Zambia’s government filed notification of plans to take over Vedanta Resources Ltd.’s domestic copper assets, President Edgar Lungu said.
The southern African nation’s Eurobond yields surged to a record high and the currency hit a 3 1/2-year low.
The move marks an escalation in tension between the government and mine owners, after Lungu last week threatened to “divorce” Vedanta and Glencore Plc, two of the biggest employers in Africa’s second-largest copper producer.
Relations have been simmering after the state earlier this year increased royalties and unveiled a plan to overhaul the value-added tax system.
Lungu mainly targeted Konkola Copper Mines, Vedanta’s local unit, in a weekend visit to Zambia’s Copperbelt province, where some companies are cutting production and firing workers.
“There should be no question about our resolve to divorce, starting with KCM,” Lungu said in comments broadcast on state TV on Sunday. “We have filed that notification.”
The kwacha fell as much as 1.7% on Monday to 14.3152 against the dollar, the weakest level since November 2015, while yields on Zambia’s $1 billion of Eurobonds due 2024 rose by 19 basis points to 18.4%, the highest on record.
Konkola is yet to receive formal notification on the future of its assets in the country, it said in an emailed statement Monday.
The company said it plans to meet the government “as a matter of urgency to discuss the future of KCM and the impact that the current onerous situation is having on the company, the people of the Copperbelt and the Zambian people as a whole.”
Zambia has for years accused mining companies of not paying enough tax and has made 10 changes in the past 16 years as it struggles to settle on a comprehensive system for the industry.
This year’s royalty increases have come as Lungu’s government seeks cash to settle a surging foreign-debt bill. Servicing external loans has already caused foreign reserves to drop to a decade low, while the currency has fallen by more than 14% against the dollar this year, making it the worst performer globally after Argentina’s peso.
The state has had run-ins with Konkola Copper Mines for years and revoked its CEO’s work permit in 2013 over planned job cuts. Still, the latest turmoil could be symptomatic of a populist shift amid what could be a looming economic crisis, according to Neville Mandimika, an economist at FirstRand Bank Ltd. in Johannesburg.
“Whenever a government comes under stress you see more populism,” he said by phone Monday. “It’s almost a self-fulfilling prophesy in that the worse it gets, the worse it will get.”
Zambia’s Copperbelt province has often been a political bellwether for the country, and the ruling Patriotic Front has historically enjoyed strong support there. In April, a new party led by Lungu’s former information minister Chishimba Kambwili won a by-election in the province’s Roan constituency.
In the 2016 elections, the PF had won the same constituency with more than twice as many votes as the opposition.
Lungu said the government would comply with the law in taking over Vedanta’s assets, and that other investors were keen to operate them. His spokesman, Amos Chanda, declined to identify the companies.
Glencore must hand over to local contractors two copper shafts it plans to close, Mines Minister Richard Musukwa said in comments broadcast over the internet at the weekend.
Bloomberg
Zambia has been ripped off from its mineral resources for so many years. This is hard decision to make. But this must be supported.
KK would not have allowed this to happen. ( That man FTJ Chiluba. )
Not only have they ripped us off, they have polluted the rivers with toxic chemicals due to carelessness.
Our politicians are very naive.
Our citizens are even more naive.
Repossessing KCM will land Zambia with heavy fines from international courts. This is what happened with Zamtel, a case that we have still not settled.
This news is only good for today.
Tomorrow, your children will curse you for voting for this impotent crop of politicians.
The worse thing is PF are going to loot KCM like never before. It will be worse than Mmembe’s The Post. Luckily enough Mmembe changed company name, and run away to Cuba.
But with KCM, this will be the worst disaster country will ever see, and they smear on HH.
Its done, now how hard is it to run a mine? The learned bloggers explain to me. If Argawal had 25 Million to start, how can the whole nation fail to run a mine? What does it take to run a mine in Zambia? Zambian people have been working these mines for God knows how long. On a management level how are Zambian professionals represented in the mining industry. Is it just a bunch of imported CEOs there at the top or what…? If we are well represented at the top, what else do we need? Do we need more money right?
EC L is shooting himself in the Foot. Nationalisation of the Mines is sending a negative message to investors. Lungu is doing this to retain Political support on the Copper Belt. This Action alone will see the Kwacha depreciating sharply and inflation rising sharply. Wait and see.
