By Kombe Chimpinde Mataka – The Mast News
ECONOMIST Lubinda Haabazoka says if with common voting shares ZCCM-IH faced disputes with First Quantum Mines’ Kansanshi mine, he does not see any good that will come from the 3.1 per cent royalty deal.
“I think we need to be truthful and remove our egos. This is a bad deal,” he said.
Haabazoka told The Mast, in an interview, that it is quiet strange that “we have reached an agreement where we are forfeiting our right to claim a dividend in exchange for 3.1 per cent of revenue”.
“If with common shares and voting shares we had disputes with the same mine I just don’t see any good that will come from the investor in this particular case. I am positive that KCM (Konkola Copper Mines) and Mopani, ZCCM –IH won’t have anything to do there because if they are scared to hold 20 per cent in a mine that posts profits what more KCM and Mopani?” he asked. “It is quiet strange that we have reached an agreement where we are forfeiting our right to claim a dividend in exchange for 3.1 per cent of revenue and it is not even clear whether this is going to be revenue after cost of gross revenue because what I know is what governs shareholding is the company’s Act and also we have tax laws in this country. So the deal in itself means we are converting our common shares that give us voting rights into preferred shares which are semi-equity – meaning the characteristics of debt and equity and the dividend has been put at 3.1 per cent. So what we need to ask ourselves is that, if the previous ZCCM-IH has suspicion that there was under declaration of dividends, surely in whose best interest is this deal? Why can’t the other owners of the same mine also go into such type of arrangement with government to say ‘for our 80 per cent shareholding we are going to be getting this much. Why should they push it to us?”
Haabazoka said that the government should have demanded for both royalty and dividends.
“Our shares were voting shares and we had dispute with FQM on the declaration of income. I remember then ZCCM-IH CEO (chief executive officer) Pius Kasolo taking on this case and he was very confident that we were going to win it,” he said. “Zambia gets mineral royalty tax which is regardless of whether there is profit or not. So why should we again go for the same? I was of the view that we get mineral royalty and on the other hand we benefit from the profits. Unfortunately, the language they have used cannot be broken down even by an average economist. You really need to understand the company’s Act and you also need to understand dividend policy and shareholding. For me I think this should have been taken to Parliament for debate.”
Haabazoka observed that there was use of jargon to mislead Zambians.
“What we have now is no longer common share. Common share has certain principles which this government has violated. We will be lucky if they have converted preferred shares and not forfeited our shares for some financial instrument. A lot of economic jargon is being used to confuse the population and posterity will judge us harshly,” he warned. “If we had a history of not receiving dividends and under declaration, what ghost has entered into the investors for them to give us a good deal? People that have been known to under declare will never give you a better deal because these are people that have been fighting for preferential tax treatment. They got mineral royalty now that is deductible. They have a mineral royalty that is administered like pay as you earn. Basically paying less and government is losing about K2.8 billion every year from the adjusted mineral royalty. Now we have to ask ourselves what is in it for us, 50,000 jobs? Government created 40,000 jobs, almost all what the mining sector employs.”
Haabazoka said there was need to harness that and use it for investment inflows.
“What we need from the mines are foreign exchange inflows and unfortunately, if we don’t have a grip on that we will not go anywhere. No matter how much we seem to be liberalists, capitalists or whatever, if God has given you comparative advantage and that is minerals, I think our generation is a letdown to this country. The generation of Dr [Kenneth] Kaunda are turning in their graves because we have been unable to harness anything from the mining industry,” noted Haabazoka. “The investors are lying to us that if we give them this preferential treatment, they will increase production to three million tonnes? If we are going to be having six hours load shedding, which three million tonnes are we talking about? And I have not heard of any power project coming up on board. I have not heard of any smelting capacity coming up in Zambia. Everything is still. I think we need to be truthful and remove our egos.
This is a bad deal.”