Zambia proves Vedanta

 

Lusaka – The row over Vedanta Resources Plc-owned Konkola Copper Mines (KCM) continues with the Zambian government vowing that it would investigate and establish the truth of reports that the multinational company was ripping off Zambia in undeclared taxes.

The London-listed copper producer has been in the news over various matters related to tax evasion, environmental pollution and plans to lay off thousands of workers as a cost-saving measure to sustain the company with the fall in copper prices.

International media have reported Vedanta Resources Group, the holding company for KCM ‑ including its chairman Anil Agarwal, bragging that KCM earns about US$500 million per year after buying the mine for only US$25m from the Zambian government in 2004.

The reports have sparked sharp reactions from most stakeholders who feel that the KCM boss was mocking Zambians and the government says it will investigate the reports using proper channels through relevant institutions such as the Zambia Revenue Authority (ZRA).

Vice-President Guy Scott says the government will ensure that it gets a fair share of wealth from Konkola Copper Mines.

According to VP Scott, should it be established that the figures attributed to Vedanta Resources Group chairman are different from the ones KCM has been declaring locally, the company will have to account for what it has not paid to the Zambian government in taxes.

“We can’t all be tax inspectors. Even the Vice-President cannot be a tax inspector. We want our fair share of wealth from the operations in KCM.

“We can’t start saying that we have always told you that they are crooks without figures because that will not help anyone. We need to see the figures first.” 

According to reports citing Agarwal, the KCM boss was recently reported as mocking the government over the paltry amount of money he paid to buy the mine, which is now giving him millions of dollars in profit.

A video released by activists from Foil Vedanta, Agarwal boasted of raking in US$500m per year when he bought the mine for a lesser amount, despite the fact that currently, the company is reportedly battling with operational challenges.

Agarwal allegedly boasted in the video that the Zambian authority had accorded him VVIP (Very Very Important Person) treatment when he came to acquire the asset and eventually becoming majority owner of KCM at the current 69 percent in 2004.

He made the controversial comments when he addressed more than 4 000 delegates during the gathering of the Bangalore chapter of the Jain International Trade Organisation (JITO) in Bangalore, India, between March 22 and 23, 2014.

JITO is a worldwide body of Jain businessmen, industrialists, knowledge workers and professionals in various fields reflecting their glory of ethical business practices.

Agarwal told the cheering crowd how he bought KCM for a song, rather than the US$400m asking price, in a 3:58-minute video, a bragging Agarwal describes his surprise at receiving a VVIP welcome to the Zambian Parliament, and ridicules the then Zambian president Levy Mwanawasa for claiming that Vedanta would improve the lives of Zambians, especially those in Chingola and Chililabombwe.

Agarwal claimed he duped the late President Mwanawasa on their first meeting that 30 members of his delegation missed the connecting flight out of Johannesburg into Lusaka, when in fact he had only travelled with one engineer from his firm.

Agarwal claimed in the video that KCM was giving him US$500m every year in profit, plus an extra US$1 billion.

In recent years, KCM has threatened to dismiss close to 2 000 workers from its mining units to cut down on labour costs and improve its profitability. Vedanta had continued to claim that they were making losses or a minimal profit at its KCM operations.

The mining unit claims declining ore grades at its mining units and high operational costs on the backdrop of high labour and energy costs was hurting the country's second-largest copper producer.

Agarwal said in the video that: “We took over the company. It's been 9 years, and since then, every year it is giving us a minimum of US$500m plus US$1b every year… it has been continuously giving back. It's a matter of taking a chance. I will keep telling you stories. We had Oil Company. They told us no one else can buy Oil Company…”

This seems to have greatly angered Foil Vedanta, which had previously released figures from Vedanta's annual reports showing that the company made US$362m in 2013, a figure that was disputed by Vedanta chief executive officer, Tom Albanese, during his visits to Zambia last February.

Foil Vedantais an independent grassroots solidarity organization focused primarily on the FTSE 250 British-Indian mining giant Vedanta Resources PLC.

Former mining engineer then under the Zambia Consolidated Copper Mines and now an opposition political leader, Charles Milupi has joined the fray arguing that Zambians should not be taken for fools over their minerals by investors like KCM owner.

And Chingola residents, where the mines have their major operations have resolved to petition Zambian President Michael Sata over the activities at KCM over allegations the parent company, Vedanta Resources has over the nine years it has been operating the mine just declared US$75m in dividend payments, – of which a fifth was to the Zambian government. Milupi is adamant that Vedanta had taken very little out of KCM. “Agarwal has come out very clearly to say that in fact they are making a lot of money. Agarwal is the chairperson of the whole group. He knows what he is making,” the opposition leader told local Press.

“The statement that they have. Zambians must not be taken as fools. The chairman is the owner of the company, that is the one person who knows what is coming in and in this case Agarwal has told us he is very happy with what is coming out of KCM because of what he has done.”

He urged President Sata to immediately recall parliament from the recess so that they can come and legislate the reintroduction of windfall tax because these happenings are not just applying to KCM, but mining sector in general.

VP Scott told parliament on February 14, 2014, in a ministerial statement 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$1b. They have not paid loans to banks; they owe a lot of money to companies. So there are a lot of all these strange things happening,” Vice-President Scott said.  He argued that KCM was hiding a lot of information from the government something he described as sad. 

“It seems they are heading into the direction of receivership. It is a matter that concerns billions of dollars that we stand to lose. The owner of Vedanta is buying his own shares at the moment,” he said. 

However, Vedanta Resources has dispelled reports by refusing that its chairman mocking the Zambian authorities.

Group Communications and Corporate Social Responsibility Executive Vice President Roma Balwani said in a statement that: “nearly all the returns from KCM have been reinvested back into the company. In fact, over nine years of ownership by Vedanta Resources, KCM has made US$2.9b of capital investment and made just US$73m in dividend payments – a fifth of which is to the Zambian government.”

The statement, however by Vedanta Resources did not contain a direct apology for the statements made in the video, but it did quote Vedanta Resources CEO Tom Albanese, as saying:

“KCM has a long mine life, and we are committed to see it through the near term challenges it currently has. We have made the investments, and now we’re making a commitment in terms of all aspects of the management, the stakeholder relations, the government dialogue, to make this the world-leading Company that it deserves to be. Our reinvestment in the business is not for the next three to six months, it’s being reinvested into the business for the next 50 years.”

The company also claims to have invested US$120m in “local communities, providing schools, educational programmes, sustainable agricultural initiatives, critical medical programmes and funding for cultural events”. However, on the leaked video, Agarwal boasted that KCM makes him US$500m in profits a year, while he acquired the mine for only US$25m. Earlier Scott said that the ZRA had written to KCM to ask them to reconcile the figures by their chairman Anil Agarwal and what they have declared before the tax authority.

May 2014
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