Zambian president threatens Glencore, Vedanta with "divorce"

Zambian president threatens Glencore, Vedanta with `divorce'

Bloomberg News

18 May 2019

Zambian President Edgar Lungu threatened to “divorce” the domestic copper
units of Vedanta Resources Plc and Glencore Plc after the companies said
they’d curb operations in the southern African nation.

The threat marks an escalation in tensions between the mining industry in
Africa’s second-biggest copper producer and the state, after an increase
in royalties and plans to introduce new taxes. Last week, Mines Minister
Richard Musukwa said the government directed Glencore’s Mopani Copper
Mines to hand over two shafts to local contractors rather than close them.

Zambia’s kwacha extended its losses against the dollar to as much as 3.2%
to the lowest level since 2015, and was down 2.3% at 13.91 per dollar by 4
p.m. in Lusaka, the capital. Yields on the country’s $1 billion of
Eurobonds due April 2024 rose 11 basis points to a record 18.25% after
Lungu’s statement. "President Lungu accused mining companies of lying
about their profit, and trying to arm-twist the government over its plans
to replace value-added tax with a new sales tax system"

Lungu visited Copperbelt province Friday to meet officials from labor
unions and the Chamber of Mines, the main industry lobby group, after
Mopani announced last week it plans to shut two shafts and fire hundreds
of workers. The disagreement could weaken the kwacha, which is already the
world’s second-worst performing currency against the dollar this year,
having fallen 14.7%.

Investor interest

“I want to make it very clear that I have come here to sanction, if it’s
the will of the Zambian people, that we divorce these mines,” he said in a
speech broadcast live on Facebook as the crowd responded with cheers. “My
position is that enough is enough. The attorney general is here, the
lawyers are here. They will guide us how to proceed with this divorce.”

Amos Chanda, a spokesman for the president, said that by using the word
“divorce,” Lungu was referring to the fact that other unidentified
investors are interested in Zambian mining assets.

“Everything that will be done will be done within the confines of the law,
in line with the existing mining licenses,” Chanda said. “It is not in the
policy of the Zambian government under any circumstances to engage in
nationalization or seizure of private assets without due process.”

Vedanta’s Konkola Copper Mines noted Lungu’s concerns and said it’s
committed to its operations in the country.

“We believe there is an opportunity to resolve these matters for the
benefit of all stakeholders,” Eugene Chungu, a company spokesman, said by
phone. “Certainly, we are committed to investing in the country for the
long haul.”

A Mopani spokesman requested emailed questions when called for comment,
which the company didn’t immediately respond to.

Lungu accused mining companies of lying about their profit, and trying to
arm-twist the government over its plans to replace value-added tax with a
new sales tax system.

“We know they are liars, they are cheats and they take us for fools,” he
said. “Let me conclude by saying that sales tax is here to stay. We are
not going to be blackmailed by the investors, no. Those who are
uncomfortable to stay in our house can go out.”

(By Matthew Hill and Taonga Clifford Mitimingi)