African miners pay the price of Glencore pain
Huge £20bn debt pile means 4,000 face axe
ON THE drive into town, a sign at the side of the road says ‘Mufulira: A place of abundance.’ The vast mineral riches in this part of Zambia’s Copperbelt tempted Glencore – then a little-known private commodities trader – to buy the Mopani copper mine in 2000.
But while Mopani has helped enrich Glencore and its uncompromising boss Ivan Glasenberg, for those who live downwind of it, the notion of abundance is becoming a grim joke.
For years, they have lived under the shadow of choking sulphur dioxide pollution that damages health, homes and crops.
The crippling effects were revealed by the Mail in 2011, the year Glencore listed on the FTSE 100 to great fanfare. Now people in the Copperbelt are facing a new threat, the economically devastating prospect of more than 4,000 job cuts.
Many more people in the local supply chain and support networks will be affected. It’s all part of the firm’s plan to reduce its groaning £20bn debt pile and boost profits.
Under pressure from investors, copper output in Zambia and the Democratic Republic of Congo is to be suspended for 18 months.
The Switzerland- based firm has axed full-year and interim dividends and said it would sell £1.3bn of assets.
It is also raising £1.6bn in share placing that will see Glasenberg alone shell out £135m just to avoid diluting his 8.4pc stake. That sort of expenditure will hurt even the multi-billionaire South African.
Ordinary investors, whose shares have slumped from a float price of 530p to 132.15p last night, have also had their noses put out of joint.
Many are angry that billionaire directors were allocated 22pc of the stock, while other shareholders had no such choice.
This decision is a ‘ serious and unnecessary breach’ of a promise that shareholders would have ‘preemption’ rights to buy shares, said The Investment Association, adding: ‘ This sets a very damaging precedent for market practices.’
But their pain pales in comparison to that faced by the residents of Kankoyo, the destitute district of Mufulira that is Mopani’s nearest neighbour.
Obvious Mumbi, 63, is one of those with the most to lose.
He already struggles to afford medical care for severely disabled 15-year-old daughter Sandra.
His family relies on two sons who work in the mines to fund visits to a doctor in Lusaka, the capital of Zambia.
‘We depend on our children so it will be very unfortunate [if they lose their jobs]’ he says. ‘If the company fires them, I don’t know how life is going to be.
‘If they put employees on half salaries, if they get something, it’s better than nothing.’
Like most miners l i ving in Kankoyo, many of whom work as informal contractors, Mumbi’s sons don’t yet know if job cuts will affect them.
Glencore says it will ‘do what it can to minimise job losses’, adding that voluntary redundancies will be favoured, while its training centre in the region will remain open.
Social projects such as schools and medical facilities, which Glencore says cost it more than £10m a year, will continue to be funded.
Glencore added that during the suspension it will perform work to expand the mine.
Weighed against that is the reality that unemployment, already a big problem here, is going to soar.
It isn’t just those who work in the mines, where the salary for a drill operator is around £250 a month, who will suffer.
Guesthouses, restaurants and small businesses are all reliant on this focal point of the economy.
A local union source, who asked not to be named, said job losses could rise still further if contractors are affected.
‘If they go ahead, this place will be a ghost town’ he said. ‘People here have big families. I don’t know how we will survive.’
What’s happening to Mufulira has its roots not just in the commodity slump caused by China’s economic woes, but in Glencore’s voracious appetite for deal-making. Its global ambitions led the firm to rack up debts to push through a £42bn mega- deal to swallow up miner Xstrata in 2013.
Chastened by its subsequent financial problems, Glencore now hopes to prevent a credit rating downgrade that would threaten the cheap loans that help fuel its commodity trading empire.
The plan is also part of a power play in which Glencore limits how much copper it puts into the market to support the metal’s market price.
People in Kankoyo won’t be surprised to learn that it is they who will take the hit.
When the Mail first visited in 2011, we found a village blighted by sulphur dioxide emissions. The pollution predated Glencore’s arrival in the Copperbelt in 2000.
But it was only in 2014, amid growing public scrutiny, that it took decisive steps to stop it, installing an acid plant meant to capture 97pc of emissions. That, supposedly, was that. But residents still suffer the longterm effects on their health and the soil. Many are now asking that Glencore helps pay for them to be relocated to the fertile lands away from the barren wasteland that Kankoyo has become.
There seems to be little chance of that happening.
Glencore has an agreement with the Zambian government that indemnifies it against the cost of environmental problems.
The mining and trading giant is famous for never spending money when it doesn’t have to.
As it tightens its belt to ride out the commodity crash, it isn’t about to start now.