adminforeign investors in the copper industry.
The bank noted that given the downside risks to copper prices induced by global growth prospects, the new administration is expected to be pragmatic in its discussions with foreign investors in the copper industry.
In a statement issued in Lusaka the bank noted that the victory by Patriotic Front leader President Michael Sata brings the Movement for Multiparty Democracy 20-year rule to an end.
Last month, the Standard Bank
that traded as Stanbic in Zambia predicted that the MMD would win the 2011
elections.
The bank, however, noted that with the promise of change in President Sata’s election campaign, there is anticipation of change to economic policy framework especially taxation and regulation of the mining sector.
“While the PF’s election campaign centred around increasing the benefits of Zambia’s vast natural resources to the broader public, he (Sata) is unlikely to want to jeopardise the significant investment flows that the copper industry attracts,” read the statement.
Standard Bank added that investment commitments by copper producers are estimated at around US$6 billion for the period 2011 to 2013.
It noted that the PF has suggested introduction of new measures to increase the revenue collections from the mining sector after discussions with the industry.
“Interestingly, many of the development agreements (not public information) that the government has signed with mining companies are set to expire before the end of Sata’s first term.
“Yet given the downside risks to copper prices induced by waning global growth prospects, we expect the new administration to be pragmatic in its discussions with foreign investors in the copper industry,” read the statement.
The bank notes policy direction to look out for will be the choice of economic ministers and the 2012 budget which is to be read in Parliament at the beginning of fourth quarter this year.
It also pointed that other policy directions would be the new government’s relationship with the International Monetary Fund after the last extended credit facility expired in June this year.
Meanwhile, the kwacha depreciated sharply against the US dollar in the immediate aftermath of the election result.
The kwacha last week moved sharply from a close of K4,822 on the day of elections to K5,160 against the US dollar.
“The lack of certainty on the policy stance of the new government undoubtedly played its part.
“It is likely to continue to weigh on investor confidence in the short term even if there is some reprieve in global risk sentiment, depressed copper prices and US dollar strength,” noted the bank.
President Sata was declared the winner of the 2011 presidential elections on Friday last week after running for the fourth time with a 43 percent of the votes against 36 percent for the incumbent Rupiah Banda. – Zambia Daily Mail.
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