The Zambian government’s moves on fellow Konkola Copper Mines (KCM) investor Vedanta Resources is a disturbing direction for those worried about resource nationalism trends on the continent. The nation has diminished in its mining investment attractiveness over the past five years and the government has worryingly cast a further shadow on the mining industry by taking its latest path.
KCM is the nation’s largest integrated copper producer and a large employer, employing about 13,000 people in the African country. A long-term shutdown to mining at KCM’s operations in the country could dramatically affect employment in the country of 17.1 million people, which is also the continent’s second-largest producer of copper.
Zambia’s government owns 20.6% of the privatised government asset through its state mining company ZCCM-IH and is setting a disturbing course by pressing ahead with appointing a liquidator to its investment and encouraging the sell-off of significant shareholder Vedanta’s 79.4% majority stake in the asset.
The landlocked regime’s move to force an ownership change has political as well as mining implications, with parts of the nation understandably concerned about the possibility of a proposed sell-off of Vedanta’s stake to the country’s largest creditor, China.
High-level leaders in Zambia have waded in on KCM, with Zambian Mining Minister Richard Musukwa saying KCM’s alleged breaches of environmental and financial conditions should serve as a warning to other companies and be a signal to “put their houses in order”. Musukwa’s comments followed Zambian President Edgar Lungu’s comments on national radio that the nation was looking to “divorce” from its relationship with Vedanta and find a new investor for KCM.
Vedanta has contested ZCCM-IH’s appointment of a liquidator, Zambian law firm Lungu Simwanza & Company, with the move now with an international arbitrator to work out of Johannesburg, as per a shareholders’ agreement.
KCM’s operations at Konkola are not without controversy, with the London-headquartered company being accused by the Zambian government of breaching licence condition. The company which has its origins in Mumbai, India, more than four decades ago, is also answering a community suit in London from several thousand people who surround KCM’s Zambian operations who argue health and environmental effects.
KCM and its owners certainly have responsibilities to the communities in which they operate. However, by pushing to withdraw KCM’s mining licence, and making moves to force it into liquation, Zambia’s mining government arm has undeniably had a negative effect on expected future production and the trust would-be company investors would place in the nation as a suitable economic destination.
To counter any further dampening of investment sentiment toward Zambia and to prevent even more failures to reinvestment in new equipment, the mining industry and government must adopt a proactive approach during Zambia’s upcoming ZIMEC conference for mining next week on June 13-14.
This is particularly important considering that the theme of the eighth Zambia International Mining & Energy Conference & Exhibition conference is ‘Creating an attractive investment framework to catalyse Zambia’s mining & energy sectors’.
Receptiveness towards and certainty of investments should be a vital component of this focus for all parties hoping to move things forward. With that in mind, industry and government should set a proactive agenda during ZIMEC 2019 focused on the important work that must be done to get the industry and nation back on the front foot.
Let us set a progressive plan for change at ZIMEC and support industry efforts to reinvest in infrastructure and build a positive investment climate that protects jobs and projects and ensures continued benefits to workers, investors and communities.
- Yolanda Torrisi is Chairperson of The African Mining Network and comments on African mining issues and the growing global interest in the continent. Contact: firstname.lastname@example.org