Bank of Zambia of Zambia governor Caleb fundanga and his deputy Denny Kalyalya

Zambia’s economy may grow faster than the government forecast this year on higher copper prices and a bumper grain crop, putting the country in a good position to seek its first credit rating, central bank Governor Caleb Fundanga said.

The government may sign an agreement with JPMorgan Chase & Co. as early as this week to advise it on proceeding with the credit rating, Fundanga said in an interview yesterday in Abidjan, the commercial capital of Ivory Coast.

Zambia, Africa’s biggest copper producer, shelved plans for a credit rating in the second half of 2008 after the global financial crisis hit. Copper prices have more than doubled since the beginning of last year, while the government estimated a 42 percent surge in grain output in 2010. That could push economic growth to between 7 percent and 8 percent in 2010, compared with 6.3 percent forecast in December, Fundanga said.

“There are reasons why one should be optimistic,” the governor said. “I don’t see why in a year when we have fewer problems we should do less than a year when we had more problems.”

Zambia will probably produce a grain surplus of 1 million metric tons this year, which will be exported, boosting foreign currency earnings, Fundanga said.

Credit Rating

A credit rating will allow local companies to borrow at more favorable rates abroad, the governor said. The government hasn’t decided whether it will also use the rating to sell an international bond, he said.

“If there’s an opportunity for the government to borrow to finance critical investment in infrastructure, for example hydropower generation, roads and so forth, there’s no reason why the government can’t borrow,” Fundanga said. “Debt sustainability ratios are good right now, and our capacity to repay is very good.” Still the primary purpose of the rating is to “assist our private sector,” he said.

Angola, which vies with Nigeria as Africa’s biggest oil producer, was awarded its first credit rating of B+ by Standard & Poors and Fitch Ratings last week, paving the way for the sale of an international bond. Ghana, the world’s second-biggest cocoa producer, is also considering selling its second dollar bond next year, Deputy Finance Minister Fifi Kwetey said in an interview yesterday.

China and Copper

Zambia’s economy is benefiting from Chinese investment in its copper industry. China Development Bank Corp. will provide $5 billion of loans to companies involved in Zambia’s mining sector under an accord signed this month, the official Zambia News & Information Services reported on May 13.

Copper production is forecast to reach 1 million metric tons in 2012 from 700,000 tons this year, Fundanga said. Output was 697,860 tons last year.

“If there’s an opportunity for the government to borrow to finance critical investment in infrastructure, for example hydropower generation, roads and so forth, there’s no reason why the government can’t borrow,” Fundanga said. “Debt sustainability ratios are good right now, and our capacity to repay is very good.” Still the primary purpose of the rating is to “assist our private sector,” he said.

The price of copper climbed to as high as $7,960.25 a ton in April, compared with $2,809.50 in December 2008.

“The key to maintaining a high price depends on growth in the key copper-consuming countries, such as China,” Fundanga said. “If China continues to grow, if India continues to grow, and countries in the euro zone can sort out their problems and start growing, that will help. They are also major consumers of our copper.”

Zambia’s Kwacha has slumped 6.6 percent this month as investors sold riskier, emerging market assets on concern the European debt crisis may stall the global recovery. The currency was trading at 5,065 per dollar late yesterday.

The inflation impact from the Kwacha’s depreciation may be limited, while exports may benefit, Fundanga said. The government is still on track to meet its goal of bringing inflation rate down to 8 percent by the end of the year, from 9.2 percent in April, he added.

“With a food surplus like that, prices will come down,” the governor said. “The trend is towards lower levels of inflation. Our target can easily be attained.”

[Bloomberg BusinessWeek]
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–Editors: Philip Sanders, Heather Langan

To contact the reporters on this story: Nasreen Seria in Abidjan at [email protected]

To contact the editor responsible for this story: Peter Hirschberg at [email protected]

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51 COMMENTS

  1. 1. Sounds good….but does this mean our economic fortunes are dependant on external factors for which we have no control????

