CRITICAL DIMENSIONS OF INDIAN INVESTMENT IN AFRICA: A Case Study Of Indian Investment In Zambia

Presentation By: Annie M. SiameAssistant Programmes Officer

CUTS International-Lusaka11th September, 2014

Presentation Outline• Introduction• Methodology• Case study: Nava Bharat Ventures Ltd• Survey Results• Key Findings• Recommendations• Way Forward

INTRODUCTION • Relationship Between India And Zambia• Investment Climate In Zambia• Overview of the Mining Sector

INTRODUCTION • India and Zambia have cordial relations.• Economic cooperation between Zambia and India can be

traced as far back as the 1970s and has continued to grow over the years.

• India has invested in Zambia in different key sectors of the economy such as mining, agriculture, extractive industry, and tourism.

• The mining sector is one of the sectors that India is heavily investing in.

INTRODUCTION CONT.• A number of Indian companies are doing business in Zambia

and many more have shown interest to invest in this friendly country abundantly endowed with natural resources.

• Some of these companies are Airtel Zambia, Tata Africa, Nava Bharat Ventures Ltd., RJ Corporation, Taurian Manganese and others have made large investments in various sectors in Zambia.

• Since 2007 Indian foreign direct investment (FDI) to Zambia has surpassed US$3bn.

• These companies have employed over 25,000 Zambian nationals.

INTRODUCTION CONT.

• India’s export items include drug and pharmaceuticals, machinery and instruments, transport equipment, cotton yarn and fabrics, plastic, rubber, chemicals, and electronic goods.

• India’s imports from Zambia include non-ferrous metals, ores (copper and cobalt), semi-precious stones and raw cotton

INTRODUCTION CONT.• Zambia and India’s exports

INTRODUCTION CONT.

Investment Climate in Zambia• Zambia offers a very liberal investment environment. • This is attributed to the economic reforms undertaken in

the early 1990s, with the key aim of making the country more attractive to private (both domestic and foreign) investment.

• The 2 major reform programmes are the Private Sector Development Reform Programme (PSDRP) and the Millennium Challenge Account (MCA).

INTRODUCTION CONT.Foreign Direct Investment, Net Inflows1

1 http://www.factfish.com/statistic-country/zambia/foreign+direct+investment,+net+inflows,+bop

• Prime growth sectors for investment are Manufacturing, Agriculture and Agro processing, Tourism, Energy and Mining.

INTRODUCTION CONT.• Currently, FDI is governed by the Zambia Development

Agency Act of 2006, which offers a wide range of incentives in the form of allowances, exemptions and concessions to companies.

• Other policies that affect investment in the country.

INTRODUCTION CONT.

Overview Of The Mining Sector• The mining industry has been the economic and social

backbone in Zambia since the first exploitation of copper deposits on the copper belt.

• Copper and cobalt are the key commodities produced in Zambia.

• The mining industry engages in the production of lead, zinc, coal, silver and gold.

• The sector has gone through three main phases of ownership: first, private ownership under a colonial administration, then national ownership post-independence and finally reprivatization from the late 1990s.

INTRODUCTION CONT.• Zambia’s mining sector is currently dominated by entities

owned by multinationals.• Currently Copper production in Zambia is over 800,000ton

as 2012.• There are approximately more than 15 players in the mining

sector currently.• Zambia still has an exceptionally high level of macro-

economic dependence on mining. • The sector contributes at least 12 per cent of GDP, to total

export earnings it contributes about 80% and accounts for 86 per cent of FDI.

• Mining also plays a vital role in generating employment in and around mining districts in Zambia.

INTRODUCTION CONT.• Together the four major mining companies employed

56,300 people in 2012, almost all of whom are Zambian (98–99 per cent).

• In relation to government revenue, in 2012, almost one-third (32 per cent) of all tax revenue received by the government was from mining sector taxes.

• The mining sector in Zambia also registers its impact on the nation’s social sector through its huge contributions towards Corporate Social Responsibility (CSR) Programmes.

INTRODUCTION CONT.• There is no legislative framework governing CSR in

Zambia. There are no tangible guidelines for firms on implementing CSR in the country.

