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Tuesday, 10 June 2014

To nationalise or not to nationalise?

President Michael Sata says nationalisation is an option if KCM does not change its ways :
"The mines should be honest. Let me single the mine out…Vedanta and KCM should be honest. The Indians must be honest. The Zambians and miners themselves are saying 'let us nationalise KCM', but when the situation becomes alarming, the government will consider that. You tell them, I'm waiting for a report from the Ministry of Mines and as soon as I have the report, I will table the report in Cabinet....Let the copper which KCM is exporting from Zambia bring dollars back, because KCM is exporting so many things. Why should they export concentrates to go and be processed in South Africa? When there was Anglo American and other companies, the kwacha was very strong. But these Vedanta, who are the owners of KCM, let them be honest. If they are honest to us, the situation is going to be completely different."
PRESIDENT MICHAEL SATA
(Source : The Post)

Mines Yaluma Christopher Yaluma on 20th May said exactly the opposite. He said that GRZ will not nationalize Konkola Copper Mines (KCM) because as at 30th September 2013, KCM’s total liabilities of US$D1.5 billion exceeded the current assets by US $123 million. In short KCM is unable to meet its obligations and neither can GRZ if took over the mine, compensation costs and all the rest.

Simply put, the president and his minister are living on on two different planets. Which is not very good because it suggests a degree of chaos at the heart of government. 

AUTHOR
Chola Mukanga
 Economist | Consultant | Researcher
Copyright © Zambian Economist 2014

7 comments:

  1. They're such a chaotic bunch!!

    ReplyDelete

  2. Hi Cho,

    Mines Yaluma Christopher Yaluma on 20th May said exactly the opposite. He said that GRZ will not nationalize Konkola Copper Mines (KCM) because as at 30th September 2013, KCM’s total liabilities of US$D1.5 billion exceeded the current assets by US $123 million. In short KCM is unable to meet its obligations and neither can GRZ if took over the mine, compensation costs and all the rest.

    Why do you think that Anil Agarwal is posting $1.5 billion in debt for KCM? While boasting that he is taking out 0.5 billion a year, 'plus $1 billion'?

    Do you really think he is going to be a good chap, and when copper prices fall back to their historical range, he is not simply going to walk away from KCM, declare it bankrupt, and leave the Zambian state with KCM's debts anyway? Which may be even greater than $1.5 billion.

    And there is no point in blaming the PF government - this is the effect of the IMF's privatisation drive, that started back in the 1990s.

    Simply put, the president and his minister are living on on two different planets. Which is not very good because it suggests a degree of chaos at the heart of government.

    It suggests corruption and neoliberal policies. Christopher Yaluma is likely to have received money to hold the opinion that he expressed, just as all the Finance Ministers before him.

    Right now, I don't trust ANY political party not to get into office and do exactly the same thing. Not the PF, not the UPND, and certainly not the MMD.

    Also, it is very unclear how much money the foreign mines are stealing from the country. For instance, when President Sata remarks that KCM is exporting ore, he is right - we don't know what is in the ore. It is copper - and we know that cobalt is often found with copper. They could also contain diamonds. So when Anil Agarwal says he is making $500 million a year 'plus $1 billion' - is that another Billion every year, from whatever else is in the ore?

    One thing is clear, that the IMF/World Bank's policies of privatisation and deragulation have cost the Zambian taxpayer and economy tens of billions of dollars. And they're still giving is advice?

    I have a very long thread on the issue here.

    ReplyDelete

  3. A London judge finds that KCM profit of $500 million 'plus $1 billion', do not show up in their official numbers, and may be caused by transfer pricing (for instance, selling $7000 worth of copper for $2000 to it's off-shore subsidiary, therefore 'declaring a loss'.

    What does it take to get the politicians moving, unless they are all deeply and hopelessly corrupt, in which case it is time for a military revolution.

    (THE POST) kcm cheating on copper exports
    By Mwala Kalaluka
    Fri 04 July 2014, 14:00 CAT

    THE High Court of Justice in London has heard that Vedanta Resources-owned Konkola Copper Mines is cheating on its copper exports prices by under-pricing and selling it through subsidiaries in Dubai.
    The assertions pertaining to KCM's business practices came up during a hearing on Wednesday at the Royal Courts of Justice in London, where the High Court of Justice held that the London Court of International Arbitration's order to KCM to pay U&M Mining Zambia Limited US$14,619,900.12 and 15,155.23 British pounds over disputed copper mining agreements was valid and could be enforced in Zambia.

    .....

