By Logic Lukwanda
The Centre for Trade Policy and Development (CTPD) has noted with concern, that Glencore, the former owners of Mopani Copper Mines which the Zambian government has acquired at a cost of $1.5 billion lent itself money for the operations of MCM.
CTPD Senior Researcher-Extractives Webby Banda notes that this is clear that multinational enterprises borrow themselves money to dodge tax payments and this subsequently translates into revenue leakages in the mining sector.
Mr Banda has also questioned the value of the loan and how confident the government is that this loan has not been overpriced at the benefit of Glencore and whether the state did undertake comprehensive financial due diligence to ascertain the true value of this loan.
He said looking at the sketchy details of this deal, one can safely conclude that Glencore has transmitted all technical and market risk to ZCCM-IH and is to benefit from the riskless docile position of debt servicing by ZCCM-IH and arbitrage opportunity emanating from having buying rights on copper output adding that the trend of undervaluing and overpricing of mining assets will continue in perpetuity if the country does not craft its own mineral asset valuation code.
Mr Banda also notes that what is not clear is if the loan settlement mechanism is sustainable, and whether the interest and principal payment shall be based on 10, 90, or 100 percent production as well as what happens when ZCCM-IH defaults in servicing the principal and interest amounts and if $1.5 billion transaction debt add to the current debt stock of Zambia.
Meanwhile, Mr Banda says looking at the circumstances in which the deal was negotiated it was unavoidable given the threat made by Glencore to place the mine on care and maintenance as this could have resulted in a loss of more than 15,000 jobs and this could have subsequently sent ripple effects to other businesses linked to mining adding that 2021 being an election year, the government could not trade the job losses with care and maintenance.
PHOENIX NEWS