By MUBANGA LUCHEMBE
Addressing Konkola Copper Mines (KCM) workers, who had written a petition to President Hakainde Hichilema, Minister of Mines and Minerals Development, Paul Kabuswe explained that the UPND government would find a competent investor, to take over KCM on the Copperbelt once the mine’s liquidation process came to an end. Adding that consultations were underway on which investor would take over the mining giant.
The Mines Minister further explained that the government was aware of the operational challenges that resulted in ruining the welfare of thousands of workers and their families. Adding that the newly-elected government would not subject Zambians to suffer once a new investor took over KCM. Furthermore, he assured KCM workers that the government would address their problems starting with the issue of salary increments.
Whilst, some KCM workers who took turns complaining to the Mines Minister about their plight appealed to the government to immediately conclude KCM’s liquidation process. The Mines Minister’s long-winded assurances made to KCM workers had from the first been dismissed as a narrative full of hot air. But sometimes hot air is just what is needed when others want something hushed up. This was the case with the UPND’s position to vehemently insist that the Zambian government was not capable of running KCM. That raises the question: Why are UPND leaders loathe having to denounce Vedanta Resources?
Predictably though, the ruling party’s Chairperson for Mines, Percy Chanda instead advised that the State should consider re-engaging KCM and handover the mine to Vedanta. Furthermore, he explained that mining was a costly venture adding that the state was broke. He wondered how the government through ZCCM –IH would run the mine particularly that the government was failing to service its humongous domestic and external debts. Besides, he further cautioned that the eventual dismantling of KCM units would scare away prospective investors in the mining sector.
But in stark contrast to the way its long-time political adversary, the PF, did things – its government sold future copper output to Trafigura for a US$40m advance. The newly-elected UPND government allegedly wants to know where the money is. Admittedly, one of President Hichilema’s toughest challenges is the raft of complex and costly legal battles over mining assets bequeathed by the then-PF government.
The most intricate of these is the dispute with mining giant Vedanta Resources over the government’s attempt to liquidate Vedanta’s Zambian subsidiary, KCM, one of the biggest producers of the country’s main export. In May 2019, the previous government, through the 20% stake in KCM that it retains, put the business into liquidation in what was intended as a vote-winning nationalist move that would also raise cash. The state-appointed liquidator, Milingo Lungu, tasked to split KCM into two parts: the mine (Konkola Mineral Resources Ltd) and the smelter (KCM SmelterCo Ltd), intending to offer them for sale. But Vedanta wanted to keep KCM as one company and contested the move. Would-be buyers stayed away for fear of legal entanglements.
Whilst Vedanta invoked arbitration proceedings, which are compulsory if demanded by either party and whose judgements are binding. The case is being heard in London and knowledgeable observers predictably say that the arbitration panel is likely to rule in Vedanta’s favour. As the legal arguments continued in London, the liquidator organised a deal with the Swiss-based commodity trader Trafigura just before 2021 general elections. He arranged to pre-sell US$100m worth of copper to Trafigura. On 27 July the contract was signed. The Swiss-based company would advance the money to KCM against future deliveries of copper over the next 18 months after a moratorium of six months.
The advance, or pre-sale, would be recouped by Trafigura when it sold on the world market the monthly deliveries of copper promised by KCM in the contract. The loan conditions included a provision that if any litigation or government or regulatory action was started by the copper mining company, Trafigura could demand full repayment within two working days. Trafigura duly paid US$40m of the US$100m just before 2021elections, according to unconfirmed reports. It was earmarked for pension fund contributions, understandably, with the remaining US$60m to go toward the plant maintenance and its capacity expansion.
Strange as it may appear, the newly-elected Zambian government reportedly couldn’t find where the US$40m had gone. However, the Drug Enforcement Commission (DEC), one of the state agencies that have been investigating suspected corruption in the previous administration, spotted what it thought were improper movements of KCM funds into offshore accounts just after the elections, and blocked them – albeit DEC swiftly arrested and arraigned the KCM provisional liquidator on charges of suspected money laundering.
There has been growing public awareness that the UPND promised to handover KCM back to Vedanta straight away if it won the 2021 elections. With this knowledge, and under public pressure, UPND leaders have had to change tactics. Given that Vedanta is deeply unpopular locally because it is blamed for pollution and regarded as profiteering. And its bosses have made inflammatory statements. Caving in too easily to Vedanta would damage the newly-elected government and the UPND’s electoral standing. Above all, Vedanta has operated as a secret society at KCM when it comes to politically sensitive issues and deliberate obfuscation has often been its coinage.
Under the prevailing circumstances, civil society bodies throughout the Copperbelt – mineworkers’ unions and civil rights groups – are not holding their breath. Their impatience is growing at the slow progress of KCM’s liquidation process and what they see as unnecessary foot-dragging and head-scratching by UPND’s newly-hired mandarins, if not deliberate delays by Vedanta. So rather than risk unpredictable outcomes, UPND’s preference may be for the return of Anglo American at KCM, with its strong historical connections in Zambia’s mining sector, as a better alternative to Vedanta. Moreover, the unending financial support UPND gets from Brenthurst Foundation – an organization established by the Oppenheimer family, founders of Anglo American cannot be held against it.