The Copper Squeeze
Zambia’s Konkola plans massive job lay-offs
The high cost of production and continued slump in the price of the red metal ‑ Zambia’s largest foreign exchange earner ‑ coupled with recent revised taxation measures, is forcing foreign companies to review their operational costs to remain competitive in the copper-rich nation.
Konkola Copper Mines (KCM), one of Zambia’s largest copper producers, has announced plans to slash 2 000 jobs from its 8 263-strong workforce in a restructuring exercise ‑ a move which has sent jitters across the country’s copper-dominated mining sector.
KCM, owned by Indian metals giant Vedanta Resources, said it will downsize its workforce to cut costs, citing the fall in the price of copper on the London Metal Exchange (LME).
Copper for three-month delivery has slumped 8.3 percent to US$7 273 a metric ton over the past 12 months.
The copper producer argues that prices of the metal will remain depressed this year and has no choice but to cut its workforce.
KCM spokesperson, Joy Sata, said in a statement recently that the company needs to lay off 24 percent of its 12 000 labour force spurred by the copper price downturn to “remain economically viable”.
“The price of copper on the world market has been steadily declining by about 22 percent in the last year while macro-economic trends suggest it will remain depressed.
“At the same time, our two key costs ‑ labour and electricity ‑ have been increasing constantly and substantially,” Sata said.
Worries of a further slide in the global economy and slowdown in China’s growth have kept copper prices under pressures during the past months.
“KCM needs to make business changes to remain economically viable.
“Regrettably, this means reducing staff numbers as many of the upgrades and expansion projects come to an end,” the company said.
Vedanta, undoubtedly Zambia’s largest copper producer ‑ with an annual outturn of more than 320 000 tonnes and seeking to raise its outturn to over 450 000 and later 7.5 million tonnes ‑ says the fall in copper prices would ultimately make the company unprofitable, hence the consideration to lay off 2 000 workers.
Konkola Copper Mines, a unit of London-listed Vedanta Resources has invested US$2.75 billion in upgrades and expansions at KCM since it started operations in Zambia in 2004.
The move by KCM has stoked fears that major mining companies along the Copperbelt would seek to slash costs through retrenchments.
Government has publicly stated that it will not allow job cuts, setting the stage for a bruising encounter with mining companies.
“Our stance as government is that we are not going to encourage companies to start laying off workers.
“Of course, people in business go for profit but this should be amicably discussed between KCM, the unions and government,” Zambia’s minister of information Kennedy Sakeni told Zambian media.
“Government cannot support the issue of laying off workers at this critical moment because we have a policy of creating jobs for our people,” Sakeni added.
Roy Mwaba, the secretary-general of Zambia Congress of Trade Unions (ZCTU), said it is unacceptable for the miner to consider offloading workers when the government is working hard to create jobs for citizens against a backdrop of high levels of unemployment and poverty.
The Mineworkers Union of Zambia (MUZ) has hailed government for its timely intervention in blocking the planned lay-off of 2 000 miners by KCM.
MUZ general secretary, Joseph Chewe, says the decision to downsize the labour force by such a huge figure was unacceptable.
Chewe argues that the union was still convinced that the prevailing copper prices on the international market were good enough to support KCM workforce and sustain its operations in Zambia.
Zambia’s economy heavily relies on copper mining, which is also the country’s top foreign currency earner.
Copper is used for pipes, wires and cables and accounts for nearly 80 percent of Zambia’s foreign currency earnings.
Zambia produced around 823 000 tonnes of copper and government says the country is on course to produce 1.1 million tonnes of the red metal by 2015.
Apart from KCM, other major mining companies in Zambia include Mopani Copper Mines, Kansanshi, Lumwana and Chibuluma, among others.
The looming retrenchments in Zambia mirror the situation in South Africa’s mining sector, where planned job cuts at various mining operations have riled workers’ unions.
Amplats, a unit of Anglo American came under blistering attacks from government and unions after it announced plans to slash 14 000 jobs.
Facing mounting pressure, Amplats later revised the figure to 6 000 after government threatened to revoke its licences.
Mining companies argue that rising production costs, fuelled by inflation-wage-linked demands from mining companies, are chewing into their profit margins and threatening viability.
In South Africa, tension has been high across the entire mining sector following the death of 34 miners, who were shot by police last year at Marikana, along the country’s platinum mining belt.
• Story by Felix Njini in Windhoek and Jeff Kapembwa in Lusaka