Join our Mailing List

"As long as human rights are violated, there can be no foundation for peace. How can peace grow where speaking the truth is itself a crime?"

Copper Belt Squeeze

November 21, 2011

- Wednesday, November 16, 2011,

A tense link between a copper mine strike and Zambia´s new president is
troubling Chinese companies

By staff reporters Shen Hu and Han Wei in Zambia | 1648 words

A rhetorical U-turn by Zambia's new President Michael Sata recently
brought at least some relief to Chinese investors rattled by strikes and
his anti-China campaign speeches. But Chinese companies in Sata's
resource-rich country - including mining, power plant and construction
concerns - remain seriously challenged in the face of Zambia's fluid
business conditions, labor relations, public sentiment, and an awkward
political environment. "My dear Chinese brothers and sisters, Zambia
welcomes you," Sata declared at an October 26 luncheon in Lusaka for more
than 100 Chinese business leaders. "Because we are all-weather friends."
For several months before the luncheon, and during his successful
campaign, Sata's harsh criticism of Chinese businesses put investors on
edge. His outspokenness strained executive nerves at hydroelectric plant
builder Sinohydro Group, general contractor Jiangxi International and
several mining companies with Zambian investments worth billions of yuan.
Fresh in mind at the luncheon was an acrimonious, two-week strike by
workers at a copper mine owned by NFC Africa Mining Corp., a subsidiary of
government-owned China Nonferrous Metal Corp., that had ended just a week
before. Today, Sata calls himself a friend of Chinese business. He's also
promised to work with Chinese investors to boost economic development in
his country all through his five-year presidential term. Some Chinese
business leaders working in Zambia and interviewed by Caixin say they're
not entirely sold on Sata's apparent change of heart. Yet for now, they're
willing to stay in Zambia. They're also trying to ascertain the
president's - and his people's - true attitudes toward Chinese companies.
And in the wake of the latest NFCA strike, every foreign mining company in
Zambia is now waiting to see whether Sata will adjust the nation's labor
laws, minimum wages, corporate taxes and state shareholdings in ways that
affect their bottom line. Caixin also interviewed Sata for his views on
how Zambia can balance economic development and foreign investment. He
hinted that Chinese companies may not be permanent fixtures in his
country. "We do not possess some specific skills, for which we need help
from foreigners," he replied. "At the same time, we're eager to become
self-reliant. "If you understand that African education is still very
backward, this is not a question of a choice between foreigners or
self-reliance," the president said. "If we can do it ourselves, there is
no need for foreigners." Copper Crisis The October walkout at NFCA's
Chambishi mine by about 2,000 workers was the longest ever for a Chinese
company in Zambia, and came at a time of political tension following
Sata's inauguration. The antagonism between the unionized miners and
company managers was so great that it pulled the new president into the
fray. Sata was elected September 22 after he stoked Zambian hostility
toward Chinese investment throughout his campaign. Indeed, he ran on a
platform that openly opposed Chinese investment, and called for improved
working conditions at Chinese-owned businesses. So emotions were running
high when the Chambishi miners struck, demanding higher pay and better
conditions. NFCA and miners' union officials told Caixin the strike broke
out without warning. NFCA executives were uncertain about what to expect
next, given the political climate. They felt like "a lone boat on the
ocean being tossed about in a fierce storm," said a company insider. "An
extreme situation could have occurred at any moment. "We prepared for the
worst - being expelled from Zambia - in which case all the money invested
over the years would be gone." NFCA, China's biggest miner in Zambia, has
sunk about US$ 1.4 billion into its copper facilities - an amount that
eclipses all other Chinese financial interest in this landlocked country.
Since 1964, when Zambia won independence, some 300 Chinese concerns have
invested a total US$ 2 billion. The company bought Chambishi for US$ 80
million in 1998, and to date has earned about US$ 200 million, all of
which the company says it has reinvested at the site. Industry sources
said China indirectly or directly is the final destination for most of
Zambia's copper output, which totaled about 800,000 tons last year. Zambia
is Africa's largest and the world's fourth-largest copper-producing
country. The Chambishi purchase 13 years ago was the first overseas
non-ferrous metal mine buyout approved by the Chinese government. NFCA
started work at the site in 2000, and three years later started churning
out ore. The company expects to produce 25,000 tons this year. The
operation turned profitable in 2005, following a US$ 160 million
investment. The company plans to invest another US$ 800 million at a
neighboring pit. On the 12th day of the strike, NFCA management announced
that Chambishi workers who refused to return that day would be dismissed.
They were also given 48 hours to appeal if they want to return to the job.
NFCA Chairman Tao Xinghu said the threat was designed to get workers back
into the pits as quickly as possible. According to management and the
union, the strike was technically illegal. Zambian law says the two sides
