Zambians have reacted with shock and dismay at a leaked video on Youtube showing Anil Agarwal, Vedanta founder and executive chairman of the United Kingdom-based Vedanta Resources PLC, mocking the Zambian government on how he was sold Konkola Copper Mines (KCM) at a cheap price of US$25 million.
Agarwal, who spoke at an event in India last March, is seen in the video ridiculing the Zambian government about how he dribbled government over the paltry amount of money he paid to buy the mine, and boasted that KCM was giving him US$500 million every year in profit, plus an extra US$1 billion.
He also mocked the Zambian government for giving him VIP treatment in 2004 when he came to acquire the asset and eventually becoming majority owner of KCM at the current 69 per cent.
At what was intended to be a “motivation speech” Agarwal, who was addressing the Jain International Trade Organisation in Bangalore, India, between March 22-23 this year, told the cheering crowd how he bought KCM for a song, rather than the US$400 million asking price.
In the 3:58-minute video, a bragging Agarwal describes his surprise at receiving a VIP welcome to the Zambian Parliament, and ridicules the late Zambian president Levy Mwanawasa for claiming that Vedanta would improve the lives of Zambians, especially those in Chingola and Chililabombwe cities where the mines are located on northern Copperbelt province.
Agarwal reveals how he told 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.
Following the Youtube revelations last week, Zambians and government have now kept up the pressure around the saga, with government demanding that KCM reconciles the profit figures attributed to its owner and those declared to the Zambia Revenue Authority.
“We took over the company. It’s been 9 years, and since then, every year it is giving us a minimum of US$500 million plus US$1 billion every year… it has been continuously giving back. It’s a matter of taking a chance,” Agarwal stated in his “motivational talk” to the gathering.
“Take chance in life definitely! All people sitting there… Take chance! If you won’t take chance, nothing will happen. Why we are different – different because we take chances. I told you we have to take chance. Then we said ‘US$25 million we will give you cash and US$375 million we have to invest in making the machines running’. We forgot the matter, and suddenly in about a month or so, we received calls; they invited us. We called up and inquired. They confirmed: ‘This company is yours’ … Really?” Agarwal said amid claps and whistling from the audience.
His remarks have angered Zambians especially that Vedanta had previously released figures from its annual reports showing that the company made US$362 million in 2013.
But Vedanta chief executive officer Tom Albanese disputed this during his visit to Zambia last February, repeating the previous claim that KCM was making a very low profit or a loss due to high operational costs and higher taxes.
Recently, KCM has touted to dismiss close to 2,000 workers from its mining units to cut down on labour costs and improve its profitability. The mine planned to cut 24 per cent of its workforce, attributing the reduction of staff numbers to high costs, dropping copper price and many of the upgrade and expansion projects comin to an end.”
Vedanta had continued to claim that they were making losses or a minimal profit at KCM. 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.
The London Stock Exchange-listed Vedanta made a profit of US$26 million from KCM for the three-month period October to December 2004, effectively recovering the purchase price in just three months.
Parliamentary Public Accounts Committee member Cornelius Mweetwa says it is unfortunate that KCM, which threatened to lay off workers for alleged low productivity, could boost of the reported huge profit margins.
Zambia Revenue Authority is investigating to establish whether claims by Vendanta Chairman that Konkola Copper Mines makes a minimum of US$500 million in profit per year is at variance with profits declared.
If the company is found wanting, tax adjustments with possible resultant penalties and interest will be made.
According to Zambian vice President Guy Scott, the Zambia Revenue Authority has written to Konkola Copper Mine-KCM asking it to reconcile the profit figures attributed to KCM owner and those declared to ZRA.
Scott warned that the law will visit KCM if found wanting.
“It is disheartening that the KCM boss could talk about buying a national asset for a song with such impunity,” ActionAid Zambia economic justice project officer Patrick Nshindano said in Lusaka.
“For us at ActionAid, this video confirms what we have always said about the privatization of some of these assets. This goes to mean that there was something fishy about the whole process,” he added.
Nshindano urged the government to move in to ensure Vedanta accounted for its operation and also to ensure that the right corrective measures were taken to see to it that Zambians benefited from the mines.
He also said the Zambian officials that negotiated the sale of KCM owed Zambians an explanation on why a company worth billions was sold to Vedanta Resources for peanuts.
The government came under heavy attack from the mining area’s chamber of commerce and the Zambia Congress of Trade Unions (ZCTU) as well as mining experts for allowing the mine to be sold for peanuts.
