ONLY ONE STEP IS REMAINING BEFORE KCM IS HANDED BACK TO VEDANTA
….and production will resume, says Finance Minister
Lusaka… Friday February 23, 2024 (SMART EAGLES)
Minister of Finance & National Planning Dr. Situmneko Musokotwane says there is only one step remaining before Konkola Copper Mines plc (KCM) is handed back to Vedanta Resources and production will resume.
Delivering a ministerial statement in parliament today, Dr. Musokotwane said this should happen soon.
He added that in terms of Mopani Copper Mines (MCM), the target date for handing it over to the new investor is end February 2024.
The Finance Minister said the importance of these two mining firms is that even before they increase production, they are already sending money to Zambia, in foreign exchange, to pay local creditors and to prepare for increased production.
He emphasized that this is happening now and that these payments are supporting the Kwacha.
“Beyond this preparatory stage which is already supporting the exchange rate, we are looking forward to increased copper production and foreign exchange earnings as the two companies get to work. The effects of the return of the two mining companies is set to change things positively,” he said.
“The second leg of increasing copper production is by expanding production at First Quantum (Kansanshi) and Barrick (Lumwana). As indicated already, both companies had contemplated leaving Zambia because of unconducive investment climate under the PF government. Had that happened, almost the entire mining industry in Zambia would have closed since it would have meant KCM, MCM, FQM and Lumwana all being non-operational. The economic consequences would have been unimaginable.”
Dr. Musokotwane indicated that after the UPND government assumed office in 2021, both companies were successfully persuaded to stay.
“But their earlier decisions to leave has impacted production now because they had not developed new ore bodies in time. Both FQM and Barrick have started developing the new ore bodies and have put in $1.3 billion and $2 billion respectively to achieve enhanced production,” he added.
“Madam Speaker, the shock to the exchange rate was largely attributed to problems in the mining sector. This has been a temporal problem which this government has resolved. Going forward the people of Zambia should feel comfortable that the future is bright. On account of the mining sector alone, without considering other sectors, concrete steps will soon be visible as production towards the three million tons target takes shape. I am sure my colleague in charge of mining will at an appropriate time share the projected expansion of the sector.”
He further indicated that stability comes about because supply and demand for foreign exchange roughly balances.
“We have already discussed the supply, as we described developments in the mining sector because it is the main source of foreign exchange. The demand side can be managed by monetary policy actions such as those instituted by the Bank of Zambia. These included the withdrawal of government deposits from commercial banks to the Bank of Zambia and the increase in the statutory reserve ratios,” he said.
“Both measures have the effect of reducing access to local currency financing from the banking system and, therefore, dampens effective demand for domestic expenditure, including on foreign exchange purchases. Once again, the positive effects of the monetary policy actions are evident today.”
Moving on to debt restructuring, Dr Musokotwane expressed happiness that significant progress has been achieved.
“We all recall that there are two broad categories of external debt: the official and the private. For official debt restructuring, this was already achieved last year. All that remains is to complete the formalities which are expected to be signed shortly,” he informed the House.
“Regarding the private sector creditors, the focus of the work now is to clarify the meaning of comparable treatment of all creditors. Members will recall that as a way of ensuring that no creditor takes advantage of other creditors, a requirement exists which demands that any proposal for debt restructuring must satisfy the criteria of comparable treatment.”