Zambia: Government to impose audits in all mines

In the aftermath of the conflict with the Vedanta group, the Zambian government announced a forthcoming audit in all mines across the country. This measure further increases the tension between the State and the actors in the sector.

The Zambian government continues to tighten the screws on mining operators. After President Edgar Lungu announced on Monday the withdrawal of Vedanta Resources’ operating permit for its Konkola Copper Mines (KCM) copper production unit following « a series of offences (Vedanta is suspected of squandering assets for its benefit », it was the turn of Mines Minister Richard Musukwa to declare on Thursday that the government would now require regular audits at all mines in the country to prevent similar violations from occurring in other companies. KCM’s fate has been the subject of a battle between its two shareholders for several weeks: the Vendeta Resources group, which holds 79.4% of its capital, and the Zambian State, which holds the remaining 20.6% via the Zambia Consolidated Copper Mines (ZCCM) public holding company. Richard Musukwa, however, made it clear that the action against KCM « should not be interpreted as nationalization ». However, it is not clear that this development will reassure the main stakeholders, as the mining community is increasingly concerned about the rise of economic nationalism in the country. Earlier this month, it was the announced increase in the mining tax (from 3% to 9% as of July 1) that prompted an outcry from stakeholders in the sector. Speaking on behalf of the latter, the Chamber of Mines of Zambia, in the wake of Thursday’s ministerial statement, warned that the country, Africa’s second largest copper producer, was « at risk of a sharp drop in its copper production », due in particular to the impact of tax changes.
Vedanta Resources, controlled by Indian tycoon Anil Agarwal, has begun its response. On Friday, at a hearing, the firm challenged the government’s decision to revoke its operating licence on KCM. The case was adjourned until June 5. In the meantime, KCM will continue to be managed by a court-appointed liquidator.