Copper Colonialism report shakes Zambia

Picture 310th March 2014.  Over the past few weeks Foil Vedanta’s report Copper Colonialism: British Miner Vedanta KCM and the copper loot of Zambia has been creating national level debate in Zambia and even globally. Vedanta’s executives have now flown out to Zambia four times in the last month to try to minimise the reputational damage caused by the evidence presented in the report, including tax evasion, misdeclaring of profits, environmental devastation and abuses of worker’s rights. Following a series of closed door meetings the Government of Zambia has now made a deal with Vedanta which claims that they will not sack any workers and will pay off debts. The truth in this claim in yet to be seen but many other issues remain unaddressed. Primarily, Zambians must demand that the Annual Reports of KCM and the government’s investigation into the company are made public.

This is a compilation of some of the articles covering these issues in chronological order, with a few key excerpts from each one.

Copper gate scandal deepens

03 February 2014. Zambian Daily Nation

Mineworkers Union of Zambia (MUZ) has instituted investigations into a report by Foil Vedanta which shows that KCM made $360 million in the year 2013.

MUZ general secretary, Joseph Chewe confirmed having received the report which has since been given to the union technocrat team comprising director of research Charles Muchimba and his deputy Yoya Kumwenda.

The report contains various contentious issues such as how much KCM was bought by Foil Vedanta and how much it makes which the Zambian people do not know about.

The report also shows that KCM contaminated water supply in Helen and Shimulala communities which are located near KCM’s Nchanga mine in Chingola as well as the Mushishima stream which runs nearby.

Vedanta Raked in 362 Million US Dollars From KCM in 2013

Feb 03, 2014.    MUITV

Misconceptions continue to reign in Zambia’s mining sector.

This time Foil Vedanta, a London based group has released a report on the operations of Konkola Copper Mines-KCM- in Zambia revealing that, contrary to popular opinion, Vedanta which is KCM’s parent company, is making large profits at KCM.

 

Vedanta Resources dismisses reports that KCM has been reporting false profits and loses

February 6, 2014.  Lusaka Times

Vedanta Resources Plc, the owners of Konkola Copper Mine (KCM) have dispelled rumours that the company had been reporting false profits and losses to the Zambian Government and externalising its profits.

Meanwhile,Government and Vedanta Resources Plc have amicably resolved all differences surrounding the retention of workers at the mining giant.

With new management at Vedanta and PF being new in power, we have agreed to bring on table the new approach to business to have a win, win situation as we burry all our past differences and looking forward to cordial working relations, “he said.

 

 

Govt assures of permanent jobs at KCM

February 7, 2014. Daily Mail.

 

Minister of Labour and Social Security Fackson Shamenda said Government and Vedanta have agreed to do away with casualisation at KCM.
Mr Shamenda said this at a media briefing in Lusaka yesterday after a meeting with Vedanta Resources Plc’s new chairperson, Tom Albanese.

 

And Mr Albanese said the profit and loss accounts of KCM are transparent.
He said audit reports which are thoroughly scrutinised are made available within the country and outside.
“On behalf of the shareholders and subsidiaries of Vedanta, the reports are prepared according to Zambia, United Kingdom and United States (US) financial regulations,” Mr Albanese said.
He said despite KCM making profit, most of it is lost to taxes and operational costs.
“I can assure you I have a responsibility to ensure that those reports are transparent. I will be happy to have face-to-face discussions with any NGOs that feel the company is externalising its profits,” Mr Albanese said.

 

 

Report dismisses claims that KCM is loss-making

By Kabanda Chulu, Thu 13 Feb. 2014.  Post Zambia

 

THE Zambian government must not believe the perception created by Vedanta Resources that KCM is a loss-making company that needs to be rescued by the state, says a UK-based civil society group.

But Vedanta Resources’ subsidiary Konkola Copper Mines public relations manager Joy Sata says the mining company does not want to discuss any aspect of the report as it is inaccurate and misleading.

The report suggests that Vedanta might also be exporting considerably more copper than they claim in Zambia as well as cobalt and other minerals.

