9.5 C
Alba Iulia
Thursday, May 12, 2022

Vedanta, the Grave Digger of Hichilema’s Political Career

Columns Vedanta, the Grave Digger of Hichilema's Political Career

By.James Musonda (PhD)
Socio-political anthropologist, Université de Liége, Belgium

Summary

This article argues that the political future and relevance of the Zambian president presently rests on the decision his government will make on Konkola Copper Mines. If they give KCM to Vedanta, Vedanta will be Hichilema’s political grave digger, and Vedanta’s capital will be the shovels with which Hichilema’s political career will be buried. If the election results since Zambia’s return to multiparty democracy in 1991, is anything to go by this claim is valid, as no party has won formed government without winning Copperbelt, which often votes alongside Lusaka, and to a larger extent, the Northeastern provinces.

Introduction

It is now roughly just three months before president Hichilema and the UPND clock one year in office. Yet, the new dawn government’s position on Konkola Copper Mines, remains at best, blurred, incoherent and inaudible, and at its worst, hopelessly absent. Compounding this silence is the UPND’s uncoordinated public relations approach to governance rooted in keeping quiet and firefighting later. This is unfortunate because copper prices on the global market are unprecedentedly over the roof. Also, KCM has one of the richest copper deposits, the largest reserves, and the third-largest copper producer in the country.

This silence has coincided with the Zambian Court’s reluctance to make a ruling on the status of KCM ownership. Indeed, the doggy manner in which KCM was liquidated requires careful attention by both the judiciary and the executive. This is because any further mistakes can lead to unbearable legal costs for a country already struggling with over US$14 billion thoughtlessly borrowed by the PF, which was recklessly abused and corruptly spent. Add to this, the debt that the UPND has borrowed since it came into office, and the US$1.5 plus interest that ZCCM-IH owes to Glencore through an irresponsible acquisition of a company within the first year of its acquisition made a US$91 million net loss.

Unfortunately, the delay and the silence are not solving any problems. If anything it is deepening the chronic anxiety among Zambian mineworkers and their families for whom uncertainty has become the norm. This chronic uncertainty dates back to the sustained economic crisis from the mid-1970s to 2000 when the company was privatised, from mid-2000 when Anglo-American Corporation and its partners withdrew its capital and handed over the company to the government, during the ownership of Vedanta, to the present, under the controversial liquidation.

Instead of creating certainty and hope, the government’s loud silence has instead opened the space for Vedanta, the embattled owner of KCM to attempt to rebuild its reputation through misleading, misinforming and misrepresentation of facts. In this pursuit, Vedanta has sought, using back door means, the support of union branch leaders, who were made to issue statements in support of Vedanta’s return even when they were not legally authorized and, for misrepresenting the union position. These junior branch leaders have in the case of MUZ been subjected to disciplinary processes.

The mine unions are on record supporting the liquidation and the nationalisation of KCM. This is evident in various media statements in print, video and radio stations. Vedanta has also sought the support of some poorly informed NGOs.

I argue that the political future for the UPND squarely rests on the decision they will make on KCM. Giving KCM to Vedanta will effectively make the UPND a one-term party. This is because Vedanta carries a hugely tarnished image, and anyone seen to associate with the company is likely to suffer the consequences. Here is why.

1. In 2014, a video clip went viral on the Internet showing Anil Agarwal, the majority owner of Vedanta, bragging about making an easy profit of $500 million each year from KCM, the mine he purchased for a mere $25 million. This is despite the company declaring losses every year, failing to invest, and failing to bring in the FDI the company promised to develop the KDMP.

2. When Vedanta bought KCM, there was a one-year gap between development (the opening of the shafts) and production (the actual production of the copper ore), but starting from 2006, the gap had reduced to just one and a half months of reserves.

3. Instead of developing underground resources, Vedanta concentrated on the surface plant concentrator to process seven million tons per annum of ore it did not produce but purchased from other countries. Jobs were created in other countries at the expense of underground miners in Zambia.

4. Vedanta mismanaged the KDMP project. The initial aim of developing the KDMP was to increase production from two million tons of ore per annum to six million in the medium term and, in the long – term to nine million. This was indeed very feasible given that at Nchanga the copper deposits are found near the surface and hence cheaper to mine. On top of that, prior investments by Anglo – American Corporation of $350 million before it abandoned the mine helped to modernize the shaft and infrastructure to better standards than during ZCCM.

