🇿🇲 VIEWPOINT | Why ZCCM-IH’s Royalty Model Could Reshape State Returns
Zambia’s mining policy has often been debated through the lens of ownership. How many shares should the state hold? Should government increase equity in mining companies? Should foreign investors be pushed to dilute their holdings? These debates have dominated the national conversation for years. But the more important question is often overlooked: how exactly should Zambia earn from its minerals?
The latest figures from ZCCM–Investments Holdings (ZCCM-IH) provide a useful case study. Between 2022 and 2024, the state-owned investment company received US$110.64 million in royalty revenue from Kansanshi Mining Plc after converting its dividend entitlement into a 3.1 percent gross revenue royalty in 2021. At first glance the adjustment appears technical. In practice, it reflects a deeper shift in how the state participates in mining returns.
Historically, Zambia relied heavily on the equity model. Under this system, the state participates as a shareholder and receives income through dividends declared by mining companies. The difficulty with this arrangement is well understood in the mining industry. Dividends depend entirely on profit, and profits fluctuate according to operational costs, expansion cycles, commodity prices and accounting decisions taken at board level.
A mine may produce enormous volumes of copper while reporting modest profits or choosing to reinvest earnings instead of distributing dividends.
Kansanshi illustrates this reality with unusual clarity. The mine paid US$59.6 million in dividends in 2022, but declared no dividends at all in 2023 and 2024. Had ZCCM-IH remained solely dependent on the dividend structure, the state shareholder would have received nothing in those two years despite ongoing production at one of Africa’s largest copper mines.
The royalty model prevented that outcome. Because the 3.1 percent royalty is calculated on gross revenue rather than profit, payments continued regardless of the company’s internal cost structures or dividend decisions. ZCCM-IH received US$17.66 million in 2022, US$38.48 million in 2023, and US$54.51 million in 2024, bringing the three-year total to US$110.64 million.
This pattern is not accidental. In mining economics, revenue-linked royalties provide stability precisely because they are tied to production and sales rather than corporate profitability. A mine must sell minerals to operate. As long as revenue flows, royalty payments follow. Profit-based dividends, by contrast, remain vulnerable to cost inflation, capital expenditure programmes and accounting adjustments.
A longer historical comparison reinforces the point. Between 2012 and 2021, ZCCM-IH received US$244.25 million in dividends from Kansanshi, averaging roughly US$24 million annually. Analysis contained in ZCCM-IH’s Mining Corner 360 publication suggests that under comparable market conditions a royalty structure could have generated close to US$48 million per year.
The difference reflects a fundamental principle recognised across global mining jurisdictions: governments capture more predictable value when they participate directly in revenue streams rather than waiting for profits to be declared.
The timing of this adjustment also coincides with broader structural changes in the mining sector. Zambia’s copper industry is entering a new phase characterised by declining ore grades, rising capital expenditure and increasingly complex processing technologies. Mines must invest heavily simply to maintain output levels. These investments, while necessary for long-term production, tend to suppress short-term profitability.
At the same time, global demand for copper is strengthening as electrification, renewable energy infrastructure and artificial intelligence-driven data centres accelerate the consumption of critical minerals. Zambia therefore sits at the intersection of two forces: increasing strategic demand for its copper and rising operational costs within the mining industry. In such an environment, a revenue-based return mechanism becomes particularly valuable for a state investor.
Kansanshi’s S3 Expansion Project, commissioned in August 2025, illustrates this dynamic. The project aims to expand production capacity even as ore grades decline. Higher volumes of processed ore will sustain revenue generation, even though profitability may fluctuate depending on costs and market conditions. Because the royalty is calculated on revenue, ZCCM-IH stands to benefit directly from increased output regardless of profit cycles.
There is also an institutional implication for the state investment vehicle itself. ZCCM-IH has indicated that the royalty arrangement strengthens its cash flow and enhances its capacity to reinvest in Zambia’s broader mineral economy, including the emerging gold subsector and other strategic projects along the mining value chain.
If managed prudently, this could allow the company to transition from a passive equity holder into a more deliberate investment arm within the country’s resource sector.
For Zambia, the Kansanshi example offers a practical lesson in resource governance. Ownership structures matter, but the architecture of revenue capture matters even more. Equity provides influence and long-term participation in assets. Royalties provide immediate and predictable income linked directly to mineral extraction.
The most effective mining policy does not choose between the two. It balances them.
The state must remain an investor, but it must also secure dependable revenue streams that reflect the reality that Zambia’s minerals are finite national assets. The shift at Kansanshi suggests that policymakers and mining financiers are beginning to refine that balance.
In a sector where production cycles span decades and commodity prices rise and fall with global economic tides, such financial design can shape the national benefit from mining far more than ownership debates alone.
The People’s Brief is a reader-built publication. Follow us for verified reporting, share our stories, and contribute your analysis or commentary by writing to us at editor.peoplesbrief@gmail.com.
© The People’s Brief | Ollus R. Ndomu