By Peter Chazya Sinkamba
As the Green Party, we find Government position on liquidation of Konkola Copper Mines (KCM) not only stunning and contradictory but also ill-disposed. We urge Government to rethink and abandon the liquidation strategy before it is too late as it will awfully hurt the economy even more.
We say the move is contradictory in the sense that from the exparte order appointing provisional liquidator Milingo Lungu, it is stated that the liquidator has been charged with powers to carry on with the business of KCM. Carrying on the business of an entity under liquidation does not constitute liquidation.
Who is a liquidator? A liquidator is a person appointed to wind up a company. What is liquidation? Liquidation is all about dissolution of a business, not carrying on with a business. So, the role of a liquidator is not to run a business but wind it up. Winding up is the process of settling of accounts in anticipation of dissolution of a company.
In this regard, if the objective of Government’s take-over of KCM operations is to carry on with the business of KCM with a view to rescue the business from alleged insolvency, then instead of going for liquidation, ZCCM-IH should have commenced proceedings under Section 21 of the Corporate Insolvency Act No.3 of 2017. This Section provides for rescuing a business which is in a financial distress, if there is a reasonable prospect of rescuing that company from going under. Furthermore, this Section has a better human face in that when triggered, chances are very high that the company’s creditors are likely to achieve better outcomes than in a case when a company is liquidated.
A liquidator is an undertaker or a malukula. His core job is to sell assets to settle the liabilities in a manner prescribed in Section 127 of the Corporate Insolvency Act No.3 of 2017. After selling the assets, first and foremost, he must pay himself for costs and expenses incurred for winding up, including auditors and lawyers’ remunerations.
Second priority is to pay Government liabilities including environmental costs running in millions of dollars as well as taxes, duties, rents, and rates.
If there is still change remaining, the next on the priority list is local councils’ liabilities.
If any change remains, that is when workers’ liabilities can be looked at. Even then, only 3 months’ salary severance packages are eligible for payment, including, leave pay for maximum two years. If salaries were in arrears, only 3 months’ arrears are eligible for payment.
If there is any change, next on the priority list is NAPSA and Workers’ Compensation liabilities outstanding.
Thereafter, that is when contractors and suppliers liabilities can be considered. If no change is available, then contractors and suppliers totally lose out.
From our assessment of environmental and other Government liabilities, there is a likelihood that there could be no change to pay workers, contractors and suppliers if KCM assets were to be auctioned off on ‘as-is’ basis. This is why we think that liquidation of KCM is awfully irrational.
Lastly, here is why we think a liquidator of KCM cannot carry on the business of the company. First, his mandate on sale of assets is by public auction. Come to think of a scenario whereby after processing the copper, then the liquidator must auction it within KCM premises! For if he dares export the copper abroad in a ‘transparent manner’, chances are very high that it will be seized by KCM creditors abroad who obtain global execution orders.
Also, it is important to note that mining and mineral processing is dependent on suppliers and contractors for literally everything on credit running in millions of dollars. Come to think of being given an order headed “KCM (in liquidation)” to deliver goods on credit and you are aware that other creditors have not been paid for several months if not years. You must be foolish to pump in your millions in such a venture. Especially when you consider the liquidator’s payment priority list alluded to above…..