Seventy Years of Anglo Mining in Zambia

seventy years of anglo mining in zambia

ngos fight legacy of manipulation and damage

Peter Sinkamba , Citizens for a Better Environment, Zambia

The Anglo American Corporation (Anglo) has been mining in Zambia for almost 70 years. Now the company wants to leave the country without cleaning up the environmental problems created during its long history of open-pit and underground mining there. This is especially vexing to Zambians aware of the extravagant concessions Anglo received from the Zambian government. Anger and frustration over Anglo's history of manipulation and irresponsibility has led NGOs to take their case against Anglo to the United Nations and the Organization for Economic Cooperation and Development (OECD).


abuse of power
When Zambia's copper mines were privatized in 2000, Anglo abused its dominant position as a Zambia Consolidated Copper Mines (ZCCM) board member (see box) to obtain secretive, so-called “Development Agreements.” These legally-binding agreements between Anglo and the government granted excessive concessions to the company in terms of taxation, royalty payments and repatriation of profits. They ensured that any liability for redundancy payments, ZCCM debts, and past and future environmental pollution would be shouldered by ZCCM and the Zambian government.

The government agreements with Anglo weakened environmental protection laws. But they also provided Anglo with even greater protection by exempting the company from liability for fines, penalties or third party claims against past activities of ZCCM or present activities of Anglo. The company obtained legal immunity or indemnity for 20 years – the mines' anticipated lifespan. Yet Anglo, as a shareholder in the past, as well as the newly-privatized ZCCM, should have been forced to assume responsibility for its own share of liabilities.

Anglo thus manipulated its dealings with the Zambian government to ensure that affected communities would be harmless, hopeless and helpless for as long as the company operated in Zambia.

The exclusive concessions granted to Anglo would have been unacceptable to the Zambian people. The results of these secret negotiations were not made public even after the sale was concluded.

ngos take fight for zambians' rights to un
When civil society groups in Zambia and abroad learned of these concessions, concern and anger led to action. Two Zambia-based NGOs, Citizens for a Better Environment and the Inter Africa Network for Human Rights (Afronet) joined forces with the UK-based Rights and Accountability in Development. The three groups submitted a complaint to the UN Committee on Economic, Social and Cultural Rights in Geneva, demanding an investigation into the role the Zambian government and multinational companies played to deny Zambians these same rights, as well as their right to a clean environment.

anglo conduct violates oecd requirements
The three NGOs also made a submission against Anglo to the UK Department of Trade and Industry, which is the national contact point for the OECD. The submission details how Anglo's actions and influence during the sale of government-owned ZCCM created conditions that denied the majority of Zambians fundamental human rights.

Many aspects of Anglo's conduct are in violation of OECD requirements. Of special concern was Anglo's private influence of government to ensure social deregulation of local communities.

details of manipulation and influence
During a public consultation and disclosure process in 1999, Anglo used unreasonable influence to ensure that key documents and information, including the development agreements, were kept from public scrutiny. 

But Anglo also used its influence as dominant shareholder and member of the Board of Directors of ZCCM in numerous other ways. Anglo's influence led to the rejection of a government-hired consultants' report giving advice about the best mode of privatization for the group of state mines. The consultants advised the government against selling the mines to a single company. Rather they recommended unbundling the mines and selling them as several individual units, to encourage competition and avoid monopolistic tendencies.

However, Anglo's use of its dominant position to reject the consultants' report led to an unreasonable delay of the mines' sale, so much so that the mines' value deteriorated and led the government to lose close to US$1 billion.

frustrating other buyers
Anglo also used its position to negotiate the exclusive right to purchase and develop the Konkola Deep Mine, and to do so only after other major mine sales were concluded. This mine was the gem that all other buyers were eyeing, and its exclusion made the sale of the other mines unattractive.

