In it for the long term? Governance and learning among Chinese investors in Zambia's copper sector

China Quarterly

Volumn , Issue 199, 2009, Pages 627-646

  Haglund, Dan ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

COPPER; CORPORATE STRATEGY; ECONOMIC RELATIONS; GOVERNANCE APPROACH; INCENTIVE; INTERNATIONAL RELATIONS; INVESTMENT; MINING INDUSTRY; STATE OWNED ENTERPRISE;

CHINA; ZAMBIA;

EID: 77249165117     PISSN: 03057410     EISSN: 14682648     Source Type: Journal    
DOI: 10.1017/S0305741009990130     Document Type: Article

References (112)

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29. Peter J. Buckley, L. Jeremy Clegg et al., "The determinants of Chinese outward foreign direct investment," Journal of International Business Studies, Vol. 38, No. 4 (2007), p. 499.
30. UNCTAD, Asian Foreign Direct Investment in Africa, p. 5;
31. J.P. Pham, "China's African strategy and its implications for U.S. interests," American Foreign Policy Interests, Vol. 28 (2006), pp. 239-53 at p. 244.
32. Interview with vice-president, CITIC International, Beijing, 27 June 2008. According to Manning, the MOFCOM is the responsible ministry for commerce as well as the principal manager of aid projects. See R. Manning, "Will 'emerging donors' change the face of international co-operation?" Development Policy Review, Vol. 24, No. 4 (2006), pp. 371-85.
33. Harry G. Broadman, Africa's Silk Road: China and India's New Economic Frontier (Washington, DC: World Bank Publications, 2007), p. 305.
34. Bosshard, "China's environmental footprint in Africa."
35. Gill and Reilly, "The tenuous hold of China Inc. in Africa," p. 45.
36. Interview with Deputy Director of Chinese Academy of International Trade and Economic Co-operation which provides consultancy services to PRC Ministry of Commerce, Beijing, 30 June 2008.
37. People's Republic of China, Ministry of Commerce, "Dui guanyu jiaqiang jingwai Zhongqiye jigo yu renyuan anquan baohu gongzuo de yijian de jiedu" ("Explanation regarding the suggestions for strengthening the human safety and protection of workers for Chinese enterprises and organisations overseas"), 31 August 2006, http://hzs.mofcom.gov.cn/aarticle/bk/200608/ 20060803022750.html.
38. Bosshard, "China's environmental footprint in Africa," p. 6
39. Morck, Yeung et al., "Perspectives on China's outward foreign direct investment," p. 343.
40. Kevin G. Cai, "Outward foreign direct investment: a novel dimension of China's integration into the regional and global economy," The China Quarterly, No. 160 (1999), p. 877.
41. See "The struggle of the champions," The Economist, 6 January 2005, http://www.economist.com/business/displaystory.cfm?story-id=E1- PVPVRTR.
42. John Henley, Stefan Kratzsch et al., Foreign Direct Investment from China, India and South Africa in sub-Saharan Africa: A New or Old Phenomenon? (New York & Geneva: UNU Wider Research Paper No. 2008/24, 2008).
43. Broadman, Africa's Silk Road, p. 30.
44. Deborah Bräutigam, "Close encounters: Chinese business networks as industrial catalysts in sub-Saharan Africa," African Affairs, No. 102 (2003), pp. 447-67.
45. Giles Mohan and Dinar Kale, "The invisible hand of South-South globalisation: Chinese migrants in Africa," unpublished report for the Rockefeller Foundation, 2007, pp. 14-15.
46. Personal communication with Ching Kwan Lee, 20 September 2008.
47. Ching Kwan Lee, "Raw encounters: Chinese managers, African workers and the politics of casualiza-tion in Africa's Chinese enclaves," in this volume.
48. Gretchen Helmke and Steven Levitsky, "Informal institutions and comparative politics: a research agenda," Perspectives on Politics, Vol. 2 No. 4 (2004), pp. 725-40.
49. See Heidi Ø. Haugen and Jørgen Carling, "On the edge of the Chinese diaspora: the surge of baihuo business in an African city," Ethnic and Racial Studies, Vol. 28, No. 4 (2005), pp. 639-62. The importance of "trust" in working with locals was also stressed in interviews with a Chinese private copper trader in Zambia (Kitwe, 18 September 2007) and a consultant for MOFCOM (Beijing, 30 June 2008).
50. See Julia C. Strauss, "The past in the present," in this volume.
51. Mining represents three-quarters of recent Chinese investment according to Zambia Development Agency data. See Kragelund, "Knocking on a wide open door," p. 5.
52. BGRIMM stands for "Beijing General Research Institute of Mining and Metallurgy." See "Dozens killed in Zambia explosion," BBC News, 21 April 2005, http://news.bbc.co.uk/1/hi/world/africa/4466321.stm.
53. Interview with Environmental Council of Zambia (ECZ) official, Lusaka, 11 September 2007.
54. Jeremy Gould, "Zambia's 2006 elections: the ethnicization of politics," research note for the Nordic Africa Institute, 2007;
55. Miles Larmer and Alastair Fraser, "Of cabbages and King Cobra: populist politics and Zambia's 2006 election," African Affairs, Vol. 106, No. 425 (2007), pp. 611-37. "Zambian hopeful takes a swing at China," Washington Post, 25 September 2006, http://www. washingtonpost. com/wpdyn/content/article/2006/09/24/AR2006092400915-pf.html/. Terms and conditions of labour at Chinese-owned mines remained an issue in Sata's presidential campaign in 2008;
