Zambia survives recession

ROBERT MAKOLA
Correspondent | Friday January 22, 2010 00:00

As the curtains closed on 2009, the Southern African country is still hopeful it will meet its macro-economic targets in spite of the many internal adversities and the largely still hostile systemic conditions.

After enjoying a single-digit inflation rate in 2007 and 2008 before it rolled back into double figures last year, the Minister of Finance and National Planning, Situmbeko Musokotwane, set 10 percent as the target for 2009.  At the end of November it had dropped to 11.5 percent from a high of 14.5 per cent in September, bringing it within sight of the target.On December 31, the Central Statistical Office (CSO) broke the good news to herald the New Year: the rate of inflation for December is 9.9 percent, 1.6 percent down from the November rate of 11.5 percent.

Briefing the press in their monthly brief, CSO Director Efridah Chulu said the drop in the rate of inflation to a single digit rate was mainly due to a decline in food prices during December.

Chulu said gross domestic product (GDP) which was set at five percent for 2009, is now estimated at 6.3 percent after a cycle of positive developments in the economy and the Kwacha had stabilised to hold steadfast against the hard currencies during the past few months.

This high rate of growth has been ascribed mainly to the massive growth in mining, construction and agricultural sectors that experienced unprecedented growth during 2009.Providing the icing on the litany of good economic news, Chulu also disclosed that the extreme poverty indicators also showed that poverty had dropped in the 10 years from 1996 to 2006 from a high of 44.5 to 36.5 percent.In mid-November, Musokotwane informed Zambians that the economy had reached a reserves level of US $1.7 billion, the highest in 38 years.  Month on month, Zambia continued to register positive import-export trade surpluses against many trading partners.The reasons for this economic resurgence are obvious.  Government's efforts to persuade the mining companies to stay after the copper price crash last year was successful, saving jobs, at least some of them, and maintaining industrial harmony especially in the important but volatile Copperbelt Province.

Secondly, the price of copper - Zambia's major foreign exchange earner - has recovered from the deadly downward swing experienced in 2008, when it dropped from a high of US $8,500 per tone to below $3,000 per tone.

The Zambian Parliament recently changed the budget cycle from the previous April-to-March tradition to the January-to-December cycle, which has cheered many business and cooperating partners as it opens the way to more efficient management of the budget.

Chinese investments, which some opposition political groups especially the Patriotic Front (PF) party criticise as unwelcome and exploitative to Zambian workers, has created 15,000 jobs in the various investment sectors including mining.In December, the residents of Luanshya, which had been reduced to a ghost town, woke up to a deserving Christmas gift as the town sprung back to life with the re-opening of the local mine after a year in the doldrums.  A Chinese company, Non-Ferrous Metals, has bought the mine and rehired 1,300 former employees out of the original 2,000.  The remaining 700 will be given back their jobs in the New Year as the company expands production.

Despite these positive economic indicators, however, even the government has acknowledged that the benefits have not filtered down to the grassroots of the population, many of whom are poor and cannot afford three meals a day.

One major failure of the current government, critics say, is the removal this year of windfall tax on the mining companies which was introduced by the late president Levy Mwanawasa's government in 2008, as copper prices hit the roof at the London Metal Exchange. However, the new Banda government took the matter back to parliament and removed the windfall tax, replacing it with operating tax, which critics say is difficult to collect because of the cumbersome procedures. 

Musokotwane and other government leaders, however, have justified the move, arguing that it is imprudent to tax the mining companies heavily while they are still trying to find their feet as the global credit crunch thaws out.  As would be expected, the mining companies are happy at the development.Secondly, Zambia's political climate has unnerved some observers, who point to the inter-party violence and the vitriolic language and insults among the political players as the major minuses in the political arena.

This has been triggered by the opposition's determination to ensure, at any cost, that the ruling Movement for Multi-party Democracy (MMD) is removed from power in next year's elections.And in a determined effort to achieve this, the two main opposition parties - the United Party for National Development (UPND) and the Patriotic Front (PF) - with individual political manifestos that are far from converging - have formed a pact to fight the MMD. But, not surprisingly, the MMD is not taking those threats lying down.  It accuses the leaders of the two pact affiliates as power-hungry and not having an agenda for the people of Zambia.  The result has been cut-throat, dog-eat-dog competition despite the elections being almost two years away.Out of the three, the ruling party retained its Chitambo constituency in central Zambia with a comfortable margin.  The opposition PF also retained its Kasama Central constituency in Northern Province, also with a comfortable majority.The other party in the pact, UPND, within the spirit of the pact, rendered its support to the PF candidate, Lusaka businessman Joseph Munkonge, who had defected from the ruling party to the opposition PF.Indeed, as the saying goes, fair is fair. 

However, it was the Solwezi Central constituency by-election in North-Western Province which shook the Zambian political landscape.  The seat was held by the ruling MMD through its minister of local government and housing, Benny Tetamashimba, who died last September.The pact floated one candidate, UPND's Watson Lumba, an accountant by profession, and grabbed the seat from the ruling MMD, beating the latter's candidate by more than 1,000 votes.  The pact has not yet chosen the candidate between PF's Michael Sata, and Hakainde Hichilema of UPND, to face off with the MMD's candidate in 2011, and it is feared that this may trigger the undoing of the pact, but the pact leaders refute these rumours claiming that, 'the pact is here to stay'.

As 2009 cascaded to a close, and 2010 reared an uncertain future across the horizon, Zambians have been crossing their fingers amid hope that the no-holds-barred politicking among the political players will not ruin the positive economic developments that have raised Zambia's profile as the Southern African Development Community (SADC) strives to tackle widespread poverty in the region. (Sila Press Agency)