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Why a Tax Crusade in Zambia Worries Copper Miners

Driver of divorce.

Driver of divorce.

Photographer: Waldo Swiegers/Bloomberg

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Zambia’s government has long complained that it doesn’t derive sufficient revenue from its copper industry, Africa’s second-biggest and the world’s seventh-largest. President Edgar Lungu upped the ante in May, when he accused the local unit of Vedanta Resources Ltd. of lying about its expansion plans and cheating on taxes. A state-owed company is now moving to liquidate Vedanta’s assets. Lungu’s heavy-handed embrace of resource nationalism, which could be directed at winning reelection in 2021, has the potential to upend copper markets.

There’s a fundamental disagreement over how Zambia’s copper spoils should be shared between the state and companies that mine them. Tensions have boiled to the surface whenever the government has sought to raise taxes and companies have responded with threats of shaft closures and job cuts. Vedanta’s relationship with the government has been particularly fraught since its local chief executive’s work permit was canceled in 2013. Other companies have also been targeted -- First Quantum Minerals Ltd. was presented an almost $8 billion tax bill last year, while Glencore Plc has been ordered to surrender shafts it had planned to mothball to local companies so they can continue operating.