Vedanta Resources Limited’s financial struggles in India have sparked concerns over the fate of Konkola Copper Mines (KCM), Zambia’s largest copper mining company.
As a result, KCM’s future has been thrown into doubt, with some industry experts speculating that Vedanta may divest from the company pledges. This would be another major blow to the Zambian economy, which relies heavily on copper exports, with KCM’s potential to account for nearly 40% of the country’s copper production.
The uncertainty surrounding KCM’s future has also raised concerns among stakeholders, who fear that employees may lose their jobs if the company is sold or shut down. KCM employs over 13,000 people, making it one of the largest employers in the country.
According to recent statements by sources close to the matter, Vedanta, who had previously returned as an investor at KCM, is facing financial difficulties in India. The issue has raised concerns over whether they will be able to honor their investment in KCM.
Vedanta had previously owned a majority stake in KCM before being forced out by the Zambian government due to alleged environmental and social violations. The company subsequently reacquired a stake in KCM. However, the current financial difficulties faced by Vedanta in India have cast a shadow over their ability to support KCM.
Economist Yusuf Dodia has said with the coming on board of new investors for both Konkola Copper Mine –KCM- and Mopani Copper Mines –MCM-, it is important for the government to get investment commitments to ensure the investors do not exploit the country by failing to meet their commitments.
Recently the Zambia Consolidated Copper Mines Limited -ZCCM-IH also announced the Dubai-based United Arab Emirates’ International Resources Holdings –UAE’s IRH- as the new strategic equity partner in –MCM-.
Speaking in an exclusive interview with the Zambian Business Times –ZBT, Dodia said there must be an investment plan with investment commitments not only agreed upon but documented on paper.
Dodia said –MCM- and –KCM- both have new investors and that both give a reason for concern. He reiterated that Vedanta who have been returned as investors at KCM are facing financial constraints in India noting that they have a lot of credit and it is in doubt of whether they will honor the investment in KCM.
He further noted that 85 percent of Mopani Copper Mines was owned by Glencore who sold their shares to ZCCM-IH at about 1.5 billion dollars. He said the Shares may have to be sold to the new equity partner who will then begin to run the mine. “Those people must be able to commit to paying the 2 billion, they must be able to commit putting another 1 or 2 billion dollars into the mining operations so that they make it a mine which is productive,” said Dodia. He said all commitments need to be on paper starting from how much money will be brought in, when it will be brought, and what they will achieve, as well as the benchmarks and milestones.
He said if this is done, Zambia will be in a position to monitor the investors and ensure that the country has a serious investor. “If that happens then clearly both Konkola and Mopani Copper Mine become productive mines, they produce copper and start exports,” said Dodia.
Dodia further mentioned that whether Zambia will benefit from the increased mining operation is a big question because companies are not compelled to bring their mining export earnings into the country, but keep their money outside. He said this is the reason the kwacha is depreciating.
He however noted that the initiative of the export proceeds tracking framework by the Ministry of Finance and National Planning will compel all exporters to bring their foreign exchange earnings into Zambian Bank Accounts.
He said with this initiative, it will be reassured that exports from -MCM- and KCM will add to the prosperity of the Zambian economy.
