(LUSAKA TIMES) ZCCM-IH to appeal against the Lusaka High Court judgment delivered in favour of First Quantum Minerals
March 31, 2020
ZCCM Investments Holdings Plc (ZCCM-IH) has said that the company intends to appeal against the Ruling of the Lusaka High Court delivered on 23 March 2020 regarding a matter the firm commenced in
2016, against
First Quantum Minerals Limited (FQM Ltd), FQM Finance Limited, Philip Pascall, Arthur Mathias Pascall, Clive Newall, Martin Rowley, and Kansanshi Mining Plc.
In a statement released to the media, ZCCM-IH said that the defendants’ conduct, allegedly, among others, that
the defendants on several occasions fraudulently engaged in transactions totaling in excess of $2 billion for the benefit of the FQM Group, is detrimental to ZCCM-IH’s interests and those of the nation, and remained committed to protecting the said interests, adding that it will be appealing against the Ruling.
In 2016, ZCCM-IH started the process of claiming up to $1.4 billion from First Quantum Minerals Ltd accusing the firm of engaging in fraud. The claim included $228 million in interest on $2.3 billion of loans that ZCCM-IH said First Quantum wrongly borrowed from the Kansanshi copper mine, as well as 20 percent of the principal amount, or $570 million, according to an internal company presentation, dated Nov. 4, 2016.
ZCCM-IH is also seeking $260 million as part of a tax liability the Zambia Revenue Authority said Kansanshi owed it, as well as the cost of the mine borrowing money commercially that ZCCM-IH said could have been avoided.
In papers filed in the Lusaka High Court on Oct. 28 2016, ZCCM-IH said that First Quantum used the money as cheap financing for its other operations.
ZCCM-IH is triple listed on 3 stock exchanges: the Lusaka Securities Exchange (Primary listing) and on the London Stock Exchange and the Euronext Access (Paris – Marche Libre) (Secondary Listings).
Government holds directly 17.25% shares and its 60.28% shares is held through the Industrial development Corporation (IDC) in Zambia, with the remaining 22.47% held by institutional and private individual shareholders.
ZCCM-IH currently has an investment portfolio of 22 companies, including Kansanshi Mining Plc (20%), Mopani Copper Mines Plc (10%) and Konkola Copper Mines Plc (20.6). Its shareholdings in these companies range from 10% to 100%, with commodities and services that are diversified in nature, including copper, gold, cobalt, coal and power, limestone, mining consultancy, financial services and gemstones.
Labels: FQM, KANSANSHI MINING PLC, TAX EVASION, ZCCM-IH
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COMMENT - This is awesome. What happened?
(LUSAKA TIMES) ZCC IH sues FQM claiming $1.4 billion
November 14, 2016
ZCCM Investments Holdings has started the process of claiming up to $1.4 billion from First Quantum Minerals Ltd accusing the firm of engaging in fraud.
The claim includes
$228 million in interest on
$2.3 billion of loans that ZCCM-IH said
First Quantum wrongly borrowed from the Kansanshi copper mine, as well as
20 percent of the principal amount, or $570 million, according to an internal company presentation, dated Nov. 4, obtained by Bloomberg.
The company is also seeking $260 million as part of a tax liability the Zambia Revenue Authority said Kansanshi owed it, as well as
the cost of the mine borrowing money commercially that ZCCM-IH said could have been avoided.
ZCCM-IH said in papers filed in the Lusaka High Court on Oct. 28 that First Quantum used the money as cheap financing for its other operations.
ZCCM-IH also last month filed a notice of arbitration against Kansanshi in London over the same matter.
No figure was mentioned in the court filings.
ZCCM-IH owns 20 percent of Kansanshi.
But in a statement released Monday evening, FQM President Clive Newall said having carefully studied the claims made in both the Notice of Arbitration and Statement of Claim, First Quantum is firmly of the view that the claims are utterly without merit, or indeed any foundation in facts.
“It is notable that the Kansanshi Mining Plc deposits were fully repaid to KMP and were then used to fund a major investment program in Zambia, including the successful construction and commissioning of the Kansanshi smelter and expansion of the processing plant and mining operations.
“On October 28, 2016, KMP also received a Statement of Claim filed in the High Court for Zambia naming additional defendants, including First Quantum, its subsidiary FQM Finance Ltd., and a number of directors and an executive of the named corporate defendants. This dispute arises out of the rate of interest paid on deposits made by KMP with the Company’s financing entity, FQM Finance Ltd. The funds on deposits were retained for planned investment by KMP in Zambia.”
He said, “FQM Finance paid interest on the deposits to KMP based on an assessment of an arms-length fair market rate, which is supported by independent third party analysis. ZCCM disputes that interest rate paid to KMP on the deposits was sufficient. Unfortunately, ZCCM has taken the extra-ordinary additional step of commencing a further action in the High Court for Zambia, making allegations repeated from the Notice of Claim against certain First Quantum directors and an executive that are inflammatory, vexatious and untrue.”
“In fact, KMP is now indebted to FQM Finance for the funding of further investment in Zambia. The Company is currently engaged in constructive discussions with representatives of the Zambian Government, which holds a 92% direct and indirect majority shareholding in ZCCM, with a view to achieving an amicable resolution. We do not believe it is appropriate to comment further on the arbitration or court proceedings while they run their proper course, but we will provide further information as and when required.”
Meanwhile, Philippe Bibard, a spokesman for a minority shareholder group based in France said FQM is disregarding the rights of minority owners in ZCCM-IH in dealing directly with government.
*With Additional Reporting by Bloomberg
Labels: KANSANSHI MINING PLC, KCM, TAX EVASION, TAXATION, ZCCM-IH
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Mining skills lacking in Zambia, observe experts
By Henry Sinyangwe
Mon 28 Oct. 2013, 14:00 CAT
THE mining industry is facing a severe skills gap in most critical areas with serious national implications, observes the ZCCM-IH training committee.
The committee suggested that there was need to introduce new development skills in the extractive industry to address the deteriorating skills in Zambia's mining sector.
The committee observed that skills training and development in the mining industry, especially post-privatisation in 2000, lacked coordination.
"This scenario has precipitated the current skills shortage in the industry. Given the increased mining activities and ongoing expansion over the medium to long term, the skills shortage issue will be further aggravated by the current 57 per cent shortfall in technical skills, which is projected to more than double by the year 2015," the committee stated.
The committee observed that there was need to develop and establish a mining sector integrated and collaborative skills training framework that would address the current skills shortage in the mining sector.
"Insufficient funding for teaching and research laboratories resulting in lack of world class teaching and laboratory facilities at tertiary institutions; nonexistence of apprenticeship and learnership programmes for the production and supply of critical intermediate skills due to the demise of ZIT coupled with underfunding leading to the deterioration of training facilities at NORTEC; lack of auxiliary core skills such as instrumentation, assaying, winding engine driving, rigging and coded welding and others," the committee observed.
The study recommended the introduction of stakeholder-supported training and technology levy for the enhanced and sustainable production of demand-driven quality manpower for the mining and associated industries.
It observed that there was need for a coordinated national approach to labour law formulation, enforcement and skills data bases, in relation to alignment with long-term investment plans, to be operationalised as a matter of urgency.
"Professional institutions shall be responsible for providing the necessary professional advice with regard to the employment of foreign nationals in their respective professions whenever rare skills are required," the committee recommended.
According to the study, the absence of a centralised institution to plan and coordinate training support after the privatisation of ZCCM in 2000 led to a severe skills gap in most critical areas with serious national implications.
"There is need for government, industry and academia to collaborate and coordinate for the purpose of ensuring that the quality and quantity of skills coming out tertiary institutions not only support the mining industry but are internationally competitive and productive," recommended the committee comprising ZCCM-IH director Sophie Mutemba, CBU dean in the School of Mines and Minerals Sciences Prof Glasswell Nkonde, UNZA senior lecturer in the School of Mines Dr Mathias Mpande and mining consultant Pius Maambo.
Labels: MINING, ZCCM-IH
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(LUSAKATIMES) ZCCM IH is insolvent, proposes share offer to raise funds
Time Posted: October 5, 2013 3:33 pm
ZCCM Investments Holdings says it would be offering stock to its existing shareholders for sale in a bid to raise funds to pay off its debt and seek opportunities in new developments.
ZCCM IH is an investment company owned by the Zambian government with an 87.6% stake while private equity investors hold a 12.4% stake. In a statement, ZCCM-IH said it would use a portion of the funds to reduce its USD 379 million debt it owed to the government of Zambia.
The company said this huge debt has suppressed the value of the company and made the company unattractive to investors and the market.
The balance sheet of ZCCM-IH for the year ended 31 March 2012 carried total liabilities of K2, 352 million against total assets of K2, 302 million resulting in a negative book value of K50.5 million.
The bulk of the liabilities constitute debt owed to the GRZ carried over from ZCCM.
The company said the GRZ indebtedness has severely constrained its balance sheet in the recent past and that this has affected valuation of the Company by the market and limited the capacity of Management to unlock value for the benefit of shareholders.
“Taking into account the high volatility associated with copper prices, the unpredictability of dividends from investee companies, and other related factors that impinge on the revenues of the Company, the Board of Directors of ZCCM-IH believes that it is imperative that the balance sheet of ZCCM-IH be restructured as a matter of urgency and that priority be the reduction or elimination of the current debt burden,” the statement read.
“In so doing, the Company will be put on a sustainable trajectory going forward and thus will maximise shareholder value.”
The company said in order to implement the Strategic Plan and achieve its critical objectives, the Board has recommended that the Company should immediately undertake a Share Rights Offer to all shareholders.
A Rights Offer is an offer made to existing shareholders of a company to subscribe for new shares on a pro rata basis.
It is a common mechanism for raising a large quantum of capital relative to existing market capitalization, particularly where shareholders do not wish to be diluted.
