The Zambian government recently revoked three small-scale mining licenses held by Chinese Collum Coal Mine in Sinazongwe in Southern Province due to violations of safety and environmental laws and its failure to pay mineral royalties. The Zambian government has taken over operations until a suitable investor willing to comply with the law has been identified. Since the mine was taken over by the Zambian government, it claims that regular inspections have been conducted in order to remedy the mines’ problems. The decision to revoke the licenses sets an important precedent for similar cases, while also indicating a change in the trade partnership between China and Zambia, in which the African country is less inclined to allow Chinese companies to dictate rules and takes more active ownership of its natural resources.
According to Zambian Minister of Mines, Energy, and Water Development Yamfwa Mukanga, the mining company had a history of poor compliance to existing legal standards, mainly due to the employment of non-qualified personnel. Some of the offences included a non-availability of emergency medical treatment facilities such as underground first aid stations or ambulances, as well as the company's failure to declare its mineral production, as required by law.
Strikes between Zambian workers and the Chinese managers had occurred periodically since 2005 as a result of poor payment and working standards. While legally the company was obliged to pay workers during both busy and slow times, as well as provide housing and medical insurance, it avoided these requirements by using temporary workers. Moreover, the workers were physically abused, and were often kicked and beaten.
The first strike took place in 2005. The Chinese managers attempted to disperse the demonstrating workers by shooting into the sky. In 2006, the government, aware of the poor working conditions, tried to shut down the mine, but--most likely due to bribery and the people’s desperate need for jobs in the area--the mine stayed open. In 2010, the demonstrations turned violent. During one of the protests, the Chinese managers shot into the crowd of demonstrators, injuring 13 workers; they later claimed to have feared for their lives. The case against the managers was quickly dropped, most likely as a result of the mine’s owner pressuring the government. In 2012, a worker killed a Chinese supervisor and several other individuals during new protests about pay at the mine.
Until being taken over by the government, the Collum Mine was owned by Xu Jianxue, the founder of a company called Yangtze Jiang Enterprise Ltd., who had been involved in other major construction initiatives in Zambia (including, ironically, the Zambia Anti-Corruption Bureau Building). Xu obtained the rights to exploit the mine in 2003. He was the only bidder, as previous foreign investors had given up due to security dangers in the area as well as geological risks around Lake Kariba. Moreover, Collum Mine relied on fluctuating demand from local cement factories, making its ability to generate income unpredictable.
In August 2012, the government sent a default notice to Collum Coal Mining Industries, invoking the provisions of Section 102 of the Mines and Minerals Development Act regarding the obligations to declare mineral production and pay mineral royalties worth over KR5 million. The company was given 60 days to remedy the problems. When it did not, the government proceeded canceling the three licenses.
In response to the company’s tax avoidance at a cost to the country of two billion dollar a year, Zambia has adopted a new law aiming to increase transparency and accountability. Under the new law, the Bank of Zambia will establish an electronic reporting and monitoring system that will oversee the collection of royalties and taxes from foreign investors. Under the new law, the investors, many of whom were originally attracted to Zambia because they could take their profits abroad, will be required to open and operate taxable foreign-currency bank accounts. When exporting goods, foreign investors will have to deposit their profits into Zambian banks within two months after the goods are sent abroad.
Moreover, while emphasizing that it is not interested in nationalizing Zambia’s mines, the government stressed that it would not hesitate to end other non-compliant and inactive mining rights, including prospecting licenses where holders fail to remedy the default. The Zambian government may have signed itself up for a considerable task. According to a new Human Rights Watch report, these types of safety, environmental, and human rights violations taking place at Collum Mine are widespread in Chinese-owned copper mines throughout Zambia. This strict approach to Chinese investment in the country seems in line with the electoral promises of the current President Michael Sata, who promised to ensure that Chinese investments in Zambia are beneficial for the locals, and that workers at Chinese-owned copper mines are safe and properly paid. This is a significant shift in policy, as the previous president Rupiah Banda was focused on attracting Chinese investments by easing the restrictions they have to face in accessing the country’s resources.
Zambia and China have longstanding economic relations. Zambia currently benefits from the third-highest level of Chinese investment, as China invests more than $2 billion in the mining industry alone. China has also created nearly 50,000 jobs, while trade between the two countries reached $3.5 billion in 2011. The recently-elected Zambian President Sata seems less inclined to tolerate abuses on the part of its foreign investors. While the government is improving its policies regarding the benefits foreign investors gain from the country's natural resources, it is still allowing foreign companies to take its primary goods and sell back manufactured ones, which is essentially a form of modern colonialism to some.
