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Zambia sees higher economic growth on improved power supply

By Olivia Kumwenda-Mtambo
Posted on Wednesday, 10 February 2016 12:00

An electricity shortage in Africa’s no.2 copper producer has stunted the mining sector, while weaker copper prices due to slower growth in top consumer China have put pressure on Zambia’s economy and its currency.

Stabilising power supply, especially to the mines, should give us an upside

Global firms Glencore and Vedanta were forced to lay off workers after temporarily closing certain mining operations to curb copper output in a bid to support flagging prices, shedding thousands of jobs.

“Stabilising power supply, especially to the mines, should give us an upside. Our GDP outlook is on a positive trajectory,” Christopher Mvunga told Reuters in an interview at a mining conference in Cape Town.

The World Bank has said Zambia’s GDP growth will fall below 4 percent this year due to a combination of domestic and international pressures but expansion will pick up in subsequent years.

Mvunga said the central bank had not sold dollars to stabilise the struggling kwacha. “We are not using reserves by any means to stabilise the kwacha, absolutely not,” Mvunga said. “But we are looking at areas where we can reduce imports which are not critical to reduce the strain on demand for dollars.”

The kwacha has had a rough ride due to waning demand from the world’s top copper consumer, China, which hammered the southern African nation’s foreign exchange revenues.

Mvunga said reducing power supply to the country’s mines had not impacted on production, adding that supply constraints were mainly targeted at auxiliary activities. “There are non-core mining activities, like golf clubs, that’s where power has been removed. We are not impacting the core production areas of the mines,” he said.

Zambia power companies have cut electricity supply to mining firms by 30 percent. Mining minister Christopher Yaluma said at the same conference that his country is planning to add 1,500 megawatts to its power grid by 2020 in a bid to ease the electricity shortages.

Despite the power cuts and closure of mines, copper production inched higher to 711,515 tonnes in 2015 from 708,000 tonnes the previous year after a new mine owned by Canada’s First Quantum Minerals started production, according to data from the chamber of mines.

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