The company hopes the rights offer would de-gear its balance sheet by expunging GRZ debt of K1, 998 million (approximately US$ 363 million) and thereby unlock the value of the company for the benefit of all shareholders.
It said the rights offer would ensure ZCCM-IH remains financially solvent and able to continue as a going concern.
ZCCM-IH has minority shares in Mopani, KCM, Kansanshi and a host of other mining and related companies.
The Company has a primary listing on the Lusaka Stock Exchange Zambia and currently has non active secondary listing on the London Stock Exchange and some shares are traded on the Euronext stock exchange in Paris.
ZCCM-IH is the privatized entity formerly known as Zambia Consolidated Copper Mines Limited.
In 2000 ZCCM was privatized by the Government of Zambia.
ZCCM-IH emerged from the privatization of ZCCM as an investments holdings company with equity stakes of between 10 to 20.6% in the new companies that were formed from the unbundling of ZCCM.
Labels: ZCCM-IH
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ZCCM-IH mulls diversification
By Chiwoyu Sinyangwe
Mon 05 Aug. 2013, 14:00 CAT
ZCCM-INVESTMENT Holdings is touting starting up manufacturing companies to produce some of the inputs for the mining sector, says executive chairman Willa Mung'omba. ZCCM-IH, a custodian of Zambia's investments in privatised mines, has
launched an exploration company called MAWE.
"Apart from doing general exploration, the company ZCCM-IH, has been mandated to exploit the significant opportunities that exist for the establishment of local industries to produce some of the inputs into the mining industry as well as add value to the output from the mining industry beneficiation," Mung'omba said during the ongoing 87th Zambia Agriculture and Commercial Show.
"The inception of this company will allow for ZCCM-IH to effectively change the company's technical activities to suit patterns of business as well as make an effort to suit the environment."
And Mung'omba said the local mining sector continues to suffer acute shortage of skills for sustainable development of the mining sector.
"ZCCM-IH recognises the importance of skills development within the industry in Zambia," he said.
"The shortage of skills impedes innovation for our country and causes the private sector to struggle to attain high levels of productivity. The goal is for our industries to strive to contribute to economic development."
Mung'omba said lack of skills had constrained the efforts of key sectors such as mining and agriculture to achieve real economic integration.
"Industry deserves technical competence and suitably qualified personnel," said Mung'omba.
"ZCCM-IH, along with key stakeholders, is taking progressive steps in finding solutions to the skills deficit in the mining industry. We will deliberately, continue to invest in skills development and engage the key training providers in order to address the country's human capital shortage."
Labels: MAWE, WILLA MUNG'OMBA, ZCCM-IH
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Govt to keep 900,000 farmers on FISP
By Chiwoyu Sinyangwe
Sun 04 Aug. 2013, 14:01 CAT
PRESIDENT Michael Sata says the government will maintain the 900,000 farmers currently receiving subsidised maize-growing inputs under the Farmer Input Support Programme. And ZCCM Investment Holdings has warned that the country needs to start facing the reality of the falling copper price.
In a speech read for him by Vice-President Dr Guy Scott, President Sata said the government would prioritise investment in infrastructure as it sought to expand production and increase productivity.
"These agriculture development programmes will place emphasis on expanding production and increasing productivity of the crop, livestock and fisheries sub sectors and these programmes include continuation of provision of subsidy to the 900,000 beneficiary farmers under the Farmer Input Support Programme," President Sata said.
"However, the contribution by each farmer has been increased with effect from the 2013/2014 agricultural season."
President Sata also said the Food Reserve Agency would be focusing on most vulnerable farmers as it performed its role of being the buyer of last resort.
"My government will continue to purchase maize from small-scale farmers mainly for strategic reserves and FRA will continue to be a buyer of last resort, particularly in out-lying areas that are not serviced by private sector," he said.
President Sata said the theme for the 87th Zambia Agriculture and Commercial Show which was 'Business in a changing environment' was appropriate as it was in line with Zambia's national agricultural policy which was responsive to social, economic and political orientation of the country.
"It is important that you continue to attract and retain exhibitors and ensure increased participation by many companies and individuals both locally and internationally in future shows," said President Sata.
"I urge you to aggressively embark on infrastructure rehabilitation and development. Though the Zambia Agricultural and Commercial Show should be commended in this area, there is still room for improvement. I have no doubt that the Zambian business will greatly contribute to raising the average incomes of Zambians and further increase employment."
And ZCCM-IH executive chairman Wila Mung'omba said the mining sector still remained vulnerable to external pressures which depress the price.
Mung'omba said the effects of the 2008 global economic crises which depressed copper prices to below US $3,000 per tonne were still being felt in the sector.
"To this day, the effects of the global financial crisis on economies and businesses are still being felt," Mung'omba said during the luncheon sponsored by ZCCM-IH, the custodian of the government's shares in the privatised mines.
"We have again copper prices dropping. Change will keep coming."
Mung'omba said there was need for the country to continue diversifying the economy from mono-dependence on mining which accounts for 80 per cent of export receipts.
"ZCCM-IH recognises that mining should not be the mainstay of the Zambian economy but we don't believe that it will holistically transform the Zambian economy and fight poverty on its own," said Mung'omba.
"It has been acknowledged that successful agriculture in a country has the ability to transform industry and society."
Some of the companies who won awards this year's show included National Pensions Scheme Authority (NAPSA) for Best Overall Exhibitors award, Evaca (Best International
Exhibitors), while the Zambia National Service walked way with the Best Infrastructure Development Exhibit.
Zambia Sugar plc was awarded for Best Environmental Awareness while Zambia Revenue Authority got the Best Interpreter of the theme.
Labels: FISP, GUY SCOTT, MICHAEL SATA, ZCCM-IH
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(STICKY) (LUSAKATIMES) Management failure at ZCCM-IH has lead to a loss of $1 billion income
Time Posted: August 7, 2013 11:54 am
Long-term minority shareholders of Zambia Consolidated Copper Mines-Investment Holding (ZCCM-IH), the investment holding company of the Zambian Government have urgently appealed for intervention in the corporate governance and management of ZCCM-IH as Zambia continues to loss colossal sums of money through mismanagement.
This is according to an Open letter addressed to Vice President Guy Scott and made available to the media. How GRZ and the Zambian people continue being cheated and short changed by Foreign mining companies
The Long-term minority shareholders raised concerns over the ineffective management of the company that has led to ZCCM-IH and through it the GRZ and the Zambian people being cheated and short-changed by the foreign mining companies in which it is invested.A few examples are:
1. According to the international auditors Grant Thornton, Mopani Copper Mines fraudulently avoided $175 million in corporation tax to the ZRA in the 5 years from 2003 to 2008, by various fraudulent procedures including transfer pricing to the Swiss parent company Glencore and misrepresentation of production figures and production costs. In this same period ZCCM-IH also lost $50 million per year in profits from Mopani
source:
appendix 1
appendix 1.1
Questions
* Why has ZCCM-IH together with the Government and the Zambian Revenue Authority failed to take any action whatsoever to recover these fraudulent losses?
* Why has no pressure been put on Mopani to come clean or otherwise lose its mining licence?
Recovering these fraudulent gains from Glencore along with due penalties would make a big difference to the well-being of the Zambian people as well as dissuading other companies from doing the same.The shareholders reminded Vice President Guy Scott of what he once said.
“We don’t want to destroy the cow that produces the milk but we want to make sure that you get your share of the milk”Post
* Why does Government let Glencore take our share of the milk?
* Why has the new audit of mines initiated by the former Mines Minister Wilbur Simuusa not been finalised and made publicsource: Reuters
* Why has the current Minister of Mines Yamfwa Mukanga failed to take action on this scandalous situation, whereas in 2011, he stated
“no government official must protect Mopani Copper Mines for violating the law and Mopani should be punished”Post
2. In 2007, the Zambian Task Force on Corruption investigated a fraudulent loss of $ 100million at the expense of ZCCM-IH. These investigations helped to identify those responsible, as well as the banks that received the stolen funds but as surprising as it sounds, no action was taken!All the investigations that were started during the presidency of the Late President Levy Mwanawasa have been stopped. Why were they not taken up since the election of the new President 18 months ago?
Source:APA
APA – Port Louis (Mauritius) Zambia and Mauritius, within the framework of the MutualAssistance Programme are working to retrieve 100 million dollars alleged swindled from theZambia Consolidated Copper Mines (ZCCM), APA learnt here.The Zambian government holds 85 percent of shares in the ZCCM.A high level delegation of the Zambian Task Force on Corruption, Tuesday arrived inMauritius to pursue the matter. Rama Valayden, the Attorney General and Minister of Justice to reporters Wednesdayin the capital, Port Louis, that he will hold a working session in the evening with theZambian delegation to discuss the follow up of the case which implicates offshorecompanies incorporated in Mauritius.He said about 100 million dollars have been transferred through the Bank of ButterfieldAccount in London, before being invested in the banking system in Mauritius and saidthe suspects in the scam are known by Zambian and Mauritian authorities.At the beginning of the year, at the request of the Zambian government, the MauritiusSupreme Court issued an ’Attachment and Freezing Order’ to several banks here onthe accounts of the suspects, Mr Bernard Mungulude, Mr Kazhi Kateke and the Laxidiamond company.The duty of the Zambian Task Force on Corruption now was to seek to identify the localagents and representatives of the suspects so as to be able to recover and repatriate themoney.Hence, local banks have been assigned to submit documentary evidence to expose thecriminal gang, or else the banks will face dire consequences, Valayden said. SR/daj/tjm/APA 02-05-2007
3.ZCCM-IH hold a 20% stake in Kansanshi Mining, the most profitable Mining Company in Zambia. The ZCCM-IH stake in Kansanshi currently represents $550,4 million in undistributed profits attributable to the Zambian holding. FQM 2012 Annual Report (see page 56). Non-controlling interests are the Minority shareholders’s benefits after investment. ZCCM-IH is the only Minority shareholder in FQM accounts.The amount of non-controlling interest (for ZCCM-IH) is $550.4 million, a sum that increases by more than $100 million per year. However the majority owner First Quantum Minerals (FQM) insists on conserving this money as a legal reserve and only distributes derisory dividends to ZCCM-IH in spite of having made more than $2,5 billion in net profits in recent years and having totally recovered its investment in the mine.