Stakeholders questioned the deal and the competence of the negotiating team and the awarding of an eight-year tax relief to Vedanta Resources.
Action Aid Zambia country director Pamela Chisanga has demanded that KCM be shut to allow investigations to take place so as ensure that Zambians know how much the mine makes. It has also demanded that President Micheal Sata gives the government’s position on the matter.
Vedanta Resources in a media statement issued in response to the video posted on Youtube, accused “one activist” for taking a small part of the video of its chairman’s speech and using it negatively out of context.
Group Communications Executive vice president, Roma Balwani, said Agarwal in an anecdote, referred to Vedanta’s 2004 acquisition of KCM, but that Agarwal decided not to mention that since the acquisition, nearly all the returns from KCM have been reinvested back into KCM, as it simply wasn’t relevant to his anecdote.
“In fact, over nine years of ownership by Vedanta Resources, KCM has made $2.9 billion of capital investment and made just $73 million in dividend payments – a fifth of which is to the Zambian government,” Balwani stated.
Anil Agarwal, chairman, said in the statement: “In the nine years of ownership by Vedanta Resources, KCM has made nearly $3 billion of capital investment and taken very little out. With our investment, we have invested heavily, extending the mine life, creating jobs and investing in the community. We are now Zambia’s largest employer and second biggest taxpayer.”
Balwani said with that investment, the company had dramatically increased the mine life, dramatically increased employment, doubled real salaries there, provided technical and management training for thousands of Zambians, reduced the number of expatriates and continued to be Zambia’s second-biggest mining taxpayer.
Tom Albanese, chief executive officer, said: “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.”
But an economist, Jimmy Sakala says: “No amount of damage control by Vedanta will do for any well-meaning Zambian. In fact, Vedanta’s attempt at damage control shows its insincerity. The video was demeaning, degrading and insulting to our country.”
“Nothing was taken out of context, the video shows exactly what the man was saying and this is insulting. All we are interested in now is our fair share from the US$1.5 billion profits per year paid retroactively since acquisition,” Sakala told PANA.
Timothy Mwenya, a secondary school teacher, said: “President Mwanawasa sold the mines to Vedanta for a song. This was a mistake but despite being duped and our copper stolen since then, we now have a lucky chance to get what belongs to us as a country.”
Mwenya commended President Sata for halting about 2,000 workers who were planned to be laid off by KCM.
Opposition Forum for Democracy and Development (FDD) leader, Edith Nawakwi, says revelations made by Vedanta chairman that Konkola Copper Mines has been making a minimum profit of US$500 million per year is clear indication that “all economic managers in the country are sleeping”.
The outspoken opposition leader and former Finance Minister in the previous MMD government under late president Frederick Chiluba expressed regret that the country was losing huge amounts of money in taxes as a result of the insincerity of some international companies operating in Zambia.
Nawakwi said she strongly suspected that certain elements in the ministry of Finance were conniving with some international companies to deprive the country of the much needed resources.
United Party for National Development (UPND) President Hakainde Hichilema has proposed that government re-introduces windfall tax in view of such revelations.
And National Movement for Progress (NMP) President, Ng’andu Magande, says when he reminded the ruling Patriotic Front government of the need to reintroduce the windfall tax he was called a lunatic.
Magande who introduced windfall tax during the time he served as Finance Minister in President Mwanawasa’s government before it was scrapped by Situmbeko Musokotwane says the PF has now seen the result of failing to reintroduce the tax.
“It is common knowledge that many developing countries such as Zambia are losing billions of dollars in the extractive industry owing to poor policies,” he states.
The independent Post newspaper in an editorial this week said Agarwal’s story about how he had dribbled the Zambian people and their government to make a fortune was annoying, and hoped there would be a national awakening in the light of these experiences and start doing things in the right way.
“But the anger should not be wholly directed at him (Agarwal). A greater part of it should be directed at ourselves, our leaders and our government. Agarwal knew what he was doing and we should also have known what we were doing. In fact, the Zambian government and the Zambian people were warned about how poor this deal was,” the Post newspaper stated.
It noted that through this deal, government had given away a 51 per cent stake in Konkola Copper Mines for US$25 million, a mining venture that just recorded US$60 million in its half year results this year.
“The sale is almost giving away KCM to Vedanta unless there are other hidden benefits which are yet to be disclosed. Zambians should start to question the government on the continuing practice of giving away national assets even if there is pressure from the International Monetary Fund and the World Bank,” the paper stated, concluding: “Do we deserve to be mocked by Agarwal.”
CREDIT / SOURCE : africanmanager.com