Zambia: In his first year Hichilema stabilised the kwacha, but corrupt officials remain untroubled

By Chiwoyu Sinyangwe
Posted on Monday, 29 August 2022 16:40

Zambian President Hakainde Hichilema arrives for the Leaders' Retreat, on the sidelines of the Commonwealth Heads of Government Meeting at the Intare Conference centre in Kigali, Rwanda June 25, 2022.
Zambian President Hakainde Hichilema arrives for the Leaders' Retreat, on the sidelines of the Commonwealth Heads of Government Meeting at the Intare Conference centre in Kigali, Rwanda June 25, 2022. Dan Kitwood/Pool via REUTERS

The burst of optimism that ushered President Hakainde Hichilema and his United Party for National Development (UPND) into power a year ago have run into the reality of governing a highly expectant population. Although progress has been made on the economy, Hichilema is taking a different approach to unpicking the corruption of the previous regime.

On 24 August 2021, Hichilema became Zambia’s seventh president after beating then incumbent president Edgar Lungu with over one million more votes after highly dissatisfied Zambian voters ended the former ruling Patriotic Front’s 10-year reign.

A nearly collapsing economy, wrecked rule of law, reports of grand corruption in government, chaos in the key mining sector and the government’s failure to employ essential public sector workers gave Hichilema and his UPND that much-needed catalyst to record Zambia’s second-biggest ever election victory against an incumbent president.

That was the easy part.

“We have not yet seen the change – there is sanity in markets and bus stops, but there is no money in the economy and no jobs,” says Christopher Ngwira, a 29-year chemistry graduate who is still without a job after graduating from the university four years ago.

Ngwira’s views reflect the overall feeling of a decent section of the Zambian population that saw Hichilema as the magic bullet to the litany of governance and economic challenges that characterised Lungu’s seven-year rule.

To overcome high youth unemployment, Hichilema is – this year – hiring over 40,000 new public sector workers, such as teachers and health workers, in a move expected to soothe anxiety among the crucial youth voters.

Rhetoric versus reality

“Lungu left a fractured economy, a bruised nation and a demoralised society and so, in an attempt to win last year’s elections, President HH committed to sorting out all the problems and he obviously ‘over-promised’ and it is only fair that some people feel he was not entirely honest – he did not tell the truth to the win that election,” says Charity Musamba, a University of Zambia Political Science lecturer.

“Clearly, for the long time the UPND were in the opposition [23 years], they did not prepare adequately and had no prior strategy with clear priorities on how they were going to tackle the economic and governance challenges the country was facing,” Musamba says.

Fight against corruption

The appointments of Mumba Malila, a strong reformist and anti-graft crusader as chief justice; former attorney general Musa Mwenye as chairman; and Lusaka lawyer Gilbert Phiri as director general of the Anti-Corruption Commission (ACC) are expected to reignite a sense of the respect in the highly distrusted anti-corruption watchdog.

However, lack of convictions among politically-connected individuals from the previous regime leave many in Lusaka in doubt that the fight is living up to expectations. Several close allies to former president Lungu, including his wife and children, have had their assets worth millions of dollars seized for being suspected to be “proceeds of crime”, but most in Zambia want to see more convictions and prison sentences.

There seems to be no credible plans to fight corruption at the moment and we are yet to move from mere political rhetoric to the actual actions

Hichilema’s fight against corruption is focused on seizing assets and forcing them to be forfeited to the state, in a move the current regime says is less costly than marathon courts processes that characterised the anti-corruption crusade championed by the late Levy Mwanawasa – who was president between 2002 and 2008, and whose efforts are hailed as Zambia’s biggest fight against graft, to date.

“There seems to be no credible plans to fight corruption at the moment and we are yet to move from mere political rhetoric to the actual actions,” says Musamba.

Economic restoration

Hichilema, arguably the most pro-market reformist president that Zambia has ever elected, was elected on the promise to “fix the economy” among other political commitments.