Question:
1. Why does the ZCCM-IH management and the GRZ fail to put pressure on FQM to distribute fair dividends to ZCCM-IH and so get its proper yield from the most important investment held by ZCCM-IH on behalf of the GRZ?As this scandal continues, FQM is using Zambia’s money to build the world’s largest mining corporation by buying othermining companies outside Zambia.
2.When will the GRZ take action to get its fair share from its vast mineral wealth and put a stop to foreign companies plundering its resources? What will the Zambian people have to live on once these resources are depleted?
Opacity in governance of company as well as infringement on shareholders rights
The long term minority shareholders also raised concerns over the persistent bad governance of ZCCM-IH with respect to minority shareholders as demonstrated by the way the selection of the eighth board member has been handled.
Early last year ZCCM-IH launched a call for nominations to elect a representative of minority shareholders to the Board of ZCCM-IH. The GRZ holds 7 seats on the board and the nomination of an eighth member to represent minority shareholders was seen as a significant effort improve the corporate governance of the company by letting minority shareholders have their say in company matters in proportion to their holding (12.3% of ZCCM-IH shares traded on Paris Euronext, the London and the Lusaka Stock Exchanges)
Use of an obsolete Register of shareholders
The minority shareholders made a very strong and co-ordinated response to this call despite starting from the considerable disadvantage of not being recognised as registered owners of ZCCM-IH shares.The Company Secretary, Mr Chabala uses an obsolete Register of Shareholders which does not list the owners of any ZCCM-IH shares bought through the Paris Euronext Stock Exchange (the most active of ZCCM-IH’s markets). Strangely, shares of the old ZCCM bought decades past in the UK and whose owners died many years ago are listed as registered shareholders.
To compound this failing, Mr Chabala is said to refuse to recognise official bank or broker’s certificates attesting to the ownership of ZCCM-IH shares.
The minority shareholders have repeatedly asked the Company Secretary to correct this failure and have explained the procedure to be followed to update the register, without success. As a consequence of this attitude, most minority shareholders are denied their legal right to attend company meetings or to vote directly on company matters.In order to respond to this “Call for nominations” minority shareholders had no choice but to adopt avery laborious and indirect voting procedure (via their stockbrokers, banks and Euroclear, theInternational Share Depository that records all share ownership and transfers) to ensure that their voteswere registered.
Secrecy
Unfortunately, but not surprisingly, the company refused to make public the result of this vote (even though the minority shareholders gave a clear mandate to their chosen representative by a very large majority of the votes submitted). Since then the Executive Chairman Mr Wila Mung’Omba, in what the shareholders describe as a totally unacceptable act of bad governance, has postponed indefinitely the nomination of the eighth board member to represent the minority shareholders.
It is not known the reasons why the Executive Chairman wants to keep minority shareholders excluded from exercising their democratic rights in matters of governance of the company of which they, alongside the GRZ, are the owners and who have the same reasons to make sure that this company is properly run for all the stakeholders.
The minority shareholders fear that the Executive Chairman may be planning a biased and unethical conversion of government debt into ZCCM-IH shares
ZCCM-IH Cautionary Announcement leading to severe dilution of the minority shareholding thus making the nomination of the eighth board member no longer an issue and giving him the freedom to run the company single-handedly.
The opacity of the companies intentions and the past years of poor (or corrupt) governance give credence to even the worst scenarios. Having exhausted all other avenues of intervention (letters to successive Chairmen, the Zambian Securities and Exchange Commission (SEC), the Lusaka Stock Exchange etc.), the long term minority shareholders humbly asked for the Vice President to help to ensure that the legal rights of the Minority Shareholders of ZCCM-IH are upheld and that the company finally applies the rules of good corporate governance. The credibility of foreign investment in Zambian securities is surely weakened by the failure to ensure high standards of governance of this most emblematic government-controlled Zambian company and can only bring dishonour to the Zambian Government.
Conclusion
Without all these management failures, ZCCM-IH would have been able to register income of more than $1 billion and so refund the long-standing debt of $425 million to the GRZ as well as paying dividends to shareholders (including the GRZ) and investing in the Zambian economy. Had ZCCM-IH benefited from good governance, good management and strong support from its majority shareholder the GRZ, to make sure that it got its fair share from its mining investments, it would now be a flourishing company providing wealth, employment and pride for the Zambian People.
Time for us to develop ourselves
President Sata once said “Zambia was tired of moving with a “begging bowl” from one developed country to another as the country had the capacity to become self-reliant and lift its millions of unemployed youths out of poverty if its vast natural resources were exploited to the benefit of Zambians”. He added “Time has come for us to develop ourselves and let others come to beg from us because we have more resources than the people we are begging from”. The minority shareholders expressed extreme disappointment that the Executive Chairman Willa Mung’omba has not put all his efforts into ensuring that ZCCM-IH lives up to the expectations of President Sata.They said this lack of action, hesitations, incomprehensible decisions and lack of transparency only serve to create suspicion about the intentions of the company and the government-appointed officials that runit.
The long term minority shareholders acknowledged however, that since the nomination of the CEO Mukela Muyunda in June 2010, the management has made unprecedented efforts to catch up on no less than 5 years arrears in the publication of the company’s accounts. They encourage him to finally get the the accounts up to date in2013 and to make sure, as promised, that the company’s assets are listed in the balance sheet at fairvalue. Until now these have been incomprehensibly listed in the company balance sheet at minimal cost valuations (approx. year 2000), which massively undervalues the company and disastrously distorts its balance sheet.
Promises can not hide a woeful performance
Changes have also been promised since more than 40 shareholders sent emails in November 2012 to the executive Chairman W. Mung’Omba expressing their dissatisfaction about the management of the company. The shareholders now fear that these may be hollow promises to calm the reactions of the shareholders.Only time will tell.
In any case these hypothetical promises cannot to hide the woeful performance of ZCCM-IH. At a time when the GRZ is considering quoting other para-public companies and inviting Zambian citizens to invest their hard-earned money in such companies, should it not first take a close look at its most emblematic para-public company and ensure that ZCCM-IH sets an examplet hat others can follow? There is still so much to be done here.
The minority shareholders stated that have exactly the same interests as the majority shareholder, the GRZ: that ZCCM-IH becomes one of the leading companies in Africa. It has the means to achieve this, but so far,as a result of weak direction, it has lacked the will to make significant progress. They therefore humbly asked the Vice President to consider taking an active part to ensure that the corporate governance and management of ZCCM-IH are of the highes torder and above suspicion so that the Zambian people can once again be proud of this flagshipcompany and reap the benefits that should be theirs.
Labels: CORRUPTION, GUY SCOTT, MINING, SITUMBEKO MUSOKOTWANE, WILBUR SIMUUSA, WILLA MUNG'OMBA, YAMFWA MUKANGA, ZCCM-IH
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ZCCM-IH urged to take over the operations of the embattled Collum coal mine
Time Posted: February 25, 2013 8:02 pm
ZCCM
The Zambia Chambers of Commerce and Industry ( ZACCI ) has urged the Zambia Consolidated Copper Mines Investment Holdings ( ZCCM-IH) to take over the operations of the embattled Collum coal mine.
ZACCI Vice President –South Chabuka Kawesha says his organization ZCCM-IH should consider taking over operations to ensure continuity of all operations at the coal mine.
“ ZCCM-IH must address the flows that lead to government’s decision being that of repossessing the mine, “ he said. ZANIS reports that Dr. Kabwesha said this in a statement in Lusaka, today.
He explained that operations of Collum coal mine as represented through various media reports over the past years have raised concerns.
“ And we believe the appropriate ministries and other government offices had more detail and information hence the decision taken by Government, “ he said.
He added that his Institute believes that ZCCM-IH may within its powers and in the shortest possible time, appoint or select a small group of local Zambian mining experts to manage the facility by going forward.
“ We believe that ZCCM-IH may within its powers and in the shortest possible time, appoint or select a small group of local Zambian mining experts to manage the facility going forward and bring it to profitable levels with the right framework of employee engagement and sustained visible philanthropic support to the local community, “ he said.
He explained that as a nation we have the capacity to identify local or internationally based professional Zambians with credible credentials to manage the mine and the new managers should go to the local and international finance markets for operational capital for Collum Coal Mine going forward.
Dr Kawesha suggested that the appointed team should first identify a revival strategy for the operations and enable sustainable operations with minimal government support. Thereafter look for equity partners in addition to working with ZCCM-IH.
It is not a secret that foreign run mining companies go for syndicated finance options or to international capital or financial institutions like the IFC, African Development Bank and many others to finance huge projects which are capital intensive, he explained.
“ Therefore, the team of Zambian managers should put up a bankable document and obtain finance from either local or foreign financial institutions so as not to place any burden on the government,” said Dr. Kawesha.
The Chamber says the Ministries of Finance and Mines and the ZCCM-Investment Holding (IH) should appoint a team of professional Zambian in the areas of administration, mining and finance to revive and operate the Munali Nickel mine in Mazabuka.
It adds that the team should also consider restoring national assets at the coal mine in similar lines like at Zambia Railways led by an ably qualified Zambian engineer can be replicated to our mining facilities.
We all know it’s a long stretch for government to finance Professor Chirwa’s positive and well-intended project. And at some stage local or international financial institutions have to come into play by way of financing the national and inter-town rail networks.