5. But Vedanta adopted a “ruinous model of business” at Konkola Deep Mine Plant (KDMP) by turning operational revenue into capital. Instead of investing in developing reserves, Vedanta went to the open pit, took the ore out in the quickest way possible, got the money, and built the smelter. In so doing, Vedanta effectively changed the philosophy of the business entirely from a “mining”, into a “treatment facility”.

6. Vedanta changed the design of the mine by positioning the shaft in the wrong place. To better exploit the ore body located ten kilometers long from nose to end, Vedanta needed to develop the mine to create a broad base of ore to feed processing. Instead, Vedanta dug a very steep gradient (what experts call “diving in.”), took the ore out, leaving behind a lot of waste for a future producer to take out. In doing so, they shifted the center of gravity, sinking a shaft over one kilometer with no ore in between the two ends, where there are ores (Lee 2017, 69-70).

7. In 2014 KCM announced its intentions to retrench an excess of 1,529 employees.

8. The government immediately commenced an audit of the entire operation of KCM. The audit revealed: high indebtedness and the threat of insolvency. The total liability of the company as of 30 September 2013, stood at US$1.567 billion exceeding its current assets by US$123 million. It was also under the threat of receivership from Standard Bank for defaulting on its US$700 million loans.

8. Yet Vedanta was unconcerned. For example, in September 2011, Vedanta prematurely recalled the US$500 million loan it had given to KCM earlier which was supposed to have been repaid in 2012.

9. Vedanta also failed to fulfil its commitment to inject US$397 million into KCM as FDI.

10. Instead, the company used all the funds it generated within KCM towards capital projects. This deprived the company of the necessary funds for operations and maintenance.

11. The investment into KDMP was further delayed by about seven years mainly due to design challenges and resource mobilization resulting in increased cost of sinking of shafts, development of the ore resources, and a loss in excess of four million tonnes of ore anticipated per annum.

12. Vedanta’s failure to properly manage its contractors, coupled with its failure to purchase or maintain its own equipment further undermined its production capacity. Hence potential loss of possible jobs, and tax revenue.

13. The government’s efforts of reviving the company by providing it with a Business Improvement Plan (BIP) to increase production from 132,318 tonnes of finished copper in 2013, to 178,994 tonnes by 2017 were frustrated by Vedanta’s failure to fulfill its commitments resulting in a further decline in production to 86,585 tonnes.

14. In 2018 the Zambian government had no option but to threaten the repossession of the mine. But this did not result in any improvements forcing the government through its minority shareholder, ZCCM-IH to commence the liquidation of the company.

15. At the time of liquidation: KCM’s debt had exceeded UU$2.5 billion; developments at KDMP had stalled; underground operations at Nchanga suspended, while the open pit was operating at very low capacity; the smelter was not running at full capacity due to lack of concentrates. The company depended on imported concentrates to run and operate the mine; the acid generation at the acid plant had declined alongside the reduced operation at the smelter.

16. This resulted in declines in the operations at the tailings leach plant which requires a lot of acid to treat the Chingola refractory ore from the surface dumps basal sandstones and other sources from Nchanga ground; the Nkana Refinery in Kitwe was on care and maintenance while the company continued to export copper anodes; Operations at the Nampundwe Mine slowed down; annual production dropped from 191,685 metric tonnes in 2014, to 97,946 metric tonnes in 2018.

17. In other words, Vedanta failed to run a company with over 280 million metric tonnes at Konkola, with an estimated lifespan of over fifty years and in excess of over 53.9 million metric tonnes at Nchanga Mine.

18. In 2006, the KCM under Vedanta polluted the main source of water in Chingola in which most people depend for water for their everyday consumption. The company was found guilty by courts in Zambia and the UK. Vedanta fiercely and expensively claimed innocence and appealed the court rulings in both Zambia and the United kingdom instead of taking responsibility and sympathising with the poor women, children, the disabled, poor villagers, retrenched miners and the old people living in Chingola.

19. Put simply, Vedanta failed to run KCM: profitably and technically; pay taxes; offer decent
employment to its workers; pay contractors; repay its loans and prevent pollution from affecting poor communities. In May 2019, the Zambian government announced the liquidation of the company because of the company’s alleged environmental and financial regulation breaches.

