The artice claims that First Quantum is still prepared to turn to international arbitration if discussions with the government and the World Bank do not go well. It quotes TD Newcrest's Greg Barnes: "We believe that the World Bank has been encouraging the Zambian government to increase its revenues from the mining sector via increased taxes and royalties," he wrote. He cut his target on First Quantum to $85.00 from $100.00 and maintained a "hold" rating.
Barnes' argues that the government has not been clear on whether Equinox Minerals 'greeenfield' development at Lumwana would be exempt from the new taxes. I think it has and the answer is no. But maybe he knows about some background negotiations that I don't.
Thursday, 29 May 2008
Govt clarifies mines taxes - companies irritated at World Bank
An article in the Canadian publication, the National Post, suggests the Zambian Government has provided additional clarification on how its revised mines taxes will work. Presumably this refers to the 'practice note from the Zambian Revenue Authority' that some companies claimed to be waiting anxiously for, as reported in last week's blog. The article claims that the clarification is 'bad news for the companies' and also suggests that the companies believe the World Bank is heavily involved in the negotiations, and is politically supportive of the government, against the companies' interests.
Sunday, 25 May 2008
How to spend and monitor mine revenues?
There have been a number of ideas aired about how the increased revenue from mine taxes should be distributed. Should they simply go into national government coffers as with all other revenue, for the state to spend strategically on the development of the whole nation? Should a certain percentage be set aside for local authorities, perhaps even traditional authorities (a position advocated by the influential campaigner Peter Sinkamba at Citizens for a Better Environment? Should a certain percentage be spent on government facilities in mine areas (a position put forward by some of the companies, presumably hopeful of securing 'social peace' in a tense region?)
The Daily Mail reports comments from Mines Minister Kalombo Mwansa that Government has requested the World Bank to carry out a scoping study on whether Zambia should join and implement the Extractive Industries Transparency Initiative (EITI). “The EITI commits a country to publish all payments made to Government by extractive companies,” Dr Mwansa said. There is a paper here from the Director of Budgets at the Ministry of Finance and National Planning on this subject. And the background to a conference on the subject held in December and organised by Southern Africa Resource Watch here, here and here.
Meanwhile, The Post report that Nkana PF member of parliament Mwenya Musenge has said the government should immediately establish a mining communities development fund to benefit residents of mine areas.
In an interview in Lusaka on Friday, Musenge said people who lived in mining communities were seeing the benefits that investors in the mining companies were getting but that little or nothing accrued to them.
He said this in reference to the Zambia Revenue Authority (ZRA) having collected K29.7 billion mineral royalties from the major players in the mining sector.
Musenge warned that should government fail to establish the fund, people living in mining communities would have no option but to start agitating for it.
“Many countries in the world have a development fund that benefits communities that live in mine areas. If we do not establish this fund in Zambia, even the mine developments that we are talking about like in North Western Province and Southern Province will not amount to anything,” he said.
“There’s so much excitement for North Western Province but many years down the line, once the investors have made their profits and when there is no more mining to talk about, we’ll just be lamenting like we are doing for the Copperbelt.”
Musenge proposed that the government should retain at least 40 per cent of the profits from the mines to benefit mining communities and cities.
“This money could be shared between the local authority for that particular town and communities surrounding the mine,” said Musenge.
The Daily Mail reports comments from Mines Minister Kalombo Mwansa that Government has requested the World Bank to carry out a scoping study on whether Zambia should join and implement the Extractive Industries Transparency Initiative (EITI). “The EITI commits a country to publish all payments made to Government by extractive companies,” Dr Mwansa said. There is a paper here from the Director of Budgets at the Ministry of Finance and National Planning on this subject. And the background to a conference on the subject held in December and organised by Southern Africa Resource Watch here, here and here.
Meanwhile, The Post report that Nkana PF member of parliament Mwenya Musenge has said the government should immediately establish a mining communities development fund to benefit residents of mine areas.
In an interview in Lusaka on Friday, Musenge said people who lived in mining communities were seeing the benefits that investors in the mining companies were getting but that little or nothing accrued to them.
He said this in reference to the Zambia Revenue Authority (ZRA) having collected K29.7 billion mineral royalties from the major players in the mining sector.
Musenge warned that should government fail to establish the fund, people living in mining communities would have no option but to start agitating for it.
“Many countries in the world have a development fund that benefits communities that live in mine areas. If we do not establish this fund in Zambia, even the mine developments that we are talking about like in North Western Province and Southern Province will not amount to anything,” he said.
“There’s so much excitement for North Western Province but many years down the line, once the investors have made their profits and when there is no more mining to talk about, we’ll just be lamenting like we are doing for the Copperbelt.”
Musenge proposed that the government should retain at least 40 per cent of the profits from the mines to benefit mining communities and cities.
“This money could be shared between the local authority for that particular town and communities surrounding the mine,” said Musenge.
FFTUZ / ZCTU join forces to press for changes to new labour laws
The Post report that the Federation of Free Trade Unions of Zambia (FFTUZ) and the Zambia Congress of Trade Unions (ZCTU) have agreed to work together in pushing the government on the labour law reform process.
The two unions met yesterday at Pre-Cem Motel Lusaka to discuss with their members on how to proceed in the law reform process after failing to agree with the government over some clauses in the amendment bill.
The labour movement and the government have differed over some clauses in the proposed labour bill with the unions accusing the government of taking the bill to parliament before it was agreed upon by all the stakeholders.
The labour movement is now calling for the withdrawal of the bill for further consultation.
FFTUZ president, Joyce Nonde said it was not democratic for the government to try and impose a law on the workers. "Yes we know they are in power and they are using their numbers in parliament, but that is not the way laws are formulated. So we still expect them to come back to the round table and reason with us, not the way they have done it," she said.
Nonde said the FFTUZ had realised the need for unity within the labour movement, saying that workers had the same problems. And ZCTU president Leonard Hikaumba hoped that the government would listen to the workers, saying there was no need to keep quarrelling as it affected production.
The two unions met yesterday at Pre-Cem Motel Lusaka to discuss with their members on how to proceed in the law reform process after failing to agree with the government over some clauses in the amendment bill.
The labour movement and the government have differed over some clauses in the proposed labour bill with the unions accusing the government of taking the bill to parliament before it was agreed upon by all the stakeholders.
The labour movement is now calling for the withdrawal of the bill for further consultation.
FFTUZ president, Joyce Nonde said it was not democratic for the government to try and impose a law on the workers. "Yes we know they are in power and they are using their numbers in parliament, but that is not the way laws are formulated. So we still expect them to come back to the round table and reason with us, not the way they have done it," she said.
Nonde said the FFTUZ had realised the need for unity within the labour movement, saying that workers had the same problems. And ZCTU president Leonard Hikaumba hoped that the government would listen to the workers, saying there was no need to keep quarrelling as it affected production.
Saturday, 24 May 2008
China in Zambia
An great piece of journalism from Richard Behar here. It helps explain the 'push' factors driving Chinese investment in Zambia - a real gap in the dominant literature on the subject. For me it raises an interesting question - whether the image of 'state-led' investment is quite right, or whether the dynamic is more about Chinese individuals, and individual firms, making their way to Zambia and enjoying some financial support from the Chinese state, and possibly, political and economic protection from Chinese diplomats / the Zambian state. I've pulled out one juicy quote:
"most of the value of Zambian copper is unlocked only after it reaches China. Zambian politicians have dreamed for years about using their copper to create a light-industrial sector before they run out of the mineral -- most of which is likely to be gone by 2025 -- but there's still no coherent strategy to make it happen. Meanwhile, Chinese entrepreneurs are using fat bank accounts, vast credit supply, and, in some cases, government-funded incentives to buy up exploration and mining rights, just as they have with timber licenses and concessions in Mozambique. As a result, Zambia and, more particularly, ordinary Zambians are seeing very little benefit. While copper prices have quintupled since 2001, more than 70% of locals still live below the poverty line."
I am not sure about a couple of facts in the article (I don't think there were any fatalities in the shooting at Chambishi, and I don't think copper will runout in 2025), but the basic argument is very interesting.
"most of the value of Zambian copper is unlocked only after it reaches China. Zambian politicians have dreamed for years about using their copper to create a light-industrial sector before they run out of the mineral -- most of which is likely to be gone by 2025 -- but there's still no coherent strategy to make it happen. Meanwhile, Chinese entrepreneurs are using fat bank accounts, vast credit supply, and, in some cases, government-funded incentives to buy up exploration and mining rights, just as they have with timber licenses and concessions in Mozambique. As a result, Zambia and, more particularly, ordinary Zambians are seeing very little benefit. While copper prices have quintupled since 2001, more than 70% of locals still live below the poverty line."