• The Ministry of Mines and Minerals Development is responsible for enacting legislations for the mining sector in Zambia. The Mines and Minerals Development Act 2008 is the primary statute that governs the mining sector in Zambia.

• Zambia is party to numerous international treaties and conventions at the global, regional and sub-regional level. These treaties cover a variety of fields such as trade and investment, diplomatic relations, climate change and human rights.

INTRODUCTION CONT.• In the mining sector Zambia adheres to the following

international convection and treaties:

• Safety and Health in Mines Convention, 1995 (No.176)

• Labour Inspection Convention, 1947 (No.81)

• Working Environment (Air Pollution, Noise and Vibration) Convention, 1977 (No.148)

• Occupational Safety and Health Convention, 1981 (No.155)

• Occupational Health Services Convention, 1985 (No.161)

INTRODUCTION CONT.• An overall environmental and natural resources

management framework exists through the National Conservation Strategy of 1985, National Environmental Action Plan of 1994, and the National Policy on the Environment of 2007.

• The Environmental Management Act also contains provisions that regulate the conduct of mining operations under subsisting mining legislation.

INTRODUCTION CONT.• The Zambia Environmental Management Agency (ZEMA)

administers the Environmental Management Act and deals with issues pertaining to mining that arise therefrom

• ZEMA is an independent environmental regulator charged with ensuring the sustainable use of the country’s natural resources.

• ZEMA’s mandate is outlined in the Environmental Management Act of 2011 that covers all matters affecting the environment, from pollution to waste disposal.

METHODOLOGY • A scoping mission was undertaken before the actual

research in order to gain understanding of the area and the operations of the company, Maamba Collieries.

• . The mission was concentrated more on interactions with a few selected members of the surrounding communities. A total of 17 community members were met who gave – similar answers – in terms of challenges and opportunities which exist in the community.

• The research used both qualitative and quantitative methods.

• Primary data was collected using structured questionnaires.

METHODOLOGY CONT.• 50 questionnaires were administered to the community members in

Maamba. • Interviews were also conducted with other stakeholders; Civil Society

Organizations, Regulatory Authorities, Media, The Company and Business Chamber.

• Face to face interviews were applied.• Convenience sampling was used (a method of non-probability

sampling) with the community.• With the other stakeholders purposive sampling (homogenous

sampling) was used.• The responses from the other stakeholders were fed into the

quantitative survey. • Data entry and analysis was done using Excel and SPSS and

frequency tables were generated in both packages to facilitate presentations and interpretations of results.

CASE STUDY: Nava Bharat Ventures Ltd

• Nava Bharat Ferro Alloys Limited (NBFA) commenced operations in 1975 at Paloncha in Andhra Pradesh, a state in Southern India.

• To represent better the diversified business activities, the name of the company was changed to Nava Bharat Ventures Limited (NBV) in July 2006.

• NBV spread its wings globally through overseas projects and trading activity controlled by Nava Bharat (Singapore) Pte. Limited, a wholly owned subsidiary of NBV, functioning from Singapore.

• The domestic business divisions of the company includes: Ferro Alloy, power, sugar, infrastructure and the International business divisions of the company include: Power, Mining, Coal, Ferro Alloy, and Mineral Ore.

CASE STUDY CONT.

• NBS holds a majority equity stake (65% equity stake) in Maamba Collieries Limited (MCL), the largest coal mining company in Zambia.

• MCL was privatized by the Government of Republic of Zambia in 2010.

• The Zambian government selected Singapore-based diversified organisation Nava Bharat Ventures as the strategic and technical partner for Zambia Consolidated Copper Mines (ZCCM), to revamp and develop the existing Maamba coal mine for the purpose of producing and supplying coal to the new coal-fired power plant as well as selling coal domestically and internationally.

CASE STUDY CONT.

• The project is developed under public–private partner-ship with ZCCM, which represents the Zambian government, and this is being carried out on a build, own and operate basis.

• It has total estimated reserves of 140 million tonnes comprising high grade and thermal grade coal, spread over 1070 hectares out of a total concession area of 7900 hectares.

