Green Party President Peter Sinkamba has advised the Minister of Finance Margret Mwanakatwe to consider selling toxic assets owned by Government in all mining companies as of the ways to redeem Eurobonds and high-interest Chinese loans.
The Green Party leader said this in Kitwe this morning when asked to comment on the Party’s expectations for the 2019 budget which Ms. Mwanakatwe will soon present to Parliament.
“Government has vehemently denied that Zambia is in debt-stress mode. Let truth be told: Zambia is in debt stress. Government should simply come out of this denial mode,” Mr. Sinkamba said.
He hopes that the Finance Minister will focus more on viable fiscal discipline and asset optimization strategies with primary focus to dismantle pressing debts, especially high interest Chinese loans and Eurobonds.
He cited sale of ZCCM-IH shares in privatized mines as one of the key strategies that Government could adopt to generate sufficient funds to liquidate such loans.
“I have shared with Ms. Mwanakatwe some of the strategies that she could employ to dismantle the debts. I strongly believe that offloading toxic assets in one sure strategy to sustainably dismantle these debts.
“Government is loaded with too many toxic assets. I made this very clear to her in our last meeting. In addition to what I shared with her, I think she should also consider ZCCM-IH toxic assets.
“As you may be aware, mining shares owned by Government are toxic assets. These assets have experienced a significant drop in value and lack an active market where they can be easily sold. In simple terms, these assets are toxic assets because they are troubled assets. In my view, Government is better off selling such toxic assets through a trade-off, say with China, to off-set Chinese or indeed extend to liquidating other loans such as Eurobonds,” Mr. Sinkamba said.
“The case in point is that ZCCM-IH dividends received from all mining assets are worthless. For example, during its 78th Meeting held in March 2018, the ZCCM-IH Board disclosed that in the last five years, it only received dividends worth K251million. In dollars terms, ZCCM-IH received a paltry $25 million from all of its mining assets in five years. On average, this is a paltry $5 million per year. This is like what some footballers get per month. Take for example Messi and Ronaldo, they receive salaries worth over $50 million per annum or roughly $5 million per month” he added.
“My point is that the dividend policy for Government in mining has lamentably failed. It is not worthy to have multi-billion shares in an investment that fails to generate as little profit as $50 million in 18 years. Hopefully Ms. Mwanakatwe will take cognizance of this fact and thereby sell of ZCCM-IH shares in all mining companies apart from the one per cent Golden Share,” Mr. Sinkamba said.
And Mr. Sinkamba said it wrong for Government to give away ZESCO to the Chinese as a way to pay off loans which it got from China. He also said it is morally wrong to refinance the Eurobonds. He argued that refinancing of loans is morally wrong because it is a form of economic enslavement of future generations.
“As The Green Party, we think that ZESCO should be spared from the impending Chinese take-over. We think it is worthy selling off ZCCM-IH shares in all these mining companies than lose ZESCO. We also think that refinancing Eurobonds is morally wrong. We think that it is some form of economic enslavement of future generations. Refinancing is all about shifting liability from oneself to grandchildren. Doing so is immorality of the worst order. Our view on refinancing loans is that we better off generating funds ourselves, to redeem Eurobonds than shift the liability to posterity. It is naivety to keep toxic shares in mining companies and refinance the loans at the expense of future generations,” he added.
“Put simply, we think it is worthwhile to put in place enhanced tax collection systems for the mines than Government retaining shares besides the Golden Share. Empirical evidence shows that Government dividends from mining assets have undoubtedly been as elusive in the Third Republic as they were during the First and Second Republics. So, we better off doing other things,” Mr. Sinkamba said.
Mr. Sinkamba disclosed that setting off Chinese loans with ZCCM-IH shares at this moment when China is hungry for resources could generate in excess of $5 billion additional income.
“Waiting to dispose these shares beyond this point could be as fatal as the Chiluba Government mistake on the Kafue Consortium deal of the 1990s,” he said.