zccm-ihLong-term minority shareholders of Zambia Consolidated Copper Mines-Investment Holding (ZCCM-IH), the investment holding company of the Zambian Government have urgently appealed for intervention in the corporate governance and management of ZCCM-IH as Zambia continues to loss colossal sums of money through mismanagement.

This is according to an Open letter addressed to Vice President Guy Scott and made available to the media.

How GRZ and the Zambian people continue being cheated and short changed by Foreign mining companies

The Long-term minority shareholders raised concerns over the ineffective management of the company that has led to ZCCM-IH and through it the GRZ and the Zambian people being cheated and short-changed by the foreign mining companies in which it is invested.A few examples are:

1. According to the international auditors Grant Thornton, Mopani Copper Mines fraudulently avoided $175 million in corporation tax to the ZRA in the 5 years from 2003 to 2008, by various fraudulent procedures including transfer pricing to the Swiss parent company Glencore and misrepresentation of production figures and production costs. In this same period ZCCM-IH also lost $50 million per year in profits from Mopani

source:
appendix 1
appendix 1.1

Questions

  • Why has ZCCM-IH together with the Government and the Zambian Revenue Authority failed to take any action whatsoever to recover these fraudulent losses?
  • Why has no pressure been put on Mopani to come clean or otherwise lose its mining licence?

Recovering these fraudulent gains from Glencore along with due penalties would make a big difference to the well-being of the Zambian people as well as dissuading other companies from doing the same.The shareholders reminded Vice President Guy Scott of what he once said.

“We don’t want to destroy the cow that produces the milk but we want to make sure that you get your share of the milk”Post

  • Why does Government let Glencore take our share of the milk?
  • Why has the new audit of mines initiated by the former Mines Minister Wilbur Simuusa not been finalised and made publicsource: Reuters
  • Why has the current Minister of Mines Yamfwa Mukanga failed to take action on this scandalous situation, whereas in 2011, he stated

“no government official must protect Mopani Copper Mines for violating the law and Mopani should be punished”Post

2. In 2007, the Zambian Task Force on Corruption investigated a fraudulent loss of $ 100million at the expense of ZCCM-IH. These investigations helped to identify those responsible, as well as the banks that received the stolen funds but as surprising as it sounds, no action was taken!All the investigations that were started during the presidency of the Late President Levy Mwanawasa have been stopped. Why were they not taken up since the election of the new President 18 months ago?
Source:APA

APA – Port Louis (Mauritius) Zambia and Mauritius, within the framework of the MutualAssistance Programme are working to retrieve 100 million dollars alleged swindled from theZambia Consolidated Copper Mines (ZCCM), APA learnt here.The Zambian government holds 85 percent of shares in the ZCCM.A high level delegation of the Zambian Task Force on Corruption, Tuesday arrived inMauritius to pursue the matter. Rama Valayden, the Attorney General and Minister of Justice to reporters Wednesdayin the capital, Port Louis, that he will hold a working session in the evening with theZambian delegation to discuss the follow up of the case which implicates offshorecompanies incorporated in Mauritius.He said about 100 million dollars have been transferred through the Bank of ButterfieldAccount in London, before being invested in the banking system in Mauritius and saidthe suspects in the scam are known by Zambian and Mauritian authorities.At the beginning of the year, at the request of the Zambian government, the MauritiusSupreme Court issued an ’Attachment and Freezing Order’ to several banks here onthe accounts of the suspects, Mr Bernard Mungulude, Mr Kazhi Kateke and the Laxidiamond company.The duty of the Zambian Task Force on Corruption now was to seek to identify the localagents and representatives of the suspects so as to be able to recover and repatriate themoney.Hence, local banks have been assigned to submit documentary evidence to expose thecriminal gang, or else the banks will face dire consequences, Valayden said. SR/daj/tjm/APA 02-05-2007

3.ZCCM-IH hold a 20% stake in Kansanshi Mining, the most profitable Mining Company in Zambia. The ZCCM-IH stake in Kansanshi currently represents $550,4 million in undistributed profits attributable to the Zambian holding. FQM 2012 Annual Report (see page 56). Non-controlling interests are the Minority shareholders’s benefits after investment. ZCCM-IH is the only Minority shareholder in FQM accounts.The amount of non-controlling interest (for ZCCM-IH) is $550.4 million,a sum that increases by more than $100 million per year. However the majority owner First Quantum Minerals (FQM) insists on conserving this money as a legal reserve and only distributes derisory dividends to ZCCM-IH in spite of having made more than $2,5 billion in net profits in recent years and having totally recovered its investment in the mine.

