Zambia gained nothing from sale of KCM

Zambia got nothing from the sale of Konkola Copper Mine (KCM) prominent businessman Andrew Sardanis has revealed.

Mr Sardanis has further revealed that the US$16.8 million that Vedanta should have paid to ZCCM-IH has disappeared.

Instead according to Mr Sardanis, president Levy Mwanawasa awarded KCM a tax gift of US$2.5 billion by allowing it to carry forward tax losses, meaning that Zambia surrendered US$2,543,588,000

Mr Sardanis said that the Mwanawasa government had been very secretive about the deal.

“I tried to obtain the details for my book, “A Venture in Africa”, but I struck a wall of silence. I never managed to obtain information as to whether the ministry of finance had actually received the US$16.8 million  from Vedanta or whether it  waved it and on whose  instructions,” he said

Detailing the term under which KCM was sold Mr Sardanis explained that the mines was sold to Vedanta on terms that US$25 million would be paid in subscriptions for shares to secure 51 controlling interest. Since this diluted the shareholding of Zambia Copper Investments (ZCI) from 58 to 28.4 per cent Vedanta paid ZCI US$23.32 million by installments over a period of four years in compensation.

Vedanta should also have paid US$16.8 million to ZCCM-IH as compensation for the dilution of its shareholding in Konkola from 42 to 20.6  per cent but it did not.

According to Mr Sardanis then minister of finance Mr Ng’andu Magande issued a credit note to ZCCM-IH against its government debt and is not clear if this money was paid. Mr Sardanis however said that the worst aspect of the deal was the tax concession.

But Mr Mwanawasa’s generosity to Vedanta knew no bounds. He proceeded to give it an additional present of some US2,5 billion by allowing KCM to carry forward all the tax losses incurred up to and including December 31 2003.

These, according to published accounts, amounted to US$635,897,000. As the income tax rate for KCM was set at 25 per cent unchangeable for 20 years, KCM will not start paying income tax until after it made profits in excess of US$2,543,588,000, which means that government gave Vedanta a present of US$ 2.5 billion dollars in tax foregone.