Four-fifths owned by Indian commodity tycoon Anil Agarwal’s Vedanta and the remainder by the government-controlled Zambia Consolidated Copper Mines Investment Holdings , Konkola Copper Mines
In explaining the liquidation application, President Edgar Lungu’s government cited breaches of KCM’s operating licence and its financial position. But there may be more sinister motives related to Zambia’s precarious debt situation. An IMF deal is currently unlikely. The Zambian government kicked out the IMF representative Alfredo Baldini in 2018, and there’s no good way to negotiate without a resident representative in place. Moreover, the IMF is unlikely to change its view that the government of Zambia needs to stop spending and borrowing, especially from the Chinese, which they won’t do.
Equally, a rise in electricity tariffs hit KCM particularly hard, with its huge power demand on pumping no less than 350 million litres of water a day, which doesn’t produce any copper. Trimming labour costs is made more difficult in an environment where cash flow is weak and workers are entitled to three months’ pay for each year of service.
Vedanta, and KCM, with a record of environmental problems and faltering production, is the softest target for such a move among the big miners. The liquidation application came shortly after Vedanta reported an annual loss of $165-million, blamed on import taxes on concentrate from the Congo and the weakening of the kwacha.
There is, of course, the cost to governance — and of establishing the wrong incentives for government policy — if a solution is cobbled together. This “success” could encourage a fresh attempt to extort from other mines, including through raising electricity tariffs.