The Effects of Privatization in Zambia

“For Whom the Wind Falls: Six Problems with Privatization in Zambian Copper Mines” by Professor John Lungu and Alastair Fraser.

I found this really informative website called Fatal Transactions. It says it’s “a network of different European and African NGO’s and research institutes.” Their website offers a list of publications on the practice of resource extraction and its effects on local communities here. Professor Lungu and Alastair Fraser’s work, which was introduced to me in an excellent seminar can be found on the website as well.

Since 1991, government, heavily in debt, moved towards privatization with pressure from the IMF and World Bank. The consequences have been quite devastating; the report calls what has happened in the Copperbelt a “social crisis”. The authors identify six problems with privatization:

1) Deals were made in unequal circumstances. Because the Zambian government was heavily in debt, they had to make concessions in the “Development Agreement” that significantly benefited private investors at the expense of workers.

2) The Zambian government’s regulatory powers have been undermined; thus, it seems unlikely they will be able to govern the behavior of foreign investors to ensure that workers receive proper social services.

3) Nearly half of the workforce is casual labor, which means while this scheme is profitable for mining companies, temporary workers are unjustly deprived of health care, pension and other social services.

4) Pension funds continue to dwindle. There’s a tragic story on page 34 about a mineworker who was promised pension for his labor since 1981 and was cheated out of the money after he was retrenched as a worker for a privatized mine. At the time of the report, he was living hand to mouth.

5) Something I had not thought about and this article points out is the loss of businesses, suppliers and manufacturers tied to the mines. The report argues for industrial policy concentrated on building more copper smelters and manufacturing bases so that local Zambians will benefit from these investments. However, the government is held in a bind due to restrictions by the IMF and World Bank.

6) Companies failing to provide social services. Zambia Consolidated Copper Mining (ZCCM) used to provide health care, housing, HIV-AIDS and malaria prevention programs. The article states: “according to free-market ideology, and the Development Agreements, these goods and services should now be provided either by the local authorities or by market forces.” Free market ideology complete misses the point. How will locals provide social services when they cannot afford them? Certainly, some workers were retrenched after privatization but many were not. Those who were retrenched have received meager pay and no social services, since free market ideology also dictates that hiring casual labor is cheaper for the companies. Thus, stating that it’s up to the free market to provide social services is really an evasion of the problem at best and most definitely, a rejection of responsibilities incumbent upon the mining companies to provide for the well-being of workers and local community members.

Karen Transberg Hansen has written about the detrimental effects of neo-liberal development in Lusaka, Zambia. In her article, she observes that since the housing market was privatized, most people are forced to live in informal housing with inadequate electricity, water or transportation. From 1992 to 1999, formal employment declined from 17 to 11 percent. IMF policies such as the removal of food subsidies have engendered adverse effects. Some of the adverse effects are most evident in the expansion of the informal economy and the black market.

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2 thoughts on “The Effects of Privatization in Zambia

  1. I lived in Zambia from 1958 to 1981. I had a substantial business, which relied almost entirely upon imported materials and consumables. I was forced to downsize to an untenable position due to lack of import licences (no forex). I laid off most of the staff and I sold the business for a pittance. At one stage I employed 365 people, and their employment fed an average of 2000 people under the extended family system. All gone !!!
    Zambia was originally colonised by the British, and enjoyed prosperity and stability for many years. Then it gained independence in 1964, and from that point on it was all downhill. Reserved jobs for Zambians only, nationalisation of the mines, nepotism to an enormous extent, bribery and corruption. Not to say that the previous government was immune to some of the sins, but at least they managed to run the country in a reasonable manner.Thus Zambia had shed what the President at that time – Kenneth Kaunda – termed the colonial oppression, and the country was now “free” from the yolk of colonisation. The economic and political history of Zambia is well known and documented, and it is known to what state of decline it went to. The main reason for this was the incompetence and political philosophies of the powers that be. I call it the “cult of the individual”. Even after 30 years of independence, the government was blaming their woes on what hey loved to use in speeches etc. They blamed it all on “The colonial hangover”. The ex-President, Mr. Kenneth Kaunda, is now living in Camps Bay in South Africa, and he lacks for nothing.
    At that time, I and a few of my business associates, made a prediction that not only Zambia, but Africa would be re-colonised by the Chinese. They are tough, ruthless and demand high levels of work performance for very little remuneration. Look at China itself !
    The Zambian government, due to their economic plight, has been forced to make concessions to the Chinese which has resulted in deprivation, poverty, social inequality like never before and etc. etc. The yolk is well fixed.
    Shakespeare said – “The Engineer is hoist with his own petard”. How true.

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  2. Kenny, I apologize for the delayed response. I have been away for some time. Thank you for sharing your experience in Zambia and impassioned thoughts. I would love to hear more. If you are open to discussing this a bit more, please do contact me at jannychang1@gmail.com. I'm available via Skype. Cheers.

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