President Edgar Lungu is reportedly panicking and running out of options when it comes to dealing with the swelling level of Chinese debt, the latest Africa Confidential says.
It observed that President Lungu’s government has racked up much bigger debts to Chinese companies than it has previously admitted.
According to the report, sources in the Finance Ministry in Lusaka say that the Chinese creditors are losing patience over debt arrears.
Chinese companies are not keen on debt rescheduling and would prefer to get some collateral, perhaps in the form of other mining assets.
Under growing political pressure as economic problems mount, President Lungu is running out of options.
Chinese companies would seek to benefit from the liquidation of Vedanta’s Konkola Copper Mines (KCM) and are also watching First Quantum Minerals (FQM), the country’s largest producer, which operates Kanshansi and Sentinel mines.
The government-owned ZCCM Investment Holdings, which has a 20% stake in the country’s biggest mines, wants to liquidate KCM, claiming that Vedanta is lying about expansion plans and is paying too little tax.
However, Chinese companies are reluctant to buy disputed assets.
ZCCM-IH’s claims have to go through arbitration.
This is an important test and could open the way for a sale.
The companies also face some anti-Chinese sentiment on the ground among trade unionists and local communities.
This explains the secrecy as Jiangxi Mining has purchased about 9.9% of FQM, listed on the Toronto Stock Exchange.
The purchases have come through derivatives and direct stock purchases and have so far cost about $800 million.
It would take about $2bn to give Jiangxi a shot at majority control.
Meanwhile, there is a standstill agreement between FQM and Jiangxi in which the Chinese have agreed not to take over without the approval of FQM’s managers and shareholders.
Glencore’s Zambian mine Mopani may also be ready for the auction block. Some industry insiders say Glencore’s two majority-owned Congo-K companies, Mutanda and Toronto-listed Katanga Mining, which operates the Kamoto Copper Project, are also being prepared for sale.