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Kansanshi agreement is a neat solution to a historical problem: All shareholders in Kansanshi are now incentivised towards maximising production – Prof. Oliver Saasa

CCM-IH’s recently announced decision to move from a dividend model to a revenue-sharing model has been both praised and criticised in the media but, concerningly, the rationale and details appear to be widely misunderstood. Mining For Zambia asked renowned economist Professor Oliver Saasa to shine a light on this agreement, which has been three years in the making.

There has been a significant amount of commentary in the media on the Kansanshi agreement since it was announced earlier this month. Has this surprised you?

I personally believe that the interest Zambians have shown in this deal is healthy. Citizens are interested in understanding – and even questioning – the reasoning behind decisions that have consequences for the larger economy. So, it is essential that the public is properly informed about the intricacies and technical details of this agreement, to ensure that people’s opinions are founded on facts – and not on fiction. What the commentators are asking is pertinent: ‘Whose idea was this transaction? How did it come about?’ For those that have followed its genesis, it’s clear that both ZCCM-IH and First Quantum [FQM] have wanted a change, and feel that the dividend model is no longer fit for purpose for either party.

What do you understand to be the rationale behind ZCCM-IHs desire to convert its dividend rights in Kansanshi into royalty rights? Or, put differently, whats in this deal for ZCCM-IH, as you see it?

As ZCCM-IH has explained publicly, a review of its portfolios performance in 2019 revealed that the dividend model had not been maximising shareholder value because it was not delivering predictable revenues. For this reason, pursuing alternative revenue streams became a focus in its subsequent Strategic Plan, for 2020-2026. Securing consistent revenue flows from its investment portfolio (via royalties) is a solution that addresses the unpredictability of dividend payments, which were not serving ZCCM-IH’s interests.


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