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CTPD urges govt to be cautious with KCM liquidationBy Mirriam Chabala on 24 May 2019
CTPD has asked government not to force Konkola Copper Mines (KCM) to discontinue its operations due to the company’s current financial challenges but instead follow a proper legal process to mitigate potential losses at the firm.
CTPD has also expressed concern that placing KCM under liquidation will result in closing down the company, laying off of over 13,000 workers and loss of tax revenue and forex among other things and that it would be extremely difficult to find another investor to take over the mine after an assets disposal exercise, as the required investment to resume operations would be too high high.
In a statement, CTPD policy lead in charge of extractives Natalie Kaunda recommended that government undertakes a comprehensive audit in order to determine the true value of KCM’s assets and liabilities before proceeding with securing another investor.
“CTPD would like to caution the government over the suggested nationalisation of the Konkola Copper Mines or any other mines in general. While we understand the displeasure from the government over the continued push back by some mining firms on most policy pronouncements meant to maximise revenue collection from the country’s mines, we still feel a cautious approach must be taken to address the matter at hand. This is because KCM employs over 13,000 workers and is a significant contributor to the nation’s exchange earnings. Any disruption in operations, would increase poverty and result in continued depreciation of the Kwacha, thereby further compromising macroeconomic stability,” Kaunda stated.
Kaunda noted that government’s concern over the poor returns that the country had been getting from the mines was justified because it had been a cry of the civil society for a long time.
“We have been advocating for a mechanism that will enhance community benefaction from our God-given resources. We have also advocated for government to increase its stake in the mines through ZCCM-IH since this would ensure that there is more state ownership of public resources and therefore, more control over profits and tax revenue, especially at this time when Zambia is grappling with the raising debt. However, even as we endeavour to maximise on domestic revenue, we must not do it at the expense of efficiency. We must learn from our past experiences of running the mines which proved disastrous. The same mines that are now seemingly making profits, howbeit not every year, were loss making at the time they were being controlled by the government due to inefficiencies,” she stated.
“As CTPD we would like to believe that government’s intention is not to start running KCM but to transition it towards improved operational efficiency and profitability through securing another investor. Therefore, the ‘liquidation’ process initiated should not result in the selling off of strategic assets of the mine in order to secure payments for creditors, shareholder, and commissions for the liquidator, as is the case in a ‘classic liquidation’. Performing actual liquidation of KCM will result in closing down the company, laying off over 13,000 workers, tax revenue and forex losses among others. It will be extremely difficult to find another investor to take over the mine after asset disposal since the required investment would be very high. CTPD is of the view that KCM remains a going-concern and thus government should follow proper legal process and restraint to mitigate against these potential losses.”
CTPD advised that a comprehensive audit would determine the true value of KCM’s assets and liabilities before proceeding with securing another investor.
“This will be useful in ensuring that the shares of the mine are valued correctly so that appropriate investment is made in taking over the mine. It is well known that KCM was previously sold for less than its market value, this should not repeat itself in this case. As the president is currently engaging with the different stakeholders in a process of consultation concerning the KCM issue, CTPD would like to advise government to also engage with civil society organisations working in the extractive sector. CSOs play a key role in bridging the gap between policy and community engagement,” stated Kaunda.
About Mirriam Chabala
Mirriam covers current affairs and writes in-depth feature articles on social issues.
Email: mirriam [at] diggers [dot] news
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