The sale of Zambia's economic bedrock, the ZCCM parastatal has been convoluted, agonising, confused and according to some, confounded. Whatever happens in the future, one thing is certain: there have been many more losers than winners. Bram Posthumus presents an in-depth analysis.

History has caught up with Zambia's copper mining industry. The saga of the privatisation of the country's giant mining parastatal reached its conclusion last October with previous owner Anglo American getting the main assets. The game is over, there are few winners and many losers. This is the tragic tale from the Zambian Copperbelt, caught between the rock of politics and the hard place of the free market.

The towns in Zambia's once-prosperous Copperbelt Province no longer have a rush hour. It is hard to believe that you are in what was the centre of Zambia's economic power-house, a string of towns of anything between 100,000 and 400,000 inhabitants. They should bustle - but they don't. Shops are locking up, a sure sign of a dangerous economic slow-down and the impression is confirmed by what the locals say. A local reporter puts it very bluntly: "We are dying here."

The town of Luanshya is a pathetic sight. In the centre, a few people hang around the shops that have not yet closed. There is an eerie silence in the air. Even the trees are not spared: people, desperately poor and in need of firewood are cutting them down everywhere.

Not only poverty, but malnutrition and disease stalk the compounds. Tom K‰mwendo, of the Kitwe Chamber of Commerce fills in the details: "All the money the people have goes on food, therefore the school fees go unpaid. Children do not go to school. The same for health: people will only go to a hospital in an emergency. In all other cases you have to pay. Health and education are half free - but it's the other half that will kill you." Dr. Manasseh Phiri, with a life-long history in the Copperbelt medical world agrees: "Nutrition is very poor and people's defences are down. It makes them much more vulnerable to infections, including the threat of HIV/AIDS. There is not a single family here that has not been affected".

When President Chiluba's government came to power in 1991, it was crystal-clear that something had to be done about Zambia Consolidated Copper Mines (ZCCM), as the state giant was known. There was unwarranted political interference from the previous government and although industry sources would say the mines were still reasonably professionally run, output was in steep and apparently unstoppable decline. The conglomerate was in need of serious capital injections to speed up maintenance and start new exploration.

The Zambian government, dependent on the unpredictable roller coaster that is the world copper market and sweating under a $6bn foreign debt, had no money. The only way to get that money was through privatisation, which tied in brilliantly with the new orthodoxy that had taken root at the World Bank and the IMF. The push was there: the state sector had demonstrated its helplessness - time to give free reign to the market forces. Pressure could be applied at will: aid was tied to progress in the privatisation exercise.

Six years later, most major assets (Nkana and Nchanga, jointly producing more than half of Zambia's copper, and Konkola and Mufulira) remained unsold. Two mines and some related industries had been taken over by serious mining houses like Cyprus Amax, First Quantum, Crew Development and Meteorex and were doing reasonably well. Retrenchments were inevitable but it is better to have a reduced operation than none at all.

The long delays drove people like K‰mwendo to despair. Answering the question why it was taking so long to sell the mines, he threw his hands up in the air and said: "I really cannot tell you why. I just don't know. Look, government should have streamlined ZCCM first and then put it on the market. Now we are beggars. ZCCM is a very unattractive company to sell in its present form." How unattractive? "ZCCM can only borrow short-term. Banks do not give long-term loans because they don't know who they will have to ask the money back from.

"We have not had any significant capital inflow for the past four years. Suppliers, especially foreigners, have gone into hedging their deliveries: they want to see money first. We are working with obsolete material. ZCCM is a very expensive producer." Surely, the streamlining argument makes sense in business terms, so why has it not happened?

Kamwendo points at one culprit, "The donors. They have exerted far too much pressure on the government. They kept on saying: sell those mines! Remember, it was the precondition to get balance of payment support. So potential buyers can just sit and wait until they feel the price is right".

One eloquent testimony to privatisation gone haywire must surely be the Roan Antelope Mine (known as RAMCOZ) in Luanshya. Emotions are running high. The former branch director of the Mineworkers' Union of Zambia (MUZ), Cameron Pwele claims: "This is an operation running without a vision and without a plan. There's no production at the moment. Maintenance is not taking place. There's no development. You can see where we're heading. Already, most of us have no job. We have become loafers."

There are claims and counter-claims from both sides. The union claims that some of the workers' entitlements, amounting to $3.5m cannot be accounted for and that widows have been not been paid their benefits. Whatever the merits of these claims, there is no doubt that two years after the new owners, Banini, a U.K. based metal trader took over, the mine is badly limping and production, according to industry insiders, has stopped.

Industry sources say that although the mine may still be a going concern, there will have to be a complete re-assessment of the operations. As one analyst put it: "One would have to look at the damage. Have corners been cut? No-one knows the state this mine is in." In the meantime, the whole town of Luanshya (150,000 inhabitants) has become a ghost town.

Anglo American's patience has, meanwhile, been rewarded: it has bought the Konkola, Nchanga and Nampundwe operations at knock-down prices. The cash payment is $30m up front and $60m in deferred payment. In a parallel deal, Anglo has sold its existing share in ZCCM to the Government of Zambia - for $30m. It's a clean swap, which will leave nothing extra in the state coffers.

Anglo will, pending the fulfilment of certain financial and other criteria, invest some $731m to develop - among others - the much talked-about Konkola Deep Mining Project upon which most of Zambia's future as a major copper producing country is said to hinge.

Compare this deal with the June 1997 bid for much the same number of assets minus Konkola, done by the K‰fue Consortium consisting of Avmin, Noranda Mining and Exploration Inc., Phelps Dodge and the Commonwealth Development Corporation: well over $1bn in cash, debt assumption and committed or expected investment. The ZCCM/government negotiating team refused the bid, citing unacceptable conditions placed before it by the Consortium.

