THE MAST FRIDAY EDITORIAL
HH’s consistent inconsistencies
Abraham Lincoln said, “You can fool some of the people all of the time, but you cannot fool all of the people all of the time”.
How is it possible that between April 25 and May 9, 2022, in a mere 15 days, a decision to suspend litigation was made and announced on foreign soil at the Mining Indaba in Cape Town, South Africa? The government should have first made a decision on the way forward, which is that Vedanta’s investment in KCM is no longer wanted and finally begin formal negotiations (not backdoor discussions by Hakainde Hichilema’s friends; the external advisors) on Vedanta’s exit and the litigation should not be discontinued to ensure KCM assets are protected against claims. ZCCM-IH has previously undertaken a forensic audit that clearly showed the serious fraud by Vedanta. It would have been wiser to have arrived at a phase in negotiations with Vedanta where their exit would have been agreed and then discontinue the litigation.
In less than forty-eight hours after Hakainde announced that litigation has been suspended, Vedanta is in court to stop the appointment of Celine Nair as KCM liquidator. This is laughable and clearly shows that Hakainde is being led on a garden path of chaos. It is clear that he knows not what he is doing nor does his ill-informed legal team of interns. But what is emerging clearly is that Hakainde has a contempt for entire Zambian government administration – he has his own errand boys and girls running his things!
We all recall on April 25, 2022 during his first quarter press conference President Hakainde Hichilema saying, “I have seen the media falsehoods that we want to give KCM back to Vedanta. That’s not true. We want to unlock KCM. It’s a Zambian asset and nothing should stand in the way so that the people of the Copperbelt and the people of Zambia can benefit. When KCM is unlocked, it benefits the people of Copperbelt. It benefits our citizens here, it benefits suppliers. It benefits revenue and foreign exchange income.” He went at length saying the mining asset is being abused and the government is determined to do what it takes to bring the asset back into production, adding that no innuendo or court process will slow the government down.
“That’s why you hear the noise on the liquidator of KCM because he was sitting in the way of resolving the KCM problems. Mopani [Copper Mines], we are very close. It’s an easier asset to unlock so we are getting there. Soon you will hear the progress we have made. KCM is a bit complicated and it was made complicated by appointing a liquidator who should not have been there in the first place,” said President Hichilema.
And in South Africa on Monday, he tells foreign media, “Vedanta and ourselves agreed that we suspend litigation, by-and-large as a partial way of resolving the matter. The outcome I wouldn’t predict but there will be a resolution of Konkola Copper Mines.”
So, who has been stating falsehoods then?
Why the deception and lies? When was the decision to drop all litigation with Vedanta taken? What negotiations have taken place in the past six months or in the 15 days after the press conference at State House? Was Cabinet consulted and if so, when? There has been no such announcement of a Cabinet decision as is the case with all other Cabinet decisions. The answer to these questions is that no meaningful negotiations have ever taken place, other than preliminary discussions that Hakainde’s external advisors had with Vedanta’s negotiating team that, as we understand, consisted of Greg Mills, Valentine Chitalu and Andrew Chipwende, amongst others. On one hand State House has acknowledged that external advisors were being used on the other the Minister of Mines, Paul Kabuswe has categorically denied this. Why the deception and lies? The nation was being told by Hakainde that the impediment was [former] provisional liquidator Milingo Lungu, and the process of removal of Milingo is now mired in chaos and court proceedings due to incompetence of the presidential staff. It’s undignified behaviour and certainly below standard for the President who said he will set the governance bar very high. Hakainde is now being consistently inconsistent. He is not being truthful either. He has been caught up in deception, if not lies.
Let’s get back to the main character in this KCM drama. Anil Agarwal’s rise and his rags to riches story, though captivating, is misleading. Anil Agarwal, the chairman/owner of Vedanta Resources Limited has been dogged with controversies wherever he has his investments. In India the government has closed down his copper smelter in Tamil Nadu, for pollution breaches. The truth about Vedanta in Zambia is that in 2006, KCM released raw effluent from their pollution control dam into the Mushishima stream, which runs directly into the Kafue River, the water source for 40 per cent of Zambia’s population. The result was some of the worst contamination Zambia has ever seen.
A Mine Workers Union of Zambia official Leonard Phiri, in 2014, said, “They can’t take care of safety measures. They can’t talk about their future plans for KCM or where they expect to go to after this… They can’t follow mining regulations. They have huge indebtedness due to outsourcing companies that were not being paid money. All these things have been made clear to the people in the country… and it has really been looked at in a negative light by the Zambian community and the Zambian state where the government now has to look for a team to monitor its operations so they can see if they can salvage the company from its current doldrums, which is a very very sad state of affairs. And, if it is owned by the British, as you are saying, I would not expect this, because the British have a history of running entities in a professional manner, respecting the indigenous laws of the country they are operating from, and motivating the workers of the country. This is not the case with KCM”.
This perception has dogged Vedanta’s KCM to this day. Nothing has changed. Vedanta is not only disliked, but they have consistently lied.
Can you trust Vedanta? What were the issues that necessitated the PF government to “seize” KCM? The reasons are legitimate but the method used by PF was wrong, hence the drama we see unfolding before us. KCM had been facing operational challenges that continue to this day. Declining mineral production, failure to meet its obligations to employees, contractors and suppliers. This has been the case ever since Vedanta took ownership of KCM.
These are the issues with Vedanta that are still valid. The former mines minister Richard Musukwa’s parliamentary statement in June 2019 said, “High Indebtedness and Threat of Insolvency: As of 30th September, 2013, KCM’s total liability stood at US $1.567 billion exceeding the current assets by US $123 million making it difficult for KCM to meet its obligations as they fall due. Further, KCM defaulted on a Standard Bank loan which it acquired to the tune of US $700 million. The bank gave a waiver up to 31st March 2014, beyond which the bank could appoint a receiver if conditions of the waiver were not complied with. The loan in question was secured on all KCM assets. It was also discovered that in 2011, Vedanta Resources loaned in excess of US $500 million to be repaid in 2012, but this loan was prematurely recalled in September, 2011. Despite having financial challenges, the major shareholder went ahead and recalled the loan. Non-compliance to the commitment to bring in foreign direct investment: Vedanta Resources Plc had not complied with its commitment to inject US $397 million into KCM as FDI. Instead, funds which were generated within KCM, which in normal operations would be used for operations, were diverted to finance capital projects. As a result, operations were starved of the necessary maintenance funds and resources. The commissioning of the Konkola Deep Mining Project (KDMP) had been delayed by approximately seven years mainly due to design challenges and resource mobilisation related to the facility. This not only resulted in the increased cost of sinking of the shaft and development of the ore resources, but the loss in excess of four million tonnes of ore anticipated per annum. …The sub-contracting of all mining activities by KCM resulted in high cost of doing business. KCM did not purchase or maintain its own equipment. Consequently, any pull-out of any contractor meant suspension of mining activities in respective areas, and this has impacted on the company negatively….” Richard detailed other issues and his statement is in public domain.
Direction needed from Government: That Vedanta must exit and negotiations begin. Can Vedanta Resources be trusted? Can the mine workers and the unions trust Vedanta Resources? Can the Hakainde administration be trusted on KCM? No!