Vedanta Unit Apologizes to Zambia After Permit Revoked

Zambian President Michael Sata (Reuters picture)

Vedanta Resources Plc (VED)’s Zambian unit apologized to the president of Africa’s biggest copper producer after the country revoked the work permit of its chief executive officer.Konkola Copper Mines Plc, the southern African nation’s biggest investor, “wishes to unreservedly apologize to the president of the republic of Zambia and the nation for the unfortunate remarks” published in the media, the company, based in Chingola, said in a statement on Monday 1 1.

Zambia canceled the work permit of CEO Kishore Kumar after Konkola said it would dismiss 1,529 workers. President Michael Sata said government will cancel the company’s license if it fired any workers, and the labor minister Fackson Shamenda said Kumar told him the president’s remarks were “mere rhetoric,” the state-owned Daily Mail reported on Nov. 8.

“He was being very arrogant,” Minister of Information and Broadcasting Mwansa Kapeya said by mobile phone from Lusaka, the capital, yesterday. Kumar, who started the job in August, won’t be allowed back into the country, Kapeya said.

The state-owned Times of Zambia newspaper on Nov. 6 reported the company fired 76 workers effective Sept. 19, under the headline “KCM defies Sata.”

Konkola “fully respects” Sata’s directive not to fire any workers and the reports of dismissals were inaccurate, the company said in a statement published in the Lusaka-based newspaper today. Kumar flew out of the country on a scheduled business trip to South Africa on Nov. 8, the company said.

Personal Issue

The revocation of Kumar’s permit is a personal issue with an individual, and the government still “fully supports” Konkola, Mines Minister Christopher Yaluma said in an interview today in Lusaka. Earlier, he told reporters that government is putting together a task team to investigate the operational problems at the company.

NKC Independent Economists, a Paarl, South Africa-based political and economic research company, cut Zambia’s political risk rating because of the actions against Konkola and said expansion plans in the country are “best mothballed” in the short term.

“We downgraded our rating because Zambia’s investment environment can no longer be trusted,” Gary van Staden, an analyst at the company, wrote in an e-mailed note. “The Sata regime cannot continue with this suicide plan, it either stops and some semblance of sanity returns, or the economy suffers significant damage.”

Reversing Decision

In addition to his role at Konkola, Kumar is the CEO of Vedanta’s Africa base-metals business, which operates zinc mines in South Africa and neighboring Namibia. He also overseas the company’s Copper Mines of Tasmania unit.

The company in June reversed a decision to fire 2,000 workers after holding talks with the government and labor unions. Konkola says the latest proposed cuts are necessary because of a decline in the grade, or proportion, of copper in the ore it mines, low prices for the metal and poor worker productivity. The Zambian unit is forecast by the London-based company to produce 140,000 metric tons of copper this fiscal year, which ends March 30.

“You need to have regard for the authorities,” Kapeya said. “The government said you just can’t be terminating employment without giving a specific reason.”

Shoprite Case

A Konkola spokeswoman, who asked not to be identified in line with company policy, declined to comment. Kumar didn’t immediately respond to an e-mail seeking comment.

Shoprite Holdings Ltd. (SHP), Africa’s biggest grocer, last month reversed a decision to fire more than 2,000 striking Zambian workers after the government threatened to cancel its trading license.

(With Bloomberg)

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