I am not sure about a couple of facts in the article (I don't think there were any fatalities in the shooting at Chambishi, and I don't think copper will runout in 2025), but the basic argument is very interesting.
Thursday, 22 May 2008
Two companies still resisting new taxes
The Lusaka Times reports that Zambia is on course to collect the $415 million the state projected from new mining taxes in 2008. Zambia Revenue Authority (ZRA) commissioner-general Chriticles Mwansa said in a statement mining companies had complied with the new tax law and paid the mineral royalties at 3 percent. Mwansa said mining companies paid the tax authority $8.4 million in May compared with the $1.4 million that they used to pay per month before the introduction of the new taxes. That's a six fold increase in revenues to the state.
Okay, and that then begs the question your statement that you’re willing to challenge this according to your stated rights of the stability agreement. Are you going to include as well you actually believe your stability agreement is the legal document?
Clive Newall, President:
We have advice that that is true. We of course are taking more advice from our legal advisors on how better to deal with this, i.e. whether to pay the tax and recover it through the stability agreement or not pay the tax and handle it another way. We have yet to decide which way to go."
I guess we'll all find out soon.
“I am confident that the targeted $415 million will be collected. The compliance levels so far by the mining companies are very encouraging, hence we are extremely hopeful that the government will meet the target. The first payments for mineral royalty were due on May 14, 2008 following the introduction of new taxes but the bulk of the revenue will be paid in June when the first returns and payments for company income tax and other taxes are due,” Mwansa said.
Mwansa's comments somewhat contradicted earlier reported commments from Emmanuel Ngulube, permanent secretary in the Ministry of Finance, who said on Monday that power outages would affect mine production, reducing projected income for the state in 2008. On the other hand, Finance Minister Ng’andu Magande said on Wednesday Zambia was on course to achieve a targeted 1.0 million tonnes of refined copper in three years and that the revenues predicted would be collected. Well, it's all reading as breezily good news so far, including Magande's comment, also reported in The Guardian (UK), that "all but two foreign mining firms in mineral-rich Zambia had agreed to pay the increased taxes, after initial threats of litigation in international courts." Indeed, the Government-sponsored Times of Zambia concludes in its editorial "Contrary to the sentiments of some sceptics in some circles both within and out side Zambia, mining houses operating in the country are showing themselves to be true partners with the people of Zambia."
.... HANG ON.... Does it make me a horrbile sceptic if I say, 'all but two?' It has been a significant achievement of skilful politics by the Zambian Government, opposition parties and civil society to resist the World Bank and IMF's love of 'property rights' and 'stable investment environments', and to refuse the blackmail of a 'negotiated solution' and get most of the mining companies this far. But there aren't that many mining companies in Zambia. Two not paying is still pretty serious.
So, which two? (From media noise, I am guessing Equinox and First Quantum). This transcript of a phone conference between First Quantum management and journalists on May 14 this year suggests the company is not yet paying all the taxes, and is considering legal action. Company President Clive Newall initially states,
"The Company, along with other miners in the region, have entered into development agreements with the Government of Zambia, which unequivocally provide for stability in the regulatory environment and with rights of international arbitration in the event of a dispute. Currently the Company, along with other miners, is seeking mediation with GRZ but, if necessary, will exercise its rights on its development agreement. The industry is also right now awaiting a practice note from the Zambian Revenue Authority, which will hopefully provide some clarity on how these taxes may apply, because I think most of you are probably aware there’s lots of different interpretations on how these taxes are to be applied. Hopefully this practice note will at least to allow us to see what we’re dealing with, which is not the case at the moment."It's looks from that comment, issued 4 days before First Quantum was supposed to pay up on its taxes due, as other companies evidently have, that the firm is trying to buy time and is non-compliant. If that were the case, as far as I am concerned, the question is, what does the state propose to do about this illegal non-payment? The Guardian quotes Magande commenting, "I think everybody now wants to move on except for two companies that are still asking some questions. We now want them to provide us with their accounts because we feel everyone is making profits as a result of high copper prices."
However, further into the teleconference transcript (page 4) there is a discussion with institutional investors about how First Quantum calcuated its taxes in May. Here it appears the company paid the new mineral royalty and corporate tax rates, but feels the windfall and profit taxes are unclear. After more discussion on page 5 it seems pretty clear the company does have an understanding of how those taxes would apply. There's more on page 8 and page 10. In none of these cases does the specific nature of the 'confusion' First Quantum are suffering from become clear. The journalists and management seem, in each case, to reach agreement on the nature of each tax. Some clarity comes eventually on page 13 where Newall says, "The big question marks still, Kerry, on are deductibility of these new taxes. That’s what we don’t... And it makes a huge difference." The other big question is of course what, legally and politically, the company plans to do. This comes out on page 10:
"Onno Rutten, UBS Securities:
Okay, and that then begs the question your statement that you’re willing to challenge this according to your stated rights of the stability agreement. Are you going to include as well you actually believe your stability agreement is the legal document?
Clive Newall, President:
We have advice that that is true. We of course are taking more advice from our legal advisors on how better to deal with this, i.e. whether to pay the tax and recover it through the stability agreement or not pay the tax and handle it another way. We have yet to decide which way to go."
I guess we'll all find out soon.
Wednesday, 21 May 2008
Does Mwansa protest too much?
The Post reports that Mines Minister Dr Kalombo Mwansa has said the government's relationship with the mining companies in the country has remained cordial despite the new mining taxes.
The government introduced new mining fiscal regime which came into effect on April 1 this year.
The move resulted in increased mineral royalty to three per cent from 0.6 per cent, while corporate tax on mines rose to 30 per cent from 25 per cent.
The government also introduced a 15 per cent variable profit tax on taxable income above eight per cent and a minimum of 25 per cent windfall profit tax.
The move led to an outcry from mining companies operating in the country which congregated through the Chamber of Mines of Zambia, a cartel of mining companies operating in the country, to denounce the new tax regime.
The mining companies insisted that, by implementing the new mining fiscal regime, the government had abrogated the development agreements that it signed with them.
But Dr Mwansa insisted that the government had clarified with the mining companies and that the new mining taxes were not meant to stifle growth of the sector in the country.
"We still have a cordial relationship with them. Nothing has change. I think they have understood that our reasons to increase the taxes were not meant to hurt them but that we only wanted to get a fair return for our mining sector," said Dr Mwansa. "In fact, we should have been meeting them through their chamber Chamber of Mines of Zambia when we were on the Copperbelt last week for our quarterly meeting but we postponed but we should be meeting them very soon."
The government introduced new mining fiscal regime which came into effect on April 1 this year.
The move resulted in increased mineral royalty to three per cent from 0.6 per cent, while corporate tax on mines rose to 30 per cent from 25 per cent.
The government also introduced a 15 per cent variable profit tax on taxable income above eight per cent and a minimum of 25 per cent windfall profit tax.
The move led to an outcry from mining companies operating in the country which congregated through the Chamber of Mines of Zambia, a cartel of mining companies operating in the country, to denounce the new tax regime.
The mining companies insisted that, by implementing the new mining fiscal regime, the government had abrogated the development agreements that it signed with them.
But Dr Mwansa insisted that the government had clarified with the mining companies and that the new mining taxes were not meant to stifle growth of the sector in the country.
"We still have a cordial relationship with them. Nothing has change. I think they have understood that our reasons to increase the taxes were not meant to hurt them but that we only wanted to get a fair return for our mining sector," said Dr Mwansa. "In fact, we should have been meeting them through their chamber Chamber of Mines of Zambia when we were on the Copperbelt last week for our quarterly meeting but we postponed but we should be meeting them very soon."
Tuesday, 20 May 2008
Lubinda calls handling of Vedanta/ZCI 'really sad'
Influential Patriotic Front (PF) MP Given Lubinda has claimed that Vedanta Resources is likely to reject the government’s proposal that some of its shares in KCM be offered to the public. He described the Government's handling of the ZCI case and the Competition Commission's enquiry as 'really sad'. “What is more frustrating is that government acted against the advice of the Zambia Competition Commission (ZCC) to first look at the whole transaction before Vedanta could be allowed to take over the ZCI shares,” Lubinda said. “The decision government took to invoke section 3 of the Competition and Fair Trading declared the ZCC totally irrelevant in the governance of Zambia which is really sad.”
Lubinda chairs the economic affairs parliamentary committee. A long article in the The Post includes sections of a letter from 'a shareholder' in Zambia Copper Investments (ZCI) asking the government to coordinate the approach of Vedanta’s takeover of ZCI’s 28.4 per cent shares in Konkola Copper Mines (KCM). The whole letter was previously published on this blog. President Mwanawasa’s special assistant for Press and Public Relations John Musukuma told The Post that State House had not yet received the letter.
