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Thursday, 10 December 2015

Electricity goes down and up!

Government last week increased electricity tariffs for residential and non-mining commercial customers.  Prices to residential consumers have increased by 205%. Non-mining commercial prices have increased by 180%. Social services consumers such as schools, hospitals, orphanages and churches face a 190% increase.

The largest consumer of electricity, mining companies, are exempt from these changes. They do not get their power directly from Zesco. They get it from Copperbelt Energy Corp (CEC) which buys electricity from Zesco in bulk and in turn sells it to mining companies including the local units of Vedanta Resources and Glencore.  CEC already has agreements in place which ZESCO cannot change.

The Energy Regulation Board (ERB) claims the new tariffs are necessary to bring electricity pricing to "cost reflective” levels in order to attract investment.  It suggests that the increases would generate revenue that may facilitate an investment of up to US$3.7 billion in power generation projects. 

However, these figures look more like guesswork because no analysis or evidence has been offered by ERB to substantiate the claims. A point conceded by the IMF who recently noted, “the [increase] on its own, does not ensure full cost recovery in electricity provision”. So we are far from encouraging investment in the future.

The main reason for the latest huge increase is that the current electricity deficit has led to import of emergency power at a huge cost to government. A falling Kwacha, high inflation (19.5%) and high interest rates (15.5%) means high operational costs for ZESCO. Unless the prices rise the government's budget deficit will get worse.

What does this all mean for ordinary Zambians? The cost increase will not stop the constant load shedding. It is also not clear how much new investment will be generated in the long term because much of the increase is designed to ease operational costs on ZESCO not move us to cost reflective levels.  

What the increase will do in the short term is massively increase costs for small and medium businesses. What we now have is reduced supply of electricity at substantially greater cost. This will make life very difficult for farmers, traders, manufacturers and many social sectors. The result is higher unemployment and higher inflation. 

So not only will residential consumers face higher electricity prices they will have to meet these higher costs in the context of ever rising joblessness! 

As we recently noted, Zambia is facing "supply shocks" which should not be met by increased austerity measures of the kind being taken forward. It needs to focus on boosting supply not constraining it by increasing the cost of doing business, especially given the high prevailing interest rate. It fiscal response needs to focus on moving spending away from unproductive sectors to more productive areas. 

It has to tackle its fiscal deficit challenges in a way that does not turn Zambia into Venezuela. The latest move by ZESCO is another policy that has some merit but is in fact poorly timed and badly executed. 

It is poorly timed because though we certainly need to move toward increasing electricity prices in the future to cost reflective levels, in order to encourage long term investment in generation and transmission, now is not the time for reason explained above. 

It is badly executed because the new prices are still below cost recovery, and hence are unlikely to attract levels private sector investment. Most importantly, simply increasing prices is not the answer! 

Any move towards cost reflective prices must be put forward as part of an overall policy package that includes renewed obligations by GRZ to settle its own debts to ZESCO on time; undertake privatisation reforms for ZESCO that sees it only retaining monopoly over transmission (generation and distribution should be privatised); and wider public ownership of energy policy.

Saturday, 5 December 2015

Pricing in dollars

The government is apparently considering reintroduction of suspended Statutory Instrument (SI) 33 of 2012 which prohibits quoting prices in dollars, according to the Ministry of Finance.

Times of Zambia’s James Muyanwa in a recent summary of President Lungu’s press conference reported that the President as saying the “dollarisation of prices is illegal and unjustifiable, hence it should be stopped with immediate effect”.

Wednesday, 2 December 2015

Zambia's Tinbergen Moment

A reader recently asked for more explanation on the precise challenges facing Zambia. This is a huge question! We have already said much about this subject through many posts, especially on our Facebook page. But we appreciate that there is a lot more to be said than we have said.

Simply put, the situation facing Zambia is one of having many policy objectives (problems) but insufficient policy instruments (solutions), in face of serious external supply shocks. Zambia is failing the "Tinbergen Rule".

The rule reminds us that the number of policy targets (objectives) demands at least the same number of policy instruments. In simple english, you can't solve three problems with one or two solutions! You need at least three solutions.

Saturday, 28 November 2015

Good news on the constitution

The big news in Zambia this past week is that the Constitution Amendment Bill passed the second reading in Parliament. 106 PF and MMD MPs voted in favour defeating UPND and its small UPND leaning MMD faction. 

This is a monumental victory for the Zambian people. There was no reason for UPND to oppose the Bill at second reading given that the Bill contained exactly the same clauses as the Draft Constitution. 

The Bill now goes to Committee Stage where a simple majority will be sufficient for it to come back to Third Reading. That is when the real hard work begins. And it is at that stage where UPND should have concentrated by positively working to keep the contents, rather than opposing for opposition sake!  

If PF decides to get rid of some clauses and insert their own, then MMD may not support the Bill at third reading which may mean the whole thing collapsing. If ECL and NSM play well and patriotically together Zambians may finally have a better Constitution that has elluded us for two decades. 

The public mood in Zambia is broadly is strongly in favour of the Constitution Amendment Bill. The support among Zambians abroad is overwhelming. Not everything in the Bill is perfect, but it is vastly better than the status quo. 

So we are urging all our readers to get behind this process so we can end decades of constitutional inertia that has only benefited politicians and the so called civil society. Together these two groups have enriched themselves through many allowances in various disguised forums at the expense of the poor. 

Most importantly Zambians have endured a difficult year. The potential implementation of the Constitution Amendment Bill gives us something positive to look forward to in 2016 in the midst of dark times. It will begin a new journey for our country. A new hope for the future. This is the leadership Zambians want from our politicians.

Chola Mukanga
Copyright © Zambian Economist 2015

Friday, 27 November 2015

Zambia suffers mining job losses

Konkola Copper Mines has suspended operations at its Nchanga underground mine in Chingola with effect from Friday, 27th November 2015. The mine will be back in operation "when market conditions improve".

The decision means that all "contracting firms operating at Nchanga will be released". This will result  in immediate loss of around 1,675  contracted employees. A further 825 will be laid off over the next three months. 

KCM has already laid off 150 employees. This brings the total job losses to around be around 2,650. It  has advised that "pensionable KCM employees and permanent staff" from the Nchanga underground will be redeployed within the business.  

KCM's decision comes off the back of Glencore, an Anglo-Swiss commodities company, cutting 4,300 jobs at the Mopani Copper Mine. The Chinese-owned company CNMC Limited has also suspended operations at the Baluba mine in Luanshya, laying off 1,600. 

The jobs losses are now galloping towards 10,000. But as we indicated this week that focusing on that figure underestimates the scale of unemployment. It is not just mining workers being laid off, mining contractors have also already lost a lot of businesses which has resulted in more unemployment in other areas. 

We should also keep in mind that those who are being laid off will in turn lay-off others. Some workers employ house servants. Now that they no longer have a job or contract in mining companies they will in turn not be able to employ other people. 

