Tag: zccm-ih

KCM/Mopani deals: A case of untimely inaction being worse than untimely action

KCM/Mopani deals: A case of untimely inaction being worse than untimely action Featured

Mr Hakainde Hichilema’s government promised to sort out the issues of Mopani and KCM by the end of July. Today the dates have been changed to “we don’t know when”.

Clearly, after several months of illusions and posturing over Mopani and KCM, reality has dawned on Mr Hichilema and his far-right UPND government and they are now running back and forth. Even the lies have dried up as the truth steadily seeps in through the cracks on these two transactions. They are lost and stuck, and literally dangling from the ceiling like bats in broad daylight.

What’s the problem? What’s troubling them?

On KCM, the trouble is that Vedanta has spent money and promised to be given back the mine based on agreed terms, including some Key Performance Indicators that Mr Hichilema’s government has included in the draft agreement.

The Key Performance Indicators include the following:

  1. An investment of more than $1 billion to develop KDMP;
  2. Salary and wage increments for KCM staff;
  3. Assume and pay-off debts owing to suppliers and contractors to KCM. These will be mainly debts incurred by the Provisional Liquidator and may be upwards of $300 million, excluding the electricity bill.

Should the Key Performance Indicators not be met, Vedanta will be compelled to offer its shares in KCM to ZCCM IH at a price. It would appear it is the asking price from Vedanta that might now be delaying the conclusion of the deal.

Vedanta is asking for upwards of $2.75 billion should the government invoke the Article to takeover the mines if Vedanta fails to attain certain Key Performance Indicators. It is incomprehensible that such an Article would even be considered because one wonders what safeguard measures have been put in place to safeguard GRZ/ZCCM IH/ and the people of Zambia, who are the ultimate beneficial shareholders in ZCCM IH, from Vedanta should Vedanta deliberately underperform so that ZCCM IH triggers the Articles for the Vedanta shares to be sold to ZCCM IH in the name of not meeting KPIs for Vedanta to automatically be owed $2.75 billion by ZCCM IH.

Should this information we have be true, then this imminent deal between Mr Hichilema’s government will surpass the Lungu government’s $1.5 billion deal with Glencore over Mopani.

Noticeably, there is something fishy about this deal and it can only be because Vedanta may have parted with some money to allow for such a bad deal against Zambians to be tabled for finalisation.

It cannot be wrong to assume that this deal might have an upside for some government officials pulling strings to make it happen. Your guess is as good as mine as to what level such deals are given the go-ahead.

As for MCM, it appears that after almost concluding with a Chinese group, the government has reopened the bid process by allowing a possible last-minute entry to be considered for its acquisition.

Whatever the reasons, it is now two years since Mr Hichilema was elected into office to manage Zambia with the promise that “Bally will fix it”. It appears Mr Hichilema either underestimated the challenges Zambia is and has been facing, or that may be “Bally” had no plan even after being given 16 years to prepare for the job.

The delayed capitalisation of the two mining operations has been and is too painful for Zambia, especially for the residents of the Copperbelt Province. Statements to the effect that the delay is “because the government wants to safeguard the interests of Zambians” are hollow and deceitful because it is clear that Mr Hichilema and the UPND had no plan to “fix” any challenges Zambia was facing before they were elected, and now the problems have grown bigger.

But armed with the painful history of the privatisation exercise and the activities of some negotiators/consultants who were implicated, we can only hope and pray that these seemingly continuous delays are not coordinated to enable a handful of business friends and partners to carve up the two mines, which have been the engines of the Copperbelt.

That is why, as responsible citizens, we strongly feel that we have a duty to demand total transparency in these two transactions to ensure that we prevent a situation where the same individuals with a checkered past or those connected to them, gain the right to take over the running of these prime ventures for a song or a mere fraction of their true value.

A repeat of thoughtless agreements, such as happened with the mine in Luanshya and how Grant Thornton – a firm where Mr Hichilema was at the helm of the consulting wing – got involved and was rewarded millions of dollars for the mine whose sale remains one of the enduring sources of tragedies in Luanshya and beyond, must never be allowed to happen again.

We must remain vigilant and not allow the swindlers of our mines during the sham privatisation exercise to return as messiahs of the Copperbelt. The architects of the existing poverty and squalor on the Copperbelt must not be given another opportunity to hoodwink our people into thinking that they have a solution to the issues surrounding Mopani/KCM. Let us not allow them to use public office for private gain.

Further, it is now inescapable for Bally to now explain whether he meant to “fix” the people of Zambia and not the problems they were facing, because clearly his delay in fixing the economy is fixing the poor people of Zambia. And the delay to “fix” the mines is indeed fixing the people of the Copperbelt. Its like the people of the Copperbelt are being punished for trusting Mr Hichilema and his campaign promises, which they have later learnt were built on total deception, lies and manipulation.

