Will Luanshya survive mine closure?

For a place that was referred to as a “ghost town” not so long ago, and has known more ups and downs than a rollercoaster, the Copperbelt mining town of Luanshya seems to be doing pretty well.

That’s according to an article posted today on the website Mining For Zambia.
Shoprite, Zambia’s leading supermarket chain, is building a second store there – bigger, more upmarket and with a wider range of products. The store is part of a new shopping mall under construction in the town centre. Competitor Pick n’ Pay also operates there, and if the presence of shoppers is anything to go by, both stores are doing well.

A drive around the neighbouring townships suggests that a mini-boom of residential property is under way, with dozens of new homes under construction or recently completed. Commercial farmers in the nearby Mpongwe area are growing soya, beans and wheat. Golden Lay, a Luanshya-based company, is producing thousands of trays of eggs a day for the local and regional market, and has attracted $24 million of private investment funding for expansion.

“There is a cautious sense of optimism in Luanshya, but it comes with some uncomfortable questions,” the article says. “How sustainable is it? What if the mine closes again?”

Luanshya Mine was the very first mine to be privatised in 1997, and its fortunes have risen and fallen ever since. It closed down in 2000 after the owners ran into financial difficulties, causing severe economic hardship. New owners got the mine going again, but the copper price fell in the 2008 global crisis, and they sold out to China Non-Ferrous Metals Mining Company (CNMC group) in 2009.

“CNMC promptly set about bringing Luanshya Mine into the 21^st century, and invested nearly half a billion dollars in the operation,” the article says. Within five years, annual copper production had nearly doubled to 18 000 tonnes, and employment had gone from just over 600 people to nearly 3 000. The mine paid some $60 million in corporate tax, and its employees paid $31 million in personal income tax. The town of Luanshya was economically revitalised.

Luanshya continues to benefit from this five-year growth period, despite the mine’s underground operations and slag reclamation project being put on care-and-maintenance earlier this year because of the nationwide power restrictions on the mining industry.

Clearly, the town’s fortunes are tied to those of the mine. But the mine won’t last forever, and will reach the end of its working life around 2025. What should Luanshya be doing in the meantime?

“The answer is economic diversification, and that can only happen with the right incentives and policies in place from central government,” says Robert Kamanga, deputy CEO of CNMC Luanshya Copper Mines, quoted in the article. “There is a 10-year window to get this right. Otherwise, when the mine closes, Luanshya will become a ghost town again. And all the money presently being invested and spent here will have been wasted.”

This point is echoed by Simukondi Godwell, chairman of the Luanshya District Business Association. “Government needs to create the financial and tax incentives that will make Luanshya an attractive business destination in its own right,” says Godwell, in the article.

A diversified Luanshya economy capable of outliving the closure of the mine comes down to political will on the part of government. “If there is political will, there won’t be a problem. We will grow. But with no political will, nothing will happen.”

Meanwhile, Luanshya’s economy continues to attract new businesses, and CNMC Luanshya Copper Mines continues to produce copper for world markets.