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The Mopani copper mine, Zambia – How European development money has fed a mining scandal

Cover Mopani report

Cover Mopani report

The Mopani copper mine’s contributions to Zambia’s economy and budget are inexistent, the mining company’s social policy is marked by a race to the bottom and it leaves a devastating impact on the environment. This is the conclusion of the report “The Mopani copper mine, Zambia – How European development has fed a mining scandal”, five years after the European Investment Bank  (EIB) granted the mining company a €48 million development loan to do exactly the opposite. “This obviously comes nowhere near development”, says Anne-Sophie Simpere, the author of the report. [1]

“This report is built upon a case study but the Mopani copper mine is far from a standalone case.  Different mines scattered all over Zambia are tarred with the same brush”, Simpere explains. Therefore this report – in line with previous analyses – seriously questions the link between development and mining in general.

The EIB however keeps on lending to the mining sector under the veil of development. Between 2000 and 2010 ten out of fourteen projects involved the mining sector in Zambia, taking a share of 81% of the total amount of EIB loans in the country.

“It is clear to us that these EIB loans benefit western companies and Europe’s quest for raw materials rather than the people of Zambia”, the author states. The Mopani mine is owned by the Mopany Copper Mine (MCM) consortium, which main shareholder is Glencore. The notorious legal, environmental and human rights reputation of this Swiss company got rewarded with the 2008 “worst corporation of the year” Public Eye Award. The report examines the large flows of cheap Zambian copper into Switzerland from where large amounts of copper are sold at a much higher price, suggesting that Glencore uses transfer pricing as a way to avoid paying taxes. “Considering this, it’s surprising that the EIB agreed to finance this consortium with public funds for development. All the more because, considering its turnover, Glencore should have no difficulties raising funds on private markets”, Simpere says.

While it has never supplied evaluations of these projects on the basis of precise development criteria and independent analyses on the ground, in recent years the EIB has developed an active communication strategy to boast the merits of the mining sector in Africa. Most of the articles published on the subject are content to affirm that the sector can alleviate poverty, without supporting these claims with empirical evidence. This reaction from a Zambian professor probably reflects better the sentiment of the Zambian people towards Western mining companies:  “They don’t pay taxes, they have expelled the farmers and closed off the land, they’re building the infrastructures that interest them, they’re not going to employ many people because everything’s highly mechanized, but they’re going to discharge huge quantities of polluting waste, including radioactive.  So from an economic point of view, with a simple cost/benefit analysis, it is clear that the Lumwana project  is of no advantage to Zambia”. [2]

The report concludes by calling up on the European member states and institutions, which decide on the EIB’s functioning, to ensure that EIB funding is consistent with European commitments on development and environmental affairs. Among other things the report recommends “a moratorium on the financing of mining projects, extended until the bank adopts all the recommendations of the Extractive Industries Review  and guarantees that the appropriate mechanisms have been set up to ensure their application.” [3]

Read the full report in EnglishFrench or Polish

An interview with Savior Mwambwa, Executive Director of the Centre for Trade Policy and Development in Zambia is available here

Notes for editors:

1. The EIB’s legal development responsibilities were confirmed both in the Lisbon Treaty and by the European Court of Justice.

2. Another Zambian mine which the EIB granted 3 loans totaling €85 million.

3. The “Extractive Industries Review” (EIR) is an in-depth study of the extractive industry sector, commissioned by the World Bank. It has produced key recommendations to ensure that extraction projects have positive impacts. As an international reference (based on multi-sectoral consultations in several regions of the world), the EIR served as the basis for the final report “Striking a Better Balance”, published in December 2003, which analyses the situation, highlights the main problems, and makes recommendations.

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