Now all Anglo had to do was wait. It has paid off handsomely. When the K‰fue deal fell through, Anglo came back in "as the knight in shining armour" as The Times of Zambia wrote in its 26 September, 1999 edition. The company said it needed "a strategic partner" and came up with the Chilean state-owned mining giant Codelco.

This aroused considerable suspicion in Zambia. Why, some asked, was Codelco, a direct competitor of ZCCM, allowed unrestricted and free of charge access to ZCCM information as it carried out its "technical, financial and business analyses"? In any event, the Chilean giant decided "the proposed transaction did not meet its investment criteria" (quotes from Anglo's press statement 26 August, 1999). Some of the wilder speculation even suggested that the Chileans were carrying out a form of 'industrial spying' on their main competitor.

When Codelco, quite predictably, left the scene and Anglo decided to forget about Zambia and invest in a Canadian venture instead (the Hudson Bay copper mine), the question that was asked in the Zambian press was "What game is Anglo playing?" Many stakeholders in the Copperbelt said aloud what others had been thinking: let's just give them our mines - that's what they want. "You know, they ran these mines until they were nationalised. So it is their chance to get revenge," was the opinion of one Copperbelt businessman. Anglo, of course have dismissed these allegations and said their only concern was good business practice. At any rate, Anglo has a solid track record and is probably more likely than any other mining company to turn the mines around. However, President Chiluba's assertion: "We will not sell the mines for a song", has turned out to be hollow.

Not just donors, the Zambian government itself has come in for a lot of criticism, especially in relation to the refusal of the bid by the K‰fue Consortium, an act which local mining analyst Theo Bull has described as "monumentally foolish". His calculations show that this move has cost the Zambian economy some $17bn in reduced purchasing prices, reduced debt assumption, reduced investments, continued losses and consciously withheld donor support.

Local observers put it down to inexperience. "They have been learning on the job since 1991," one businessman commented. "And there was more pressure than goodwill from the donor community, while we were groping in the dark..." Other industry sources tend to concur with this view. "I have come to the conclusion that government's actions have been largely misguided and politically based," is a typical view. However, this does not explain certain actions that government must have known would raise eyebrows, especially the transfer of the ZCCM privatisation exercise from the Zambia Privatisation Agency (ZPA) to the Government/ZCCM negotiating team, headed by the same man the MMD government had fired in 1991 from his post as Chief Executive of ZCCM, Francis K‰unda. The reason for this move remains unexplained. A faxed message from the negotiating team has this to say: "The privatisation of ZCCM being a very complex process, required the involvement of a specialised team, which operates within the Privatisation Act...Other industries have also assigned specific teams to ensure the success of the privatisation of the respective industries." The crucial difference is of course that "the respective industries" do not earn around 90% of Zambia's foreign currency.

In addition, ZPA, under the stewardship of Valentine Chitalu, had earned itself a reputation of professionalism and transparency. Expertise could have easily been hired by ZPA, without creating a body whose legal status is in doubt. A letter to the government-owned Times of Zambia of 22 September, 1999, argued: "The Government was advised that it was illegal to take the privatisation of ZCCM away from the ZPA".

The goings on in Luanshya and the giveaway to Anglo begs the following question: are there really any rules for privatisation? There is, after all, a Privatisation Act but it is obviously not watertight. The fact that one company can run an entire town into the ground and get away with it bears testimony to that. Was Zambia used as a guinea-pig in the economic laboratory of the big international financial institutions?

It seems the whole privatisation saga is a continuation rather than a clean break with Zambia's past. One analyst says "In the heady days of copper, Zambia was a milking cow. You had many hangers-on."

For his part, Cameron Pwele puts it in the simplest terms possible and his point applies not only to RAMCOZ, "Workers do not care who owns this mine. What the workers want to see is a professionally and efficiently run mine whose future will guarantee job security for the workers." What Luanshya and its 150,000 inhabitants did not want was to see their mine ruined in the name of market liberalisation, as pushed by foreign donors.

The donor pressure K‰mwendo referred to is real and the cumulation of outside forces has extremely serious knock-on effects, against which the country has no defence. In January 1999, some $530m of balance of payments support was withheld by the major donors until ZCCM had been privatised. Six months earlier, when the K‰fue Consortium pulled out, the British announced a discontinuation of aid because they feared their money was going into ZCCM, which was costing the Zambian government anything between $1m and $2m per day at the time.

The copper price had in the meantime started one of its familiar slides and the kwacha plummeted in the course of 1998 from 1,400 to the US Dollar in January to 2,400 in December, a staggering 70% depreciation. When in January 1999 the agreement with Anglo was announced, the World Bank arranged $175m in balance of payment support, debts were rescheduled and other donors came forward.

In a donor-driven economy like Zambia's, GDP growth or decline does not depend on sound business sense but on being popular in Washington. The World Bank also finances the retrenchment pack‰ges with which miners - for instance - can buy their own houses in the compounds. It would go too far to describe this as blackmail but an international confluence of interests bordering on extortion would not be too far from the truth.

On the virtually deserted President Avenue in Ndola, an old man sits in a shop porch. He clutches a battered guitar. A little boy is wrapped in a blanket, in spite of the stifling heat, and sleeps. The man strums his guitar and sings in a quivering voice about one of the few escape routes Zambians have still available to them: the heavens above. "I'll be free when I die," he sings.

Time is running out fast for this once-proud region. As my business contact pointed out, guaranteeing a future for the Copperbelt is not beyond the international community: "You know, it's collusion on the part of the likes of the US, Russia and the World Bank/IMF. If you can spend tens of billions on a totally corrupt system like in Russia, don't tell me you haven't got one billion for Zambia?For us it means life or death.