Sunday, April 14, 2024

Finding a partner for resource development: The case of Moxico in Zambia

Globally the economic impact of Covid-19 on international trade and foreign direct investment has caused many countries to re-evaluate their partnership arrangements with multinational companies as the need to defend resources and social spending has been enhanced. The more positive prospects of the role of key commodities like copper in the greening of energy also mean that the net revenues to be generated are increasing. Politics also always plays a key role, for example in Zambia former President Lunga’s rhetoric led him to take controversial decisions over mining. Hakainde Hichilema, the new President, must now navigate his own course as he builds on the first six months of his Presidency and manages the post-Covid-19 period.

There is no shortage of advice being offered to him. Former Vice President Kavindele called for foreign investment in the Konkola (KCM) and Mopani Mines rather than nationalisation. This followed opposing views from the Movement for National Transformation founding President Daniel Shimunza, who said that “We need Zambians to take over the running of mines because we don’t want foreigners to exploit us”. In fact, the framing of the debate in this way is not helpful. What matters is the way in which the partnership is formed. Zambia needs foreign investors in its mines but it needs the right ones. A case in point is the UK based Moxico Mining.

There are four key things that should be used to evaluate a foreign partner: long term commitment to the country, support from the community in which the mines are located, standards of governance and respect for the rule of law, and a dedication to the environment and sustainability  -which also means the sustainability of the local economy. In two long running involvements in Zambia, Moxico has shown itself to be impressive in each of these areas. The simpler illustration of the Moxico approach is the Mimbula project. The more complex but in some ways even more impressive project is the Kalengwa Mine project.

The British High Commissioner and the UK Prime Minister’s Trade Envoy visited Mimbula in October of 2021. Reuters described the mine as Moxico’s flagship development in Zambia. The company raised a further $73 million over four weeks in July and August of 2021, money that will be invested in completing the construction of the mine, creating jobs in the local community: “Once in full production, Mimbula, which is 85% owned by Moxico and 15% by Zambian partners, will produce 30,000 tonnes of copper cathode per year.” Moxico was granted the large scale mining licence in 2017 and can operate the mine for 25 years creating jobs and paying local taxes into the state.

The fund raising in August coincided with the end of a long running saga over another Moxico owned mine  – the Kalengwa Mine. The High Court had placed an injunction over the illegal occupation of the mine by a rival mining company, KPZ,  linked to the UK mining firm Xtract and its Chief Executive Colin Bird. Info Brokers International, a business intelligence company, have done an extensive analysis of the dispute over the ownership of the Kalengwa mine here.  This quotation from that much longer piece sums up the story:

….following the victory of the Moxico group in the Lusaka Supreme Court case on March 28, 2017. This judgment was later confirmed again after Lungu suspended the application of the judgment by a decision of July 22, 2019. Bird and Fawaz’s [a well-known local gang leader and criminal] response: Days after the verdict, in early August, militiamen in Jerabo attacked security forces and workers in Kalengwa – ruthlessly beat them and then kidnapped, tortured some of them. [No one was killed as the info Brokers report falsely claimed].The Lungu government reacts by overturning the Supreme Court’s decision with an illegal decision by Richard Musukwa’s mining department. The next day, the Fawaz militiamen occupy the mine and start working with their staff after the Moxico [team] fled in fear.

The change of government in Zambia has changed the context for this bitter fight. The High Court has consistently ruled in favour of the Mine’s real owner Euro Africa, who  partner with Moxico, and the Bird-Fawaz gang can no longer ignore these rulings. Moxico worked closely with the local community throughout and people came together for a thanks giving meeting when the Mining Ministry gave the licence back to its rightful owners and then on November 5th  last year the people of the area marched to the mine to take back possession.

The Moxico team are now moving as quickly as possible to open the mine and begin its legitimate operation backed by the courts and the local population. Together with the Mimbula mine, Moxico will be underpinning around 2,000 jobs in the mining sector and will invest around more than $250 million to make the sites fully operational. The mines will be run in full compliance with environmental regulations and make significant contributions in tax revenues as well as through profits for the Zambian partners. The criminal element will be excluded from the mining so that the benefits flow to the local community and the nation.

The case of Moxico illustrates a simple fact – resource rich countries can work hand in hand with international partners if they are the right partners. In this case Moxico have demonstrated over many years that they have the four key things needed in a partner: long term commitment to Zambia, support from the community of Mufumbwe District, a commitment to good governance and respect for the rule of law supported by the many judgments of the High Court in their favour and respect for the environment shown by the way in which they run their operations. Moxico and companies like them can be partners in the extractive sector and they can be judged on their track records. It is a shame that not all potential partners have the same credentials.

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