Fast Company

Mining Copper in Zambia

I ask Xiao Ye, an Africa statistical researcher for the World Bank, whether a clear chart or table exists laying out the full extent of China's economic involvement in Africa. "I don't know anyone who has done such a thing," he responds. "As far as I know, China no longer releases [its] foreign direct investment to Africa country by country." Or as Lucy Corkin, the China-Africa think-tank expert, explains, "You've got Africa, the big black hole of data, and China, the big black hole of data -- put the two of them together and it's a disaster."

That opacity makes it hard to know how much control China's Communist Party has over events in the sub-Sahara. Anglo-American's Clem Sunter maintains that the party Politburo "can be likened to the board of the biggest multinational company in the world." To keep that company growing, the Chinese government has vowed, for example, to transform the city of Chongqing into a megalopolis -- the "Chicago of the East" -- by 2020, making urbanites of some 12 million farmers. The problem is, there aren't yet jobs for 12 million peasants in Chongqing. So the Politburo is urging some of them to move overseas. "To convince the farmers to become landlords abroad," says Li Ruogu, the head of China's Export-Import Bank, his office will provide capital, project development, and "product-selling channels." More than 13,000 Chinese have arrived in Africa from Chongqing alone.

Chongqing is only one dot on the map, however, and China's growth and population pressure have driven a systematic policy of commercial emigration. In 2001, the Politburo set down its global zou chuqu ("go out") directive, instructing state-owned enterprises to seek long-term access to natural resources. Varying levels of financial help have accompanied this push, with state-owned Chinese construction companies in Africa getting goodies ranging from export credits to sweetheart credit lines to government guarantees for bank loans. At the same time, state-controlled banks have made cheap funds available to private Chinese companies that invest abroad. "It's trickled down to your micro-entrepreneurs," says Corkin. "It's a huge diversification and fragmentation of Chinese commercial actors coming out of China."

I met two of those actors on a couch in the InterContinental Lusaka lobby, the epicenter of foreign deal making in the Zambian capital. Frank He and Michael Huang -- brothers in their late twenties -- seem pretty typical of the Chinese entrepreneurs combing Zambia for opportunity. Back home, they have a company near Shanghai with 500 employees and annual sales of refined copper products of about $185 million; they leveraged that success into a $10 million budget for buying copper-mining rights here. They've already scooped up prospecting rights on a 1,300-square-kilometer plot for $1 million, as well as four others, including one they intend to take public in Canada this summer.

The Chinese government has been very encouraging of their Zambian adventure, Huang tells me. "They said they can protect me if we get into trouble." Moreover, adds He, "if a Chinese entrepreneur invests a significant amount overseas, you could be entitled to a zero-interest loan." He concedes that "if the commodity price goes down, you can lose, but that's the risk of life." If they win, they could reap gains of 100 times their stake.

I watch the brothers open an account with a local banker seated beside them in the hotel. They then excitedly fire up a laptop to take me on a photo tour of their company and their experiences in Zambia, which included visiting the country's vice president and founding president at their homes and presenting them with gifts of silk garments. It's hard not to get swept up in the brothers' joy, their dream of a copper empire. They marvel at how globalization and a shrinking planet have led to our encounter on the couch. "The media is so open, like your coming to Zambia," He says. When I tell them Chinese embassies in Africa don't return my calls, Huang suggests, "Tell them you love China and love China's policy." Then after a smile and a pause, he adds: "If you're a journalist, they will never talk to you. Because you're American."

Nevertheless, the brothers plan on "selling copper products to the U.S.," as He tells me. That's part of their path to becoming "bigger than what my dad [who founded the company] could imagine." Americans may be competitors for raw materials, but as with Mozambique's timber, they are also the target market for finished exports from China itself. The brothers go on to highlight another driver behind their presence here: feeding the demands of American companies in China. "Many of the top companies in the U.S. move to China," He explains. "What do they need? Plastic, steel, copper, aluminum. People are crazy about resources! China is so competitive, so we come to Africa."