Most industry forecasts suggest that copper prices will not rebound until late 2016 / early 2017.  It is very sad situation Zambia finds itself in. What is even worse is that it could all have been avoided. 

We have been predicting this scenario for three years now. We strongly advised that there was need to slow down borrowing and ensure sufficient fiscal space to enable more expansionary policies in the highly likely event that copper prices collapsed. We were told that we were foolish!

A nation that imports onions!

Zambia needs to urgently rethink its growth model. It does not make sense to have an urban growth model built on building countless shopping malls stuffed with foreign products. 

In one shopping supermarket we looked at this week, this is one of a handful products made in Zambia. The rest are imported from around the globe.

Monday, 23 November 2015

IMF- Zambia Watch (November 2015)

IMF Staff Concludes Visit to Zambia
Press Release No. 15/531
November 20, 2015

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

At the invitation of the authorities, an International Monetary Fund (IMF) team led by Tsidi Tsikata visited Zambia during November 11–20 to review recent economic developments and discuss the authorities’ policy responses to the macroeconomic challenges currently facing the country.

Sunday, 15 November 2015

On Break!

I am currently taking time off writing to renew my batteries and spend some time thinking around various issues on the ground. Will resume in December.

God willing we will have much more consistency and comprehensive writing than has been possible over the last few months due to limited time on my hands!

Many thanks for your unwavering support! 

Tuesday, 13 October 2015

Zambia Budget 2016

Finance Minister Alexander Chikwanda delivered the Budget Statement 2016 on Friday. A fairly boring budget with nothing new really, which is as expected given the chaotic fiscal and monetary situation Zambia has found itself in. The only surprise is that Alexander Chikwanda has continued his overly optimistic forecasts of the fiscal deficit. It is a surprise because one would have thought a dose of realism would have set in by now. More discussion on some of the proposals in due course.

Thursday, 1 October 2015

Zambia is downgraded again!

Editor's note : The ratings agency Moody's recently downgraded Zambia's credit rating from 'B1' to 'B2' based on "sustained deterioration in fiscal and debt metrics" in the context "lower growth environment" due to weaker copper prices and electricity shortage. The outlook has been revised to stable from negative, suggesting it is unlikely to experience another downgrade over the next 12-18 months.
Moody's Investors Service has downgraded Zambia's government issuer rating to B2 from B1 . The outlook on the rating has been changed to stable from negative.

The key driver for the downgrade is our expectation of a sustained deterioration in fiscal and debt metrics that is unlikely to reverse over the course of the 3-5 year rating horizon given the challenges stemming from a lower growth environment amid an extended period of weak commodity prices, constrained copper production, and domestic electricity shortages constraining business activity.

Sunday, 6 September 2015

Zambia's economic woes goes viral

We recently shared this post on Facebook which has gone viral. it has been wonderfully exciting to see it re-shared countless times. Most importantly it has generated interesting discussions about how to tackle the changelings ahead .

There are essentially nine big economic policy challenges facing GRZ :

(1) Very weak copper prices (lowest in 5 years)
(2) Rising debt levels (Highest since HIPC)
(3) High fiscal deficit (likely to get even larger soon)
(4) High youth unemployment
(5) Power deficit (possible blackout in October)
(6) Volatile and falling Kwacha ($1 per K10)
(7) Poor policy credibility
(8) High and rising cost of private borrowing
(9) High poverty levels (80% poverty in some areas)

Saturday, 5 September 2015

Zambia Kwacha Chaos : State House Response

Editor's note : President Lungu has issued a formal statement on the rapid depreciation of the Kwacha. The Kwacha today was trading above K10 per US$1. The Bank of Zambia Governor Denny Kalyalya yesterday indicated that he has no plans to halt the depreciation, "It is very clear what our policy is, we are going to maintain a flexible exchange rate". His statement has fuelled further panic with with no end of "bottoming out" in sight. Here is the statement released by State House pertaining to Kwacha issues. It largely repeats what BOZ said recently.
Following the deterioration of the currency and energy situation in the country in recent months, His Excellency Mr. Edgar Chagwa Lungu, President of the Republic of Zambia has intervened to guide monetary and fiscal policy measures designed to stabilise the markets.

The continued difficulties in the global economy and the unprecedented strengthening of the US Dollar has sent all currencies including our national currency, the Kwacha on a downward spin.

Friday, 4 September 2015

Zambia in Figures (1964 - 2014)

A very helpful statistical pack covering key figures since independence. This should hopefully help eliminate confusion over competing figures quoted in the media.

Chola Mukanga
Copyright © Zambian Economist 2015

Thursday, 3 September 2015

Zambia Kwacha Chaos: BOZ Response

Editor's note: A recent statement from the Governor of the Bank of Zambia on the sharp depreciation of the Kwacha which has seen it breach K9 per US$1 and now looks inevitable to reach K10 as copper prices tumble and the fiscal deficit worsens. The BoZ analysis is looking outdated with every minute.
Having had our Quarterly Media Briefing earlier in the month we thought we would not be coming back this soon. However, global economic developments over the past two weeks have had such adverse effects on many emerging and developing economies, including Zambia, and thought that our explanation of the developments would assist our local economic agents and the general public to have a better appreciation of what is going on and therefore avoid taking actions that will compound the situation.

Wednesday, 2 September 2015

Zambia MTEF 2016-18 and 2016 Budget

The Government has released the Medium Term Expenditure Framework (MTEF) for 2016 - 2018 and the outline for the 2016 budget. This is essentially the PF plan for re-election as this will be last budget outline before the elections in 2016 [actual budget due next month]. The document certainly merits close study, but sadly a quickly glance through the MTEF already shows that the assumptions on copper prices and growth looks rather outdated. Shockingly although wages already account for more than 52% of tax revenues, government plans to increase this even more in the 2016 budget at a time when the economy appears to be life support.All on a quick glance of course!

Tuesday, 1 September 2015

Zambia Monetary Policy Statement (August 2015)

Editor's note : The Bank of Zambia released its quarterly monetary policy statement in August. It noted the need for fiscal consolidation, by addressing revenue shortfalls and rationalising expenditures, in order to achieve fiscal sustainability and lower government security yield rates. 
The Monetary Policy Committee (MPC) held its meeting on 10th August 2015. The MPC considered developments in the global and domestic economies during the second quarter of 2015, the outlook for the third quarter and to decide on the monetary policy stance aimed at achieving the Central Bank’s inflation objective in order to support macroeconomic stability.


The Committee observed that the trend of weak growth in the global economy evident in the first quarter of 2015, was sustained during the second quarter. Major emerging market economies, such as China, Russia and Brazil, continued to be sources of weakness to global economic growth, with deflationary consequences on most commodity prices. Over the quarter, the average prices for copper and crude oil (Dubai), for example, fell to US $5,833.0 per metric tonne (mt) and US $ 61.3 per barrel from US $6,295.0 per mt and US $63.7 per barrel, respectively. In addition, the brighter growth outlook in advanced economies, particularly in the USA, increased the prospects for interest rate hike over the next 12 months. This shifted investor preferences in favour of US dollar denominated assets and further supported the strengthening of the US dollar. As a result, there was pressure on the currencies of emerging market and developing economies which led to increased currency volatility and outflow of capital from these economies.

