SA MUST PAY ATTENTION TO DAMAGE ZAMBIA HAS DONE TO ITS MINING INDUSTRY

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 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.

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.

Vedanta has invested $3bn in Zambia over the past 15 years to bring the mine to account and to build a new smelter.
There is clearly something very wrong with the relationship with the government that has now taken such a hard, uncompromising line with Vedanta. Both sides have put their views out but seeing through the spin and posturing is difficult.

It is something that SA 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 SA 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.

Vedanta went into Zambia with what it thought were water-tight contracts with ZCCM and the state, but the way these agreements are being handled by the government will surely make any other large investor in the mining sector think carefully before they put any money into the country.