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Sunday, 2 December 2007

Theo Bull on the Anglo pull-out

Now what must Zambia do in response to Anglo's decision to pull out of KCM?.....Officials have rightly underlined that we have to find a mining company to take Anglo's place. The general public and firstly all our decision makers, have to understand that Zambia cannot begin to afford to create and run a state controlled mining company without huge external assistance. We do not have either the credit or the freedom of action to borrow vast sums on the international markets as we did when Kenneth Kaunda took over the mines....and here is a further word of serious warning. Many of us (though not Kasonde) are in danger of misreading the lips of the World Bank. However effusive and enthusiastic senior officers of the Bank may have been to us in recent weeks, the word is out : No concession finance. Let us be well aware : neither the Bank nor any others of our foreign friends can or will under any circumstances subsidise a new ZCCM.
Just one of the many fascinating comments from Theo Bull's articles published at the time of Anglo's pull-out from KCM, and the limited options that were available to Zambia. You can access the articles here. My thanks to Murray Sanderson for making these available.

9 comments:

  1. Cho,

    Have you read Murray Sanderson's (I presume it is him, because his name is at the bottom of the letter) to The Post, pleading for no renegotiation of the mining contracts, because of 'intangible factors' such as Zambia's reputation?

    I quote:

    Cost of cancelling agreements
    By Murray Sanderson
    Monday December 03, 2007 [03:00]

    Our signatories to the mines privatisation agreements were guilty of a serious oversight. Today we all recognise this and would like to correct it. But we must take great care lest, in attempting this, we commit an even greater and more costly oversight. Let me explain. Many voices are urging that we cancel the agreements.

    Yes, we could do that, and the foreign investors who bought the mines would have no effective way to prevent it. If they fought us we could win. But it would be a pyrrhic victory, a battle won leading to a war lost.

    For economic development depends on much more than natural resources, money and technical skills. Far more important are certain intangible factors, such as trust, the rule of law, respect for property rights, and a reputation for dependability.

    Some people may argue that Africa does not yet have the trust of other peoples, so there is little or nothing to lose. But I believe that view is profoundly mistaken.

    Trust is something one has to win, and today Zambia has a great opportunity to win it. How? By honouring signed agreements, instead of taking the attitude that the end justifies the means and tearing them up.

    If we keep our word, varied by whatever changes can be agreed in friendly negotiation, we shall add immeasurably to Zambia's reputation as a dependable partner in development.

    But to keep our word will require courage. Far easier to give in to current popular demand and forget about Zambia's international standing. That, however, would be an oversight which our children and our grandchildren could bitterly regret.


    I say the long arm of the mining companies shows itself again.

    This is what happens when the nation's key industry is in foreign hands.

    Do I really need to say out loud that without the money from the mines, the country has no money with which to develop? In the place of hard cash, Murray Sanderson offers 'intangibles'.

    Appealing to fear is for cowards.

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  2. MrK,

    Yes, I have seen Murray's article.
    I'll ask him for a more fuller version. Normally the Post cuts down a little bit so the full arguments are never presented.

    What we need is a full article that looks not just at the costs but the benefits.

    The Post article is too focused on what Zambia might lose without balancing that against what it might gain, if anything.

    Its unclear to me where the balance is. No one knows what cancelling the agreements might mean. Is it full nationalisation? It is possible that owners could leave and then what happens?

    I suspect Murry dreads the same thing, a government run copper industry without transparence and proper accountability. That we must avoid among all other "intangible costs".

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  3. mr K for once i respect your input on certain things. the mines are already a messed up affair because of politicall gains that where seen at the time of negotiations.

    now that stpidity is coming to haunt us.

    if the people that bought mines did their home work on the vaibility of the mines why should it be there fault that we didn't do ours?we thought we capturing or fooling these guys in investing in our dying mines but or small brains have been exposed and we want t change our position?

    show me evidence that these guys did something illegal during negotiations?

    even we get these mines from these guys they mostly the same guys that process this copper anyway,so where does that leave us?

    we did a bad judgement and we have to live with it or let the guys get their returns and hope to get something out.

    we have more to lose than gain from gaining access to these mines. before you engage in confrontation you must weigh your chances.

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  4. This is an interesting document. It also has a piece from Emily Sikazwe (Women For Change) on the rip-off by Anglo-American.

    On other statements from Theo Bull:

    From: NEPAD perspectives and views every story has two sides or more?

    http://69.13.173.12/docs/Update/Update%20Feb-March%202002.pdf

    This is not all, how else should we interpret the revelation by Theo Bull in The Post of 8 February, 2002 that:

    (i) the KCM purchase offer by the Kafue Consortium (which government rejected) “…in terms of price and commitment to invest was two and a half times higher than Anglo’s”;

    (ii) “the Anglo deal came two years later; ZCCM continued to lose $250million dollars a year or thereabouts this time”;

    (iii) “the investment recovery and economic improvement that has taken place is far smaller and has affected far fewer people, than it would have if the Kafue Konkola sales had gone ahead”; and

    (iv “initially the privatization exercise was to be implemented carefully and transparently as “set out by two respected consultancies Kienbaum and Rothschids. Everything was moving steadily and in the right direction up to the point where Chilub put Francis Kaunda in charge”.

