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Home Field Trips Copper Tour Kitwe

Kitwe

Overdependence on Copper

Next issue - Industrialisation of Zambia >>

Whereas the richer industrialised countries tend to have diversified economies many LDCs depend heavily on the export of a few primary commodities.

Source: Reconstituted from Table 3 (Oxfam 1993, P. 8)

As you can see Zambia is no exception. The colonial government of Britain organised the country's resources to produce and export copper. Following Independence this continued with limited success at industrial diversification. Many economists would argue that Zambia demonstrates an extreme case of overdependence. Whilst the earnings from copper exports contributed considerably to periods of substantial economic growth, dependency on a single or few primary commodities opens the economy up to a number of dangers.

The dangers of overdependence of copper

• The demand for copper is being replaced by alternative synthetic substitutes such as fibre optics and silicon chips. As a consequence the overall demand for copper may decline or at best grow at a slower rate. As a consequence of demand changes and improvements in technology enabling supply to increase, the market price of copper has declined
• The reliance on copper mining and refining has created many environmental problems such as air and water pollution that has a serious impact on the health of people living in the vicinity of mines and smelters.
• A long-term downward movement in prices of copper means that the revenue and profitability of copper producing firms also decline. This has a number of negative effects on development.

The impact on economic development

• Firms attempting to cut their costs will make workers redundant increasing the already high level of unemployment and resulting poverty.
• Foreign firms are less likely to invest in the industry. This has been demonstrated by the reluctance of foreign mining businesses buying parts of Zambian CCM.
• There is no strong incentive to invest in more environmentally desirable smelting and processing techniques.
• The inflows of foreign currency from exports are reduced thus worsening Zambia's balance of payments and debt situation.

The irony is that the level of copper consumption in Zambia itself is small. Yet their economy is so dependent upon its fortunes in the world markets. The minerals are produced almost entirely for export and traded on volatile international commodity markets over which they have little if any control. It's not surprising then that the Zambian government sees the need to encourage other non-traditional sectors of the economy such as gemstones and floriculture to reduce this dependency.

Next issue - Industrialisation of Zambia >>

Related Glossary Items:
Liberalisation
Inward Oriented Development
Outward Oriented Development
Import Substitution
Parastatals

Related Issues:
The Importance of Copper to the Economy

Related Theories:
Price Movements of Primary Commodities
Commodity Agreements