By Peter Sinkamba
KCM LIQUIDATION COURT PROCESS IS PERPLEXING: SO MANY UNANSWERED QUESTIONS
Since 2019 when state-owned ZCCM-IH, which is a minority shareholder in KCM launched it motion in High Court to liquidate KCM, I have always held the view that the court process was illegal right from the start.
In May, 2019, the Zambian government placed KCM in liquidation proceedings after accusing KCM of violating its operational licence and not paying all its taxes, sparking a four-year legal battle with Vedanta.
ZCCM-IH launched its court case using the Insolvency Act, which, according to Section 138 is not applicable to the mining sector. The Insolvency Act is inapplicable because the principal law for the mining sector, the Mines and Minerals Development Act, already has winding up provisions. For exactly the same reasons, the Insolvency Act is inapplicable to wind up a law firm because the Legal Practitioners’ Act already provides for such.
What is perplexing to me is that despite the illegality of the process for commencement of the liquidation for KCM, somehow, the court process has been sustained.
The other perplexing issue on KCM’s liquidation process is withdrawal of the liquidatiion from court. Last year, on Tuesday, September 5, 2023, Government announced at a press conference held at Government complex that it had halted the court process and that from that point forward, Vedanta would continue to run the mines as the majority shareholder with 79.4 percent stake in KCM.
“The KCM board will be reinstated and Vedanta Resources Limited will return to its previous role as the majority shareholders,” Mine Minister Paul Kabuswe told a press conference in Lusaka.
The firm will enjoy “a renewed financing commitment towards investment in mine development and to increase production,” the Minister Kabuswe said.
Zambia is Africa’s second biggest copper-producing country on the continent after the Democratic Republic of Congo, and the sector is a major employer.
Vedanta said it will invest $1.3 billion into developing KCM over the next five years and pay the outstanding debt of $250 million upon taking over the operations. Vedanta also pledged to invest $20 million into the local mining community annually.
It is now 9 months since government announced that it had withdrawn court process. Yet, on the ground, the court process has not been withdrawn.
Yesterday, the Provisional Liquidator held a meeting with Class 1 KCM creditors in Lusaka and Kitwe to vote on a court-aligned scheme of arrangement for settling of the debt owed to them. From statements expressed at the Lusaka and Kitwe meetings, it is very clear that the creditors are not interested at all in the court process. All the creditors wanted was to paid their money by 17.00 hrs yesterday.
The liquidator informed Class 1 creditors that next week there will be a meeting with Class 2 creditors, for them to also vote on the scheme of arrangement. Thereafter, a report will be complied on the outcome of the two meetings that will be submitted to High Court. The liquidator informed Class 1 creditors that in the event that the scheme is not approved or sanctioned, then the company will proceed into final liquidation through the winding up of the business.
The perplexing question is: who is still pursuing the liquidation process after government and ZCCM-IH announced publicly on 5 September, 2023?
Perusal of the High Court Order dated 21st February, 2024, to convene the meeting of creditors to consider the scheme of arrangement shows that parties to the matter are ZCCM-IH, KCM and Vedanta Resources Holdings Limited. These are the same institutions that convened a press briefing on 5 September, 2023 announcing to the nation and the world at large that the liquidation has been withdrawn from court.
Vedanta Resources Holding Limited has announced several times that it wants to take over the operations but is inhibited by the court process. Meanwhile President Hakainde Hichilema and Mines Minister have repeatedly announced to the nation that the court process has been withdrawn.
At yesterday meeting, I asked the liquidator to clarify the position on ZCCM-IH considering that government, which owns ZCCM-IH has indicated several times that this matter has been withdrawn from court, yet from ongoings the court is still in the picture. No clear answer was given.
From yesterday Class 1 meeting, it is very clear to me that the court process is infructuous. It has proven to be fruitless. It is producing no useful results to creditors, Vedanta Resources, ZCCM-IH, and Government and the communities on the Copperbelt and Nampundwe who are supposed to have started receiving their $20 million annual allocation from Vedanta Resources. Class 1 creditors made it very clear that the court process is not only illegal but also has no meaning to them and really is unnecessary.
Class 1 creditors are persons or companies owed by KCM one million dollars and below. Class 2 creditors are persons or companies owed by KCM above one million dollars.
Class 2 creditors include Government institutions including ZCCM-IH, ZESCO, Zambia Revenue Authority, Worker’s Compensation Fund, NAPSA, NHIMA. Others are Vedanta Resources Holding companies, Trafigura, and Copperbelt Energy.
The court record shows that besides ZCCM-IH, KCM, and Vedanta Resources Holding, no other person or company in Class 1 or Class 2 is a party to the court proceedings.
So, if Class 1 and Government have found the court process to be infructuous, then who is it, that is not a party to the court proceedings, that is sustaining the court process from 5th September, 2023 to date? Is it the lawyers using legal gymnastics who are attending their accounts through this infructuous court process at the expense of the creditors and community? Or is it the accountants doing so? Or is it the liquidator? Or is their another hidden hand?
Frankly speaking, this court process mess must end now! We are sick and tired of a fruitless misadventure!!
