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Friday, 31 January 2014

Copper Colonialism in Zambia

Foil Vedanta have today released a report (embedded below) on the operations of Konkola Copper Mines (KCM) in Zambia. The report reveals that, contrary to popular opinion in Zambia, Vedanta (KCM's parent company) is not Indian but wholly British owned and controlled, and is making large profits at KCM. The report demonstrates Vedanta's pattern of buying undervalued state companies, polluting, and operating without permission all over the world. It also reveals how investment companies like Blackrock have controlling interests in Zambian copper as key shareholders behind Zambia's biggest mining companies.

Foil Vedanta's(1) report 'Copper Colonialism – Vedanta KCM and the copper loot of Zambia'is a groundbreaking study of copper mining in Zambia, focusing on British mining company Vedanta, KCM's parent company. The report reveals that Vedanta made approximately $362 million, or 12.9% of their total group revenue, from KCM in 2013 (according to the company itself and analyst reports)(2). The authors, who visited Zambia in December, note the number of misconceptions about this company in Zambia – where Vedanta has created the perception that they are an Indian company, and are making such a loss at KCM that they may need to be rescued by the state. In fact KCM are one of the highest profit making subsidiaries of the parent company.

The report details how Vedanta, a FTSE 250 London based company which is 67.99% owned by Chairman Anil Agarwal via tax havens, bought KCM for a fraction of its true value, possibly losing the Zambian exchequer up to $1.4bn in total.(3) It goes on to record some of the environmental and social abuses of the company in Zambia – including pollution of the river Kafue in 2006 and 2010 which have led to ongoing health problems as extreme as deformed births and miscarriages in the Chingola area, as well as poor workers conditions and low pay. Vedanta's tax contributions in Zambia are close to zero, and they even brag that 50% of tax paid is via employees Pay As You Earn (PAYE). Vedanta hide these truths in Zambia by paying former journalists as PR agents to keep their image clean.

The authors demonstrate that this style of operation is a pattern for Vedanta across India and elsewhere, where they are consistently opposed by people's movements and under investigation by authorities for corruption and legal violations. In Chhattisgarh, India, they bought BALCO's bauxite refinery, smelter and mines for $89 million in 2001 when it was worth around $800 million. Vedanta Chairman Anil Agarwal is currently under investigation by the Central Bureau of Investigations in India over the original disinvestment of 51% of Hindustan Zinc Ltd (HZL) to Vedanta for only $72 million, claiming the deal was considerably undervalued, and may have lost the exchequer hundreds of millions of dollars in revenue.

Vedanta's subsidiary Sesa Goa are accused of exporting 150 million tonnes of iron ore from Goa, India in 2010/11 while only declaring 7.6 million, their agreed export allowance. The report suggests that Vedanta may also be exporting considerably more copper than they claim in Zambia, as well as cobalt and other minerals, and recommends citizens monitoring of trucks leaving their facilities to estimate the true amounts.

The report also looks at the real interests behind mining companies in Zambia. Using shareholder information it shows that secretive investment company Blackrock have high percentages of shares in Vedanta, Glencore and First Quantum, Zambia's three biggest miners. Blackrock and JP Morgan are currently buying the majority of the worlds available copper to launch a futures market which will control the price of copper, giving them high returns on their investments while leaving copper producing nations in poverty.(4) The report also draws attention to foreign governments such as Norway and the UK, who play a duplicitous game of funding transparency and accountability projects on mining via NGOs and the Zambian government, while also profiting from the abuses of the very same mining companies.(5)

Author Samarendra Das says, "We were shocked to discover how little information Zambian authorities and communities have about their own resource and the companies exploiting it. Despite its role in the economy, copper is the elephant in the room in Zambia. This report aims to expose the real interests controlling Zambia's copper industry - from banks and investment firms to foreign governments and NGOs."

Co-author Miriam Rose states, "Mining companies are commonly called 'investors' in Zambia, but what they are doing is far from investment, it is short lived extraction and loot of resources, leaving behind only environmental and social damage which will be paid for by future generations. There is limited time left for Zambians to change the course of history, make links with peoples' movements opposing these policies elsewhere, and truly profit from this resource before it is all gone."