    2. ‘Zambia, Africa’s biggest copper producer’ – AND YET ONE OF ITS POOREST COUNTRIES, what a paradox!

    3. ‘Zambia will probably produce a grain surplus of 1 million metric tons this year, which will be exported’ – AND THEN HAVE A SHORTAGE AROUND DECEMBER AND IMPORT GMOs, it beats me.

    Suggestions:1. Zambia needs to work towards exporting copper products and not wait for other countries to develop so that they buy raw copper from us.

    2. In the event of Maize surplus, we should be exporting meali-meal not raw maize…atleast this is easy. market is there and setting up mills aint so expensive. this will create jobs and add more value to the economy

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  2. With all due respect ba Caleb. Sorry to say but wenye wanu. Don’t even bring the JPMorgan Chase & Co. agreement in. I, once upon a time worked with them right here in diaspora and I know what exactly goes on in this business. This nchekelako attitude wont take us anywhere and you know it! Please don’t bring yourself so low, lower than the level of our current crop of politicians :)>-

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  3. This is positive news especially on Credit rating.But I thought JP Morgan Chase was an Investment Bank.The most renowned in this business are Fitch,Moody’s and S&P,however,if they do the rating,they are more than welcome.

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  4. Nigeria is Africa’s number 1 producer of oil yet the poverty levels in that country is even higher than that of Zambia.The focus should not be so much on copper but agriculture.Zambia has so much land and water we need to sustain food security in the country,the 1million metric tones of maize expected this season is a sign of good agric policies by the MMD government which need to be congratulted for a job well done.Keep it up RB and company.

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  5. Our decision makers dont seem to utilise the techniques of forecast, when markets are favourable, we say ‘we should have………., on maize lets not get excited and start making pronouncements of bumper harvest. lets work towards exporting finished goods, i.e. they ve got value added in them and hence the more forex.

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  6. Zambia does not an external credit rating, what we need is to concentrate on economic fundamentals, manufacturing strengthening the export regime, creditors will use this data to see our credit worthiness. At the moment there is little respect and regard for credit raters, firstly they were paid by banks (including Chase) to rate them Banks favorably, and they did, ka boom, the credit crisis, the same credit raters rated Greece for a long as credit worthy, ka boom, Greece is threatening to pull down the entire world financial system! PS: someone should check what we are paying JP Chase (officially and in brown envelopes). This is just my humble and therefore correct opinion.

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  7. Imwe bantu-vavuta kansi. Now if of course as we depend on copper’s swings. The countries that are doing us good by using this resource are with us. We will not grow their economies so that we get them buying us and eventually help ours a bit of course. There should be another direction in wooing these countries trade with us in other commodities. We should initiate a transition to include other resources as part of our economic backborn. The euro debts will stil continue raming us and stall globall econmic recovery but even then africa and Zambia in particular is doing no good to the continent. Borrowing and mismanaging. Donor money is pocketed by Tufupiz. In Zambia, it seems there is only money to pocket than to use for development.
    If MMD comes again, 2012 is the end of the…

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  8. Bushe credit rating chinshi? Mukabebe ati ifwe nga twaingilamo we will lose it in 90 days!

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  9. JPMorgan Chase & Co.Bank? We know of some Zambia working for this Bank at its corporate office in in investment in the USA. Started low during his undergraduate but they went on sponsoring him into Business school to get the job he is using to push and GRZ deliver deals to his employer. Seemiingly its payback time the man is now being used to get JPMorgan Chase & Co.some business deals from GRZ? Reliably rummor has it that GRZ has even started drawing lines of credit for oil feed stock importation and now they are talking of credit rating. Ushe tebu crook nomba pamunshi guys? How did they get this contract against all interested parties?

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  10. All this growth talk is nonsense, nothing ever trickles down to the poor. All the cooper being mined is not ours. What are these chaps talking about?

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  11. The talk is very sweet I just hope the result will be sweeter for the common man. We are paying high interest rates because the ecomony is still not favourable for bank investment.

