the mines.215 It was squandered opportunity, the Bank contended, that came from the new government's failure to anticipate worldwide market developments; too much internal change; and a general "enthrallment" with copper. Still, there must have been something of value to all those "wasting assets" on the Copperbelt, for the World Bank also pronounced that, out of Zambia's entire privatization process, the mines represented, "the biggest prize."217
said to be fantastic amounts of money.220 But, since this information frequently came from
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the World Bank, some Zambians remained skeptical.
Uncertainty over re-privatization combined with the mines' now dire straits diverted
9 9 9
management's attention and that made things worse. It wasn't just the uncertainty of the process, it was the concept of the sale itself. The prospect of re-privatization was not a simple change of ownership but represented something much more.
[T]he people in production engineering...went back into short cuts. Washing a used bearing...things that they had thrown away to the salvage yard. You would go back and see how we could clean it up to fit in because there was no bearing on the shelf in the stores...So they started to realize they were taking short cuts..."Let's keep these mines going; let's keep these things—let's keep some production going." So they realized that we were short of funds...
Anglo said this to us—that they were amazed at how we managed during the last four or five years of ZCCM to keep it going. Yes. They were amazed.
Without money. They were amazed at how the whole thing was kept going.
There was just that commitment. It was like nationalism; it was like a national duty. Because even our—our salaries including myself—were not as good as we are being paid here under privatization. But we just said, "This is
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our country. We cannot afford to see these things sink."
2.4.1 Manner of sale questions
All the country's parastatals were divided into tranches for sale. The first to go were Eagle Travel and Auto Care. The mines were much farther down on the list, but should ZCCM be sold in one piece or broken up into smaller companies?
220 The Zambian Revenue Authority, however, pressured these same companies for payment of taxes and supply company owners found themselves in the ironic position of trying to convince one arm of government that their tax delinquency was due to non-payment by another arm of government. Interivew with long-term Copperbelt resident and independent supply company owner, 2004.
221 Some reports listed the figure at $1 million USD/day. Interview with former ZCCM senior manager, 2004.
Others speculated on $500,000-$750,000/day. Interview with former ZCCM senior executive and current ZCCM-IH manager, 2005. Eugene Appel, Deputy Minister for Commerce, Trade, and Industry was quoted in the Daily Mail (July 17, 2004): 1 as saying that ZCCM losses in 1994 were $157 million. From 1996-2001, there was an average of $15 million USD lost per month.
22 Interview with former ZCCM senior manager, 2004.
23 Interview with former ZCCM general manager and current senior executive, Copperbelt mining company, 2004.
There were arguments on both sides and things got stuck at this point for another two years. Experts from Anglo-American advised that for chemical reasons ZCCM should be left intact. The orebodies of the Copperbelt are sufficiently different within the space of even 50 kilometers that specialized mixing is required to produce the concentrates properly. Who could say whether there would be adequate cooperation across new companies to see that such production details worked? Experts from the investment bank N. M. Rothschild &
Sons, however, drew up a plan that called for "unbundling" of ZCCM's assets.225 Breaking the company into various pieces would allow individual companies control over the entire copper production process from underground development through smelting and refining.226
Unbundling would also make clear which assets were core business concerns and which weren't.227
By the mid-1990s, the mines' non-core assets were considerable. The most obvious were all the townships themselves. If the mines were sold as a unit or in pieces there would be workforce reductions either way. But if people owned their own homes, at least they would have somewhere to live. Chiluba dealt with the non-core housing issue by selling homes to the workers who lived in them. This was a popular move that may have been conveniently timed as well.
Interview with long-term resident, departmental and divisional manager, Copperbelt mining company, 2005.
Both the investment firms and lawyers brought into the mine privatization process were paid for by World Bank funds. McNeil, "For Sale." Rothschild clearly controlled the process; the Zambian government was the client. Interview with former ZCCM senior executive and current ZCCM-IH manager, 2005. Rothschild also had representatives on the De Beers Company board. Pallister, Stewart, and Lepper, South Africa, Inc., 16.