Notes :
  1. Foil Vedanta are a London based international solidarity group focusing on the activities of British mining company Vedanta. We link up global communities affected by Vedanta, and hold them to account in London. We are currently aiming to make the case for Vedanta to be de-listed from the London Stock Exchange for their human rights and corporate governance abuses.
  1. Excerpt from report (p.12):
KCM and other mining companies in Zambia don't publish their profits, even though the Zambian taxpayer has a share in most of them via ZCCM-IH. However Vedanta's 2013 annual report claims KCM produced 216,000 tonnes of copper in 2013. In the same year costs of production were valued at 255.1 US cents/lb, putting the total cost of production that year at $1.2 billion, which would constitute a profit of $362 million (at a current copper price of $7,300). Analysts reports from Global Data reveal that KCM made 12.19% of revenue for the entire Vedanta group in 2012 so they are certainly not doing too badly.
  1. Excerpt from report (p.6):
A 51% share in KCM was sold to Vedanta Resources for just $25 million, paid in cash, and $23million in deferred payments, in 200412. The deal was facilitated by Clifford Chance and Standard Chartered Bank13 (one of the main bookrunners and lenders to Vedanta Resources). Within three months Vedanta had already recouperated its initial investment, making $26 million. The banks also helped Vedanta secretly negotiate a call option allowing them the right to purchase Zambia Copper Investments' 28.4% share14, which they exercised in November 2005 (a year after their initial purchase), giving them the 79.4% monopoly they currently hold on KCM, while the Zambian government - via ZCCM-IH (their mining investment wing), own the remaining 20.6%. The Competition Commission was even rendered irrelevant by the Zambian government to allow Vedanta such a large majority share.
The price negotiated for the buyout of ZCI's remaining shares is not reported, but analysts at the time valued it between $250 million and $550 million, putting Vedanta's original 51% share at between $455 and $910 million, nine to eighteen times what Vedanta paid! This means the Zambian exchequer lost between $155 and $340 million in from the sale of 21.4% of ZCCMIH's shares alone. In response, ZCI's 33% French shareholders (grouped into a company called Sicovam SA) called the deal 'the most outrageous and scandalous ever seen in Africa for decades'.
This puts the value of the entire 79.4% share held by Vedanta at between $705 and $1460 million, losing the Zambian exchequer between $600 and $1400 million in undervalued assets.
  1. Excerpt from report (p.26):
Blackrock is the world's biggest asset management company, in charge of $4.1 trillion of assets (including much of Zambia's copper via its shares). It is bigger than any bank, insurance company or government fund, and is the majority shareholder in half of the world's 30 largest companies. It was set up by Larry Fink - a Washington insider who was named as a potential treasury secretary in the US. Blackrock, JP Morgan and Goldman Sachs are currently working together in an attempt to buy up 80% of available copper on behalf of investors, and hold it in warehouses. This will create a copper futures market enabling speculation, futures trading, and backing of new loans and funds.

In 2010 JP Morgan bought more than half of the available warehoused copper in a few weeks, leading to a spike in copper prices. Manufacturers and copper wholesalers warned the Securities and Exchange Commission (SEC) that such a monopoly on copper would squeeze the market and send prices skyrocketing but under pressure from Blackrock and the banks the SEC approved their proposal.1 The aluminium futures market set up by Goldman Sachs, on which the copper takeover is modelled, is estimated to have cost consumers billions of dollars in price hikes, as market manipulations sent prices soaring.2

(5) See section on NGOs and civil society, p.30 of report.
The New York Times, July 21st 2013, 'Next up Copper.'

David Kocieniewski, New York Times, July 20, 2013. 'The House Edge: A Shuffle of Aluminum, but to Banks, Pure Gold'


(Source: Foil Vendata, 31 January 2014, Press Release)

11 comments:

  1. This is a useful piece but the fact is that agarwal who owns 70 percent is Indian and 4 of the six members of the board are Indian also. Even oneof the other Bitish members of the board worked in India and probably met Agarwal there. It is simply a majority Indian owned company registered and headquartered in the UK. It is not really British.

    Many companies register in a different country to where the majority ownership resides. Can be for tax.

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    1. I suppose it is a perfectly legitimate question of what makes a company Zambian or British! Certainly Facebook is American because of its operation HQ or is it Irish because of its tax HQ? It is probably better to say both!

      I think Foil Vedanta are correct that Vedanta is Indo-British. The British government regulates its taxation activities and the company is understand its legal jurisdiction. The colour if the skin of those who run it does not eliminate its Britishness.

      Ownership is important because in this era of transnational companies small governments like Zambia are powerless. Activists like Foil Vedanta need citizens in the home of these transnational companies to effect change. And one way of doing that is to call to attention what is being done by 'British' companies.

      Delete
    2. Thanks .

