Zambia and Vedanta lock horns

Published by MAC on 2013-11-13
Source: Bloomberg, Mining.com, Lusaka Times, Reuters

Zambia revokes Vedanta unit CEO's work permit

Matthew Hill

Bloomberg

11 November 2013

Zambia, Africa's biggest copper producer, has canceled the work permit of the chief executive officer of the local unit of the biggest investor in its mining industry, Vedanta Resources Plc local unit.

"He was being very arrogant," Minister of Information and Broadcasting Mwansa Kapeya said by mobile phone from Lusaka, the capital, yesterday. Kishore Kumar, who started the job in August, won't be allowed back into the country, Kapeya said.

Zambia's government has criticized Vedanta's Konkola Copper Mines unit after the company announced plans to fire 1,529 workers to cut costs. President Michael Sata on Nov. 4 threatened to cancel the company's license if it dismissed any employees. The state-owned Times of Zambia newspaper on Nov. 6 reported the company fired 76 workers effective Sept. 19, under the headline "KCM defies Sata."

The company in June reversed a decision to fire 2,000 workers after holding talks with the government and labor unions. Konkola says the latest proposed cuts are necessary because of a decline in the grade, or proportion, of copper in the ore it mines, low copper prices and poor worker productivity. The Zambian unit is forecast by the London-based company to produce 140,000 metric tons of the metal this fiscal year.

"You need to have regard for the authorities," Kapeya said. "The government said you just can't be terminating employment without giving a specific reason."

A Konkola spokeswoman, who asked not to be identified in line with company policy, declined to comment, saying the company will issue a statement today. Kumar, mwho left the country on Nov. 7, didn't immediately respond to an e-mail seeking comment.

The kwacha, Zambia's currency, closed 0.2 percent lower on Nov. 8 at 5.545 against the dollar, the weakest level since May 2009.

--Editors: Antony Sguazzin, John Simpson

---

Vedanta unit sues Zambia tax authority over $586m bill

Matthew Hill

Bloomberg

7 November 2013

Vedanta Resources Plc's Zambian unit is suing the southern African country's revenue authority over a 3.2 billion-kwacha ($586 million) tax charge relating to exports of copper cathode.

Konkola Copper Mines Plc wants the Lusaka High Court to quash Zambia Revenue Authority's decision to charge a 16 percent value-added tax on the exports from January 2011 to March this year, according to court papers. KCM also wants the court to reverse the authority's decision to levy the tax from July.

"There are serious legal questions to be determined with regard to the legality of the assessments," Joel Chitambala, business controller at KCM, said in an affidavit filed on Oct. 31. The tax charge would "heavily impact" the company's ability to service its financial obligations, including paying workers, he said.

Zambia implemented a law in July to allow better monitoring of exports by the government, which says mining companies are avoiding as much $2 billion a year in tax. KCM's relationship with the government has deteriorated since March amid proposals for job cuts and Zambia's President Michael Sata threatened to cancel the company's license after it announced a plan to retrench 1,529 workers on Nov. 1.

KCM said Zambia Revenue Authority notified the company on June 7 that it had not complied with laws, after carrying out a tax audit in April, according to court filings. The authority said the company was required to supply import certificates from the country of destination for copper sales, KCM said in the filings. The authority also said KCM received payments for its exports in a U.K. account instead of a Zambian one.
Tax Charge

The authority is charging the 16 percent tax on the sales because the audit found no import certificates for KCM's copper, according to the court filings.

The ZRA, based in Lusaka, has yet to file a response in court and didn't immediately reply to e-mailed questions seeking comment. Joy Sata, a spokeswoman for KCM, declined to comment.

KCM sells its copper cathode exports to traders including Traxys SA, Marubeni Corp. and Ambrian Metals Ltd., and is not privy to who the final buyers are or where they are located, Chitambala said in his affidavit.

The company routed sales proceeds through a U.K. bank account to honor loan security requirements before depositing the money in a Zambian account, KCM said.

--Editors: Dylan Griffiths, Ana Monteiro

---

Vedanta to replace 1,500 Zambian workers with machines

Ana Komnenic

Mining.com

2 November 2013

Vedanta Resources announced on Friday that by March it would cut more than 1,500 jobs in Zambia through its subsidiary Konkola Copper, Reuters reports.

Kishore Kumar, the chief executive of Konkola, said that automation "may affect upwards of 1,529 members of our staff," Reuters writes.

Vedanta believes a more mechanized process will allow it to increase production, which currently stands at 8 tonnes per employee annually. Kumar said this was "'unsustainable when compared to the global average of 100 tonnes."

The news comes as a major blow to the country where Konkola is the largest copper producer.

