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Zambia vows to sell Konkola Copper Mines despite stay order by a South African High Court.

The ruling by the Johannesburg arbitration Tribunal sets Vedanta Resources on a collision course with President Edgar Lungu who has vowed to find new investors for the strategic Konkola Copper Mine.

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The Indian-owned KCM which owns an 80 percent stake in the mines, had filed an injunction with the Johannesburg arbitration tribunal seeking to block Zambia’s appointment of a liquidator to wind up Vedanta’s operations.

News Diggers reports that Wednesday’s interim interdict by the South African court validates Vedanta’s plea that the Consolidated Copper Mines Limited Investment Holdings, (ZCCM-IH) representing Zambia in the matter, had also breached articles of the shareholders’ agreement on winding up operations.

Reparations

The High Court also ordered the holding to pay Vedanta’s legal costs for three lawyers who applied for the interdict.

Zambia which owns just 20 percent of shares in the KCM has been locked in a dispute with Vedanta, over the alleged abuse of its mining license since May.

No U-Turn

“Government is confident that it made right decision against the investor” argues Chibanda Kenyama a Zambian economist based in Lusaka.

He explains that 15 years after the 2004 agreement to increase Zambia’s copper output, to nearly 2 million tons per year, KCM instead played with transfer pricing” by shifting profits and importing most of its copper concentrates from DR Congo for processing rather than mining local reserves.

Contractual failures

According to Chibanda Kenyama, Vedanta’s failure to develop the Konkola dip was evident in the serious liquidity problems it faced from overdrafts contracted from commercial banks to years of overdue suppliers’ payments.

“This has had a significant impact on the growth of jobs on the copper belts and the wellbeing of Chingola, Chililabombwe and Nampundwe which relied on the major investment”, the economist Kenyama noted.

“KCM lost the social license to trade, its credibility in the eyes of the community, that of its workforce, which in his opinion, posed a huge risk to the government, precipitating Lusaka’s move to place the company under liquidation.”

News Diggers reports that on the eve of the South African High Court ruling, the Zambian government called a press conference to reiterate its stance about the issue.

Issues of sovereignty

“The ruling will have no bearing on the Zambian court process”, mines minister Richard Musukwa is quoted by the newspaper as saying.

This is despite the designation of the Johannesburg tribunal as the seat of arbitration in the KCM shareholders agreement.  

“The principle that one sovereign state should not attempt to regulate the proceedings before the court of a different sovereign state was outdated” argued justice minister Given Lubinda who also took questions during the briefing.

Lubinda also disclosed that the country’s attorney general Likando Kalaluka would be travelling to South Africa to join the appeal team there, “in order to protect the integrity of Zambian courts”.

Potential investors waiting

Meanwhile the Zambian Mines Minister says he expects investors from Russia, Turkey, Australia, Canada and China to submit bids for the Konkola Copper Mines business within weeks.

Lusaka Times relays a warning from University of Zambia lecturer Sishuwa Sishuwa that even if the government has a very good case against Vedanta, it was messing up and could pay a heavy price for failing to “follow the legal procedure”.

Edgard Lungu's millstone?

Shishuwa’s signal came amid wild rumours trending on social media in Lusaka that the Democratic Republic of Congo was forced to pay Vedanta Resources 1.2 billion dollars, as the first quantum of reparations in a similar case.

The Vedanta affair increasingly looks like “a millstone tied around President Edgard Lungu’s neck”, warns a Zambian on the interactive column of the Lusaka Times.

As he puts it, “if Zambia loses its bid to liquidate and sell the company to new investors, it would mean more woes to the foreign exchange market, at a time when the economy badly needs stability”.

07:18

Paris Live/ Focus on Africa/Zambia in court battle with SA over planned liquidation of copper mine, 24/07

 

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