    The court heard that the juxtaposition of KCM's apparently poor position on paper with owner Anil Agarwal's statement that KCM was giving Vedanta US$500 million profit every year since 2009, was obviously troubling.

    "The accounts for KCM do not make any provision for any such payment. This may be occurring through "transfer mis-pricing", i.e. by the selling of copper to an associated company at an undervalue allowing the seller to declare less profit (or even a loss) and reduce its tax liability. The associated company, usually based in a tax haven or lower-tax jurisdiction, then makes a large profit on resale of the copper. In the case of KCM, it appears that this practice is indeed being done through a subsidiary called Fujairah Gold (owned by Vedanta) based in Dubai. These transactions amount to transactions at an undervalue, putting KCM's assets beyond the reach of creditors," the court heard.

    ReplyDelete
  4. http://in.reuters.com/article/2014/06/27/africa-investment-idINL6N0P83NG20140627

    This may not be the correct place to put this but for want of a better place I do.

    ReplyDelete
    Replies
    1. AM,

      Thanks for the article. Of course Switzerland is also home to Glencore International, which today has Tony Hayward of BP as it's Chairman.

      What profits?

      (THE POST) Zambia still has windfall tax, says Musokotwane
      By Chiwoyu Sinyangwe
      Mon 24 May 2010, 04:01 CAT [3905 Reads, 0 Comment(s)]

      Dr Musokotwane said the government did not abolish the windfall tax as outlined in the 2008 mining fiscal regime but only refined it to align the tax to profit being made by mining companies and not revenues.

      (MINING REVIEW) Zambia expects 30% rise in mining revenue by 2013
      Posted by:
      May 28, 2010

      “Our expectations are that all these other mines, because of high metal prices, will in two to three years be paying more than we projected. During this period, we expect the revenues from mining to rise sharply,” he said.

      Musokotwane said Zambia would not reintroduce the controversial mining windfall tax to preserve growth in the mining sector. “When you tax the revenue and not the profit, you are basically closing the mines,” he explained.

      Musokotwane said maintaining the windfall tax of 2008, which the government had scrapped last year, would have led to the closure of some mines and created social unrest in the mineral-rich Copperbelt.

      (REUTERS) AFRICA INVESTMENT-The Swiss commodities connection in African poverty

      In 2008, the study estimated, Zambia's GDP would have been 80 percent higher if the copper leaving its borders in that year alone had received the same price as Switzerland. It's a pattern of trade mispricing that has persisted, critics say.

      Delete
    2. From (REUTERS) AFRICA INVESTMENT-The Swiss commodities connection in African poverty:

      In 2008, the study estimated, Zambia's GDP would have been 80 percent higher if the copper leaving its borders in that year alone had received the same price as Switzerland. It's a pattern of trade mispricing that has persisted, critics say.

      And...

      But it found Switzerland also declared higher re-export prices for those same commodities and this difference was as high as $120 billion.

      And...

      "And second, if as we have shown, commodity exporters appear to receive systematically lower prices when trading with Switzerland than other partners, which Swiss opacity facilitates," he said.

      Now it so happens, that the world's biggest commodity trader, the Goldman Sachs of commodities, has it's headquarters in Switzerland - Glencore International AG.

      The new Chairman of Glencore-Xstrata is Tony Hayward, a business partner of Nat Rothschild, the great-great-grandson of the first Baron Rothschild, Nathaniel Mayer, who with his younger brother Leopold von Rothschild, financed Cecil Rhodes, and De Beers. De Beers is still the world's largest diamond miner, even though they can no longer claim Zimbabwe's diamond deposits as theirs.

      (TELEGRAPH UK) Nat Rothschild and Tony Hayward raise £1.35bn for Vallares oil cash shell, close book early
      http://www.telegraph.co.uk/finance/newsbysector/energy/8583042/Nat-Rothschild-and-Tony-Hayward-raise-1.35bn-for-Vallares-oil-cash-shell-close-book-early.html

      Tony Hayward is now the Chairman of the board of director of the merged Glencore-Xstrata.

      (GUARDIAN UK) Former BP boss Tony Hayward named Glencore Xstrata chairman

      By the way, if anyone remembers, back in the day ZAMTEL was taken over by the Libyan goverment under Col. Ghadaffi, and it turned out that RP Capital Partners was a project of Dany Gertler (grandson of the founder of the Israeli diamond exchange in Tel Aviv). Dany Gertler's is a partner with Glencore in Nikanor PLC. See more here.

      Delete
    3. You don't mention Marc Rich.

      Delete

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