Zambian President Edgar Lungu. Image from You Tube.
Zambian President Edgar Lungu threatened to “divorce” the domestic copper units of Vedanta Resources Plc and Glencore Plc after the companies said they’d curb operations in the southern African nation.
The threat marks an escalation in tensions between the mining industry in Africa’s second-biggest copper producer and the state, after an increase in royalties and plans to introduce new taxes. Last week, Mines Minister Richard Musukwa said the government directed Glencore’s Mopani Copper Mines to hand over two shafts to local contractors rather than close them.
Zambia’s kwacha extended its losses against the dollar to as much as 3.2% to the lowest level since 2015, and was down 2.3% at 13.91 per dollar by 4 p.m. in Lusaka, the capital. Yields on the country’s $1 billion of Eurobonds due April 2024 rose 11 basis points to a record 18.25% after Lungu’s statement.
President Lungu accused mining companies of lying about their profit, and trying to arm-twist the government over its plans to replace value-added tax with a new sales tax system
Lungu visited Copperbelt province Friday to meet officials from labor unions and the Chamber of Mines, the main industry lobby group, after Mopani announced last week it plans to shut two shafts and fire hundreds of workers. The disagreement could weaken the kwacha, which is already the world’s second-worst performing currency against the dollar this year, having fallen 14.7%.
“I want to make it very clear that I have come here to sanction, if it’s the will of the Zambian people, that we divorce these mines,” he said in a speech broadcast live on Facebook as the crowd responded with cheers. “My position is that enough is enough. The attorney general is here, the lawyers are here. They will guide us how to proceed with this divorce.”
Amos Chanda, a spokesman for the president, said that by using the word “divorce,” Lungu was referring to the fact that other unidentified investors are interested in Zambian mining assets.
“Everything that will be done will be done within the confines of the law, in line with the existing mining licenses,” Chanda said. “It is not in the policy of the Zambian government under any circumstances to engage in nationalization or seizure of private assets without due process.”
Vedanta’s Konkola Copper Mines noted Lungu’s concerns and said it’s committed to its operations in the country.
“We believe there is an opportunity to resolve these matters for the benefit of all stakeholders,” Eugene Chungu, a company spokesman, said by phone. “Certainly, we are committed to investing in the country for the long haul.”
A Mopani spokesman requested emailed questions when called for comment, which the company didn’t immediately respond to.
Lungu accused mining companies of lying about their profit, and trying to arm-twist the government over its plans to replace value-added tax with a new sales tax system.
“We know they are liars, they are cheats and they take us for fools,” he said. “Let me conclude by saying that sales tax is here to stay. We are not going to be blackmailed by the investors, no. Those who are uncomfortable to stay in our house can go out.”
(By Matthew Hill and Taonga Clifford Mitimingi)