Commenting on commerce permanent secretary Davidson Chilipamushi’s statement that the government would compel Vedanta to offload some of its shares to the Zambian public, Lubinda said it would be very difficult for the company to offload part of its 79.4 per cent shares in KCM to the Zambians after concluding its Call-Option agreement entered into with ZCI about three years ago.
Chilipamushi said the government was discussing with Vedanta Resources Plc to compel the mining company offload part of the shares purchased from ZCI to the public. He said as much as Vedanta has successfully purchased 28.4 per cent shares in KCM previously held by Bermudan registered ZCI, the government could still negotiate for a certain percentage of shareholding to be held by Zambians.
But University of Zambia (UNZA) development studies lecturer Dr Francis Chigunta expressed doubt on whether Vedanta would agree to offload some of its shares to the Zambian citizens.
Vedanta held a Call-Option Deed on the 28.4 per cent of KCM owned by ZCI whereby they agreed that the latter, upon exit, would offer its 28.4 per cent shares in KCM to the former. The mining company has since concluded the deal and US $213.85 million (approximately K739.1 billion) has been paid to ZCI for the 28.4 per cent shares. Shareholders bitterly dispute the valuation.
Lubinda chairs the economic affairs parliamentary committee. A long article in the The Post includes sections of a letter from 'a shareholder' in Zambia Copper Investments (ZCI) asking the government to coordinate the approach of Vedanta’s takeover of ZCI’s 28.4 per cent shares in Konkola Copper Mines (KCM). The whole letter was previously published on this blog. President Mwanawasa’s special assistant for Press and Public Relations John Musukuma told The Post that State House had not yet received the letter.
Commenting on commerce permanent secretary Davidson Chilipamushi’s statement that the government would compel Vedanta to offload some of its shares to the Zambian public, Lubinda said it would be very difficult for the company to offload part of its 79.4 per cent shares in KCM to the Zambians after concluding its Call-Option agreement entered into with ZCI about three years ago.
Chilipamushi said the government was discussing with Vedanta Resources Plc to compel the mining company offload part of the shares purchased from ZCI to the public. He said as much as Vedanta has successfully purchased 28.4 per cent shares in KCM previously held by Bermudan registered ZCI, the government could still negotiate for a certain percentage of shareholding to be held by Zambians.
But University of Zambia (UNZA) development studies lecturer Dr Francis Chigunta expressed doubt on whether Vedanta would agree to offload some of its shares to the Zambian citizens.
Vedanta held a Call-Option Deed on the 28.4 per cent of KCM owned by ZCI whereby they agreed that the latter, upon exit, would offer its 28.4 per cent shares in KCM to the former. The mining company has since concluded the deal and US $213.85 million (approximately K739.1 billion) has been paid to ZCI for the 28.4 per cent shares. Shareholders bitterly dispute the valuation.
Monday, 19 May 2008
Kansanshi workers win 17.5% backdated rise after government intervenes
The Post reports that Kansanshi Mining PLC has awarded its unionised workers a 17.5 percent salary increment backdated to March 2008.
The increment followed an agreement between the workers' unions and Kansanshi management.
Briefing the press at Floriana Lodge after a prolonged meeting, labour deputy minister Austin Liato said the mine had also extended the contract of service from two to five years and increased leave passage from K200,000 to K1 million.
"After government intervention, a settlement has finally been reached between the two unions and management. I want to commend the two parties for reaching a settlement because their differences would have resulted in work stoppage at the company," Liato said.
Liato urged the workers now to focus on hard work for the company to be productive thereby create wealth.
He said government was committed to promoting industrial harmony in the country as opposed to work stoppage.
And National Union for Miners and Allied Workers (NUMAW) president Mundia Sikufele urged mining companies to stop paying their workers peanuts.
"We know that when we make these demands these companies are able to pay, it is not
that we don't know their capacity because that is where we work," Sikufele said.
Sikufele said trade unions in the country would not stop advocating for good conditions of service for its members even if some companies did not want to work with unions.
The increment followed an agreement between the workers' unions and Kansanshi management.
Briefing the press at Floriana Lodge after a prolonged meeting, labour deputy minister Austin Liato said the mine had also extended the contract of service from two to five years and increased leave passage from K200,000 to K1 million.
"After government intervention, a settlement has finally been reached between the two unions and management. I want to commend the two parties for reaching a settlement because their differences would have resulted in work stoppage at the company," Liato said.
Liato urged the workers now to focus on hard work for the company to be productive thereby create wealth.
He said government was committed to promoting industrial harmony in the country as opposed to work stoppage.
And National Union for Miners and Allied Workers (NUMAW) president Mundia Sikufele urged mining companies to stop paying their workers peanuts.
"We know that when we make these demands these companies are able to pay, it is not
that we don't know their capacity because that is where we work," Sikufele said.
Sikufele said trade unions in the country would not stop advocating for good conditions of service for its members even if some companies did not want to work with unions.
Thursday, 15 May 2008
More riots and protests in Kansanshi and Chingola
The Post reports that Kansanshi mine workers on Tuesday morning staged a demonstration over delays in negotiations for new conditions of service. Talks have been going on for almost six months. Among other issues, workers want a 30 per cent salary increment across the board..
National Union for Miners and Allied Workers (NUMAW) president Mundia Sikufele told the paper, “I can confirm to you that this morning, we received a report that workers at Kansanshi Mine staged a demonstration demanding management to address them over the prolonged negotiations. We are monitoring the situation.”
The demonstration lasted about one hour. Management suggested that the demonstration targeted labour deputy minister Austin Liato who was visiting the plant in an effort to encourage the parties back to the negotiating table. “My advice to management really is for them to speed up the process and not to put the blame on the minister, he just came to reconcile the parties and it was up to management to go back to the board to report what we had agreed and not the minister,” said Sikufele.
The workers agreed to go back to work but gave management an ultimatum of today to conclude the negotiations if they don’t then workers would go on strike.
Kansanshi Mine public relations manager Godfrey Msiska said, “I can confirm that a number of workers gathered within the plant to be given an update on the negotiations and management went to address them advising them to go back to work as they await to be updated.” Msiska explained that when Liato went to chair the meeting to reconcile management and the two unions, they agreed that none of the parties was to issue statements in the press apart from Liato’s office, adding that they were still waiting for an update from his office.
Meanwhile the Times of Zambia reports a riot in Chingola by illegal miners after two of their friends were shot and wounded by Konkola Copper Mines (KCM) and Cobra Security officers. The miners were part of a large group working disused pits.
The miners mobilised themselves early in the morning and blocked the Chingola-Chililabombwe road with stones near the underbridge, stoning motorists using the road. Police fired teargas to disperse them. Copperbelt police chief, Antoneil Mutentwa confirmed both the shooting and riot by the illegal miners.He said the two who were shot were at first rushed to Nchanga North General Hospital before being referred to Kitwe Central Hospital for specialised treatment.
He said this was the second time the illegal miners were rioting. Last year on April 19, illegal miners rioted to protest against being barred access to the disused pits. Mr Mutentwa said police would continue to use force. Mr Mutentwa said KCM was chasing the illegal miners from the disused pits not because the company was losing money but on account that the Government was concerned with the number of deaths recorded as a result of the illegal mining activities. "The Ministry of Mines under its wing, the mines safety department (MSD), has warned KCM that if the company fails to keep the illegal miners away from the dangerous areas, then the company risked closure, being charged or held responsible for the deaths. As State police, we were informed of the shooting and we have made some reinforcement to supplement other security wings."
KCM communication advisor, Sam Equamor declined to comment and referred all comments to state police because the matter involved shooting of suspects. Meanwhile, Citizens for a Better Environment executive director, Peter Sinkamba said the directive by MSD on KCM to bar the illegal miners was placing the company in an awkward position because the company was primarily involved in copper production. Mr Sinkamba said there was need for the Government to expedite the handing-over of the disused pits in Chingola to illegal miners to reduce deaths.
National Union for Miners and Allied Workers (NUMAW) president Mundia Sikufele told the paper, “I can confirm to you that this morning, we received a report that workers at Kansanshi Mine staged a demonstration demanding management to address them over the prolonged negotiations. We are monitoring the situation.”
The demonstration lasted about one hour. Management suggested that the demonstration targeted labour deputy minister Austin Liato who was visiting the plant in an effort to encourage the parties back to the negotiating table. “My advice to management really is for them to speed up the process and not to put the blame on the minister, he just came to reconcile the parties and it was up to management to go back to the board to report what we had agreed and not the minister,” said Sikufele.
The workers agreed to go back to work but gave management an ultimatum of today to conclude the negotiations if they don’t then workers would go on strike.