Question:
1. Why does the ZCCM-IH management and the GRZ fail to put pressure on FQM to distribute fair dividends to ZCCM-IH and so get its proper yield from the most important investment held by ZCCM-IH on behalf of the GRZ?As this scandal continues, FQM is using Zambia’s money to build the world’s largest mining corporation by buying other mining companies outside Zambia.
2.When will the GRZ take action to get its fair share from its vast mineral wealth and put a stop to foreign companies plundering its resources? What will the Zambian people have to live on once these resources are depleted?

Opacity in governance of company as well as infringement on shareholders rights

The long term minority shareholders also raised concerns over the persistent bad governance of ZCCM-IH with respect to minority shareholders as demonstrated by the way the selection of the eighth board member has been handled.

Early last year ZCCM-IH launched a call for nominations to elect a representative of minority shareholders to the Board of ZCCM-IH. The GRZ holds 7 seats on the board and the nomination of an eighth member to represent minority shareholders was seen as a significant effort improve the corporate governance of the company by letting minority shareholders have their say in company matters in proportion to their holding (12.3% of ZCCM-IH shares traded on Paris Euronext, the London and the Lusaka Stock Exchanges)

Use of an obsolete Register of shareholders
The minority shareholders made a very strong and co-ordinated response to this call despite starting from the considerable disadvantage of not being recognised as registered owners of ZCCM-IH shares.The Company Secretary, Mr Chabala uses an obsolete Register of Shareholders which does not list the owners of any ZCCM-IH shares bought through the Paris Euronext Stock Exchange (the most active of ZCCM-IH’s markets). Strangely, shares of the old ZCCM bought decades past in the UK and whose owners died many years ago are listed as registered shareholders.

To compound this failing, Mr Chabala is said to refuse to recognise official bank or broker’s certificates attesting to the ownership of ZCCM-IH shares.

The minority shareholders have repeatedly asked the Company Secretary to correct this failure and have explained the procedure to be followed to update the register, without success. As a consequence of this attitude, most minority shareholders are denied their legal right to attend company meetings or to vote directly on company matters.In order to respond to this “Call for nominations” minority shareholders had no choice but to adopt avery laborious and indirect voting procedure (via their stockbrokers, banks and Euroclear, theInternational Share Depository that records all share ownership and transfers) to ensure that their voteswere registered.

Secrecy
Unfortunately, but not surprisingly, the company refused to make public the result of this vote (even though the minority shareholders gave a clear mandate to their chosen representative by a very large majority of the votes submitted). Since than the Executive Chairman Mr Wila Mung’Omba, in what the shareholders describe as a totally unacceptable act of bad governance, has postponed indefinitely the nomination of the eighth board member to represent the minority shareholders.

It is not known the reasons why the Executive Chairman wants to keep minority shareholders excluded from exercising their democratic rights in matters of governance of the company of which they, alongside the GRZ, are the owners and who have the same reasons to make sure that this company is properly run for all the stakeholders.

The minority shareholders fear that the Executive Chairman may be planning a biased and unethical conversion of government debt into ZCCM-IH shares
ZCCM-IH Cautionary Announcementleading to severe dilution of the minority shareholding thus making the nomination of the eighth board member no longer an issue and giving him the freedom to run the company single-handedly.

The opacity of the companies intentions and the past years of poor (or corrupt) governance give credenceto even the worst scenarios.Having exhausted all other avenues of intervention (letters to successive Chairmen, the Zambian Securities and Exchange Commission (SEC), the Lusaka Stock Exchange etc.), the long term minority shareholders humbly asked forthe Vice President to help to ensure that the legal rights of the Minority Shareholders of ZCCM-IH are upheld and that the company finally applies the rules of good corporate governance. The credibility of foreign investment in Zambian securities is surely weakened by the failure to ensure high standards of governance of this most emblematic government-controlled Zambian company and can only bring dishonour to the Zambian Government.

Conclusion

Without all these management failures, ZCCM-IH would have been able to register income of more than $1 billion and so refund the long-standing debt of $425 million to the GRZ as well as paying dividends to shareholders (including the GRZ) and investing in the Zambian economy. Had ZCCM-IH benefited from good governance, good management and strong support from its majority shareholder the GRZ, to make sure that it got its fair share from its mining investments, it would now be a flourishing company providing wealth, employment and pride for the Zambian People.

