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Zambia’s good times could be at an end

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Before president Levy Mwanawasa’s stroke in late June, Zambia was riding an economic high powered by record prices for copper, the country’s main export.

His successor, who will be elected Thursday, faces a less rosy scenario as copper prices have tumbled by 50 percent from their peak in July, raising fears that the good times are ending in a country struggling to lift itself from poverty.

“Whoever comes into power is going to face some very real challenges,” Leon Myburgh, a Citigroup analyst who studies sub-Saharan Africa, told AFP

The global commodities boom had allowed Mwanawasa to build up foreign reserves to an all-time high of $1.1 billion (R11.7 billion), while stabilising the value of the kwacha currency and pulling inflation down to 10 percent.

But now the global financial crisis is causing worries even in the world’s poorest countries like Zambia.

Banks here have few international assets and are generally not affected by the credit crunch, but the resulting global slowdown has dramatically cut demand for raw materials, sending prices into a tailspin.

With some of the world’s largest copper reserves, the metal accounts for 80 percent of Zambia’s export earnings.

That means every swing in the value of copper can have dramatic knock-on effects for the value of the national currency, which in turn could spark higher inflation.

Economists say that Zambia’s new president will need to diversify to offset dangers of currency fluctuations and falling tax revenues as its export value falls.

“The demand for copper has dropped and the price has gone down, and it’s impacting on the kwacha’s value,” said Chibamba Kanyama, of the Economic Association of Zambia.

“A huge depreciation of the exchange rate will cause general price instability, which is inflation, and that is not good for investor confidence,” he told AFP.

The central bank last week cut growth projections to six percent, citing the kwacha’s volatility amid the plunging copper prices, foreign investor withdrawals and increased uncertainty around the elections.

Mwanawasa’s prudent economic policies have so far sheltered Zambia from the worst of the global economic storm, said Bongani Motsa, senior economist at Pan-African Capital Holdings in Johannesburg.

“What Zambia needs now is somebody who will carry on where Mwanawasa left off,” Motsa told AFP.

Acting president Rupiah Banda, who took over following Mwanawasa’s stroke, has assured investors that he would continue the policies that made Zambia one of Africa’s most stable countries.

In a thinly veiled dig at main opposition leader Michael Sata, who two years ago swore to boot out the country’s sizable Chinese investors, he has also publicly welcomed foreign investors.

Sata now says he’s willing to work with the Chinese, but has raised dust with a campaign promise to force companies to hand a 25 percent equity stake to local investors.

Banda has denounced his statements for “undermining investor confidence.”

But he has also turned to the vote-friendly power of social assistance, slashing fertiliser prices by 75 percent while on the campaign trail.

Talk by both candidates of spreading Zambia’s mineral wealth more evenly has great resonance in a country where more than 60 percent of the 12 million people are living on less than two dollars (about R21) a day.

Sapa-AFP

editor
editorhttp://www.lusakatimes.com

88 COMMENTS

  2. Why should a 25% stake in a Chinese company be an issue for us when in China a foreign company can have no more than 50% ownership??

  5. This talk of diversifying started during Kaunda’s era but up to now none of these power hungry politicians has had the vision or will to make it happen. There are cities in the world that have no minerals but survive on the service industry like consulting. With Zambia’s huge brain power, why can’t we do the same.

  7. Common, which part of this commentary does Sata understand? He wants to counter this with nationilsation of all companies, which investor will be happy with this.This is the last of the good in Zambia, esp. if PF wins this election. #2 Bcoz china has the capital and won all these companies post-communism, You want to take what investors have paid for 25% is alot of stake, for free!.Guys look at the bigger picture, even foreigner are warning you of your own politicians.

  8. SATA will make more boats so we catch more fish for exports. We are gonna catch more BUKABUKA for export and earn necessary FOREX to substitute copper exports.

  10. zed needs a strong man with pricipals of respecting zed pipo not just to fear the name of investors it must be equal builds schools and good roads and hospitals for the poor local zed
    and give them wat is good not changes no

  15. This article is very true. Hence my surprise reading last week Magande saying we are not affected by credit crunch! Does our finance minister not understand what is happening.

    Crunch= reduced economic output (globally)=less demand for comodities (copper, gold etc).