Here in Zambia, just across the border from Mozambique, it becomes clear that China's strategy in Africa is far more than piecemeal opportunism. Last year, Chinese president Hu Jintao announced that Zambia's mineral-rich Copperbelt province -- set amid the rolling hills of the country's north -- will become home to the first of perhaps five tax-free "special economic zones" that China will build in Africa. While the details of the $800 million plan are still vague (the upper tiers of the government have the fine print, but they aren't sharing it with the populace), China says it wants to form an export-based "production chain" with a new $220 million smelter at its heart, luring Chinese investors and potentially creating thousands of new jobs.

China is doing its utmost to paint this initiative as a win-win for everyone, Zambia's citizens included. But it may be too late to win the hearts of the locals. Since the start of the decade, Chinese firms have been snapping up huge reserves of the country's copper, used for everything from electrical wiring and construction to computers and cars. With global copper prices at record levels, Zambians have grown furious, complaining that Chinese operators -- who bought the reserves at lower levels -- are lining their pockets at the expense of the people. During my visit to Zambia, almost everyone I talked to outside the upper tiers of the government spoke harshly about the Chinese. When Hu himself came last year for a groundbreaking ceremony for the new "zone" in the Copperbelt, he had to cut the ribbon from the safety of Lusaka, 200 miles away, because of threats of riots.

China's interest in Zambia is simple. China is both the world's biggest user of copper, soaking up more than a fifth of total consumption, and the eighth-biggest exporter of refined copper products. China has few large-scale mines of its own; its enormous smelting industry relies on raw copper "feedstock" or "concentrate" from abroad. In Africa, Zambia has the second-largest reserves of raw copper (after Congo).

That could be a mutually beneficial trade were it not for one key fact: As with the boatloads of timber leaving Mozambique for China's ports, most of the value of Zambian copper is unlocked only after it reaches China. Zambian politicians have dreamed for years about using their copper to create a light-industrial sector before they run out of the mineral -- most of which is likely to be gone by 2025 -- but there's still no coherent strategy to make it happen. Meanwhile, Chinese entrepreneurs are using fat bank accounts, vast credit supply, and, in some cases, government-funded incentives to buy up exploration and mining rights, just as they have with timber licenses and concessions in Mozambique. As a result, Zambia and, more particularly, ordinary Zambians are seeing very little benefit. While copper prices have quintupled since 2001, more than 70% of locals still live below the poverty line.

"A lot of Chinese businessmen are now looking for Zambians who have small licenses," Enoch Kavindele Jr., the son of a former vice president of Zambia, tells me. They could apply for a license from the government, but, Kavindele explains, "the Chinese find it easier to approach desperate and hungry Zambians who know nothing about mining but who have a license. Walk in with $100,000 in a briefcase, and it's yours."

Western-educated and charming, and wearing a tailored suit, dreadlocks, and jewelry, Kavindele hardly looks like a man being bypassed by economic development. But he says he too is worried for the future. "What will Zambia look like in 10 years' time?" he asks. "Will my children be working for a Chinese company? Will our children still have access to mining?"

At the other end of Zambia's economic scale, those questions have already been answered. For many people here, the only employment available is in a copper mine. The lucky ones may end up with a job at a Western mining giant, or perhaps with Chinese employers, such as the brothers He and Huang, who vow they will pay their local workers $200 a week (the norm is more like $200 per month). The less fortunate will find themselves with no job security, no health care, and poor safety standards at Non-Ferrous Company-Africa (NFCA) Chambishi -- the largest Chinese-owned mine, in the heart of Zambia's Copperbelt.

By all accounts, the workers at Chambishi receive the lowest wages and suffer the worst safety conditions in the Copperbelt, and the mine's managers have gone to great lengths over the years to prevent a local union from organizing the workers. The mine is easily the region's biggest user of part-time or "casual" labor, which keeps costs low -- and the workforce bitter.

In 2005, the biggest disaster in Zambia's industrial history took place at Chambishi when an explosion at an NFCA-linked Chinese explosives factory (aptly named BGRIMM) incinerated an unknown number of Zambians; their unrecognizable body parts are buried in a makeshift cemetery just outside of the mine's main gate. The Zambian government has never released any findings on the cause of the incident, which local experts attribute to a heavy reliance on unskilled casual workers. A year after the blast, a riot by Chambishi workers ended in five dead. Nobody was prosecuted, and whether the shooters were Zambian police, Chinese managers, or a Chinese security firm isn't known. "Zambia is a festering wound for China," says Corkin.

