ZAMBIA: EFFECT ON COPPER EXPORTS OF CLOSING OF ROUTE THROUGH RHODESIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700050007-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 12
• Document Creation Date: December 20, 2016
• Document Release Date: March 10, 2006
• Sequence Number: 7
• Publication Date: January 1, 1973
• Content Type: IM

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Confidential
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
Zambia: Effect on Copper Exports
of Closing of Route Through Rhodesia
CIA
SVin. S
Uff"U"CUMENT rR'
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FILE COPY
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January
1973
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
January 1973
ZAMBIA: EFFECT ON COPPER EXPORTS OF CLOSING
OF ROUTE THROUGH RHODESIA
1. On 10 January the Rhodesian route that handles about 50% of
Zambia's copper exports of 55,000 metric tons a month was shut down.
Although there is no absolute physical barrier to the movement of all this
copper through two alternative routes - overland by road or road/rail to
the Tanzanian port of Dar es Salaam, or overland by rail through Zaire
to the Angolan port of Lobito, which handled 30% and 20% of Zambia's
copper exports, respectively - political and managerial problems would have
to be resolved before the entire displaced tonnage could move. A full
resumption of copper shipments would require cooperation from China,
whose equipment and resources are now being used on the Tanzam Railroad.
Even if Zambia ships all its copper, however, it has no chance of being
able to avoid a sharp drop in the volume of its imports because of inadequate
transport capacity.
2. As for the first alternative route, for the longer term the truck
fleet of 500 units now employed on the 1,100-mile Tanzam Highway (the
Great North Road) to Dar es Salaam (see the map) could be augmented
by rounding up an additional 500 trucks on contract and by re-directing
the use of part of the 1,000 trucks now estimated to be engaged in the
Chinese-sponsored Tanzam Railroad project. Furthermore, the 437-mile
completed portion of the Tanzam Railroad might be used as a supplement
to the road, which is in especially battered condition in that particular
stretch. The port of Dar es Salaam does not pose a physical barrier to
the export of additional copper in the amounts under consideration.
Note: This memorandum was prepared by the Office of Economic Research
and coordinated within the Directorate of Intelligence.
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(rd pqu?6m~
(,aJhidd
3. The political problem of making appropriate arrangements with
the Chinese on the Tanzam route would be small compared with the
managerial and administrative problems of:
? Stepping up the efficiency of the existing road operation
without incurring the excesses almost typical of the less
developed countries - for example, the overloading of trucks
and the failure to control fuel supplies;
1 ATLANTIC
OCLAN
I ecngueL~
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2
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9 Providing the necessary management and manpower to
increase the physical flow through the port facilities at Dar
es Salaam.
4. As for the second alternative route through Zaire and Angola,
the political atmosphere is a deterrent to its use. Zambia's President Kaunda
wants to avoid exporting more copper through Portuguese territory. On
the management side, the Zaire-Lobito railroad line could carry large
additional tonnage only if managerial efficiency is higher than usual and
if extra rail cars are provided.
5. The prospects for carrying a substantial additional tonnage over
the alternative routes (over and beyond small increments) thus depend on
the favorable resolution of a number of intertwined political and economic
considerations. We do not believe that these problems are likely to be
resolved in a matter of weeks. In the short run, we estimate that only
40% (11,000 tons) of the 27,000 tons of copper formerly transiting
Rhodesia each month will reach maritime ports via alternative routes. Of
equal importance, little of the approximately 65% - some 70,000 tons a
month - of total imports formerly received via Rhodesia can be shifted
to other routes for at least several months.
6. So far the shutdown of Zambia's copper shipments through
Rhodesia has had little effect on the world copper market, which indicates
a general belief that normal deliveries will soon be restored. The most
important economic effect will be the cumulatively serious impact on
Zambia itself - on its foreign exchange reserves and on its imports of
machinery and materials necessary to keep the domestic economy operating.
If the shutdown persists, Rhodesia also will be feeling the cumulative loss
of transit fees at a time of foreign exchange stringency. Because both nations
overreacted in the situation, political pressure for settlement is being added
to the mutual economic interest in restoring the status quo ant:. Already,
a movement toward accommodation is apparent.
Recapitulation of Events
7. Zambia and Rhodesia are ergaged in their most serious
confrontation since Rhodesia's Unilateral Declaration of Independence
(UDI) from the United Kingdom in November 1965. A recent upsurge in
terrorist attacks by Zambia-based Rhodesian guerrillas prompted Salisbury's
decision on 9 January to close its border with Zambia to all but copper
movements until Lusaka brought such incidents to a halt.