    Sadly this is not a problem that Sata or HH, or any zambian president can fix, its simply laws of supply and demand. Unless output is reduced for copper collectively by copper producers.

    Alternative is to diversify the economy.

    We need leaders who understand international economic and have a strong team to help them.

  18. #2 probably handing over ownership is the wrong term.”Buying” could have been mre appropriate and this condition should apply to all these so-called investors coming in and taking out all the wealth they harness from Zambias resources and leaving pennies behind in for of slave wages and low royalties. Where they come from they dont have the luxury of low tax rates and paying people low salaries. We should be tough as a country to benefit from what we own.

  19. THE ECONOMY HAS CHANGED IN THE LEADERSHIP OF BANDA THE MAN HAS FAILED TO BALANCE THE ECONOMY HE WAS BUSY BUYING CARS FOR FORMER CORRUPT PRESIDENTS WHY SHOULD WE GIVE HIM A VOTE? NO WAY WE HAVE TESTED HIS POOR LEADERSHIP

  20. 17

    I dont think that was a mistake, how can he say a full sentence endorsing an opposition candidate and later realise that he is wrong.

    I see R.B being lonely after he loses these elections pantu aba bonse they will run away from him

  21. Sata full marks – empower your people so the same should be done with land. Right now in Zed the best land is in foreigners hands and Zedians sell coz they need the cash. We need to protect our heritage. Good start. Zed is so so cheap and thats why they cry when its time to go back to their countries and our people start worshiping them. Right also about Magande- the man has no understanding of what is going on globally.

  22. Zambia is capable of rising above all the troubles it has experienced in the past. People shouldn’t v a negative attitude towards this country. our weeping may endure for a night but joy will certainly come in the morning. i see a prosperous Zambia . A Zambia that is rich.

  23. Touarisim could save Zambia, but Zambia remains one of the most expensive 3rd world countries to visit. A 10 day holiday to eygpt costs £2000, while a 2 week safari to Zambia costs £5000. And that money is recived in SA, with only a drop going to Zambia.
    property prices are some of the highest in Africa. Lusaka remains the most expensive place to fly to directly in the whole of Africa.
    Untill this GRZ stops turning a blind eye to the bloodsucking of the common man, because they get taxes from the bloodsockers, we are headed nowere. An affordable life and good education will remain a dream never attained.

  24. # 5 i think Canada naimiya kumutwe! Which African Country can do that. Brain Power? u hv ran away 4rom consulting in Zambia, tamwa kwata amano. IDOIT

  28. Zedians this is a wake up call for those that think Sata can make a good president. He can not understand any of this economics at play. The intellectuals in PF (poor finishers) understand this but coz there is no room for independednt thinking in PF they can not advise the man. We experienced this when the technical team at Luanshya told him that Binani could not run the mines and his response was “Bansamya ababene ebakwete ulupiya finshi mulenda baice” and today he is talking about revamping Luanshya oh God help us! Even Dr. Scott could not explain the PF maifesto coz it is in Sata’s mind only, not discussed or adopted. So only professionals that are worth their salt can stand up to Sata and tell him that all that he is talking about is crap. Look at the PF constitution and anlyse it, surely it has no room for professionalism. Cadres will be running institutions (if at all he will win). Let us not make a mistake by voting Sata. This man must be retired from politics by 30th Oct 2008 and allow young thinking men like Given Lubinda to lead PF

  29. # 26 Lamise Investments – nobody or few people blogging here is going to vote but its the common jim and jack outside your shop. so go and dish out brown envelops to get your piont to the voters and dont waist the bandwith telling us who not to vote for.

  30. I get very disappionted with those who clam to be educated and call us kaponyas when they themselves understand nothing. PF has never advocated for nationalisation. All it has siad is that Zambians as individuals must have a 25% stake in companies. That is not nationalisation-its called Citizen Empowerment. The Zimbabwean economy has been able to stand to this day because most Zimbabweans have a stake in the industry. In China no major campany is owned morethan 50% by outsiders. Zambia must be developed by zambians that is all PF is saying. If banks can’t give you finances use your natural resources. If an investors wants to invest in a mine let him partner with the local zambians (25%).

