Late last year, I advised Finance Minister to focus more on viable fiscal discipline and asset optimization strategies, and in particular, to consider selling toxic assets owned by Government in all mining companies as of the ways to redeem Eurobonds and high-interest Chinese loans.
I thank Lusaka Times for publishing my advise to put it in public domain. Now, as Minister of Finance has confirmed, her ministry has since received several unsolicited offers from mining investors, including First Quantum, to buy what I termed as “ZCCM-IH toxic assets”.
I am glad that once again, my ideas are back in the news as premium ideas. The primary focus for Government should be to dismantle pressing debts, especially high interest Chinese loans and Eurobonds from these toxic assets.
Selling off the ZCCM-IH shares 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. So, Government needs to go for it now, than later.
Article on redeeming Eurobonds and Chinese loans using ZCCM IH toxic shares
By Peter Sinkamba
Green Party President
Zambia is going Green!
Green Party is only party with workable economic solutions in Zambia at the moment. Mwanakatwe needs to tap into these great ideas
Hoooo ya we forgot it was Sinkamba idea to sale ZCCM. Ok ok we change the mind again, so Maggie please sale damn Shares. If it’s Peter suggesting, then it is good idea.
ZCCM-IH shares in First Quantum are NOT toxic assets. Maybe those in Ndola Lime due to operational problems caused by the brand new vertical kiln they failed to commission.
Actually ZCCM-IH has a $1.4 Billion lawsuit against FQM plus another against KCM for taking funds from Zambia to build mines in DRC & Australia without informing ZCCM-IH. So selling the shares for $700-million is a joke.
We can’t auction the country’s assets, prime land to foreigners becoz of PF’s reckless borrowing. It’s throwing the bath-water together with the baby.
I usually find Sinkamba’s articles on point but this completely misguided. To start with he’s referring to ZCCM-IH shares in mining operations as toxic assets.
Come on, man!!! Toxic assets are non-performing investments, our shares in all mining companies are some of the best performing assets the smart people of the Zambian Enterprise have.
Lastly, with copper and cobalt driving cellphone and car battery production around the world and we have reserves for both for another 50 years, now is not surely the time to sell but increase our holdings.
So, on both counts Sinkamba is wrong here. Come on, man!!!
Ba Mumba, I beg to differ. Toxic assets are assets that become worthless when the secondary market for buying and selling them disappears. If mineral reserves are exhausted, ZCCM-IH shares will zero in that shares cannot be sold as doing so will be a guaranteed way to lose money. Since 2000, in excess of 17 million tonnes of copper have been mined. At current price, is over $100 billion worth. Yet, less than $0.5 billion has been received by ZCCM-IH as dividends. You call that as best performing assets? Do you know the environmental cost to date? If it has taken ZCCM-IH 18 years to make $0.5 billion from $100 billion worth of copper mined, how many years, and what tonnage of copper will it take to make $5 billion, which Sinkamba is talking about, if these toxic assets are sold now? Lets…
Ba Mumba, lets roll, big man! Sinkamba is damn right on this one! Maggie should buy into this idea!
On your cell phone and car battery argument, those two have nothing to do with ZCCM-IH shares. Even if ZCCM-IH sold its shares, Government still retains its 1% Golden Share which is more powerful than the 20% ZCCM-IH shares in that Government still retains its powers of veto, and take over operations in event of inimical conduct by mining operators. It also retains its licencing authority. It can still exercise its Golden Share and various licencing portfolios to support entrepreneurs who want to venture into cell phone and battery manufacturing.In fact, Government makes more revenue from mining taxes than mining dividends. What ZCCM-IH made as dividends in 18 years is what Government makes in one year from mining taxes…so what is the fuss about?
Mwanakatwe is enjoying stellenbosch wines, she has no time for progressive ideas from the Chamba man!