• The Company has revived coal mining operations and is establishing a mine-mouth, 300MW coal fired power plant, with a total capital outlay of around US$ 750 Million.

CASE STUDY CONT.

• Since the mine was reopened in May, 2010 the total coal production levels have reached over 400,000 tons in 2013.

• Since commencement of production in April 2010, Maamba Collieries Limited (MCL) has created 1, 460 jobs at the mine and the power plant construction site.

• These jobs are through the sub-contracted companies it has engaged to carry out various specialized works in Maamba.

• MCL has 215 direct jobs but also owns a subsidiary company called Maamba Development Trust (MDT).

SURVEY RESULTS • The survey consisted of 50 questionnaires which were

administered to the community. • The aim of the survey was to analyse the impact of Indian

investment on the sustainability of local communities in Zambia and to get the perceptions of the community on what they thought about the investment of the Indian owned company (Maamba collieries).

• This report benefits from a survey that was conducted on local communities in Maamba, a Township in Sinazongwe district of Southern Province of Zambia, which is about 350 kilometres from the capital city of Zambia, Lusaka.

SURVEY RESULTS CONT.• It was important to get the views of the community in this

survey in order to get a useful insight into how people perceive the current investment in their community.

• A description of the community, the people’s attitudes and their expectations from the company.

• Also the views help identify the needs of the community in order to provide services appropriate to those needs.

SURVEY RESULTS CONT.Profile of survey respondents

Table 1: Respondents Characteristics

Response Count

Percentage %

Total number of respondents 50 100 Male 26 52 Female 24 48

Table 1 shows the composition of the respondents by sex. Fifty two (52%) were male and 48% were female. Majority of the respondents were aged between the ages 30 and 39 years old with a percentage of 38%. The most common size of the households was between the ranges 4 and 6 with 46%, Seventy two percent (72%) of the respondents come from the area were the survey was carried out because they have lived there since birth.

SURVEY RESULTS CONT.

• How long respondents have resided in the area

The chart shows that twenty two percent (22%) of the respondents have lived in the area between 0 to 5 years.

SURVEY RESULTS CONT.

• Migration

Table 2: Community Perception of the Company Response

Count (yes) Percentage

% Do you feel that the presence of the company has benefitted the community? [11]

27 54

Have you benefitted from the presence of the company personally? [12]

28 56

Most of the respondents (94%) felt that there has been an influx of people into the region since the company started its operations.

Graph 1. Influx of people in the research area

0

5

10

15

20

25

30

35

high moderate none low very low

frequency

frequency

SURVEY RESULTS CONT.

Graph 2: To what extent do you think that the increase in people has put pressure on natural resources? [Q.15]

Graph 3: To what extent do you think that the increase in people has put pressure on basic infrastructure? [16]

05

1015202530354045

A lot Not a lot A little None non-response

frequency

frequency

SURVEY RESULTS CONT.

Displacement• Thirty one (31) of the

respondents were aware of how the land was acquired.

• The company bought the land from the community through the chief.

• In comparison with the responses the respondents gave, they believe the company bought the land from the government.

Table 3: Conflict amongst members

Response Count

(Yes) Percentage

% Have you witnessed any tensions between the community members who were originally here and those who moved here after the company begun its operations? [Q.18]

31 62

Have there been measures to resolve the conflicts? [Q.20] 8 16

The table shows that 62% of the respondents have witnessed tensions between the community members who were originally there and those that have moved there. Those that agreed to witness the tensions were not victims personally. The people experiencing tensions/ aggrieved in this area are the locals because they say that they are competing for jobs with foreigners and people coming from other parts of the country. They feel they are not given first priority when it comes to job opportunities.

In terms of measures being undertaken, 16% of the respondents agreed that measures were being taken to resolve the conflicts, while 34% said no measures were being taken and 42% responded that this was not applicable. For those that agreed that measures were being undertaken responded that the interventions were being done by the chiefs mostly and to a lesser extent the area councillor.

SURVEY RESULTS CONT.• The acquisition of the land by the company was done

according to the laws and regulations of the country.• These are the Land Act 1995, Land Acquisition Act 1996

and the Mines And Minerals Development Act 2008• The primary pathways for acquiring customary land are

through the consultation of customary land owners (Lands Act 1995, Land Acquisition Act 1996).

