The New Changes at KCM
Mining

The long-run average cost curve of a firm is said to be saucepan-shaped. At the beginning of operations, a firm will have fixed costs that are as a result of investment in indivisible fixed capital and as such making the average cost high.

With time, the average cost starts going down as the firm engages in massive output production. When the firm becomes too big, in the long-run, inefficiencies costs start to kick in and as a consequence, the average cost curve goes up creating what economists call a ‘sauce pan-shaped average cost curve.

 

In order to solve this, firms will adopt measures such as decentralisation policies that will aid in minimising the rising costs associated with inefficiency. This is the premise behind KCM’s recent announcement of the restructuring and reorganisation of the mining company.

 

On 28 December 2020 acting chief executive officer Enock Mponda gave out a management brief stating the plans, by the provisional liquidator Mr. Milingo Lungu, to restructure and reorganise KCM into two separate subsidiary companies namely, KCM SmelterCo Limited and Konkola Mineral Resources Limited.

The rationale behind, as stated in the publication, was to increase efficiency and business opportunities, as well as to foster optimization. The publication goes on to state, “ KCM SmelterCo Limited has been in existence since 2002 and has been a fully owned KCM company, except it has been a dormant subsidiary.”

 

The commencement of operations of the two companies is set to be on 1st February 2021. KCM SmelterCo Limited and Konkola Mineral Resources Limited will each have their own separate management. It is the hope of the provisional liquidator and management that by taking this action KCM’s technical health, integrity, competencies will be restored and ensure the retention of the company’s position as a major asset in the mining sector and a great contributor to Zambia’s Domestic Product GDP.

 

In making the restructuring and reorganisation of KCM, it seems the employees, the unions as well as the contractors and their employees have also been guided accordingly on how they will fit in this new development. The success of this endeavor is having prudent industrial relations which is what they have done by this move.

 

Information on employees is that all those directly working for Konkola Copper Mines will be offered new contracts of employment in either of the two companies. That is to say, all employees working in the processing and refining plants, except for Konkola Concentrator and the New East and West mills at Nchanga, will be offered new contracts of employment in KCM SmelterCo Limited, while all those working under mining operations, and all shared services will be offered contracts of employment in Konkola Minerals Resources Limited.

 

The Nampundwe pyrite mine will be part of KCM SmelterCo Limited, while the Konkola Concentrator and the New West and East Mills at Nchanga, as well as the 500 TPD Acid Plants and Tailing Dams will be part of the Konkola  Minerals Resources Limited.

Employees’ basic working conditions are said to remain the same until after the commencement and conclusion of collective bargaining between the management of the two companies and the respective unions. “Further details on employees’ circumstances will be explained in each individual letter to be issued to all employees,” says the publication. Employees currently working for KCM will all be paid severance packages in the agreed form to ensure all old liabilities are cleared and that they will be reengaged seamlessly by the two separate companies, with no job losses.

 

Other, expected changes will be on contractors and their employees. All contractors and suppliers having contracts with KCM will be transferred to the two separate companies and that the two companies will be responsible for honouring and executing of the terms of the contracts starting from 1st February 2021. This in turn entails that employees of the contractors will be retained by their employers as this change does not constitute material change that could alter the existing contracts.

Unions and union membership is expected to remain the same with no changes at all.

The provisional liquidator reiterates a call for all employees, KCM business partners, and concerned stakeholders to support a smooth transition following the operationalisation of the two companies for the benefit of employees, other stakeholders and the Zambian economy.

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