‘Chiluba, his committee of ministers were directly responsible for selling ZCCM and all its assets’

(By Mast Analyst)

TWENTY-TWO years after privatisation of the Zambia Consolidated Copper Mines by the Zambian government/ZCM negotiating team led by on Francis Kaunda, there is now talk of instituting a public inquiry into privatisation programme.

In 2000 a Parliamentary Committee recommended the same, but the majority members of MMD rejected the proposal in Parliament.

It was Kaunda and his team, under the late President Frederick Chiluba and his committee of ministers who were directly responsible for selling ZCCM and all its assets.

No one else was involved. The Committee of Ministers usurped the powers of the ZPA illegally and made decisions of the sale of mining assets on recommendations of the Kaunda led Negotiating Team.

Were there other ways in which the ZCCM sale had not been handled in accordance with the Privatisation Act?
ZCCM management and the Government itself, not the ZPA, were handling negotiations over the sale of ZCCM.

According to press reports at that time, the chief executives of the four major partners in the Kafue Consortium – at the time bidding for the Nkana/Nchanga mines visited Lusaka.

They met with President Chiluba, Francis Kaunda, Luke Mwananshiku, and Edward Shamutete on 15 August 1997 to press for a speedy resolution of negotiations.

A question was asked in Parliament by Lusaka Central Independent MP then, Dipak Patel, as to why the Government was heading the ZCCM negotiations, and not the ZPA, as stipulated in the Act. The Deputy Minister of Mines and Mineral Development, Kaunda Lembalemba, failed to answer the question or address the issues it raised.
First Quantum, a company which was unsuccessful in its bid for the Luanshya/Baluba mine had sued the ZPA, ZCCM, the Binani Group as the new owner, and the government as a fourth defendant.

It alleged that its bid was superior and that the decision to award the contract to the Binani Group was not considered by the ZPA Members nor was the sale handled by the ZPA.

The company wanted a declaration to the effect that no other body except the ZPA was entitled to offer for sale any State-owned enterprise under the Privatisation Act. The implication was that the decision to sell to Binani was taken by the Government and ZCCM negotiating team.

Valentine Chitalu, the chief executive of ZPA, was a Director of ZCCM. Late Willa Mung’omba, a member of the ZCCM Privatisation Negotiating Team, was also a Director of ZCCM.

But the Privatisation Act purposefully specifies that the ZPA, and not the company board and directors of a parastatal, was to handle all sales.

In the case of ZCCM, this distinction was blurred. Similarly, Kaunda, the chairman of the ZCCM negotiating team who was appointed over the heads of the ZPA members, is a former chairman and chief executive of ZCCM.
It may make sense for someone with a thorough knowledge of ZCCM to head up the team, but the manner of Kaunda’s appointment sent a clear message that ZPA was no longer in charge of the process.

Col Nawa, member of parliament for Sesheke, contributing to a debate to adopt the Parliamentary Committee report said “the appointment of former ZCCM chief executive, Francis Kaunda as chairman of the GRZ/ZCCM Privatisation Negotiating Team was a blatant disregard of Section 32 of the Zambia Privatisation Act, which stipulates that all members of the team shall be appointed by the ZPA Board.”

In 2000, the chairman of ZPA in his submission to the Parliamentary Committee on Economic Affairs and Labour said: “…that the appointment of the GRZ/ZCCM Privatisation Negotiating Team did not follow the spirit of the ZPA Act, even though it was claimed that the appointment was in national interest. Notably, after the appointment of the team, the ZPA Board was merely informed of the decision, rather than be allowed to scrutinise and effect the appointment. The Chairman had further said that the ZPA Board had written to the Negotiating Team and the Attorney General regarding the need for the ZPA Board to be kept abreast of any developments in the privatisation of ZCCM assets, and to in-fact take decisions in the matter. However, these representations had not yielded the desired result and the Negotiating Team had continued to report to the Committee of Ministers. If anything, the working relations between the Negotiating Team and the ZPA Board had been very poor.”

The chairman also explained that there was some political interference in the sale of the mines. For example, when the Negotiating Team was appointed, ZPA had been negotiating the sale of Luanshya Mine and a preferred bidder had been identified. The ZPA Board met to consider the bids and made a decision to award the mine to the preferred bidder in the name of First Quantum Minerals. Within hours of making this decision, pressure was brought to bear on the Board by the Committee of Ministers. The Board was instructed to meet again the following day and award the contract to another bidder, the Binani Group. The reasons for this action were not given. The minutes of the original ZPA Board meeting at which the contract had been awarded to First Quantum Minerals had been withdrawn on instructions from the Committee of Ministers.