The ZACCI Vice President –South has further suggested that the Ministry of Finance, Ministry of Mines and ZCCM-IH should appoint separate teams of Zambian experts in the areas of administration, engineering, finance and mining to undertaken the operations of the Collum Coal Mine and Munali Nichel Mine both located in Southern Zambia.
“ Each team should, just like foreign mining operators based in Zambia or elsewhere do, go to the international or local capital markets to raise operational capital or indeed invite in an equity partner or two,” he said.
Alternatively ZCCM-IH should call for “expressions of interest” or “request for proposals” as a matter of urgency for both mines. EOI or RFP opens the playing field and guarantees strong partners, he concluded.
Government recently took over a Chinese-run coal mine where managers once opened fire on its Zambian workers during a labor dispute.
Mines and Minerals minister Yamfwa Mukanga explained that that government had seized control of Collum Coal Mining Industries Ltd.
Mr. Mukanga said the Chinese managers had not addressed safety, health and environmental concerns at the mine, had also failed to declare production and had not paid royalties to the government.
There has been a history of problems at this mine. Two Chinese managers were accused of shooting coal miners there during a labor dispute in 2010.
Clashes at the mine in August reportedly saw one Chinese worker killed and two others injured.
Labor conflicts at Chinese businesses in Zambia are pointed to as examples of problems with Chinese investors across Africa.
ZANIS
Labels: CHABUKA KAWESHA, COLLUM COAL MINE, NATIONALISATION, YAMFWA MUKANGA, ZACCI, ZCCM-IH
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ZCCM IH to form an exploration firm
TIME PUBLISHED - Wednesday, November 14, 2012, 2:37 pm
Zambia Consolidated Copper Mines Investment Holdings has announced plans to enter into exploration of base metals with the creation of an in house exploration arm to oversee the venture.
ZCCM IH Chairman Willa Mungomba told Reporters that the company is interested in venturing base metal exploration in Zambia as part of its reinvestment programme.
Mr. Mungomba said necessary documents has been developed and submitted to the Ministry of Finance and Mines and the Attorney General’s office for legal opinion.
He said ZCCM IH hopes that the new exploration firm would be operational by January 2013.
Mr. Mungomba said ZCCM IH would welcome local and foreign investment into the venture as a way of a stake.
ZCCM IH, with a market capitalization of USD 178 million is an investment holdings firm for the Zambian government and holds minimum equity in most of the mining companies operating in the country.
Labels: WILLA MUNGOMBA, ZCCM-IH
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ZCCM-IH invests $170m in Equinox
By Chiwoyu Sinyangwe
Wed 28 Mar. 2012, 12:59 CAT
ZCCM-IH in the first six months of 2011 received K87.3 billion (about US $18.4 million) in dividends from four of the over eight foreign owned mines it holds a stake in. And ZCCM-IH says it has invested the US $170 million received from the sale of 2.28 per cent stake in Equinox Minerals Ltd, the former parent company of Lumwana Mines.
ZCCM - Investment Holdings (ZCCM-IH) is a company formed and majority-owned by the Zambian government to retain minority equity in the privatised and current foreign owned mines. Meanwhile, ZCCM-IH fears the current prolonged debt crisis in Europe will hurt international copper prices.
During the first six months ending September 2011, ZCCM - IH received in dividends K35.7 billion (about US $7. 6 million) from Kansanshi Mines, K23.6 billion (about US $5, million) from Konkola Copper Mines, K19.9 billion (about US $4. 2 million) from Chibuluma Mines and K8 billion (about US $1. 6 million) from Copperbelt Energy Corporation.
Other companies in which ZCCM-IH holds a stake include 10 per cent each in Mopani Copper Mines and Chambishi Metals, 15 per cent each in Luanshya Copper Mines and NFC Africa.
And ZCCM-IH said it used US $170 million it got from the sale of 2.28 per cent stake in Equinox Minerals Ltd to invest in new and ongoing mining projects.
"The funds from the sale of shares in Equinox Minerals Limited have since been invested in partly Maamba Collieries Limited as an equity contribution in order to maintain the equity shareholding of ZCCM-IH at 35 per cent," stated company secretary Chabby Chabala.
"Part of the money has also been used as equity contribution to in Konkola North Copper (Konnoco) project which…is a start up copper mining project. ZCCM-IH exercised an option and obtained 20 per cent shareholding in Konnoco, of which five per cent is free-carry while the additional 15 per cent will require that ZCCM-IH contributes cash to the development of the mine. The shareholders agreement, the financing agreements and services agreements relating to Konnoco were signed by ZCCM-IH on 15th September, 2011."
ZCCM-IH stated that it had disbursed a shareholder loan to facilitate the recapitalisation programme for its 100 per cent owned Ndola Lime Company to help lower unit costs of production and strengthen production capacity.
During the same period, the company's operating profit jumped 54 per cent to K785 billion compared to the same period in 2010.
ZCCM-IH which during the year under review made a part payment of US $55 million towards pre-privatisation loans to the government, said it was keenly observing events in the Eurozone.
"Events in the Eurozone are likely to adversely impact global commodity demand and prices," stated ZCCM-IH.
"With lessons from the global financial crisis of 2008, 2009, a number of mining companies have kept a close watch on unit production costs in order to better manage base metal price fluctuations. ZCCM-IH is keenly observing events in the Eurozone and the efforts being made to address them."
Labels: EQUINOX, ZCCM-IH
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Government to increase stake in mines
By Gift Chanda in Sinazongwe
Wed 01 Feb. 2012, 14:01 CAT
THE
Zambian government says it will not nationalise mines but instead increase its stake to about 35 per cent. Mines minister Wylbur Simuusa said the government wanted Zambian participation in the mining industry to increase.
Speaking when he toured Maamba Collieries mine on Monday, Simuusa said most governments globally were currently considering raising their stake in mining companies to about 35 per cent and the Zambian government would want to take that step too.
Simuusa noted that, through the state mining-investment company, Zambia Consolidated Copper Mines -Investment Holdings (ZCCM-IH), Zambia currently owns less shares in mining companies thereby limiting proper supervision of the mining companies.
Currently, ZCCM-IH holds between 10 and 20 per cent of major mine projects across the country and Zambia has been exerting ore control on mineral exports.
"In the previous regime, it was very clear that the mining sector was not being properly supervised and I know that is one thing that undid the previous regime," Simuusa said.
"In this new government we want the mining sector to be properly supervised …in fact, we know that the key to turning this nation around is in our mineral resources. One of the measures we want to take as PF government is to increase Zambian participation in our mining industry…we are not going to nationalise the mines but we would want to increase our participation."
Government recently said it was considering buying a stake in the financially troubled Munali Nickel Mine were it currently owns 0.97 per cent.
"It is sad that Zambia being so richly endowed in mineral resources, we have got copper and high grade coal yet we are ranked among the 20 poorest countries in the world. That is quiet unfortunate and as the PF government, we want to turn this around," Simuusa said.
He further called on mining company owners to ensure that preference was given to local suppliers of goods and services to the mines. He said that was the only way the mining companies would be helping the government create more jobs for Zambians.
And Simuusa commended Singapore's Nava Bharat Pte , the majority owners of Maamba Collieries, for awarding salary increments to workers at the country's largest coal producer.
He said it was cardinal that benefits from the mining companies started accruing right with the miners. Earlier, Nava Bharat Private Limited chief executive officer, Ashwin Devineni said works on setting up the new coal handling processing plant in time for the resumption of full-scale mining activities and sell of high grade coal in March, were on course.
Nava Bharat acquired a 65 per cent stake in Maamba in 2009 and planned to spend U$108 million on modernising the mine.
The new mine, which was expected to produce 360,000 tonnes of coal in its first year, aims to reach a maximum output capacity of 2 million tonnes per year.
It also expects to ramp up the washed coal sales from about 30,000 tonnes a month to about 50,000 tonnes by 2013.
Labels: MAAMBA COLLIERY, MINING, WYLBUR SIMUUSA, ZCCM-IH
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State ponders ZCCM-IH listing on LuSE
TIME PUBLISHED - Friday, January 6, 2012, 9:02 am
GOVERNMENT says it will consider a full listing of ZCCM-Investment Holdings (ZCCM-IH) shares on the Lusaka Stock Exchange (LuSE) after the restructuring exercise is finalised.
ZCCM-IH has been a quoted company on LuSE for a long time and there are calls from various stakeholders to have the firm fully listed for the public to participate in the ownership.
Minister of Mines Wilbur Simuusa said a positive decision will be made as soon as the restructuring exercise is completed.
“Yes we are considering that (full listing) although it will be done after the restructuring process is completed. We have to ensure that the books, the balance sheet are worked on to enable us to do it,” he said.
Mr Simuusa said this in an interview in Lusaka on Wednesday.
He said ZCCM-IH has not posted profits or given dividends since its inception over 10 years ago and Government plans to re-brand the organisation to make it operate profitably and promote local participation in the ownership and management of mining assets.
He said a meeting will soon be convened with a technical committee to map out a way forward.
The minister, however, said currently Government is not in a position to decide whether the firm’s shares should be fully listed on the local bourse.
Mr Simuusa said ZCCM-IH is an important unit which, if properly managed, can help the country realise huge benefits from the mining resources.
[Zambia Daily Mail]
Labels: LUSE, WYLBUR SIMUUSA, ZCCM-IH
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ZCCM-IH to disclose the whereabouts of K850 billion next month after board approval
TIME PUBLISHED - Monday, November 7, 2011, 5:13 am
ZAMBIA Consolidated Copper Mines Investment Holdings (ZCCM-IH) has
broken its silence regarding the whereabouts of the US$167.5 million Barrick Gold paid for a 2.28 percent stake in Lumwana Mining Company (LMC).“The funds are
placed in short-term investments with local financial institutions,” ZCCM-IH said in a statement placed in the Daily Mail following
concerns from minister of Mines and Minerals Development Wylbur Simuusa that the company might have either ‘misplaced’ or ‘misapplied’ the money.