8. In early December, Rhodesian officials reported skirmishes with
a guerrilla band and uncovered a sizable arms cache. Just before Christmas,
3
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terrorists raided two farms in the first attack on whites since early 1970
and followed with a series of land mine incidents in late December and
early January. In a statement of 10 January in which he reiterated his
support for African liberation movements, President Kaunda announced that
he was shifting Zambia's copper exports away from Rhodesia and freezing
payment ?o all imports from Rhodesia, South Africa, and Mozambique until
they arc actually delivered. Among these imports were mining equipment
from South Africa and ir;lustrial materials necessary for continued operation
of Zambian mines. Copper had been exempt from Salisbury's border closure,
presumably because of the more than US $20 million in transit fees
annually paid to Rhodesia, which currently is short of foreign exchange.
Significance of Copper
9. Copper is the foundation of Zambia's economy. Mining and
processing of the metal account for more than one-half of total government
revenues, more than 90% of foreign exchange earnings, and almost 40%
of gross domestic product (GDP). Outside of the copper industry the
economy is underdeveloped, relying on imports to supply a major share
of domestic needs of all kinds except for basic foods in good harvest years.
Imports continue at a high level despite efforts to increase the number
of import-substitution industries and to cut back consumption of luxury
goods.
10. Production of copper in 1971 reached 633,000 tons valued at
$630 million and was 394,000 tons in the first seven months of 1972.
Almost half of the copper exports have been shipped by rail through
Rhodesia and the ports of Beira and Lourenco Marques in Mozambique;
perhaps 20% has exited the Angolan port of Lobito via Zaire, with the
remaining 30% being trucked over the Tanzam Highway to the port of
Dar es Salaam.
11. A decline in Zambian output and in world copper prices led to
a serious reversal of Zambia's economic fortunes in the early 1970s. Copper
production was cut by about 8`,%o by the flooding of the countrj's second
largest mine at Mufulira in September 1970; restoration will not be complete
until mid-1974. A general weakening of the world market has dropped the
price of copper from almost $0.80 per pound in early 1970 to around
$0.50 per pound at present, reducing Zambia's merchandise trade surplus
in 1971 to $125 million, less than one-fourth that for 1969. Foreign
exchange reserves have fallen to about one-fourth of 1970's record high
of $562 million. Government revenues also dropped substantially, as most
public funds are derived from taxes on profits of the mining sector. The
budgetary deficit was $271 million in 1971 and was probably even greater
in 1972. Deterioration of the budget position has forced Zambia to slash
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investment spending from the level envisioned in its Second National
Development Plan (1972-76). Rural development programs will probably
be most affected by the cutback.
Efforts to Reduce Dependence
12. President Kaunda may now test the viability of his seven-year
program to wean Zambia away from economic dependence on Rhodesia.
Almost immediately after UDI in 1965, Lusaka embarked on a campaign
to break all economic relations with the Smith government. British colonial
policy had gone far toward integrating the economies of Rhodesia and
Zambia, however, and Zambia soon encountered a host of transport and
supply problems. The copper industry depended almost entirely on
electricity from the Kariba power complex, jointly owned with Rhodesia,
and on coal from Rhodesia's Wankie coalfield. Furthermore, the rail line
through Rhodesia at that time was the only transport route capable of
handling Zambia's annual foreign trade traffic of more than 3.5 million
tons.
13. Zambia has spent several hundred million dollars to reduce this
dependence, in the meantime relying on Rhodesia's rail system to carry
most of its goods into and out of the country. Three hydroelectric projects
have been undertaken to reduce the need for power from the Kariba
complex, but Kariba still accounts for a large share of Zambia's electricity
needs. The Tanzam Highway, formerly the Great North Road, has been
upgraded into a dual-lane all-weather road. However, an older 100-mile
segment immediately west of Dar es Salaam has badly deteriorated. Oil
requirements - the most critical problem faced by Kaunda after UDI -
are now met by a pipeline from the Tanzanian coast. The country's copper
industry now uses only domestic coal; yet imported raw materials are needed
to improve the quality of this coal.
