‘Think again, Anglo,’ says Anderson Mazoka
Anglo American’s announcement that it was pulling out of Zambia’s Konkola copper mines has to be counted as the biggest failure of privatisation in Africa thus far. The economic implications for Zambia are severely negative. Can Anglo be persuaded to think again? Anderson Mazoka, former director of Anglo in Zambia and now leader of the opposition in the newly formed government, in this conversation with Tom Nevin, thinks Anglo can and should.
Former director in Zambia for Anglo American and now leader-apparent of the opposition after being pipped at the post by Levy Mwanawasa in the January Presidential election, Anderson Mazoka, feels that Anglo American has both a moral and business obligation to stay in Zambia.
When African Business asked him if he thought Anglo was correct in pulling out, Mazoka said Anglo was faced with a level of historical commitment.
“If you understand Anglo correctly, you will see that they have made money out of Zambia. Anglo plc now has its headquarters in London. The seed capital that took Anglo out of Africa was the proceeds from Zambia investments, from Minorco.”
Mazoka contends that Zambia’s contribution was an important one in making Anglo what it is today “to the extent that a solution can be found. There may be some discomfort – but a solution can be worked out to save the situation.
“I think Anglo has a certain moral obligation to look at Zambia much more seriously before they pull out,” he contends. “I also believe that in the present world economy, money is quite cheap.
“There are many investors looking for a home for their funds, and I don’t believe that Anglo would fail to find reasonable funds, or cheap enough funds to invest in that (Konkola Deep) business.”
Anglo owns 50.9% of Zambia Copper Investments, the major shareholder in the Konkola copper mine with a 65% stake. Mazoka also maintains that Anglo has not altogether pulled out.
“They have said they will pull out if they cannot correct the financial position,” he points out. The Zambian businessman and rapidly rising political star has to wear a number of hats, so “it would not be fair if I did not put my different positions. The first is that as a businessman, I recognise that in a company like Anglo, the managers act on behalf of the shareholders. Their mandate is to make profits and that position demands that if they see any danger or threat to the assets of the investors, they must react in the most prudent manner.
“That is one hat. The other I wear as a Zambian citizen. The mining industry is one of the most important economic sectors of the country, and without it we would be facing serious problems. It employs the largest number of private workers and if we do not look after that investment, we’ll be in big trouble.”
Historical and moral ties
Mazoka says it’s important to look at the history of Anglo American. “Anglo was the successor of the BSA (British South Africa) Company. They have seen Zambia grow from infancy to where it is today and that gives it historical and moral ties.” He also urged multilateral organisations like the World Bank to look at ways of providing finance via the Zambian government.
“We know that the World Bank cannot give commercial finance, so that organisation and the Zambian government must sit together and look at how they can fund that operation via the government – as long as transparency is introduced into the dealings.
Measures must be taken to ensure that the funds and the interest the Zambian government receives are not abused as has been the case in the past. That’s the position as it stands at the moment – and I am convinced that there are ways that it can be saved.”
How thorough was the homework?
Anglo American’s official reasons for their withdrawal were cited as falling metal prices and a short life expectancy of the operation. But the project went sour quite quickly – in under two years. Was Anglo’s feasibility investigation wobbly? Did conditions change radically?
“Firstly,” responds Mazoka, “Anglo is a very prudent and very capable firm, and extremely conservative in the manner in which it looks at investments. In my opinion, it was not a lack of prudence on their part. I think the world economic order changed towards the end of last year and that made an impact. There was a world downturn and, obviously, base raw materials took the first knock. They are not bread and butter items and business tend to economise.”
Anglo took reasonable up-front steps, in Mazoka’s consideration. From the outset Anglo made exhaustive proposals to the government on how to privatise the mines, and how best to deal with the ups and downs of the industry.
“The government chose to ignore that advice,” says Mazoka. “In fact the consultant that was commissioned by the government to look at the privatisation of the mines actually shied away from Anglo. I was in the Anglo camp at that time. The government didn’t want to talk to Anglo. And if you remember, Anglo was a last resort when other avenues closed. So I don’t think Anglo was not diligent in the manner in which they did the study. My view is that even from the beginning, they exercised a lot of community responsibility.”
The withdrawal by London and Johannesburg listed Anglo American, if it happens, would mark the biggest privatisation failure in Africa. Options are open to the government to try and save the situation, but much depends on the government’s appreciation of it.
Limited ways forward
“The ways forward are limited,” observes Mazoka, “and there is only one certainty — and that is that the mining industry must continue. The bottom line is that Anglo is looking for cheap money. Questions seeking answers are: Can the government raise cheap money? Can they re-enter the mining arena, if only temporarily.
“If there is a company in crucial need of support for the restitution of the national economy,” says Mazoka, “then the government must rise to the support of that company. Obviously, the government cannot fund the operation itself, but it can help to find the money elsewhere. The problem must be looked as from a business perspective and various sources of funding investigated.”
Notes Mazoka: “I would like to believe that those who seek the leadership of this country must know that that requires certain mental assets that they should use properly and live up to expectations. There are many options available.”
Avmin bites the bullet
Meanwhile, the South African-based diversified mineral processing company, Anglovaal Mining (Avmin) has decided to bite the bullet and stay the course despite writing down over RI.Sbn on Chambishi Metals, its cobalt operation on the Copper– belt. The decision may have a signal effect on stemming the exodus of mining companies from Zambia in the wake of Anglo’s melt– down.
Avmin’s write down was blamed on technical problems and a weaker cobalt price and came just days after Anglo American called it quits on its troubled Zambian copper mining properties. Anglo itself wrote down R4bn against its Zambian assets when costs started to run away in the development of the Konkola Deep copper mine. Unlike Anglo, however, Avmin is staying put. “We still believe the project is viable and we’re seeing the project through to full production at the end of the year,” reports Avimin chairman, Rick Menell. “Avmin will recover its investment over time.” But he ruled out making any further investment in the project.
The company has so far invested some $260m on Chambishi. Part of Avmin’s technical problem was a leak in a furnace at its cobalt smelter, creating a year’s delay in production. A dip in the price of cobalt on the metal market from $10/lb to $7/lb further put the squeeze on Avmin’s cash flow. Menell reveals, however, that the operation had been making money before the cooling plant at the furnace failed, and that Chambishi would show a positive balance at cobalt prices as low as $4/lb.
Avmin’s announcement was not unexpected. In December last year the company warned that it was considering a write down at Chambishi after it became clear that technical difficulties would prevent full operation until the end of 2002.
Avmin’s cash position was also bolstered by the weak rand which, at around R11 to the US dollar, beefed up the company’s revenue. The operation may also gain from a likely upswing in the global commodity cycle. Said one analyst: “Avim might just get lucky. The commodity cycle looks to be in its favour.”
Copyright International Communications Mar 2002
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