ZCCM-IH, in a management statement, said it will disclose the whereabouts of the money after a board approval next month because doing so before the board’s consent would be tantamount to flouting listing rules. The company is listed on the Lusaka and New York bourses.
Last week, Mr Simuusa gave the company a one-week ultimatum to account for the money which in Kwacha terms stands at tens of billions and could provide a major boost to poverty reduction programmes.
Former minister of Finance Situmbeko Musokotwane, in an interview via phone from Zimbabwe where he is doing some work, said he is confident the money could not have been misapplied.
ZCCM-IH, in a management statement, said it will disclose the whereabouts of the money after a board approval next month because doing so before the board’s consent would be tantamount to flouting listing rules.
“If there are any suspicions by the minister (Mr Simuusa) that the money is missing,” Mr Situmbeko said, “the matter must be reported to the police.”
The Peter Munk owned gold digger paid Australia’s Equinox Minerals up to US$7.5 billion for LMC and insisted on buying off the 2.28 percent stake Zambia had even after the local competition commission advised that ZCCM-IH must maintain the stake which by extension gave ZCCM-IH a stake in the multi-billion Jabil copper and gold mine in Saudi Arabia.
Criticism mounted regarding ZCCM-IH’s decision to take a ‘measly’ US$167.5million from the largest gold digger in the world instead of actually demanding a large stake in the mine that has an extendable 35-year lease life.
However, speculation has been escalating that ZCCM-IH only agreed to give up the 2.28 percent stake in LMC after Canada’s Prime Minister from 1984 to 1993 Brian Mulroney visited State House with a Zambian author based in the United States.
Barrick Gold is a Canadian owned mine. The nature of discussions Mr Mulroney “quietly” had at State House with the Zambian author and State House officials remains unknown.
[Zambia Daily Mail]
Labels: CANADA, CORRUPTION, LUMWANA MINING COMPANY, SITUMBEKO MUSOKOTWANE, WYLBUR SIMUUSA, ZCCM-IH
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ZCCM-IH not positing profits
By KALONDE NYATI
THE
ZCCM-Investment Holding (IH) has not posted profits or given dividends since its inception over 10 years ago and Government will re-brand the organisation to make it operate profitably and promote local participation in the ownership and management of mining assets.
Mines and Minerals Development Minister Wilbur Simuusa said in an interview that Zambia has for along time not yielded benefits from the mining sector due to the ineffectiveness of ZCCM-IH.
“ZCCM-IH is currently irrelevant and obscure…it is supposed to be like the watchdog for Zambians because it was set up to hold investments in the mines for Zambians,” he said.
He said ZCCM-IH is an important unit which if properly managed, can help the country realise huge benefits from the mining resources.
Mr Simuusa said there is need for the country to have increased ownership in the mines and ZCCM-IH is an engine which can facilitate the process.
He said Government will also engage mining firms on possibilities to list on the Lusaka Stock Exchange (LuSE) to enable Zambians own shares.
“We will get mining firms to float shares on LuSE to give locals the chance to own shares in the mines and benefit from the country’s mineral resources,” he said
Mr Simuusa said the mining sector needs to be fully reviewed if it is to contribute to economic development.
He cited the current tax regime as one of the areas that need to be revisited.
Mr Simuusa said the tax system is complicated and is not fully understood by stakeholders such as the Zambia Revenue Authority which has resulted in failure to collect adequate taxes from the sector.
“We have not collected adequate taxes in the past because ZRA has no capacity to collect the taxes due to the complicated tax regime,” he said
Mr Simuusa said there is need for a simplified tax regime which will benefit both the country and the mining firms.
“We want to look into the whole tax regime and come up with a system which will be a win-win for all stakeholders,” he said.
And on possibilities of re-introducing the ‘controversial’ windfall, Mr Simuusa said Government will decide on whether to re-introduce it after reviewing the mining sector.
“Government will look into the whole process and should it be necessary to bring windfall tax back, we will re-introduce it, though it may take a different form,”
He said Government will engage the mining sector in the whole process.
Labels: DIVIDENDS, TAX EVASION, WILBUR SIMUSA, WINDFALL TAX, ZCCM-IH
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COMMENT - The MMD is clearly mismanaging the mining sector and the economy. These deals have to be turned back. It is completely unacceptable that in a country with 40% malnutrition, the government can just get rid of the windfall tax, and be this uninterested in benefiting from the mining industry. Of course they personally benefit from taking bribes to do just that, which is why their excuses make no sense.
Zambia will get K800bn from sale of Equinox, says Simuusa
By Chiwoyu Sinyangwe
Wed 04 May 2011, 16:30 CAT
ZAMBIA will get US$171 million (over K800 billion) from the imminent US$7.68 billion sale of Equinox Minerals, the parent company for Lumwana Mining Company, reveals Wylbur Simuusa. And Simuusa says President Rupiah Banda was celebrating deprivation of Zambians by ground-breaking a large-scale Trident mine wholly-owned by foreigners.
Simuusa, who is Patriotic Front chairman for mines, said
Zambia’s low stake in Lumwana Mining Company would result in the country getting a paltry amount from the country’s record transaction in the mining sector. Barrick Gold agreed to buy Equinox Minerals, whose Lumwana Mining Company, built for over US$1 billion in Solwezi is Equinox Mineral’s primary asset while other operations include a copper development project in Saudi Arabia.
“Hon Maxwell Mwale mines minister should explain what’s going to be the future of ZCCM-IH’s stake in the new company after Barrick Gold takes over Lumwana Equinox Minerals,” said Simuusa, who is also Nchanga Constituency member of parliament. “Because as things stand now, we are only going to receive about US $171 million from this deal but our shareholding might be diluted. So, let Mwale explain.”
Both finance minister Dr Situmbeko Musokotwane and Mwale could not be reached by press time as their mobile phones went unanswered. Simuusa also regretted that the government position on the transaction of the Lumwana magnitude remained unclear despite the country hosting the mines.
And Simuusa says President Banda was worsening the poverty levels in the country by creating an environment that exclusively favoured growth of the foreign capital. Simuusa regretted that President Banda went to celebrate the opening of the new mine with little benefits for the country.
During the official opening of the over US$1 billion First Quantum Minerals Trident mining in North Western Province, a project to be heralded by Kalumbila Mines in Solwezi, President Banda said it was gratifying that the mining sector had become viable again and contributing significantly to the economic growth of the country. President Banda hailed the Trident project as a boost to economic and social wellbeing of people in Solwezi and the country as a whole.
But Simuusa said President Banda was depriving the Zambian people of their birthright by abrogating the Zambian laws on mining which stipulated that Zambia, through ZCCM-IH needed to retain 35 per cent stake in new mining projects. “What was the President groundbreaking and celebrating about when we don’t have a single share in Trident,” said Simuusa.
“In the absence of the windfall tax, and the in view of the projected high copper prices, the future is that we should start increasing our stake in these mines, especially new ones and in that way, we will be benefiting from higher copper prices in the future, that’s more pertinent. But there you have the President celebrating where we are losing out. And since the shareholding is not being handled properly, the foreigners in the end will get everything while we will be left yawning and quarrelling among ourselves. So, the celebration by the President doesn’t make sense.”
Labels: EQUINOX, FIRST QUANTUM MINING, MAXWELL MWALE, PF, SITUMBEKO MUSOKOTWANE, WYLBUR SIMUUSA, ZCCM-IH
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Floatation of KCM is Gold for Vedanta - What about the Zambian people?
By Prof Clive Chirwa
Sun 05 Dec. 2010, 04:01 CAT
ALL of us are rejoicing at the announcement by Vedanta Resourses to IPO (Initial Public Offer) or float its ordinary shares to institutional investors in the United Kingdom and other parts of the world excluding the USA, Canada, Australia and Japan before considering listing on Lusaka Stock Exchange. Ministers, mineworkers unions, directors are all pumping up the volume hailing the government for the favourable investment climate in our mining industries because the KCM flotation indicates good investment conditions for the country. Is that the case?
As a tough, prosperous and shrewd capitalist, I was extremely pleased to hear the announcement and I am looking forward to buying the ordinary shares in droves once Vedanta Resources Plc has been granted admission to officially list on London Stock Exchange under a new trading name of Konkola Resources plc.
My question however was simple and plain. What about the ordinary people of Zambia who own the majority of ZCCM-IH plc, what are they getting out of this?
To answer it, I went to dig deep, as I always do before buying any shares, because I have been burnt in the past and as a result lost all what I invested.
For all of us, the reason for investing must be to benefit the company in question as it embarks on a new road to prosperity and in the process makes money.
What I have found concerning the floatation application by Vedanta on KCM raises a number of issues that need rectifying now so that the ordinary people of Zambia who are majority share holders in ZCCM-IH Plc that has 20.6 per cent in KCM do not lose out in the black hole of globalisation by large institutions who will be new shareholders.
This is just my curiosity that is based on my twenty years experience as a share holder of scale in many global companies. If I was the government, I would “Ring Fence “my majority shares in KCM and let Vedanta and all the share holders in Investments Holding (IH) speculate their shares.
Indeed Mr Arawal, the executive chairman told Dow Jones of USA that Vedanta plans only to publicly list 25 per cent of KCM as it wants to maintain a majority stake in KCM. What percentage will ZCCM-IH commit to IPO?
The way I see this unfolding is Vedanta will push the government to float its entire share on LuSE (Lusaka Stock Exchange) and then buy the shares through some offshore formed company.
This formula has been used by many companies operating both in developing and developed countries.
In the end the Vedanta KCM’s 25 per cent share flotation on LSE will generate the needed cash to partly finance the acquisition of 51 per cent of Cairn Energy of India valuated at £3.75 billion.
