adminand policies, as well as a possible energy crisis that could hit the expansion of Africa’s biggest copper sector.
Former President Rupiah Banda conceded defeat to opposition Patriotic Front (PF) leader Michael Sata, who immediately declared he wanted to change the face of Zambia within 90 days, suggesting new spending plans within the current budget.
President Sata also launched a probe into last year’s sale of telecoms operator Zamtel and vowed to keep a close eye on copper exports, while finance minister Alexander Chikwanda told banks to cut interest rates.
In a sign of Sata’s administration acting quickly on populist campaign promises, Chikwanda said lending rates in Africa’s biggest copper producer were “inconsistent” with inflation, which hit 8,8 percent in September.
Sata also fired respected central bank governor Caleb Fundanga, suggesting a possible shift in monetary policy to the concern of investors who had come to trust Fundanga during his nearly 10 years at the helm of the Bank of Zambia. Zambia has also been hit by electricity shortages, with peak demand of 1 580MW against available generation of 1 401MW, according to the energy regulator.
High oil prices are also posing a risk for an end-year inflation target of 7 percent. Global oil prices have climbed more than 17 percent this year and retail fuel prices have risen 11 percent since February.
The US$13 billion economy is running at more than 6 percent annual growth but many Zambians say they have missed out. The new government wants to change that, but it is unclear what it will do and how it will pay for it.
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The biggest risk after the elections remains short-term populism eroding policies designed to build long-term growth.
Rapid urbanisation is creating a huge demand for jobs and services in cities, and may spawn elections pledges that come back to haunt the country and economy.
Privatised state enterprises and foreign investments could become political targets, with possible controls on expatriate labour or higher taxes for the mining sector.
Pressure after the polls to invest in capital projects could push the government into excessive borrowing.
Before the election Zambia was readying a debut US$500 million eurobond, part of one trillion kwacha (US$217 million) earmarked for road upgrades.
Mining taxes are another probable source of finance, although analysts say the budget is under pressure in light of social and economic promises made by political parties.
The new government also plans to expand existing agricultural subsidies to give small-scale farmers more seed and fertiliser.
Zambia has attracted huge amounts of foreign investment, mainly in mining, from emerging markets such as China. President Sata says Chinese investors are welcome but must obey the law.
He met the Chinese ambassador during his first official engagement as president, easing tensions, but also made clear the Chinese companies that have ploughed more than US$2 billion into the mining sector would not get preferential treatment.
Amid concerns about copper exporters misreporting the amount of ore leaving the country, Sata has also tightened up any loopholes, ordering that all export payments will have to be routed via the central bank.
He also said the statutory minimum wage of 450 000 Zambian kwacha (US$90) a month was too low and needed to be revised quickly.
The tax that the government was getting from the mines was not enough and may need to be reconsidered, Wilbur Simuusa, Zambia’s new mines minister said after his appointment.
Donors have raised concerns about corruption and have frozen aid three times in the last few years. In line with his zealous anti-corruption pledges, President Sata has thrown a spotlight on a number of deals executed under Banda, who was criticised for taking a relatively lax line on graft. Sata also appointed a new head of the anti-graft body last week.
As well as investigating state fuel tenders, Sata said he would look at last year’s sale of state-owned fixed line operator Zamtel to Libya’s LAP Green Networks for US$257 million and reverse this year’s sale of commercial lender Finance Bank for US$5,4 million to South Africa’s FirstRand Bank.
Electricity supply will remain tight for the next four years, casting a shadow over the power-intensive mining sector. The Energy Ministry estimates generation capacity will not exceed projected demand until 2015.
State power utility Zesco is rationing household power and asked mining companies to reduce their consumption temporarily after a fault on a power line from South Africa. – Reuters.
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