can negotiate new contract terms within three months of an old contract's
expiration. But the Chambishi workers struck before contract talks start,
demanding a monthly salary hike of about 2 million kwacha, or about US$
400, from the current average US$ 334. Moreover, according to a worker,
NFCA management pledged last March to improving working conditions, but
took no action. On October 11, Zambian Mines Minister Wylbur Simuusa began
mediating the dispute on behalf of the new president. That led to an
agreement signed by two union officials - the chairman and general manager
of the Mining Worker Union for Kitwe City - and NFCA President Wang
Chunlai. The union promised all workers would return by October 22, and
Chambishi's managers promised reinstatements for all. After that, a
cooling-off period began during which the two sides were to negotiate
salaries. Many workers were still angry when they returned to work after
the strike. They complained Chinese mining companies pay less than others
in Zambia, and are run by arrogant, stubborn managers who refuse to listen
to dissatisfied workers. Yet if NFCA would meet all the strikers' demands,
the Chambishi workers would be the highest-paid in the industry in Zambia.
Wang says that would be unreasonable, given that the mine's ore grade is
about 2 percent - below grades found at other mines, which makes
extracting from Chambishi costlier. Wang said Zambia's largest copper
miner, Indian-owned Konkola Copper Mines (KCM), averages 20 tons per
worker a year, for example, while Chambishi gets only about 70,000 tons.
The strike was the third at an NFCA facility so far this year. Earlier
disputes occurred in January and March. Altogether, the company said, it's
lost one month's production this year, costing about US$ 16.8 million.
Anti-Chinese Slogans Management wants workers to come to grips with the
reality of business conditions for Chinese copper mine companies. In
Wang's eyes, that means they should accept the company's pay offer.
"Zambia has several dozen mining companies," said Wang. "Our production
scale is fifth in the industry, and our salaries are at mid-level,
corresponding to our position in the industry." He noted that KCM's
average wage exceeds US$ 600 a month. Wang said NFCA is still investing in
its Zambian operations and cannot afford to pay workers as much as other
foreign mining companies. Yet he admits the dispute seems to be about more
than wages. Some strikers shouted anti-Chinese slogans on the picket
lines. Others demanded dismissals for Chinese managers, or that NFCA
should get out of their country altogether. NFCA was not the only Chinese
company hobbled by labor strife in recent weeks. In September, for
example, short-term walkouts were held at Jiangxi International and
Sinohydro worksites. Some industry insiders say these labor issues have
been politicized amid Zambia's changing political situation. Sata's
campaign speeches were peppered with anti-Chinese, anti-Indian,
anti-Lebanese rhetoric. Indian and Lebanese companies have also invested
heavily in Zambia. Sata once claimed that if elected president, he would
expel all Chinese investors. He also campaigned on a promise of "more work
and tax cuts, so there is more money in your pocket." It was a slogan that
apparently made a deep impression on the public mindset. While the
fledgling Sata government has yet to propose a specific policy path for
labor, or push for raising the minimum wage and updating labor laws, the
nation's workforce seems eager to act, particularly at Chinese job sites.
"Chinese people pay the lowest wages," one mine worker told Caixin. He
linked these arguably depressed salaries to speculated corruption
involving Chinese businesses and the administration of the nation's former
president, whom Sata replaced, Rupiah Banda. "In the past, there was a
good relationship between China and the Banda government," he said. "The
Banda government was corrupt and didn't listen to us. Now Sata has come to
power, and he will help us get back what we deserve." Meanwhile, Chinese
company managers are quick to complain about Zambian workers, labeling
them inefficient, lazy, unskilled and disloyal. They also fault them for
being unwilling to accept performance-based pay that includes penalty
clauses. Zambian workers are aware of these complaints. "We are badly in
need of work," said another miner. "But just because you give us work
doesn't mean you can exploit us like slaves. Why would we want a job that
doesn't pay enough to support ourselves?" An NFCA executive mused that
Chinese companies in Zambia will not find China-like business and labor
conditions. And that's troublesome for some managers. "The Chinese way
doesn't work here, and copying it will make trouble." he said. "But I
still don't know how to improve labor productivity." Chinese companies in
Zambia are also challenged by communications issues involving their
headquarters bosses back home. Some struggle to explain the business
environment to people who've never worked in Africa. "We can't apply
Chinese standards when making demands of Zambian workers," said another
NFCA executive. "But headquarters uses Chinese standards to make demands
of us. "We've had several strikes this year, but production targets from
headquarters have not changed. When we look at the striking workers
outside the window, we get very anxious." This report was supported by the
Heinrich BöLL Stiftung Foundation.

CTC National Office 1425 René-Lévesque Blvd West, 3rd Floor, Montréal, Québec, Canada, H3G 1T7
T: (514) 487-0665
Developed by plank