By Kaela B Mulenga,

Lately, there have been many stories written about Glencore. But the most striking one is that published on September 11, 2015 by BBC, which, for details can be accessed here:, by Peter Shadbolt.

Let me begin by making an important point that – any economy which is dependent on commodity exports like Zambia is: [in Zambia over 80% of its exports comes from copper], its currency is suffering. This situation is driven by the fact that China’s appetite for commodities consumption has now slowed down.

In Zambia this manifestation is seen through Glencore, owners of Mopani Copper Mines. Shares of Glencore – a large commodity trader and miner, have dipped by about 30%, thereby affecting its profit margins.

But as its profits decline and debts mount in an effort to keep operations afloat, something must give in. Hence, Glencore, the second largest employer in Zambia after government, has unavoidably announced the laying off of nearly 4,000 workers. And since the other sectors of the economy DO NOT (at least not in the short term) have the capacity to absorb the laid off workers, the impact of joblessness must be big.

It is this state of affairs, which has caused jittery and a lot of political mimicry. As a country, unless we can handle this crisis well, which is by and large an external shock – we risk causing more irreparable damage.

In my view, this is a great opportune for us to draw some important lessons, which I catalogue below.

I. The world’s interconnectedness (s.called globe village), should teach us a thing or two. That for example, China’s demand of commodities affects many countries of the world small or big and vice-versa.

II. That China’s economy, which is in theory a “socialist one” – has affected “capitalistic economies” in Europe and North America. This means that instead of being antagonistic, the two systems have become symbiotic. This is thanks to the international marketing system – where trading has been possible and domestic institutions and rules of the game have been allowed to function unimpeded. As a result many people have become better off.

III. Zambia a developing economy in Africa and Canada a developed one in North America – both being natural resources and commodities suppliers, have become equally impacted by the sluggish Chinese economy.

IV. That Glencore Corporation, both a mining company and trader in commodities – it too gets affected when a big economy like the Chinese one bleeds. That is, as the Chinese economy slows down there is a direct relationship with sources of commodities.

V. That China being aware of its superiority position — as the world’s largest consumer of commodities and energy, on occasion, it tries discretely or openly to manipulate commodities’ prices. For example, as a consumer of over 45% of copper, China has often tried to lower the copper price by selling off a portion from its inventories or stock piles. But other players like Glencore being aware of this sneaky strategy on the part of China, it too has tried a counter move by reducing its production. This reaction from Glencore, has helped to uplift the copper price a little or at least slowed down its free fall.

VI. From #5 above, you can see that – both Glencore and Chinese players are always looking for strategies that can improve their returns/position. That is, they are both onstantly planning and strategizing for a better tomorrow. In essence, each party is looking and striving for the so-called Adam Smith’s “self-interest” position. For the former, it is maximizing investors’ returns (apportioned from corps’ profits). And for the latter, it is maximizing the public’s good for its citizens.

VII. While Canada is fully aware of this precarious position caused by external shocks (i.e. influenced by factors beyond one’s control), and plan for the future and save something for a rainy day – on the other hand, Zambia doesn’t. At best Zambians consume what comes their way and proudly boast about it – that they live better lives than many other Africans. [Even though the majority of Zambians still live in abject poverty]. It doesn’t cross their minds that this is an act of selfishness and of depriving future generations of their due share. I just wonder!
VIII. That the natural resources are not distributed evenly among nations of the world. Some have plenty while others have none. And since these are non-renewable or that it takes centuries to replenish, it would be wise to use them sparingly.

IX. When you have natural resources which are finite, the best strategy for you would be to diversify from them opting for others which are re-newable such as harvesting energy from wind or solar. In Zambia, instead of being dependent on copper, we could have prioritized our economy on sectors like Agriculture & Tourism. One only hopes that the future operations/thinking will take this into consideration.

X. Finally, that, Glencore whose debts have grown to over $10 billion has tried to put in place measures to reduce it; and China has considerably cut its overall growth investments. The former avoiding going under while the latter fearing too hot an economy.

As we can see from these points above – be it a multi-national company or a state, the decisions taken and necessary are plain common sense ones. Those in charge have to decide and act in the best interest of its constituency, namely owners/investors or citizens. Reacting appropriately and timely being one of the most important ingredients.

In Western countries like Canada, US, France, UK, West Germany, Sweden, Australia and others (now China included) – people are working hard to improve their democracies on which human rights, freedoms, and well being of its people is built. In many countries in Africa, Middle East, parts of South East Asia and Latin America – people are busy tearing each other apart. We’ve little interest in achieving equality or building just societies.

We make life and conditions so abominable in our countries so much so that millions of people are fleeing from these resources rich regions. This is unfortunate because it only reinforces the belief that “WE” the non-Caucasians, are incapable of ruling ourselves.

So unless we can improve the way we do things – being introducing policies aimed at diversifying the economy or actions taken to improve efficiency or cutting down on corruption, the world will continue down playing our abilities. If those running Glencore or Canadian economy can react appropriately, why can’t we? This always remains the question.

In the next and last part, I will analyze the importance of infrastructure in an economy. Cheers!

Kaela B Mulenga / Commentator

About Kaela B Mulenga

The Author is not part of PF government or on its pay roll. These are purely his personal views.
Category : Columnists, Dr. Kaela Mulenga.
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