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Thursday, 31 March 2016

Zambia's mining challenges

Mopani Copper Mines (MCM) is planning to invest over US$1 billion as part of its construction of three new mine shafts. The company plans to make the investments between now and 2018, as part of what MCM dubs its “commitment to turning Mopani into a world-class mining operation by 2023”.

The announcement is a bit of positive news for the mining sector after losing over 10,000 jobs last year following the scaling down of mining activities. MCM lost around 4,300 mining jobs. Of course Zambia is not alone in these challenges. The SADC region has lost approximately 490,000 mining jobs.

The challenge for mining companies in Zambia is that as well as high production costs and low copper prices, the companies face the huge challenge of poor electricity supply. The result is that copper production will remain weak for the foreseeable future with negative impact on economic growth and tax revenues.

Monday, 28 March 2016

IMF - Zambia Watch (March 2016)

Editor's note: The latest IMF statement on Zambia confirms the gloomy state of the economy. The only good news at present is the stability of the exchange rate. How long that holds depends on fast the fiscal issues are addressed. It remains to be seen whether the increased willingness by the government to contemplate an IMF supported programme will be matched by real sacrifices. There doesn't appear to be political room for such a programme before  the elections (August 2016). But then again agreeing austerity measures that are unlikely to bite until after August ought to be a no-brainer. 
At the invitation of the authorities, an International Monetary Fund (IMF) team led by Tsidi Tsikata visited Zambia during March 9-18 to review recent macroeconomic developments and discuss with the authorities how best to address the current economic challenges facing the country.  At the end of the mission, Mr. Tsikata issued the following statement:

"The Zambian economy is under intense pressure. Lower copper prices, electricity shortages, and poor rainfall have dampened the pace of economic activity. Moreover, inflation has increased, expenditure pressures have risen, and financing conditions have tightened substantially. The mission estimated that economic growth declined to about 3 percent in 2015. Resolute action is needed as quickly as possible to restore macroeconomic stability and pave the way for a return to high sustained growth.