56. see "Zambia: Banda sworn in, riots spread," Independent Online, 2 November 2008, http://www.iol.co.za/index.php?set-id=1&click- id=84&art-id=nw20081102170239312C293933.
57. "Chinese beaten up in Zambia mines," BBC News, 4 March 2008, http://news.bbc.co.uk/1/hi/world/africa/7277006.stm.
58. John Craig, "Putting privatisation into practice: the case of Zambia Consolidated Copper Mines Limited," Journal of Modern Africa Studies, Vol. 39, No. 3 (2001), pp. 389-410.
59. Data collected from the Zambia Revenue Authority indicate that in 2006 fiscal revenues amounted to $200 m, on the basis of $3.1bn in copper sales. Low receipts from the mining sector reflect various investment incentives provided for under state-investor contracts. These contracts were revoked in April 2008, significantly raising the effective tax rate, although the subsequent fall in the copper price has led the government to cancel some of the proposed taxes. See "Zambia rejects mining companies' requests for tax-law changes," Bloomberg, 28 March 2008, http://www.bloomberg. com/apps/news?pid=20601116&sid=aZ1MI6CN7f8s&refer=africa.
60. Interview with Charles Muchimba, Director of Information and Research, Mineworkers Union of Zambia, Kitwe, 3 August 2007. For details of recent strike activity, see the MineWatchZambia blog, available at www.minewatchzambia.com.
61. Finance Minister Magande has acknowledged that growth has been concentrated in urban areas, and in capital-intensive sectors such as mining, trade and construction. "Improved economy hasn't reduced poverty," The Post, 27 July 2007.
62. An editorial by The Post is spot on when it notes that "foreign investment is not bad. What is bad is the blind belief that foreign investment equals development. That is what we see inmost of our leaders. They are sloganeering and parroting this song as an immutable dogma," 10 June 2007.
63. Peter Nunnenkamp, "To what extent can foreign direct investment help achieve international development goals?" The World Economy, Vol. 27, No. 5 (2004), pp. 657-77;
64. Klaus E. Meyer, "Perspectives on multinational enterprises in emerging economies," Journal of International Business Studies, Vol. 35, No. 4 (2004), pp. 259-76.
65. NFCA is a subsidiary of the state-owned China Non-ferrous Metal and Mining Group (CNMC), China's 29th largest outward investor by value in 2006. See http://www.cnmc.com.cn/en/index.asp.
66. "Zambia wins Chinese investment, opposition snubbed," Reuters, 3 February 2007, http://www.alertnet. org/thenews/newsdesk/ L03330799.htm.
67. "Chinese companies to invest over $800 million in Chambishi, Zambia," MineWeb, 4 April 2008, www.mineweb.com/mineweb/view/ mineweb/en/page504?oid=48636&sn=Detail. See for instance Equinox Minerals Ltd's press release, 15 February 2007, "Equinox signs first Lumwana Concentrate off-take in five-year agreement with New Chambishi Copper Smelter."
68. Interview with Sun Chuanqi, Company Secretary, CCS, Chambishi, 1 November 2007.
69. As a good example, see the announcement of investment by Zhonghui Mining which mentions a truly wide assortment of political appointees. "Mr Banda said the coming of the new mining company emanates from the visit of President Levy Mwanawasa to the China-Africa Summit and the reciprocal visit of Chinese President Hu Jintao last year," "New Chinese company coming," Lusaka Times, 19 March 2008, http://www.lusakatimes.com/?p=2382.
70. Anonymous interviewee 3, NFCA, Kitwe, 30 November 2007.
71. Interview with Gao Xiang, deputy CEO, NFCA, Chambishi, 21 August 2007. This point was corroborated by another (Zambian) employee.
72. This broker function also works through the Chinese Embassy, such as during the BGRIMM situation which one informant notes quickly became a "government-to-government" issue. Anonymous interviewee 2, NFCA, Kitwe, 25 August 2007.
73. "Chambishi jobs for citizens - China," Times of Zambia, 28 February 2008, http://allafrica.com/stories/200802280057.html.
74. "New Chinese company coming."
75. Interview with manager of European Commission-funded "Mining Sector Development Programme," technical assistance housed within the Zambian Ministry of Mines. Lusaka, Zambia, 15 November 2007.
76. Interview with Charles Muchimba, MUZ.
77. Ibid,.
78. Jean-François Bayart, "Africa in the world: a history of extraversion," African Affairs, No. 99 (2000), pp. 217-67.
79. Interview with Goodwell Lungu, Executive Director, Transparency International Zambia, Lusaka, 22 October 2007.
80. Anonymous interviewee 2, NFCA, telephone conversation, 20 July 2008. To illustrate their closeness, correspondence to all these entities arrives at NFCA's post office box 22592 in Kitwe.
81. Among the international mining companies surveyed, only NFCA's annual accounts consistently received auditor qualifications, with Deloitte&Touche citing unavailability of information that makes them "unable to determine whether proper accounting records have been maintained" (NFCA Annual Accounts 2005).