By last year’s election, Zambia’s economy had posted some of the worst results ever since the country reverted to democratic rule in 1991. Zambia, with a GDP around $25bn, had been shackled by a public debt of around $19bn. Inflation was nearing 25%, economic growth slumped into negative and copper production was declining. The frequent changes to the prices of the goods and services pushed many Zambians into poverty and the brink of desperation.

The focus of Hichilema was to stabilise the macroeconomic environment, to create an anchor for the economic recovery. Defying global trends of rising global inflationary pressures caused by the Russia/Ukraine conflict, Zambia’s inflation declined to 9% by end of August 2022 while its local currency the kwacha is one of the best performing currencies, according to Bloomberg.

Economic growth is expected to be lifted to just slightly above 3.5% this year.

To rein in inflation and stabilise the exchange rate, the Central Bank has tightened monetary policy while the government has drastically reduced key subsidy support to energy products.

“That’s why some are arguing that this appreciation of the kwacha and fall in inflation is somehow being engineered because it is not being supported by increased productivity – we just can’t see that,” says Christopher Chifunde, a Lusaka-based economist.

Ever since the Bank of Zambia began tightening monetary policy earlier this year in the aftermath of the re-appointment of Denny Kalyalya as governor, Hichilema’s gamble seems to be paying off.

Zambia’s consumer price index is trending downwards while a number of foreign banks operating in the country have started announcing a reduction in interest rates.

A stronger kwacha has cut the cost of imports in an import-dependent country and most households are experiencing a de-escalation of prices for the essential commodities, a stark departure from the trend in the PF regime. An announcement of restructuring of the country’s foreign debt supported by the IMF is expected in September 2022.

Murky situation in the mining sector

Hichilema and the UPND are banking on the mining sector to anchor economic recovery. Zambia is targeting to mine 3m tonnes of copper by 2031 by lowering taxes to attract foreign mining investors.

First Quantum Minerals (FQM) has announced a $1.5bn investment in expanding its operations in North Western Zambia, the biggest foreign direct investment into the country’s mining sector in over a decade. FQM is also in the process of establishing the biggest nickel mine in Africa.

However, FQM is highly technologically advanced, and despite its increased mining activities it won’t employ as many Zambians as ageing mines like Konkola Copper Mines (KCM) and Mopani Copper Mines (MCM).

Zambia’s $1.5bn debt to Glencore’s Carlisa investment is proving a huge encumbrance on the operations of MCM.

To exit its majority shareholding in MCM in 2020, Glencore agreed to sell its stake to Zambia’s ZCCM-IH for $1.5bn, money expected to be paid over a period of 17 years. Glencore retains control of all MCM’s copper sales. ZCCM-IH is currently struggling to sustain operation of MCM and even Treasury support is proving unsustainable.

What we have seen so far is far from being impressive, but again, the UPND have four more years to prove to the Zambians they are still serious about running the country

Having fired the PF-appointed Provisional Liquidator Milingo Lungu, the focus of Hichilema is to halt the marathon litigation between ZCCM-IH and original shareholders of KCM, Vedanta Resources.

“You cannot continue mining in court,” Hichilema said. Although Hichilema wants to manage the smooth exit of Vedanta from KCM, the Indian-originated miner wants to stay a little longer, perhaps motivated by current high metals prices.

Hichilema won the Copperbelt vote for the first time in 2021 on the conviction of the locals that his business savvy would aid in revamping economic activities in the restive Copperbelt province.

“Maybe it is too early to judge but there is nothing happening here [on the Copperbelt] – as for Mopani, the situation is much worse off than it was during Lungu’s time. Contractors are going for months without pay and even workers, you are not sure when you get your salary,” says Kenneth Mambwe – one of the workers.

Given the ruinous performance of the previous PF regime and lack of credible oppositionists, many in Zambia are willing to give the UPND and Hichilema more time to settle.

“What we have seen so far is far from being impressive, but again, the UPND have four more years to prove to the Zambians they are still serious about running the country,” says George Sichalwe, a civil society advocate in Lusaka.

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