Copper proves a rocky road for Zambia – by John Filitz (Global Risk Insights – April 25, 2016)

http://globalriskinsights.com/

The town of Luanshya, situated on Zambia’s copperbelt, serves as a bellwether for the country’s economy. However, political developments in Zambia are causing significant uncertainties in the copper industry.

With a sustained annual GDP growth rate above 6%, driven primarily by copper, the past decade has been tumultuous for Luanshya. Founded as a service town for the country’s first copper mine, Roan Antelope Copper Mines Ltd in 1927, the town in the northwest of the country has through the years seen significant episodes of copper prices driving booms and busts.

The first such episode occurred in the early 1930s, reducing an initial workforce of 31 941 at the peak of the 1930 boom to just 6 677 by the end of 1932. The second and possibly the most protracted collapse occurred during the post-liberation period of state ownership. Starting in 1969 and morphing into full-scale nationalization in the 1970s, the period of culminated in the late 1990s with increasingly inefficient mines under state control, succumbing to a sustained slump in the copper price.

Ultimately, by 1987 Zambia was forced undertake painful structural adjustment as part of a World Bank and IMF bailout. The severity of the crisis is demonstrated by the fact that in the period 1974-1994 saw per capita income decline by over 50%, resulting in Zambia becoming the 25th poorest nation in the world.

Resilience of copper

Copper mining continues to play a dominant role in the Zambian economy. China’s spectacular rise has since 2004 resulted in the country witnessing the longest and most prolific growth phase to date. Annual GDP growth averaged 6.5% in the period of 2004-2016.

For the town of Luanshya, fortunes too had changed. After the failed privatization to Indian investment group Binani in 1997 and subsequent forfeiture to the state, it was sold to the Swiss-based International Mineral Resources and the Bein Stein Group Resources of Israel in 2002.

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