Mining Collapse Cripples Africa’s Dreams of Prosperity – Wall Street Journal

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“It’s like being back to square one. We never expected such a situation,” said Reagan Musonda, one of about 4,000 workers who lost their jobs at


PLC’s local Mopani unit in November. Saddled with tuition bills for three siblings and two children, Mr. Musonda—whose grandfather named him after the 40th U.S. president—is turning the forest on a patch of land he owns into charcoal to make ends meet.

Kitwe’s trauma is reverberating across Zambia and other resource-reliant African economies from South Africa to the Sahara. After years of blistering expansion, Nigeria, Angola and South Africa—whose oil, gold and platinum industries have long driven the region’s growth—are mired in crises that are freezing development and testing increasingly cash-strapped governments.

Turmoil is also raising the prospect of political change. Angola’s entrenched regime is facing unprecedented public criticism. Local elections in South Africa this year could see the ruling African National Congress lose control of key cities like Johannesburg and Pretoria for the first time.

Zambia’s president faces a tough challenge in August elections from Hakainde Hichilema, whom he defeated by less than 30,000 votes in a special election last year after the death of his predecessor.

“We are seeking public office to inject some sanity into the economy,” Mr. Hichilema said, overlooking the manicured lawns and helipad of his sprawling compound on the edge of Lusaka. “There is economic war here and people are dying.”

The dramatic shift has revealed how reliant many African economies remain on commodity riches, prompting some investors to reassess an “Africa Rising” narrative that exaggerated gains in manufacturing, infrastructure and education.

In 2011 the African Development Bank crowed that the continent’s nascent consumer class was already 350 million strong. Multinational banks, brewers and car makers clamored to make customers of them.

As it turns out, the bank’s tally included Africans who make hardly more than $2 a day, an income too low to put many families in the market for world-class goods and services.

Credit Suisse

concluded in October there are actually just 20 million middle-class Africans, defined as having the equivalent of at least $50,000 in assets, adjusted for local prices. That is a mere 3% of the continent’s exploding population.

“The emerging middle class has come under enormous scrutiny,” said

David Cowan,

Citigroup Inc.

’s chief Africa economist. “Africa got oversold as an idea.”

Business has plummeted at a traditional market, top, as well as at the sleek Mukuba Mall, open for less than a year.

Some companies that spent years evangelizing Africa’s economic potential are in retreat.


PLC wants to sell a majority of its sprawling business on the continent.

Nestlé SA

in June cut 15% of its workforce in 21 African countries. The International Monetary Fund has cut its forecast for the region’s growth this year to 4% from 4.3% previously and chided officials for failing to use the commodity boom to create factories and commercial farms that could employ the 18 million Africans entering the workforce each year.

“The number of unemployed youths is frightening,” said

Antoinette Sayeh,

director of the IMF’s Africa program.

Africa remains the world’s second-fastest-growing region behind developing Asia. Construction cranes that pepper the skylines of Lagos, Johannesburg and Nairobi testify to the buoyant ambitions of the continent’s wealthiest people and businesses.

Zambian officials remain upbeat, arguing that more than $8 billion in foreign-direct investment during the boom will protect them from what investors have labeled “the superbust.”

“The panic of people now is because they lost their jobs, but they need to wait, said

Chanda Kabwe,

district commissioner for Kitwe, the mining hub. “In six months we will see a new cycle and new jobs germinating.”

Business leaders agree that Zambia’s decade of stable government and high copper prices transformed the country. Now they are forecasting a profound slump.

Activity has slowed at the Chinese-owned Chambishi Copper Smelter mine near Kitwe.

The prospect of protracted economic pain caught many Zambians off guard after years of plenty.

Many of Zambia’s 16 million people traverse their boomerang-shaped nation on thousands of miles of road paved by Chinese contractors. Miners and telecom technicians unwind at Pizza Hut restaurants and mirror-walled dance clubs. In recent years many took their first vacations to Johannesburg, southern Africa’s retail and cultural mecca.


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Mining Collapse Cripples Africa’s Dreams of Prosperity – Wall Street Journal