The Chairman further stated that although the Terms of Reference of the GRZ/ZCCM privatisation Negotiating Team were very specific as regards the role to be played by the Team (i.e. Advisory to ZPA) the reality was that the Team concluded Sales Agreements with various bidders in the sale of the mining assets.

On 17th November 2000, the then Chairman of the Parliamentary Committee on Economic Affairs and Labour, Patrick Kalifungwa tabled a motion in Parliament to adopt the Committee’s report on the Review of the privatisation of ZCCM. On Tuesday, 28th November 2000, the actual debate on the report had begun. The report was subsequently rejected by Parliament through a vote, in which the MMD had a majority.

During 2001, attempts were made by several members of parliament to have the Committee report re-considered. The Speaker made an announcement on Wednesday, 25th January 2001: “The House will recall that, on Tuesday, 28th November, 2000, the hon. Member of Parliament for Mambilima Constituency, Mr. Patrick Kalifungwa, MP, moved a motion to adopt the Report of the Committee on Economic Affairs and Labour for the Fourth Session of the Eighth National Assembly on the review of the privatisation of ZCCM, laid on the Table of the House on 17th November, 2000, in his former capacity as Chairman of the Committee. The said motion was seconded by the hon. Member of Parliament for Lusaka Central Constituency, Mr. Dipak Patel, MP.

The House will further recall that, after long debates on the Floor of the House, the motion to adopt the Report was rejected. Following the rejection of that motion, attempts were made to bring about a point of order on the conduct of business with regard to the rejected motion. However, such attempts could not be allowed to proceed due to the parliamentary principle, which disallows debate on a matter that has already been disposed of.

It is a settled principle of law, embedded in the doctrine of Res Judicata, that once a matter has been decided upon, it cannot be raised again.

In spite of this, some former members of the Committee on Economic Affairs and Labour raised, again, the matter in writing, thereby totally disregarded my earlier advice on the Floor of the House when the hon. Member for Kapiri Mposhi, Mr. MacDonald Nkabika, MP, tried to raise the same issue by way of a point of order.

I appreciate the fact that the Committee may have been displeased with my advice, but, this notwithstanding, you will recall that sufficient time to debate the motion was given to both sides that were either for or against the motion. Consequently, the Chair, having been satisfied that both sides had debated the motion fully, put the question to the House whether to accept the motion or not. Accordingly, those who were against the motion were in the majority and, as such, their view prevailed. Hon. Members, the assertion that the outcome of the debate on this matter had tarnished the integrity of Parliament, its staff, and the Committee cannot stand. This is because the procedure followed in arriving at the decision of the majority was not, in any way, different from the established practice and procedure of the Commonwealth and other parliamentary systems. You may also wish to be reminded that, on a number of occasions, the back-bench has criticised the Front Bench to the extent of casting aspersions at the character of individual Ministers. However, none of the victims of such aspersions has ever attempted to commit his or her displeasure in writing and presenting the same to the Office of the Speaker, as what those hon. Members have done. I take this opportunity to advise the House that according to our own procedure and according to Mr. N. Kaul and S. L. Shakdher, and I quote:
‘It is not customary for the Speaker to enter into correspondence with regard to proceedings of the House or with a view to elucidating ‘Rulings’ made by the Speaker in the House’. This book is available in the Library. In this regard, the House may wish to know that abuse of the right to petition and reflections on the character or proceedings of the House have been constantly punished by the United Kingdom House of Commons upon the principle that such acts tend to obstruct the House in the performance of Parliament business by diminishing the respect due to them. Hon. Members may wish to consult Erskin May, also available in the Library.

In view of the foregoing, I now take this opportunity to guide Members who may fall into a similar trap that they risk being ‘named’ and their case referred to the Standing Orders Committee for appropriate sanction.
Finally, and in the light of my earlier advice on this matter, I cannot consider the hon. Members’ petition and I hope that this announcement sufficiently explains why the House does not entertain further reference to, or debate on, a Bill, a motion or any other matter that it previously rejected or even approved. I thank you.”

These were the recommendations of the Parliamentary Committee on Economic Affairs and Labour 10th February 2000:
“In view of the observations made in the Report, and in the best interests of transparency and accountability of public assets, your Committee strongly recommend as follows: –
1. That an independent public inquiry be instituted, in accordance with the Inquiries Act, Cap 41 of the laws of Zambia, to examine issues of public interest in the management of ZCCM, the divestiture of each ZCCM asset and the realization and utilization of the proceeds of the sale of the core mining assets and the non-core assets. The findings of this independent inquiry should be handed over to the Director of Public Prosecutions for further action, as deemed necessary.
2. That in public interest the Luanshya Mine be repossessed from RAMCOZ, due to consistent gross non-compliance of the sales and development agreement signed with GRZ, and the be advertised for re-sale.
3. That the ZPA Act be reviewed and amended to provide for: –
(a) Any offence committed under the Act to be criminally prosecutable
(b) Stiffer penalties against offenders; and
(c) Any illegal transaction to be rendered null and void.