Kansanshi Mine public relations manager Godfrey Msiska said, “I can confirm that a number of workers gathered within the plant to be given an update on the negotiations and management went to address them advising them to go back to work as they await to be updated.” Msiska explained that when Liato went to chair the meeting to reconcile management and the two unions, they agreed that none of the parties was to issue statements in the press apart from Liato’s office, adding that they were still waiting for an update from his office.
Meanwhile the Times of Zambia reports a riot in Chingola by illegal miners after two of their friends were shot and wounded by Konkola Copper Mines (KCM) and Cobra Security officers. The miners were part of a large group working disused pits.
The miners mobilised themselves early in the morning and blocked the Chingola-Chililabombwe road with stones near the underbridge, stoning motorists using the road. Police fired teargas to disperse them. Copperbelt police chief, Antoneil Mutentwa confirmed both the shooting and riot by the illegal miners.He said the two who were shot were at first rushed to Nchanga North General Hospital before being referred to Kitwe Central Hospital for specialised treatment.
He said this was the second time the illegal miners were rioting. Last year on April 19, illegal miners rioted to protest against being barred access to the disused pits. Mr Mutentwa said police would continue to use force. Mr Mutentwa said KCM was chasing the illegal miners from the disused pits not because the company was losing money but on account that the Government was concerned with the number of deaths recorded as a result of the illegal mining activities. "The Ministry of Mines under its wing, the mines safety department (MSD), has warned KCM that if the company fails to keep the illegal miners away from the dangerous areas, then the company risked closure, being charged or held responsible for the deaths. As State police, we were informed of the shooting and we have made some reinforcement to supplement other security wings."
KCM communication advisor, Sam Equamor declined to comment and referred all comments to state police because the matter involved shooting of suspects. Meanwhile, Citizens for a Better Environment executive director, Peter Sinkamba said the directive by MSD on KCM to bar the illegal miners was placing the company in an awkward position because the company was primarily involved in copper production. Mr Sinkamba said there was need for the Government to expedite the handing-over of the disused pits in Chingola to illegal miners to reduce deaths.
Wednesday, 14 May 2008
More sympathy for First Quantum
Does anyone remember the discussions in February, in Parliament, when Jeremy Allen from First Quantum Minerals threatened that investors would stop developing the Zambian copper industry if new taxes were imposed unilaterally? Have a look at an old blog here.
I was just wondering, because Bloomberg today report that first-quarter profits for First Quantum more than doubled because of higher output and prices. Net income climbed to $182 million, or $2.65 a share, from $78.3 million, or $1.14, a year earlier. Net sales nearly doubled to $512 million. Making that kind of money it will be interesting to keep an eye on second quarter reports (i.e. after the new reguime kicks in)
The decisive factor in profits is, of course, not the local tax regime, which remains highly competitive. Rather, copper on the London Metal Exchange was 30 percent higher, on average, in the first quarter compared with a year earlier, and reached a record $8,880 a metric ton on April 17. First Quantum's total copper output may rise 32 percent to 310,000 metric tons in 2008, from 226,693 tons in 2007, Newall said on Jan. 22.
That estimate was higher than the 300,000 tons previously forecast because of better-than-expected performance at the Kansanshi mine in Zambia. Kansanshi yielded 52,303 tons in the first quarter, accounting for 69 percent of the company's total copper output in the period. Commercial copper production at First Quantum's Frontier mine in Congo, which began in November, will be about 84,000 metric tons in 2008, the company said. The earnings results were released after the close of regular trading on the Toronto Stock Exchange, where First Quantum fell 87 cents to C$91.35 at 4:17 p.m. The shares have risen 7.4 percent this year.
I was just wondering, because Bloomberg today report that first-quarter profits for First Quantum more than doubled because of higher output and prices. Net income climbed to $182 million, or $2.65 a share, from $78.3 million, or $1.14, a year earlier. Net sales nearly doubled to $512 million. Making that kind of money it will be interesting to keep an eye on second quarter reports (i.e. after the new reguime kicks in)
The decisive factor in profits is, of course, not the local tax regime, which remains highly competitive. Rather, copper on the London Metal Exchange was 30 percent higher, on average, in the first quarter compared with a year earlier, and reached a record $8,880 a metric ton on April 17. First Quantum's total copper output may rise 32 percent to 310,000 metric tons in 2008, from 226,693 tons in 2007, Newall said on Jan. 22.
That estimate was higher than the 300,000 tons previously forecast because of better-than-expected performance at the Kansanshi mine in Zambia. Kansanshi yielded 52,303 tons in the first quarter, accounting for 69 percent of the company's total copper output in the period. Commercial copper production at First Quantum's Frontier mine in Congo, which began in November, will be about 84,000 metric tons in 2008, the company said. The earnings results were released after the close of regular trading on the Toronto Stock Exchange, where First Quantum fell 87 cents to C$91.35 at 4:17 p.m. The shares have risen 7.4 percent this year.
Tuesday, 13 May 2008
Workers at sharp end of the boom - CCS, Sino Metals, KCM accused
Mineworkers Union of Zambia (MUZ) general secretary Osward Munyenyembe also expressed concern over the accident. He said his union had instituted investigations into the matter and that after investigations were concluded it would issue a comprehensive statement.
Meanwhile Munyenyembe disclosed that the union intended to take to court some mining firms that had failed to sign the recognition agreements. "Workers have applied to join the union but their management cannot accept to sign the recognition agreement with us," he said. He said among the companies that had refused to sign the recognition agreement was Chambeshi Copper Smelter. "We have 90 workers at Chambeshi Copper Smelter and 100 at Sino metals who have applied to join us but management has refused to accept," he said. Munyenyembe said by Friday, the union and management were still discussing the matter. Munyenyembe said it was unfortunate that workers were denied a chance to belong to the union of their choice when their conditions of service were generally pathetic.
Mine taxes and share prices
The Chamber of Mines told the Zambian Parliament that introducing new taxes would likely cause a recession, job losses and disinvestment as 'investor confidence' in the country collapsed. This blog called that talk what it was: bull.
So, six weeks into the new tax regime, who still thinks the Zambian mining taxes will have a devastating effect on investment, share prices and profitability of copper mining in the country? Not the international business community, that's for sure. As Moneyweb reports, share prices of the copper mining companies (except ZCI, and we know why that is) are going through the roof. As you can see, poor old Equinox, who just can't stop whining, are really feeling the pain of the continued copper boom, with a 24% hike in share price! The article notes:
"Across the border, the Zambian government remains intent on extracting more taxes from its mainly copper mining sector, also creating a perception that investments in the country have been sold off. Equinox (EQN CN, C$5,77), with interests exclusively in Zambian copper (with a significant potential uranium byproduct), has posted a price gain of 24% in the past three weeks. First Quantum (FM CN C$91,89), which operates in both Zambia and the DRC, has posted a 22% increase in its stock price over the past three weeks. The Metorex stock price has declined 16% in the past three weeks. Metorex holds significant interests in both the DRC and Zambia."
Equinox still think they are special!
Blogger Cho provides a link to the new Equinox presentation on their massive Lumwana project. The company apparently still think they are special and won't have to pay the new ining taxes because uniquely their Development Agreement is not subject to changes in Zambian law. I don't get it. The legislation is through. It's available for public inspection. The idea that it only applies selectively appears a blatant breach of the rule of law. And yet this company continually insists the laws of the land don't apply to them. There has been, as far as I can tell, no official comment on this issue from Zambian politicians or officials to suggest we are dealing with anything but wishful thinking from Equinox. There's an interesting discussion on Cho's blog about what Lumwana should or should not be asked to pay. But I can't even for the moment establish the facts. I assume the law applies and if they fail to pay the first tax bill that comes through, will face the consequences like anyone else refusing to pay their taxes. Any ideas readers?
Wednesday, 7 May 2008
Govt wants Vedanta to offload shares
I post this story, which is long and technical, exactly as is, from The Post. The issue is well discussed on this site, so I won't offer any comment for the moment other than to say this looks like a 'political clarification', after the fact of whether the ZCC was leant on by the Government or decided for itself (having been leant on?).
++ THE government is discussing with Vedanta Resources Plc to compel the mining company to offload part of the shares purchased from Zambia Copper Investments (ZCI) to the public, commerce permanent secretary Davidson Chilipamushi has said.
And Chilipamushi has said the Zambia Competition Commission (ZCC) voluntarily withdrew from handling the Vedanta Call-Option Deed as a result of the legal technicalities involved in the transaction.
Chilipamushi said as much as Vedanta has successfully purchased 28.4 per cent shares in Konkola Copper mines (KCM) previously held by Bermudan registered ZCI, the government could still negotiate for a certain percentage of shareholding to be held by Zambians.
“Government is closely monitoring what is happening although the 28.4 per cent additional shares bought by Vedanta did not belong to the state. The interest of government is to ensure the transfer of wealth to the Zambians through shareholding in these major companies,” Chilipamushi said. “We are in discussion with Vedanta Resources so that they can sale some of the shares to the Zambians.”
