3.1% ZCCM –IH Revenue Royalty Model with Kansashi Copper Mine is a good deal for Zambia – Lumba
December 13, 2022
LUSAKA – A Local Economist has dispelled assertions that the ZCCM -IH sold its 20 percent shareholding in the First Quantum Mine owned Kansashi Copper mine of Solwezi and advised Zambians to avoid politicizing matters bordering on national wealth creation.
Watson Lumba says it is unfortunate that Zambians are finding comfort in politicizing everything and anything, a trait he added has a potential to plunge the nation into a crisis especially when it borders on the economy and wealth creation.
Mr Lumba who was speaking when he guest appeared on today’s Let the People Talk show on Radio Phoenix said there is no way ZCCM IH could sell its shares and still remain on the board with voting rights adding that people must stop politicizing good policies.
He said the decision by ZCCM –IH to forgo its dividend royalty in preference for the revenue royalty model of 3.1% is a good move and allows the investment holdings which only has 20% holding in the mine to receive its share regardless of the status of the mining company instead of waiting for profit dividends which are not guaranteed.
“It is not true to say ZCCM –IH has sold its interest in the mine. What is true however is that the investment holdings still have a stake in the mine. It will receive its money which will be calculated according to sales and not profits as is the case with dividends. Mind you, ZCCM –IH with its 20% shareholding in the mine had very little say despite having voting rights as the other shareholders have more than 50 +1 % giving them the ultimate decision making power. But under the new model, whatever decisions the majority shareholders make will not affect ZCCM –IH and its money as it is guaranteed through sales,” he explained.
He said the revenue royalties will ensure the stability of revenue inflow into ZCCM IH coffers because it is based on the gross value of production as opposed to dividends which are centered on profit and added that the production value is less volatile than the profit value because of the cost element in the latter and the fluidity of the dividend policy that is at play.
Mr. Lumba further disputed assertions from especially members of the opposition that government and the people stand to lose under the revenue royalty despite being the owners of the mine.
“Let us separate the two. Government on behalf of the people of Zambia owns the land and the minerals underneath the land but is not engaged into any form of production and does not incur any costs. Because of that, the government is getting the mineral royalty tax by virtue of it owning the land and minerals underneath. Then we have ZCCM –IH which sits as a shareholder on the board with voting rights but with no or less power to change any decision”.
“Under this arrangement, ZCCM –IH was only told what the major shareholders had planned to do with the profits and could do nothing other than take the company to court if not satisfied with the majority decision which was a cost on both entities. But under the revenue royalty model, ZCCM –IH will get its money according to the sales and will not be bothered by any investment decisions by the majority shareholder. The more they invest, the better for ZCCM –IH as it is assured of increase in returns on its 3.1% royalty. This is a good deal. Let us just not politicize economic policies as that will affect the growth of our economy,” he added.
(C) THE FALCON