“Citizens must enhance the monitoring of trucks leaving their facilities to estimate the true amounts,” it stated.

The report also looks at the real interests behind mining companies in Zambia.

“There is also need to question foreign governments such as Norway and the UK, who play a duplicitous game of funding transparency and accountability projects on mining through NGOs and the Zambian government, while also profiting from the abuses of the very same mining companies.”

Commenting on the report, Das stated that it was shocking to discover how little information Zambian authorities and communities had about their own resource and the companies exploiting it.

“Despite its role in the economy, copper is the elephant in the room in Zambia. This report aims to expose the real interests controlling Zambia’s copper industry, from banks and investment firms to foreign governments and NGOs,” Das stated.

And Rose stated that mining companies were commonly called ‘investors’ in Zambia but what they were doing was far from investment. “It is short-lived extraction and loot of resources, leaving behind only environmental and social damage which will be paid for by future generations. There is limited time left for Zambians to change the course of history, make links with peoples’ movements opposing these policies elsewhere and truly profit from this resource before it is all gone,” she stated.

When asked to respond to the allegations raised in the report, Sata said Vedanta, through KCM, had invested more than US$2.8 billion in its mines in 10 years while paying out US$68 million in dividends to shareholders and had extended the mine life substantially.

“We have read the report published in January 2014 and do not wish to discuss any aspect of it; their report is inaccurate and misleading. KCM has increased jobs from 13,000 to 18,000, doubling wages in real terms, and has provided technical training to many thousands of Zambians,” Sata stated in an email response. “KCM has paid US$120 million into social investment programmes across the country; investing in schools, hospitals, agricultural and educational schemes, as well as sports and recreation.

Foil Vedanta responds to Tom Albanese’s refute of evidence against Vedanta in Zambia

Lusaka Times, February 13, 2014.

A word for word copy of our response to Tom Albanese

Comments on this piece:

Alenzo mukena says:

February 13, 2014 at 9:14 am

Vedanta is a complete prestine capitalist. Its unfortunate few years from now we will have deserts on the copperbelt with nothing to show for. Why has the goverment been blinded when in the actual sense more than 2000 employees have lost employment through contracting companies.kcm has been grabing contractors` sites so that they are forced to lay off.and there you are kcm has rescinded the decision to lay off. May God deliver mother Zambia. Its sad.

C. General says:

February 13, 2014 at 10:46 am |

Foil Vedanta operates as An Opposition Party that is against anything that the Ruling Party does. All their publications are meant to dent Vedanta image with information they gather from unreliable sources or indeed from the streets.

When you read their article “Copper Colonisation” (last paragraph on page 5) you find that they claim to have failed to obtain true production statistics from neither KCM nor the Zambian Government. So, who is furnishing them with their speculated information??? Is it the street vendors who steal ore and copper from KCM day in and day out???

I have just come to believe that intentions of Foil Vedanta are ill concieved and very soon even the Zambian Government will ban them. KCM provides statistics to Govt and Foil Vedanta has failed to obtain these…

 

Zambia Says Vedanta Unit Aims to Move $1.5 Billion Liability

Bloomberg.   By Matthew Hill Feb 14,

Vedanta Resources Plc (VED)’s Konkola Copper Mines Plc unit has removed “a lot of money” from Zambia and wants the government to assume its liabilities that exceed $1.5 billion, said the nation’s Vice President Guy Scott.

This is a matter of national importance,” said Scott. “It’s a matter concerned with billions and billions of dollars, tens of billions of kwacha, that we stand to lose if we don’t stand together and show that we won’t be taken for a ride.”

An external spokeswoman for Vedanta declined to comment by phone from London, asking not to be named in line with company policy.

 

 

Govt won’t be taken for a ride by KCM – Scott

By Moses Kuwema,   Sat 15 Feb. 2014,

During the Vice-President question and answer session yesterday and in response to Bwacha PF member of parliament, Sydney Mushanga, who wanted to know what the government was doing about the plight of KCM workers, Vice-President Scott said there were a lot of strange things happening at KCM.


