referendum on Chinese investment in Africa, especially after US Secretary of State Hillary Rodham Clinton’s broadside against Chinese engagement at an African Growth and Opportunity Act summit held in Lusaka on 7-8 June. Without mentioning names, she referred to ‘countries that will sign a contract or build in a country, but they do nothing to improve worker skills or enable small businesses to develop.’

The Chinese Communist Party mouthpiece People’s Daily argued that people should listen to African views about Chinese investment and that even ‘President Sata is developing a new understanding of China and now welcomes Chinese investments.’ It suggested that the tensions created by Chinese projects were often because ‘the traditional Chinese principle of enduring hardship and working hard usually conflicts with the Africans’ happy-go-lucky attitudes.’

Source: www.africa-asia-confidential.com