The report, Undermining Development? Copper Mining in Zambia, by three international development organisations SCIAF, Christian Aid, and ACTSA, examines the record of KCM, Zambia’s largest copper producer.

KCM is majority-owned by Vedanta Resources – a UK-based FTSE 100 company backed by household names such as Standard Life, HBOS, and Barclays. The report explains that KCM is ‘short changing’ Zambia with royalty fees of just 0.6 per cent instead of the 5 to 10 per cent industry average in developing countries. Whilst legal, this rate of royalty implies that, in 2006/07, the Zambian government would have received mineral royalties of only US$6.1 million from KCM, while company extracted copper ore worth over US$1 billion.

Zambia’s copper generates 75 per cent of the country’s foreign export earnings but the government is not receiving its fair share of the income generated at a time when life expectancy in the country is 37 years, one in three children do not go to school, and 68per cent of the population live in extreme poverty. Last year KCM made a net profit of US$310 million which is more than Zambia spent on healthcare. If the country continues to receive such a raw deal, it is likely to remain the ninth poorest country in the world according to UN rankings.

The international development charities organisations are calling on Vedanta, during the current contract re-negotiations to pay 30 per cent of profits in income tax (up from 25 per cent); pay mineral royalties of at least 3 per cent, up from the current 0.6 per cent; pay the Zambian government a larger share of the difference between the actual copper price and the trigger copper price in the price participation scheme.

According to the Zambian Finance Minister at the time, the government was put under considerable pressure from the World Bank, IMF and other donors to privatise its copper mining industry in the 1990s; privatisation was a condition for debt relief. This contributed to the Zambian government having a much weakened bargaining position when entering into negotiations with the private mining companies.

SCIAF Policy Analyst Abi Dymond states that whilst private investors in developing countries are there to make a profit and do provide social benefits such as employment, Zambia is not receiving a fair proportion of the money raised by its copper resources at a time when the country urgently needs funds to lift its population out of absolute poverty.

Dymond said, “It is vital that Zambia is given a fairer share of the profits from its main natural resource to help combat crippling poverty in the country. SCIAF, Christian Aid, and ACTSA are now calling for Vedanta management and UK investors to use their influence to make sure Zambia gets a fairer deal. Evidence suggests that Zambia is drowning in poverty whilst a rich mining company is running away with its greatest natural resource.”

Joyce Nonde, President of the Federation of Free Trade Unions of Zambia (FFTUZ) said, "we endorse this report and are encouraged by the international pressure being applied on the company and the support for Zambian Civil Society calls for improved development agreements, labour rights and environmental protection. It is time that companies operating in Zambia started paying fair taxes and mineral royalties and commit to assist the development of our country rather than undermine it."

ACTSA Campaigns Officer, Simon Chase said, “Corporate accountability and social responsibility in the Copperbelt are being badly neglected as the evidence shows in the report. Zambian people are suffering at the hands of companies like Vedanta and this is their opportunity to implement real and positive change.”

The report also focuses on the KCM’s employment practices which have been described as ‘draconian’ with some sub-contracted skilled labourers claiming they are paid as little as £37 per month when it is estimated that the average Zambian family needs at least £151 a month to meet their basic needs. Concerns are also highlighted over the pollution arising from KCM’s activities, and its effect on local communities. According to the Environmental Council of Zambia cited in the report, the ‘grossly negligent’ behaviour of ‘KCM management’ resulted in rivers used by local communities for drinking water being ‘significantly polluted’.

The report also calls on the government to make amendments to the Companies Act 2006 to ensure that UK businesses are held to account for the social and environmental impact of their activities in vulnerable developing countries.

The full report and executive summary are attached and can be downloaded from: www.actsa.org or www.sciaf.org.uk.

Send an email to the Director of Corporate Strategy at Vedanta to help make sure that Zambian efforts to end poverty aren’t undermined.