“We are keeping a careful eye on KCM. It seems a lot of money was taken out and the firm now has a lot of liabilities which are in excess of US$1 billion. They have not paid loans to banks, they are owing a lot of money to companies. So there a lot of all these strange things happening,” Vice-President Scott said

He said KCM was hiding a lot of information from the government something he described as sad.

 

Milupi calls for effective mine tax regime

By Kabanda Chulu, 17 feb 2014.  Post Zambia.

 

Commenting on the report compiled by UK-based civil society group, Foil Vedanta, that the Zambian government must not believe the perception created by Vedanta Resources that Konkola Copper Mines (KCM) was a loss-making company that needed to be rescued by the state, Milupi yesterday said there were various ways in which mining companies hide their profits.

He said the report was a clear manifestation of what was obtaining on the ground.

The report titled ‘Copper colonialism-Vedanta KCM and the copper loot of Zambia’, revealed that Vedanta Resources made approximately K2 billion (US$ 362 million) or 12.9 per cent of their total group revenue from KCM in 2013.

But Vedanta Resources’ subsidiary KCM’s public relations manager, Joy Sata, said the mining company doesn’t want to discuss any aspect of the report because it was inaccurate and misleading.

Vice-President Scott also disclosed that KCM seemed to have taken a lot of money out of the country, resulting in the company having liabilities in excess of over US$ 1 billion.

“They have not paid loans to banks; they owe a lot of money to companies. So, there are a lot of these strange things happening and government is keeping a careful eye on KCM which is hiding a lot of information from the government,” he said.

 

Guy Scott’s sentiments

Mubanga Luchembe,  Mon 17 Feb. 2014,  Post Zambia

It is an indication that the multinational company previously used the muscle of its capital to bamboozle MMD political leaders to grant the firm concessions that, in effect, gave it a disproportionate, and unconscionable share of the proceeds that accrued from the Zambian mineral resources.


And this is where the problem lies. The great sinners in this alleged rip-off could be no other than Vedanta Resources.
They used their negotiating skills, honed over decades; and it appears with the help of the political and economic muscle of their overseas collaborators, they browbeat the MMD government to sign away mining concessions that ensured that Zambians got very little for their God-given resources.


Therefore, this message goes to all government leaders dealing with Vedanta Resources – it is only interested in advancing its own interests, never KCM’s and never yours.
It is now generally accepted that Zambia is one of the richest countries in Africa, in terms of natural resources, but one of the poorest by bank balance.


This conundrum has been made possible by a skewed world economic and political order that ensures that Zambian resources are exploited for a song by multinational companies, which leave very little for the development of our country; so little that there is never enough to run the economy without foreign aid.

 

Dipak wants KCM to account for its conduct

Bivan Saluseki. Tue 18 Feb. 2014,  Post Zambia

 

DIPAK Patel says Konkola Copper Mines should be made fully accountable for its conduct in Zambia.
“Enough is enough,” said Patel, who is former commerce minister.
He said the findings in the “Vedanta KCM and the copper loot of Zambia” report deserved a considered and detailed response from the Zambian government.


In an interview yesterday, Patel said the issues raised on actual revenue, price of the copper sold, taxes paid and unpaid were real and needed to be answered.
“It is shocking that a British listed company could have engaged in fraudulent activities and non-transparent governance,” he said.
“It also begs the question as to what the Zambian nominated directors on the board of KCM are doing. Under the Zambian companies Act, each director of the board is personally responsible for the activities of the company and can be held liable. It is high time that all directors are made to account as should the management.”


Patel said the environmental concerns raised in the report need to be answered by the Zambia Environmental Management Agency.
“And we all need to know as a matter of public interest whether the Kafue River is being polluted or not and by who,” he asked.

 

Patel said the observation by British member of parliament Lisa Nandy about Vedanta being ‘one of the companies that have been found guilty of gross violations of human rights’ should also be taken seriously.
Nandy quoted Rochard Lambert, the former director general of Confederation of British Industries, who said ‘it never occurred to those of us who helped to launch the FTSE 100 index 27 years ago that one day it would be providing a cloak of respectability and lots of passive investors for companies that challenge the canons of corporate governance such as Vedanta…’.


