Mopani copper mine, Zambia

In February 2005, the EIB granted a EUR 48 million loan to Mopani Copper Mine (MCM)[1] for the rebuilding and modernisation of the Mufulira copper smelter. The project was supposed to stimulate economic growth and reduce poverty, secure and stabilize employment in Mufulira and improve the quality of the environment by reducing sulfur and dust emissions around Mopani site. However, a close study of the case reveals that these objectives remain unfulfilled.

Under pressure of the IMF and the World Bank the Zambian government largely privatised the mining sector. The privatisation process went hand-in-hand with a new Investment Act and a Mines and Minerals Act passed in 1995, both of which were especially favourable to investors. In particular, they set up an attractive tax system for the mining companies – including MCM – and allowed for the repatriation of their profits back to their home countries. As a result Zambia’s revenues from the exploitation of natural resources by the mining sector in general and Mopani in particular is extremely low.

When in 2008 the Zambian government tried to reform its tax system and introduce a windfall tax so it could benefit from the boom of mineral prices, MCM was one of the companies that resisted the changes and refused to pay the windfall tax

In February 2011, Counter Balance and les Amis de la Terre leaked a tax audit of Mopani suggesting that MCM was dodging taxes. The auditors found that the MCM transferred its profit out of Zambia by increasing its costs and selling its commodities far below marked prices to its mother company, Glencore, located in the very tax attractive and secretive canton of Zug, Switzerland.

Additionally labour standards at MCM are worrying. It appeared the company was responsible for casualties among the workforce and the violation of the local farmers’ rights. The poverty increased around the mine as the public services were abandoned after privatisation, and not taken over by Mopani. After the financial crisis in 2008, MCM laid off hundreds of workers from one day to another, leaving them in a dramatic situation. At that time, the price of copper was higher than when Mopani bought the mine in 2000.

Mopani is also infamous for its disastrous environmental impact. While the EIB sponsored smelter might have reduced the emission of sulpher dioxide it still remains up to 72 times higher than the legal limits. Emissions of dust, arsenic and lead are also above the authorised limitations. These emissions are responsible for acid rains that destroy the land around the mine and deteriorate people’s houses.

MCM has also introduced a new extraction method: in situ leaching. This practice consists in injected acid solutions/ in the ground to dissolve copper directly in the deposit. This very hazardous practice led to the pollution of Mufulira’s domestic water in 2005 and 2008. In 2008, between 700 and 800 people were poisoned by the acid water and had to rush to the hospital. Apart from underground water pollution, the massive use of acid is an ever present danger, notably as trucks transporting acid are constantly travelling on bad roads. All this seriously affects the health conditions of the local communities and the environment around the mine

Counter Balance and les Amis de la Terre have produced a report, based on two field missions and testimonies of many stakeholders, to detail the situation of the Mopani Mine.

In June 2011 over 50 MEP’s signed on to an open letter addressed at the Council, the European Commission and the EIB to call for a moratorium on public financing for mining projects. The case generated a lot of commotion in the press. After pressure from NGOs, press and the European Parliament the EIB reacted by freezing future loans to Glencore and announced an internal investigation into the case.

While the investigation was closed at the end of 2011, the EIB decided to keep its findings secret, despite numerous requests from civil society organisations including through a letter addressed to EIB president Werner Hoyer signed by 11 organisations. After these requests were turned down, Christian Aid took the case to the EIB complaints mechanism, and then to the European Ombudsman. Both recommended the EIB to make the report, or at least a redacted version or summary, public.

More than 3 years after the investigation was closed, the EIB finally published a 2 page summary of the report on its website on 29 January 2015. In the Summary the EIB declares that:

“The work of the EIB Review Team was non-conclusive due to the difficulties faced in the investigation of the case. As not all of the necessary information could be obtained, it was not possible to comprehensively prove or disprove the allegations raised in the Leaked Draft Report regarding Mopani’s costs, revenues, transfer pricing, employee expenses and overheads.”

Consequently the EIB agreed with Glencore that the company would repay the entire loan in 2012 but a proper investigation was never carried out.

 

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Open Letter: http://www.counterbalance-eib.org/?p=1270

Tax audit: full and summary

Press briefing: http://www.counterbalance-eib.org/?p=1262

 


[1] Mopani Copper Mine (MCM) is a joint venture whose main shareholder is the Swiss commodity trader Glencore International. It owns two copper and cobalt mines in Nkana and Mufurila, in the Zambian Copperbelt.

 

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