The government of Zambia has defended its efforts to kick London-listed copper miner Vedanta Resources out of the country, in an escalating row over tax and alleged underinvestment.
The southern African nation’s national mining vehicle, ZCCM, is seeking to have Vedanta subsidiary Konkola Copper Mines (KCM), its partner in the country’s largest copper mine, placed into liquidation.
Vedanta responded earlier this week by seeking to have the case referred to arbitration in South Africa.
The Zambian government, including its president, Edgar Lungu, has accused KCM of underpayment of dividends and taxes, as well as underinvestment in the mine, a crucial plank in Zambia’s copper-fuelled economy. It appointed a liquidator to run the company in May.
“We need the dividends from that mine to invest in schools, to invest in hospitals,” the Zambian information minister, Dora Siliya, said.
“We can’t keep talking like this over and over. We want a partner that we can work with so we can invest elsewhere. The time for mediation is over.”
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“This is not nationalisation, it is not compulsory liquidation, it is following law.”
She added that local suppliers in Zambia’s mining region, known as the Copperbelt, had been made to wait for payments, hurting the local economy.
She said the liquidator trying to sell Vedanta’s 80% stake in the mine had already had visits from Chinese, Turkish and Russian firms keen to buy it.
A South African court has ruled that the sale process should be halted but the government has pressed on regardless.
One source within the Zambian tax authorities said the company owed about $100m (£82m) in VAT, customs duties and other taxes, even once refunds due to the company were taken into account. The source added that KCM, which has previously been criticised over pollution, has also withheld $10m (£8.2m) in dividend payments.
“On the balance of numbers they owe the government more than they are owed. They’ve not been consistent in meeting their tax obligations. It’s a worsening situation.”
Vedanta disputed this, saying that it was owed $164m (£139m) by the Zambian Revenue Authority and had not been informed about outstanding payments it was required to make.
The Indian-owned company said it had “fulfilled its commitments” in Zambia and was concerned about the “apparent misuse of the legal process” by ZCCM.
It said it had paid $2.3bn (£1.9bn) in wages, $1.2bn (£1bn) in power bills and $700m (£576m) in taxes and royalties since 2006, as well as $72m (£59m) in dividends.
It admitted KCM had made local suppliers wait for payment but blamed this on the financial stresses caused by the tripling of power costs, tax increases, import restrictions on copper concentrate and the government’s failure to pay VAT refunds.
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