Zambia’s main opposition party leader Hakainde Hichilema criticised the government’s deal with Glencore on Thursday, comparing the economy to a leaky bucket broken by debt.
The state mining investment arm ZCCM-IH agreed on Tuesday to take on $1.5 billion in debt in exchange for full control of Mopani Copper Mines, previously majority-owned by Glencore.
“You are filling the economy with more debt, expensive debt, there’s no compensating growth. Where is the money going? It’s going. The bucket is leaking,” Hichilema, president of the United Party for National Development (UPND), said in a TV interview.
Zambia became Africa’s first pandemic-era sovereign default in November, and its debt burden is a key issue for the public, who will head to the polls in a general election on Aug. 12. Hichilema is the main challenger to President Edgar Lungu.
Lungu has framed the Mopani deal as a boon for workers and a success for his strategy of greater government control over mining assets. Glencore sought to shut the mine last year due to covid-19 disruptions and lower copper prices.
“What is wrong with government acquiring shares in the mines, especially when the investor was not keen to pump in resources?” he said on Thursday.
ZCCM-IH says the $1.5 billion is guaranteed by Mopani, not by the government, and is therefore not sovereign debt. It was unclear how the International Monetary Fund (IMF), to which Zambia has applied for a financing arrangement, would classify the loan.
Under the deal terms, Glencore will retain buying rights to Mopani’s copper, and ZCCM-IH will repay the loan principal by giving Glencore creditors 3% of Mopani’s gross revenue from 2021-2023 and between 10% and 17.5% of gross revenue from then on.
Glencore declined to comment.
(By Chris Mfula and Helen Reid; Editing by Hugh Lawson)