KCM has been tabled as a guarantee by Vedanta to a consortium of lenders including the Royal Bank of Scotland, Barclays Capital, Citi, Credit Suisse, Goldman Sachs, JP Morgan, Morgan Stanley and Standard Chartered for the acquisition of Cairn Energy.
In addition the cash is intended to pay off dividends to all the share holders and pay off KCM’s US$782.2 million net debt as of 30 September 2010.
There is a warning tag that has been tied around KCM’s neck by the financial institutions who scrutinise every IPO. For this floatation, as observed by Fairfax; an innovative international investment bank, the cash costs appear relatively high for large operation and will require economies of scale as a means to reduce this. This should not deter investors as I can see a steep valuation.
Let us now return to ZCCM-IH and see how it will benefit this public company as KCM floats on LSE and LuSE.
The first thing any investor will notice in the application document is that KCM shares are clearly stipulated to be 79.4 per cent and ZCCM-IH is quoted to having currently 20.6 per cent shares in KCM.
But after the listing of 25 per cent of Vedanta’s shares on LSE, ZCCM-IH will no longer have that same share quantity it had in KCM.
Indeed according to Vedanta our government is “expected” to remain a “significant” shareholder. By how much, nobody knows.
This to me is alarming because I have seen the British government lose control of its holdings as the open market is ferocious and it is not for the faint hearted.
I am not saying this will happen to Zambia but we must be alert and cautious.
The UK story has been sad especially in automotive industry where a very big chunk of its manufacturing sector has been lost to foreigners who take the proceeds to their respective countries.
For the Zambian people to be certain of a return from their natural resources mined by KCM, we need to publicly know how much we own in the 20.6 per cent ZCCM-IH partnership and what percentage are we floating and what we are “Ring Fencing”.
In case Vedanta successfully floats 25 per cent on LSE and ZCCM-IH floats 20.6 per cent on LuSE, then the ordinary people of Zambia will lose their share in a big way.
There is nothing to stop Vedanta to buy the 20.6 per cent ZCCM-IH are offering on LuSE since this will be done after the LSE has generated enough capital and hence have some liquidity to acquire the 20.6 per cent and bring the new KR and its subsidiary KR Group back to where they started with 75 per cent shares meaning in reality a total control of 100 per cent ownership.
If this happens it will be a disaster and a dark day for the people of Zambia as will they feel cheated. The beneficiaries will only be the closed quarter of Vedanta. Why am I advancing this hypothesis?
The answer is simple. If you look at the application for IPO submitted to LSE by KCM, there is this complex company emerging from the simple clear business with two shareholders.
KCM will become Konkola Resources Plc (KR). Please note that in the floatation document and prior to admission KCM has presented itself under a name SEVCO 5042 Plc.
Nobody knows why. However, underneath Vedanta will be majority shareholder, while ZCCM-IH will be one of the shareholders if not forced to release its shares to global institutions. KR as a listed public company will have a subsidiary KR Group that owns the mines and the welfare of the employees.
In KR Group there is an offshore trust registered in Bermuda called Zambia Copper Investments with 28 per cent shares of all copper and cobalt produced at KCM and the ZCCM Investments that has the government owning 21 per cent.
On top of this there is yet another company the Copper Development Foundations with a stake of 44 per cent in Zambia Copper Investments. Are you following?
How this complex web of companies is going to be played in order to safeguard the natural resources’ revenue for the people of Zambia is not clear.
There are just too many players. No wonder we see KCM making losses on the balance sheet, while in reality KCM operations make enormous profit and Zambia can rightly afford to tax it accordingly.
Zambia today is not collecting enough monies from it’s natural resources, that is the bottom line. There are people who want to confuse the issues of taxation by coupling variable taxation with windfall tax.
These are two different tax regimes that are used by many developed countries including our competitor Chile who have embedded it in DL 600 Law.
Currently Zambia has a tax regime equivalent to corporation tax of 30 per cent; mineral royalty rate of 3 per cent; and Variable profit tax rate of up to 15 per cent of taxable income that is above 8 per cent of agreed gross revenue (if you pay this your corporation tax comes to 45 per cent).
There is also a penalty for late payment of 15 per cent on interest. In effect on average the gross tax is 48 per cent for Zambia.
If the graduated windfall tax that is payable only when the price of copper goes beyond a certain agreed threshold is implemented, then Zambia can collect today an extra 50 per cent on the gross profit above that agreed profit limit. The windfall tax is like a bonus.
It is not paid every year but only when the copper prices yield a large profit way and above the target.
For Zambia this is essential and must not only be enjoyed by the investors alone. It should be a shared bonus based on a 50/50 basis. What else do you need for fairness? We need it back.
The Chilean experience as brilliantly described in a document by Patricio Meller and Anthony Simpasa is similar to ours.
Way back in 1960s, we started at the same level, but en route we made catastrophic errors that have left us so much behind that we can no longer compare ourselves to Chile.
We can now compare ourselves with China, Peru, Indonesia who produce similar levels of copper output. Chile is King.
However, for comparison in taxation Chile has corporation tax of 35 per cent plus an undisclosed remittance tax hidden inside the DL 600 Law.
Chile can afford to collect this tax because all the copper revenue is suppose to some extent to be collected in Chile.
If investors are not happy with tax regime, they can opt for a tax regime known as Tax 69 which allows investors to pay 42 per cent on remittance of profit for a duration of 10 years.
This invariance may be waived at any time, once only, leaving the investor subject to the common regime applicable at the time of remittance, which is 35 per cent plus the unknown tax in DL 600 Law.
If we compare directly, we see that Zambia has a tax regime calibrated at about 48 per cent and from time to time including windfall tax this comes to about 76 per cent on average, while Chile has about 45 per cent with hidden tax in DL 600 Law and with profit remittance tax this shoots up to 85 per cent that is also paid from time to time when profits are high.
[Another difference is that mining in Chile happens through the government owned parastatal, so the collection of taxes is at least possible, unlike with this foreign ownership nonsense. - MrKK]
Although it is difficult to compare the two countries tax regimes, what is clear is that Chile collects more from copper activities than Zambia. The CODELCO Company works much better for the people of Chile than ZCCM-IH works for Zambians.
Therefore, I am making a call to stand back and see if floatation of the ZCCM-IH shares is really in the interest of the Zambian people. Our current arrangement of listings at LuSE and Euronext is perhaps safer.
As a capitalist with a heart, I want to see the government not float its shares until we see the results of the Vedanta IPO on LSE.
The reason being that the disclaimer that accompanies Vedanta floatation Press release which says in parts that everything has a greater degree of uncertainties that may arise from the behaviour of financial and metals markets; Exchange, fluctuations in interest and or exchange rates and metal prices; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature.
Let us not rejoice so soon.
God bless you all.
Labels: CLIVE CHIRWA, KCM, NEOLIBERALISM, PRIVATISATION, VEDANTA, ZCCM-IH
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Musokotwane advises foreign mining firms to support local enterprises
By Chiwoyu Sinyangwe and Kabanda Chulu
Thu 18 Nov. 2010, 04:00 CAT
FINANCE minister Situmbeko Musokotwane has advised foreign mining firms that the only way to protect their investments in the country is by making their operations relevant to local communities.
During Konkola Copper Mines (KCM) Plc’s post-Initial Public Offer luncheon, Dr Musokotwane said there was need for mining firms to give business lines to local entrepreneurs and at the same time pay taxes to the Treasury.
KCM, the country’s biggest mining operation is dual listing on the London Stock Exchange and Lusaka Stock Exchange under a new company called Konkola Resources in a transaction the company expects to raise US $1.1 billion to boost its operations.
Although the exact date for listing has not been set, sources close to the transaction have revealed that Konkola Resources would be listed in London before the year end, “soon after,” in Lusaka.
Dr Musokotwane who praised KCM for listing, in a move that would allow Zambians to own shares in the mining firm which projects to raise copper output to 400, 000 metric tonnes by 2012,
[At present prices of $7,000 per tonne or more, that is $2.8 billion. - MrK]
said there was need for the mining firms to remove perceptions that mining firms were reaping from communities they operate in without paying back.
“You can have all laws in this country to protect this industry, but the most important thing to protect this investment is to make yourself relevant to the community,” said Dr Musokotwane.
Earlier, KCM chief executive officer Kishore Kumar said the listing provided Zambia with a useful marketing tool to attract many other global players to invest in other sectors in the country apart from mining.
KONKOLA Resources Plc, the holding company of KCM, yesterday announced intentions to list some of its shares on the London and Lusaka Stock Exchanges with expected net proceeds of US $1.1 billion to be channelled towards its capital expenditure programme and loan repayments.
In a statement that did not include share structure breakdown and when the listing will take place, the company expects the global offer to comprise an issue of new ordinary shares and the sale of existing ordinary shares to institutional investors in the United Kingdom and elsewhere.
Additional ordinary shares of up to 15 per cent of the global offer are expected to be made available pursuant to an over-allotment option. All offer shares will be subscribed for, or purchased, at the offer price.
The company intends to pursue a listing on the Lusaka Stock Exchange and to offer new ordinary shares to Zambian investors by public offering shortly following admission as well as making an allocation of shares to employees.
Commenting on the matter, ZCCM-IH chairman Alfred Lungu said the initial public offer (IPO) would ensure Zambian investors making direct investments in the company.
“This first listing of a Zambian mining company is an important milestone in the history of Zambia , a development based on the substantial investment already made in KCM’s operations. The listing will help unlock value in our portfolio and encourage further investment in Zambia ,” stated Lungu.
