The Government of Zambia has announced plans to step up auditing work at its country’s mines, following its removal of Vedanta’s permit to operate its Konkola Copper Mines (KCM) due to breaches of licence conditions.
The government removed the company’s operating licence earlier this week due to multiple violations of its licence, although it is unclear which particular conditions have been broken. Mining minister Richard Musukwa said that the government would insist on regular audits at all of the country’s mines to prevent similar breaches from taking place at other companies.
While Musukwa assured Reuters that the move “should not be misconstrued as nationalisation”, the national government has steadily increased its control in the project, a trend that has caused concern among private miners. State-owned investment company ZCCM Investment Holdings, which owned a 20.6% stake in KCM, successfully petitioned a local court for a Zambian company to be appointed as the project’s liquidator.
Vedanta and the national government are set to meet in court this week to resolve their dispute over the appointment of a liquidator, with the company claiming to have not been involved in the decision, and that ZCCM lacked the authority to make such an appointment, as it is a minority shareholder.
“KCM is seeking to meet with the government as a matter of urgency to discuss the future of KCM and the impact that the current onerous situation is having on the company, the people of the Copperbelt and the Zambian people as a whole,” said Vedanta earlier this week.
“The most recent restrictions and duty on concentrates have negatively impacted the running of the smelter and the much-needed acid to run its operations. In addition, the Zambian Government owes the company more than US$180 million in VAT refunds which has made the situation even more challenging.”
These “restrictions” refer to a new tax code implemented in January, which the Zambian Chamber of Mines said would damage the country’s mining industry. The body claimed the rules would cause more than half of Zambia’s copper mines to lose money, and put almost 30,000 jobs at risk,
and both the new tax laws and removal of Vedanta’s operating licence are broadly in line with President Edgar Lungu’s policy to “divorce” foreign companies from their operations in the country.
Zambia is Africa’s second-largest copper producer, with a copper output of 711,000 tonnes in 2015. However, four companies account for 80% of this total, and only one is headquartered in Zambia, Mopani Copper Mines, which has encouraged the government to push for more direct involvement in, and benefits from, the country’s mineral resources, rather than leaving space for foreign companies to operate.