MAPUTO – Vedanta Resources is seeking an urgent meeting with Zambian President Edgar Lungu over the threat to its local assets after a state-owned investment company asked the Lusaka High Court to liquidate them.
Lungu at the weekend accused Konkola Copper Mines of lying and cheating and said Africa’s second-biggest copper producer would find other investors to take over the assets. On Tuesday, Zambia’s ZCCM Investments Holdings applied for the liquidation of KCM, in which it holds a 20.6% stake.
“Vedanta is a long-standing, loyal investor in KCM and in Zambia having invested over $3-billion since the acquisition of the asset in 2004” and paid about $1.3-billion in taxes in that period, the companies said in an emailed statement. KCM on Tuesday reported a $165-million operating loss before items in the year through March for its Zambian unit.
The state’s intervention is “lawful, orderly and under the due process” and Lungu won’t be meeting Vedanta, his spokesman said by text message. “There are no immediate plans to do so, given that there is a legal process underway and so we don’t want any undue pressure on the court process, whose next hearing is this Friday,” Amos Chanda said.
There is “no room” for the government to take over KCM, Chanda said. Rather, the “liquidator will now engage all creditors and act as reliable bridge with government, which has a leverage over the more than three prospective investors seeking to take over KCM.”
The stand-off has exacerbated a spike in the yield on Zambia’s Eurobonds to almost 20%, and a selloff in the nation’s currency, which is the world’s worst performer against the dollar after Argentina’s peso. Zambia’s economy was already struggling amid a drought and soaring foreign debt, and the tension with Vedanta is heightening investor anxiety.
On Monday, government ordered police to man all gates at KCM’s assets, state-owned ZNBC radio reported, citing Copperbelt Province Minister Japhen Mwakalombe. Mineworkers unions have expressed support for the government’s moves.
Zambia has for years accused mining companies including Vedanta of not paying enough tax and has made ten changes in the past 16 years as it struggles to settle on a comprehensive system for the industry. The state has had several run-ins with KCM and in 2013 revoked its chief executive officer’s work permit over planned job cuts.
This year’s royalty increases have come as Lungu’s government seeks cash to settle a surging foreign-debt bill. Servicing external loans has already caused foreign reserves to drop to a decade low.