SURVEY RESULTS CONT.

Table 4: Land Acquisition Response Count

(yes) Percentage

%

Were your land rights affected by the land acquisition? [Q.24]

27 54

Do you feel it was a fair and just process? [Q.26]

16 32

The land rights regulations in Zambia are the Lands Act (1995) and the Lands Acquisition Act. In relation to land rights, they have been issues pertaining to ownership of the houses that have been built by the company after some members of the community were displaced. The displaced people cannot get title deeds for the houses because the land is owned by the company. The table illustrates that 54% of the respondents felt that their land rights were affected. it can be seen that 32% of the respondents felt that it was a just process while 58% feel that the process was unjust. This is due to the fact that they cannot get title deeds. All the respondents to whom the questionnaires were administered were not involved in the land acquisition process. 32 of the respondents would have preferred to be involved in the acquisition of land.

Table 5: Compensation Response Count

(Yes) Percentage

% Are you aware of people who were displaced during the establishment or expansion of the country project? [Q.29]

42 84

If yes were the displaced people compensated? [Q.30]

44 88

The table shows that 84% of the respondents are aware of the people who were displaced during the establishment/ expansion of the project. 88% responded that the people who were displaced were compensated. The community is aware of who was supposed to compensate the displaced people. The responses were reflective of the actual laws of the land, 42 responded that the company was supposed to compensate the people and this is in line with the laws of the country, the land acquisition act states that Compensation is determined and paid to those private persons or bodies whose land is so acquired. Most of the respondents (30) felt that the whole process was handled well and that the reason why they stayed behind was because they were not affected by the expansion process. Their land is far from the construction site only the shop owners were affected.

SURVEY RESULTS CONT.

Infrastructure Investment

The presence of the company has brought about infrastructure development to the Maamba community. 58% of the respondents acknowledge that there is infrastructure development.

Graph 4: What infrastructural investments have taken place?

Graph 5: How accessible are the infrastructural developments made by the company?

The graph shows that 30% of the respondents felt that the educational facilities were easily accessible. 14% of the respondents felt that the medical facilities were also easily accessible. Even though some of the respondents felt that the company had some infrastructural developments with regards to the training facilities and to electricity, these facilities were however not easily accessible. 33 (66%) of the respondents indicated that the facilities can be used by anyone.

SURVEY RESULTS CONT.Economic Impacts• Most of the respondents (52%)

own the homes they live in. • In terms of employment

majority of them are self-employed with an income range of between K600 ($100) and K1500 ($250) this compared to the minimum wage of the country as stated by the labour laws is higher.

• The minimum wage according to the labour laws of Zambia is k520 ($86).

Gender Table 6: Gender Response Count

(Yes) Percentage

% Do you feel that the company created more job opportunities for women?

14 28

Does the company run any skills-development programme or any other schemes specifically for women in the community?

0 0

Do you feel that the socio-economic position of women in the community has changed since the company’s arrival

14 28

The table shows that only 14 members of the community felt that the company had created more job opportunities for women and that the socio-economic position of women in the community has changed since the company’s arrival. 8 of the 14 members that felt that the company had created more job opportunities for women and that the socio-economic position of women in the community has changed since the company’s arrival were male, whereas only 6 were female. Looking at the total number of females that were respondents 24 only 6 felt that the company had created job opportunities for the women and that their economic position had been changed since the company’s arrival. From the total number of men which was 26, only 8 agreed to this. What can be deduced here is that most of the respondents feel that the company has not provided job opportunities for the women and those that felt that the company has provided jobs are probably employed by the company.

SURVEY RESULTS CONT.• The respondents felt that the

company has increased the community’s employment opportunities.

• Thirty six (36) of the respondents felt that the company had increased employment opportunities to the community.

• Forty six (46) members of the community felt that were job losses as a result of the establishment of the company,

• Twenty four (24) respondents felt that these people were able to find alternative employment.

• A majority of 52% of the respondents felt that there had been an increase in the overall income of the local community.

• 54% of the respondents felt that the local economy had been impacted positively since the company arrived.