Time for us to develop ourselves
President Sata once said “Zambia was tired of moving with a “begging bowl” from one developed country to another as the country had the capacity to become self-reliant and lift its millions of unemployed youths out of poverty if its vast natural resources were exploited to the benefit of Zambians”. He added “Time has come for us to develop ourselves and let others come to beg from us because we have more resources than the people we are begging from” .The minority shareholders expressed extreme disappointment that the Executive Chairman Willa Mung’omba has not put all his efforts into ensuring that ZCCM-IH lives up to the expectations of President Sata.They said this lack of action, hesitations, incomprehensible decisions and lack of transparency only serve to create suspicion about the intentions of the company and the government-appointed officials that runit.

The long term minority shareholders acknowledged however, that since the nomination of the CEO Mukela Muyunda in June 2010, the management has made unprecedented efforts to catch up on no less than 5 years arrears in the publication of the company’s accounts. They encourage him to finally get the the accounts up to date in2013 and to make sure, as promised, that the company’s assets are listed in the balance sheet at fairvalue. Until now these have been incomprehensibly listed in the company balance sheet at minimal cost valuations (approx. year 2000), which massively undervalues the company and disastrously distorts its balance sheet.

Promises can not hide a woeful performance
Changes have also been promised since more than 40 shareholders sent emails in November 2012 tothe executive Chairman W. Mung’Omba expressing their dissatisfaction about the management of the company. The shareholders now fear that these may be hollow promises to calm the reactions of the shareholders.Only time will tell.

In any case these hypothetical promises cannot to hide the woeful performance of ZCCM-IH.At a time when the GRZ is considering quoting other para-public companies and inviting Zambian citizens to invest their hard-earned money in such companies, should it not first take a close look at its most emblematic para-public company and ensure that ZCCM-IH sets an examplet hat others can follow? There is still so much to be done here.

The minority shareholders stated that have exactly the same interests as the majority shareholder, the GRZ: that ZCCM-IH becomes one of the leading companies in Africa. It has the means to achieve this, but so far,as a result of weak direction, it has lacked the will to make significant progress. They therefore humbly asked the Vice President to consider taking an active part to ensure that the corporate governance and management of ZCCM-IH are of the highes torder and above suspicion so that the Zambian people can once again be proud of this flagshipcompany and reap the benefits that should be theirs.

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31 COMMENTS

  1. Ok we have seen this in another format, same issue. Here is the thing, this issue is beyond the PF government. They can not handle it, because they do not understand it. Simple as that.

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    • From all the proud graduates of UNZA isn’t there even one who can sit with these ba zungu’s and GET the money owed to Zambia back.It seems MMD as well as PF were easily deceived and due to possibly an inferiority complex they sit in those meetings and just nod their heads when the white man says ‘ Gentlemen we have decided to hold on to your governments dividends, we shall dig holes in your country and leave you as poor and miserable as you’ve always been.The only difference between now and before we came is we would have damaged your environment and left you with big holes.’At this point the Zambia delegation reads a speech thanking them for the investment and then pose for the camerman as they shake hands and exchange documents which are never read.

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    • We’re cursed, CURSED CURSED CURSED Why are u so dull mwefyaba kuntanshi mwefyafyelwe bwangu you dont know that if u get that money it will surpass the $1million bakulishamo shame rot in hell bonse

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    • This is old news and has been on the Zambian economist website since last year and was not written by HH but by minority shareholders

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    • If its HH then we need him to be the president because he understands economics very well. I heard him in one of his rallies in 2011 saying that”There is a lot of money in our Country Zambia in mineral resources and HH knows where to get this money”

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  2. Do we zambia a Govt in zambia? i really feel sad for my country. ba stiopet balaonaula ichalo chesu

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  3. This is what happens when you have over-centralisation of power and governmental involvement in corporate governance – no checks, no accountability and a fraudster’s paradise! What an afront! And still the investigation into these matters always bogs down to finding a zambian “culprit” to parade as the cause of such misery; these are structural failures of a dysfunctional state over decades, no windfall taxes, holy cows everywhere….cry my beloved country – it makes one abso-effing-lutely lurid with anger; it doesn’t get dummer than this!

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  4. Meant…
    Do we have a Govt in zambia? i really feel sad for my country. ba stiopet balaonaula ichalo chesu

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  5. The Zambia taxpayer put US$425 million into ZCCM-IH (which is not paying interest on this money) these minority share holders put up ZERO as their share.

    Firstly ZCCM-IH should get all the dividends locked up in these companies, then GRZ should charge ZCCM-IH interest at market rate from the time the loan was given, after the loan and interest are fully paid back, ZCCM-IH should declared a dividend and pay its main shareholders, the Zambia people. As for the minority share holders, put up your share of what Zambia put in ZCCM-IH or shut up!

