A SOUTH African newspaper, Business Live, has told that country’s government to ‘watch’ Zambia’s damage to mining industry.
Business Live stated that the forced liquidation of KCM, which is backed by the government, was odd.
Business Live further noted that the strange battle playing out in Zambia over the Konkola Copper Mine (KCM) was deeply damaging for investor perceptions of the country as a copper-mining investment destination, despite the enormous latent mineral wealth.
“The last thing SA needs is an antagonistic relationship with a major mining company that spins out of control and beyond reason. A strange battle is playing out in Zambia over the Konkola Copper Mine (KCM), and it has come to court in Johannesburg as India’s Vedanta and the Zambian government wrestle for control of the assets,” the newspaper stated.
“The forced liquidation process of KCM, which is backed by the government, and which was launched by ZCCM Investment Holdings, the state-owned mining company that holds a 20% stake in the mine – is odd. It is also deeply damaging for investor perceptions of Zambia as a copper-mining investment destination, despite the enormous potential latent mineral wealth.”
Business Live further stated that Vedanta had invested $3bn in Zambia over the past 15 years to bring the mine to account and to build a new smelter.
It stated that there was clearly something very wrong with the relationship with the government that had now taken such a hard, uncompromising line with Vedanta.
On Wednesday, mines minister Richard Musukwa said government was dealing with a company, which had broken the law, as they did not bring the investment they committed to the country.
He said Vedanta committed to invest $357 million as start up capital but did not.
Musukwa further insisted that KCM owed government about K3.1 million contrary to assertions that they were owed.
He, however, confirmed that government owed the mining company K1.4 million through the Zambia Revenue Authority.
Musukwa also disclosed that KCM’s indebtedness was over $2.5 billion through non-payment of local and international suppliers.
But Business Live stated that Vedanta had invested $3 billion in Zambia over the past 15 years to bring the mine to account and to build a new smelter.
“While the matter has largely been fought in Zambia, it is now before the high court in Johannesburg where Vedanta, which has restarted large-scale zinc mining in SA, is asking for the liquidation to be halted and for international arbitration to be started in Johannesburg. Both sides have put their views out but seeing through the spin and posturing is difficult,” stated Business Live.
“It is something that South Africa must avoid at all costs. It has developed a poor reputation as an investor-friendly mining investment destination, particular during the tenure of then-mineral resources minister Mosebenzi Zwane. The last thing South Africa needs is an antagonistic relationship with a major mining company that spins out of control and beyond reason, such as the KCM matter in Zambia, where the state blows hot and cold on its stance towards mining and cannot provide concrete tax regimes.”
Business Live stated that Vedanta reached Zambia with what it thought were watertight contracts with ZCCM and the state but the way such agreements were being handled by the government would make any other large investor in the mining sector think carefully before they put any money into the country.