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Copper mono-economies under siege: Will they survive

Filed under: Breaking News,Business |
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Copper

Copper

By Dr. Munyonzwe Hamalengwa

Copper mono-economies like Zambia have this week received some of the worst news of their lives.

Copper prices have plummeted to their lowest levels since the great recession of 2009. The prices are now about $2.00 per pound.

Given the strength of the dollar to the kwaca and ours is an exporter of raw (unmanufactured) products, and importer of manufactured products (even those we previously exported -like copper), the pricing in dollars given the unfavourable exchange rate, is one of the killers of our economy. Our neighbor to the West, Angola and our friend in West Africa, Nigeria, being also mono-economies in the main relying on Oil, experienced great economic difficulties recently when oil prices had sunk. Even Russia was squeezed because it depends on oil exports, despite its more diversified economy.

Canada is one of the leading producers of copper but because its economy is diversified, the shock of the down-ward spiral of copper prices have not affected the economic engines.

China has been the fulcrum upon which the world economy has pegged itself in the last several years. China’s world-wide primitive accumulation of capital (raw materials extraction) on top of its financial muscle is no longer buying as much copper as it used to even as late as last year.

China needed copper for its ship building and armaments industry. China now has a surplus of copper and does not want to buy much more from Zambia and other countries. As China slows, so does much of the world.

To aggravate matters, copper mines in Zambia are foreign owned and foreigners can abandon sinking ships at a whim, leading to the loss of thousands of jobs. If there is one gigantic sin that President Chiluba committed against Zambia, it was to capitulate to IMF conditionalities and selling our mines at give away prices. Was bending to the IMF inevitable. One school of thought maintains that President Kaunda had so destroyed the economy that the only way to repair it was to surrender to the IMF. History will I suppose be written to record exactly what transpired to sell our economy away like that. Who benefitted to the wholesale annihilation of Zambia’s economy?

It has not helped that the following governments were weak in their tax regime negotiations with multinational corporations that controlled the mines. Copper prices rose up after 2011 but Zambia did not benefit much with the tax windfall that transpired. Then we have continued to flip-flop on what tax regime we want.

The lesson is very clear and it has been clear from the beginning our country’s life in 1964. President Kaunda said it so many times, as have other presidents and economists and other scholars: Zambia needed to diversity its economy. We are still talking about diversification. But nothing has been done. You cannot expect a different result when you are committed to doing the same thing that produces negative results every time you do the thing.

It falls that the greatest sin President Kaunda committed is failure to diversity the economy despite his intelligence, love for Zambia and the robust economy that existed before the oil crises of the mid-seventies. Kaunda had the command of the country, resources, capability and knowledge to diverse the economy but he did not. Why he did not has not yet been written down. There was less corruption in those days. The nationalist politicians were imbued with patriotism, sacrifice and a mission. What went wrong?

Zambia has other minerals, valuable ones and the best in this world, emeralds for example. Zambia has agricultural land to boot, if the Chinese and Indians do not gulp it at free or give-away prices. We have the potential to be one of the leading countries in Southern Africa in tourism.

In the western world, South Africa sells the Victoria Falls as an appendage of its tourist attractions and reaps millions of dollars from this. We are sitting on a gold mine while foreigners reap the fruits of tourism that we have planted. We don’t even own the hotels on our soil.

If Zambia was a family homestead, could a father tell his wife and children that they should bear the hunger because even the neighbour’s family is hungry? Comparative and historical analysis is well and good and necessary. But the question a family should always ask is: How do we get out of this hunger? While our neighbor is hungry, the other more resourceful neighbor is not hungry, so hunger is not universal. One solution is diversification of the economy. Other countries have done it. Zambia can do it. This is not rocket science. However, even rocket science is solvable since there are rocket scientists.

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