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Posted on Friday, 27 November 2015 11:00

Zambia Country Profile 2015: Sata's uncertain legacy

By The Africa Report

Flag Zambia

A tough baptism awaits the late President Michael Chilufya Sata's successor after presidential elections due in January 2015.

There will be intense pressure to resolve the political disputes that have affected economic policy-making despite the economy's strong recent growth. Different factions within the ruling Patriotic Front (PF) began to jostle roughly within days of Sata's death on 28 October.

There was an appearance of solidarity with Sata's own belated choice of Edgar Lungu, despite a failed attempt by acting president Guy Scott to remove him from the party leadership, but there was no shortage of other candidates for the presidential ticket.

Sata's appointment of Lungu as PF secretary general in late August had already been contentious in that it had entailed the removal of the man previously seen as the most likely successor, justice minister Wynter Kabimba.

Lungu's competitors

Most PF members judged Lungu to be less divisive than Kabimba, and Lungu's backers supported him for the position of secretary general although it remained unclear whether they would support him for PF presidency.

Some of his key supporters, like sports minister Chishimba Kambwili and former defence minister Geoffrey Bwalya Mwamba, were discreetly eyeing the PF presidency themselves. Other candidates potentially include Sata's son Mulenga and his nephew Miles Sampa, although the former's open campaigning even before the burial alienated PF members.

Lungu's main strength was the support of the influential Bemba power brokers around the man seen as king-maker, finance minister Alexander Chikwanda. Kabimba had been under fire for his policy interventions, which had resulted in inconsistency in key decisions affecting mines and the financial sector.

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Analysts suggested that Kabimba's departure could alienate PF voters in non-Bemba regions, although this could be offset by the planned investment of some $5bn in road and energy projects in rural areas.

In September's parliamentary by-elections, the PF took seats in remote districts in Eastern, North Western and Western Provinces from the Movement for Multiparty Democracy, the weakened former ruling party.

In the year ahead, the PF will be torn between ensuring party unity and delivering its campaign promises as it fends off the challenge from Hakainde Hichilema's United Party for National Development (UPND). One of the most important topics on the government agenda is the long-delayed constitutional revision.

The opposition complains that the process has been opaque and that the PF has failed to deliver a revision process driven by the Zambian people. The government's 2011-2015 national development plan also comes to an end next year, so it is discussing priority economic sectors and areas for infrastructure development.

Mining for votes

Among the issues dividing the PF has been the relationship between the government and big investors in the mining sector. Kabimba, at times with the connivance of the late president, often adopted radical and sometimes statist policy positions, and on occasion Sata acted to stop or even reverse some of Chikwanda's decisions.

On the other hand, the group around Chikwanda has been accused of being too cosy with the mining companies. Should the PF struggle with the succession and show signs of falling apart, the UPND and Hichilema would be best placed to take advantage.

In February 2014, the UPND won the Mvula local government seat in Chililabombwe, its very first ward seat in the urban Copperbelt. The victory was attributed to a refusal by PF supporters to cast their votes in protest at the lack of so-called benefits for supporting the ruling party.

After Kabimba's dismissal in August, Sata made an impromptu trip to meet Copperbelt party officials in an effort to rebuild PF unity in the most crucial province in the country. After Sata's demise, central bank governor Michael Gondwe was quick to give assurances about the fundamental strength and resilience of the Zambian economy and to note that the slide in the kwacha in the first half of 2014 had been overcome – although he warned that financial markets might be unsettled by events. However, the financial sector remained well capitalised and the prospects for 2015 and beyond were bright.

The economic focus for government in 2015 will be to apply the brakes to its recent increase in spending in an effort to contain the mounting budget deficitand help stabilise the economy. Since coming to power, the PF has focused on front-loading expenditure into key infrastructure projects, especially roads
and energy developments. Growth will be seen across the board in the agriculture, mining, manufacturing, construction and energy sectors.

Zambia's economy may continue to grow at a rapid pace but fiscal and exchange-rate fluctuations present a constant risk. According to the medium-term expenditure plan, Zambia will keep inflation relatively low in the single digits and cut its fiscal deficit.

In June, the government reduced its 2014 budget deficit forecast to 5.2% of GDP, from 6.6% projected previously. Higher salaries for public sector workers and fuel and maize subsidies are some of the reasons for the budget deficit.

Chinese bad for kwacha

Chinese businesses were widely blamed for the depreciation of the kwacha when they externalised large quantities of foreign exchange through the Bank of China, but government measures have begun to yield results. In the course of 2014, the kwacha showed signs of stabilising.

Despite a flow of foreign direct investment totalling $5.2bn in the past three years, investors have been complaining that the investment climate is too unstable. This sentiment was aggravated by a bitter stand-off between the Zambia Revenue Authority and the mining companies over prolonged delays in value-added-tax refunds.

The government withholds them until companies present evidence of the destination of their production. Key mines on the Copperbelt, like Vedanta's Konkola Copper Mines and Glencore's Mopani Copper Mines, continue to face industrial unrest.

However, there is expansion elsewhere. Total copper output rose from 697,900tn in 2012 to 765,037tn in 2013 and will grow further as First Quantum presses ahead with its $2bn Sentinel copper project at Kalumbila, North Western Province.

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However, analysts predict that the copper price will continue its downward trend in 2015 after dropping from $7,400/tn in January 2014 to $6,600/tn in October. Electric power output is increasing as new projects come on stream, albeit more slowly than planned.

After completing the 360MW Kariba North hydropower scheme, Zambia is now seeking to raise $280m from the World Bank to repair structural weaknesses in the Kariba Dam, which is vital to energy security in both Zambia and Zimbabwe.

Both countries are also touting the construction of the 1,600MW Batoka Gorge project. Thanks to good weather and targeted inputs for farmers, agriculture, too, has been performing well.

There was a surplus of 500,000tn of maize held over as a strategic reserve from a record crop of 3.3m tonnes in the 2013/14 season. The telecoms sector could receive a big boost in 2015 if the government follows through with plans to award a licence to a new mobile operator. Airtel is the current market leader in terms of numbers of subscribers, followed by MTN and Zamtel.

Copperbelt – Zambia's restless political heartland

The restive Copperbelt province remains the nerve centre of Zambian politics. With the highest number of registered voters in the country, it is the power base for the ruling Patriotic Front (PF), but there is growing discontent about the government's relationship with investors.

The province is at the centre of a power struggle within the PF. Supporters of dismissed justice minister Wynter Kabimba, who are particularly numerous on the Copperbelt, have been purged from the PF and have faced harassment.

The former ruling party, Movement for Multiparty Democracy, lost control of the Copperbelt when residents perceived them to be too cosy with the mining companies.

Michael Sata expressed radical opinions before becoming president, and the government is now working on a major mining tax overhaul. Party sources blame poor performance of the PF's parliamentarians for its failure to satisfy supporters on the Copperbelt.

Mining firms are widely seen as not doing enough to stimulate the economy. Infrastructure in most Copperbelt towns remains in poor condition.

The companies say high costs at the older mines have hurt their profits. The popular perception is that they have been cheating, and residents say the government has done little to safeguard the country's interests.



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