Hopefully she tastes and enjoys the Stellenbosh super pinotage, chenin blanc and a shiraz. No doubt about it, they are the equivalent of Pinot noir, Cabernet Sauvignon, Cabernet Sauvignon, Petite Sirah, Madiran, and Barbera, which are renown as the healthiest wines ever for the heart and brains…She needs the wines for her heart and brains…..more so to comprehend progressive Chamba man super IQ issues!
Why not increase the stake of ZCCM IH shares to say 40%. This may work for now, but we will lose future earnings from an electric car boom soon as most developed nations will abandon diesel and fuel propelled vehicles. These are short term fixes that may work for now but the long-term effect will be costly and detrimental. We can still repay these loans if only we fight corruption with vigor and channel resources to income generating activities like agriculture and tourism. We should not give these mining giants 100% stake in these mines because they will ill treat our workers with impunity and cloud government from monitoring inside trading thereby promoting tax evasion and further exacerbate transfer pricing. Government should instead increase its stake.
Bamwine, mining is a short term investment for one reason, minerals are wasting assets. Money in mining is not in the shares and dividends. Its is in the taxes and supply chains or linkages. Whether you increase to 40%, your returns on investment will always be zero if perpetually your mining company declares losses. Hence Sinkamba is calling the shares as toxic assets. The value of these assets will be zero when the minerals run out. So focus on taxes and supply chains. As regard to electric cars, cobalt mined in Zambia is one of the primary materials for batteries for the cars you are talking about. The strategy should be on how entrepreneurs can venture into battery making as supply chain linkage.
On workers plight, Government does not need to increase its shareholding to have a say on workers. It only needs 1% Golden Share, which Government has already, to deal with that aspect. Thus why Government always intervene when mining companies threaten to lay off workers
Did you just say high-interest Chinese loans?
Why mind zero interest loans or grants?
Between Zamtel, URL which don’t generate any profits but gobble eurobonds and ZCCM-IH which gives dividends. Which of the two are toxic assets. Too much chamba!
Between Zamtel, URL which don’t generate any profits but gobble eurobonds and ZCCM-IH which gives dividends. Which of the two are toxic assets. Too much chamba!
Meant ZRL TAZARA and the soon to be launched Zambia Airways
Let them sell Times of Zambia instead.
Assets are not toxic just because they are loss making. Distinguish the two. Bashi Chite.
Lungu and his minions must not sale the mines! Maggie for a turnaround is wishful thinking – not with corruption driven scotched earth policies. These are ploys/exercises in futility.
No one is saying Maggie wants to sale the mines. The mines were sold in 2000. What Maggie is saying: dispose toxic shares owned by ZCCM-IH, retain golden shares owned by Government for strategic reasons, and use the revenue generated from sale of toxic assets to repay the Eurobonds. This is the simple logic
We must be thinking of increasing the stake to up to 40%,This solution of selling all the shares may work just for short while. And how sure are that the PF Govt has got the fiscal discipline to put the money realized to good use????
@Chaos theory reloaded Much as I agree with your assertions, there is a reason why all of a sudden these mining giants wants to buy these shares. Remember there is a US1.4billion law suit which they have realized that they will lose hence dandling this US700million carrot to hoodwink the government to sell and discontinue the case. In retrospect what these canning investors are saying is that instead of them parting away with US1.4billion law suit, they would rather trade part of it by buying the so called toxic assets. Like I said, they have fathomed that the demand for copper will soon skyrocket and they will amass supernormal profits to the detriment of the government. The bottom line is that we should maintain these shares if possible even increase shareholding. Remember taxes that…
@Bamwine: The reason why suddenly these mining giants want to buy the shares is this: When Sinkamba floated the idea of selling ZCCM-IH toxic assets, Chinese firms started eyeing shares in Kansanshi, Lumwana, Kalumbila, Mopani, KCM etc. with a view to buy the shares and shift the flow of copper, cobalt and uranium flow to China. At the moment, Mopani, for example, is selling all its copper to Switzerland. If Chinese bought the 20% ZCCM-IH shares in Mopani, then at least 20% of copper produced by Mopani will now start going to China. The same will happen to other mines. So, for China, it is not the value of shares that matters. They can pay a premium price for that provided raw materials start going to China…This is the game at play.