But University of Zambia (UNZA) Development Studies lecturer Dr Francis Chigunta expressed doubts on whether Vedanta would agree to offload some of its shares to Zambians.
“Considering Zambia’s attempt to promote economic empowerment, Vedanta should offload shares on LuSE so that Zambians can participate in KCM’s shareholding. I however have doubts whether Vedanta will do that because the company fought aggressively to increase its shareholding in KCM,” Dr Chigunta said.
“Vedanta is obviously happy. It has struck a good deal considering that the price of copper is very high and it is projected to remain like that for quite some time, and so the company will make good money. There will be reluctance for Vedanta to offload shares.
It’s a bit of a challenge for government to attempt to persuade Vedanta to offload shares to the public.”
And Chilipamushi said the Ministry of Commerce, Trade and Industry was working at a programme that would compel each mining company to offload part of its shares to the Zambian public before accessing any incentives from the government.
“We have had a bad experience as the country in terms of investments that have been coming in Zambia. For example, those that bought off enterprises like ZCBC just left after making money in Zambia.
Others came with one suitcase and went back with suitcases after making as much profits as they could from our resources,” Chilipamushi said. “What the problem has been is that there is no local participation in most of these investments. That is the reason why government’s immediate plan is to have local participation in the running of foreign companies so that when they decide to leave, Zambians can take over the operations.
We are trying to create an incentive scheme where if you meet certain requirements such as local participation in the company, corporate social responsibility programmes and giving top positions to some Zambians, then such a company will have an opportunity to do business with the government, being the largest player in the market.”
Chilipamushi said the ministry was therefore considering the amendment of the ZDA Act, Empowerment Act and Companies Act so that the proposed initiative could be included in the three pieces of legislation.
Vedanta Resources Plc has concluded the purchase of 28.4 per cent of ZCI shares in KCM through a “Call-Option Deed” entered into by the two companies a couple of years ago. Vedanta held a Call-Option Deed on the 28.4 per cent shares of KCM owned by ZCI whereby they agreed that the latter, upon exit, would offer its 28.4 per cent shares in KCM to the former.
The mining company has since concluded the deal and US $213.85 million (approximately K739.1 billion) has been paid to ZCI for the 28.4 per cent shares, as assessed by Rothschild in August 2005.
Rothschild evaluated 100 per cent shares of KCM at US$750 million – a move that most shareholders and concerned Zambian citizens opposed, saying Vedanta needed to pay more for the shares in question.
South Africa-based investment advisors, Southern Charter Wealth Management (Pty) Ltd said the US $213.85 million paid by Vedanta for the 28.4 per cent ZCI shares in KCM would rob shareholders and Zambian citizens of millions of dollars in value.
Some ZCI shareholders insist that Vedanta bought the 28.4 per cent shares very cheaply as it did with the 51 per cent shares of KCM stock in November 2004 for a mere US $48 million (approximately K166.5 billion).
And Chilipamushi said ZCC had not been directed to discontinue the handling of the Vedanta case, but willingly gave up in view of the legal technicalities involved in the “Call-Option Deed.”
Vedanta and ZCI concluded the deal after government’s invocation of section 3(f) of the Competition and Fair Trading Act under the Zambia Competition Commission to allow the latter become a majority shareholder in one of Zambia’s huge mining operations.
Section 3 (f) of the Competition and Fair Trading Act CAP 417, states that "nothing in this Act shall apply to...activities expressly approved or required under a treaty or agreement to which the Republic of Zambia is a party."
The government’s approval of Vedanta’s bid to takeover ZCI’s 28.4 per cent shares in KCM comes at a time when Parliament is debating the percentage of foreign ownership of mining rights, proposing a shareholding of not more than 49 per cent for an individual entity.
++
And Chilipamushi has said the Zambia Competition Commission (ZCC) voluntarily withdrew from handling the Vedanta Call-Option Deed as a result of the legal technicalities involved in the transaction.
Chilipamushi said as much as Vedanta has successfully purchased 28.4 per cent shares in Konkola Copper mines (KCM) previously held by Bermudan registered ZCI, the government could still negotiate for a certain percentage of shareholding to be held by Zambians.
“Government is closely monitoring what is happening although the 28.4 per cent additional shares bought by Vedanta did not belong to the state. The interest of government is to ensure the transfer of wealth to the Zambians through shareholding in these major companies,” Chilipamushi said. “We are in discussion with Vedanta Resources so that they can sale some of the shares to the Zambians.”
But University of Zambia (UNZA) Development Studies lecturer Dr Francis Chigunta expressed doubts on whether Vedanta would agree to offload some of its shares to Zambians.
“Considering Zambia’s attempt to promote economic empowerment, Vedanta should offload shares on LuSE so that Zambians can participate in KCM’s shareholding. I however have doubts whether Vedanta will do that because the company fought aggressively to increase its shareholding in KCM,” Dr Chigunta said.
“Vedanta is obviously happy. It has struck a good deal considering that the price of copper is very high and it is projected to remain like that for quite some time, and so the company will make good money. There will be reluctance for Vedanta to offload shares.
It’s a bit of a challenge for government to attempt to persuade Vedanta to offload shares to the public.”
And Chilipamushi said the Ministry of Commerce, Trade and Industry was working at a programme that would compel each mining company to offload part of its shares to the Zambian public before accessing any incentives from the government.
“We have had a bad experience as the country in terms of investments that have been coming in Zambia. For example, those that bought off enterprises like ZCBC just left after making money in Zambia.
Others came with one suitcase and went back with suitcases after making as much profits as they could from our resources,” Chilipamushi said. “What the problem has been is that there is no local participation in most of these investments. That is the reason why government’s immediate plan is to have local participation in the running of foreign companies so that when they decide to leave, Zambians can take over the operations.
We are trying to create an incentive scheme where if you meet certain requirements such as local participation in the company, corporate social responsibility programmes and giving top positions to some Zambians, then such a company will have an opportunity to do business with the government, being the largest player in the market.”
Chilipamushi said the ministry was therefore considering the amendment of the ZDA Act, Empowerment Act and Companies Act so that the proposed initiative could be included in the three pieces of legislation.
Vedanta Resources Plc has concluded the purchase of 28.4 per cent of ZCI shares in KCM through a “Call-Option Deed” entered into by the two companies a couple of years ago. Vedanta held a Call-Option Deed on the 28.4 per cent shares of KCM owned by ZCI whereby they agreed that the latter, upon exit, would offer its 28.4 per cent shares in KCM to the former.
The mining company has since concluded the deal and US $213.85 million (approximately K739.1 billion) has been paid to ZCI for the 28.4 per cent shares, as assessed by Rothschild in August 2005.
Rothschild evaluated 100 per cent shares of KCM at US$750 million – a move that most shareholders and concerned Zambian citizens opposed, saying Vedanta needed to pay more for the shares in question.
South Africa-based investment advisors, Southern Charter Wealth Management (Pty) Ltd said the US $213.85 million paid by Vedanta for the 28.4 per cent ZCI shares in KCM would rob shareholders and Zambian citizens of millions of dollars in value.
Some ZCI shareholders insist that Vedanta bought the 28.4 per cent shares very cheaply as it did with the 51 per cent shares of KCM stock in November 2004 for a mere US $48 million (approximately K166.5 billion).
And Chilipamushi said ZCC had not been directed to discontinue the handling of the Vedanta case, but willingly gave up in view of the legal technicalities involved in the “Call-Option Deed.”
Vedanta and ZCI concluded the deal after government’s invocation of section 3(f) of the Competition and Fair Trading Act under the Zambia Competition Commission to allow the latter become a majority shareholder in one of Zambia’s huge mining operations.
Section 3 (f) of the Competition and Fair Trading Act CAP 417, states that "nothing in this Act shall apply to...activities expressly approved or required under a treaty or agreement to which the Republic of Zambia is a party."
The government’s approval of Vedanta’s bid to takeover ZCI’s 28.4 per cent shares in KCM comes at a time when Parliament is debating the percentage of foreign ownership of mining rights, proposing a shareholding of not more than 49 per cent for an individual entity.
Friday, 2 May 2008
Bizarre relations between MMD Government and Chinese investors tell us why we need Labour Law reform?
A story in the government-owned Times of Zambia today unwittingly reveals the state of relations between labour, investors and the state in Zambia today. In a story ostensibly about the refusal of the Government to withdraw the controversial Industrial and Labour Relations Amendment Bill, the Times reports, without comment, a frankly bizarre statement from President Mwanawasa: "Do not be surprised if we fire ringleaders. Ringleaders at the Chambishi were fired and I have directed that they should not be re-engaged."
