Prof. Ndulo sceptical about new investors in KCM
By Staff Reporter
PROFESSOR Muna Ndulo is sceptical a new investor will be willing any time soon to take over Konkola Copper Mines (KCM) following its liquidation by the Zambian government.
The Zambian government, using the ZCCM-IH, placed Vedanta Resources-owned Konkola Copper Mines (KCM) under provisional liquidation on Tuesday.
Prof Ndulo, stated yesterday that the Zambian government’s claim that it was in the process of seeking an investor to take over KCM countered investors’ logic.
“No investor would ever be willing to buy assets that are in dispute nor would they want to invest in a country that possesses haphazard mining policies,” Prof Ndulo stated.
“There will be no new investor, Chinese or otherwise, any time soon. Investors are rational and are answerable to their shareholders.”
The Professor of law believes there will be a shareholder dispute in the provisional liquidation case of KCM.
ZCCM-IH, on behalf of the Zambian government, is a minority shareholder in KCM with 20.6 per cent shareholding portfolia while Vedanta Resources of India holds the other 79.4 per cent shares.
“Almost certainly, there is an arbitration clause which requires disputes between shareholders to be settled through arbitration. Once arbitration is chosen, it ousts the jurisdiction of courts. It would come as no surprise if KCM files for arbitration in London,” Prof Ndulo stated.
“That would mean that court processes cannot continue in Zambia in violation of an arbitration agreement. Given, all these challenges the best course for the government would have been to engage KCM and find a solution to its problems. It is ironic that of all the major copper producing countries in the world-Chile, Peru to name a few only Zambia has problems with its investors. Maybe it is time Zambians humbled themselves and learned best practices from other countries that are operating vibrant copper mines.”
He added that there was no doubt that KCM had for some time now been having challenges to run its mining operations.
Prof Ndulo stated that there was also no doubt about the need to resolve KCM challenges so that: “it can make a positive contribution to the Zambia economy.”
“The challenges at KCM are complex and require cool heads and expertise and not populism to resolve. Liquidation is not the proper course to take. First liquidation here is being used as a form of indirect nationalisation,” he stated.
“Nationalisation has very clear consequences in international law. Zambia would have to pay adequate, effective and prompt compensation to KCM for its assets. The trouble with liquidation is that it triggers defaults. This author would not be surprised to find that KCM has huge overdraft facilities with several commercial banks in Zambia.”
Prof Ndulo stated that with liquidation, the loans became payable immediately and that KCM would have no access to those facilities.
“There is also the problem that since one of the challenges facing KCM is liquidity, it is not clear as to who is going to come up with the money to pay for operations, wages, etc during liquidation process,” stated Prof Ndulo.
“The Zambia government does not have the money. There is also the problem that reduced sales of copper from KCM would negatively impact on foreign exchange receipts and the value of the Kwacha. Sadly, the ordinary workers, the cheerleaders, in this unfortunate debacle are also going to end up bearing the gravest consequences of this debacle, which will include an uncertain future and the loss of jobs. For as Karl Marx warned that if not properly managed, “capital . . . , it drags with it into its grave the corpses of its slaves, whole hecatombs of workers, who perish in the crises.”