Labels: ALFRED LUNGU, KCM, MINING, SITUMBEKO MUSOKOTWANE, SUPPLIERS, ZCCM-IH
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Minister angers ex-ZCCM workers
By Ernest Chanda
Sun 05 Sep. 2010, 21:30 CAT
A GROUP of former Zambia Consolidated Copper Mines (ZCCM) employees have complained against labour deputy minister Simon Kachimba who allegedly referred them to Frederick Chiluba over their unpaid retrenchment packages.
In a walk-in interview yesterday, group representative Eston Mugala complained that Kachimba was treating them like destitutes by referring them to Chiluba who had no power to help them. He said their matter involving terminal benefits was well known by State House but that recently Kachimba referred them to Chiluba to sort it out.
“We were retrenched by the Chiluba administration on November 30, 1992, about 65 of us. The issue went as far as the Supreme Court but we withdrew because we did not have money to pay our lawyer Mr Sakwiba Sikota, who was demanding to be paid K4 million. Some of our colleagues have been paid, others have died on the way and we are only four now,” Mugala explained.
“So, we wrote to President Rupiah Banda and State House welcomed us very well. They later referred us to the Ministry of Labour where the Labour Commissioner Mr Noah Siasimuna treated us quite well.
He even instructed ZCCM-IH through a letter to pay us but the company refused, saying they do not obey verbal orders from the President. The worst thing is that labour deputy minister Simon Kachimba who has been dealing with us has suddenly changed his mind. He recently told us to see the former president Chiluba for help.
Kachimba said Chiluba has been put in charge of retrenchees by President Banda, so he is the only one who can help us.”
Mugala wished that God could pass instant judgment on their situation for them to receive justice.
“I wish God could judge these issues instantly as He did in the olden days; maybe we could have received justice. I don’t know if the President is aware of the treatment we are receiving from his ministers.
Is this the country we worked for, and why should we suffer for our money like this? Why our God, why are we made to sleep at the Intercity Bus Terminus, why?” Mugala asked as he broke down.
He said Kachimba had also been blocking the group from meeting labour minister Austin Liato.
“It has become a problem for us to see Honourable Liato. We are always told that he Liato is in a meeting or he is not feeling well, so we can come later.
If Honourable Liato is aware and he is avoiding us, fine, but we will remind him and the others that they are also workers who have children to feed. They will not be in those positions forever, just like others have been there before and they left to join us in suffering,” he said.
Mugala wondered if Kachimba and others had a conscience.
“I now agree with what William Banda said early this year that there are some ministers who are not working with President Banda.
The President welcomed us well and referred us to the relevant ministry, so why should we be referred to Chiluba again? Chiluba’s time is gone, and in fact it’s him who left us in this misery after abusing our money,” said Mugala.
“I know they will complain that we went to the media. Yes, let it be so because the situation is now out of hand. It’s them who have made it this way and the only hope we have is the media. Maybe the President can read and understand that we have been neglected.”
Labels: FREDERICK CHILUBA, LABOUR, SAKWIBA SIKOTA, SIMON KACHIMBA, ZCCM-IH
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COMMENT - First of all, why is ZCCM-IH (a state owned holding company) looking for investment objectives. Give the money to the state, and let the state have it's own economic plans. This seems so disorganized. It is as if ZCCM-IH never planned on having a return on their shareholdings, and now they don't know what to do with it. Just add it to national revenues. Oh and by the way, I have a few ideas for agricultural investment. However, this is no substitute for getting a billion a year and having an agricultural policy.
ZCCM-IH proposed agricultural investment could change – Lungu
By Chiwoyu Sinyangwe
Thu 27 May 2010, 04:00 CAT
ZCCM Investment Holdings (ZCCM-IH) has said its proposed investment in agricultural projects in Central and Copperbelt provinces using the dividends from Kansanshi Mining Plc may be changed as it is not concrete.
Board chairman Alfred Lungu announced early this month that ZCCM-IH had identified some land in the Central and Copperbelt provinces for it to undertake some agricultural activities from US $18.1 million dividend from Kansanshi Mining Plc, but the move has been roundly criticised by some interest groups.
ZCCM-IH acting chief executive officer William Musama stated that the firm was still searching for viable investment projects in the country.
He said the initial decision to invest in agricultural projects in Central and Copperbelt could still be changed.
“ZCCM-IH is actively searching for profitable projects all over Zambia, with the agricultural land in Central and Copperbelt merely being some of the potential investments,” Musama stated.
“To this end, nothing has been concretised as the process of due diligence and investment identification by management and the board is still going on.”
Musama said the dividend from Kansanshi Mining Plc had given ZCCM-IH more investable funds.
“The Kansanshi Mining Plc dividend has added to the pool of resources that ZCCM-IH receives from its many investments,” stated Musama. “This pool of resources will be utilised to invest in project proposals or companies that meet the company’s criteria for viability and profitability. The resources will also be used to discharge historic liabilities.”
Labels: ALFRED LUNGU, WILLIAM MUSAMA, ZCCM-IH
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COMMENT - This is an excellent Socratic treatment of the pro's and con's of a re-introduction of the Windfall Tax, and why the Zambian economy is not benefiting from it's main economic activity - copper mining. Please comment on this article at the original page on
the Zambian-Economist blog.
Eight reasons for rejecting higher mining taxes..
by Chola Mukanga
Saturday, 22 May 2010Today, we turn the tables and present the most cogent arguments that could be made, if I was hired as a “spin doctor” for Rupiah Banda and help argue against relatively higher taxation than at present (It is taken for granted in the post below that higher taxation would mostly likely involve restoration of the Mwanawasa mining fiscal regime, with windfall taxation at its heart). I offer eight reasons that can be put forward for rejecting higher mining taxes - offering both the central argument to substantiate the reason and then the counter-argument (response). Effort has been made to be impartial but also succinct. One can write an essay on each of the arguments, but for ease of access I have tried to summarise them. I’ll leave it to the reader to expand on them and decide whether the “argument” is stronger than the “response”. By nature of the "title" and this introduction, I have shifted the burden of proof onto those seeking change.
Reason 1 : High taxes would reduce competitiveness
Argument: Increasing mining taxes when other countries are not changing their tax systems, with the exception of Australia, would make Zambia uncompetitive in this important area. Zambia is a small country and we are not exactly renowed as an attractive place to invest. on It is because of the mining revival that we are now having investment in excess of $3bn annually. We have also seen that countries that have imposed windfall taxes have lived to regret. For example Mongolia once raised its mining taxes only to find itself in a quagmire with investment drying up! We must also remember that low taxation is the bedrock of attracting foreign direct investment (FDI). It is therefore critical that we see mining in the overall context of Zambia’s successful FDI policy. No one doubts that low taxation is critical component to that.
Response: The argument is based false premises for several reasons.
First, Zambia’s taxation threshold has enormous scope for increasing taxes without harming competitiveness. Zambia has one of the lowest tax regimes in the world. Prior to 2008, the effective tax rate stood at around 32%, with the Levy Patrick Mwanawasa (LPM) changes it was intended to rise to 47%. LPM put it best : "with these new measures, the Zambian tax regime still remains competitive and moves Zambia into the media position in international comparisons at 47% effective tax rate. The effective tax will not adversely affect the companies' viability as their returns will remain well within the international norms". In short Zambia was to tax more than Tanzania but less than resource rich nations Botswana, Mozambique and Angola. It is therefore wrong to suggest that reintroducing the windfall tax for example would significant damage it’s competitiveness.
Secondly, there’s no concrete evidence that FDI is driven by lower taxes per se. Although tax competition is used usually to justify the level of tax, it is clear from literature that the key driver of foreign direct investment tends to be political stability, cheap / diverse labour and, most importantly, prevailing global economic forces. Zambia’s mining industry is booming because the prices of commodities are high and will continue to be high for some time, aside from few fluctuations because of the long term global imbalance between demand and supply. Of equal importance is that the investors are confident of the political ambiance in the country.
Third, the argument is structurally predicated on the idea that growth in mining must necessarily be driven by external investment – this need not be the case. Many economists believe that although FDI has a role to play in development, what matter is the structural transformation of the production side of the economy. To do that requires government investment in technologies and other supporting industries, which won’t happen without access to mining revenue. Indeed, without government revenue there can be no tangible and accelerated diversification.
Finally, there’s a broader point also to be made – the current low mining taxes may be attracting “wrong investors”. Many of the investors Zambia has attracted in the mining industry have been nothing short of short term vultures (term used is "infestors"), whose primary interest is to come into the country to siphon resources on the cheap and vacate premises when the going gets tough. Poorly designed incentives coupled with a friendly regulatory structure continues to undermine Zambia. A strong starting point in rectifying these problems is appropriate and fair taxation.
Reason 2 : High windfall tax would harm exploration
Argument: The biggest challenge for Zambia is to discover and exploit the vast minerals we have. To do that we need exploration, this is a costly and uncertain exercise. It is undertaken only if there’s a strong possibility of finding something and being able to earn a return on it. Relatively higher taxes, especially in the form of revenue windfall systems, are a disincentive to exploration. As a country we are in a hurry to develop and achieve middle income status by 2030. We must incentivise investors to undertaken exploration activities because that would guarantee a better future for our children. Allowing foreign mining firms to continue operating under existing conditions would guarantee the opening up of more copper mines, which would in turn create more employment for Zambians. Not only that government would collect more taxes through personal income tax and land tax the councils collect from the mining firms, while the tourism and services sectors would also benefit from wider catalytic impacts.
Response: There are three problems with this argument. First, it treats mining taxation in very general fashion. We must distinguish the principle from the application. It is not true that any mining taxation reform would lead to lower exploration activity. Different incentive or taxation structures can be developed that would allow the people to benefit from current mining activities while incentivising future exploration. Secondly, it predicated on a highly uncertain future. The investments that would be disincentivised, if the argument is to believed, are those taking place from 2020 and beyond. However, given the current configuration of the taxation system, as we have seen in Lumwana’s case, no significant revenue would begin to accrue from any such unknown investment until 2025 and beyond. In short this is an argument about an unknown and distant future. Finally, the argument again presupposes that only foreign firms can do “exploration activities”. There’s a strong case for government to assume a greater role in exploration activies to narrow the information loss between investors and government. This would also help reduce the sort of problems we have seen where Lumwana has huge uranium deposits off the back of a copper investment. More exploratory and geological exploration would put the Zambian people in the driving seat of their resources.