SURVEY RESULTS CONT.

Graph 6: What level of impact do you feel the company has had on employment generation?[Q.45]

Graph 7: To what extent do you think the company has created jobs for the community within the company? [Q.46]

SURVEY RESULTS CONT.

Graph 8: To what extent do you think the company has Created an environment for other business opportunities in the area?[Q.47]

Graph 9: Do you feel that the company has in overall impacted the local economy positively?

SURVEY RESULTS CONT.Environmental Impact Table 7: Responsibility towards Environment Response Count

(Yes)

Percentage

Is this company environmentally responsible? [42]

42 84

Is the company taking any steps to restore the environment? [43]

17 34

42 respondents felt that the company was environmentally responsible but only 17 respondents felt that was company taking any steps to restore the environment. The areas that the community members felt were most vulnerable to degradation were: air quality, 56% of the respondents felt the company was negatively impacting the quality of the air; diseases, 68% of the respondents felt that the most of the diseases that were prevalent in the community were as a results mining activities in the area, land pollution, 80% 0f the respondents felt that the mining activities were negatively affecting the land, and forestry and vegetation, 60% of the respondents felt that the company’s mining activities were putting pressure on the forestry and vegetation in the area. The respondents were of the opinion that the only step the company was making to restore the environment was the replacement of water pipes.

Overall Graph 10: In what areas would you like to see Maamba Collieries focus on more in the

community?

The graph illustrates that 70% of the respondents felt that the company needed to focus more on improving the educational facilities in the community. The members of the community felt that the company needed to involve them (the community) and the government in the developments the company was making in the community. They also felt that the company should provide loans for them in order for them to establish businesses around the community.

KEY FINDINGS Social • The company has brought about employment

opportunities for the locals, leading to income generation which has been seen to be a positive impact for the community.

• There has been influx of people in the region since the company started its operations

SOCIAL IMPACT CONT.• Due to expansions by the company, some of the residents

in the community were displaced. • Those that were displaced were compensated by the

company. • According to the company the affected persons were

properly resettled – with a compensation package of physical houses, relocation allowance and other related infrastructure (like street lightning, water, recreation hall, roads).

• While Zambia has no resettlement policy, the government refers to the World Bank guidelines on resettlement in its communications.

TheretoFrom here

SOCIAL IMPACT CONT• The respondents have indicated that there has also been

infrastructure development as a result of the company’s presence.

• The company has employed some women from the community who are working in operatives, middle management as well senior management.

• The company does not run any special skill development or similar programme for women (non-employee) but plans are under way to teach unemployed women in income generating skills.

ECONOMIC IMPACTS• Employment opportunities have been increased in the

community.• They have been job losses as a result of the

establishment of the company.• But those that lost there jobs have been able to find

alternative jobs.• The company has created other employment

opportunities through backward/forward linkages.• The community feels that there has been an increase in

the overall income of the local community.• The local economy has been impacted positively.

ECONOMIC IMPACTS• Civil society organizations indicated that much still needs

to be done for the surrounding communities of the mines in terms of employment.

• The mining sector is characterized with casual employment and a number of employees have been laid off in the last couple of years.

• they pointed out that there has been a reduction in agriculture and pastoral activities due to mining operations in the local community, by the company.

ENVIRONMENTAL IMPACTS

• The respondents felt that the company was environmentally responsible but a large number of them also felt that the company was not taking any necessary steps to restore the environment.

• The respondents were of the opinion that the only step the company was making to restore the environment was the replacement of water pipes.

• 80% 0f the respondents felt that the mining activities were negatively affecting the land, and forestry and vegetation and that most of the diseases in the area were due to the mining activities.

ENVIRONMENTAL IMPACTS CONT.• In response to these concerns the company is taking the

necessary steps to protect the environment by undertaking massive landscaping within the mine area where trees and lawns have been planted.

• Trees have also been planted in the township. The company is also sensitising the community on the dangers of indiscriminate dumping of plastic waste in the environment through “keep Maamba free from plastics” campaign

OVERALL• The respondents felt that the company needed to focus

more on improving the educational and health facilities in the community.