226 The configurations upon which various investors bid, however, did not end up this way, some resources were unevenly distributed. Interview with former ZCCM senior manager, 2004.
From a technical and economic standpoint, Luanshya had not been profitable for years, but ZCCM's interest in job creation and maintenance seemed to have been the driving force behind keeping the mine open.
Interview with independent technical consultant assigned to ZCCM privatization project, 2005; Interview with former ZCCM senior manager, 2005. It was also made clear that the new, privately held mines would not be responsible for municipal and social services. "ZCCM Transformation Plan" (Item 14.3.9E, ZCCM Archives, Ndola, September 16, 1998).
[T]hey talked about mass redundancies which were on the way; coming up.
And these people were going to be declared redundant. Where on earth were they going? They had stayed in those houses for many years. They had brought up their families in those houses. Their families have been going to school in these areas and not anywhere else. But if they were declared redundant, they were going to lose their houses. They were going to be destitute. And I decided never to allow that to happen because these are the people that built those houses for many years. And so I said we are going to take away all the non-performing assets, reduce the balance sheet by taking away the non-performing assets and leave only plant and equipment. Plant, machinery, and equipment to sell to them—which included houses. And we also left a small portion of a number of houses, maybe between 50 and 100, for management. But the rest of them we sold—I don't know—what price you call it? It's not market price...It's not giveaway price. It's—I don't know what price but it was a wonderful price which everybody afforded. And so today we don't have any war to fight. People have been declared redundant but they have turned elsewhere. As long as they have their shelter, they have a roof. They have just turned elsewhere and begin to do some business on their own. And they live and survive.228
2.4.2 Kafue Consortium deal collapse
The privatization process may have reached its dramatic high point in the late 1990s during negotiations with a consortium put together by several multinational mining houses.
By some accounts, the Kafue Consortium was interested primarily in ZCCM's Nkana, Nchanga, and Chambishi assets." By other accounts, Kafue Consortium wanted the entire company, something Chiluba insisted he would never accept.
Had we accepted Kafue Consortium we would have made shifting ZCCM as one unit—a public monopoly—into Kafue Consortium—one unit. But this time a very dangerous private monopoly. And as a trade unionist I could not accept that. I could not. So my government stood firm.
Discussions had reached a very late stage in London when a last minute disagreement caused the Consortium to walk away. The official version was that the $400 million bid was
228 Interview with President Chiluba, 2005.
9 The consortium consisted of Avmin out of South Africa, Noranda from Canada, Phelps Dodge from the USA, and the Commonwealth Development Corporation from Great Britain.
230 Interview with President Chiluba, 2005. See the transcript of this interview in the appendices for his further comments on the background and motivations behind the Kafue Consortium's actions.
too low for the Zambian people. Private speculation was that perhaps some bribes were expected. Yet another possibility was simply confusion over the point at which copper becomes meaningful.
[S]omebody sat down and calculated what they thought they would get by privatizing. And they thought they were going to get millions of dollars because they—I think the guy that did it calculated the sales revenue if you got a certain tonnage of copper over a certain number of years. And when the companies came in and started offering them 70-80 million, because that's all it was worth to them, there was such a shock. And then recoil, "These people are out to gouge us again. They haven't stopped. You know it's just the eagle with the talons again ripping us off big time."
So there was a major schism between actual and expectation. So that stalled the privatization process for a good year or more. And then the first consortium walked. And it—the guys in the ZPA they, I think they were smart cookies and they understood it wasn't worth anything. Copper in the ground is worth nothing. You've got to invest in it; mine it; get it out and then get to sell it. Then take what you've left over is what it's really worth. And if you're expecting a certain amount of profit then how much of that profit can you pay up front? And of course, you always try and give the lowest price;
that's business. 31
2.4.3 Other purchase possibilities
With the Kafue Consortium deal collapse, talk turned to questions of other buyers.
