/ 7 January 2007

Zambia economic march marred by political squabbles

Zambia is in the midst of record economic growth but political squabbles and the Southern African nation's failure to tackle endemic poverty have taken off some of the sheen, analysts say. Multimillion-dollar contracts are pouring in, but most Zambians are preoccupied with the political jousting between President Levy Mwanawasa and main opposition leader Michael Sata.

Zambia is in the midst of record economic growth but political squabbles and the Southern African nation’s failure to tackle endemic poverty have taken off some of the sheen, analysts say.

Multimillion-dollar contracts are pouring into the key mining sector and in construction, but most Zambians are preoccupied with the political jousting between President Levy Mwanawasa and main opposition leader Michael Sata.

“Zambia has made significant gains in the economy but unfortunately everyone is discussing politics [at] the expense of development,” said economist Charles Chiti.

In June last year, the country managed to bring down inflation to a single digit for the first time in three decades, while the average economic growth has been above 5%.

According to the International Monetary Fund, domestic savings in 2006 equalled 25,1% of gross domestic product and total investment reached 23,5%.

“The overall inflation out-turn has been unprecedented at 8,1%,” said Caleb Fundanga, governor of Zambia’s central bank.

The country also recorded a food surplus of 160 000 tonnes in the 2005/06 farming season and exported some of it to neighbouring Zimbabwe.

But Zambia, which has one of the world’s biggest copper reserves, is one of the poorest in Southern Africa, although it has been hailed as a model by the International Monetary Fund for introducing fiscal discipline.

Last year, Zambia got a waiver of $3,8-million on the estimated $6,5-million it owes various creditors, including the World Bank and the International Monetary Fund.

Its external debt is estimated to have been reduced to about $500-million by the end of 2006, according to Zambian treasury officials.

But most of its people live under crippling poverty and Mwanawasa has acknowledged that his government has not managed to effectively fight the scourge.

Mwanawasa, who was re-elected in September for a second and final term in elections opposition leader Sata insists were rigged, has since been involved in a series of battles with the latter, who challenged his authority.

But despite the charged political scenario, things are looking up on the economic front.

Australian firm Equinox has invested over $500-million in a new copper mine in the North-western Province. The Lumwana mine is due to begin production in 2008.

Zambia’s biggest mine, Konkola Copper Mine (KCM), has, meanwhile, kick-started a $400-million expansion programme, which will increase its life for 22 years.

KCM, which is run by an Indian mining firm, Vedanta, is due to complete its project in 2009 and will increase output from the current two million to six million tonnes per annum.

Copper exports last year more than doubled to $2,7-billion from the $1,2-billion raised in 2005, according to official figures.

Sata, however, says the country has sold out to foreign investors during a privatisation programme launched at the start of this decade when foreign investors were given tax breaks of up to 15 years.

Mwanawasa struck an upbeat note in his new-year message but slipped in a word of caution in an oblique reference to his political rival.

“Zambia is in a hurry to develop economically, socially and politically,” the president said.

“This development can be achieved if, among other things, we do not allow quarrels or differences to detract us,” he said, adding: “The economy is poised to thrive on account of the ever-growing investor confidence.”

But the common man is unimpressed.

“We can’t eat figures. We want to see jobs and more money in our pockets in order to believe that the economy is improving,” said John Banda, a street hawker. — AFP