Zambia's Economy Falls With Price of Copper

By SARAH CHILDRESS

LUANSHYA, Zambia -- Here in the heart of Africa's copper belt, last year's high
commodities prices meant regular chicken dinners for the family of Hurryton
Mwanza.

But the 39-year-old miner lost his job when the town's foreign-owned copper
mine shut down in January. Mr. Mwanza pulled his eight-year-old daughter out of
private school, and is expecting an eviction notice from the landlord of his two-
room apartment. He gets by selling cooking oil from a wooden market stall.
These days, dinners for the family are only nshima, a cheap staple made of corn
flour.

"We've got no other solution," he says. "No other source of income."

Over the past decade, as a commodities boom boosted growth across poverty-
stricken sub-Saharan Africa, governments, donors and aid groups watched and
hoped it meant the start of a more prosperous era. But now the commodities
downturn is walloping big swaths of the continent, ending an unprecedented
period of optimism in resource-rich countries across Africa.

In the good times, Zambia's Copperbelt province flourished. Rural towns

blossomed and prospered, sustained by foreign-owned mining companies and
the handsome salaries they provided.

In the good times,

mining families went
on picnics to nearby
scenic areas

Since the January

closing of the copper
mine in Luanshya,
Zambia, brick makers
who had struggled to
keep up with booming
construction demand have lost most of their customers.

1
 Block
makers in
Luanshya
stand by
unsold
bricks,
nobody is
building
anymore

The Zambian
government
didn't take
advantage of
the boom to
diversify its economy or save for a rainy day. It lost out on a large share of
copper revenue by offering lucrative concessions to mining companies. When the
mines began to pull out, Zambia's foreign-exchange flows dwindled, depreciating
its currency, the kwacha. The International Monetary Fund is considering a $200
million loan to boost the country's foreign-exchange reserves, on top of a $79
million loan approved in June.

"The copper industry is dominant," says David Punabantu, a Lusaka-based

economist. "So when the price of copper went down, the economy was literally
dead."

Zambia is working to find new investors to take over the closed Luanshya mine.
Maxwell Mwale, minister of mines and minerals development, says that several
companies are interested and that he hopes to have the mine back in business
by May.

The government also said it will boost its stake in mines across the country's
copper-producing region so it will have more control over Zambia's economic
mainstay in future crises.

"Mining cannot be left to commodities traders," Mr. Mwale says. "It's not for
speculators, but for those who understand the mining business. That's the lesson
the government has learned."

The carnage isn't uniform across sub-Saharan Africa. The price of gold, a
plentiful commodity in many of Africa's mining-dependent economies, has soared

2
as global investors rush to safety. And some of the continent's economies -- even
those most exposed to commodities -- are better off than they were in the
aftermath of an earlier boom in the 1980s because of measures they took during
the good years.

In Botswana, DeBeers Group SA has suspended operations at a handful of

diamond mines. But the country has socked away considerable foreign-exchange
reserves, cushioning the blow. The boom lured energy companies to Ghana, in
the past seen as too risky for oil exploration. Production will begin there next
year, opening a big new revenue stream, even at today's lower prices. Other sub-
Saharan governments -- including Liberia, once seen as a desperate case --
have tried to diversify their economies away from a single-commodity play.

Zambia didn't. The country relies on copper sales for an estimated 70% of
government revenue. Only last April, as copper prices were nearing their peak,
did officials restructure antiquated tax laws to take better advantage of the boom.

Copper prices have fallen to just under $4,000 a ton from their peak of just under
$9,000 a ton last summer. With demand in the industrialized world falling not just
for copper, but also for other minerals and metals plentiful in Africa, mining
companies across the continent have shut down operations.

Canada-based Anvil Mining Ltd. suspended operations at its big copper mine,
Dikulushi, in the Democratic Republic of Congo in December. Two months later,
platinum producer Lonmin PLC suspended operations at its mine in Limpopo, in
northern South Africa.

In the copper town of Luanshya, the mine, a Swiss-Israeli joint venture, fired all of
its 1,740 workers in January. While that's just a small slice of the town's
population of 120,000, mining money trickled down and fed most facets of the
economy.

Farmers sold produce to feed miners' families. Bars and restaurants popped up.
Brick makers couldn't bake bricks fast enough to keep up with the construction
boom. Minibuses motored shoppers around town.

Miners in Luanshya -- some of whom had been making more than civil servants -
- bought land and started building larger homes for their families. They took out
loans to start up side businesses and sent their children to private schools. They
bought televisions and DVD players, and sent money across Zambia to family
members in rural areas, who depended on the monthly assistance.

"People were in a jovial mood," says Chishimba Kambwili, a provincial

representative in the national parliament. "They had money. They could do
anything."

3
That ground to a halt on Jan. 21, when Luanshya Copper Mines PLC announced
the closure. Workers arriving at the mine's red-iron gates were told to go home.

Today, the town center is quiet. Rows of empty minibuses and taxis wait for
passengers. Restaurants have few customers. Some neighborhoods are dotted
with half-built brick homes, already being reclaimed by the brush. Market stalls
selling kapenta, or tiny dried fish, tomatoes and beans are largely empty of
shoppers.

Just a few months ago, Spencer Ngolotiya, 44, was training to become a mine
captain, a job that would have put him in charge of some 300 workers. He bought
the three-bedroom home he lives in now, along with a minibus, hoping to start a
side business. His salary was enough to send his children to private school and
take the family on vacations to a nearby game park, where they watched impala
prance through the bush.

Now laid off, he's driving his minibus to earn a living. But few people can afford to
ride. Mr. Ngolotiya spends his time in the quiet town square, sitting in the driver's
seat. He's lucky if he can get enough passengers to make a single trip each day,
he says.

"I used to knock off around six and go to church with my family," he says. "Now I
spend up to 20 hours here, just trying to see if I can make a second trip."

Like Mr
Ngolotiya,
some
miners
splashed
out on
vehicles like
this,
imported
from Dubai,
hoping to
earn some
extra cash
from the
mining
boom