CONTINUED…taxes that FQM is yet to pay which was around US7.9billion according to ZRA. Tanzania and Botswana all have shares in the mines on behalf of the masses, We should not go the KCM way, look to what is happening there total chaos.
There are so many fake I yelled thanks I. Zambia. They are quick to pull out their fangled pseudo economic advice and come out all proud to have f*rted them out……. loudly. As a Christian nation we should have our leaders understand good financial conduct. The problem here is toxic loans which when we took them the government argued they were sustainable and they were long term and that the projected Zambian economic growth would cover these comfortably. Both Mwanakatwe and her predecessor Chikuanda put this theory to the nation.
These loans are not toxic they were meant to be paid over time not to be cleared by selling meagre state shares in our CASH COWS. How is it that ZAMBIANS can accept watching their land being cut up and having their resources being taken away abroad…
This is such nonsense and should be buried away in old mind share.
PF, tell us please whether your Economic Strategy has failed? That’s the bottom line. We’ve seen this catatonic economic failure before when the Mines were sold, Zambia Airways was sold TO PAY BAD DEBTS the government took in the early ’70’s. It lead to poverty and long term economic austerity. Now we see PF panhandling all over the place as IMF, is giving you the treatment over bad debts and corruption. This issue is one Zambians should keep an eye on in election fever time. ASK, Has your economic strategy failed?
Buried away in old disused mine shafts!
How is it that ZAMBIANS can accept watching their land being DUG up and having their resources being taken away abroad without even one penny to them because their share has been sold to pay bad debts? How really is this tool writing this marijuana driven drivel claim this astute financial conduct?
ZAMBIANS, these type of people with these ideas are like bad gamblers. They play, lose and to stay in the game they gamble the car, the house, every asset they have; and the first the wives know about it is when the bailiffs come round. We really can’t let His Excellency think we will accept such an admission to failure of their economic strategy. I’ll be off the PF support boat so fast. Forget about it!
I do not understand his narrow perception of toxicity of assets that make money for a country sustainably. Please let us acquire relevant education coupled with proper understanding of the underlying concepts. It is not sustainable to sell it today and tomorrow generations to have nothing to turn to in times of need. Lets not practice economics of selfishness at its lowest point.
I need to be educated here. I have read what those for and against selling of shares have said. My question is, “why are we being offered money for the little shares that we own if the business of mining offers so little dividends to share holders such that we as a country have only realised US$0.5 bn from a US$100bn mined and exported as stated above? What do other shareholders get? What is in it for them?
@Ba Alam C. Mpande. Good question. Dividends are paid are not an expense of the corporation. So, if its makes a loss, no dividend is paid. e.g, all mining companies have consistently declared losses since 2000. So no dividend paid. Only exception is First Quantum that declared dividends in 2014-2015 paying ZCCM-IH of $0.5 billion and other shareholders about $2.5 billion. Yet, metal sales were $100 billion. So what is in shareholding? A majority shareholder influences where to sale minerals; who buys; who is a contractor; who is employed; who prepares books of account/audit, etc. Now, this is where the money is ($100 billion- $2.5 billion)=$97.5 billion. This is what is in shareholding.
@Chaos theory reloaded. What would be wrong for government to buy majority shares of 51% or more? Would that be in our favor or not? Wouldn’t it be a good idea to have earnings from Taxes and and dividends and also the peace of mind knowing we own our means of production? The obvious visible shift to increased use of electric vehicles to curb air pollution in China and the climate change debate tells us copper could be more valuable than oil in the near future. Why not leave this choice to future generations than our generation correcting the mess of our debt by auctioning our children’s future? We should work so hard and pay back our debt instead of kicking the can down the road. We have been through this path before and within living memory we have seen Vendata buy a mine and pay back…