Institute for War and Peace Reporting | Giving Voice, Driving Change

Georgian Mine Digs Deep For Survival

The Georgian government is giving an ageing industrial giant one last chance – to the fury of competitors
By Ekha Pkhakadze

The vast manganese mine and processing plant, which dominate the tiny Georgian town of Chiatura, have been saved from shutdown – but some are complaining the cost of salvation is too high.

The Chiaturmarganets mine, one of the biggest enterprises in western Georgia, has been hit this year by a wave of protests by workers demanding back wages. In February, 20 women descended into the mine and said they would go on hunger strike until they received four months pay that was due to them. A government delegation from Tbilisi failed to convince the women to give up the protest.

The strike only came to an end after President Eduard Shevardnadze personally took the decision to spend 800,000 lari (around 400,000 US dollars) from his presidential fund to cover two thirds of the debt.

Chiaturmarganets, which is 85 per cent owned by the state, is one of Georgia’s best known companies, extracting manganese from six shafts. Founded in the 1920s, it provided factories across the Soviet Union and Eastern Europe with the metal in Soviet times.

In recent years, along with the rest of Georgian industry, it has suffered a heavy slump, producing only 150,000 tonnes of manganese a year, when it had once turned out more than three times that. The company owes the state more than 27 million lari and runs up fines of around 8,000 dollars a day.

Last autumn, with Chiaturmarganets on the verge of collapse, the government stepped in to launch a reconstruction plan to save the mine. A new manager, Zurab Kapanadze, was put in charge of the project and a new director for the whole plant, Akaky Gurjidze, was appointed in February.

The decision to prop up the mine came with the full support of state minister (equivalent in Georgia to prime minister) Avtandil Jorbanadze, and mirrors a wider policy of supporting big companies that employ thousands of workers. But it has been criticised by smaller and more profitable companies and the environment ministry, which believes the manganese mine is a health risk.

“We need government lobbying for strategic state companies,” said Kapanadze, giving the rather unfortunate example of Great Britain’s support for the coal industry (most of which has now shut down).

Kapanadze revealed that the factory is now being charged only half the price for electricity that the local population was paying, and that it is asking for special concessions on railway shipping costs.

“To revive production we need money and we can receive it in two ways – either by declaring a privatisation tender, or finding our own funds,” explained another of the managers, Anton Kikabidze. “But we have not yet heard any concrete offers from investors and it will be hard to get any other funds.”

Kikabidze admitted that they had hoped that the reconstruction programme would take “five to six months” but “there turned out to be a lot of problems, one after the other”.

But he said that the new programme was already bringing results, with a resumption of exports of manganese to Ukraine.

The factory is now offering the government a debt repayment scheme, similar to one already being applied to an aviation and sugar factory in Tbilisi. The idea is that creditors to the government get paid in Georgian products, rather than cash. “The government can make a deal with foreign creditors that they get paid in manganese, which will simultaneously write off our debts to the budget,” said Kapanadze.

Chiaturmarganets would like to go one step further and receive a monopoly on the export of manganese. But this – along with all the other favours the mine is receiving – is infuriating its competitors.

The industrial giant has rivals in five local private firms, which mine the metal in shallow veins only 30-40 centimetres below ground level and all of which make a decent profit. Jumber Kharaishvili, one of the leaders of these firms, Marganets-2000, received an award for entrepreneurship from President Shevardnadze last year.

While the mine employs three thousand workers and works deep underground, the smaller firms have fewer employees and smaller overheads, as they work nearer the surface.

However, the competitors brush off criticism that they are interested only in profit, not in the wider community. “Last year I put 75,000 lari into the budget and there are 40 workers in my company, all of whom regularly get around 200 lari a month,” Kharaishvili, who has a reputation as a benefactor in the local area, told IWPR. “Isn’t that enough?”

Temur Tavberidze, director of another small firm named Kristall, lost his mining license last month and blames his big rival. “Chiaturmarganets isn’t capable of being the only firm that can make manganese concentrate,” Tavberidze said. “It used to lose out just the same when it had most of the privileges.”

Whatever happens to the mine, life is unlikely to get any easier for the Chiaturmarganets workers.

“People work down these mines in the most primitive conditions,” complained Temur Chumburidze, leader of the local trade union. “There is no special clothing, a whole group of people goes down the shaft with just one torch between them, there is no basic hygiene.”

Archil Megrelishvili has been employed at the mine for 26 years. His father also worked there for much of his life. “We used to have everything: a high salary, holidays in any resort, a pension at 50 year’s old,” said Archil. “Nowadays we get just 100 laris a month and that is a problem. People laugh at us, saying ‘you have gold and you are dying of hunger’.”

Eka Pkhakazde is a freelance journalist based in Kutaisi, Georgia