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Why ZCCM IH cautionary notice on KCM is timely

ZCCM IH recently informed the market on the outcome of the tribunal proceedings which sought to determine whether the Provisional Liquidator at KCM would continue in office or not following Vedanta Resource Limited and Vedanta Resources Holdings Limited pursuing the matter. The ruling was in favor of ZCCM IH by way of the arbitrator dismissing the application by the Vedanta Group.

In compliance with the requirements of the Securities Act No. 41 of 2016, shareholders are informed that on 23 March 2020, the tribunal appointed in arbitration proceedings commenced by Vedanta against ZCCM-IH dismissed an application by Vedanta for an interim measure requiring ZCCM-IH to withdraw the Petition and procure the removal of the Provisional Liquidator from office”, read a statement issued by ZCCM IH’s Company Secretary Chabby Chabala on 10th November 2020 in Lusaka.

Under the section relating to consideration of applications for proposed take-overs and mergers in the Securities Act of 2016, section 134(4)(b), which states that the disclosure of timely and adequate information to enable shareholders to make an informed decision as to the merits of an offer, ZCCM IH was compelled to provide this timely update to investors.

The market has been waiting patiently for the announcement of this particular outcome. Part of the composition of the market is potential investors who, among other things, consider all matters of concern such as environmental and internal factors.

With knowledge on the outcome of know environmental factors, the investment decision is influenced. In the case of KCM, the proceedings with the arbitrator placed a pebble in the timeline for an investor decision to be made. Hence, clarity in the matter now paves the way for an astute investment decision to be made going forward.

However, matters outside the control of either party involved in this particular case is Country Risk. At the moment, many investors have been following with intent the issue of the Ministry of Finance’s deliberations with Euro Bondholders and Chinese Lenders. The outcome of these discussions has never been more important in the investment journey of Zambia.

Fitch, Moodys, and S&P credit rating agencies all place Zambia’s credit rating as a country with substantial risks. Some of these risks include the risk of default. Until recently, the Ministry of Finance has been in discourse with Bondholders and Chinese lenders for a possible moratorium of facilities following the Covid 19 pandemic. Zambia is not the only country to engage its lenders in such a manner. Argentina and Mozambique also engaged the services of Lazard, a world-leading financial advisory and asset management firm, to aid in restructuring conversations that would also involve difficult discussions with lenders.

With a myriad of environmental factors, mostly weighted towards those that are not within the investment entity’s control, investors will be watching very closely with sand in their hour glasses before investment decisions can be made.

Source: Financial Insights 

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