Don’t nationalize KCM, says International Monetary Fund

After lengthy debate by various economic players within and outside Zambia, the International Monetary Fund has added its voice to appeals by the Government not to nationalize Konkola Copper Mines despite its shortcomings in recent years over its operations.

In recent years, KCM, one of Zambia’s main copper and cobalt producers has come under intense debate over its operations in the copper rich Zambia, chiefly on its taxation obligations with its chairman recently claiming he was making US$500 million profit annually after securing the unit at US$25 million during privatization of the mines in the late 1990s.

However, while some players seek to have KCM, with a labour force of more than 11,000 nationalised, the International Monetary Fund (IMF) has pleaded with the Government not to go ahead with the calls for nationalization but instead monitor its operations and ensure it meets all the obligations required of the London listed and owned by Vedanta Resources Plc miner.

During a mission by the global lender to Zambia from 27 May to June 4 and having consulted various players including Bank of Zambia and the ministry of finance officials, the lender advised Government against nationalising Konkola Copper Mines (KCM) but instead work on strengthening the taxation system to stem tax evasion.

IMF team delegation leader Byung Jang said  Zambia Revenue Authority (ZRA) should  instead be strengthened in its  mining taxation system to enable it to collect the appropriate taxes from KCM and other mining companies, a revenue which could assist the Government expand its economy threefold than the present 6.5 percent per annum. 

Many of the players, while they have called on the Government to consider to nationalize the KCM, following recent debates over calls to repossess the mines after various alleged failures to meet taxation obligations and arguments by the mines that it seeks to retrench over 1,500 miners at its units in Zambia for lack of profitability, which recently forced the miner to consider reverting to mechanization in place of people, the IMF believes KCM is still viable if monitored and guided properly by relevant institutions.

Jang  told reporters in Lusaka at the end of his mission that  the IMF is working with Government to assist ZRA improve its taxation capacity. Speaking after a joint meeting between Government and IMF to conclude the organisation’s visit to Zambia the IMF leader noted that although there are serious concerns about the mines’ operations, there were better options of resolving the impasse.

Zambia Revenue Authority (ZRA) commissioner general Berlin Msiska said in a statement recently that the revenue agency plans to soon  says carry out a forensic audit of KCM to determine the company’s compliance to taxation to cover the period 2007, 2008, 2010, 2011, 2012 and 2013, according to a notice of forensic audit written to KCM and copied to the Office of the Vice-President.
The IMF delegation  had visited Zambia to review economic developments and discuss the macroeconomic framework with Minister of Finance Alexander Chikwanda; The team also met Bank of Zambia (BoZ) governor Michael Gondwe, senior government officials and representatives from the private sector and civil society.

Recently the Government reiterated its desire to ensure the private sector drives the economy and not to interfere but however stated that it has no plans to nationalise Konkola Copper Mines (KCM) for allegedly evading tax,  according to mines minister Christopher Yaluma.
The decision to retain KCM is intended at protecting the over 7,804 direct jobs and 9,549 indirect ones that have been created at KCM through contractors although Government is still  investigating reports indicating that KCM has been evading tax. 

 “We as Government shall ensure that at the end of the day, the people of Zambia get a fair share of the returns from their mineral wealth,” Yaluma said.  
Government will not nationalise KCM but ensure it meets its obligation of recapitalising the mine, and paying off its debts to lenders, suppliers and contractors, including concentrate suppliers. KCM’s liabilities stand at US$1.6 billion, exceeding the company’s assets by US$123 million.

President Michael Sata had warned that nationalisation is an option if KCM does not change its ways  as has been the case in recent past with a call for the mining company to be honest in its business.

“Let them be honest.  If they are honest to us, the situation is going to be completely different.”

Writer : ZMN Staff

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