      I very much agree with the last paragraph. Your previous post highlighted one of the methods transnational companies avoid paying tax in one country is by exaggerating their income in the low tax charging country and minimising their income in the high tax charging country.

      Obama or was it Bush? complained about "US" companies registered overseas to avoid tax.

      Starbucks etc in the UK are doing the same thing as Vedanta in Zambia.
      http://www.bbc.co.uk/news/magazine-20560359.

      It would seem that the cases may be different but if there is a way to avoid tax some transnational companies will do so.

      I am certainly not defending Vedanta or the like. To me they lack ethics and moral values.

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    3. This is an excellent example of how Vedanta uses its ambiguous nationality to create confusion. It has done so in India too. The fact is that Vedanta is wholly British because:

      a) It is answerable to British corporation/taxation law not Indian. Grievances with Vedanta would have to be taken to the UK government/legal system.

      b) it is majority owned by a UK resident (Anil Agarwal) from finance in a British controlled tax haven (the Bahamas).

      c) Not even 0.1% of Vedanta is owned by Indian finance and there is no Indian government interest in the company, while the UK government have openly lobbied for Vedanta to get deals (e.g http://www.foilvedanta.org/articles/uk-govt-support-for-cairn-and-vedanta-deal-revealed/)

      Several people we spoke to in Zambia had strong feelings about Vedanta being Indian, and suggested either - that Zambia should support Indian companies like Vedanta, or that Indian companies like Vedanta have lower human rights/workers/environmental standards which explains their behaviour.

      The reason we wanted to highlight the misinformation around the company's nationality is partly to show how little is really known about Vedanta (and other mining companies) by the Zambian elite and public. The pattern of abuses elsewhere is very important for Zambians to know.

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  2. Listed on the FTSE 250, but owned and controlled by a single individual living elsewhere. Doesn't have to be resident or tax resident in the UK to be listed there. If the shareholdings you've shown are right, I guess it will be de-listed fairly soon as the FTSE prefers more of the shares to be freely traded. If 65% are owned by one man, its not really a public company. Don't think anybody thinks that Facebook, or Apple or Amazon or Google are Irish companies, although they are all "resident"there. Follow the money!

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  3. http://www.bbc.co.uk/news/uk-23389695

    Further to the above on transnational tax avoidance this post from the BBC shows the world wide scale of the problem and the attempts to rectify it.

    Somed of your readers may think it is an emerging markets problem and not a world wide problem.

    Maybe better times are coming but these proposals will never deal with corruption in Government.

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  4. " The deal was facilitated by Clifford Chance and Standard Chartered Bank13 (one of the main bookrunners and lenders to Vedanta Resources). "

    From the Board of Directors page at ZCCM-IH, and Wila D. Mung'omba's brief professional history:

    "Mr. Wila D. Mung’omba served as President of African Development Bank. From 1995 to 1998, Mr. Mung'omba was World Bank's appointed Team Leader in the initial preparation of the ZCCM Limited privatization Report and Plan by the UK based Investment Bank NM, Rothschild & Sons and international law firm Clifford Chance."

    The same banks that did the privatisation of ZCCM, back in 1998.

    Standard Chartered Bank, like De Beers, was founded by Cecil Rhodes, when he was funded by NM Rothschild & Sons Ltd. in London.
    http://www.rothschild.com/our_history/1880-1914/
    "With the provision of funding for the creation of De Beers in 1887, Rothschild also turned to investment in the mining of precious stones, in Africa and India." Cecil Rhodes became the Founding Chairman of De Beers the following year, 1888.


    Who owns Blackrock

    The usual Big Four (multi-) trillion dollar investment/hedge funds make an entrance - FMR (Fidelity), Vanguard, State Street, Blackrock itself, as well as JPMorgan Chase (America's biggest bank and founded as Chase National Bank by the Rockefeller family which also founded Standard Oil Trust, which today is doing business as ExxonMobil, Chevron and probably Philips 66), Welllington Management Company. The biggest single shareholder is PNC Financial Services.

    (PNC's shareholders: "Top 5 stock holdings are BLK (Blackrock), VFC, XOM [ExxonMobil, formerly Standard Oil of New Jersey and Standard Oil of New York - biggest shareholders: Schroder Investment Management, Vanguard State Street, BlackRock, as well Wellington, JPMorgan Chase], PG, GE [General Electric, which also owns either MSNBC or NBC]. These five stock positions account for 32.75% of PNC FINANCIAL SERVICES's total stock portfolio."