Should old familiar investors, such as Anglo-American, be invited to resume more significant roles? Anglo-American had all along retained a minority share ownership in the mines. It was also becoming increasingly involved with Konkola Deep Mining Project (KDMP), casually known as Konkola Deeps, not far from Chingola. The company's attachments to Zambia came primarily from Harry Oppenheimer and he was now elderly, but pushed the
231 Interview with long-term resident, departmental and divisional manager, Copperbelt mining company, 2005.
12 According to expert judgments Konkola Deeps represents, for its size and grade, one of the greatest undeveloped copper properties in the world. Interview with independent technical consultant assigned to ZCCM privatization project, 2005. It had long been understood that ore reserves at KDMP were sufficient for about 100 years. Mining Mirror (August 31,1979): 1.
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Company's board to return. What about management buyouts? Some ZCCM executives attempted to put together plans.234 Should new foreign sources be sought and, if so, whom should they be? There was talk of diversifying mine ownership around the globe. The Chiluba government appeared to think that inviting investors from various parts of the world to purchase individual mines would help bilateral relations."" What about the Zambian government's and people's interests? Finance minister, Ronald Penza, assured the public that government would retain a "golden share" in each privatized package. This would give government limited special rights concerning such things as changes of ownership and mineral asset disposal.236 As to the people, government would eventually float its shares on the newly established Lusaka Stock Exchange (LuSE). This, said industry reports, would
"enable Zambian participation in the ownership of the new company."
More vacillation and uncertainty delayed the process and now the world copper price dropped. Zambia then found itself being "a very, very willing seller" looking for "a very reluctant buyer."23' But, since the World Bank and IMF were refusing further funding, the privatization program went forward.239
33 Harry Oppenheimer was the son of Ernest Oppenheimer. Anglo also had a 27.3% share in ZCCM.
234 "Kafue Deal Collapse May Delay Privatization," Sunday Times (April 5, 1998):
http://www.btimes.co.za/98/0405/comp/comp4.htm. With the notable exception of Copperbelt Energy Corporation (CEC) proposals for Zambian share holding in the newly privatized companies appeared to be ignored or overlooked. Interview with former ZCCM general manager and current senior executive, Copperbelt mining company, 2004. By the mid-2000s, CEC, ZCCM's former power division, had some local shareholders but was majority owned by National Grid out of the United Kingdom and Cinergy GP from the United States.
"Copperbelt Energy's Changing of Guard," Sunday Times of Zambia (March 5, 2006): 8; "Copper Studies,"
CRU Analysis 32, no. 11 (May, 2005): 4.
35 Interview with former ZCCM general manager and current senior executive, Copperbelt mining company, 2004.
236 "Luanshya, Chibuluma Sale Pact Sealed," Mining Mirror (September, 1997): 1. ZCCM-IH, the mines' holdings company generally retained from 10% to 20% share in the re-privatized companies.
237 Mining Mirror (My, 1997): 8-9. The LuSE was set up in 1994. As of 2004, the second stage of the overall process had not been implemented. Interview with former ZCCM general manager and current senior executive, Copperbelt mining company, 2004.
238 Interview with former ZCCM senior executive and current ZCCM-IH manager, 2005.
239 Interview with former ZCCM senior manager, 2004. See also timetables of these events as rendered in Situmbeko and Zulu, Zambia: Condemned to Debt, 24ff and "Zambia Country Assistance Strategy," 59ff.
By 1997, the first sale was completed. Kansanshi mine, the site of some of Africa's oldest copper mining and smelting activities, went to Cyprus AMAX based in the USA.240
Some of ZCCM's other assets then went to various companies that had formerly been part of the Kafue Consortium. Avmin bought what became Chambishi Metals while Phelps-Dodge took over Zambia Metal Fabricators (ZAMEFA) in Luanshya. Anglo-American once again assumed a more active role, purchasing the largest company, Konkola Copper Mines (KCM), based on hopes for Konkola Deeps. The mine privatization exercise then continued until 2000 when the sale of the Nkana and Mufulira sites to a small consortium running a company called Mopani Copper Mines completed the process. But, according to officials, ZCCM's debts were actually more than cash receipts from the mines' sales covered. Whatever revenue Zambia received at the time of sales went to pay off arrears.241
By late 2001, Chiluba himself was out of office, his attempt to amend the constitution giving him a third term thwarted by public opposition from a now weary and unsettled public.