Privatization of Copper Mines in Zambia

Subject: Industry
Pages: 10
Words: 2830
Reading time:
11 min
Study level: Undergraduate

Introduction

The significant contribution made by copper mining towards the development of the Zambian economy is undoubted. Since its inception, the mining industry has helped numerous people in the society earn their daily bread not to mention the revenue earned by the Zambian government from the industry. The industry has helped the government establish numerous social services, develop different infrastructures in the country as well as give most of the Zambians an employment opportunity (Ngonini pp. 35-40). Despite the copper mining industry in Zambia being instrumental in improving the living standard as well as the economy of the country, it is imperative to vital to mention that the industry has detrimental effects on both the economy and society after its closure. It is important to note that mining activity is not a sustainable activity and it eventually comes to closure when copper resources are exhausted. The land becomes deselected as it can not be productive in any way.

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Zambia copper mining industry has been found to employ a huge number of citizens. This has made it difficult for the government to effectively manage the mines. Being one of the major environment polluting industries, the government has tried to come up with measures to help in environmental conservation. This is by ensuring that mine operators become more responsible in their activities (Solomon pp. 64-70). This can only be achieved by privatizing the industry. Privatization would lead to people owning most part of the industry thus devoting them to ensuring the continued operation of the industry thus overcoming the social-economic effects associated with premature closure of companies. This has seen the Zambian government struggling to ensure that it has come up with incentives aimed to lure investors to buy the industry.

Economic impacts attributed to the closure of companies

Despite Zambia depending on Agriculture for its source of income, it also depends on mining companies and other companies for income generation. As a result, the country is able to supplement its revenue from other sectors through earnings from the mining industry thus being able to go on with its projects. With the industry employing numerous people from the country, it also helps in improving the living standard of the country. Premature closure of the company may result to the government stopping to generate income form the company thus bring to a stop its projects (Rao & Pathak pp. 555-570). As a result, development in the country can be adversely affected by closure of the mines as revenue used in development from the mines would no longer be accrued.

Apart from being a source of direct income to the government and the community in Zambia, copper mining companies also facilitates in the survival of other businesses in the country. For instance, staffs working in the companies require food, accommodation and other basic needs (Young 342). This has led to emergence of numerous businesses around the companies offering these needs and other services to the staffs working in copper mining companies. There has also been emergence of mining related businesses due to presence of copper mining companies. Closure of the companies implies rendering such business not operational thus affecting the economy of the country. There has been a strong relationship between the bankers and the mining companies. Miners have for many years acquired loans from the banks to facilitate in expanding their operations and later repaying the money with interest. This has facilitated in growth of the banking industry in Zambia. Closing the companies would lead to slowed growth of the banking industry in the country as it would not earn interests it used to earn from loans borrowed by the companies (Rolfe, Lockie & Franettovich para. 7-11). As a result, unemployment rate in the country would be high while government earnings would also go down. This would make it hard for people to lead a decent life.

Social impacts attributed to closure of companies

Social impacts refers to the alterations in the manner in which people work, relate, live or organize themselves in bid to cope with numerous hardships and challenges experienced in their day to day life. There are numerous social impacts associated with closure of companies. One of the impacts is reduction in income among the society. As most of the people earn their income by working as permanent or casual laborers in the companies, closing these companies leaves these people with no other means of earning their income. As a result, it becomes hard for such people to earn their living. Failure by such people to get an alternative source of income results to emergence of criminal gangs and all sorts of crimes as people try to earn their living. Poor living standards due to closure of companies result to emergence of street families (Sango, Taru, Mudzingwa & Kuvarega pp. 2-14). This is because people move to towns in pursuit of employment or well wishers who would help them with money.

Mining companies in Zambia not only acts as a source of income to the society but also facilitates in establishment of social facilities such as schools and hospitals. To cater for children hailing from families of staffs working in the mining industry, there has been establishment of schools around the companies. There have also been establishment of hospitals and other social facilities (Tilton pp. 91-97). All these facilities are funded with money obtained from these companies. Closure of the companies would lead to lack of fund to improve these facilities. This would lead to schools, hospitals and other public infrastructures working at a very poor state. Eventually, the facilities would stop being operation due to lack of funds. Generally, the closure of companies would adversely affect the living standard of people who initially depended on them for living.

