Undermining Development: SCIAF Reports

Zambia is rich in copper, but is one of the world’s poorest countries. Average life expectancy is 37 hears and one in five people are living with HIV/AIDS.

Zambian society is deriving few of the advantages of copper mining while suffering many of the disadvantages.

Zambia’s largest copper mining business, Konkola Copper Mines (KCM), is 79% owned by UK company Vedanta Resources. Investment in Vedanta Resources comes from Scottish companies such as Standard Life and HBOS, and from household name such as HSBC and Barclays.

KCM / Vedanta’s operations in Zambia are deeply concerning. KCM’s net profit is larger than Zambian government spends on healthcare and social protection, but the company has been paying extremely low mineral royalty rates - 0.6% compared to an industry average rate of 5-10%.

Contracted employees receive a quarter of the amount that is required to fund basic needs such as food and housing and KCM operations have had a negative impact on the environment and local communities. Neither voluntary corporate action, nor regulation by the Zambian government, is enough to ensure responsible behaviour from the company in question.

"International finance and capital is milking Zambia. Zambia is rich in copper but women are delivering on floors, children are sleeping in trenches, and families live by picking food from dustbins. I look forward to a day when the consumers of copper say ‘Lets see how the people of Zambia are living on the Copperbelt’. They will find us living in poverty and drinking polluted water from foreign investment."
- Edith Nawakwi, former Finance Minister of Zambia

It’s not all bad news – thanks to your efforts, progress has been made since the publication of the report:

· The Zambian government has introduced a new tax regime which, when implemented, will result in an estimated additional US$415 million dollars for Zambia in 2008 alone.

· This is double what it would have earned under the former mining tax regime and three times that of the Zambian government health budget.

· The Zambian government has also committed to further transparency and announced that it will use the money to “implement vital programmes in health and education”.

· KCM / Vedanta have agreed to adopt the new tax regime.

· The Zambian government has committed to improve environmental and safety regulations.

Vedanta and KCM should be commended for adopting the new tax regime – but they still need to make progress on transparency, workers' rights and the environment. The Zambian government is trying to improve mining regulations and the UK government must also play its part, complementing the efforts of the Zambian government by ensuring that UK companies act responsibly overseas.