GOVERNMENT’S intention to acquire 90 per cent shares in Mopani is a recipe for disaster because the mine will eventually go down the drain, says Alliance for Democracy and Development (ADD) president Charles Milupi.
And Milupi says the government’s approach in taking over companies that are in private hands is sending a signal that government does not want Foreign Direct Investment (FDI).
In an interview, Milupi said both government and ZCCM-IH had no financial capacity to acquire the shares Glencore was intending to offload.
He explained that government’s current indebtedness, coupled with the huge fiscal stress it faced, made it impossible for government to acquire the shares.
“This government now wants to take over upto 90 per cent of the Glencore shares. Mopani has a valuation, which, when I looked at the figures some time back, I think this comes to maybe a billion dollars. Government will not be able to take the mine free of charge, they will have to pay money. So, government has to think carefully, where are they going to get that money? They have depleted the reserves, unless they want to allocate all the remaining reserves to the buying of Glencore, so that they take over Mopani. We are an over borrowed nation in excess of US $25 billion. Lenders are unwilling to lend Zambia. This government cannot borrow money to come and buy shares in Mopani. So, where are they going to get money? The takeover itself does not make sense because you can’t buy something if you don’t have the money,” Milupi said.
“When you say, ‘you will source for funds…’ from where? First of all, because of the way they have conducted themselves, the over borrowed nature, this country is rated very poorly. We are slightly just above junk status if you look at the rating agencies. That means anyone willing to lend to this country they will now charge a fortune, it is called yield rate. ZCCM-IH, if they are saying they are going to source, last time I looked at their balance sheet, I think they have roughly about US $43 million. Now, you are asking someone who has US $43 million to buy something that is worth US $900 million does that make sense? It doesn’t make sense. Are they going to borrow? If government itself is failing to borrow from the IMF (International Monetary Fund) how can ZCCM-IH be able to borrow? They should have sat down, resolved the issue with Mopani and charted a way forward.”
Milupi said that political interference would also characterise Mopani’s operations if government took over.
“The other aspect I want to mention is that, to operate the mine is not an easy thing. In a situation, now, where there is so much segregation arising from government, there is so much nepotism, there is so much tribalism. People get appointed into quasi-organisations and parastatals one can easily see a situation where as soon as they take over Mopani, which people are going to be appointed? They don’t even care about qualifications as we have seen in KCM, they have got a lawyer. So, we will see the same thing being perpetrated in Mopani not on the basis of merit, but on the basis of where people come from. That is a recipe for disaster! In a short time, we will see Mopani going down the drain,” Milupi cautioned.
“This government, the way it is set-up, it is not really positioned to run anything, especially something that pertains to mining, something that pertains to business. I do not think that they are in a position to run. This is not to say that parastatals can’t operate, you will need political will, you will need meritocracy, you will need people who will task the board of directors what are the deliverables? You will need a management appointed purely on merit. If you do that, any parastatal can succeed. Going into an election, you will see the PF abusing Mopani in terms of employing their own relatives, cadres; in terms of the direction of business, contracts will now be towards cadres. As we have seen in KCM, as we have seen in Zesco and so on. All these factors put together is a recipe for disaster.”
And Milupi observed that government’s approach of taking over private sector companies was sending a negative signal that government was no longer interested in attracting much-needed FDI.
“The last point, when you start to take over these companies that were in private hands, you are sending a clear message to the markets that Zambia does not want Foreign Direct Investment. Whether you like it or not, what you have done in CEC (Copperbelt Energy Corporation), what you are doing in Mopani, what you have done in KCM, you are just saying you don’t want Foreign Direct Investment. That is going to impact negatively on the development of this country and creation of employment,” said Milupi.
“We have seen that these people will not be stopped by anything. We have seen what happened in KCM, we have seen what happened in Copperbelt Energy without any viable reason, they went and disturbed something that was doing so well. We are now seeing what is going to have in Mopani.”
Last Sunday, Mines Minister Richard Musukwa announced that Glencore Plc is facilitating the offloading of 90 per cent shareholding in Mopani to ZCCM-IH following its submission to increase its shareholding in the mining company.
While Musukwa acknowledged that ZCCM-IH did not have money sitting on their profile of this magnitude to purchase Glencore’s shares, he explained that the parastatal would be able to galvanise these resources through other entities.