Long-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
- 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?
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.
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.
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.
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.