Edgar Lungu’s handling of Konkola Copper Mines’ problems is reckless and dangerous.
It is reckless because it is heedless of danger or the consequences of his actions; rash or impetuous.
It is dangerous because it is likely to cause problems or to have adverse consequences for the country and our people, especially the workers.
As a consequence of the mishandling of Konkola Copper Mines’ problems, Zambia’s Eurobond yields has risen to record highs.
The yield on Zambia’s US $750 million of securities maturing in September 2022 climbed 81 basis points to 19.74 per cent in London. Rates on notes due in April 2024 rose 51 basis points to 19.02 per cent. No other country apart from Venezuela, which is in default, has yields as high.
The ex parte provisional liquidation of Konkola Copper Mines after emotional outbursts from Edgar undermines investors’ confidence in Zambia’s judiciary and is likely to unnerve both local and foreign investors.
Many investors are now also concerned that Zambia may default on its loan obligations unless it gets a bailout from the International Monetary Fund or negotiates easier terms on loans from China.
Zambia’s Eurobond curve is now inverted, a rare occurrence and a signal that its assets are well into distressed territory.
And this is happening at a time when the kwacha has weakened 14 per cent against the US dollar – the second-worst performance globally after Argentina’s peso – to 14, which is making Zambia’s external borrowings more expensive to pay off.
It cannot be denied that Konkola Copper Mines has problems. But these problems can be resolved in a better way – a way that doesn’t compound the problems and scare away investors.
Edgar seems to have completely ignored the investment agreement the Zambian government had entered into with Konkola Copper Mines.
The owners of Konkola Copper Mines will certainly fall back on this agreement and seek compensation.
If effort was made to do things the right way, the investment agreement would have been scrutinised to find Konkola Copper Mines’ defaults and nail them to the cross on that.
The use of the courts to obtain an ex parte provisional liquidation order is not something that will win Zambia international respect in terms of adherence to the rule of law and having an independent judiciary.
This is not even a provisional liquidation because Edgar has made it clear it is final!