Monday, 17 August 2015

Broke Parastatals

An interesting statement from Finance Minister Alexander Chikwanda. He says only 7 parastatals are currently declaring dividends. The rest are loss making :
There are as many as forty State-owned enterprises. Of these, seven parastatal companies declared dividends..This is a small figure, meaning that the other parastatal companies are not performing to the expectation of the taxpayers who put money in these entities. We are, therefore, at liberty to show concern that so many State-owned enterprises are not declaring dividends... it would be logical to wind down the companies that are not doing well because the alternative would be to overburden the already over-extended taxpayers to find money to run the parastatal organisations. Therefore, I think that it is quite a reasonable proposition that companies that are not doing well, and may not do well in the foreseeable future be liquidated (Source : National Assembly)
The seven parastatal companies that declared dividends mentioned by Alexander Chikwanda are (a) Afrox Zambia Limited; (b) Kagem Mining Limited Company; (d) Mofed London; (e) Nanga Farms Private Limited Company; (f) Zambia National Commercial Bank (ZANACO); and, (g) Mulungushi Village Complex Limited.

Saturday, 15 August 2015

Austerity or Bust?

A recent article by the Government think tank ZIPAR on Zambia's rising Eurobond debts carries the following observation :
With the [current] economic malaise, it is therefore not surprising that the [recent] third Eurobond, at an annual interest rate of 9.375%, is more expensive than the 2012 and 2014 Eurobonds whose interest rates were 5.375% and 8.5%, respectively. This means Zambia will pay US$117.2 million annually in interest until 2025 on this new Eurobond alone. Between now and 2022, interest payments for the three Eurobonds will increase from US$125 million to over US$240 million annually (Source : ZIPAR)
We would suggest that the situation is actually much worse than painted by ZIPAR. Government does not just need to pay back the interest, it also needs to pay back the principal (the actual money owed), when the three bonds mature on different dates.

Wednesday, 12 August 2015

The Constitution of Zambia (Amendment) Bill 2015

The Government has published the Constitution of Zambia (Amendment) Bill 2015 which will take forward the enactment of specific clauses which are not subject to the referendum. The public are asked to study and engage their parliamentarians before it makes it way into the House. You can read the accompanying Constitution of Zambia Bill, 2015 (12 pages)  via the National Assembly. 

Copyright © Zambian Economist 2015

Monday, 10 August 2015

Corruption, Poverty and the Capable State

Editor's note : Ricardo Hausmann argues that preoccupation with fighting corruption does not end poverty, and in many cases does not produce growth. What produces growth is having a capable state, which necessarily reduces corruption and does much more. The article does not examine the important issue of different forms of corruption and the relationship with inequality. However, it's basic premise seems sound. The unexplored question of course is, what produces a capable state?
Countries are poor because governments are corrupt. And, unless they ensure that public resources are not stolen, and that public power is not used for private gain, they will remain poor, right?

It certainly is tempting to believe so. Here, after all, is a narrative that neatly aligns the promise of prosperity with the struggle against injustice. As Pope Francis said on his recent trip to Latin America: "corruption is the moth, the gangrene of a people." The corrupt deserve to be "tied to a rock and cast into the sea."  Perhaps they do. But that won't necessarily make their countries more prosperous. 

Thursday, 30 July 2015

Africa's Incredible Economic Potential

Editor's note:  The article below highlights Africa's economic potential in ten charts. It has been put together by Michael Johnston, senior analyst for All Emerging Markets. 
If some key hurdles can be cleared, Africa could experience explosive GDP growth over the coming decades.
GDP Trajectories

At present, the contributions of Africa to the global economy are often overlooked. With a GDP of roughly $1.6 trillion, sub-Saharan Africa equals roughly 10 percent of the U.S. total and 2 percent of the global total. In the coming decades, however, Africa is poised to experience incredible growth that will make it a meaningful contributor to the global economy.

Wednesday, 29 July 2015

Zambia's falling education standards!

By Michael Chishala

About thirty years ago, the Zambian public education system was something to talk about. We had quality expatriate teachers from all over the world (eg India, West Africa, East Africa, the UK and USA) in addition to our own wonderful locally bred educators. We learned with kids from all kinds of nationalities. Whites, Indians, Chinese and even Koreans were in the public schools. Even up to the late 80s we had Indians still with us and a literacy rate of almost 70% of 15-24 year olds.

Our education system produced the highest rate of IQ in Southern Africa as measured by the Special Paper 1 and 2 in the GCSE Primary School system. When the Zambian economy began to tank in the late 80s, we exported plenty of professionals, especially teachers to Botswana and Namibia. I remember many teachers leaving us and coming back with new vehicles within a year.

Tuesday, 28 July 2015

Zambia's electricity crisis

Zambia is in the middle of a crippling electricity crisis as the country grapples with a 560 MW power deficit, a situation likely to only get worse as demand for electricity grows 200MW annually. ZESCO has embarked on a countrywide power rationing mechanism in order to preserve the limited water available for power generation until the 2015/16 rainy season. The shortage of electricity has been building for some time but has become more pronounced with reduced water levels at Kariba North Bank Power Station, Kafue Gorge Power Station and Victoria Falls Power Station.

Zambezi River Authority CEO Munyaradzi Munodawafa recently warned that Zambians should brace themselves for total blackout by November 2015 if nothing is done about the low water levels at Kariba Dam. He has been calling on GRZ to take "serious interest in investing in a standby water reservoir". The situation has sent politicians in a frenzy with a group of parliamentarians recently touring Kariba Dam and Kafue Gorge to check on "the real cause" of the load shedding. The Kariba Dam of course has deeper problems with its crumbling walls which recently forced the European Union to donate up €64m in emergency funding.

Thursday, 23 July 2015

Broke Zambia looks for money

The government is currently on an international roadshow looking to borrow $2bn through a new Eurobond. The money is needed to plug a funding hole in the revised 2015 Budget that has arisen due to the reduction in mining revenues following the mineral taxation regime reversal, lower copper prices and volumes. GRZ also has accumulated a number of expenses in arrears including payments to to the public pension system, agriculture subsidies and road projects.

So this Eurobond is different from previous Eurobonds because it is a necessity born out of fiscal incompetence. This point is important for two reasons. First, the price GRZ will pay for borrowing through this new $2bn Eurobond is likely to be dear, somewhere between 9-10% annually which will substantially push up debt serving costs (currently 25% of tax revenues). The servicing costs will get worse as the Kwacha depreciates further. Secondly, public debt levels are currently around 39.6% of GDP. With new external debt this is likely to rise above 50% of GDP, with sharper rises next year as election looms. Little wonder the ratings agencies appear worried. 

