1. This deal was somewhat unavoidable given the threats made by Glencore to shut down some of the operations under its care. This would have led to loss of about 13,000 jobs. Given the context of high unemployment levels in the country, the shut down would have had serious economic, social and political consequences.
2. ZCCM IH showed determination to go ahead with this transaction despite strong voices not to proceed. This somewhat demonstrates the company and government itself have better information on the whole deal than the rest of us. We only hope that the country will not come back ten years from now questioning the wisdom of the transaction/negotiation team and advisors. I should add that I saw great leadership over the whole Mopani issue in past one year.
3. The transaction has happened at a time the price of copper is over US$8,000/ tonnes, implying we are in for good returns should this price be sustained for longer periods or even exceed the projected US$10,000/tonne.
4. This is a significant step on the part of government to own strategic assets and the transaction reduces the existing suspicions around transfer pricing as well as private (undeclared) foreign currency remittances from which government would have gained in foreign exchange reserves. The mine under total government ownership will now directly improve the country’s fiscal position albeit in the long term.
5. The real winner in the transaction is Glencore. They wrapped up the deal well. On one hand, this is a leveraged or debt financed deal from which Glencore will start earning interest after a period of time and will also have other gains accruing to it on the principle amount (being US$1.5 billion it has borrowed from itself!) Second, until all outstanding amounts are repaid, Glencore will have control of copper sales through a purchase offtake and this presumed to be at a fixed price of copper. The arrangement is beneficial to government given the huge fluctuations in the copper price.
6. Loosely and to bring the above point home, I liken the deal to an ‘Outgrower Scheme’ where farmers are financed through fertiliser, seed, technical advice and chemicals to grow tobacco. The financier is also the buyer at a fixed price. Both teams are winning but the financier/buyer is the absolute winner and that’s why this whole deal works well for Glencore.
7. It also means Zambia has acquired a new debt worth about US$1.5 billion (take away other costs) for the ownership of Mopani Copper Mines. The consolation is that we will not pay this money from tax revenue. The asset is projected to finance itself. What worries me though is that it all depends on what happens to copper production and the price during the life of this deal. The comparison is an American mortgage which you service over 25 years without having absolute ownership to the property. First, it makes it difficult for you to access fresh capital to recapitalize the building because someone has absolute ownership to it. Second, a lot of things will change before you finish paying and that’s how many American mortgagees have lost property on which they had already serviced a significant portion.
8. I am sure the IMF and other creditors are following this transaction very closely and how it affects the planned programme negotiations. Though government will have a case to explain the debt is not on the treasury but on ZCCM IH, those Washington colleagues read between the lines and they will still bring the number on the government loan book and prove to government that Zambia has moved deeper into debt unsustainably.
9. On the whole, I congratulate government for saving the mine, keeping the jobs, owning the Mopani asset totally and all we can do now is to continue to advise about how to manage this asset and make it more profitable than Glencore did. We can learn from the mistakes of the old ZCCM and build on the previous failures to beef up our national coffers. Let there be no political interference in the operations of this mine. Otherwise, seven years from now, it will be the same old sad story. I wish all the people of Zambia well in this deal. It should be good for the country.
The operation was a sucess but the patient died!
Garry Brooks how was it a success then….?
Japhet Kakoma Kahokola Ok I will use another saying…….rats leave a sinking ship!
Garry Brooks do you think ZCCM can resucitate the patient?
The mzungus would not sell a money maker unless something is wrong….change of government, falling copper prices or the huge profit they are to make for a wornout hole in the ground
Mulenga Bwalya Zambians have a had habit of running companies into the ground
Mulenga Bwalya I hope I am wrong
Garry Brooks cry my beloved Zambia
Mulenga Bwalya Don’t listen to to this white he is just trying to look after his kind.
Bwalya Augustine Consider all ends, Glencore is a profit making company. All they are looking for is prifits. Question is, if we start running the mine is the govt going to run it based on charity or profits?. Private companies make decisions to downsize or close some operations when business is low. From politics point of view in Zambia, such decisions cannot be made and that’s what runs our companies to the ground.
Makiyo Cooliz Muwirimi That may be true but that white man there is saying that Mzungus only can manage our mines in short. I find that very insulting considering that we have run our mines before and they were successful. We shouldn’t be inferior to these white men when it comes to running our natural resources. He and his kind can’t be here if they don’t benefit anything. He wants to make sound like they are here to do charity work.
Bwalya Augustine tell me exactly at what period in history did we ever run any mine successfully.
Victor Chansa check the history
Victor Chansa Check your history if indeed you are a Zambian. Why do you go to school if you can’t run your country? You are here receiving insults from a white man and you are busy laughing. Zambians you Surprising me. What independence did you get if not being in control of your resources? What does independence mean to you ba Mwansa ?