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  12. Mwe bantu, reading this article again makes one accept that Zambia is
    truly cursed. Its history repeating its self. We have gone back to borowing. Soon our debt will be back to where it was before. Please, Lord save us from this myopic and greedy leadership.

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  13. On the maize grain he is sound ok BUT NOT COPPER prices the benefits here is 0.5%,why should I say so (1) the fact that when we sell our copper the mine owner are allowed to leave the proceeds abroad means that, that money does NOT work for Zambia (2) Only very few Zambians are employed by mine OWNERS and get little change as salaries, and so the multiplier effect is negligeble or non (3) RB has done away with windfall tax which a clear loss for Zambia.Assuming windfall tax was allowed then yes Zambia could have managed to repair a good number of roads , cry for these fools MMD who think that copper will geminate ONE DAY even AFTER digging tunnels.

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  14. but why still so much poverty, still same old narrow bad roads, still same stadiums. hospitals, universities, etc why why why ~X(.

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  15. Its sad to read some of these comments its like reading a kaponyas analysis on a new space program. Firstly Zambias production of copper is essential because the governement although not in control of the mines gains huge tax revenue from them and their growth is vital also when it comes to development of rural areas and employment, dont talk out of your butts ba diaspora sit your testicles, Zambia has once again reached single digit inflation which they are strengthening, The credit rating for you that don’t know is essential because it will open up more possibilities for the government and private sector to get more funding from Developed countries. If you haven’t noticed Zambia from 2005- has sold itself as harbour for investment even for financial services i.e. access bank

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  16. Is this not what Dambisa Moyo was proposing recently in an article on Lusaka times of the 16th of April?
    If we get a rating, it is not just for govt that will benefit by borrowing at cheaper rates but the private sector aswell. This means that any company wishing to invest in Zambia will be able to borrow at a more favourable rate. For all you Chinese haters, this should be good news as it would mean that the govt has other outlets from which it can access cheap credit.

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  17. Give credit where it is due and do not criticize for the sake of it. If the things that Dr Fundanga ( whom i have a lot of respect for) do happen then it is definately positive. Let me just add that these are not RB initiatives – Fundanga is not a politician. Why is a credit rating good for Zambia. Take the case of Greece which was recently down graded and is going through a period of severe fiscal turbulance – the poor credit rating means that their cost of capital ( borrowing) increases as they are considered high risk.

    This credit rating not only affects sovereign debt but also corporate debt – which arguably fuels the private sector. Barclays bank zambia would access money at a cheaper rate for passing on to businesses in Z. The same goes for GRZ.

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  18. the copper prices where much higher in the last boom than now, so why didnt we seek the credit rating then? as it is now the copper price has slumped due the DRC saga, and may slump further if the greece continues.

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  19. 20 continued. As for the Copper/Grain outputs plus economic growth, i still believe we need incentives for investors to keep the money in Zambia. I dare suggest maybe some sort of controls over repatriation of funds.

    Macro economic measures of economic growth are no good unless they translate into better living standards for the majority.

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  20. # 7 & 10 Thanks guys for the info. All these guys Fundanga, Mutati etc regardless of being educated have really let us down. They dont have morals. They are stealing from the poor day in and out. We dont need Credit Ratings in the first place. How is JP Morgan being appointed? Who is going to pay for their service. These guys think they are clever thank God we have youngster, exposed and learned hence know about all these dealings.

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  21. Fundanga bauze bavesese. Rb whether you like it or not is a luck person. economic recession yamupita vaa. Again vi-Maize bwebwebwe.Vi-copper navo too much. Uyu umwina Chipata alatushupa.Mwati ka-90 day formular kalabomba apa.London boyi kambako.

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  22. “The government may sign an agreement with JPMorgan Chase & Co. as early as this week to advise it on proceeding with the credit rating”! Chizungu please. He did not say that JP Morgan Chase are conducting the rating themselves – they are merely advising.