Anglo further manipulated the removal of the Mufulira smelter from a larger Nkana mine sale package. The smelter's removal made the package unattractive; bidders found it odd to purchase a mine without a smelter. Furthermore, Anglo's dubious acquisition of the management contract of these facilities, and its right of first refusal to buy and/or veto other potential purchasers, made the sale of other Nkana mine assets extremely difficult. Anglo also pressured the Zambian government to lend it US$80 million to rehabilitate the Mufulira smelter and refinery; the company was then offered the same facilities for purchase when all assets were on sale on an “as-is basis.”

Anglo's unreasonable conduct in these cases violates OECD competition guidelines, which state that companies should “refrain from actions which would adversely affect competition in the relevant market by abusing a dominant position of market power, by means of, for example: a) Anti-competitive acquisitions; ...c) Unreasonable refusal to deal ...” (OECD Guidelines for Multilateral Enterprises).

unfairly eliminating competition
Anglo's goal to be the sole contender for the mines' purchase exerted a very unhealthy influence on the sale process. Anglo retained the right of its directors on the ZCCM board to vote on the final acceptance or rejection of each winning bid, which made the sale of mines extremely difficult. Credible mining houses, including Noranda, Phelps Dodge and AVMIN had formed a consortium to purchase the mines, and offered a very lucrative package to the government. However, Anglo used its voting power to deliberately frustrate the sale to this
consortium, ultimately leading to the dissolution of the consortium.

tax concessions widely criticized
Tax concessions accorded to Anglo and its majority-owned KCM during the ZCCM privatization were a source of concern to everyone. These concessions violated OECD guidelines which state that “Enterprises should: refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework related to environmental, health, safety, labour, taxation, financial incentives, other issues.”

IMF directors expressed their concern over the generosity of the tax concessions granted to Anglo. Both the Zambia Institute of Chartered Accountants and Price Waterhouse Coopers criticized the exclusivity of Anglo's position that led to its preferential treatment over other mining companies. And Meteorex and Chambishi Metals criticized the discriminatory nature of mining industry concessions, and have since demanded that the same conditions be applied across the board.

environmental exemptions
Anglo also negotiated huge windows of environmental exemption in order to avoid full compliance with environmental regulations. It is pertinent to note that Anglo had a 27 percent stake in ZCCM through ZCI (see box). To maintain that Anglo's majority-owned ZCI subsidiary, KCM, should be absolved from immediate responsibility for past damage and pollution caused through ZCCM is unjustifiable. It is also unfair that Non Ferrous Corporation Africa, a company with no historical interest in ZCCM, should inherit all the responsibility for environmental mitigation in this mining licence area.

premature departure
Now, barely two years of after purchasing the mines, Anglo has announced that it is prematurely pulling out of ZCI. This is being done without due consultation of other shareholders and stakeholders. Anglo has not developed any premature closure plans. Most distressing of all, the company wants to leave the country without clearing the environmental liabilities that are its responsibility for its 70 years of mining in Zambia.

anglo must be caught!
Anglo must not be allowed to run away from its present and past responsibilities. Join the struggle of Citizens for a Better Environment and other NGOs and help us make Anglo accountable to the people of Zambia.

a long & dirty history One of the oldest mining companies in Zambia, Anglo was the owner of Nchanga Consolidated Mines (NCM) before the mines were nationalized during the 1970s. After nationalization, the Zambian government acquired 51 percent of NCM shares, and Anglo retained 49 percent. Prior to the privatization of Zambian mines in 2000, Anglo also retained partial ownership of Zambia Consolidated Copper Mines (ZCCM), the entity owning all the nation's copper mines. The smallest share that Anglo ever retained in ZCCM was 27 percent, held through Anglo's Zambia Copper Investments (ZCI). Then in 2000, the highly controversial privatization process of the copper mines led to the formation of Konkola Copper Mines (KCM) as a ZCI subsidiary. After privatization, Anglo had a 51 percent share interest in ZCI and market investors retained the remaining 49 percent. Anglo has a 65 percent share interest in KCM, the Zambian government 20 percent, and the International Finance Corporation (IFC) and Commonwealth Development Corporation (CDC) 7.5 percent shares each.