Falling copper prices hit Zambia in pocket
Copper accounts for 80 percent of Zambia's foreign currency earnings
By Francis Maingaila
Slumping international prices for copper haven't only hit Zambia in the pocket, they've also made the national economy more vulnerable.
"Falling copper prices have increasingly become a source of concern," Secretary to the Cabinet Roland Msiska told The Anadolu Agency.
"Although we are selling well, the pricing is not as profitable as we would like it to be," he said. "This is not good for our young economy."
According to Msiska, copper prices in recent months have tumbled to a current average of $5,500 per ton.
Copper accounts for 80 percent of Zambia's foreign currency earnings and is considered a major driver of the country's economic growth.
Minister of Finance and National Planning Alexanda Chikwanda told AA Zambia had exported 981,340 tons of copper in 2013, representing an 11.3-percent increase on the 882,095 tons exported in 2012.
The country's copper export earnings for 2013, he added, were $6.941 billion – 10.3 percent higher than the $6.294 billion generated in 2012.
But the finance minister regretted that these figures were likely to fall in line with declining global copper prices.
"We hope this won't last long because the whole world is united in finding a lasting solution to falling copper prices," Secretary Msiska told AA.
"But even if it lasts longer than anticipated, the government is currently working on measures to ensure a steady flow of investment... and [to ensure] that the situation does not ground our economy," he added without elaborating.
Secretary Msiska noted, however, that while copper prices had tumbled, mining companies had been pushing for over $800 million in refundable Value Added Taxes (VAT).
Some mining companies, he noted, were also calling for the cancellation of a new tax regime, saying the market was no longer favorable for such a tax scheme.
"This sudden change of events in the recent past is now becoming very unfortunate for the country, especially that some mining companies have begun to cut down on further investment because the mines are no longer profitable," Msiska told AA.
"Ultimately," he warned, "this may not just affect their profits, but their employment base [as well]."
Steve Din, CEO of the Konkola Copper Mine, agrees.
He said the sharp decline in global copper prices, coupled with high mining royalties imposed by the government, would lead to huge job losses in the mining sector, thus affecting the livelihoods of numerous people.
"The company is reviewing its operations in light of lower copper prices and VAT refund issues, including the changes to the royalty regime," Din told AA.
Newly-elected President Edger Lungu, for his part, has vowed that his government would not tolerate the layoff of mine workers as a result of declining copper prices.
"The problem of falling copper prices on the international market is not unique to Zambia," he said in a recent statement.
"I see no reason why some mining companies are entertaining the idea of laying off workers," the president said.
Lungu added: "Let me warn those companies that my government will not tolerate – or entertain the idea being incubated by those mining companies – to close the mines as a result of falling copper prices."
Yusuf Dodia, a Lusaka-based economy expert, said falling copper prices would also serve to ratchet up pressure on the government in terms of public service delivery.
"As a result of falling copper prices, the government will face problems in social investments for such critical sectors as education and health," he told AA.
According to Dodia, who is also president of Zambia's Private Sector Development Association, more than half of the national population is currently coping with a food security crisis exacerbated by a stagnant economy.Anadolu Agency website contains only a portion of the news stories offered to subscribers in the AA News Broadcasting System (HAS), and in summarized form. Please contact us for subscription options.