4. That in public interest, ZCCM Investment Holding Company, which currently holds the minority shares in privatised mines, make known publicly as to when and how the shares will be sold to Zambian citizens

5. That in public interest, all known assets sold irregularly or illegally be repossessed and the ZPA be instructed to re-sell the assets.

6. That in public interest, the Government and ZPA establish a true list of all ZCCM assets and investments prior to privatisation. In this regard, the relevant officers such as the Secretary to the Treasury should henceforth ensure that they keep a fair inventory of all assets held on behalf of the public.
7. That in public interest, the provisions of the sales and development agreements with the purchasers of the ZCCM mines be made known.
8. That in public interest, the Government initiate the re-nomination for consideration and ratification by Parliament of the Directors of the ZPA Board.

9. That in public interest, the Government provide for consideration and ratification by Parliament the Directors of ZCCM Investment Holding Company. Your Committee recommend that these Directors should be appointed with a view to maximise returns on Government’s shares.

10. That the Government legislates prudent investment guidelines for all public pension’s funds, including Mukuba Pension Scheme, and also provide for the consideration and ratification by Parliament of Directors of public pensions funds/schemes. The Government should, meanwhile ensure that all workers retrenched from the former ZCCM receive their full pension dues, and that those re-engaged by the new investors are not unduly disadvantaged in terms of pension benefits. The indiscriminate employment of expatriate personnel should also be checked to ensure Zambian professionals are not disadvantaged.

11. That the Government level the playing field for the entire manufacturing, agricultural and tourism sectors, including mining.

12. That in public interest, the International Finance Corporation consider divesting their interests in the former ZCCM mines by selling their shares.”

And the Anglo American Plc made the following submissions to the UK National Contact point in January 2002 in accordance with the Adherence to the OECD Guidelines for Multinational Enterprises in respect of its operations in Zambia:

This submission examines the conduct of Anglo-American plc and its predecessor and subsidiary companies in the privatisation of Zambia Consolidated Copper Mines (ZCCM), both during the sale itself and in its management of those privatised operations which it now controls. This assessment is made against the benchmark of the OECD Guidelines for Multinational Enterprises (hereafter ‘the Guidelines’). The Guidelines lay down recommendations governing the activities of multinational enterprises.

QUOTE “While the sell-off was underway, the Parliamentary Committee on Public Investments denounced deviation from the Privatisation Act and urged the Government to ensure that privatisation is carried out in accordance with its provisions. The Parliamentary Committee on Economic Affairs and Labour, in its review of the privatisation of ZCCM, observed that: ‘The process of privatising the mines was characterised by personal differences amongst key players, and not by observance of due process in the best interests of the nation. In some cases, political considerations appear to have overridden public interest, transparency, and even the law. The Committee concludes: ‘The Ministers of Commerce, Trade & Industry, Finance and Economic Development, and Mines and Minerals Development, their representative Permanent Secretaries, the Attorney General, the ZPA Board, the Chairman of the GRZ/ZCCM Negotiating Team and the Committee of Ministers, have all been negligent in performing their legal and/or moral responsibilities in protecting and preserving public assets.

Deviation form the Privatisation Act – Prior to the finalisation of the sale of the mines, fears grew that ZCCM did not have the capacity to dispose of compromised ZCCM assets at reasonable prices and hence action was necessary to expedite the sales. The Chairman of the GRZ/ZCCM PNT – while still claiming that the process was in conformity with the Privatisation Act – has confirmed that: ‘The Shareholders of ZCCM, therefore, developed a transformation plan with technical assistance from the World Bank. In this plan, all the assets were divided into three categories: (a) Core assets (b) Non-core, subsidiary companies (c) Miscellaneous[.] There were then appointed group leaders to lead the negotiations for the disposal of each category of assets, under the overall supervision of GRZ/ZCCM PNT Chairman who convened regular meetings of the Team for the purpose of being apprised of progress in the groups’ negotiations.’