In May, Vedanta considered laying off more than 2,000 due to depressed metals prices. It halted these plans after the government threatened to take over the mines.

In response to Friday's announcement, Zambia's mines minister Christopher Yaluma is seeking a metting with Kumar, Bloomberg writes.

"We would very much like to discuss with them and find a solution that is not detrimental to them and not detrimental to the government," Yaluma told Bloomberg reporters.

Konkola Copper Mines is Zambia's largest private sector employer. It has over 9,500 full time employees and 11,000 contracted workers, according to its website.

---

Mopani sulphur-dioxide emissions cause Mufulira District Commissioner to collapse

Lusaka Times

18 October 2013

MUFULIRA District Commissioner (DC) Beatrice Mithi was on Tuesday left requiring the services of an oxygen machine when she collapsed after allegedly inhaling the highly-toxic sulphur-dioxide emission by Mopani Copper Mines (MCM).

Ms Mithi who is asthmatic, fainted soon after she inhaled the toxic sulphur-dioxide emission which had just been discharged into the atmosphere from the MCM's plant in Kankoyo.

She was taken to the hospital unconscious where she was admitted and put to on oxygen until yesterday when she was discharged.

The district commission confirmed the incidence in an interview with the Times in Kitwe yesterday shortly after being discharged.

Narrating how she suffocated, Ms Mithi said she was returning from officiating at a function at Ronald Ross Hospital within the district when MCM plant in Kankoyo discharged the sulphur-dioxide into the emission [atmosphere].

"I was returning from officiating at the hospital when suddenly there was fume in the atmosphere, which apparently happened to be sulphur-dioxide emission by Mopani Copper Mines.

"I got choked by the sulphur-dioxide emission and I immediately collapsed after becoming unconscious," she said.

Ms Mithi said she was quickly rushed to the hospital where she was admitted and put on oxygen until yesterday when she was discharged.

"It appears the type of sulphur-dioxide Mopani is discharging at the moment is highly toxic because the case involving myself is the second one after another person who is asthmatic also was affected last week," Ms Mithi said.

She said from information to her knowledge, the person who got choked last week allegedly by the sulphur-dioxide emission died unfortunately.

---

Zambia warns miners to consult government on job cuts

Chris Mfula

Reuters

13 November 2013

LUSAKA - Zambia, Africa's top copper producer, warned mining companies that any moves to lay off workers without consulting the government would be seen as a violation of their investment licences.

President Michael Sata, a populist who swept to power two years ago on an activist platform to defend workers' rights, has been taking a hard line with miners and other foreign companies that have tried to lay off workers.

"It has been observed that some investors in some mining companies have found it necessary to downsize their workforce each time they are faced with operational challenges," the government said in a statement on Wednesday.

"Government views such actions as a violation of, and not within the spirit of the investment licence."

The government added that it was "unwarranted, unfortunate and unacceptable" for mining companies to cut jobs before consulting the government and other stakeholders.

This week Zambia revoked the work permit of the chief executive of Konkola Copper Mines, its biggest private sector employer owned by Vedanta Resources, as the latest move in a dispute over its plan to cut hundreds of jobs.

Sata's government also last month threatened to shut Shoprite stores after the South African company fired workers who went on strike over pay. Shoprite, Africa's biggest retailer, subsequently backtracked on the sackings.

From Confusion to Clarity

"You now have to go to the government to get approval for firing workers. This clarifies that the cost of doing business in Zambia, especially as it relates to labour, is higher than people thought in the past," Chris Becker, Africa market strategist at ETM Analytics, said.

"They are trying to stake their position on this, and at least it is giving some clarity now and we know what to expect, because there has been so much confusion the last few weeks, starting with Shoprite," he said.

Zambia is not alone when it comes to state or political intervention to protect jobs in a region where unemployment levels are high and subsistence farmers make up much of the workforce, putting a high social premium on a regular wage.

Senior officials with South Africa's ruling African National Congress threatened the licences of Anglo American Platinum earlier this year over its plan to cut up to 14,000 jobs as it tries to restore profits.

They also expressed anger at Amplats' alleged lack of consultation over the proposed layoffs. Amplats, a unit of Anglo American, has since pulled back its target under intense government and union pressure.

Elsewhere in Africa such as in neighbouring Zimbabwe, government barbs are often aimed at investors from the west or South Africa, while pointedly sparing those from China, in part because of Beijing's policy of offering aid, soft loans and investment with no strings attached.

In Zambia, however, Sata's nationalist posture has in the past also targeted Chinese investors, whom he has accused of ill-treating Zambian workers or of not providing enough jobs to locals.

Mining companies in Zambia include First Quantum Mineral, Glencore International, Vale and China's Jinchuan.