20. Throughout its existence Vedanta has been reluctant to pay taxes by declaring losses amidst growing suspicion of tax evasion and avoidance.

 

These reasons do not paint Vedanta as a good investor and this claim is consistent with my ongoing ethnographic research among KCM employees and their families. What is likely to happen if Vedanta comes back is as follows:

a) Most people will associate Hichilema with the Vedanta’s bad name
b) Given its record of fulfilling promises Vedanta is likely to fail to fulfil its promises. This will lead to growing frustrations and uncertainty among workers and their families and the Copperbelt in general.
c) Vendata will likely continue providing precarious jobs, and subcontracting workers on poor salaries
d) Vedanta is likely to continue to arm-twist the government when it comes to taxes, especially during elections by threatening retrenchments or to leave the country forcing the government to avoid any tax raises.
e) On 7 August at Parklands Secondary School in Kitwe, Edgar Lungu accused Hichilema of receiving money from Vedanta for campaigns and of promising to give KCM back to Vedanta. Giving back KCM to Vedanta is likely to give life to these accusations no matter how baseless they may look at the moment.

Way out

  1. The government waits upon the court ruling which may give KCM to Vedanta on top of compensation and courts
  2. Build a strong case against Vedanta to secure a legally enforceable liquidation
  3. Secure a negotiated settlement with Vedanta that will see Vedanta disappear from the list of owners. This will mean finding money. Vedanta is unlikely to agree given the high copper prices at present.
  4. The government just seats and does nothing and achieves nothing.
  5. Government finds the money to pay off Vedanta and recapitalize the company.

The government finds an alternative investor other than Vedanta to clear Vedanta and invest new money to revamp production and pay off all the debts (I do not favour privatization).

Conclusion

Vedanta remains a potential gravedigger of the UPND and president Hichilema. It is up to them to make the right decision because in a democracy, those who suffer political deaths, are also required to attend their funeral and mass burial. This is what happened to Lungu during the inauguration of Hichilema. Also, the UPND should not allow a situation where people start to miss the PF. That would be disastrous for all of us.

24 COMMENTS

  1. No sensible investor can risk their money in the mines under KCM especially the underground. Today’s miner goes for the ore nearest to surface using the latest mining methods and technology. Nkana and Chingola are encient mines. The so-called synchronolium at Nkana is so deep that bringing up one tonne will cost more than selling it. Vedanta don’t mean well and I suspect there’s something they left behind that they want to retrieve after which they will run away

    9
    1
  2. Let those with ears hear. There is emotions on Vendanta and indeed is a political time bomb for the new govt. It could be diffused or it can explode. The president prouncements on it should not leave the Zambian people to speculate like his statement on mining indaba. In any case, why make that statement there and not at home on the copperbelt and explain what the govt thinks are possible outcomes if court actions are receded. In reality there many possible solutions but returning to the previous status core will not be accepted by Zambians. This message the president should have articulated to avoid speculation. Also Vendanta need to know that. If Vendanta crossed the red line, regardless any govt in power one cannot go back to the previous status core. There are many models out…

    10
    1
  3. The Article is full of spite. You can actually tell the writer ‘s political bias and evil wish. The tribalist talks of voting pattern which he wished continued in 2021 more to insinuate that Copperbelt belongs to one tribe with connections to what he calls Northeastern provinces.

  4. I feel for the miners who are being represented by such a corrupt bunch of shameless individuals in the unions…these guys are suppliers to KCM so Vandanta stating that they will pay suppliers and pledge billion dollars is music to their ears. Remember the same people stood behind Milongo Lungu the liquidator and back the take over ..the same people stood silent whilst Milongo and State House officals stripped the assets from KCM…the same people will start bidding for Vandenta to come back once they are all given brown envelopes.

  5. In the face of the many breaches, some stated here, by Vedanta I don’t see which claim to compensation can be granted by any sensible tribunal or Court. To aver that GRZ stands to lose billions of Dollars paying Vedanta claims is misleading, how can it be? It can only come from those that are busy cutting deals with the Indian. We now have to put up the harsh realization that our President is Mr. Greg Mills’ Chola Boi.

