SITUMBEKO Musokotwane says government’s objective in taking over Konkola Copper Mines and Mopani Mine is not clear.
In a write-up titled: Mopani, KCM, the mining industry and the future of the Zambian Economy, the former finance minister says the government’s objective on the two mines is also confusing.
Dr Musokotwane, an economist, also doubts the possibility of any future investor getting a stake in the two mines.
“The strategic objectives of the government in taking over some mines is unclear and confusing. For KCM, they announced more than a year ago that they are putting the company under liquidation. In addition, they said they are looking for a new investor to take over the company,” he wrote. “However, to date, matters relating to the ownership of the company still remain under litigation. Mopani Copper Mines on the other hand has been bought by the government-controlled company ZCCM-IH. Here, as in the case of KCM, the government says it is looking for a strategic equity partner who can infuse the capital required to increase production. The chances of success for both companies to attract fresh money under current circumstances are low.”
He said for KCM, the immediate problem is “the on-going litigation processes”.
Dr Musokotwane argued that it is problematic to find new investors for both companies, looking at their current problems.
“It is unlikely that a serious investor can risk their money buying a company whose ownership remains in dispute before courts of law. The prospects of finding an investor for Mopani are not easy either,” Dr Musokotwane contended. “This arises form huge debt of $1.5 billion owed to the former owner, Glencoe, which has been assumed by the company in exchange for ownership. A private investor is unlikely to buy into a company that is so heavily indebted unless the Zambian government assumes the whole or a part of the $1.5 billion debt. An excessively indebted Zambian government can hardly afford to assume the debt.”
He also doubted the future of the two mining companies since they may not attract new capital injection.
“For now, both Mopani Copper Mines and KCM
are unlikely to attract new money to expand production due to the circumstances mentioned
above. Without new money infusion in both companies, their future sustainability, let alone ability to expand production, is questionable,” Dr Musokotwane said. “This leads to the distinct possibility that the government, through its agents, could continue to run the mines for the foreseeable future. It also means the chances of bringing those two mining companies to full potential and expanding output is low for lack of funds to invest.”
And Dr Musokotwane said the future role of government in mining is confusing.
He attributed this to conflicting statements on the issue from government officials.
“At times the government has said it will look for investment partners. At other times, the same
government has said it will increase its stake in all mines and that it is very happy with the
performance of the Zambian managers of the taken over mines,” he said. “In furtherance of its political agenda on the mines, PF officials have accused some opposition leaders of expressing the view that local managers have no capacity to run mines. This is a lie because there is no opposition leader who has expressed such views. Such an accusation, yet again, clearly shows that the prime interest of the government in this matter is political. Zambia has some excellent professionals in mining.”
Dr Musokotwane also expressed fear that the two mines would experience government interference in their operations.
While dismissing the argument that local professionals have failed to run mines, Dr Musokotwane said several of them run key operations locally and abroad in world class mining houses.
“So, there is no question of Zambian citizens failing to successfully manage mines. What is however troubling is that the mines that have been taken over are under the direct control of government through ZCCM-IH,” he said. “In that respect, these mines will have governance influences that are similar to other business institutions in which the state has controlling influence- the parastatals. That’s where big problems are likely to emerge in mining.”
He said the government argument that taking over mines would improve their performance was a lie.
Dr Musokotwane said it was equally political for the government to tell citizens that the two mines would be revamped, citing ZCCM which was under State pressure.
He said when in government, UPND would show how mines should be run properly.
“Year after year, the reports of the Auditor General cite many companies controlled by the state which are performing badly. Why then should we be confident that the state will manage its mining companies more competently than it is running its non-mining companies that are struggling?” he asked. “The whole idea about taking over the mines is first and foremost about hoodwinking mining communities into believing that there is a caring government. But the results will be the opposite.”
Meanwhile, Dr Musokotwane said all measures the government has taken over the mines are motivated by politics.
He said that is why they have been blaming the MMD administration and UPND leader Hakainde Hichilema for the negative effects of the privatisation programme.
“Unfortunately, the measures by the PF government can be said to be motivated more by politics. It is about creating an impression that privatisation of the mining industry under the MMD government is responsible for the problems in the sector today and that, therefore, some reversals are required,” said Dr Musokotwane. “Yet under MMD, unlike under PF, copper output was rising steadily almost every year. Foreign exchange was in good supply and the exchange rate very stable. The cost of living was low.
Equally blamed very often by the PF government is the UPND leader, Hakainde Hichilema… Therefore, for elements in government to mislead the public into believing that Hichilema is responsible for the malaise today in the mining sector clearly shows that their actions are all about seeking political support in the mining communities and not about solving an important economic problem.”