I decide to visit Chambishi to find out why the mine has developed such an atrocious reputation -- far worse than that of the big mines here owned by Australian, British, Canadian, Indian, and Swiss investors. I arrange a meeting with the Zambian head of human resources at the mine, Wigan Mumba. It is a deeply frustrating encounter, during which he admits he is unable to give me any reports or documents about the operation and that only senior Chinese managers are authorized to talk to the media -- and probably wouldn't talk to me.

On my way out of the compound, I notice the Chinese and Zambian flags flying together over the main headquarters building. By the compound's gates, I spot a white bus letting off Zambian workers. I snap a photo and am immediately challenged by a guard who approaches my car. "What are you doing taking a picture?" he yells. "No pictures here. Next time ..." he slaps his wrists together to demonstrate how I'd be arrested. On the highway just outside the gate, a giant billboard reads, BGRIMM Explosives -- Turning Your Rocks Into Gold, even though the factory has been defunct since the blast.

Not far from the mine, in the heart of what is called the Chambishi Township, lies a boundless slum that is home to many of the mine's workers and their families. At the Future Inn, a listing shack selling local beer to a Bob Marley sound track, it didn't take long for about a dozen miners to surround me, each jabbering louder than the next about how much they hate the Chinese owners. I ask Lennon Nsofwa, 37, a "blaster," why he is barefoot. "How can I have shoes?" he replies. "I have a $200-a-month salary, and I'm a father of three."

The Future Inn sits alongside a pit filled with rubbish, a common sight in the township. Since the government rarely collects the trash here anymore, the residents have taken to digging these craters and tossing it themselves. That has brought a big increase in flies and mosquitoes, as well as their attendant diseases. More than 25% of annual mortality in the Copperbelt is due to malaria; one in five people here has HIV. In the township itself, where parasites proliferate alongside the desperate prostitutes, the numbers are even worse.

Francis Bwalya is the elected councillor for one of the wards near the Chambishi mine and was a safety coordinator at the mine when I visited. "We only have portable fire extinguishers, which are not for big fires," he complains. Bwalya says that in the event of an underground inferno, the Chinese depend on another local mine to put it out. "Their main interest is making money," he says. "They are overlooking the safety of employees."

Peter Mwale, a geological foreman, produces a pay stub that shows he makes $250 a month -- a salary that experts in the region say is probably the lowest paid by any company in the Copperbelt to a foreman. (One Western mining executive in the area says a foreman should be earning five times that amount.) I crush a cigarette underfoot. When I move my shoe, one of the workers bends over, scoops up the crushed butt, and relights it.

Martin Soteli, 28, a laboratory science analyst at the plant, offers to spend a few hours the following morning showing me a nearby settlement called Zambia Compound, where many miners live -- a dangerous place for an outsider to visit alone. The compound is a maze of feculent alleys; a four-inch layer of dirt kicks up as we walk, creating a fog that renders everything in slow motion. There is no relief from the poverty. "White man!" someone shouts, as I pass through the center of the village. Little children yell, "Chinese! Chinese!"

"When they see Chinese in this compound," Soteli says, "sometimes they throw stones." We approach the one-room house of a man in a bright yellow shirt with rotting gums who says his name is Happy. He is a casual worker at the Chinese mine, which means he is employed for a three-month period without benefits or a contract, which the law allows. "I'm working more than six months and I'm still casual," he says. "Look at my house. No electricity. One seat to sit in, for me and my wife."

Further up the dusty track is Brenda Mukosai, who says that her husband, Joseph, suffers from "smoke in the chest" and can no longer work at the mine. We come to a larger shack where locals sell vegetables and fish. There are no buyers. Everything is caked with insects.

Later that day, I manage to reach Xu Ruiyong, the mine's deputy CEO. "I don't suppose I can do anything for you," he says curtly. "I am hesitant to have contact with any journalist. I have to hang up. Sorry, good-bye."