14. Zambia has available two principal alternative transportation
routes for shipping copper that formerly transited Rhodesia: (a) the Tanzam
Highway, which currently handles 30% of Zambia's copper tonnage; and
(b) the rail route through Zaire to the Angolan port of Lobito, which
currently handles 20%. The alternative favored by Lusaka is the 1,133-mile
Tanzam Highway. This highway connnect the Tanzanian port of Dar es
Salaam with the town of Kapiri Mposhi on the Zambian rail line to Lusaka
and the copper fields. The road is fully -?aved from the railhead in Zambia
to Dar es Salaam, but, as mentioned above, the easternmost section between
Morogoro and the coast - a distance of about 100 miles - is in poor
condition and could adversely affect the movement of traffic. An American
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firm - Nello Teer of Durham, North Carolina - is under contract to
upgrade this portion, but the completion date is at least 18 months away.
15. The availability of additional trucks and drivers for hauling copper
on the Tanzam Highway is the main short-run constraint on Lusaka's ability
to ship out additional copper. The largely government-owned
Zambian-Tanzanian Road Service, Ltd. (ZTRS)1 has been trucking about
16,000 tons of Zambian copper to Dar es Salaam each month. ZTRS has
a fleet of about 500 trucks, some of which are currently employed in the
emergency distribution of foodstuffs to the drought-stricken interior. ZTRS
officials claim that they can contract for another 500 trucks from various
areas of East Africa. This would give them a combined fleet of some 1,000
vehicles with 30-ton capacities, which could carry current shipments and
accommodate the estimated 27,000 tons of copper per month that had
been going across Rhodesia, allowing for 40% of the fleet being out of service
at any one time. This proportion of the truck fleet out of service is easily
explained by the poor road condition east of Morogoro and customary
overloading.
16. A minimum of two months, however, is probably needed to seek
out the additional 500 trucks. Delays may be encountered because of
existing service contracts and emergency requirements for the trucking of
relief supplies to drought areas not only in Zamb'a but also in neighboring
countries. Consequently, Lusaka in the next few weeks can rely on only
those trucks currently held by ZTRS which could be freed immediately
for transpc rtirig copper. If the company can call upon all of its 500 trucks,
and if an out of-service rate of 40% is reasonably accurate, ZTRS could
accommodate a total of around 25,000 tons of copper a month, an increase
of about 9,000 tons from its current rate. This would leave - in the short
run - some 18,000 tons a month to be exported by other means.
17. Long-run prospects for trucking all of Zambia's displaced copper
to Dar es Salaam are clouded by the uncertainty of obtaining the 500
additional vehicles and the questionable ability of ZTRS's management to
cope with a massive increase in both the volume of goods to be hauled
and the number of vehicles to be kept operating. These factors would
probably limit the long-term increase in copper shipments through Tanzania
unless more efficient outside assistance is obtained.
1. ZTRS was incorporated in May 1966 with an autho:aed capital of $5.6 million. The Zambian
and Tanzanian governments each own 35%, while the' managers of the company, an affiliate of
Fiat, have 3U%.
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Enter the Chinese?
18. A potential source of assistance is the extensive Chinese transport
resources currently employed in constructing the Tanzam Railroad. So far,
there is no indication that diversion of Chinese trucks and drivers has been
sought or offered. Peking has nearly 1,000 trucks in Tanzania with capacities
ranging generally from 3 to 7 tons. These trucks currently carry materials
and supplies from Dar es Salaam to various construction sites several
hundred miles inland and could carry copper on the return trip to either
Makumbako, where it could be transloaded onto the completed portion
of the railroad, or all the way to Dar es Salaam. Railroad officials estimate
the rail line could transport monthly 36,000 tons of copper and would
bypass the worst part of the Tanzam Highway east of Morogoro.
Negotiations for use of the railroad and/or Chinese trucks would have to
be on a government-to-government basis. A possible stumbling block could
be Peking's reluctance to place its equipment under ZTRS control, which
Lusaka may want to do. Tl-e Chinese are almost certainly aware of the
high casualty rate of ZTRS trucks and delays caused by poor management.
More important, the Chinese are striving to win world prestige by cot ileting
the railroad ahead of schedule - possibly by the end of this year - and
would be reluctant to cooperate to an extent that would slow construction
work. Should an agreement be reached between Zambia and China, the
overland route to Dar es Salaam would probably be able in the long run
to handle all of Lusaka's displaced copper exports.
The Port of Dar es Salaam
19. The eastern terminus of both the Tanzam Highway and the
Tanzam Railroad is the Tanzanian port of Dar es Salaam. The port has
undergone an extensive expansion program and handled more than
2.5 million tons during 1972. Port officials state that a recent decline in
Zambian trade - primarily imports - tru;isiting Dar es Salaam has created
an excess capacity of 20,000 tons a month. Because copper bars and sheets
are a simple problem in handling at a port, the harbor master believes
existing facilities could accommodate the 27,000 tons formerly going out
via Rhodesia and Mozambique. Refined copper needs no special storage
facilities and can be left in the open with no damage.