Reason 3 : Higher mining taxes will compromise safety and harm environment
Argument: Increased taxation will not have the desired social effect because it mainly leads to mining companies pushing the costs on workers and local communities. Principally mining safety and environmental damage would get worse as foreign firms seek to maintain their profits. Indeed the service conditions of workers may also be affected. We would be robbing Peter to simply pay Paul! The worker and the local community must come first. Higher taxation would not make things easier for these groups. Quite the contrary it will make it worse!
Response: There’s some truth in that argument. Increasing taxation will always create perverse incentives for mining companies. However, this is not an argument against increasing taxation per se. Rather it is an argument for why taxation must be part of a broader strategy that takes safety and environment into account. Indeed such a strategy much also bring into line how any windfall revenues are managed to empower local people and avoid the “Dutch disease”. Its therefore simply wrong to suggest again that higher taxation per se would be the source of these potential difficulties. We can have both high revenue and a good environment if careful thought was given to these issues.
Reason 4 : The profit variable tax does the same job as windfall tax
Argument: People who argue constantly for the windfall tax have a poor grasp of taxation issues or basic economics. It is quite obvious to everyone that the removal of the windfall tax will not lead to loss of government revenue as the variable tax still captures any windfall gain that may arise in the mining sector. Infact it is better because it ensures that mining companies are not being driven out of business by explicit accounting for cost of investment.
Response: This argument demonstrates complete ignorance of the common wisdom of tax collection. Although many would agree that theoretically the profit variable tax can go some way in capturing the necessary revenue from higher copper prices, a windfall tax is easier to implement. It is also easier for the public to check how much revenue government is getting in its coffers. With a profit variable tax it is an accountant's job! Multi national corporations love profit variable taxes because it is easy for them to hide their profits through inflated costs and so forth. Simply put, the mining companies have smarter accountants than the Government. This is why the mining companies pushed for removal of the windfall tax. They knew they'll pay very little. It is also the reason why all the donor partners have concluded the status quo is not desirable, with some calling it "depressing”. Simpler taxation mechanisms are key to improving collection.
Reason 5: The “certainty principle” favours the status quo
Argument: The long-term outlook for copper mining in Zambia is still very uncertain following the period of government led ownership prior to liberalisation. . Investors don't have sufficient confidence that government is committed towards an open investment policy. Constantly changing the fiscal regime whether for good reasons or not does not inspire investor confidence. What we need is certainty and stability that reduces the risks to long term investment. Having undertake reforms in 2008 and 2009, we need a period of calmness to settle things down. We perhaps can come back to this issue in 2015 or beyond. We must learn from successful countries like Chile, Australia and Canada who don’t arbitrary change their mining taxation regimes.
Response: The point regarding certainty is perfectly valid, but it misses the more fundamental question – what drives certainty? Certainty is derived from ensuring that you have a mining settlement that has the full buy-in of all Zambians. Otherwise, every government that comes along will constantly alter its mining policies. This calls for a Zambian solution, not an MMD or PF or UPND solution. The approach to mining policy must therefore be necessarily consultative and transparent. It is not just about the level of taxation but "how" you get these stable mining policies The mining companies need to realize it’s in their long term interests to push for transparency - deals made under the table are not sustainable. The approach should be consultative and transparent. These are the foundation of “rule of law”. At present there’s no rule of law in this area because government has acted without the people’s consent. It should also be noted that the suggestion that other countries are not changing their taxation regimes is blatantly wrong as can be found here.
Reason 6: ZCCM-IH is doing its job – its about empowerment not revenue
Argument: It is disingenuous to claim that Zambia does not benefit from mining because we are also owners of these mining companies! ZCCM –IH is a state owned venture and it owns 20% plus shares in joint venture with foreign mining corporations e.g. FQM’s Kansanshi and Vendata’s Konkola . Therefore as the transnational companies soar in their mining profits ZCCM-IH gains significant windfall. A "them Vs us" approach does not therefore quite reflect reality on the ground, where ZCCM - IH is a big player with assets over $1bn. When you attack mining companies, just remember you are also an owner of those investments! For example, recently we saw huge dividends of around $18m to the Zambian people by KCM.
Response: It is true that ZCCM-IH does have interests in many of these companies, but it hardly possesses a controlling interest stake in any of the key joint investments. More worryingly it’s been clear for a while that ZCCM –IH has not been receiving meaningful dividends from its jointly owned projects. The $18m hardly qualifies as "huge". A fact which led to rumours last year that government was planning to convert these financial liabilities into equity, thereaby raising substantially its stake in the mines. That the government recognised this possibility is a clear testament that the ZCCM-IH model has not worked. Indeed, what seems to concern many people is that ZCCM - IH is not "empowering" ordinary Zambans. If ZCCM-IH was owned by ordinary Zambians a potential argument can be constructed that some money does filter back to ordinary Zambians via the "theoretical dividends". ZCCM-IH is currently listed in Lusaka (alongside London, and Euronext Stock Exchanges), with the government owning 87.6% shareholding, with the remaining 12.4% held by private equity holders largely abroad. Unfortunately the whole venture is not very transparent! According to foreign private equity holders in ZCCM-IH the company has never published its financial report for nearly 4 years! Its inventories are also not formalised! Remarkable for a listed company! It is hardly the sort of company one wants to appeal to as the reason for not increasing mining taxation. On the contrary, it beggars belief that many Zambians do not even realise that ZCCM-IH is a huge part of the reason Zambia is not benefiting from its vast reserves of copper.
Reason 7 : We are already benefiting through employment
Argument: Investment in Zambia has grown significantly, as much as $5bn has been invested in the mines. Without the current fiscal regime Zambia would never have the sort of investment it has had. Indeed part of the reason why Lumwana was built was due to the favourable regime, For 25 years, Zambia had no new mines opening, now we see plenty of new ventures being proposed under the visionary policies of the MMD led government over the two decades. Significant jobs have been created from new investment opportunities. Zambia may not be benefit as much as we all would like from mining taxes but it is benefiting significantly from new jobs. As His Excellency President Rupiah Banda has helpfully reminded us "we must ensure that we do not kill the goose that lays the golden egg. There is little point in taking in a few million dollars in tax if thousands of jobs are lost as a result”. We have seen that employment has risen from 22,000 jobs in 2000 to 48,000 jobs in the mining sector because of new investments. Any appraisal of Zambia's mining policies must account for the huge benefits we have got from this extraordinary ramp up in job creation. Our approach must be to continue allowing more money to come into the economy to create jobs.
Response: The argument as formulated is misleading for three reasons. First, without doubt Zambia has significantly increased foreign direct investment to the mining sector. But the fundamental question again is what has driven this investment? As the response to Reason 1 suggested its broader issues related to political stability, cheap / diverse labour and, most importantly, prevailing global economic forces. Secondly, the employment argument is easily rejected because the counter-factual is all wrong. The so called jobs created by the MMD led government of the last two decades are essentially the jobs they destroyed through the disastrous privatisation project of the early 1990s. But suppose we can allow the argument that these are new jobs how far does the argument go? Not very far because the real central question of course relate to the “quality of jobs”. The argument regarding job creation treats jobs as homogeneous and an end in themselves. The goal of government is to provide a conducive environment where individuals can create value adding jobs and thereby foster wealth creation. Pointing to jobs built on casualisation is not wealth creation.
Reason 8. We have corporate social responsibility!
Argument: There are many companies doing very good social responsibility projects. For example First Quantum Minerals has done much rehabilitating roads in Ndola. Similar Konkola Copper Mines is working to empower the Luano Community in Chingola through an innovative goat draft project - an interesting alternative to microfinance. Lumwana recently pledged to spend K4bn on the local area, including plans to launch a multi-million Kwacha programme to diversify its local economy in Solwezi away from dependence on mining. These are great initiatives that should be supported through lower taxation.
Response: Corporate Social Responsibility (CSR) is a positive undertaking but it is at best a distortionary second best scenario. The ideal scenario is that government should tax mineral resources sufficiently in a way that profits local people and does not impact negatively on the environment and safety of workers. The government is currently not pursuing the ideal and therefore our efforts should be directed at ensuring it does. The more serious problem with the argument is that it ignores the real manace of CSR. Such initiatives, though spun as “social projects” are essentially "bribes" to keep local people quiet. Firms do not engage in "social responsibility", they practice "shareholder responsibility". The projects mentioned in the argument should therefore be rightly seen as a small price that mining companies have decided to pay local people in Ndola and Solwezi lest they become agitated at the lack of development in the area and demand the Government to do more to tax the mine (which would be bad news for the shareholders).
I have set out the above arguments and responses for three reasons.
First, I wanted to bring all the arguments / counter-arguments together in one place for ease of reference.
Secondly, I believe both sides have reasonable arguments to make and what we need is actually dialogue rather than speaking past each other.
Thirdly, often in economic analysis it’s not black or white – the question is how one weighs up the pros and cons. If this post helps people approach other issues in similar manner, then we would have progressed how debate ought to be had. I trust that readers will find these arguments and responses useful.
More importantly, it is hoped that I have tried to make the best possible "argument" and the best possible "response". Where a "reason" appears to be missing, this should be cited and it can be added provided it is distinct from the above eight reasons. If its not added, I will respond explaining why I don't think that particular reason is distinct.
Labels: CHOLA MUKANGA, NEOLIBERALISM, WINDFALL TAX, ZCCM-IH
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