Mining industry is considered as one of the agents of environment pollution. However when the company is in operation, operators come up with varied measures to help in conserving the environment. They ensure that they have come up with sewage drainage system that effectively drain all the wastes emanating from the company as well as come up with measures to reclaim all areas that they have absolutely harvested copper. Closure of the company would mean that all these measures would go without being considered (World Bank 143). Consequently, land would be derelict, drainage systems unattended thus affecting the sanitation standards of the region. Consequently, there would be emergence of diseases associated with sanitation such as cholera as well as degradation of the environment.

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Another impact of company closure is family disintegration. Most of the families are held together by the fact that people work in the companies thus managing to provide for their families. They are capable of taking their children to school as well as buy food and other basic needs. Closure of copper mining companies would lead to people working the industry losing their source of income. This would make it hard for them to continue providing for their families (World Bank 19). Consequently, there would be emergence of chaos in the families leading to instability. Eventually, such families would end up disintegrating as people move looking for alternative ways of earning their life. In the end, street families and crimes would start cropping up in the country.

Government measures in future privatization

One of the factors that adversely affect the move to privatization is political instability of any country and government influence on the industry. Private investors are willing to spend their money on industries they are guaranteed that they will be given absolute power to manage (Gerald 123). Copper mining industry in Zambia was once managed by the whites. After the country gained independence, black experts moved into the industry and replaced the whites. By then the industry had set s successful trend. After Fredrick Chiluba became the president, he came up with counter-economic reforms that allowed for untied privatization of the companies. The move attracted more private investors however; it was not received well by most of the people in Zambia. Eventually, Chiluba lost popularity in the country leading to him not being reelected. The numerous fatalities experienced in the industry as well as lack of experience among the Zambians called for foreigners to invest in the industry.

However, the move to privatize the industry has been hampered by the move by the government to cling on socialist policies which are aimed at nationalizing the county’s industries. With most of the Zambians not having adequate finance to manage the industry, the country has been left with an option of calling for foreign investors to invest in the company (Musuku para. 4-8). Nevertheless, desire by the government to ensure that the country’s economy is managed by indigenous people has made it hand for privatization process to go on. It has been hard to get local people with the required experience as well as resources o effectively manage the mining companies. This is leading to the industry not effectively managing to mining copper bearing in mind that Zambia is one of the major copper exporting countries in the world. In bid to facilitate in privatization, the government ought to do away with socialistic policies and come up with policies that will attract foreign investors who have the necessary expertise as well as capital to invest in the industry.

Another factor that hampers privatization is lack of agreement between the government and all stakeholders. Stakeholders view the issue of privatization as selling off their influence and fortune in the company. This leads to such stakeholders having a negative attitude towards privatization thus opposing it harshly. In most cases, the public is not aware of how poorly the company is performing, the benefits of privatizing the company as well as the extent of government ownership of the company. Despite the Zambian government coming up with policies that allow for privatization, it would be difficult for private investors to take the opportunity if they are aware that their move will be negatively received by the public (Sarbib 12). As a result, the government ought to educate the public on the benefits accrued from privatization so as to come up with a consensus with all stakeholders. With stakeholders together with the public being informed about the benefits of privatization, they will be ready to accept any move by foreigners and other potential private investors wishing to buy out part of the public owned companies.

To encourage privatization in the country, the government needs to be ready to cede its ownership of industries that do not have a lot of public interest. For instance, it is would be wise for government to cede its ownership in hospitality industry. In addition, the government ought to encourage private investors to venture in these sectors (The World Bank Group para. 6-9). This will facilitate in ensuring that the public see the importance of privatization thus being ready to accept it when it is introduced in other industries.