Thursday, 9 July 2015

Chikwanda's Sinking Fund

The Government has allegedly set up a "sinking fund" to deal with any future risks of repaying the Eurobond debts when they mature in 2020 and 2022. This was announced recently by Finance Minister Alexander Chikwanda. Presumably the "sinking fund" will also be needed for the $3bn of new debts it is planning to acquire shortly.

Some analysts have been quick to praise this initiative. The JCTR said, "we are glad that government has created a sinking fund, though belated, as it will ensure smooth repayment of the two Eurobonds which were contracted in 2012 and 2014". A Daily Mail analyst said, "a sinking fund....will ensure prudent management and servicing of the debt in a transparent and accountable manner... the economic outlook of our country is not all that gloomy".

Monday, 6 July 2015

Zambia's borrowing spree!

Finance Minister Alexander Chikwanda’s speech to Parliament last month announced that government has a new unforeseen shortfall of K20bn ($2.7bn). It needs to find this to meet its spending commitments. He said that he hoped to cut that down by K5bn ($0.7bn) from “rationalising expenditure” (i.e. making cuts to existing commitments). We were told that the remaining $2.0bn would need to come from external borrowing.

But then in the same speech he said this: “I requesting the House to increase the ceiling on external borrowing from the current K35 billion to K60 billion. This will enable us to have greater recourse to external financing which at current international rates is cheaper than domestic borrowing. we intend to use any such resources to complete the various developmental projects that we commended”.

Thursday, 2 July 2015

Zambia credit downgrade

Editor's note : The ratings agency Standard and Poor has downgraded Zambia's long term credit rating because of deteriorating fiscal situation. It has kept the short term rating the same. S&P has become the first of three agencies to downgrade Zambia. It notes that public sector debt is on course to be more 50% of GDP if Alexander Chikwanda's new Eurobond debt plans succeed.   Fitch recently signaled the possibility of a downgrade in August unless the economic situation improves. Worsening credit rating may impact on the cost of borrowing and compound the current depreciation of the Kwacha.


  • In our opinion, Zambia's fiscal position is markedly and negatively deviating from our previous expectations. We believe the government's policy response will be constrained in the run-up to September 2016 elections.
  • We are therefore lowering our long-term sovereign credit ratings on Zambia to 'B' from 'B+' and affirming our 'B' short-term ratings.
  • The outlook is stable, reflecting our expectation that the fiscal deficit will not weaken over 2015-2018 more than we currently anticipate.

Monday, 29 June 2015

Zambia's Fiscal Deterioration

Ratings agencies have been weighing in on Zambia's current fiscal woes. Here is Fitch's rating latest assessment, which seems to point towards a credit downgrade in August if the external position worsens :
The increasingly large budget gap in Zambia may prove costly to finance, Fitch Ratings says. Domestic financing conditions are constrained, and new external financing could push government debt toward 40% of GDP by end-2015. 
The fiscal deficit could now jump to 7.7% (on a cash basis), according to IMF projections released earlier this month. The government expects the outturn to be lower, but has indicated that it expects the fiscal deficit to come in significantly above the 4.6% target announced in the 2015 budget. Mining revenue has come under pressure from lower copper prices and changes to the mining tax regime. 

Thursday, 25 June 2015

Judicial Reforms in the Justice System in Zambia

Editor's report: We have been sitting on this report of the Parliamentary Committe on Legal Affairs that was published last year on the judicial reforms that are in needed in the Zambian justice system. Minor edits have been made for ease of reading.
In any democratic society, the Judiciary, as one of the three Arms of the State, is at the centre of ensuring that the rule of law, constitutionalism and protection of human rights prevail by providing checks and balances to the exercise of power by the other two Arms of State (the Legislature and the Executive). It was, therefore, critical for the Judiciary to remain independent in the context of the separation of powers if it was to effectively discharge its functions.

Monday, 22 June 2015

Small victory against corruption

The Supreme Court recently sentenced former Labour Minster Austin Liato to two years in prison for possession of K2.1 million (in today's rebased currency) because it is "reasonably suspected" to be proceeds of crime. The sentence will run effect 2 June 2015. Liato’s farm and money has also been forfeited to the State.

Thursday, 18 June 2015

Diversifying Zambia's Agriculture

Editor's note : A recent Daily Nation editorial laments Zambia's agriculture policy. In recent years the newspaper has distinguished itself with its balanced and thoughtful pieces. The aricle below is well worth the read:
If we truly put our minds to it Zambia could become the bread basket of the region, if not the continent. Out of the 75million hectares of land, 43million has potential for agriculture production and yet we are using about 6million or just under 14 percent for the purpose. Our national irrigation potential stands more than 2.7m hectares.

Monday, 15 June 2015

Sustaining African Growth

Editor's note:  The article below by Marcelo Giugale for Vox EU argues  that the current positive growth in Africa is due both to good policies and higher prices of certain commodities (such as oil, gas, and minerals). To ensure sustainability governments should not rely only on these higher rents but rather implement policies that take advantage of them. We have reproduced it below because it's policy lessons are relevant for Zambia. 
Sub-Saharan Africa is doing well. The region has never grown so fast for so long.
  • On average, the growth has been around 5% per year over the past decade; the region even breezed through the Global Crisis.
  • Nine African governments have managed, for the first time, to sell bonds in London and New York – and, in a sign of confidence, these bond issuances were oversubscribed.
  • The proportion of Africans living in poverty is, at last, on a downward trend.

Thursday, 11 June 2015

Zambia's Credit Rating - Moody's (May 2015)

Editor's note: Moody's recently affirmed Zambia's credit rating at 'B1', but has revised its outlook to negative based on rising debt levels, poor track record of fiscal management and worsening trade deficit. Details below.
Moody's recently affirmed Zambia's B1 government bond rating and changed the outlook to negative. The key drivers for the negative outlook are:

» Deteriorating debt metrics, as evidenced by a rapidly rising debt burden and increasing debt servicing costs;

» A trend of missed fiscal targets that points to high execution risks in current deficit reduction plan to arrest the upward debt trajectory, particularly amid spending pressures in the lead up to next year's presidential election; and

» The shift of the current account into deficit, removing a key credit support that has historically suppressed external vulnerability.

Monday, 8 June 2015

Zambia's growing public debt

Editor's note : an interesting recent article from Kundhavi Kadiresan (World Bank - Zambia) focuses on Zambia's growing debt. There are a couple technical nuances missed (e.g. link to tax revenue base, trade deficit, international comparators, importance of CBA). But it is a helpful contribution to the debate. 
An intense debate is going on in the country on Zambia’s debt and how it is affecting the economy. The debate is taking place because debt owed by the government to domestic and foreign creditors has increased sharply during the past few years, evoking images of the not too distant past when Zambia was categorised as a highly indebted poor country and received a huge debt relief.