With permission from your party cadres who have been eating kickbacks for years…
Zambia is walking the dangerous path.China Zambia’s savior is under tariff imposition by US and now a ban by Google on China’s Huawei,what’s next?
You have no idea what you’re talking about. China has many alternatives. I’m sure you haven’t heard about the Road and Belt Project that China is undertaking with many countries, European countries included. The U.S.A needs China more than China needs the U.S.A. Because for a long time, the U.S has been benefiting from cheap Chinese goods which has led to the trade imbalance the Two nations are fighting about.
China sells about USD 500 billion to the US. No market can replace the US market . The Belt and Road initiative is good, but not good enough to replace the US market.
Zambia is going through a testing period, cool and level-headed leadership must prevail over popular-ism in order to resolve current issues.
Statements like below are factual; citizens should consider these seriously – whether you support the ruling party or not , whether you are UPND or any other party for that matter.
“The kwacha fell as much as 1.7% on Monday to 14.3152 against the dollar, the weakest level since November 2015, while yields on Zambia’s $1 billion of Eurobonds due 2024 rose by 19 basis points to 18.4%, the highest on record.”
“Whenever a government comes under stress you see more populism. It’s almost a self-fulfilling prophesy in that the worse it gets, the worse it will get.”
Don’t say you were never warned
I will be in support of this move , maybe we have a different mindset to maneging our resources…..
But this could be brinkmanship by lungu,… if the Indians call lungus bluff , there is not much time to get things right before elections
I hope not Chinese because 50 percent of Zambian workforce will be Chinese They are used to cheap labour be tough with them and apply UN Charter.No kickbacks and be transparent and you will gain respect by the new investors.
WHAT IS THE WORK OF THE INFORMATION MINISTER OR Chief Government Spokesperson ?
HAS CADRE SUNDAY CHANDA TAKEN OVER.LET US FOLLOW THE PROTOCOL IT CARRIES WEIGHT
It was a big mistake by chiluba to sell the mines and a big mistake again by tribal leader of UPND HH to undervalue the assets of these mines to get some kickbacks from the buyers. I personally applaud KK for not giving in to the external pressure to sell the mines. All what the mines needed then was just restructuring and recapitalisation, if this was done these mines would all have been owned by us Zambians. I dont agree with the idea that we Zambians have no capacity to run the mines, this is the worst kind of inferiority complex which we must not entertain in our lives because we have virtually what it takes to turn around the fortunes of these mines and retain the profits for ourselves in the country
Saimbwende please,the party in government is PF,honestly you expect them to run the mines?Everything they have touched has ended up a disaster, how you expect this lot to run mines is seriously the joke of the year.
Misleading headline.The Zambian government has not filed anything with anyone regarding Vedantta assets.The intention to”divorce”was made on a speech at an airport.Konkola(Vedantta) mine is yet to receive a formal notice.
Prepare your best lawyers to represent us in courts in the UK, truth be told these guys won’t go without a fight. This is definitely the beginning of a long court battle.
Zambian law applies. What cowardice!
Thug Sata nationalized Zamtel and over 500,000,000 dollars to be paid to the Libyans.
Now this failed oval head lungu nationalizing KCM, how much will it cost?
May be 2,000,000,000 dollars?
And theft by wako ni wako lawyer Lungi milking a few million dollars as liquidator!
Zambia is doomed
You suffer from acute inferiority complex just like HH of the UPND all due to group think mentality of typical UPND sycophants and zealots and enemies of progress
What’s the interest of discredited Bloomberg which supports the surrogate the Privatisation crook HH who has hidden the privatisation loot in the paradise papers because of his greedy and bitterness… The government thru ZCCM HI has today thru the Lusaka High court started the liquidation of the mine by appointing a liquidator and there’s no turning back
Just shut up! HH this HH that. What was Francis Kaunda and group doing in the privatisation of mines? Why are u not talking about those pipo in kaunda’s group whose job it was to sell the mines? Atase!
@ Mwanakalunga the truth really pains…HH together with the people you know have hidden the privatisation loot in the paradise… but for HH, it’s because he wants to hoodwink Zambians by running for Presidency of Zambia claiming to be clean and that’s the difference with the other crooks
Now with this latest stance from government will send shivers to all investors who will skyrocket out of here asap taking all their dollars with them and putting pressure on the already squeezed exchanged rate. Shortage of dollars equals to higher exchange rate.
Let the looting begin.
Doing business with Indians was the first mistake Zambia made. Any rational African can tell you that. They always externalize a nations money.