Effects of privatization

Unemployment

There are contradicting views with respect to unemployment when it comes to matters to do with privatization. There those who argues that privatization results in new owners of the company trying to come up with measures to curb overstaffing in the company as well as helping reduce operation costs (Earle para. 1-5). In the process, a lot of staffs are laid off resulting to increase in unemployment rate in the country. Private owners may also embark on structuring the wages to help the company operate under the constrained budget. However, this may not be the case. In some instances, layoffs are done even before the company is privatized. This can not be blamed to the move by the government to privatize the company. For instance, prior to privatization of Chile’s electricity and communication companies, staff layoffs had already been done. On the other hand, privatization may result to a company expanding its operations. This would mean that the available staffs would not be adequate to cater for additional work. Consequently, the company would be forced to employ more staffs thus leading to reduction in unemployment rate in the country (Elias pp. 45-62). As privatization may help in improvement of the country’s economy, it may lead to the privatized company venturing into other investments. Consequently, unemployment rate in the country would go down as more people would be assimilated into these ventures.

Education

The quality of education offered in the country depends on the level of income earned by both the individuals as well as the government. On instance where privatization would result to increase in unemployment rate, it would be difficult for such people to afford quality education. Such people would depend on government provided education. On the other hand, increased employment rate due to privatization would make it possible for people to pay for quality education (Gupta, Schiller & Ma pp. 23-36). This would lead to improvement of the quality of education in the country. Privatization also helps in relieving resources to be channeled on other vital developments. This means that, through privatization, the government would be relieved from offering some services thus channeling its resources to improvement of education and other social services.

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Poverty

The level of poverty in a country is determined by unemployment level as well as the amount of income earned by people. With most of privatization resulting in staffs being laid off, it means that the rate of unemployment increase as countries embark on privatization. Consequently, poverty level in the country goes high as people are left with no source of income. In most cases, privatization is accompanied by restructuring of companies’ salary and wages scheme (Thomas & Canagarajah 17). People are paid based on their productivity. For people who are less productive, their salary goes down leading to increase in poverty level. In addition, working condition in the company changes with staffs working for more hours. Another way that privatization leads to increase in poverty level among the affected staffs is by elimination of numerous allowances that were being offered to the staffs. For instance, an increase in the number of hours worked is not accompanied by overtime payments. With some of the allowances being removed from the company, staffs’ salary or wages goes down leading to an increase in level of poverty.

Health

In most cases, the government may not be able to provide quality health services to the public due to it being overloaded with numerous services to provide. The available resources become constrained making it hard for the government to offer quality health services. In addition, government of different countries has been blamed for not being efficient in offering health services. Demand by most governments to come up with measures to cut down on public spending has led to participation of private institutions in offering these services such as health services. Competition that results from privatization leads to every private institution struggling to ensure that it offers quality products or services (Filipovic pp. 15-37). Consequently, privatization leads to provision of quality health services. Nevertheless, these services are not offered without an additional cost. Private institutions offers their health services at a higher than the government. As a result, it becomes hard for poor people to afford the service.

Housing and street children

As aforementioned, privatization leads to increase in the rate of unemployment in the country. With most people having no source of income, it becomes difficult for them to earn a decent life. Such people can not afford good housing (Crowson pp. 122-130). Therefore, privatization of companies results in poor housing facilities due to low level of income among the people. As a result of increase in the rate of unemployment as well as lying off of numerous staffs, most of the families become disintegrated. It becomes difficult for parents to provide for the family resulting to couples parting their ways in bid to look for ways of earning their living. In these instances, children are the ones who suffer most (United Nations para, 4-7). This is because they can not be in a position to be employed not to mention lack of employment opportunities. Eventually, such children end up moving to streets in search of well wishers to give them food. Increase in privatization of companies result in increase in number of street children in the affected countries.

Conclusion

For Zambian government to be successful in privatizing its copper mines it has to ensure that it comes up with policies that attract private investors. The government also ought to ensure that it has educated al the stakeholders on the importance of privatizing the mines so as to avoid opposition. There are numerous effects of privatization which range from increase in unemployment rate in the country, reduction in quality of education and increase in poverty level due to staffs layoffs and lack of employment opportunities. On the other hand, privatization may result to provision of quality health services in a country, poor housing and increase in number of street children due to family disintegration.

References

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Earle, John. “Employment and wage effects of privatization: evidence from transition economies.” 2006. Web.

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