Saturday, 6 June 2015

Zambia's mining taxes collapses

Government has cut mineral royalties for underground mines to 6 percent, lower than the 9 percent which was expected to take effect on July 1. Presidential aide Amos Chanda has told Reuters that “Mineral royalty tax will be reduced to 6 percent from the earlier proposed 9 percent. It will remain at 9 percent for open pit mines”

The 2015 Budget had introduced a new fiscal regime that set underground mining royalty at 8% and open pit mines at 20%. This was reversed in April when all the royalties were set at 9%. We noted at the time that the changes did not make sense for underground mines because it meant an increase of 1%. Given the cost for underground mines are higher they should have lower royalty taxes compared to open pit, otherwise the incentives become skewed.

Thursday, 4 June 2015

Should Zambia have FOI?

GRZ says that though it remains committed to enacting the Freedom of Information (FOI) Bill it plans to do so cautiously. According to Information Minister Chishimba Kambwili the Government "is concerned that some media organisations are focused on making it fail instead of providing credible checks and balances".

The government's refusal to enact FOI based on the lack of effective media regulation seems to have received new life following the decision of the Botswana parliament to reject a similar FOI Bill in order to "preserve the secrets and security of the nation". Minister Kambwili was quick to add that "in a way you can agree with [Botswana], the situation in Europe and Africa is different” .

Monday, 1 June 2015

Where next on the constitution?

Justice Minister Ngosa Simbyakula recently appointed a Referendum Commission to oversee the holding of the constitution referendum in 2016. The government has decided, as we have previously argued, that holding the general election and the referendum simultaneously is a good way to manage costs given Zambia’s very difficult fiscal position.

In the meantime, PF plans to bring forward to Parliament “non-contentious clauses” in the existing Draft Constitution for immediate enactment, with the remainder subjected to the 2016 referendum. The nature of the "non-contentious clauses" is yet to be defined but it is thought to include such things as an "elected Vice President".

Thursday, 28 May 2015

Zambia Road Tolls

The Road Development Agency (RDA) recently announced that it has raised over K100 million from toll fees at various weighbridges since January. Last year RDA raised K296 million from toll fees comfortably exceeding its target of K250 million. The target this year is K360 million which RDA should be able to meet assuming the quoted figures only cover the first quarter or exclude border entry points.

We are still early days in the road tolling programme. One expects it will generate significant revenue going forward. The programme was launched by the PF government in November 2013 in order to provide much needed revenues for road maintenance. The MMD government had laid down the groundwork with the Tolls Act (2011) after mulling over the idea for three years.

Monday, 25 May 2015

IMF - Zambia Watch (May 2015)

Editor's note: The latest IMF statement on Zambia paints a picture of a Zambian economic policy that has gone off the rails. This is the most negative assessment to be issued on Zambia during our seven year watch over IMF Zambia relations  This is not to say that all the IMF says makes sense, but it does seem, to any regular reader of this website, that Zambia is squandering opportunities to build a better country her people due to lack of basic understanding of economics.
IMF Executive Board Concludes 2015 Article IV Consultation with Zambia
Press Release No. 15/233
May 22, 2015

On May, 20, 2015, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Zambia.

Zambia has strong growth potential, but lingering vulnerabilities pose risks to the outlook. In the last two years, the Zambian economy has been weighed down by large fiscal imbalances, lower copper prices and policy uncertainties. Real GDP growth has slowed, the current account has deteriorated, international reserves have fallen and the exchange rate has been under downward pressure. Fund staff estimate that real GDP growth slowed from 6.7 percent in 2013 to 5.6 percent in 2014, driven by a contraction in copper production. Year-on-year inflation fell from a peak of 8.1 percent in November 2014 to 7.2 percent in March 2015, largely driven by lower fuel prices. The fiscal deficit on a cash basis rose sharply to 6.5 percent of GDP in 2013 and remained elevated at 6 percent in 2014.

Thursday, 21 May 2015

Begging for Infrastructure

President Lungu recently met FQM senior management officials as part of the tour of the open pit mine and copper smelter in Solwezi. He urged the mining company to partner with GRZ to “deliver local roads” and “light up Solwezi Airport” which is restricted to day flights due to inadequate infrastructure at the airport. President Lungu said, “we have to do 21kms of roads here in townships, come on board to help improve roads including the airport. Expand your corporate social responsibility to non-traditional areas. ..”

The call for the private sector to contribute towards investment in local roads and airport infrastructure is certainly welcome. Government is spending significant sums on the current roads programme through borrowing, and that does not even include “township roads”. Not only is the programme insufficient to upgrade all roads, it is also an extremely expensive and unsustainable undertaking to maintain some of the roads that are being upgraded. So one can see why President Lungu appears to be begging the mines to help.

Monday, 18 May 2015

Zampost Rising

Zampost Microfinance Limited (ZML), a subsidiary of the parastatal Zampost, is planning to issue its first tranche (K40 million) of the K100 million bond on the Lusaka Stock Exchange (LuSE) by the end of this month to support expansion of its credit business. ZML provides salary-backed loans to the public. According to its parent company Zampost, there is increasing demand for loans. ZML’s loan book has grown to K10 million from mid-2013 to date.

Zampost is certainly one of the more genuine success stories of the PF government. Prior to 2011, the company was plagued by inefficiency and corruption. A 2008 Parliamentary Committee Report observed that Zampost suffered from “serious operational problems….lack of innovation…it has failed to reposition itself in the highly technologically advanced business environment….”

Sunday, 17 May 2015

Fuel prices go up!

The price of fuel has gone up. ERB has released the following press statement :
The Energy Regulation Board (ERB) has adjusted the pump prices of petroleum products as follows by K1.14 for petrol; K1.00 for diesel; K0.71 for kerosene and K0.99 for low sulphur gasoil (low sulphur diesel), effective midnight of 12th May 2015. Consequently the prices will now be as follows:

Friday, 15 May 2015

Zambia Monetary Policy Statement (May 2015)

Editor's note : The Bank of Zambia released its quarterly monetary policy statement this week. It notes that lower than programmed revenue is putting pressure on the financing requirements for the Budget from the domestic market which is causing yield rates on Government securities to rise. BOZ believes "further fiscal adjustments are required to address revenue shortfalls and rationalise expenditure to achieve fiscal sustainability. This is critical to achieving a stable macroeconomic environment going forward"
The Monetary Policy Committee (MPC) met on 12th May 2015 to consider developments in the domestic economy as well as global economy over the first quarter of 2015, outlook for the second quarter and decide on the Policy Rate to achieve the Central Bank’s inflation objective to support macroeconomic stability.

Saturday, 18 April 2015

Changing the Retiriment Age in Zambia

Editor's note: This is a guest post by Henry Kyambalesa, a resident contributor to Zambian Economist. He is a Zambian academic currently residing in Colorado, USA. The article makes some observations on the changes to the retirment age.
In November 2014, Acting President Guy L. Scott signed Statutory Instrument No. 63 of 2014 that raised the retirement age from 55 to 65 years, or 35 years of service.

