Business Africa, your program dedicated entirely to the economy on our continent. This week:
What economic reforms does the newly elected president, Hakainde Hichilema, plan to undertake? Hichilema has promised 10% growth per year during his five-year term as his country is in talks with the IMF for financial assistance.
In 2020, Zambia was the only African country to default on its debt. But this era seems to be on the verge of disappearing, thanks in particular to the international confidence enjoyed by President Hichilema and the strengthening of the Kwacha, the local currency. Since his election, a debt restructuring plan with the IMF has been on the table.
Interview with Chibamba Kanyama, manager consultant Bridges Limited
Question 1: So, there’s so much to talk about when it comes to the Zambian economy: debt, unemployment, inflation: where should the new administration start?
_So the first thing is to assure everybody that the environment is good, including the foreign investors, that the environment is good is right for investment in Zambia. So politically, the risks have been reduced and that is the first focus of this new government. The second thing is to spell out the new course of action in terms of achieving macroeconomic stability. They need a change, of course, a policy realignment, practical actions by the new government to induce sustainable growth, bringing self sustainability in terms of debt. And I’m sure they create the right environment for investment, for the portfolio investment which is short term, as well as foreign direct investment and domestic investment, which is for long terms. _
Question 2: Copper is of course the mainstay of the Zambian economy. Under the previous government, investment slowed down a bit. Do you think money will flow into the copper mining sector under the new government? And to what extent will this provide relief to the economy?
The first action which began with the previous regime and this hard to avoid ambiguities in taxation. Allow for clear taxes without double taxation so that agreement was made except there was not yet put it to policy. So this new government is taking over a discussion that was agreed in May awaiting consolidation, agreement on the policy, and a very, very sure that they will see the benefit of doing away with policies, fiscal policy that hindered investment in the mining sector. The minister of finance has already indicated that within the next three, four years we should see the production level, which comes from eight hundred and fifty thousand metric tons per year to close to two million metric tons per year.
Question 3: Let’s talk about the austerity measures that the government may have to put in place. Some say that President Hichilema will disappoint some of the people who voted for him, for example by raising taxes to make up for revenue shortfalls, or reducing spending on social services. Do you agree?
The reality right now is that we are choked with high external debts on the debt servicing has narrowed space in terms of government to have extra cash to spend into social services. The debt servicing doubled to forty five percent. Forty five percent of tax revenues of the budget under the other forty five percent went to the salaries leaving government with only 10 percent of the annual budget to spend to social services. In short, we have already paid the price. The new government, in my opinion, will embark on restructuring this debt, especially external debt, restructuring the external debt, seek to refinance it with perhaps cheaper or zero interest to capital interest rates to release cash so that we have space now to spend all the social services.
GUINEA ASSURES INVESTORS OF CONTINUITY
In Guinea, aluminum prices have risen. Guinea is one of the world’s leading producers of bauxite, a key mineral for aluminum production. The global volume of iron in the Guinean subsoil is estimated at 20 billion tons. The country’s potential is also based on still partially exploited reserves of uranium, oil, gold and diamonds. In addition, this West African country is known to be one of the world’s producers of bauxite. With the political instability, several foreign companies have expressed concerns about the continuation of contracts as aluminum prices have risen this week.
MOROCCO SEEKS TO ATTRACT JEWISH TOURISTS
And then, the normalization of relations between the Cherifian Kingdom and Israel, should boost tourism in Morocco. A new challenge for Moroccan restaurateurs begins: to ensure an offer that meets the specific needs of these new tourists.