  32. #23 you are spot on the goverment structure in this country is fundamentally flawed and it’s this single imperfection that makes it impossible to seriously tackle poverty and backwardness.

    If we can only realise that it’s not Govt’s fxn to be a major employer, a lot of parasite politicians and greeedy civil servants would leave government. Consequently the size of govt and expenditure would reduce. Taxation will be fair and realistic and the private sector would genuinely grow, growing the economy-in seeable terms-in the process.

  33. the economy – maybe you have not understood what costitutes the economy. Luanshya mine was sold by HH so what do you want Sata to do?

  34. at the end of the zambia is our company. we are even being generous giving these ba mwisa 75% of our wealth. Pa south ifwe tatuitamba bwino so. Sata is my man. I am denouncing my SA citizenship and i am heading back to Z. ( that is if Sata wins)

  35. 33, you are indeed a potatoe! HH did not sell Luanshya mine, it was not his to sell! He was merely a consultant engaged to carry out a specific task.

    Sata cant do anything because he will never rule. It is an insult to the Zambians to have Sata paraded as one of our best candidate to lead our nation.

    He is effective as a minister, when he has a boss to set targets for him, nothing else.

  37. No.30 “Kaponya” You seem to be a better Kaponya like me but our real Kaponya the one you want to put into plot 1 does not understand it that way. See what he has put in the PF constitution on appointments of ministers and parastatal heads and discplining of the same. A kaponya like you will be expelled from PF when you say it is not nationalisation but partnership and so let us discuss with the owners of the company so that 25% is left for Zedians. The big Kaponya will just dictate and appoint pipo who do not think like you. So be careful Kaponya coz am speaking from experience and I ll never forget coz my Luanshya is still bleeding .

  38. People! Don’t let an already gloomy situation go to the dogs, literally! Forget the THUG, let the young man simmer for some time to get him ready and vote for RB. He is Zeds only hope right now. No need to gamble here guys. Lets go for the sure thing. Lets do the wise thing. VOTE 4 RB!!!

  42. Most us here in Zambia come from congo,what diversification are you talking about?Can’t you see that we have already diversified to music like our brothers in Congo?Fast money, notutemba.Nakusema nikutaka.

  47. # 44 and 43 i think you are new to this blog, i have always shown how he will do it. refer to other topics from this blog and you are going to see…am positive you will find my posting on most of the pertinent issues….

    SATA WILL DO IT!!!

    ABR!!!!

  53. Zambian’s next elected president inherits an economy going into a downturn amid a slowing global economy that will subdue Zambia’s FDI, portfolio inflows, donor aid, export revenue, tourism revenue and fiscal revenue. It is of concern that the significant growth in FDI in recent years has been predominantly due to the extractive industry, as this highlights the country’s dependence on copper.

  54. To ensure a positive return on mining investments, the next president has the challenge of accelerating the rehabilitation and construction of energy infrastructure, to reduce the cost of production and thus reduce the squeeze on profit margins.

  55. But if investors perceive Sata as disregarding the institutions that protect their investments, they are likely to halt their investments, especially if their return is falling. This would have long-term implications, including a fall in production, a decline of taxable income, job losses and, ultimately, lower economic growth. SOURCE: STANDARD BANK REPORT ISSUED TODAY

  56. We need a president who has brains. We are facing very challenging times. We need a president who is

    1) efficient at managing the little resources – reduced income from copper earnings. We may not have much if any windfall gains from copper if prices fall below threshold lines.
    2)prudent in managing our economy in a global recession – when demand for commodities like copper has reduced and people are holding on to their £1 or $1
    3)effectively manage forex fluctuations to ensure inflation is under control so people’s money can retain some value over a longer time. Many already earn so little.

  58. Zambia’s good times are not over but we have entered troubled waters. If anything the whole world has entered uncharted waters. It’s a global recession. Every country is affected. This is why we need a president who understands what’s going on. Any one has a right to think they can be president, whether they are lunatic or sane. But no one becomes president without our vote. We will have what we voted for most. Artciles like this serve to inform us. Let us make informed decisions.