What is even worse, is Mr Hichilema’s lack of a sense of urgency in dealing with the prevailing desperate situation on the Copperbelt. He is taking his time as if he is not dealing with fellow citizens, his voters. But what more can one expect from an insensitive, greedy and plundering leadership? Our people must know that this leadership is about self-interest and the illicit amassing of wealth – they want to the first Zambian billionaires!

The suffering masses are not and will never be a priority. But we urge our people to remain resilient as we defend and protect our mineral resources and national wealth. And for Mr Hichilema and his league, to you we say, you have no justifiable reason to prolong the resolution of issues at Mopani/KCM. Look beyond your interests and rescue the masses. They have suffered enough. Have a heart; you don’t treat your fellow citizens this way.

As Lenin aptly put it, “Untimely inaction is worse than untimely action”.

Fred M’membe
President of the Socialist Party

Mopani: a deal for political survival and third term

Mopani: a deal for political survival and third term Featured

Our strategic objective as a socialist party is public ownership of the key means of production.
But achieving this in a world economy dominated by capitalism is not an easy undertaking. It calls for a tenacious, intelligent struggle. And it is this struggle that defines the process of “socialist construction”. It is a process because it is not a one off act or transaction. It’s not a single act of nationalisation and the following day you have a socialist society in Zambia.
The last 60 years of observing nationalisation in the world have taught us something, has made us a bit more wiser about what works and what doesn’t. It has taught us to be cautious and patient.
Moreover, it is said that there are many ways to skin a cat. Similarly, there are many ways to achieve our public ownership of the key means of production without engaging in very complex and unnecessary business and political deals.
Accordingly, the Socialist Party will not nationalise these troubled copper mines with limited economic lives remaining – ranging from 8 to 40 years.
And what is under exploitation now is just about a third of our mining potential – we still have two-thirds of our mining potential to exploit.
Without belittling anyone, we simply don’t have the capacity to run these financially troubled and technologically complicated mines. We don’t have enough mineral scientists, mining engineers, mining economists, lawyers with adequate mining knowledge, the financial expertise to mobilise capital for our mines and market the minerals we have mined.
What the Socialist Party in government will do is to ensure that it collects fair taxes from the mines to pump into education, health and peasant agriculture. And also make the transnational mining corporations pay for the training of our people in various mining skills. With such well trained people we will be able to exploit the remaining two-thirds of our mining potential on our own or under more beneficial joint ventures with others.
We will certainly not do what this government of the Patriotic Front and Mr Edgar Lungu is doing. What is the benefit to our people of the Mopani deal?
The main issue at Mopani has been the cost of production which is around $4,000 per tonne and the high costs of running the mine – ranging between $40m and $60m per month. In the face of low commodity prices, the mine has some challenges. In an attempt to reduce the cost of production, Mopani recently sunk three new shafts – two in Kitwe and one in Mufurila – at a cost of $4.5 billion. They were supposed to invest a further $450 million to take the shaft a bit further down just before government indicated that they would do away with VAT and instead introduce sales tax. Unlike in North Western Province where they do not need to sink a shaft, at Mopani you need a shaft of between 1.5 km to 2 km in order to maximise value for money. The previous shaft was sunk in 1975.
Mopani has copper reserves of between 38 to 40 years before activities come to a close. However, that needs about $1.5 to $2 billion investment in mine development. Why would we commit 80 per cent of our future copper production to pay off this debt when we will need between $40m and $60m on a monthly basis to run by this mine? Which banker is going to give us a credit facility under these circumstances?
We think this Patriotic Front government of Mr Lungu has messed up big time on this issue. They know that they do not have the ability to run this asset to the optimal levels that could bring a reversal of mining fortunes to Kitwe and Mufulira. In a worse case scenario, we would rather have Glencore place the asset under care and maintenance, knowing very well that as copper prices continue to improve, they would eventually begin operations within 8 months. Now, we have lost a credible investor and we are likely to see a decline in production from the mine, like we have seen with KCM, notwithstanding the type of investors we had there. Even if ZCCM-IH manage to run the operation successfully with a strategic partner, they will be constrained to expand production as they have the yoke of paying off the debt of purchase price for at least a decade.
Clearly, the decision to sale Mopani was based on political survival instincts of Mr Lungu and his colleagues in the Patriotic Front government. Understandably, they were scared of the consequences losing 15,000 jobs in an election year. This decision has nothing to do with
any strategic business formula – it’s all about political survival and a third term of office for Mr Lungu.

Fred M’membe