Chinese involvement in Zambia

China has made huge investments in Zambia’s extractive industry in the last five to six years. Chinese intentions to upscale involvement and to be one of the major players in Zambia’s extractive industry are seen through medium- to long-term investments, and in the establishment of other industry-supply based infrastructure. China is, in addition, making long-term financial commitments to the country, although obviously actual expenditures will ultimately be the basis for assessing this support and investment.

Claude Kabemba's picture

Director of the Southern Africa Resource Watch (SARW)

October 4th, 2012

China has made huge investments in Zambia’s extractive industry in the last five to six years. Chinese intentions to upscale involvement and to be one of the major players in Zambia’s extractive industry are seen through medium- to long-term investments, and in the establishment of other industry-supply based infrastructure. China is, in addition, making long-term financial commitments to the country, although obviously actual expenditures will ultimately be the basis for assessing this support and investment.

While the focus is on the copper industry, China also has an interest in secondary industries that have a direct bearing on the extractive industry, as indicated by its investment in multi-facility economic zones in the Copperbelt and Lusaka.

The Zambian mining industry is the largest contributor to the development and growth of the economy, with the main mineral resource extracted by mining companies being copper. The mining sector suffered a setback in 2008 and 2009 with a decline in production due to the global economic downturn and a corresponding reduction in copper prices. However mining, spurred by growth in China, India, and other emerging markets, has since recovered and it is estimated that Zambia’s copper production in 2010 was approximately 720 000Mt, a level last achieved in the 1970s.

The volume of Chinese investment in Zambia has increased over the years, according to the Zambia Development Agency (ZDA). Between 1993 and 2007, 166 Chinese companies invested US$666 million in Zambia and created over 11 000 jobs. Manufacturing, construction, mining, retail trade and tourism attracted the largest Chinese investments, which account for 10,5 percent of total foreign direct investments in Zambia. It is further reported that from US$46 million in 2004, there was an increase to US$68 million in 2006 (excluding investments in the mining sector). By the end of 2008, China’s accumulated investments were US$216 million and Zambia was the third most important destination for Chinese investments in Africa (after South Africa and Sudan). Chinese companies currently invest in most sectors of the Zambian economy, but mining has in the recent past experienced the largest investment pledges and expenditures.Apart from the Vedanta-owned Konkola Copper Mines (KCM) in Chingola, Equinox-owned Lumwana, and First Quantum-owned Kansanshi, Chinese investment has become cumulatively the largest investment in the extractive industry.

Chinese interest and investment in mining and exploration has spread across Zambia, especially the Copperbelt and North-Western provinces. The most significant investments are those made by the China Non-Ferrous Metal Mining Company (CNMC), which has invested US$150 million in the Chambishi copper mine. In July 2009, China’s Zhongui Mining signed an agreement with Zambia to invest US$3,6 billion in mining activities in the Copperbelt and North-Western provinces; this is expected to create 34 000 jobs. The Jinchuan Group announced on 5 August 2009 that it will take a 51 percent ownership stake in the formerly Australian-owned Albidon Nickel mine, which closed in March 2009 due to low nickel prices; and the Lwanshya Copper Mine (LCM). China is also setting up a US$ 900million multi-facility economic zone (MFEZ) in Chambishi, underwritten by the Chinese business community and government.

The government selected CNMC to reopen the Luanshya Copper Mine which was shut by ICM (a Swiss-Israeli joint venture) in January 2009 in the aftermath of the collapse of copper prices. CNMC and a smaller Chinese copper firm signed a deal in 2006 to invest US$220 million to build a 150 000-ton copper smelting plant, which has since been commissioned in the same area. When CLM took over Luanshya mine it also confirmed the existence of an estimated 60 million deposit of copper ore at Mulyashi. CLM has proceeded to build an open pit mine at Mulyashi. The company has projected a production of 41 000 tons of finished copper per month which is approximately 492 000 tonnes a year. The estimated life-span of the project is 25-30 years and at its full capacity. The project at the peak of mine construction employed 2500 people, most of them casual workers. It is estimated that at operation stage, in 2012, it will employ 1 000 people. The plight of Luanshya has featured prominently on the political agenda because, as is the case for many mining towns, the local economy is reflective of the performance levels and productivity of mining. Following the first closure of the mine (under the Binani Group), local business and development almost came to a halt. The impact is visible in the dilapidated infrastructure, abandoned office spaces, low money circulation, and lack of social amenities. The second owners focused only on mineral extraction, with very little attention paid to other sectors in the local economy. The situation became worse when these owners pulled out of the mine and 1500 workers were rendered jobless.  CNMC’s arrival must be seen in this context.

Chinese direct investment has propelled the development of the Zambian copper industry, particularly during two separate periods of crisis. NFCA acquired the Chambeshi mine in 1998, and China played a considerable role in bolstering the mining sector during the international financial melt-down between 2008 and 2010, when some western mining companies reduced (or closed) production, resulting in substantial job losses.

Chinese companies have also been accessing projects in other sectors of the economy, especially construction; Chinese companies are participating in major construction works. In 2008, the Zambian government awarded two Chinese companies seven EU-funded road construction contracts worth US$19 million. CBMI Construction of China was contracted and completed the approximately US$120 million Chilanga Cement factory in Lusaka. Other investments include construction of the government complex (including a museum, a banquet hall and a conference centre), Football House (a new headquarters for the Football Association of Zambia), and Lumwana Power Project (a power supply system for the Lumwana copper mine).

A recent study shows that Zambia’s debt to China stood at US$217 million as of 12 December 2006, making China its highest non-Paris Club creditor. Zambia’s indebtedness to China is concentrated in two areas: loans for the TAZARA project (see Chapter 3) at 36,5 percent (recently cancelled according to media reports), and the China National Aero-Technology Import and Export Corporation (CATIC) at 27,9 percent. The debt to CATIC involved the purchase of planes and earthmoving equipment. US$2 million was used to service the CATIC loan from the grant of US$6 million provided by the Chinese government during the Zambian presidential visit to China in November 2003.

About the author(s)

Claude Kabemba is the Director of the Southern Africa Resource Watch (SARW). In 2006, the Open Society Initiative for Southern Africa (OSISA) asked him to spearhead the formation of SARW. He holds a PhD in International Relations (Political economy) at the University of the Witwatersrand (Thesis: Democratisation and the Political Economy of a Dysfunctional State: The Case of the Democratic Republic of Congo). Before joining SARW, he worked at the Human Sciences Research Council and the Electoral institute of Southern Africa as a Chief Research Manager and Research Manager respectively. He has also worked at the Development Bank of Southern Africa and the Centre for Policy Studies as Policy Analyst. Dr. Kabemba’s main areas of research interest include: Political economy of Sub Saharan Africa with focus on Southern and Central Africa looking specifically on issues of democratization and governance, natural resources governance, election politics, citizen participation, conflicts, media, political parties, civil society and social policies. He has consulted for international organizations such Oxfam, UNHCR, The Norwegian People’s Aid, Electoral Commissions and the African Union. He has undertaken various evaluations related to the work of Electoral Commissions and civil society groups interventions in the electoral process in many African countries. He is regularly approached by both local and international media for comments on political and social issues on the continent. His publication record spans from books (as editor), book chapters, journal articles, monographs, research reports, and newspaper articles.

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