  59. SURE I WILL DO NOTHING I ONLY WANT THE VOTES WHAT ECONOMICS DO I KNOW BAKAPONYA IMWE MULENSEBANYA? AM ALREADY FAILING AND HAVING HEART ATTACK KUMULANDU WA MA COUNCILS I PROMISED I WILL DELIVER IN 90 DAYS. MAPOLITICS FYE AYA. I DONT HAVE A MANIFESTO O VISION, KABILI CHILUBA ALI NCHINGA UKUBA PA STATE HOUSE NDEFYAYA FYE UKUMFWA EFYO CHUMFWIKA PAR PLOT ONE. INGA UNGAPELA BAKAPONYA INCHITO NI NANI? INE NSHYASAMBILIA INCHITO SHABASAMBILILA. TARA I HAVE SAID WE WILL GET OUR PART, I HAVE ALREADY THREATEND SUN HOTEL TO CLOSE IT UP. LUBINDA WILL RUN AS A REWARD FOR HIS SUPPORT.

  60. Please spare mother Zambia from anarchy. Peace is the order of the dayin this lovely country. When/if war breaks out in this country people will go to watch instead of running away for dear life!

  61. Imichopo na chibuku nga fya yamba ukushota! Now its good to walk in Shoprite and be able to buy groceries though quite expensive for the common citizens, the average Zambians & foreigners too has to dig deep in their pockets to live in Zambia. Zambia needs to call back native people living abroad to invest back home.
    Foreigners with money are buying up all the fertile land, very few Zambians own any land at all, if not only barren land without water.

  63. #30 Any sane & educated person who allows himself or herself to be led by an illiterate should be checked medically.You may defend PF’s policy but the fact is that PF has not cleary explained his policy so we wonder where all the hype about Sata is coming from,you simply jump when he says ”more money in your pockets” if he reduces taxes but has he bothered to explain how he will cover the shortfall in govt revenue should he reduce taxes,HH has explained this several times in interviews but i have never seen or heard Sata explain,he simply says is what he intends to do how no one knows that is why he is a kaponya & so ru u his supporters coz u simply go with the wind.

  66. LT, I disagree with the following statement and please, give us quotes istead of sadly written news:

    “But now the global financial crisis is causing worries even in the world’s poorest countries like Zambia.”

    Zambia is not a “poorest” country. We have land and other things which our friends elsewhere do not have.

    Vote for president Hakainde Hichilema for a real ray of change and hope that all Zambians can believe and trust in. Together Zambians, Yes we can, only you need to vote wisely for HH.

  67. 49% of zanaco were sold to rabobank at us$8.9 million, now the remaining 51% is being sold at over us$40 million. where is the logic here. couldn’t zambians have managed to raise us$8.9 million on their own instead of relying on the foreign infestors? why are zambians being exploited? who is the kabwalala here. ni MMD!

  69. iTS DIFFICULT TO UNDERSTAND WHY PEOPLE SAY SATA CAN DO IT WHEN THE MAN DOESNT UNDERSTAND ANYTHING ABOUT ECONOMICS.sATA DOESNT QUALIFY IN ANY WAY TO LEAD ZAMBIA ANYWHERE.YOU WILL ALL REGRET AND WITH THIS I CHALLENGE LT TO KEEP THIS WARNING

  70. #67, ako kanono ba nevers, how much money does president HH alone have right now? Since you do not need to go look it up from afar, I will give it to you now.

    President HH and his family alone have ZK 38.8 Bilion Kwacha. This money plus what other have is enough to have raised that USD 8.9 million you are writing about. just do the conversion of HH’s family money into Kwacha. I would have done it for you but I am feeling lazy to check for a currency convertor on the net.

  71. I am still urging Veep RBB and the whole MMD to endorse president HH before it is too late. Zambia can not afford to have Sata as Zambia President at this time. Let us convince Sata to sit for Grade 7, 9 and 12 exams before he can come back and contend the Zambian Presidency.
    Countdown: 1 day 45 minutes remaining and we are counting.
    I envision a Zambia whose people shall stand tall as PROUD persons instead of being timid due to lack of confidence and motivation. President HH has committed himself to serve Zambia to the best of his ability and so, let us endorse HH on Thursday so that HH can bring a better future to our children. Together, yes we can and we still have 1 full day to decide