82. Interview with Olav Lundstol, Economist and First Secretary, Norwegian Embassy, Lusaka, 16 July 2007.
83. Anonymous interviewee 2 at NFCA explains that there are two invoices for all orders from China: one has a lower value and is attached to the container (used to calculate duties at the border), and another with a higher value that is used for paying the seller, usually the parent company. 25 August 2007.
84. An illustrative example is where the bore-mill broke down at Sino-Metals, and the company - not having stocked the necessary spares - was forced to airlift equipment from China. Interview with Edward Mwamulima, Kitwe, 30 October 2007.
85. Following this intervention, unanticipated by ECZ officials, KCM was merely instructed to implement mitigating measures (e.g. replacing the pipeline, stocking greater quantities of lime) to avoid future incidents. Interviews with various ECZ officials, Lusaka and Ndola, August-November 2007.
86. Lameck Malema, Director, Loma Ltd., Kitwe, 11 October 2007.
87. Anonymous interviewee 2, NFCA, Kitwe, 25 August 2007.
88. In 2006 production at NFCA was stopped for eight days upon the insistence of the Mines Safety Department because the rope winder for one of the shaft elevators needed its brakes replaced. Production was eventually resumed, without replacing the lift's brakes. "I asked somebody, why is it that this winder is running, when we were told it has a problem. He said 'this man who came, we took him to see the CEO, and that is how we produced a certificate saying that the winder is OK' ... When an official proves to be difficult, they take him to the higher management, so he is given something there." Anonymous interviewee 1, NFCA, Kitwe, 2 December 2007.
89. Personal interview, Kitwe, 18 September 2007.
90. According to data from Mineworkers' Union of Zambia (from 2007), NFCA pays the lowest average wage (Kwacha 310.000 per month) among the large foreign-owned mining companies.
91. Anonymous interviewee 2, NFCA, Kitwe, 25 August 2007.
92. Interviews with Sophie Masupha, vice-president, human resources, KCM, Chingola, 12 November 2007; and Anne-Marie Mwenya, company secretary, Chambishi Metals, Chambishi, 4 October 2007.
93. Interview with Andrew Hickman, company secretary, First Quantum Bwana Mkubwa, Ndola, 2 December 2007.
94. Interview with Joel Chitambala, business controller, marketing and treasury, KCM, Chingola, 17 September 2007.
95. Anonymous interviewee 2, NFCA, Kitwe, 25 August 2007.
96. Interview with Gao Xiang, NFCA, Chambishi.
97. Various interviews with relevant officials in Lusaka, Ndola and Kitwe, Zambia.
98. Interview with Charles Muchimba, director of information and research, MUZ.
99. At the time of the study, NFCA nevertheless remained the only foreign mining company not to provide medical coverage for all dependents of an employee. Anonymous interviewee 1, NFCA.
100. Ibid,.
101. Douglass C. North, Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University Press, 1990);
102. Paul J. DiMaggio and Walter W. Powell (eds.), The New Institutionalism in Organizational Analysis (Chicago: University of Chicago Press, 1991).
103. Argyris and Schön refer to "single-loop" learning, defined as instrumental learning that changes strategies of action in a way which leaves the values or underlying assumptions of the decision-rule unchanged. "Double-loop" learning, by contrast, is learning that additionally incorporates changes in the values of existing decision-rules. Chris Argyris and Donald A. Schön, Organizational Learning: A Theory of Action Perspective (Reading, MA: Addison-Wesley, 1978), pp. 20-28.
104. Anonymous interviewee 2, NFCA, 25 August 2007.
105. Anonymous interviewee 1, NFCA, Chambishi, 8 September 2007, who notes that this appointment still lacks any real power and is "more like remote control."
106. Ibid,.
107. Christopher Clapham, "Fitting China in," in Chris Alden, Daniel Large and Ricardo de Oliveira (eds.), China Returns to Africa (London: Hurst, 2008).
108. For a sample, see comments left by readers of the article "New Chinese company coming," Lusaka Times, 19 Mar 2008, http://www.lusakatimes.com/?p=2382.
109. Stephen Chan, "Ten caveats and one sunrise in our contemplation of China in Africa," in Alden, Large and de Oliveira, China Returns to Africa, p. 346.
110. Dan Haglund, "Regulating FDI in weak African states: a case study of Chinese copper mining in Zambia," The Journal of Modern African Studies, Vol. 46, No. 4 (2008), pp. 547-75.
111. See also Giles Mohan and May Tan-Mullins, "Chinese migrants in Africa as new agents of development? An analytical framework," paper presented at DSA 2008 annual conference, 8 November 2008; and M. Esteban, "The Chinese amigo: implications for the development of Equatorial Guinea," in this volume.
112. Vivien Foster, William Butterfield et al., "China's emerging role in Africa," Gridlines Newsletter, No. 42 (2008), World Bank PPIAF.