WHAT?!
1) What power does the state believe it has to 'fire' the leaders of independent trade unions?
2) What is the President talking about in relation to Chambishi? The firm involved is a private foreign investor, with links to the Chinese state, investing in Zambia, which prides itself on being a 'liberalised' economy. Did the company or the state fire the striking workers? What is the role of the state in negotiations between labour and the company?
This sense, that labour unions can be heavily interfered with by the state through legal harrassment or the manipulation of the internal democracy of the unions is part of Zambia's history as a one party state, but is surely something that should be left behind in the past. The fact that it apparently has not been helps explain the anxiety of union leaders about the Government sponsored amendments to the Bill.
The Post and the Daily Mail also reports the President reaction to Zambia Congress of Trade Unions (ZCTU) president, Leonard Hikaumba's appeal for the Government to withdraw the proposed amendments from Parliament. The Mail reports, Mwanwasa saying “We are not going to withdraw the amendment Bill because we have consulted all stakeholders. Mr (Leonard) Hikaumba, you know the fact that we have consulted you,” President Mwanawasa to the president of the Zambia Congress of Trade Unions (ZCTU) who had earlier spoken against the Bill. “We have consulted you but you want to make it difficult for Government. And you workers don’t ever say we will go on strike if the Bill is not withdrawn. Otherwise, you will be fired,” he added.
The Lusaka Times covers the same story. They note that President Mwanawasa "warned mining companies that they will fail to acquire the needed profits if they deny the workers better working conditions. He said even after the newly introduced mineral taxes that mining companies would still a lot from their investment. He reiterated that Zambians taxes in the mining sectors were not high on average as compared to other mining countries."
WHAT?!
1) What power does the state believe it has to 'fire' the leaders of independent trade unions?
2) What is the President talking about in relation to Chambishi? The firm involved is a private foreign investor, with links to the Chinese state, investing in Zambia, which prides itself on being a 'liberalised' economy. Did the company or the state fire the striking workers? What is the role of the state in negotiations between labour and the company?
This sense, that labour unions can be heavily interfered with by the state through legal harrassment or the manipulation of the internal democracy of the unions is part of Zambia's history as a one party state, but is surely something that should be left behind in the past. The fact that it apparently has not been helps explain the anxiety of union leaders about the Government sponsored amendments to the Bill.
The Post and the Daily Mail also reports the President reaction to Zambia Congress of Trade Unions (ZCTU) president, Leonard Hikaumba's appeal for the Government to withdraw the proposed amendments from Parliament. The Mail reports, Mwanwasa saying “We are not going to withdraw the amendment Bill because we have consulted all stakeholders. Mr (Leonard) Hikaumba, you know the fact that we have consulted you,” President Mwanawasa to the president of the Zambia Congress of Trade Unions (ZCTU) who had earlier spoken against the Bill. “We have consulted you but you want to make it difficult for Government. And you workers don’t ever say we will go on strike if the Bill is not withdrawn. Otherwise, you will be fired,” he added.
The Lusaka Times covers the same story. They note that President Mwanawasa "warned mining companies that they will fail to acquire the needed profits if they deny the workers better working conditions. He said even after the newly introduced mineral taxes that mining companies would still a lot from their investment. He reiterated that Zambians taxes in the mining sectors were not high on average as compared to other mining countries."
In a second story the Lusaka Times report that Government has finalized the proposed national social security policy for the labour force in the country as a measure to provide adequate social protection.
Mines and Minerals development deputy minister Maxwell Mwale said the policy is aimed at creating a comprehensive social security system for workers. He also said that while Government had attracted new investment, that was creating jobs, in addressing the challenges arising from the jobs created government has launched the Zambia decent work country programme as an urgent and necessary step to ensure that the jobs are decent. He said government will also improve its capacity to enforce the labour laws that protect workers rights and occupational health and safety.
Zambia Congress of Trade Union trustee M’tumbi Goma said the economic growth that government is managing now should be acknowledged by respecting worker’s rights and creation of decent work. Mr Goma said the increased demand for labour market flexibility by employers has weakened collective bargaining structures and it has lead to poor working conditions and vulnerability of workers. He challenged workers to fight and strive to ensure that better legislation and other labour market laws that will bring dignity and respect for workers are adhered to by employers.Thursday, 1 May 2008
Workers’ Rights under discussion
Worker’s Day seems a good time to think about the hopes for a solution to the long-running problems of workers’ rights in Zambia. As previously discussed, legislation passing through Parliament has been heavily criticized by trade unions for failing to tackle the biggest problems with the current system.
The Daily Mail reports that both main opposition parties in Zambia, the UPND and the Patriotic Front have said they will vote against the Government’s proposals until the state brings the unions on board. UPND vice-president Richard Kapita expressed concerns about casualisation, said Government should take a more proactive role in labour issues to ensure that workers are not abused and called on the Ministry of Labour and Social Security (MLSS) to widely consult stakeholders before amending the Industrial and Labour Relations Act. “As we celebrate this year’s Labour Day, it is sad that unemployment levels have continued to surge more and more among our people, especially the youths who are now roaming the streets without employment while those in employment no longer have satisfaction of their labour,” Mr Kapita said.
The Patriotic Front (PF) has also said it would not support new amendments to the Industrial and Labour Relations Act until a consensus was reached. PF general secretary Edward Mumbi said his party would only support legislation and political changes aimed at improving the welfare of the Zambian workers. “The Party joins Zambian workers and their representatives in wishing for prosperity and a fairer share of the great wealth currently being extracted from the country’s natural resources.”
The editorial in the Government-run Times of Zambia on the other hand, reports comments from Labour and Social Security Minister, Ronald Mukuma. "Zambia needs job creation, and the Government is determined to ensure that these jobs are essentially decent; providing rights at work, social protection and social dialogue," said Mr Mukuma in his foreword in the "Decent Work Country Programme" DWCP document for Zambia developed by the Government in conjunction with the United Nations International Labour Organisation, ILO, Lusaka Office.
The editorial notes that the designation of the MLSS as an economic ministry as opposed to a social ministry, has effectively brought labour and employment issues to centre stage, and the ministry has garnered an increased share of the Budget to enable it address the various challenges in the employment and labour sector. During 2006 to 2007, the paaper claims there has been considerable evidence of an enhanced capacity within the MLSS including doubling of its team of labour inspectors and procurement of a new fleet of vehicles to undertake inspections. “We have since carried out a total of 3,500 inspections countrywide during the past one year following the acquisition of vehicles and recruitment of 20 labour and factory inspectors. This has brought to 91 the total number of inspectors we have deployed countrywide,” said ministry of Labour ad Social Security Permanent Secretary, Ngosa Chisupa. Mr Chisupa said the Government has ratified 39 of International Labour Conventions which are currently in force. He said that the Government will progressively domesticate the Conventions in the revised labour laws when they are passed by Parliament. "We have finished the proposed amendments to the labour laws and these will be tabled in Parliament when it resumes sitting in January, 2008. We are confident that when passed, the laws will provide a conducive climate for labour to play its maximum and rightful role in the economic development of Zambia," said Mr Chisupa.
The Daily Mail reports that both main opposition parties in Zambia, the UPND and the Patriotic Front have said they will vote against the Government’s proposals until the state brings the unions on board. UPND vice-president Richard Kapita expressed concerns about casualisation, said Government should take a more proactive role in labour issues to ensure that workers are not abused and called on the Ministry of Labour and Social Security (MLSS) to widely consult stakeholders before amending the Industrial and Labour Relations Act. “As we celebrate this year’s Labour Day, it is sad that unemployment levels have continued to surge more and more among our people, especially the youths who are now roaming the streets without employment while those in employment no longer have satisfaction of their labour,” Mr Kapita said.
The Patriotic Front (PF) has also said it would not support new amendments to the Industrial and Labour Relations Act until a consensus was reached. PF general secretary Edward Mumbi said his party would only support legislation and political changes aimed at improving the welfare of the Zambian workers. “The Party joins Zambian workers and their representatives in wishing for prosperity and a fairer share of the great wealth currently being extracted from the country’s natural resources.”
The editorial in the Government-run Times of Zambia on the other hand, reports comments from Labour and Social Security Minister, Ronald Mukuma. "Zambia needs job creation, and the Government is determined to ensure that these jobs are essentially decent; providing rights at work, social protection and social dialogue," said Mr Mukuma in his foreword in the "Decent Work Country Programme" DWCP document for Zambia developed by the Government in conjunction with the United Nations International Labour Organisation, ILO, Lusaka Office.