Zambia’s population suffers from chronic unemployment and poverty, with 64 percent of the population living below the poverty line. New legislation is likely to improve the existing problem, but the government will have to develop a better strategies and policies to ensure that its population is adequately profiting from the natural resources that the country abundantly possesses.
a global affairs media network
Zambia: Standing Up to Chinese Businesses
July 22, 2013
The Zambian government recently revoked three small-scale mining licenses held by Chinese Collum Coal Mine in Sinazongwe in Southern Province due to violations of safety and environmental laws and its failure to pay mineral royalties. The Zambian government has taken over operations until a suitable investor willing to comply with the law has been identified. Since the mine was taken over by the Zambian government, it claims that regular inspections have been conducted in order to remedy the mines’ problems. The decision to revoke the licenses sets an important precedent for similar cases, while also indicating a change in the trade partnership between China and Zambia, in which the African country is less inclined to allow Chinese companies to dictate rules and takes more active ownership of its natural resources.
According to Zambian Minister of Mines, Energy, and Water Development Yamfwa Mukanga, the mining company had a history of poor compliance to existing legal standards, mainly due to the employment of non-qualified personnel. Some of the offences included a non-availability of emergency medical treatment facilities such as underground first aid stations or ambulances, as well as the company's failure to declare its mineral production, as required by law.
Strikes between Zambian workers and the Chinese managers had occurred periodically since 2005 as a result of poor payment and working standards. While legally the company was obliged to pay workers during both busy and slow times, as well as provide housing and medical insurance, it avoided these requirements by using temporary workers. Moreover, the workers were physically abused, and were often kicked and beaten.
The first strike took place in 2005. The Chinese managers attempted to disperse the demonstrating workers by shooting into the sky. In 2006, the government, aware of the poor working conditions, tried to shut down the mine, but--most likely due to bribery and the people’s desperate need for jobs in the area--the mine stayed open. In 2010, the demonstrations turned violent. During one of the protests, the Chinese managers shot into the crowd of demonstrators, injuring 13 workers; they later claimed to have feared for their lives. The case against the managers was quickly dropped, most likely as a result of the mine’s owner pressuring the government. In 2012, a worker killed a Chinese supervisor and several other individuals during new protests about pay at the mine.
Until being taken over by the government, the Collum Mine was owned by Xu Jianxue, the founder of a company called Yangtze Jiang Enterprise Ltd., who had been involved in other major construction initiatives in Zambia (including, ironically, the Zambia Anti-Corruption Bureau Building). Xu obtained the rights to exploit the mine in 2003. He was the only bidder, as previous foreign investors had given up due to security dangers in the area as well as geological risks around Lake Kariba. Moreover, Collum Mine relied on fluctuating demand from local cement factories, making its ability to generate income unpredictable.
In August 2012, the government sent a default notice to Collum Coal Mining Industries, invoking the provisions of Section 102 of the Mines and Minerals Development Act regarding the obligations to declare mineral production and pay mineral royalties worth over KR5 million. The company was given 60 days to remedy the problems. When it did not, the government proceeded canceling the three licenses.
In response to the company’s tax avoidance at a cost to the country of two billion dollar a year, Zambia has adopted a new law aiming to increase transparency and accountability. Under the new law, the Bank of Zambia will establish an electronic reporting and monitoring system that will oversee the collection of royalties and taxes from foreign investors. Under the new law, the investors, many of whom were originally attracted to Zambia because they could take their profits abroad, will be required to open and operate taxable foreign-currency bank accounts. When exporting goods, foreign investors will have to deposit their profits into Zambian banks within two months after the goods are sent abroad.
Moreover, while emphasizing that it is not interested in nationalizing Zambia’s mines, the government stressed that it would not hesitate to end other non-compliant and inactive mining rights, including prospecting licenses where holders fail to remedy the default. The Zambian government may have signed itself up for a considerable task. According to a new Human Rights Watch report, these types of safety, environmental, and human rights violations taking place at Collum Mine are widespread in Chinese-owned copper mines throughout Zambia. This strict approach to Chinese investment in the country seems in line with the electoral promises of the current President Michael Sata, who promised to ensure that Chinese investments in Zambia are beneficial for the locals, and that workers at Chinese-owned copper mines are safe and properly paid. This is a significant shift in policy, as the previous president Rupiah Banda was focused on attracting Chinese investments by easing the restrictions they have to face in accessing the country’s resources.
Zambia and China have longstanding economic relations. Zambia currently benefits from the third-highest level of Chinese investment, as China invests more than $2 billion in the mining industry alone. China has also created nearly 50,000 jobs, while trade between the two countries reached $3.5 billion in 2011. The recently-elected Zambian President Sata seems less inclined to tolerate abuses on the part of its foreign investors. While the government is improving its policies regarding the benefits foreign investors gain from the country's natural resources, it is still allowing foreign companies to take its primary goods and sell back manufactured ones, which is essentially a form of modern colonialism to some.
Zambia’s population suffers from chronic unemployment and poverty, with 64 percent of the population living below the poverty line. New legislation is likely to improve the existing problem, but the government will have to develop a better strategies and policies to ensure that its population is adequately profiting from the natural resources that the country abundantly possesses.
