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It’s illogical for companies that don’t pay dividends to bid for KCM – MumbaBy Julia Malunga on 17 Sep 2019
Chairperson of the select committee appointed to negotiate the sale of Konkola Copper Mines, Anthony Mumba says it surprises him to see some local Chinese companies like Luanshya Copper Mines and China Non-Ferrous Metals expressing interest to buy KCM when they have been declaring losses and failing to pay dividends.
And Zambia Chamber of Mines president Goodwell Mateyo has warned that if government decides to increase its stake in mining companies to 30 per cent through the ZCCM-IH, the country risks losing about of US$5 billion in compensation.
Meanwhile, Mineworkers Union of Zambia (MUZ) president Joseph Chewe says his organisation is not as powerful as it was under the UNIP government because politicians take advantage of the unions to advance their political agenda.
Speaking during the News Diggers and Eden University organised public discussion forum at Hotel Edinburgh in Kitwe, Saturday, Mumba who is also Kantanshi Independent member of parliament said it was illogical for some local companies to express interest to buy KCM when they were claiming to be making losses.
“One thing which also caught my attention in the mining sector is that for the last over 12 years ZCCM-IH holdings has various shareholdings in these companies. Now out of those nine or ten companies only one company consistently paid the dividend to ZCCM holdings. Now the funny thing that happened is that we have a mine called Non-Ferrous Metals in Chambishi which for the last 21 years has never given the government a single dividend because it has been claiming to be making losses. Which has been the same story for KCM. For 12 years KCM has never gave government the dividend but kept on accumulating these loses. But the funny thing is that China Non-Ferrous Metals. was the first company to make a presentation to buy KCM. Now how can a company which is making loses want to buy or be interested in buying another company which is making loses? That doesn’t make sense. If you are making losses as a company and you are faiuling to pay dividends, how can you buy another loss making company?” he wondered.
Mumba said he was preparing a private members Bill to Parliament that would compel all mining companies to give 30 per cent of all contracts and deals to Zambians companies.
“As explained the mining sector is the back bone of our economy. But right now, it is in a shambolic state in the sense that we are not getting as much as we need to get. Probably no wonder the taxation has been flip flopping. In 2006 and 2007 we tried the windfall tax , it failed the mines fought in left, right and centre, the mineral royalties failed. Then now we tried the sales tax which of course has been fought. Under this sector, as citizens we are paying three cents per kilowatt power for the mines. In addition, these mines which are claiming to be making loses for such a long period of time have continued bringing in mining equipment and that mining equipment they have been going further to claim VAT refunds on them. When I say it’s a in a shambolic state, I am clearly saying that we are not getting any value out of the mines as citizens. In addition to that, 90 percent of the businesses are not given to Zambians, they are given to companies abroad. It is the business side that I am saying 30 percent of that should be given to Zambian companies or indeed they can be a joint venture agreement,” said Mumba.
So we are in a situation which requires us to be in critical thinking so that we are able to benefit from these resources that God has given us. This is the only country that we have. Today we are hearing of the gold rush. Are you sure our reserves should stand at US$ 1.4 million? When we have gold laying all over the country starting from Petauke? We have been told that there is illegal gold mining taking place until we had a gold rush in Mwinulunga. That should tell you how rich we are in terms of our mineral resources. Today on the Copperbelt, because of not having a clear idea of what we want to get out of investors, most of the businesses are in the hands of foreign countries. In South Africa they have pieces of legislature that support and protects business. We don’t have a single piece of legislation. Here in Zambia you can walk in with no money as we saw even when Vedanta was buying KCM and today where it is now. That’s why I am pushing for the agenda that we have a jurisdiction that should be able to give Zambians the right to own 30 percent of the businesses that are going to be taking place in the mines.”
And Mateyo urged caution on the proposal to extend government’s stake in mining companies, warning that the country could lose billion in dollar.
“I think it is important to put thinks into perspective. If the the question is whether the Zambian government should own 30 percent of the stake of the current mining operations in Zambia, then before we look at 30 percent I think it is important to start from where exactly are we. I will take you through what the current government shareholdings and stake in the mines is at the present moment. With Kansanshi, ZCCM-IH owns 20 percent, in Mopani there is 10 percent. But if you consider that FQM owns approximately 17 percent of the mine you would keep the government indirectly or directly stake in there at 13 percent. With KCM its 20.6 percent, Lubambe 20 percent, NHCF 15 percent Chibuluma 15 percent Chambishi metals 10 percent, Luanshya copper mines 20 percent. So it is quite clear that our government has a stake in virtually every mine. If you put all of ZCCM-IH holdings in the different mines together, we come to the conclusion that actually the biggest stake in mines in Zambia is owned by ZCCM-IH,” he said.
“Now if we were to talk about the government acquiring 30 percent stake in any mine and putting legislation to that effect, obviously the starting point is our constitution. And in accordance with our constitution, any law that is enacted must be subject to the constitution or else it will be regarded as unconstitutional. If we look at article 16 of the construction in part three of the Bill of Rights, it basically says that no person whether yourself myself, a corporate entity can be deprived their right to property, unless under compulsory acquisition by the government with terms as to adequate compensation. So if we get to a point where government looks to increase the stakes in all of these mines to 30 percent, obviously there is at least two ways of going about it. Number one is; we direct negotiate with the owners through its investment vehicle, we can go and discuss and say ‘I want to get 10 percent’ and obviously there has to be commercial terms agreed. But in the event that we go the route of passing legislation essentially in expropriating a percentage of shareholding in these mines, the government will have to pay compensation. And the government is an entity representing us. So what it means is that the rest of the Zambians will have to pay compensation. What does that compensation look like? If we were to talk about Kansanshi for instance, the market capitalisation is US$8.5 billion. Government owns 20 percent. To push that to 10 percent would be `in a neighbourhood of US$858 million close to a billion dollars. If you add transaction fees and legal expenses. If we look at the other mines as well and add what compensation would look like, we easily get to US$5 billion. So the proposals there is a proposal as a nation, are we ready to get into further debt of at least US$5 billion to increase the stake to 30 percent?”
And responding to a question posed by Harrison Chewe a supplier to government who wanted to find out why the Union has been weakened, Chewe said politicians had been using the unions.
“The issue of the unions being weak, Yes I think the politicians used us through copper and they have succeeded but what they have forgotten is that the plight of workers, the plight of the communities are now in this environment. So of course they sponsored some unions but in the end who are the losers? Its us! And the future generation. We have to blame ourselves. We are yet to regain firm. And one day as unions should believe, we will come together and say ‘there is power in unity’. Even when Zambians stand and we say ‘we don’t what that investor’ like we did at Konkola. So even for the Chinese our voice can be clear and hope that all of us can support and make the union stronger,” said Chewe.
About Julia Malunga
Julia is a curious journalist who is determined to unearth the truth and is good at criminal investigations.
Email: julia [at] diggers [dot] news
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