It wasn't always this grim for Zambia's copper miners. Just five years after its independence from British rule in 1964, Zambia was classified as a middle-income country, its GDP among the highest of any African nation. In 1969, with copper prices soaring, the country's socialist government nationalized the mines and set up a cradle-to-grave welfare system in the mining communities. Then copper prices collapsed. Between 1974 and 1994, per capita income declined by 50%, leaving this the 25th-poorest country in the world. In the late 1990s, prodded by the World Bank and the International Monetary Fund (IMF), Zambia decided to reverse course and privatize. By 2000, the country's mines had been split into seven different units and sold off to various foreign operators. China's government took one slice in 1998 for what is believed to be $20 million: Chambishi. The terms and details of the deals were never made public.

One thing is known. As part of the Chambishi deal, the Chinese operators promised Zambia's government that it would have an independent environmental report done by the end of that year. It didn't appear until 2006, and when it did, it was damning. Among the highlights: illegal disposal of hazardous waste; failure to deliver a promised business plan for maximizing benefits to local Zambian businesses and suppliers; deterioration of the availability and quality of health services (despite initial vows to maintain them); failure to monitor air quality and prevent groundwater contamination (despite promises to do so); and a lack of training and development of Zambians. "The state seems to have developed political relationships with certain mining houses that mean that health and safety, labor, immigration, and environmental regulations can be ignored with impunity," concludes another recent study, "For Whom the Windfalls?", by copper experts from Oxford and Zambia's Copperbelt universities.

Populist opposition leader Michael ("King Cobra") Sata ran for the presidency in 2006 on an anti-Chinese platform. His campaign was so effective -- he was fond of deriding the Chinese as "infesters" rather than investors -- that it prompted Beijing to violate its oft-stated policy of "noninterference" by threatening to cut diplomatic relations if Sata won. He did not.

A fiery and sometimes wildly egotistical politician, Sata, improbably, eulogizes the Americans and British colonists, who, he says, left the country with a legacy of technology, civil service, and order. "The West refined the copper here and didn't leave an environmental mess," he says, sitting in his Patriotic Front party office in Lusaka. "When we took full control, they did not stop helping us. And they trained us to interpret that technology and gave us skills." Zambia's information minister, Mike Mulongoti, offers a less-rosy recollection of the colonial period: "The West left us nothing," he told me. "They were extracting [copper] and taking it away, and it's wrong for them to blame the Chinese for doing the same. You can't blame those who come afterward to try and take advantage of the situation. If it's good for the goose, it's not good for the gander?"

Nobody has a clear count of how many Chinese people are in the country. The government estimates 3,000; Sata says 80,000. Whatever the real number, there are up to a hundred Chinese-owned shops in Lusaka, and as tensions have risen, Chinese names above the doors have been frequently painted over or removed. Today, it's rare to see Chinese owners inside the stores; they may empty the registers each day, but they leave the locals to deal with customers. At one such shop, Zambia-China Mulungushi Textile, a Zambian manager behind the counter says flatly that "the Chinese are not good to work with." Pay is poor, and "if you have a problem at home and need money, they won't help you. They won't even give you an hour off to take your daughter to a health clinic if she's sick."

Amos Malupenga, managing editor of The Post, the country's top daily, says he believes workers have been mistreated by their Chinese employers. But he also identifies subtler, higher-level abuses. "There is a feeling our people are [being] exploited by these Chinese investors," he says, "and a feeling that the Chinese investors receive preferential treatment by the government at the expense of other foreign and local investors." The government rejects such suggestions, but the country's president, Levy Mwanawasa, has twice angered opponents by appearing to side with Chinese business owners against Zambian workers -- first during a recent strike by textile workers and later in a dispute at Chambishi. Mwanawasa only reinforced the impression of subservience when he apologized to China for comments Sata made during the presidential campaign.

In March, in what might have been the most serious attack on management since privatization, 500 workers took to the filthy streets in Chambishi. They chanted anti-Chinese slogans, blocked roads, set ablaze a hostel housing Chinese workers, briefly held Chinese managers hostage, and left one Chinese worker toothless after stoning him in the mouth.

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