  72. @ ba #30. Uncle Phil

    Zimbabwe’s inflation is at around 200 million percent. The Zimbabwe govt is still trying to tell the western govt’s to cut the sanctions that have been imposed on them. Agriculture used to account for about 60% of Zimbabwe’s foreign exchange earnings. When the whites where chased, Robert gave his golf buddies the farms and there was no productivity going on. With lack of foreign reserves, the reserve bank was forced to print more and more money and due to lack of confidence in the banking system, people have a high demand for money which is causing interest to increase and causing the reserve bank to print more money since the demand for money is higher than [tbc]

  73. [cont from #72]

    what people are willing to put in the bank (mostly to do with the high inflation rate. The more you money sits in the bank, the more value it loses). Banks try to offset the high inflation rates by setting the interest rates higher than the inflation rate, but at an inflation rate of 200 million percent, no one will be borrowing from the bank. I just read in the herald the other day that 2 major hospital in Zimbabwe have closed. [tbc

  74. Zambia has approximately one day to chnage its destiny in future terms on to a course that will bring all things to be running well for all Zambians. I am a carrier of a Zambia National Registeration Card (NRC) which shows that I am a Zambian Citizen. On it (NRC), there is nowhere written Tonga except the village of Chief Mapanza – which is insignificant anyway for I have never been there sadly. I also have a Zambian P a s s p o r t which also has no reference to my tribe Tonga while it only indicates my NRC (Zambian Citizenship) number. So, fellow Zambian Citizens,it is us all as Zambians and not HH as a Tonga person although this is only true (HH being Tonga). Together, YES we can.

  75. “Zambia’s four Presidential Profiles
    The BBC’s Musonda Chibamba profiles the four Zambian presidential candidates standing in Thursday’s polls and hoping to succeed the late President Levy Mwanawasa who died in August after suffering a stroke.”

    ht tp : / / news . bbc . co . uk / 2 / hi / africa / 7693337 . s tm

    Listern to the 3 main candidates for Zambian President and also see their profiles wirtten by MUSONDA CHIBANDA – I hope Zambia will continue to have peace for some TRIBALISTS are really bringing us as a Nation down.

  76. 30TH OCTOBER, 2008 PRESIDENTIAL ELECTION RESULTS ANNOUNCING MAY ONLY BE ON SUNDAY 3RD NOVEMBER, 2008.
    “The candidate with the majority of votes will be declared president. The results are expected to be announced between 3 and 9 November.”

    Source: ht tp : / / news . bbc . co . uk/ 2 / hi / africa / 7691717 . s tm

    Fellow Zambian Citizens, let us all brace ourselves for the worst or the best. May the good Lord God protect out families.

  77. I wholly agree with #18. We should be tough with investors- we should only allow those who wish to be partners with Zambia in helping develop our country. They have the financial muscle, yes, but we also have the labour force which contribute to these investors’ wealth. We have not much to lose after all, since most of our people are already suffering. When we get one deal, let’s make sure it is good for our people.

  82. You can`t teach an old dog new tricks.Sata is just a sweettalker but we know him, records are there to speak for themselves.Lets not vote for a mad man

  83. zambians need pray for peace, love and harmony to be granted only from God. Wisdom only comes from above and so are leaders…

  85. ITS NOW TIME PF AND UPND POOLED THEIR RESOURCES (VOTES) TO DISLODGE MMD. THIS IS THE CALL FROM EVERY WELL MEANING ZAMBIAN WITH INTEREST AT HEART TO DEVELOP ZAMBIA. WE ZAMBIANS ARE HUMBLY ASKING BOTH PARTIES TO BURY THEIR HATCHETS AND JOIN HANDS. WE DO NOT WANT MMD/UNIP AGAIN. THERE IS TOO MUCH POVERTY IN THE COUNTRY WITH ALMOST EVERYTHING. TO PUT IT SIMPLY, PF, UPND PLEASE PUT TOGETHER YOUR VOTES AND KICK OUT MMD. THANKS.

  86. U C u need to concentrate on Core-issues of a country hence VOTE THE-CORE FOR 2011!! i hereby form THE-CORE party today on 20 November 2008. Superman will be my Vice.Free-Market Caplist will tha economist Minister.

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