American-based Zambian law professor, Muna Ndulo says there will be no investor who will be eager to buy Konkola Copper Mine assets when its parent company, Vedanta, which owns majority shares in the embattled mining firm, disputes the liquidation.
And Prof Ndulo has warned that once Vedanta files for arbitration in London, Zambia will have a weak case to defend its move on KCM using ZCCM-IH, which only owns 20.6 per cent shares in the company.
“There is no doubt that KCM has for some time now had challenges to run its mining operations. There is also no doubt that there is need to resolve KCM challenges so that it can make a positive contribution to the Zambia economy. The challenges at KCM are complex and require cool heads and expertise and not populism to resolve. Liquidation is not the proper course to take. First liquidation here is being used as a form of indirect nationalisation. The Zambian government claims that it is in the process of seeking an investor to take over KCM. No investor would ever be willing to buy assets that are in dispute nor would they want to invest in a country that possesses haphazard mining policies. There will be no new investor, Chinese or otherwise, any time soon. Investors are rational and are answerable to their shareholders,” Prof Ndulo said, in response to a press query.
“Nationalisation has very clear consequences in international law. Zambia would have to pay adequate, effective and prompt compensation to KCM for its assets. The trouble with liquidation is that it triggers defaults. This author would not be surprised to find that KCM has huge overdraft facilities with several commercial banks in Zambia. With liquidation the loans become payable immediately and KCM will have no access to those facilities. There is also the problem that since one of the challenges facing KCM is liquidity, it is not clear as to who is going to come up with the money to pay for operations, wages, etc during liquidation process.”
Prof Ndulo said once Vedanta chooses to settle the matter through arbitration, it will oust the jurisdiction of on-going court process on Zambia on the issue.
“Using ZCCM-IH, a minority shareholder in KCM, to initiate the liquidation in disingenuous. (ZCCM-IH owns 20.6% of KCM) There will be a shareholder dispute. Almost certainly, there is an arbitration clause which requires disputes between shareholders to be settled through arbitration. Once arbitration is chosen, it ousts the jurisdiction of courts. It would come as no surprise if KCM files for arbitration in London. That would mean that court processes cannot continue in Zambia in violation of an arbitration agreement. Given, all these challenges the best course for the government would have been to engage KCM and find a solution to its problems. It is ironic that of all the major copper producing countries in the world-Chile, Peru to name a few only Zambia has problems with its investors. Maybe it is time Zambians humbled themselves and learned best practices from other countries that are operating vibrant copper mines,” Prof Ndulo said.
He further warned that the KCM debacle would see a drop in copper production, a situiatuin that would affect forex.
“The Zambia Government does not have the money. There is also the problem that reduced sales of copper from KCM would negatively impact on foreign exchange receipts and the value of the Kwacha. Sadly, the ordinary workers, the cheerleaders, in this unfortunate debacle are also going to end up bearing the gravest consequences of this debacle, which will include an uncertain future and the loss of jobs. For as Karl Marx warned that if not properly managed, ‘capital…, it drags with it into its grave the corpses of its slaves, whole hecatombs of workers, who perish in the crises’,” said Prof Ndulo.