(By Edwin Mbulo in Sesheke)
THIS mukolo (Lozi for boat) has destroyed our economy, says Hakainde Hichilema.
The UPND leader warned “what we see at FQM is going to happen at KCM, it is just the beginning and may happen to other firms.”
His comments come in the wake of reports that First Quantum Minerals is ramping up production at its Cobre Panama plant this year, even as a mining tax hike forces it to shed jobs and cut production in its Zambia operations.
First Quantum Minerals is reportedly poised to fire up a giant copper project in Panama, thousands of miles from its beleaguered mines in North-Western Zambia.
According to an advert last December, FQM president Clive Newall is quoted saying “Panama is investment grade and Zambia isn’t”.
“So there should definitely be an improvement in the bonds as the ramp up of Cobre Panama progresses,” Newall said.
It is reported that where FQM does significant business matters to bondholders who closely follow risks associated with lending to companies operating in that particular country.
Panama has an investment-grade rating, while Zambia is ranked more deeply into junk.
“Any subsequent boost to the bonds from a shift would be a reprieve for First Quantum’s lenders, who’ve seen their notes post significant losses in recent months. The firm, and producers like it, also faced pressures as the copper price tumbled, amid trade tensions and fears of slowing global growth,” the report states.
“Country of Risk: First Quantum’s US$1 billion of notes due March 2026 have posted about a 15 per cent loss on a total return basis since their February 2018 sale, according to data compiled by Bloomberg. That compares with a 2.5 per cent return handed to owners of broader Canadian corporate debt, the data show. The First Quantum bonds are now quoted at about 80 cents on the dollar.”
“It seems pretty clear to us that these bonds will be considered Panama country of risk in the near future, prompting a repricing,” said Nicholas Leach, a fund manager at CIBC Asset Management in Toronto. “This move could also significantly increase the market for these notes.”
Panama is rated BBB by S&P Global Ratings, two steps above investment grade, while Zambia is rated six notches into junk territory. The Zambian government passed legislation in December that increases royalties for copper, in a move the industry said could lead to more than 21,000 job losses and operators cutting $500 million in capital spending over the next three years.
“For First Quantum, the royalty hike was behind its plan outlined in December to cut at least 2,500 jobs in the first quarter at both its Sentinel mine and its Kansanshi facility, which is Africa’s largest copper mine. In March, the firm was also hit with a $7.9 billion tax bill from the Zambian government, an assessment it refutes.”
But Hichilema said the PF’s high tax burden was going to hurt citizens, households and companies.
“Companies are going to close down; this is only the beginning. I think you have seen it in KCM as well. You cannot tax your way into development. If you over-tax households, over-tax companies, you’re going to kill the economy and we told these PF people, we gave them free advise they never listened because they have no vision, they don’t understand how an economy is developed. You need to leave the resources into the hands of the citizens, in the hands of households and companies because they are inherently, in economics, we say they’re inherently more efficient than the government,” he said.
“So what we see at FQM is going to happen at KCM, it is just the beginning and may happen to other firms. Even in your house, today you buy less goods when you go into a shop to feed your children. This mukolo [boat] has destroyed our country. I appeal to the people of Zambia, let’s work together, and time to divide each other is over.”