20. Although the situation at Dar es Salaam probably is not as flexible
as is being claimed, the port almost certainly could handle the estimated
9,000-ton short-run increase in copper exports. A substantially greater
long-term increase probably could be handled with minimum difficulties.
Current cargo-handling performance at Dar es Salaam indicates that
9,000 tons of copper could be loaded in approximately eight days using
a single berth.
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21. The second route available to Zambia for transporting copper is
the railroad running from the Zambian copper region through the Zairian
copperbelt to the Angolan port of Lobito. Because of his longstandin^
opposition to the Portuguese, President Kaunda will probably use this route
no more than is absolutely necessary. The route has been carrying about
20% of Zambia's copper exports and 10% ofthe country's imports. Political
differences aside, Zambia would encounter difficulties in switching the
increased volume of trade onto the Lobito route. Its immediate excess
capacity may already have been largely pre-empted for the movement of
Zairian copper - some 2,000 tons a month - that formerly transited
Zambia, Rhodesia, and Mozambique. If this is the case, Zambian shipments
over this line could hardly be increased by more than a few thousand tons
a month. A gradual buildup to a greater volume using Zambian and Zairian
cars formerly used on the Rhodesia-Mozambique route is conceivable. But
many of these cars - their number has not been reported - were in
Rhodesia and Mozambique at the time of the border closure.
22. The presumed availability of these rail car's may have prompted
some Zambian copper industry spokesmen to express their confidence that
the Lobito route could immediately carry about half of the Zambian copper
formerly shipped through Mozambique. Over the longer term, the Lobito
route could be expanded to handle all of Zambia's copper exports that
formerly used Rhodesia's rail system. It would take six months to a year
after a decision to expand was made before the necessary equipment and
technicians could be acquired. It would involve an investment of some $35
million to $50 million. Zaire and Angola would almost certainly require
assurances that Zambia would continue to use the line long enough to justify
the requisite financial outlay. With the Tanzam Railroad likely to be
completed by 1975 or sooner, Kaunda is in no position to provide such
assurances.
The Future for Copper Exports
23. During the next month or so, Lusaka may be able to transport
only about 40% of the 27,000 tons of copper formerly transiting Rhodesia
each month. At current copper prices, this could subtract about $20 million
a month from Zambia's already low foreign exchange reserves, now less
than $150 million. Beyond this short-run period, management deficiencies
and equipment shortages probably will prevent Zambia from marketing all
the copper it produces unless the Chinese make available some of the drivers
and trucks currently servicing the Tanzam Railroad project.
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Copper Exports Not the Only Problem
24. Kaunda must also find ways to satisfy his country's import needs.
Since 1969, most non-essential imports have been substantially reduced as
part of a concerted effort to increase foreign reserves. This has been
necessary so that capital goods needed to build up Zambia's infrastructure,
especially its transport system, can be imported without incurring a
burdensome foreign debt. Higher living standards in urban areas are resulting
in continued pressure to increase consumer imports. Moreover, foodstuffs
must be brought in to supplement poor harvests caused by the current
drought. In sum, the government will find it difficult to pare the present
amount of imports without adversely affecting economic growth and
consumption. Kaunda has already aroused controversy with the
implementation of his one-party state in December 1972 and must be careful
not to further antagonize Zambia's highly politicized urban population.
25. The handling of imports formerly brought in through Rhodesia -
about 70,000 tons a month - will be far more of a problem than
transporting outbound copper: (a) time-consuming arrangements must be
made for increased port facilities at Dai es Salaam because the wi&? variety
of imported goods cannot stand the rough-and-ready handling that suffices
for copper; and (b) additional hauling equipment will have to be obtained,
and the Chinese resources - so important in Zambia's hope to ship its
copper abroad - cannot be made available without setting back construction
work on the Tanzam Railroad.2 A commercial airlift from South Africa
may be in the offing. This emergency route probably would be restricted
to essential industrial materials and spare parts for Zambia's mines.
Stockpiles of some items such as lime and sulfuric acid - essential for
copper refinement - are sufficient to cover only two months' requirements.
2. The Lobito route is not considered a reasonable short-run alternative for any sizable increase
in imports. Unless arrangements were worked out with Zaire regarding the allocation of goods to
be brought in, use of the Lobito route would be largely pre-empted by that part of Zaire's import
requirements now denied access through Rhodesia - about 35,000 tons a month.
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