    Whoever thinks Zambia does not need a credit rating needs their heads examined. Without a developed financial sector, of which a National credit rating AND local credit rating agencies (for individuals and businesses) are a key element, our development will be stiffled. An important issue that Dr Fundanga alluded to was that a credit rating would enable us sell government bonds internationally at a reduced yield (good for our coffers). As long as our debt sustainability ratios are good then this is a good thing. The alternative is…

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  23. # 25 Simon.Well Mr English, tell us how they are being appointed as Boz/Gov adviser on that matter. # 23 Haambwili,are you sure you are a farmer? Why is your CITY CHOMA still looking like we are in 1952 if our country has so much resources? Shikulu stop dreaming and face reality.

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  24. #26 Motsepe keep your head buried in the sand. It must really hurt you to get good news from Zambia eh? You want the country to be run like the PF councils, the reports for which we are still waiting for up till today. They dont have time to write reports but have time to issue threats of violence on Zambian people and you think we will vote for them?

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  25. This is the best news for Zambia and Zambians, I personally am a farmer and i have produced 163 bags of maize and when i went to my home town in chipata i was surprised how much grain the farmers have produced. I like calling a spade a spade, Keep it up MMD goverment.

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  26. Court convicts Katele, Chibanda, five others for corruption – BREAKING NEWS AS REPORTED BY THE POST

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  27. At least the govt is not running the country like PF councils. This is good news for those who want to access credit in order to enter economic ventures that are not mine related such as manufacturing, tourism and agriculture.

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  28. All this stuff that Fundanga is giving is all academic. It only looks good on paper. The true story is, the poor will never benefit from alll this. In fact generally Zambia will not gain much from it. Its the so called investors plus Rupiah Banda and cohorts who stand to gain.
    For how long will this credit rating hold? Zambia’s economy is so dependent on copper that stability is not guaranteed.

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  29. I am begging for comments from the PF/UPND pact followers and all pessimists who see doom in RB and MMD’s leadership…….comment! The thugs keep saying that they will come to power in 2011without saying anything to support their dreams. And this man from Bangladesh is already talking about rigging elections before they take place…already defeated! Now look at the roads,schools,clinics ,jobs etc that are happening country wide.Pray that these developments do not take place.But it seems no one will stop them. Go go MMD go!

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  30. These are signs that Zambia can do better and would have been a far better economy a long time ago.Keep it up Govt,Fundanga & Co.!

    Exporting processed maize will certainly bring more benefits to our people and national development in terms of employment creation and more revenue from the processed maize but how sure can we be that our maize buyers won’t be buying maize to simply consume it in its raw form as ziwaya, umusaku or amachasa???!!!!

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  31. Sounds good. Please only find ways of having the poor benefit from all this.

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  32. Interesting comments. Good for the believers, I for one does not see anything here to be proud of. We all too often lend ourselves to false optimism despite evident contrary hindsight. Inflation levels- single digit again, 8%. Some scrupulous former ‘president’ always boasted the like- what did it translate into? We love to talk big, clad our talk in bright colours, yet practicalities are non-existent. We have a bumper harvest, yet, as someone above has correctly observed, we will be importing GMO’s by October. If we are making such progress, “growth”, they love to call it, why can we not put in practical measures to try and replicate such harvests- we have some of the most plenteous water sources.
    Our mothers and sisters still have to break necks fetching water in Lusaka- not to…

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  33. talk of else where, if we were making practical progress in areas as these, then it would make sense to sing our colourful songs. Its pathetic, that take a 30 year-old anywhere in the country, and they have never taken a shower- (am not saying they dont bath), they have heard there’s such a thing as a shower, as typified by the natural, but infrastructure is non-existent, and the means to improve to such are taken from the people, there are no plans even to water our residences…but our sisters and mothers have to be subject to the base humuliation day after day, which exposes everyone to water-borne disease- while our economy is “growing”… If we implement simple, but practical solutions, then all the rhetoric might be sensible.
    Credit ratings- we might issue an international bond

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  34. Great news on the Credit Rating. Dr. Dambisa Moyo would be so proud. This is part of what she has been writing in her Times best seller book “Dead Aid”.

