Billionaire Agarwal Has a Warning for Zambia 

(Bloomberg) -- Anil Agarwal, the Indian billionaire owner of Vedanta Resources Ltd., said mining companies are likely to stop operating in Zambia as a result of a state-owned firm seeking to liquidate his copper-mining business there.

Agarwal’s warning, published in a government newspaper on Wednesday as a “personal message” to citizens of Africa’s second-biggest copper producer, comes as his company is trying to meet with President Edgar Lungu over state-owned ZCCM Investments Holdings Plc’s move this month to wind up Konkola Copper Mines Plc.

“The current position can only hurt the country’s hard-earned democracy and investor-friendly status,” Agarwal said. “I see a lot of mining companies looking to exit Zambia, despite there being huge potential to develop downstream industries.”

Fixed-income investors have already fled the country’s bonds. Yields on Zambia’s $1 billion in notes due 2024 surged to a record 20.8% on Wednesday. That’s higher than any country besides Venezuela, which is in default. If Agarwal’s warning proves right, an already struggling economy would suffer further from a decline in production of copper, which accounts for more than 70% of export earnings.

ZCCM-IH, which owns 20.6% of Vedanta’s KCM, on May 20 won a provisional order to liquidate the company -- three days after Lungu had warned Vedanta of “divorce” as he claimed the company had lied to the country about planned expansions and cheated on tax payments. The government said it moved to wind up the company to prevent its collapse and to protect jobs. Vedanta is seeking to formally challenge the court decision and the matter will be heard on June 4.

Taxes Owed

While acknowledging that the government owes Vedanta 1.9 billion ($142.8 million) kwacha in value-added tax refunds, the company owes the nation 3.01 billion kwacha in taxes, Information Minister Dora Siliya told reporters Wednesday in Lusaka, the capital. Vedanta is “trying to hold us ransom,” she said in response to claims the government is spooking investors.

“Even now there are many companies, people have flown into the country because they see the opportunity,” she said, referring to KCM. “We just want the best partner for the people of Zambia.”

Vedanta’s dealings with the southern African nation have been strained since at least 2013, when the government canceled its then chief executive’s work permit after KCM announced plans to fire 2,000 workers. The company has hardly posted profits since Vedanta bought it 15 years ago, and there are frequent allegations mining companies including KCM don’t pay enough tax, claims Vedanta has denied.

To contact the reporters on this story: Taonga Clifford Mitimingi in Lusaka at tmitimingi@bloomberg.net;Matthew Hill in Maputo at mhill58@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net, Pauline Bax, Jacqueline Mackenzie

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