Patel said that observation spoke volumes about Vedanta’s perception and Zambians should not shy away from ensuring that a British listed company’s investment in Zambia through KCM was made fully accountable for its conduct in the country.
“The answer may not be in nationalisation as this would ironically only help Vedanta to walk away from KCM without meeting their huge foreign debt obligations to Standard Chartered Bank and others,” he explained.


“But instead, KCM must be compelled to be made fully accountable for all revenues, taxes and other obligations. Zambia should not be shy in seeking assistance from abroad and obtain the necessary competencies that are required for a forensic audit. No longer should we be in a self-induced mode of sleep.”

 

 

Zambian mine denies reports of closing down

Shanghai Daily, Feb 20, 2014.

 

The government concerns followed a report released by Foil Vedanta, an international watchdog that has been trailing the operations of the mining giant throughout the world.

 

The report revealed that although Vedanta Resources was making most of its money from its operations in Zambia, its contribution to the country’s tax revenue was close to zero and that the company may be exporting more copper than it claims in Zambia.

According to the report, the style of operation was a pattern for Vedanta across India and elsewhere.

.But according to a statement seen by Xinhua, the company has denied the reports that it was on the verge of collapsing, adding that the company will continue to build on its current investment in Zambia.

 

“In recent weeks, a variety of wild and misleading statements have been made about KCM and its parent company, Vedanta Resources Plc, attributed to a report by an NGO (Non Governmental Organization,” the statement said.

“Our mining operations and production has never been kept secret: the Zambian people own 20.6 percent of KCM through ZCCM-IH. Therefore as a good corporate citizen, the company reports all the required operational information, on a regular basis, to its shareholders and the various regulatory agencies,” the statement added.

 

 

No mine can claim to be making losses – Mwansa

Gift Chanda Sun 23 Feb. 2014.  Post Zambia

DR KALOMBO Mwansa says there is no mining company which currently can claim to be making losses. And Dr Mwansa, a former mines minister, has challenged Konkola Copper Mines to produce evidence to back its claims that the findings in the “Vedanta KCM and the copper loot of Zambia” report were inaccurate.


Meanwhile, shareholders in KCM’s parent company, Vedanta Resources, have arrived in the country to try and resolve issues with the government on KCM.

Commenting on the report, Dr Mwansa, who also served as foreign affairs minister under the MMD government, said KCM was not being truthful about its operations in Zambia.
“…because at this stage, there is no mining company which can claim to be making losses. It is not just true because the prices are good and the labour costs are always low, especially in Zambia. The wages are relatively low compared to other countries, so there is no way any company can claim to be making losses at this stage, it is not true,” he said in an interview yesterday.


“They must be made to account, they must disclose what it is they are giving to the government other than saying they have put a road there or done this and that in terms of corporate social responsibility because corporate social responsibility cannot be a substitute for taxes. These are two different things, they should pay tax because there is no substitute for that.”

 

“KCM is saying that the report is inaccurate but they are not telling us how inaccurate it is. Let them produce their own figures because these people have produced figures,” Dr Mwansa said. “KCM must come out and explain by giving us the figures of what is really inaccurate about the report.”


He also urged the government to enhance Zambia’s capacity to understand what goes on in the copper mining industry. “We don’t have the capacity to understand what goes on beyond board decisions, beyond management decisions,” Dr Mwansa said. “For us to do that, we have to build capacity at ZRA, capacity at Ministry of Finance, and capacity at the Ministry of Mines so that we can understand the mining industry better than we do now. We need to invest in training staff to understand issues. But beyond that, we need to work with other countries. I know that there was a time when Namibia, DRC and Zambia used to meet to discuss issues of common interest in the mining industry but I don’t know if that is still going on. But beyond that, we need to involve everyone anywhere in the world so that we can understand this industry better and be able to come up with common policies and regulation so that we can prevent what we call foreign shopping within the mining industry.”

 

Copper War: Zambia puts Kongola on the spot for tax evasion

by Felix Njini, 28th Feb 2014. Southern Africa Times.