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  35. Haters. How do you suggest the poor should be given benefits? Perhaps the welfare state? You are right, the lack of key elements such as credit ratings, high export earnings, economic growth etc are not our main problem. Our main problem that is holding us back is our negativity and cynicsm. Dont expect the government to take you out of poverty. The governments role is to create an enabling environment for business and enterprise to thrive. “Give a man a fish he eats for one day”, “teach him how to fish and he eats everyday”.

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  36. #26 Motsepe, the reality is in 1952, there was only one hotel in choma, today we have one beautiful lodge and 40 new guest houses in choma.In 1952 all the houses either belonged tto the council,GRZ or the railways but today my friend there is no space for new construction of private houses and good houses.Commercial land is finished here my friend.Spar and shoprite are fighting for trading space.what are they looking for here Br Motse.Is it not the dollar sir. As for farming, I have an order of 5000x 50 bags of maize to lubumbashi congo Dr. this last years maize on my farm.This year let ba Fundanga aku-uze boi. farmers don’t build Cities they invest and invest and recapitalize their farms.I still love motsepe.

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  37. With regards to the sentencing of Katele and others, this is a master stroke by RB, well played. I am not saying that Katele is innocent, but he was given a false sense of security that a repeat of Hefty Jay would take place, only to have the rug pulled from under his seat.

    I don’t think that being a good politician is synonymous with virtue, but i admit RB is a good politician. A bad leader, but a good politician.

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  38. Ok. Borrowing and borrowing. All zambians are bad debtors. We have dislodged banks already and the ineterest rates of the banks are on our necks.
    Lets borrow, companies run and get the money.

    I think its not about opportunity to borrow money, its about govt mismanagement. For instance, we had a chance to put to use the money we realised from selling the over 200 companies under FTJ, but all of it was pocketed or channellled to their pockets by wrong awarding of contracts. RDA has road projects now that have not been done but the contractors have got the money and they are living lavishly. Come on cheaters.Credit rating? At the end of the day we will all be owned by some rich tychoon like Greece, thanks to her wealthy eurozone friends. Who can save us, poor Zam and Bob?
    MMD-rats.

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  39. I think Simon you a lost in oblivion. What makes you think good for RB? You think convicting Katele is a real thing? Wait when he will be sentenced. It will take another decade. They will put the sentencing off till after elections or suspend sentencing all together. FTJ is RB’s comrade and he has plundered Zambia together with Katele. Now you call us bloggers haters. Man, you are living in a borrowed world.You have eyes, but you cant see. You have ears but you cant hear. You have a mouth and you can vomit your rhetoric.

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  40. “I don’t think that being a good politician is synonymous with virtue, but i admit RB is a good politician. A bad leader, but a good politician”

    Bruce Lee, you can read, but cant comprehend. A good politician is not a compliment – read between the lines.

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  41. redit Rating

    ”A credit rating will allow local companies to borrow at more favorable rates abroad,” the governor said..
    #20 motsepe. this is very good news for Zambian companies because for example instead of borrowing money for investment at high rate of say 50 to 60% per annual in our zambia banks a company now can borrow at between 2 -3% the same amount of money. so borrowing interest rates will automatically come down.What does it mean there will be more money on the market for productive loans now than consumption loans.I as a farmer can buy my next 2 tractors at loan of low rate. so more ha/s and more maize for export straight from my farm to congo DR.

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  42. Having a Credit Rating is a good thing for sure but how much is JPMorgan Chase & Co. asking for advising Zambia on the issue? Did BOZ conduct some tender on the matter? We don’t want too much money to be paid to some company for its name when other good companies on the market could have advised on the same issue at a less amount. I think the general public should be told what criteria BOZ used to choose JPMorgan Chase & Co. as the advising company before any contract is signed.

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