In December 2014, the Minister of Labor and Social Security is quoted by Doreen Nawa of the Zambia Daily Mail as having defended the change in the country’s retirement age as follows: “We adjusted the retirement age as a way of increasing people’s life span. Information has shown that most people that have retired at 55 have died earlier because of many factors.”

Thursday, 16 April 2015

Election Musings

President Lungu this week delivered a blow to the opposition with three convincing parliamentary wins in his first electoral test as President. The PF won parliamentary by-elections in Chawama, Masaiti and Senga Hill and also picked a big chunk of ward victories held in various parts of the country.

Lawrence Sichalwe (Chawama) polled 7, 500 with closest rival UPND Charles Kaselwa polling 3, 200. Michael Katambo (Masaiti) polled 5,000 against closest rival UPND Peter Mumba polling 2,150. Kapembwa Simbao (Senga Hill) polled over 8500 against his closest rival who polled around 4700.

Wednesday, 15 April 2015

Mining Tax Reversal, 3rd Edition

Reports are emerging that Government has indeed reverted to the 2014 two-tier mining tax regime which was abolished in the 2015 Budget. However, the mineral royalties will now be set at at 9 percent for both open-pit and underground mines. Reuters are quoting a “source in the presidency”.

The 2014 two-tier mining tax regime consists of the mineral royalty tax (now at 9%), corporate income tax and profit variable tax. Crucially it allows for capital allowances and carry forward of losses which substantially eliminates potential taxable profits.

Tuesday, 14 April 2015

Mining Tax Reversal, 2nd Edition

President Lungu is in the process of tabling a revised Budget as Cabinet abandons elements of the Sata mining fiscal regime following pressures from mining companies. Full press statement from the Lungu administration below :
Cabinet has today approved changes to the Mineral Royalty Tax regime and His Excellency Mr. Edgar Chagwa Lungu, President of the Republic of Zambia directed ministers to bring to Cabinet next Monday details to be presented to Parliament for approval.

Wednesday, 8 April 2015

Justice in Zambia (Prisons, Police, Legal Aid)

The Legal and Justice Sector Reform Commission set up by former Justice Minister Wynter Kabimba is still seating and continues to receive some interesting submissions. Bishop Davies Malulu (Kabwe) recently told the Commission that “there is need to abandon the dress code [of judges] inherited from colonial masters and instead come up with one reflecting the Zambian identity and character.” [Source: Lusaka Times]

The Human Rights Commission (HRC) says over 80% percent of accused persons at pre-trial stage do access bond or bail despite facing baillable or bondable offences “due to ignorance”. The situation has resulted in overcrowding of detention facilities, thereby exposing inmates to inhuman and degrading conditions against international standards. Inadequacies in the penal laws such as absence of proper guidelines in the exercise of discretion on the part of the court or police when granting bail or bond contributes to increased pre-trial cases. [Source: Daily Mail]

Monday, 6 April 2015

Zambia Standard & Poor Rating (March 2015)

Editor's note: Standard and Poor a week ago affirmed Zambia's credit rating at 'B+', and kept its outlook on negative based on fiscal and external risks.
  • We continue to believe that Zambia’s institutional strengths and solid growth prospects remain sufficient to offset increasing short-term fiscal and external challenges.
  • However, we consider that policy-making could be constrained by political considerations, preventing the final resolution of key fiscal uncertainties, which could add to copper-price led currency depreciation and external pressure.
  • We are affirming our 'B+/B' sovereign credit ratings on Zambia.
  • The outlook remains negative, reflecting increasing uncertainty over Zambia's management of public finances and external accounts.

Sunday, 5 April 2015

Social Cash Transfer (Progress Update)

Editor's note: The following is statement from the Minister of Community Development, Mother and Child Health Emerine Kabanshi MP on the scaling up of the social cash transfer programme. We have made minor edits to ease reading.
I would like to thank you for according me this opportunity to give a ministerial statement on the progress made in the scaling up the Social Cash Transfer Programme. Allow me to provide some general information to the House about the Social Cash Transfer Programme in Zambia before I give an account of our initiative to scale it up.

Saturday, 4 April 2015

Diaspora Policy Formulation

Editor's note: The following is a recent ministerial statement from Foreign Affairs Minister Harry Kalaba on the proposed diaspora policy. There is nothing new in the statement except that Government is allegedly working on such a policy, with propomises of consultations. Previous governments have wasted money on trying to come up with a policy due to lack of cross party ownership. The Banda administration came with the disastrous diaspora desk which apart from achieving very little, except giving officials some foreign trips abroad, quickly sunk under the Sata administration. 
On 17th October, 2014, [the Ministry of Foreign Affairs] launched the Revised Foreign Policy which placed emphasis on economic diplomacy as opposed to political diplomacy. The launch of this document set a tone for Zambians living beyond our borders to participate effectively in the management and shaping of this country’s destiny. It was a call to patriotism, as patriotism knows no political or economic boundaries.

Friday, 3 April 2015

Parastatal Madness, 21st Edition

We have long observed that the failure of many government institutions to perform has largely been down to the failure by other parts of GRZ and the private sector to pay these governments institutions the debt owed to them. We usually refer to this problem as "parastatal madness". Here are some recent examples:

The National Pension Scheme Authority (NAPSA) is currently owed around K2.6 billion in outstanding contribution arrears and penalties by various GRZ institutions e.g. government ministries, grant-aided institutions, parastatals and councils. The non-payment and continuous delays in contributions, including failure to pay penalties continues to hamper the viability of the pension scheme. 10% of the debt is from arrears in statutory contributions and 90% is in statutory penalties.(Source: Times of Zambia)

Tuesday, 31 March 2015

IMF - Zambia Watch (March 2015)

Editor's note: The latest IMF statement on Zambia is a diplomatic way of saying the macroeconomic situation in the country, though potentially promising, is unfortunately in a big mess and needs fixing urgently. It has been poorly managed. Not in enough forward thinking to deal with the present challenges. Zambia appears to have a dangerous cocktail of poor fiscal and monetary management coupled with external pressures. No surprises in the statement except that there appears no hints of possible IMF funding support to help as they previously suggested.
IMF Staff Completes 2015 Article IV Consultation Mission to Zambia
Press Release No. 15/148
March 31, 2015

An International Monetary Fund (IMF) team led by Tsidi Tsikata visited Zambia during March 19-31 to complete discussions for the 2015 Article IV consultation. This followed initial discussions in December 2014, prior to Zambia’s recent Presidential by-election. At the end of the mission, Mr. Tsikata issued the following statement:

Saturday, 28 March 2015

On the Kindle

I recently stumbled on this book Economics for the Curious: Inside the mind of 12 Nobel laureates. As it says on the strap line, it is basically a collection of short articles from 12 Nobel laureates in economics edited by the Nobel laureate Robert Solow.