The editorial notes that the designation of the MLSS as an economic ministry as opposed to a social ministry, has effectively brought labour and employment issues to centre stage, and the ministry has garnered an increased share of the Budget to enable it address the various challenges in the employment and labour sector. During 2006 to 2007, the paaper claims there has been considerable evidence of an enhanced capacity within the MLSS including doubling of its team of labour inspectors and procurement of a new fleet of vehicles to undertake inspections. “We have since carried out a total of 3,500 inspections countrywide during the past one year following the acquisition of vehicles and recruitment of 20 labour and factory inspectors. This has brought to 91 the total number of inspectors we have deployed countrywide,” said ministry of Labour ad Social Security Permanent Secretary, Ngosa Chisupa. Mr Chisupa said the Government has ratified 39 of International Labour Conventions which are currently in force. He said that the Government will progressively domesticate the Conventions in the revised labour laws when they are passed by Parliament. "We have finished the proposed amendments to the labour laws and these will be tabled in Parliament when it resumes sitting in January, 2008. We are confident that when passed, the laws will provide a conducive climate for labour to play its maximum and rightful role in the economic development of Zambia," said Mr Chisupa.
Is the mining sector healthy?
A number of stories over the past few days raise the question, is the mining sector healthy? One question of interest, particularly for those of us who advocated for greater taxation and regulation of the sector is whether the new tax regime had an impact on a sector previously described as 'booming'? Even if we worried about the distribution of benefits from that boom, the continued general health of the sector is clearly a precondition for significant benefits to flow to workers, communities and the Zambian state. Obviously, mining companies don’t like paying taxes that would otherwise increase their profits. Their standard propaganda line is that the costs incurred do not come out of profits and dividends to shareholders, but out of investments, and thus damage job creation and the wider economy. So, should we accept that argument?
The Daily Mail reports claims from the Chamber of Mines, the industry body representing multinational mine corporations in Zambia, that some of their members have put on hold projects involving considerable capital outlay pending assessment of their operations to take into account the new mine taxes. A trustworthy correspondent also assures me the mines investors have told him they have hired attorneys and were waiting until after the taxes had been imposed to strike a legal blow, judging that only once it had happened the contracts had in fact been breached. I remain sceptical any of them will calculate that a hostil relationship with the state is a price worth paying for an uncertain legal process. Still, most of these projects seem to be ‘pending review’, which may simply mean the firms are still trying to milk maximum pressure on the government hoping for a late concession. At the same time, the Mail quotes Mufulira Chamber of Mines president, Shadreck Musozya, saying that that although capital projects were under consideration, nothing much had changed. It is unsurprising that firms continually calculate likely outlays and profitability ahead of making significant investments. Of course the questions they ask themselves are not answered simply in relation to tax.
So how else could we assess the health of the sector? The Lusaka Times notes that Zambia earned $886 million in copper exports in the first quarter of 2008. This represents an increase of 3.2 per cent compared to $858 million earned in the fourth quarter of 2007. Cobalt export earnings increased to $108 million from $79 million in the same period. This represents an increase of 36.9 percent. In each case, these increases were achieved with lower total output from the mines as a result of increasing copper prices. However, Cho visits these statistics in his blog, questioning the price models used by the Bank of Zambia. However, these statistics are for the period before the new taxes kicked in so they don’t tell us much either.
We can see, from the Daily Mail that Equinox Minerals Limited, one of the companies that has suggested the government’s unilateral imposition of taxes did untold harm to their faith in the policy environment, and would weaken future investment, has projected to spend over US$232.2 million on the Lumwana uranium project following a postive outcome of its uranium feasibility study. The study told them they would make a high return on investment. The ‘policy environment’ suddenly looked less scary, I guess. The company will this month submit an Environmental Impact Assessment (EIA) report to the Environmental Council of Zambia (ECZ) on the uranium project. There's clearly plenty of good news around with stories of new Chinese and Indian investements flowing frequently.
On the other hand, The Post reports that dividends declared by mining companies to ZCCM-IH in the second half of last year reduced to K18.180 billion compared to K26. 53 billion in the corresponding period the previous year. Again this is before the taxes kicked in.
ZCCM-IH company secretary William Musama attributed the rise in turnover mainly due to the increase in metal price participation income of K70. 757 billion, of which K12. 089 billion was for the period of six months to December 31, 2006. “However, this higher income was dampened by the reduction in dividends to the group for the period of December 31 2007 compared to K26. 53 billion in the corresponding period of December 2006,” Musama announced. “The reduction arose from one of the associate companies declaring a lower interim dividend in the period to December 31, 2007 compared to the period to December 31, 2006.”
Musama also announced that ZCCM-IH reduced its operating expenditure to K54. 73 billion for the half year ended December 3, 2007 compared to K70. 562 billion for the corresponding previous year. He attributed the reduction to what he termed ZCCM-IH’s operational efficiency. “As a result of the above, an operating profit of K54. 173 billion for half year ended December 31, 2007 compared to K70. 562 billion for the corresponding period to December 31, 2006,” stated Musama.
The Daily Mail reports claims from the Chamber of Mines, the industry body representing multinational mine corporations in Zambia, that some of their members have put on hold projects involving considerable capital outlay pending assessment of their operations to take into account the new mine taxes. A trustworthy correspondent also assures me the mines investors have told him they have hired attorneys and were waiting until after the taxes had been imposed to strike a legal blow, judging that only once it had happened the contracts had in fact been breached. I remain sceptical any of them will calculate that a hostil relationship with the state is a price worth paying for an uncertain legal process. Still, most of these projects seem to be ‘pending review’, which may simply mean the firms are still trying to milk maximum pressure on the government hoping for a late concession. At the same time, the Mail quotes Mufulira Chamber of Mines president, Shadreck Musozya, saying that that although capital projects were under consideration, nothing much had changed. It is unsurprising that firms continually calculate likely outlays and profitability ahead of making significant investments. Of course the questions they ask themselves are not answered simply in relation to tax.
So how else could we assess the health of the sector? The Lusaka Times notes that Zambia earned $886 million in copper exports in the first quarter of 2008. This represents an increase of 3.2 per cent compared to $858 million earned in the fourth quarter of 2007. Cobalt export earnings increased to $108 million from $79 million in the same period. This represents an increase of 36.9 percent. In each case, these increases were achieved with lower total output from the mines as a result of increasing copper prices. However, Cho visits these statistics in his blog, questioning the price models used by the Bank of Zambia. However, these statistics are for the period before the new taxes kicked in so they don’t tell us much either.
We can see, from the Daily Mail that Equinox Minerals Limited, one of the companies that has suggested the government’s unilateral imposition of taxes did untold harm to their faith in the policy environment, and would weaken future investment, has projected to spend over US$232.2 million on the Lumwana uranium project following a postive outcome of its uranium feasibility study. The study told them they would make a high return on investment. The ‘policy environment’ suddenly looked less scary, I guess. The company will this month submit an Environmental Impact Assessment (EIA) report to the Environmental Council of Zambia (ECZ) on the uranium project. There's clearly plenty of good news around with stories of new Chinese and Indian investements flowing frequently.
On the other hand, The Post reports that dividends declared by mining companies to ZCCM-IH in the second half of last year reduced to K18.180 billion compared to K26. 53 billion in the corresponding period the previous year. Again this is before the taxes kicked in.
ZCCM-IH company secretary William Musama attributed the rise in turnover mainly due to the increase in metal price participation income of K70. 757 billion, of which K12. 089 billion was for the period of six months to December 31, 2006. “However, this higher income was dampened by the reduction in dividends to the group for the period of December 31 2007 compared to K26. 53 billion in the corresponding period of December 2006,” Musama announced. “The reduction arose from one of the associate companies declaring a lower interim dividend in the period to December 31, 2007 compared to the period to December 31, 2006.”
Musama also announced that ZCCM-IH reduced its operating expenditure to K54. 73 billion for the half year ended December 3, 2007 compared to K70. 562 billion for the corresponding previous year. He attributed the reduction to what he termed ZCCM-IH’s operational efficiency. “As a result of the above, an operating profit of K54. 173 billion for half year ended December 31, 2007 compared to K70. 562 billion for the corresponding period to December 31, 2006,” stated Musama.
ZCI shareholders suggest KCM Vedanta deal 'illegal'
A lengthy report in The Post includes criticism from shareholders in ZCI about the sale of the company’s 28.4 per cent stake in KCM to Vedanta Resources under a 'call option' negotiated by KCM when it made its initial investment.
The paper quotes South Africa-based investment advisors Southern Charter Wealth Management (Pty) Ltd, who have advised a large client base to invest in ZCI in the past, and whose customers are disappointed at what they perceive as the low price of the sale. The firm said the US $213 million paid by Vedanta for the stake amounted to, “robbing Zambia of control of its most prized copper deposits for at least thirty years to come.”
