Zambia's economy is based almost entirely on copper. The nationalised industry, however, has never been able to ride the market-driven storms, and growth has consequently been stunted. Two recent privatisations now signal the beginning of a major privatisation band-wagon which will have an immense impact on the economy.
Big things start in small ways and, at last, two privatisations of the Zambian copper mining industry are beginning the unbundling process - hopefully the privatisation process will now gain momentum after being grid-locked for years.
The Zambian economy is basically a mono-economy with copper mining contributing traditionally as much as 90% to export earnings and 20% to GDP. Lower copper prices last year were the main factor leading to an 18% slump in export earnings to $974.9m.
The break-up and privatisation of Zambia's debt-laden mines has been a protracted affair, however it is estimated that privatisation will bring $2.5bn into the Zambian economy. This is a major amount of money when seen in light of the fact that the nominal estimate for GDP in 1996 was $3.87bn.
The major sell-off of Zambia's copper mining industry has not yet taken place but this year two smaller deals have been cut with the Zambian government on the privatisation of some of Zambia Consolidated Copper Mines' (ZCCM) assets, and this is heartening because it signals that the privatisation ball is beginning to roll at last.
In January this year, Cyprus Amax of the US bought 80% of the Kansanshi copper mine from ZCCM on terms which could ratchet up payments of $48m over a number of years. This purchase also includes some exciting exploration blue sky potential.
The Zambian government has now confirmed that as part of its privatisation programme for ZCCM, a consortium led by Crew Development Corporation and Meteorex has been allowed to purchase, for $17.5m in cash, the Chibuluma West copper mine and its associated Chibuluma South ore body.
The latest deal deserves closer scrutiny because it is newsworthy and a joint venture between a Canadian company listed on the Toronto, Vancouver, Pacific and Frankfurt stock exchanges. Recently Crew acquired a 50% stake in Metorex which is a well established junior and profitable South African mining company. Metorex has been operating for 22 years.
Since Metorex's creation in 1975, it has by strategy chosen to work with the major South African mining houses rather than be absorbed by them. To date, Metorex has been...