There are some good essays in there (e.g. Krugman on "depression economics"), but also some difficult ones follow (e.g. Nash on game theory). My favorite one was from Finn E Kydland on policy commitment. Here is a great quote on Ireland that sums up the importance of credible policy commitment :

Friday, 27 March 2015

Mining Tax Reversal

President Lungu has signalled the possibility of a spectacular policy climbed down over the mining fiscal regime. He has proposed potential options for changing the 2015 mining tax regime. Among the options include abandoning the Sata mining fiscal regime altogether. Full statement from State House below :
His Excellency Mr. Edgar Chagwa Lungu, President of the Republic of Zambia has directed the Minister of Finance and Minister of Mines and Minerals Development to effect changes to the 2015 Mineral Royalty Tax by 8 th April 2015.

In letters to the two ministers today, President Lungu stated that after receiving submissions from individual mining companies and the Chamber of Mines, he has noted that the new tax regime poses a challenge to some mining houses. The President also noted that some mines are high-cost while others are low-cost operations.

Sunday, 22 March 2015

Kwacha Contradictions

The Kwacha's crisis shows no signs of ending soon. It is closed on Friday at  K7.7 per $1 (K8.2 per €1 and K11.4 against £1). The current historic collapse is against all major currencies. The two men tasked with stabilising it have been talking. So far we are only getting a tale of contradictions between Alexander Chikwanda [Finance Minister] and Denny Kalyalya [BOZ Governor] over the domestic causes of the current Kwacha crisis.

Alexander Chikwanda's statement to Parliament:
On the domestic front, the major reason for the weakening of the Kwacha is the palpable demand/supply disequilibrium. In other words, the demand for dollars principally and other currencies exceeds supply. At the beginning of the year, the foreign exchange earnings inflows are slow because of the time lag effects in the realization of export earnings, while lower copper prices have further constrained supply conditions. In general, net monthly supply of foreign exchange in 2014 exceeded US$100 million. However, at the beginning of 2015 this fell to around US$85 million.  (Source: Ministry of Finance, 3rd March 2015)

Monday, 16 March 2015

Killing the Kwacha, Revisited

The Kwacha has fallen to a record low against major global currencies (dollar, sterling and Euro). It currently stands at around K7.4 per US$1. This is worse than the collapse last year. 

The recent sharp falls appear to be driven by the strengthening of the dollar, as well as concerns around Lungu's health which has amplified existing policy uncertainty. But that is only a small part of a larger negative trend.

The Kwacha has been steadily falling since September 2014 after a period of strengthening last year when BoZ tightened liquidity and Chikwanda abolished SI33 & SI55. That is if you believe Gondwe and Chikwanda's version of their alleged "heroic" interventions. 

Saturday, 14 March 2015

Zambia Fitch Rating (March 2015)

Editor's note: Fitch Ratings yesterday affirmed Zambia's credit rating at 'B', and revised the outlook down from 'positive' to 'stable' owing largely to poor policy coherence and credibility. It also notes a growing fiscal deficit and possibility of slower growth. The Fitch message is that we are doing OK but there are risks which need to be handled or things may get out of hand quickly. 
Fitch Ratings has revised the Outlook on Zambia's Long-term foreign and local currency Issuer Default Ratings (IDR) to Stable from Positive and affirmed the IDRs at 'B'. The issue ratings on Zambia's senior unsecured foreign and local currency bonds have also been affirmed at 'B'. The Country Ceiling has been affirmed at 'B+' and the Short-term foreign currency IDR at 'B'.

Monday, 9 March 2015

Fixing our broken prosecution

The current saga involving the Director of Public Prosecutions (DPP) Mutembo Nchito has generated a lot of commentary. The DPP is important because all criminal prosecution functions in the country are vested in the National Prosecution Authority (NPA) as set out under the National Prosecution Authority Act, 2010. The NPA Board is chaired by the DPP. This makes the DPP the guardian of all prosecutions in the country. The gatekeeper of justice.

Unfortunately, in eyes of many people the current DPP has become nothing more than a political pawn. He is viewed by many, rightly or wrongly, as being part of the infamous Cartel that ceremoniously lost out in the power struggle following President Michael Sata’s death. What seems to have upset many people recently is the DPP’s decision to enter “a nolle prosequi” (do not prosecute) in a case in which he is facing allegations of corruption and abuse of office.

Wednesday, 4 March 2015

Zambia Debt Watch (Eurobonds, World Bank, ADB)

Government plans to refinance the existing Eurobond debt by issuing another bond. Ministry of Finance recently announced that GRZ “needs to issue another bond to pay off the debt and we will look for creditors that will lend on a low rate". Zambia has two sovereign bonds of US$750 million and US$1billion which are due to mature in 2022 and 2024, when the principal needs to be paid back on top of current interest repayments. (Source: The Post)

Saturday, 28 February 2015

Lungu on Mining, Taxation and Politics

A very good interview by President Edgar Lungu that showcases as a thoughtful, strategic and calm leader. He clearly recognises the difficult balancing act that is required if he is to stand any chance of re-election. 

Thursday, 26 February 2015

Government Position on Mining Taxation Regime

By Finance Minister Alexander Chikwanda, MP

I wish to brief the House and the Nation at large on the 2015 Mining Taxation Regime which is a topical issue in our country.

Despite Zambia being endowed with vast mineral resources, the country has not realised maximum benefits from the sector’s potential to support growth and enhanced socio economic development. This is against the backdrop that the sector has been experiencing high copper prices in the recent past.

Tuesday, 17 February 2015

Lungu's Kwacha Challenge

President Lungu has assumed power when the Kwacha is again threatening to breach K7 per $1. It is currently trading at K6.95 per $1, having fallen by around 20% over the last 12 months. The current rate is just lower than the historic low of K7.05 per $1 recorded in June 2014.

However,  it seems it is only a matter of time before we reach the $7 levels again given that it briefly broke through K6.80 two weeks ago. Indeed, a longer trend suggests that the Kwacha has actually halved in value against all major developed nations' currencies since Lungu’s predecessor assumed power.

Thursday, 12 February 2015

Lungu's Copper Challenge

In 'A Memo to President Lungu', we briefly mentioned some of the challenges facing the new administration. In the next few posts we will try and expand on these. The first challenge Lungu has to deal with is the ongoing fall in copper prices.

The price of copper has fallen sharply  losing around 10% over the last two months. It has lost around 30% over the last two years. A longer trend suggests that copper has actually fallen by more than 45 per cent in the the past four years.

Zambia's new cabinet

President Edgar Lungu's has named his new full cabinet  :

President- Edgar Lungu
Minister of Defence - Edgar Lungu
Vice President - Inonge Wina
Finance - Alexander Chikwanda
Home Affairs -Davies Mwila
Foreign Affairs- Harry Kalaba
Mines - Christopher Yaluma
Transport and Communication - Yamfwa Mukanga
Education- Dr. Michael Kaingu (MMD)
Justice - Ngosa Simbyakula
Health - Dr. Joseph Kasonde
Agriculture -Given Lubinda
Commerce- Margaret Mwanakatwe
Tourism and Arts -Jean Kapata
Information - Chishimba Kambwili
Local Government and Housing - John Phiri
Lands and Natural Resources - Christabel Njimbu
Labour - Fackson Shamenda
Community Develooment-Emerine Kabanshi
Chiefs and Traditional Affairs- Dr. Joseph Katema
Gender - Nkandu Luo
Youth and Sport - Vincent Mwale (MMD)

Tuesday, 3 February 2015

A Memo to President Lungu

Congratulations, Mr President!

