The ZCCM Investments Holdings – ZCCM IH has recorded a loss of K107 million (about US$7.6 million) in their financial results for the year ended 2019 compared to the profit of K433 million in the previous year. This is despite the company confirming that it deployed assets worth K13 billion (about US$1 billion).
The loss for 2019 has been largely attributed to the decrease in dividend received from First Quantum Minerals – FQM’s Kansanshi Mining which contributed only K45 million in 2019 compared to K149 Million in 2018. The other notable contributors to the losses posted were loss making subsidiaries like Investrust and Ndola lime.
And in order to address the challenges of the company’s investments portfolio, ZCCM IH has decided to implement new strategies with the key one being the introduction of revenue sharing and royalty models to begin to extract value from its existing portfolio from the top line, which is mostly concentrated in copper mining. ZCCM IH did not however give a timeline on when this will be implemented.
Addressing the media in Lusaka on January 14th, 2020 attended by the Zambian Business Times – ZBT, ZCCM –IH Chief Executive Officer Mabvuto Chipata explained that the previous investment model of waiting for a dividend to be paid after investments make a profit has proved to be challenging. ZCCM IH has for many years now received limited to no dividends from some of the companies in its portfolio.
Chipata has further disclosed that it has some subsidiaries which have been making loses for quite some time now and these include Ndola lime, Misenge, Kariba Minerals and Investrust bank. The company is this year scheduled to implement turnaround strategies that will ensure the named companies are salvaged from making losses.
“For Ndola lime, we have restructuring plan currently in place to ensure we continue to preserve jobs for people and ensure profitability, and we have heavily invested and pumped in more capital in Investrust bank at the same time we have increased shareholding and pumped in more capital in Kariba minerals which is a key producer of amethyst, considered to be among the best in the world,” he said.
He added that the company has also recorded limited participation in mining value chain hence it is engaging with its partners to seek participation in supplying into the mining value chain which consumes a lot of materials with considerable value. The company is looking at setting up or investing in mine supply companies to leverage this sector.
And in the energy sector and to support the company’s mining projects, ZCCM–IH is set to invest in renewable energy projects to support its investments in places where electricity is in deficit. Chipata further said that in order to reduce the copper mining concentration risk, the company will further diversify into other minerals like cobalt, manganese, gold and gemstones in order to increase its returns going forward as its strength is in mining.
Chipata further said that the company is aiming to invest in mineral value addition projects and companies so that copper, cobalt, manganese, gold, emeralds, amethyst are processed locally into finished goods in Zambia, to increase export value and returns. This will stem the export of raw materials so that Zambia exports value added products.
ZCCM-IH portfolio consists of six (6) wholly owned subsidiaries and fifteen (15) companies in which it has significant stake. It main asset base is in mining with stakes in key mines that include Chambeshi Metals, Chibuluma mine, CNMC Luanshya copper mines, Kansashi mine, Kariba Minerals, Konkola Copper Mines, Lubambe Mine, Mopani Copper Mine.
Other Mining assets or shareholding is in NFC mining, Ndola lime, Kabundi resources and Copper Trees Minerals. In the energy sector, ZCCM IH has interests in CEC and Maamba Collieries. Other companies in which they have an interest in include Investrust Bank and Misenge Technical and Environmental Services.
Some analysts have indicated that the portfolio under ZCCM IH (assets of about US$1 billion) is too large and too complex to be managed under one company or team and proposed that it be split into specialised investment portfolios say at mineral level, say copper assets alone, Emerald and precious stones alone etc.
The ZCCM IH team should also be given clear financial targets as they sit on a huge asset base that should be efficiently profitably managed to meet minimum prudent investment management requirements. As it stands, even the IDC whose largest assets are mostly in ZCCM IH has limited leg room to turn the portfolio around, having done a better job so far of reducing the number of loss making entities at their company level.
The other danger at the current set up of ZCCM IH is that losses in most of its companies can easily be masked under a huge dividend declared from just one of the investee mining company. The 21 entities under ZCCM IH has an interest need to be leveraged and profitably managed, failure to which, the boards and management of non performing companies should face the consequences.