The deal was concluded after the government removed the competition commission – from handling the sale. The government claimed it had the power to end the Competition Commission's enquiry, invoking section 3(f) of the Competition and Fair Trading Act under the Zambia Competition Commission to allow the latter become a majority shareholder in one of Zambia’s huge mining operations. Section 3 (f) of the Competition and Fair Trading Act CAP 417, states that "nothing in this Act shall apply to...activities expressly approved or required under a treaty or agreement to which the Republic of Zambia is a party."
Southern Charter Wealth Management director Bruce Barclay claimed the Government did not follow appropriate procedure and that the deal was illegal as the parties involved did not gain the approval of the Zambia Competition Commission prior to entering negotiations. “It is with great distress and disappointment that we learn that the government of Zambia deemed it necessary to invoke "section 3(f) of the Zambian Competition and Fair Trading Act" and remove the jurisdiction of the Zambian Competition Commission over the transaction between Vedanta Plc and ZCI Ltd,” Barclay said. “Control of KCM has fallen into the hands of foreign investors and thereby ensures the current loss of millions if not billions of US dollars in value to Zambia, her citizens and ZCI Ltd shareholders. Despite our opinion, clearly it was in the government’s opinion that the greater good of Zambia would be served by ensuring the deal went through and therefore invoked section 3 (f) of the Zambian Competition and Fair Trading Act.”
“We are therefore mandated to act on behalf of an accumulated shareholding in that company of approximately 800,000 shares,” Barclay said. “We, as investment advisors to a number of ZCI Ltd shareholders, including ZCI's single biggest individual shareholder, will be convening a meeting to hear from them what next course of action, if any, they wish us to take in respect of this transaction. The deal may be concluded but the board’s responsibility to its shareholders and for this transaction in our opinion is not legal and it will be our advice based on our opinion that the board of ZCI ltd has failed its shareholders.”
Barclay questioned the invocation of section 3 (f) of the act, long after commencement of the transaction. “How come this section 3(f) of this act only comes to light at the dying hours of the transaction that has taken in the region of two years to conclude and only when the ZCC withdraws its approval of the transaction placing the transaction in jeopardy?” Barclay asked. “How is it that Vedanta, KCM, ZCI and GRZ were not aware of this act from the outset? If they were, then why even approach the ZCC for approval? In fact what was the ZCC getting involved for in the first instance causing further delays to citizens and shareholders and frustrating an already extremely frustrated transaction? Is it not worth questioning why KCM (essentially Vedanta) is the only mine to come out in support of the new controversial mining tax just prior to the invocation of this Act?”
And the shareholders, in their letters to the ZCI board and made available to the Business Post, have continued to oppose the purchase of ZCI’s 28.4 per cent shares in KCM by Vedanta Resources Plc even after the conclusion of the deal. They said the transaction regarding the sale of ZCI shares in KCM was absolutely against the law, considering that the ZCC was not consulted in the initial stages of the “call-option deed” between Vedanta and ZCI in 2004... In our opinion, the lawyers slipped up in November 2004 when this scheme was contemplated, by not getting the approval of the ZCC prior to signing the option contract because theoretically it is unable to be completed without ZCC’s approval,” stated the shareholders. “It is in our opinion that the board of ZCI were well informed of the status of the transaction at all times, including knowing that the transaction was illegal in terms of the Zambian Competition Commission rules and regulations who did have jurisdiction over this deal yet the board chose to remain silent and inactive in this regard and thereby, in our opinion, are responsible for perverting the ends of justice. It is time for us as shareholders either individually or collectively to call upon the directors to answer for their lack of action under the circumstances.”
But ZCI chairman Tom Kamwendo said the company had already given its shareholders enough data on the sale of its shares in KCM to Vedanta Resources Plc. Kamwendo further said ZCI shareholders would gain from the just concluded transaction on the sale of its KCM shares to Vedanta resources, at a purchase price of US $213 million. “We have written to some individual shareholders and some information has been posted on the website,” Kamwendo said. “I am very hopeful that the ZCI shareholders will gain something out of the transaction.”
And Lusaka Lawyer Eric Silwamba, who represented Vedanta Resources Plc in the deal, said the mining company had finally concluded the takeover, making it the largest shareholder of KCM with a total of 79.4 per cent shares while ZCCM-IH and government control the remaining stake
The paper quotes South Africa-based investment advisors Southern Charter Wealth Management (Pty) Ltd, who have advised a large client base to invest in ZCI in the past, and whose customers are disappointed at what they perceive as the low price of the sale. The firm said the US $213 million paid by Vedanta for the stake amounted to, “robbing Zambia of control of its most prized copper deposits for at least thirty years to come.”
The deal was concluded after the government removed the competition commission – from handling the sale. The government claimed it had the power to end the Competition Commission's enquiry, invoking section 3(f) of the Competition and Fair Trading Act under the Zambia Competition Commission to allow the latter become a majority shareholder in one of Zambia’s huge mining operations. Section 3 (f) of the Competition and Fair Trading Act CAP 417, states that "nothing in this Act shall apply to...activities expressly approved or required under a treaty or agreement to which the Republic of Zambia is a party."
Southern Charter Wealth Management director Bruce Barclay claimed the Government did not follow appropriate procedure and that the deal was illegal as the parties involved did not gain the approval of the Zambia Competition Commission prior to entering negotiations. “It is with great distress and disappointment that we learn that the government of Zambia deemed it necessary to invoke "section 3(f) of the Zambian Competition and Fair Trading Act" and remove the jurisdiction of the Zambian Competition Commission over the transaction between Vedanta Plc and ZCI Ltd,” Barclay said. “Control of KCM has fallen into the hands of foreign investors and thereby ensures the current loss of millions if not billions of US dollars in value to Zambia, her citizens and ZCI Ltd shareholders. Despite our opinion, clearly it was in the government’s opinion that the greater good of Zambia would be served by ensuring the deal went through and therefore invoked section 3 (f) of the Zambian Competition and Fair Trading Act.”
“We are therefore mandated to act on behalf of an accumulated shareholding in that company of approximately 800,000 shares,” Barclay said. “We, as investment advisors to a number of ZCI Ltd shareholders, including ZCI's single biggest individual shareholder, will be convening a meeting to hear from them what next course of action, if any, they wish us to take in respect of this transaction. The deal may be concluded but the board’s responsibility to its shareholders and for this transaction in our opinion is not legal and it will be our advice based on our opinion that the board of ZCI ltd has failed its shareholders.”
Barclay questioned the invocation of section 3 (f) of the act, long after commencement of the transaction. “How come this section 3(f) of this act only comes to light at the dying hours of the transaction that has taken in the region of two years to conclude and only when the ZCC withdraws its approval of the transaction placing the transaction in jeopardy?” Barclay asked. “How is it that Vedanta, KCM, ZCI and GRZ were not aware of this act from the outset? If they were, then why even approach the ZCC for approval? In fact what was the ZCC getting involved for in the first instance causing further delays to citizens and shareholders and frustrating an already extremely frustrated transaction? Is it not worth questioning why KCM (essentially Vedanta) is the only mine to come out in support of the new controversial mining tax just prior to the invocation of this Act?”
And the shareholders, in their letters to the ZCI board and made available to the Business Post, have continued to oppose the purchase of ZCI’s 28.4 per cent shares in KCM by Vedanta Resources Plc even after the conclusion of the deal. They said the transaction regarding the sale of ZCI shares in KCM was absolutely against the law, considering that the ZCC was not consulted in the initial stages of the “call-option deed” between Vedanta and ZCI in 2004... In our opinion, the lawyers slipped up in November 2004 when this scheme was contemplated, by not getting the approval of the ZCC prior to signing the option contract because theoretically it is unable to be completed without ZCC’s approval,” stated the shareholders. “It is in our opinion that the board of ZCI were well informed of the status of the transaction at all times, including knowing that the transaction was illegal in terms of the Zambian Competition Commission rules and regulations who did have jurisdiction over this deal yet the board chose to remain silent and inactive in this regard and thereby, in our opinion, are responsible for perverting the ends of justice. It is time for us as shareholders either individually or collectively to call upon the directors to answer for their lack of action under the circumstances.”
But ZCI chairman Tom Kamwendo said the company had already given its shareholders enough data on the sale of its shares in KCM to Vedanta Resources Plc. Kamwendo further said ZCI shareholders would gain from the just concluded transaction on the sale of its KCM shares to Vedanta resources, at a purchase price of US $213 million. “We have written to some individual shareholders and some information has been posted on the website,” Kamwendo said. “I am very hopeful that the ZCI shareholders will gain something out of the transaction.”
And Lusaka Lawyer Eric Silwamba, who represented Vedanta Resources Plc in the deal, said the mining company had finally concluded the takeover, making it the largest shareholder of KCM with a total of 79.4 per cent shares while ZCCM-IH and government control the remaining stake
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