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    • In fact, zambian taxpayers didn’t put any money in order to help ZCCM to recover. The Club de Paris did it, the money was theirs, they lended it to the GRZ who in turn helped the society. Since that, the Club de Paris cancelled this debt, but the GRZ hasn’t done the same to the society.

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  6. This is what CORRUPTION can do to a nation. It destroys!!! What we are seeing are the offshoots of severe CORRUPTION where authorities and investigatiing wings are bribed with colosal sums of money. We need the ‘SATA’ we voted for to punish these criminals. Here iam not talking about the SATA presently at plot 1 am talking about the MAN of Action I voted for. To be honest I do not know the man currently occupying plot 1???

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  7. In the Countries where these “Infestors” come from, there would be a Massive enquiry into this Corporate Scam, & Companies found wanting would lose their concessions, & as a Bonus Jail time would follow, for the perpetrators. Now most of us know these Companies are cooking the Books, to cheat us the Owners of this wealth otherwise they wouldn’t bother making a loss in a foreign country. Be warned “They are NOT mining Copper, & other metals for altruistic reasons- ( To help us poor Africans while they incur losses). Check out a Documentary ” Good Copper, bad Copper” which you can easily get online. Mzambia Wafa!

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  8. Anso because ndine’ wokalipa pano, posting again. Why are we going to other Countries to borrow money @ killer interest rates, when surely the mining tax were losing can feed us, & stop the Brain drain from Zambia. We need leaders who will act as they promised when in opposition. This nation has management Cancer needing fixing NOW!!!

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  9. typical Africans. A muzungu was telling a story of how they went to mine gold illegally in CB and the headmen started fighting among them selves about the work to guard the illegal mine, while the bugas shipped out millions. Monkies.

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  10. ” as Zambia continues to loss colossal sums of money through mismanagement. ”

    ZCCM-IH, thanks to privatisation, is now a holding company. There is nothing to mismanage.

    What we are talking about is corruption. You have a Godfrey Beene, and a Situmbeko Musokotwane as directors.

    Can we say that the mining sector is better represented on the board of ZCCM-IH than the people of Zambia.

    The whose setup needs to be scrapped, and the mines must be Zambian owned again, with an army of inspectors and accountants.

    However, I very much like the fact that the government of President Sata is going after this crookery.

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  11. I know that for more than six months Mung’omba announced it would lay off any staff ZCCM!

    since, all employees wait for the choice of chairman !

    the first august Mung’omba decided to report his decision..staff still wait…

    the conclusion is that since the last six months the company doesn’t work !

    why Mung’omba has decided to destroy society?

    for what purpose?

    who earn money in this case ?

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  12. Il faut regarder le film sur la ZAMBIE, “A qui profite le cuivre”pour comprendre les scandales financiers qui secouent ce pays, il faut rétablir la gestion saine de l’ exploitation minière, afin que le peuple Zambien profite de cette richesse gagnée durement grâce à leur travail.
    STOP aux escrocs en chemise blanche, vive l’honnéteté

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  13. Government shall also investigate Phoenix Insurance, Diamond Insurance and Madison Insurance that are using Mauritius to externalise monies and resort to money laundering in Zambia, Tanzania and Kenya. There might be many more banks and insurance companies but my check with friends in Tanzania and Kenya revealed these interesting records at the offices of the Commissioner of Insurance.
    Many Marc Rich in the making.

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  14. There are serious issues raised bordering on lack of Zambia,s capacity to deal with brutal and cunning capitalism. But the article is so poorly written reflecting this very lack of capacity to digest these financial martket place gyminastics among Zambians juornalist and economists and accountants included. Worse among engineers lawyers and worst among politicians

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  15. After the ship has sunk, everyone knows how it could have been saved. Is this not the same story?

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  16. This PF maggots, they cannot understand a thing. Sata a grade4 drop OUT what can he contribute to clean up this?

    Sata is still relevant and fit to sweep a rail station platform.

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  17. The problem is that every Zambian is just politicking instead of analysing issues intelligently.

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  18. It was shown on tv (international) how developed countries are milking Zambia, FTJ’s style of leadership … Veep Scot surrounded by more that 10 chinese delegat.. what u expect when these meetings are help behind closed doors ?????

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  19. Zambian people need to react …!!!

    because it’s the monney for all zambian people which deseppear ..

    that’s a fact ….

    an politicians are not aware of this …not enough …

    for the moment …

    Ki ck a ss soon ….

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