Zambia's Sata 'getting increasingly dictatorial'
05 November 2013, 15:28
Lusaka - Zambian President Michael Sata threatened on Monday
to revoke the licence of Konkola Copper Mines (KCM), owned by London-listed
Vedanta Resources, if it goes through with a plan to lay off more than 1 500
Lusaka made a similar ultimatum last month against South
African retailer Shoprite, raising investor concerns in Africa's top
"If he is threatening to lay off people let him lay off
one and we will take away the licence from him," Sata told state-run ZNBC
radio, referring to Konkola chief executive Kishore Kumar, who announced the
plan to cut jobs last week.
The company said on Friday that it plans to trim away about
7% of its work force of 22 000, including contractors, by March as it begins to
"We have been informed of the president's statement and
we shall endeavour to engage the head of state over the matter," a Konkola
spokesperson told Reuters.
Sata is a populist swept to power two years ago on an
activist platform that promised to defend workers in the impoverished southern
"Sata's interventions are getting ridiculous and really
clouding the investment outlook for particularly FDI (foreign) investors,"
said Chris Becker, Africa market strategist at ETM Analytics.
"Although Zambia's labour laws on paper are quite
liberal and give companies significant flexibility, Sata is getting
increasingly dictatorial and populist in his interventions."
If Vedanta were to pull out - and KCM is an underperforming
asset - it would have huge consequences as it is the biggest private sector
employer in Zambia.
Vedanta, an Indian oil and gas and mining conglomerate,
bought KCM a decade ago after the exit from Zambia of previous owners Anglo
But the business, which was intended as part of a push
beyond India and as an effort to boost copper exposure, has repeatedly
disappointed the market, its margins dragging behind more lucrative Vedanta
divisions like zinc or oil and gas.
Most recently, it downgraded production expectations for the
full year after mined metal dropped by a fifth in the first half. Zambia
accounted for just 5% of Vedanta's core profit in the year ended in March 2013.
The government last month threatened to shut Shoprite stores
after the South African company fired 3,000 workers who went on strike over
pay. Shoprite, Africa's biggest retailer, subsequently backtracked on the
Bonds versus FDI
Zambia now aims to borrow nearly $2bn from domestic and
foreign markets to fund its 2014 budget deficit and is becoming more reliant on
portfolio versus FDI inflows after a successful debut $750m Eurobond launch
ETM's Becker said Sata's moves "will continue to result
in a changing structure of Zambia's external financing from FDI to more
volatile and unpredictable inflows to sovereign bonds".
Zambia is not alone when it comes to heavy state or
political intervention to protect jobs in a region where unemployment levels
are high and much of the work force is still comprised of subsistence farmers,
putting a high social premium on a regular wage.
Senior officials with South Africa's ruling African National
Congress threatened the licences of Anglo American Platinum earlier this year
over its plans to cut up 14 000 jobs as it crafted a plan to restore profits.
Amplats, a unit of Anglo American, has since rowed well back
on this target under intense government and union pressure.