The ZPA has testified that the appointment of the GRZ/ZCCM Privatisation Negotiating Team did not follow the spirit of the Privatisation Act and that the ZPA was ‘merely Informed of the decision, rather than being allowed to scrutinise and affect the appointment. Subsequently, the Negotiating Team did not report back to the ZPA board: ‘…although the Terms of Reference of the GRZ/ZCCM Privatisation Negotiation Team were very specific as regards the role to be played by the Team (i.e., Advisory to the ZPA Board) the reality was that the Team concluded Sales Agreements with the various bidders in the sale of the mining assets. Formal approval of the mine sales by the ZPA Board has been described by the Chairman of the ZPA as ‘an academic exercise to fulfil statutory requirements’, as the decision-making power had been usurped by the GRZ/ZCCM Privatisation Negotiating Team. ZACCI has expressed its disquiet over role of GRZ/ZCCM Team as it ‘appeared to override ZPA’ which was properly constituted by parliament and should have been answerable for whole privatisation programme. The replacement of ZPA made it difficult to catalogue offers, created uncertainty over the value of the mines and therefore missed opportunities to sell, and resulted in a lack of uniformity in the terms and conditions of each sale. ZAM has condemned the removal of the ZPA as negotiator: ‘the ZPA Act was torn up when the Government appointed a GRZ/ZCCM Privatisation Negotiation Team, which operated outside the ZPA. The Permanent Secretary to the Ministry Commerce, Trade and Industry has conceded that the ZPA board ‘had expressed concern at the lack of clarity on the procedures and mandate of the Team and the role of the Committee of Ministers, particularly with regard to the law’.

The mis-sale of Luanshya Mine – A court case disputing the sale of another ZCCM mine reveals the extent of deviation from the Privatisation Act. Luanshya and Baluba, was sold to an Indian company, the Binani Group in June 1997.The other bidder, First Quantum of Canada, sought a reversal in the High Court of the decision to sell to Binani. The legal action brought a number of facts to light. First Quantum had indeed originally been selected, on a purely commercial basis, as the winning bidder by ZPA. In doing so, the ZPA board followed the expert recommendation of its advisors, the merchant bank N.M. Rothschild, rather than the wishes of the Government/ZCCM. This decision was officially reversed following an urgent meeting between Cabinet members and a minority of the ZPA board, in an apparent contravention of the Privatisation Act. Binani’s last minute bid bettered First Quantum’s offer by a precise margin, prompting First Quantum to allege that details of its own bid had been leaked. Binani had no copper mining experience, had not conducted full underground studies, and analysts questioned whether it had the necessary financial backing to fund its ambitious plans for the Luanshya operations. Their fears have proved to be well-founded. The deterioration in employment conditions, coupled with persecution of the local union leader, prompted unprecedented industrial unrest in Luanshya in November 1998.There have been negative repercussions for social provision in the local community. Mismanagement of the mine has led to a series of financial crises, culminating in the mine going into receivership in November 2000. The Parliamentary Committee has pronounced the sale of Luanshya Division as irregular, stating that ‘[t]he Committee of Ministers had no legal authority to reverse the decision of the ZPA Board.’ The ZPA has confirmed the mis-selling of the Luanshya package and the MUZ, ZACCI, ZAM have all roundly criticised the sale. Even the Secretary to the Treasury has conceded that the sale was based on ‘shaky foundations’ and should have been revisited.

The diversion of sale proceeds – The issue of the diversion of funds was raised by the Committee on Public Investment in December 1997. Subsequently, the ZPA has stated that it has no details on how the sale proceeds of the mines had be handled or utilized and the EAZ believes that ‘[t]here had been lack of transparency, as the general public was not aware as to how these proceeds had been utilized to date. The Attorney General has conceded that transparency had not always been observed in the sale of ZCCM assets and has confirmed that all privatisation proceeds should have been despoiled in the PRA and hence that ‘[a]ny other arrangements were ultra vires the law. Zambia Association of Manufacturers has criticised the mine sales for being ‘less than transparent’ and has been critical of irregularities concerning the sale of ZCCM non-core assets. The Permanent Secretary to the Ministry Commerce, Trade and Industry has confirmed this view. The Attorney General has testified to Parliament that, although his office should have been consulted for legal advice overall sales under the Constitution, this had not been done in respect of a considerable number of non-core ZCCM assets or those owned by the company abroad. No fewer than forty-six such irregular sales of significant assets are listed.64 According to the Attorney General, two Team Leaders in the GRZ/ZCCM PNT had been appointed to dispose of non-core assets, but that these transactions were not ratified by the ZPA board as required. His office had queried the disposal of certain assets by ‘deed of gift’, in a way not provided for under the law, but to no avail. The Parliamentary Committee, despite extensive questioning of key parties, declared itself unable to obtain a full and true list of all ZCCM non-core assets and could not verify what was owned, what has been sold to whom, at what price, or on what payment terms. It confirmed that the proceeds of such sales had not been remitted to the PRA and that, contrary to the law, neither the ZPA Board, the Attorney General nor the Minister of Finance and Economic Development had signed/approved the sale of a number of non-core assets which had therefore been sold illegally by the GRZ/ZCCM PNT.” UNQUOTE

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