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Zambia’s president collision course with mining giant
LUSAKA, June 23, 2019 (BSS/AFP) – If mounting foreign debt, an anaemic
currency and stagnating growth aren’t enough, President Edgar Lungu’s move to
break up Zambia’s largest copper mining firm threatens an investor exodus and
thousands of job losses.
Higher taxes on the mining sector were supposed to help Zambia with its
debt problem, but Lungu has taken a hardline approach with international
mining companies, accusing them of failing to pay taxes and threatening to
expel them from the country.
“Government will not take kindly to any form of arm-twisting,” he told a
recent mining and energy conference.
“Government’s expectation is for investors to operate within the confines
of the law — failure to do so will result in government imposing sanctions
and disengaging with the unwilling parties.”
The latest rhetoric follows a series of fiery speeches by Lungu condemning
London-based Vedanta mining company, the majority shareholder in KCM, the
country’s largest copper producer. Zambia holds a minority stake though a
state-owned firm.
Lungu, 62, has pledged to dissolve KCM, threatening Vedanta with “divorce”
and saying “enough is enough” in the dispute over taxes — winning cheers
from his supporters.
Zambia’s High Court last month appointed a provisional administrator
charged with selling off KCM’s assets.
Companies from Turkey, Russia, India, Canada and China are all interested
in buying the Vedenta unit, Lungu told Bloomberg News this past week, adding
that talks on a sale could be completed within one month.
Vedanta says it hopes for a negotiated solution, but the High Court
dismissed its application to join the liquidation proceedings.
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– Jobs, and politics –
The company — which employs 13,000 people in Zambia — has denied all
wrongdoing and accused the government of making “unfounded allegations” over
unpaid taxes.
It says it is a loyal investor in the country, but that its business is
unprofitable due to rising tax and electricity bills.
While his move against miners was ostensibly made to boost the economy,
observers also point to political interests: wooing support in the mineral-
rich Copperbelt region, where KCM’s mines are located, could prove crucial to
winning the next general election due in 2021.
Opposition leader Hakainde Hichilema has recently tapped into public anger
at KCM’s alleged failure to pay local contract workers and suppliers, thus
putting Lungu under pressure.
“There is political motivation in the attitude to KCM because the cries of
the people were getting louder — so the government ignorantly said they were
liquidating the mine,” said Charles Milupi, a leader of the Alliance for
Development and Democracy (ADD) opposition party.
“They should have considered the livelihoods of the people who depend on
KCM,” said Milupi, a former consultant at the company, adding that the
dispute meant “investors are jittery to come to Zambia”.
Analysts believe Vedanta, owned by Indian billionaire Anil Agarwal, could
be replaced by a Chinese company.
“Private property rights look increasingly vulnerable as the government
grapples with a sovereign debt crisis,” said Nick Branson, analyst with
London-based Verisk Maplecroft.
“President Lungu’s aggressive targeting of global commodity firms also
hints at Zambia’s increasing reliance on China, its largest bilateral
creditor.”
Zambia is Africa’s second copper producing country after Democratic
Republic of Congo.
Copper provides 70 percent of export earnings, and the nation’s foreign
debt has more than doubled since 2014.
Lungu seems determined to escalate the battle with Vedanta, but Chishimba
Kambwili, who leads the National Democratic Congress (NDC) party, told AFP
that the government must change course.
“The government should immediately reverse the liquidation of KCM. It is
either they appoint a receiver or embark on a rescue plan,” he said.
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