    10
  6. HH is such a fooool…..he thinks all these bazungu and Indians jostling for the mines are his friends…..well I guess he knows what he is doing…fattening his pockets so he can pay back all the loans he acquired for the past 20 years…..he needs to pay back his Funders…..time for some serious kickbacks

    10
    1
  7. @Deja Vu,
    Now you start to think right. HH is making people think smart.
    I normally don’t ready comments from people with Zambian flag tag. I stopped under PF. Why did you vote for PF thugs, because of song “dununa reverse”?
    Let’s sing it….

    2
    8
  8. While Chile, the highest copper producing country in the world, has immensely benefited from its copper exports, and is virtually considered a first world country, Zambia, in spite of being one of the ten highest copper producing countries in the world, has nothing to show for it, and remains one of the poorest countries in the world. This is totally unacceptable. Maybe it has to do with the shady foreign companies that have been extracting our mineral resources for virtually free; paying no proper taxes and polluting our environment for nothing. Time to look for better investors.

  9. It was very clear that ECL and the PF planned to give KCM to the Chinese.
    The objective was to exchange the Chinese debt with equity in KCM under the guise of finding a reliable investor.
    Then all the money the PF been stealing through the Chinese deals was going to be covered by the KCM deal.
    The author is just another PF Zealot trying to protect criminals like ECL.

    4
    13
  10. HH seems very trusting of these so called Western (and Eastern) investors, most of who are nothing more than looters, pillagers, marauders, who could care less whether Zambia truly benefits from their mining dealings or not. Take time to look for reputable investors, and never show desperation. Make sure to vet them thoroughly, before giving them any deals. Showing desperation only attracts shady characters.

  11. [email protected] 12…….. very sad indeed . DId you even understand the article? Or you are one of the educated morons who have failed this beautiful country. The Author has put up well researched points( facts). Come back to earth, this is real. I am surprised the MPs were these mines are located are just quite or not making any effort to arrest this VERY SENSITIVE matter. Bwana Independent Copperbelt is a ticking time bomb. Lets support our president by telling him the truth!!

  12. @ 1 De JaVu
    And HH is too blind to see that Vandeta still has some unfinished business with the Zambian mines….the US$650 million he raked in wasn’t enough…now he’s coming with a killer punch…..thats the problem with African Politicians…their campaign Funders always dictate and tell them how to govern….do you seriously think Vandeta really cares about Zambia….if he has a billion dollars to spend why can’t he spend on his people in India who are suffering and living on less than US$1 a day…..come on HH open your eyes….let Zambians invest in mining just let them access loans

  13. Dunana reverse reloaded indeed….and HH used to criticize Lungu over these mining deals but it turns out he is now inviting all the mining scavengers around the world to come and loot….there’s a mining company which pays laborers K1050 per month….my friend was going through their books 2 months ago….

  14. Frankly, Vedanta are arrogant. Despite HH’s comments that were largely positive, they go to oppose change of provisional liquidator. I think the rogue stance by Edgar Lungu is much better. If you want to win in the court of public opinion, get an NGO to sue them for environmental reasons.

  15. Even with this revelation of how KCM was run down by Vedanta, Hichilema is still inclined to give away this one rich mine of 4 vast sections of Nampunswe, Lusaka; Nkana, Kitwe; Nchanga, Chingola; and Konkola, Chililabombwe, home to KDMP
    The write up from James Musonda is free advice though UPND is not obliged. The president actually recently admitted that the KCM saga is very complicated.

  16. @16 I love Zambia
    Don’t mind @12 Independent..he’s positioning himself to become the number 1 chief Lumbani Madoda praise singer because Spaka and Tarino Orange have given up on HH and am told they’re about to tender in their resignations from team Lumbani Madoda also big mouth praise singer General Kanene has also abandoned HH…[email protected] Independent is sick in the head

  17. Vedanta again? When people cry against something then there’s really a problem. There’s no smoke without fire.

  18. #12 Nostradamus
    1) I don’t vote….no material to choose from
    2) Your decision not to read our comments clearly indicates inferiority
    3) There’s nothing smart about the scum.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -

Latest News

Chinsali PS says ZAF Airstrips in Muchinga need standardization and modernization

Muchinga Province Permanent Secretary Henry Mukugule, has appealed to the Zambia Air Force (ZAF) to consider improving and expanding...

More Articles In This Category