The Post reports that Zambia's Competition Commission has withdrawn authorisation for Zambia Copper Investments (ZCI) to sell its stake in Konkola Copper Mines (KCM) to Vedanta Resources. While the companies continue to insist that the delay is 'simply procedural', the tone of the Competition Commission's comments could be interpreted as reflecting a more serious concern with what has always been a controversial sale.
ZCI recognised that the Competition Commission has "withdrawn an interim authorisation that was granted earlier to Vedanta.” Zambia Competition Commission (ZCC) acting executive director Thula Kaira has said there was need to undertake a thorough independent assessment to ascertain the suitability of the transfer of 28.4 per cent shares in KCM to Vedanta Resources at a cost of US $213.15 million. “It is mandatory for the two companies to seek our authorisation to carryout a transaction of that magnitude but it is too early to say we have allowed the transaction or not since they have just applied and an independent assessment team will need to study the proposal before we can make a decision," said Kaira.
Currently, the KCM share structure comprises Vedanta with 51 per cent while ZCI has 24.8 per cent with the Zambian government through ZCCM Investment Holdings having 24.2 per cent, but with this development, Vedanta would now control 75.8 per cent shares of Zambia's largest copper mines. Independent shareholders have protested (on this blog as much as anywhere else) that the price offered for the shares both disadvantages them. The sale also removes any potential benefits to Copperbelt communities that might have flowed from a development scheme built into the structure of ZCI and that was designed to redistribute the benefits of any dividends paid out by KCM. These concerns have dovetailed with an 'economic empowerment' agenda currently making waves in the Zambian political scene as the Government, which has been responsible for the sale of vast numbers of Zambian companies into foreign ownership, seeks to rebalance relations between foreign capital and local investors.
3 comments:
How you arrive at ZCCM-IH holds 24.2% of KCM while ZCI held 28.1% of KCM and sold VEDANTA at all?
There is there not been an error or in the deal would call Vedanta he planned to make 4% to ZCCM-IH!
For information, in 2002, when ANGLO left the ship ZCCM-IH is from 20.1 to 48.2% of KCM ANY with the KCM debt ... In 2004 ZCCM-IH rose from 48.2% to 20.9 KCM but retained KCM's debt: Is this normal?
As some of the changes of ownership of KCM are difficult to believe, perhaps I can help to clarify things.
After Anglo-American left KCM in 2002 there were only two remaining shareholders: 58% ZCI & 42% ZCCM-IH
End 2004 28.4% of ZCI KCM shares were sold to Vedanta for $23.2Mln and 21.4% of the ZCCM-IH shares were sold to Vedanta for $23,7Mln (from memory),so in total Vedanta received the 51% controlling interest of KCM for aout $48Mln.
KCM is now owned 51% by Vedanta, 28.4% by ZCI and 20.6% by ZCCM-IH.
The Call Option in which Vedanta is proposing to acquire the remaining ZCI shares in KCM will give them a 79.4% monopoly of KCM for an insignificant total of about $264Mln, when most current estimates of KCM value are around $2.5 Billion.
You can see why ZCI shareholders do not agree to this "spoliation".
But who are ZCI shareholders?
44% are owned by The Copperbelt Foundation whose function is to carry out social work for the Zambian people, paid from the share dividends generated by KCM.
8% are owned by the KCM Employee Share Ownership Trust.
Finally general international shareholders own the remaining 48%.
I hope the situation is now clearer and it can be seen "who owns what" and who will "lose out" if Vedanta acquires additional shares in KCM under terms that were fixed in 2004 and are irrealistic today.
52% of ZCI shareholders are Zambians!
Small afterthought:
Those of you that are good at math will note a percentage loss when adding the parts of ZCI & ZCCM-IH that were sold to Vedanta.
To clarify: ZCCM-IH (majority GRZ)has 20.6% KCM and ZCI has 28.4%, so 49% KCM together. Leaving 51% for Vedanta. Thats it!
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