Swiss-based Commodity Trade and Life in a New Mining Town in Zambia

Copper cathodes at Kansanshi Mine in Solwezi District, Zambia’s Northwestern Province (Rita Kesselring, 2018)

Origin Zambia. 36 sheets. 2044 kg — times 50 or more. Who needs this massive stash of copper? China, of course. But also Switzerland: Over 3% of Switzerland’s gross domestic product (GDP) comes from commodity trade, thus contributing more to the country’s economy than tourism or the banking sector.

Zambian copper does not figure in Swiss import statistics, however, which reflects the fact that the traded metal does not reach Swiss soil. Commodity trading firms based in Zug and Geneva such as Trafigura, Cargill, Vitol, Gunvor and Glencore, and many others, get their margin from buying and selling a variety of commodities.

The Southern African country Zambia is highly dependent on the global copper price and on the investment of multinational companies which own the mines since the sector’s privatization in the late 1990s. Copper currently accounts for 70% of the country’s income from export.

Transit trade

Zambia and Switzerland are intimately linked through transit trade. More than 50% of copper processed in Zambia is traded through firms headquartered in Switzerland. We know very little about the way this one-sided trade relation shapes the country in the Global South, though. Having conducted 18 months of ethnographic field research in new mining towns in Zambia, I was left with the question what happens with the copper once it is extracted and processed into cathodes and anodes. I subsequently initiated the transdisciplinary project Valueworks, which, together with researchers and civil society groups from Zambia, Europa and China, traces the effects of Switzerland’s open arms (and sometimes closed eyes) policy for trading companies in Southern Africa. We use Zambia as a case study; we could easily look at Peru or Chile and probably see similar patterns.

It’s important to know that physical traders do much more than their name suggests: they are involved and invested in the logistics along the entire transport chain, in the case at hand in trucking companies, warehouses, petrol firms and harbor facilities in Southern Africa. A small number of large Swiss companies also offer essential services such as container shipping, certification, and customs management. These firms physically shape transport routes and thus influence societies in Southern Africa.

Kansanshi Mine

One mine, in particular, the Canada-based First Quantum Minerals (FQM), influences how Zambians live and relate to one another. It mines a third of the annual copper output in Zambia and owns several operations in Zambia; the two most prominent of which are Kansanshi Mine and Sentinel Mine in the Northwestern Province. Kansanshi Mine was the first commercial mine in Zambia when it opened in 1902 under the British South Africa Company, but it was largely dormant during the 20th century. Following the re-privatization of the Zambian mining sector, Cyprus Amax Minerals acquired the mine in 1997 but sold it on to FQM in 2001. It’s only then that things started to take off at a rapid pace. A highly mechanized open-pit mine was built within a couple of years.

Solwezi town and Kansanshi Mine in 2000 (Google Earth, 2000)
Solwezi town and Kansanshi Mine in 2016 (Google Earth, 2016)

As a result of that, the population of the adjacent town, Solwezi, had grown fivefold in just 15 years to approximately 260’000 residents. Despite the mine’s size, very few people find employment with what is today the largest copper mine by output in Africa. Only approximately 3’000 people are directly employed, and another 5’000 work at the mine site through subcontractors.

Unlike the Zug-based Glencore, FQM is not headquartered in Switzerland. However, all copper from its two Zambian mines is traded via trading firms based in Switzerland.

The new player in town

In Solwezi town, different groups of people deal differently with this massive new player in town. The municipal council is overwhelmed by the unprecedented growth of the town and struggles to provide services to the town residents. It doesn’t help that it works with a town development plan dating back to 1964; it means that the majority of urbanites live on land without title deeds and thus little tenure security. The town has grown into customary land which in Zambia is guarded by the traditional authorities. They, too, struggle to plan for their communities which are primarily farmers and some chiefs succumb to the temptation of selling land to investors for very little money. Land at the fringes of the town has become scarce and commercialized, and farming and building practices are intensifying as a result of that.

Buiding “the Chinese way”: saving on sand and cement (Rita Kesselring, 2015)

Most Solwezi residents vote for the opposition party; the central state has done little to protect citizens from the influence of the investors. Residents are differentiated socially and economically. Some have profited from the development of the area, while the majority is just getting by cultivating their gardens and fields and selling their produce on the markets. The lucky ones have a relative employed at the mine; but more often than not, employees come from the Copperbelt, an old mining area, bringing more experience and the necessary skills.

The expansion of the mine

There is another, more direct influence from the mine’s presence: its physical expansion — or the threat of it — affects people’s access to resources like land, water and forest.

Swimming pool at the mine’s private golf estate, where the management and their families live (Rita Kesselring, 2015)
Hand-dug well used by town residents as a source for drinking and washing (Rita Kesselring, 2015)

Very selectively, the mining company invests in infrastructure that serves the extraction of copper and its transportation out of town across the country and to the harbors. Only recently, for instance, it built a road to cut time between two steps in the production process. The construction of the new road directly affected more than 80 peri-urban households and the council was forced to change its plans to open up new areas for settlement.

While the council and also the central state would have some limited leverage to stop the expansion of the mine, it is often a question of time until the mining company gets its way. People can’t rely on the authorities. The non-synchronicity of municipal town planning and the expansion of the mine creates state governance gaps which only a small, well-connected number of residents can exploit to their own advantage.

Swiss-backed companies

Trading its copper through two off-take agreements with firms based in Switzerland offers FQM security of planning in Zambia. This does not mean that fluctuations of the global copper price do not affect the operation of the mine and the managerial decision-making of the mother company. However, the combination of low tax policy and a political environment benevolent of the mining and trading sector in countries like Canada and Switzerland results in a weakly regulated trading sector. And in Zambia, it gives these companies bargaining power when the President of the Republic of Zambia suggests, for instance, a change in the tax regime or higher electricity tariffs.

Power cut during election day in the 2016 general elections. Mines use 50% of the electric power in Zambia (Rita Kesselring, 2016)

Profits made from trade and speculation are not taxed in Zambia. This one-sided trading system has many more consequences than we typically see when thinking of commodity trade. To take responsibility for the effects of Swiss-based companies on countries in the Global South is also the key demand of the Corporate Responsibility Initiative. If it comes to a vote, it offers the Swiss a way to show accountability for Switzerland’s global entanglement.

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