Bwalya Augustine but from your opinion can gvt run the mine let’s not run from the truth
Fred Mukonzhi yes we can do it collectively as zambians
Fred Mukonzhi prior to 1990s weren’t mines run 100% by the state. ? The only truth being exhibited here is that we have inferiority complex.
Gabriel Mwape Sendama bwana we don’t have capacity to run the mine and make profit from it u can have shares but always different pipo are managing everything
Bwalya Augustine and that other insignificant person, what if I put it to you that there is not a single period in history when we successfully ran the mines ourselves in Zambia successfully and the history you want me to look up is not written anywhere or even in existence, what would you say then? Let’s say you don’t draw me into your racist rhetoric, and forget the white man and speak the truth. When? I ask because I was there before ZCCM and after it. My father worked for NCCM and later ZCCM. I was born in a mine hospital (Nkana Hospital) and lived most of my life in Nkana West, Kitwe. I know you are patriotic but you don’t need to be dishonest.
Well done govt.
We hv been talking about diversifying the economy away from mining for over 50 yrs now. If other people are doing the mining already, it gives us a chance through IDC to lead the industrialisation effort instead of sinking debt finance into an industry we want to diversify away from. I hv seen only one-sided statements so far and that is a risk.
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are we sure this is a deal worth congratulating Govt, when Glencore will be making free profit of over 3.8 Billion USD, which translates to the loss of ZCCM IH, seriously Mr. Chibamba Kanyama, did you do your economic analysis well or you are hoping for a come back into the PF lime light for a position. i m gravely disappointed that one of your callibor would do such a review without refkecting on the opposite side of the coin. “the De-Merits”.
mind the typo errors like reflecting, Caliber
Let Zambians and buy shares
so it belongs to govt now who will finance the huge operation costs and from where i hope not from the treasury
ZCCM-IH is GRZ. EVERYONE knows that. Its dividend goes to the treasury. We can accept that this was a necessary move by the GRZ just like the UK government moved in to acquire some banks during the 2005 financial crisis. What worries every thinking person is that the PF government is a PARTY and not a national government. PF behaves just like UNIP and it will suck the mine to fund party activities and to buy the next election. This is what they do. In fact, if this wasn’t an election year, the deal would not have been done this way. Zambians must take tough decisions and cease being employees. Take redundancy money and start earning a living as entrepreneurs.
so it belongs to govt now who will finance the huge operation costs and from where i hope not from the treasury becoz this will drain the govt coffers
Bwalya Augustine if indeed whites should not be the ones running the mines, why then did GRZ sell the mines to whites and Indians and Chinese over and over again? Look beyond racism brother, iyou will not dig out 1.5 bn of copper just by being bitter
Lungu and his government are think tanks. Don’t underrate them.
Use the Kasenseli gold proceeds to pay off Glencore and avoid paying interest. Just thinking.
The government has done the right thing
Indeed Glencoe is the real winner here. For the miners, it’s better they get their packages now & sign new contracts, otherwise it might be mwamoneni later on. Glencore must have been planning this for a while & knew just when to press the right buttons, they did their Cherry picking well.
@Kulutwe. Chibamba always drew inferences from the crude angle. He never studied econometrics, if he did, he failed. Otherwise his analysis would be factor ridden so that we are well informed on such responses of national interest yielding from the mines. Utushimi ne mbilo is all is good at!
Now watch the space. The brilliant minds behind this intervention will soon be accused of undermining government and vilified. Any good deed in our country is taken political; this is why a lot of your brilliant minds are wallowing outside the country in limbo. For once, don’t suspect any solution giver as an aspirant for the presidency. Awe mwe.
The tricked fooolish Lungu and he swallowed it like a fish!!
CAN THE PF RUN MOPANI AND BE DISCIPLINED ENOUGH TO PAY BACK THE 1.5 Bn DOLLARS? HAS PF FINISHED PAYING BACK THE ZAMTEL NKONGOLE TO LIBYA? IS THIS NOT JUST MALUNGA MBATA AKULISHANGILA?
I still do not understand kanyama
Just to remind Chi bamba that more than 8000 miners lost their jobs from 2019-2020
The truth be told , those whites who have been running that mine would not give up a profitable enterprise …..
My take on this this right away is those numbers of production tonnage seem very small compared to the workforce of +10,000.
Something does not look right.
Expect layoffs after elections…
“On the whole, I congratulate government for saving the mine, keeping the jobs, owning the Mopani asset totally and ‘all we can do now is to continue to advise about how to manage this asset and make it more profitable than Glencore did’.”
Chibamba Kanyama, this is a very good and straight forward analysis.
However, I would like to advance the first advice(S) to our government; 1. No portential and existing mines should be sold to foreign investers, 2. Skills and technological transfer MUST seriously be embedded in our constitution to compel current foreigners owned companies (mostly) as well as local business men and women to transfer all kinds of skills to Zambians, 3.
Somebody is spending $1.5 Billion for 13000 votes; hopefully! Good luck