You ran a remarkable campaign that within a month earned the Presidential seal and the admiration of the Zambian people. As you no doubt know, your journey, and that of our nation, has just begun, even as the campaign road has just ended. Over the next 18 months, together we shall face many challenges.

The world is facing slower growth. Growth in the BRICs and the Eurozone has slowed down. Copper and oil prices have fallen. There are also wider geopolitical threats of global terrorism and nation state crises. Though Zambia may be far geographically from the epicentre of many of these challenges, in an increasingly globalised world we are certainly not immune to them.

Saturday, 24 January 2015

Lungu takes power, HH concedes defeat

Edgar Lungu (PF) has won with the margin of around 20,000 - 40,000 or thereabouts according to our projections.  Many of you have already been following our Facebook and Twitter updates where we projected this outcome two days ago..

Hakainde Hichilema (UPND) has already conceded defeat in the presidential elections but insists that the elections have been manipulated and stolen from him. He has urged his supporters to remain calm and focus on 2016.

Speaking at a press briefing held at Radisson Blu Hotel this morning, HH says he wont contest the elections results ECZ is about to announce shortly. He instead said his energies will be diverted to the 2016 election campaign.

Four immediate observations. First, these have actually been the most exciting elections that Zambia has ever held. HH is to be commended for being part of that story and for immediately looking forward rather than to the courts.

Secondly, all observers have said this has been the best election Zambia has ever held, perhaps only bettered by 1991. Diplomats have spoken of how proud Zambia should be at how the elections were conducted.

As the Deputy Chief Justice and ECZ Chairperson Irene Mambilima said when dismissing the allegations, "We conducted the poll in an open manner. We witnessed the voting together,we counted together with all parties, we verified together. So if we stole the votes, we stole it together".

Thirdly, following on from the second point, it is unfortunate HH has called the entire election a sham. That undermines the democratic process. It does not strengthen it. Don't throw the baby with the bath water. It is poor leadership.

Finally, and more worrying, it does not appear that HH has recognised just how divisive these ejections have been. UPND only won in three provinces. The elections were close because of higher turn out there.

In short, though UPND's electoral strategy was effective but unpatriotic. They planned to govern Zambia from three provinces. This has deepened the ethnic divide. HH should have used this occasion to acknowledge this and reach out to the other seven provinces.

Copyright © Zambian Economist 2014

Wednesday, 21 January 2015

Zambia Votes

The nation went to the polls yesterday. Here is what we know based on the results we have compiled and information from our experts. 

1. PF has won decisively in Muchinga, Luapula, Northern, Copperbelt, Lusaka and Eastern provinces.

2. UPND has won decisively in Southern Province, Western and North Western. North It has also thrown some not so decisive results e.g. Magoye. 

3. PF has captured  large parts of Central province. UPND has performed reasonably well in some parts. This is more on a level. 

4. Turn out has ranged 30% - 40%. Turn out appears higher in urban areas than rural areas. For example, Copperbelt it has been around 38%. But in Southern Province very low around 30%.  We are cross checking these turn out rates. 

5. Some small parts of Eastern Province and Western have not voted yet. Probably their votes may be irrelevant based on what is coming out. 

We need to run projections based on turn out and existing results. And we shall update you as necessary. 

We are now beginning to get a sense of the overall picture. We will pull together a table of where we are. Thanks to our friend Elias Munshya who has led on this effort.

We should of course remind readers that the only authority on all of this is ECZ. And of course we are economists not pollsters or statisticians.

Tuesday, 20 January 2015

Biofuel investment in Kawambwa

Sunbird Bioenergy Africa is investing US$150 million in the production of ethanol in Kawambwa (Luapula province). Production is expected to commence this year, with capacity of around 120 million litres of ethanol per annum. It is expected that the factory would employ 600 workers. (Source : Times of Zambia)

Chief Mukanta has allocated the investor 20,000 hectares of land in the Luena Farm bloc. The factory would be located between Sub-Chief Muyembe and Chief Chitambo. The investor wants to engage 20,000 out-grower farmers who would supply cassava to the factory once it starts production.

Sunday, 18 January 2015

State of the economy

At the turn of the year the GRZ gave its assessment of the 2014 macroeconomic performance and the outlook over the 2015-17 period. Here the key quotes from Finance Minister Alexander Chikwanda :

“The economy in 2014 has remained strong with preliminary real GDP growth of 6 percent; making Zambia the seventh and tenth fastest growing economy in sub-Saharan Africa and the world, respectively”

Friday, 16 January 2015

Fuel prices fall

Government has reduced the price of fuel substantially in line with its 'cost plus pricing' model. The Energy Regulation Board (ERB) has released the following press statement:

The Energy Regulation Board (ERB) has reduced the pump price of petroleum products by K2.29 for petrol; K2.59 for diesel; and K2.08 for kerosene, which translates into 23.13%, 28.22% and 30.76%, respectively. Wholesale prices of petroleum products have been reduced by 35.93%, effective midnight 16th January 2015.

In determining prices, the ERB uses the Cost Plus pricing model, which operates on the principle that the final price of petroleum products should cover all costs incurred in the supply chain. Wholesale and pump prices are determined based on the cost of each feedstock cargo received. The cost of each feedstock cargo is mainly affected by global crude oil prices and the exchange rate of the Kwacha to the United States Dollar.

Wednesday, 14 January 2015

IMF - Zambia Watch (December 2014)

Happy new year to all our esteemed readers! A lot has happened while we were on break. We hope to touch on these points where possible.

One of the things that happened is that the IMF made a somewhat meaningless visit to Zambia in December 2014. You will recall that IMF had planned to visit Zambia to agree a new funding programme. But given that we have elections next week nothing was going to be agreed with anyone. That said, the IMF did issue a good summary of its perspective on Zambia's economic situation:
Press Release No. 14/589

An International Monetary Fund (IMF) team led by Tsidi Tsikata visited Zambia during December 4-18 to hold discussions for the 2014 Article IV consultation. At the end of the mission, Mr. Tsikata issued the following statement:

“The Zambian economy continues to register strong growth. Non-mining growth has remained close to 7 percent, but technical outages at some mines led to a decline in copper production that is projected to reduce overall real GDP growth to about 5½ percent in 2014. The exchange rate depreciated sharply in the first half of the year. A marked tightening of monetary policy and a boost to international reserves from Eurobond proceeds helped to partially reverse the depreciation and stabilize the exchange rate. Nevertheless, the annual rate of inflation edged up to 8.1 percent in November.