    ReplyDelete
  5. Cho,

    The Post article is too focused on what Zambia might lose without balancing that against what it might gain, if anything. Its unclear to me where the balance is. No one knows what cancelling the agreements might mean. Is it full nationalisation? It is possible that owners could leave and then what happens?

    Leave where? For what? Where are they going to go to?

    For all you know, canceling the agreements simply means doing away with all the 'stabilisation periods' and the exemptions that are given that prevent the mining companies from paying taxes. If someone who earns $125,- per month must pay 25% taxes, there is absolutely no excuse for the richest of the rich not to pay at least that much in taxes. And I say, considering Zambia's need to develop, they should pay more in taxes - 50% is more like it, and how about 75%? They would still collectively keep $600 million per year of their $2.4 billion profits (my estimate).

    And does anyone really believe that the mining companies would leave if they had to pay taxes? Where on earth would they go and not pay taxes? The DRC? Somalia? Trust me, there would be different costs, like violence and instability.

    Even Murray in his piece admits that "if they fought us we would win".

    And we would win. There is no country in the world that believes that they need to attract foreign investment by promising that they never have to pay taxes.

    This is corruption staring us straight in the face, nothing less.

    Let's start winning for a change.

    The Post article is too focused on what Zambia might lose without balancing that against what it might gain, if anything.

    I hope so, but I don't know if they areally edited one side of the argument out of it. But if you have access to the full letter, I would be interested in reading it.

    I suspect Murry dreads the same thing, a government run copper industry without transparence and proper accountability. That we must avoid among all other "intangible costs".

    That is making things way too complicated. How do you estimate 'intangible costs'? And how do you know we won't run into intangible as well as the obvious costs when we keep chugging along on the same route?

    I'm sorry, but to start talking about 'intangible costs' at this stage, when all our efforts should be on getting the maximum benefit from the mines is a distraction.

    If we want to talk about transparancy and accountability of government there is a time and place for that.

    And by the way, this whole renegotiation process is enlivening parliament and it's role. For the first time in a long time, parliament is discovering it's role in oversight. Edith Nawakwi, Charles Milupi, all kinds of UPND, PF and other opposition party MPs are beginning to ask questions.

    This could be the start of real oversight and a role for parliament that will put much needed breaks on the power of the President and the Finance Minister.

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  6. On the agreements, I think most people confuse cancelling the agreements with nationalisation.

    I fully agree with you, if Zambia cancelled the agreements, the mining companies would have no choice but to stay. Zambia already gets nothing. Even increasing the royaties to 20% would not make them leave!

    What I oppose is government ownership without clear mechanisms. I think Zambia can run the mines but only at the local government level working in partnership with the private sector.

    On the issue of oversight. I agree there's a new level of economic patriotism at the moment. The internet is helping and with all the discussions, people are beginning to see that we can and must do better. I like what JCTR are doing with pushing a bill on debt management for example.

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  7. MrK,

    I should add that there's another dimension - how any cancellation of contracts would affect investment in OTHER sectors, where Zambia is desperate to encourage investment and faces a lot of competition e.g. tourism, power supply etc.

    ReplyDelete
  8. Cho,

    On the agreements, I think most people confuse cancelling the agreements with nationalisation.

    Right, they could either be replaced by different agreements, or just by new laws that cover the entire industry.

    I should add that there's another dimension - how any cancellation of contracts would affect investment in OTHER sectors, where Zambia is desperate to encourage investment and faces a lot of competition e.g. tourism, power supply etc.

    Copper mining is a key strategic economic sector to Zambia. Every business individual with a brain (outside the mining industry) understands that. Governments can treat strategic sectors whichever way they choose. That is why they are sovereign entities.

    If the government of Zambia decides that it needs the copper industry to finance economic development, no one in the world will think worse of it.

    In fact, real businesses in other sectors will see it as a big plus, because they can now make use of new roads, railways, supply of agricultural products, higher consumer incomes, etc.

    No one in for instance the tourism industry will complain when the state uses profits from the mining industry to build roads and airports to make new destinations accessible. Or when the state uses those profits to expand agricultural land, no NGOs will complain about the increase in the availability of maize.

    Also, has anyone mentioned the preferability of getting taxation from the mines, over the government borrowing massively from the communist Chinese? :)

    What I oppose is government ownership without clear mechanisms.

    Nobody is yet talking about actual government ownership of the mines, which would be share ownership. Even if the government was a minority share owner, they would still not have much say in how the companies were run. However for now, people are talking about taxes.

    But again, oversight can solve a lot of problems and again, parliament can help out.

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  9. MrK,

    I would have liked to see government consult on various models for ownership. It seems to me that we are shooting ourselves in the foot by not considering a full range of options.

    For new mines there's a tremendous opportunity for encouraging various models within a simpler tax framework.

    ReplyDelete

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