• the company, they pointed out that they have carried out community need based projects through Corporate Social Responsibility (CSR.).

• The company also has a policy that defines CSR. Through this policy the company has committed USD3/ tonne of washed coal sold is channelled towards the company’s CSR

• the company’s CSR through the Provision of free medical camps to rural communities, Construction of roads and foot bridges.

OVERALL CONT.• The company further says that the engagement with

community has been good and this engagement is being done with the guidance of the company’s stakeholder engagement plan.

• The CSO’s indicated that they were still controversies regarding the investment in the community. Controversies with regards to people being displaced from their land and that their compensation was not adequate.

• As well as the environmental problems that is caused by the mines. There was a very strong uproar, the local people were not interested in the operational support.

OVERALL CONT.• Issues of Emission, the company said that these

emissions are due to heavy traffic to and from the construction site which is normally attended to by regular watering of the affected roads.

• The Maamba Collieries is not a member of the chamber of mines of Zambia.

• The civil society organisations feel that Indian investment is no different from other investment coming to the country as all investors come with the purpose of making profits.

• All stakeholders feel that the measures and/or actions that need to be taken to improve the positive benefits in terms of social, economic and environmental aspects to spill over into local communities are;

OVERALL CONT.

I. More enquiries into the investors should be done. This should be through open conversation/communication before these companies can invest in the areas. This open communication should highlight/ measure what the local are letting go by introducing the table.

II. Mining companies should have improved dialogue with the members of the community to find out what the community feels as important.

III. There is need for constant monitoring and evaluation on the company’s commitment to safeguarding the environment.

OVERALL CONT.

IV. communities need to be sensitized on the environmental impacts of the mines for them to be proactive and be able to identify and act on any violations from the mining company and not wait on government or the environment agency to act.

V. They feel that other actions that need to be taken for more benefits in terms social, economic and environmental aspects towards the community is by expanding and upgrading existing infrastructure like schools, hospital, banks, shops, housing, road network to service the ever increasing population.

VI. All operatives in the mine and thermal power plant construction should be environmental friendly.

OVERALL CONT.• The company has had some coverage by the media on

their CSR and on the controversies of the mine.• Some of the stories have been on the coal power

station, the positive impact of CSR on the members of the community and on the construction of their new smelter and power plant.

• A statement made by the management on occupational health and safety of the workers. This was a positive story because it came from the company in protecting the employees.

RECOMMENDATIONS Seeing that CSR is not discretionary. There are no

tangible guidelines for firms on how to implement CSR programmes in the country. It should therefore, be considered that a policy on CSR should be in order for the surrounding communities and the country at large to feel benefits from foreign investments.

Promote knowledge and skills transfer to local workers to increase their participation in the mining workforce. Mining companies should be required to implement training for the local residents in the surrounding communities.

RECOMMENDATIONS CONT.In order to prevent potential conflict between foreign

workers and locals mining companies should start sharing information on the labour market.

Best practices• NFC African Mining Plc a fast growing mine with a new

shaft having been sunk in 2010 at the West Ore body has improved the lives of people in Chambishi through CSR interventions such as donation of sewing machines, donation of heavy duty equipment to local authorities, rehabilitation of roads and police cells, construction of classroom blocks among others at a total cost of US $596,400 for the period 2006 to date.

WAY FORWARD

• Advocacy programmes should be done to bring out the importance of CSR programmes and the impact it might have on society and if the beneficiaries are to appreciate and accept such undertakings.

• There is need to stir up dialogue that brings mining companies, community members, CSO’s and government to the table to discuss the specific ways in which mining development will impact citizens’ lives is required.

POSSIBLE IMPLICATIONS• The possible implications for the BRICS here is that as they

invest in the country and the sector they will tend to emulate what Nava Bharat is doing in terms of business responsibility.

• There is potential for this practice to be adopted by other investors to the country. But there is also need for such practices to also be heavily practiced by government.

• The government can work as a catalyst and play a crucial role by viewing CSR and codes of conduct as cost-effective ways to enhance development.

• Companies that are already leading by example like Nava Bharat can spread the information on the spill over of CSR to communities and show how valuable it is to implement CSR.

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