Africa’s biggest copper producer, Zambia, is at war with Konkola Copper Mines (KCM), a unit of London-listed Vedanta Resources Plc, which is also one of the country’s largest miners, over allegations of transfer pricing.

Vedanta Resources officials were in Zambia this past week, in what appeared to be an attempt to calm rising tensions, as Lusaka stokes up the heat on the multinational, accusing it of dodging tax in the country.

A report released in January by a London-based non-governmental organisation, Foil Vedanta, titled ‘Vedanta KCM and the copper loot of Zambia’ accused the company of “widespread use of transfer mis-pricing”, a mechanism in which a corporate entity exploits legal loopholes to under-declare profits to reduce tax payments.

Globally, there is consensus that multi-national corporations have milked Africa over the past decades through transfer pricing, which is made easy by use of tax havens such as the British Virgin Islands and the Bahamas only to mention a few.

The maze characterising the global commodities trade system means that Zambia has no clue as to what happens to copper when it leaves the country’s shores. The government has previously admitted as much and is trying to come up with measures to plug the losses.

“The fact is that most metal is traded on the high seas   a colonial tradition which is almost totally de-regulated, and unaccountable,” says the report by Foil Vedanta.

“Vedanta claim their Zambian assets at KCM comprise 13.6 million tonnes of copper, which, at current prices would be worth US$99 billion. Is this resource benefitting the people of Zambia under Vedanta’s management? If not, how can the Zambian people radically re-examine the worth and potential of this enormous national asset,” the report says.
One African nation starts to ‘push back’ on abusive foreign investors

Copper-rich Zambia is open for business, not exploitation.

By Alexander Mutale.  March 2, 2014.

 

Africa: Undermining Africa’s Wealth

A critique of the British government’s and British extractive companies’ role in Africa

By Claude Kabemba, 2 March 2014.   All Africa.

 

In Zambia, a recent study entitled “Copper colonialism: Vedanta-KCM and the copper loot of Zambia”, it is very clear that this British company does not respect human rights or the labour laws of the host country or international standards to which Britain is a signatory.

Vedanta-KCM has created misconceptions in Zambia that it is an Indian company when it is actually a British one. Such misrepresentation raises questions about the integrity of the company.

Since it started operating the mine the company has been in the news for damaging the environment and violating workers’ rights.

It is also accused of tax avoidance – with illicit flows finding their way to Britain. Its London registration is important to Vedanta for attracting investment and for allowing it to have unrestricted use of the UK’s many tax haven territories, such as the Bahamas.

These islands are where Anil Agarwal keeps the enormous profits from his 68% share in Vedanta, via his holding company Volcan Investments, and avoids paying any tax in the UK or elsewhere.

 

 

Zambia calls crisis meeting with mining firm over closure reports

Friday, 7 March 2014. Coastweek.

 

A senior Zambian government official said on Friday that a crisis meeting has been called with mining giant, Konkola Copper Mines (KCM) Plc, following reports that the company had been transferring huge profits from the country and under reporting production figures.

KCM, a unit of London-listed Vendata Resources Plc, has come under scrutiny following reports that it was under reporting its production figures and transferring profits from the southern African nation.

The revelation forced Zambian Vice-President Guy Scott to tell parliament that “strange things” were happening at KCM and that the company maybe on the verge of bankruptcy and that the government was keeping “a close eye” on the company’s operations.

But Minister of Mines, Energy and Water Development Christopher Yaluma told journalists in an interview that a meeting has been called over the weekend to discuss, among other things, the contents of the report and to find a way forward.

We are meeting KCM management today (Friday) and tomorrow (Saturday). We want to discuss the content of the report… and we don’t want any witch-hunting,” he said.

He said the purpose of the meeting was to look at issues that would make the mining firm to improve its operations, adding that the company has invested so much in the country and it was the government’s desire for the company to continue investing in its operations.

On Thursday, the company issued a statement denying that it was on the verge of bankruptcy and that it will continue to build on its current investment in Zambia.

 

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