    In other words, with the increased concentration of wealth worldwide, we are seeing that the biggest institutional shareholders in most major corporations, as well as eachother, are just four or six large banks/funds.

    So the question is - who are the families who are behind these funds?

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  5. BlackRock CEO Laurence D. Fink is also a board member of the Council on Foreign Relations (CFR), and who started his career at First Boston Bank (also see here), where David Rockefeller is currently the Honorary Chairman.

    BlackRock is part of the Blackstone Group, which itself was founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman, both formerly of Lehman Brothers, Kuhn, Loeb Inc.

    Peter G. Peterson is a former chairman of the Council on Foreign Relations, where David Rockefeller is currently the Honorary Chairman. Peter G. Peterson was preceded as CFR Chairman by David Rockefeller, and succeeded by Robert E. Rubin.

    So, both co-founders of BlackRock are members of the Rockefeller Council on Foreign Relations.

    Maybe they're all owned by the 4 R's - Rockfeller, Rothschild, Regina (QEII) and Regis (King Willem). I'm not that far evidence wise, but it would make lot of sense.

    David Rockfeller is Honorary Chairman of the Council on Foreign Relations, and chairman/co-founder of the Bilderberg Group (1954) and the Trilateral Commission (1973).

    Here is the official first membership list of 2013, of the David Rockefeller (ExxonMobil, Chevron, JPMorgan Chase) co-founded and chaired Trilateral Commission. David Rockfeller also founded the Bilderberg Group, with Prins Bernhard zu Lippe Biesterveld, spouse to the Dutch Queen Beatrix, who still opens the Bilderberg Meetings. See their Former Steering Committee membership list here.

    Also interesting, if you look at the board of Rockfeller & Co., you will find on the Board of Directors, not only four Rockefellers, but also Lord Jacob Rothschild.

    Board Members

    Candace K. Beinecke
    Colin G. Campbell
    Merit E. Janow
    Reuben Jeffery III
    Peter M. O’Neill
    David Rockefeller, Jr.
    Mark F. Rockefeller
    Michael S. Rockefeller
    Lord Jacob Rothschild*
    Graham D.M. Thomas
    David Rockefeller, Hon. Director

    *Rockefeller Financial Services, Inc. only

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  6. Who Owns BlackRock II

    The above description of share ownership is for other 'institutional owners', but only

    According to the Public Intelligence website, BlackRock Inc, is owned by:

    Merrill Lynch & Co. (= Bank of America): 31%
    PNC Financial Services: 25%
    Barclays PLC: 20%
    Other Financial Institutions (see above): 21%

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  7. very interesting report

    and thank you MrK for your highlights !

    ReplyDelete
  8. Hi MikeTe,

    " very interesting report

    and thank you MrK for your highlights ! "


    I wish I was fluent in French, because there is an entire French branch of the Rothschild banking dynasty, and I am sure that upon closer inspection, they are all over French speaking Africa, just as they were in the 19th century.

    Just a few corrections to my own earlier post:

    Prins Bernhard zu Lippe Biesterveld, spouse to the Dutch Queen Beatrix

    Prince Bernhard zur Lippe Biesterveld was former Queen Beatrix' father. Her son Willem Alexander is now King of the Netherlands. Bernhard co-founded the Bilderberg Group with David Rockfeller in 1954, at Hotel de Bilderberg in Oosterbeek. Where both he and Lord Peter Carrington were present/fought (on the same side, sort of) during WWII and the Battle of Arnhem, immortalized in the movie A Bridge Too Far. Bernhard ended up as the head of the Dutch Prinses Irene Brigade during Operation Market Garden, and there have always been suspicions that he may have given away the Market Garden operation (with the sudden appearance of 2 SS armored units at Arnhem Bridge - he was also in contact with a resistance operative who had been flipped by the Abwehr, called Adriaan 'King Kong' Lindemans).

    Former Queen Beatrix married Klaus von Amsberg, an German aristocrat with property in Tanzania, also a member of the NSDAP, and who had also served in the Wehrmacht during WWII, possibly the SS.

    There are of course rumours about Bernhard, because before WWII, he was a member of the NSDAP, and briefly a member of the Reiter SS, which was later absorbed into the Waffen SS. He became a corporate spy for IG Farben's NW7 (IG Farben was the giant nazi conglomerate that owned Bayer, BASF and Agfa, and later ended up setting up Auschwitz III or Buna-Werke, through it's 100% owned subsidiary IG Auschwitz). (See here.)

    ReplyDelete

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