President Sata’s rapid ‘reforms’ unsettle investors

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File: President Sata meets Chinese investors at State House

AFTER a peaceful transfer of power in September’s election, Zambia faces the uncertainty of the new government getting laws through parliament and a possible energy crisis that could hit the expansion of Africa’s biggest copper sector.

Investors have been rattled by the doubling of royalties on the base metal to 6% in last month’s budget unveiled by Finance Minister Alexander Chikwanda.

He said that Zambia would not reimpose a windfall tax on miners and the World Bank has said the industry should be able to bear the higher royalties, but the investment climate could sour if the commodity cycle reverses.

Mines Minister Wylbur Simuusa said in London last week that the new royalties could be rolled back if copper prices collapsed.

Former president Rupiah Banda conceded defeat to Patriotic Front (PF) leader Michael Sata, who immediately declared he wanted to change the face of Zambia and would relentlessly fight corruption to ensure resources reached the intended poor.

Mr Sata scrapped the $5,4m sale of unlisted Finance Bank to SA’s FirstRand , launched an investigation into last year’s sale of telecoms operator Zamtel, and Mr Chikwanda told banks to cut interest rates.

Mr Sata’s war with graft has earned him enemies. Mr Banda’s Movement for Multiparty Democracy party and another opposition party say the corruption fight is a targeted persecution of opposition leaders.

The MMD and UPND together have slightly higher numbers in parliament over the Patriotic Front and if they succeed in forming an alliance, the opposition could frustrate Mr Sata’s plans.

In a sign of Mr Sata’s quick action on populist campaign promises, Mr Chikwanda said lending rates in Zambia were “inconsistent” with inflation, which hit 8,1% last month.

The dismissal of Central bank governor Caleb Fundanga with six months to go on his contract has also raised eyebrows among investors, who had approved of his tight grip on prices and oversight of the kwacha currency.

Although analysts say Mr Fundanga’s dismissal had more to do with his cozy relationship with Mr Sata’s predecessors, the delay in appointing his successor is now raising concern.

Zambia has also been hit by electricity shortages, with peak demand of 1580MW against available generation of 1401MW, according to the energy regulator.

High oil prices are also posing a risk to an end-of-the-year inflation target of 7%.

Global oil prices have climbed more than 17% this year and retail fuel prices have risen 11% since February. The $13bn economy is running at more than 6% annual growth but many Zambians say they have missed out.

Zambia’s new government unveiled an expansive 2012 budget last month, with big increases in social spending and farming subsidies to be paid for by a rise in mineral royalties and a debut $500m eurobond.

Although the doubled mineral royalties will effectively raise revenue in the short term to finance the expenditure, Zambia may be forced to change the taxation method should copper prices fall.

The bond issue is also uncertain with the problems in the Euro Zone.

Despite having largely fulfilled his campaign promise to give Zambians more disposable income through lower taxes, Mr Sata’s critics say he may undertake more measures financed by squeezing investors to please his urban base.

Zambia turned to the World Bank for finance, saying foreign aid and domestic funding were not enough to build the infrastructure needed to underpin economic growth.

Changes to watch for include increased expenditure; statements suggesting policy shifts; and a rise in economic nationalism.

Mr Sata was unlikely to take the path of resource nationalism and fiscal recklessness despite investor unease shortly after the veteran opposition leader was elected, analysts say.

But the government may reverse deals that will be found to have been corruptly agreed on under the previous government.

Zambia has attracted huge amounts of foreign investment, mainly in mining, from emerging markets such as China but many Chinese companies have been hit by strikes over poor pay and conditions since the change of government.

Mr Sata met Chinese investors operating in Zambia at the end of October, easing tensions, but also made clear that the Chinese firms that have ploughed more than $2bn into the mining sector would not get preferential treatment.

Amid concern about copper exporters misreporting the quantities leaving the country, Mr Sata has tightened loopholes, ordering that all export payments are routed via the central bank. He also appointed a new head of the antigraft body.

Zambian police last month charged a former labour minister with receiving stolen property after K2.1 billion kwacha ($414000) was found buried at his farm, in the first high-profile case in a graft crackdown under Mr Sata.

As well as investigating state fuel tenders, Mr Sata has said that Zambia’s cabinet could overturn the sale of fixed-line operator Zamtel to Libya’s LAP Green after a commission of inquiry found that it was illegally sold to the Libyan company.

[REUTERS]

43 COMMENTS

  1. They are our resources we need to benefit from them. Well done PF for raising the percentage.

    Trouble is these people still think they can easily walk into Africa and get these resources like they did a thousand years ago!

    If they can`t put up with it, let them lump it!

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  2. I can’t ever imagine a British bank being confiscated by the British goverment because it is flouting Financial Services Authority (body regulating banks in the UK) and being sold to an American bank at a give away price. The bank can be fined for flouting the rules but not taken over by the Central bank!!!! What are they complaing about?

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  3. It is not rapid reforms,it is rapid witch hunting.If it were solely about fighting corruption how do you scare investors by “charging’ Mumba without concrete evidence,breach of contract for Fundanga to serve out his term and leave the post unfilled for months?.If he cared that much about the economy he would be very wary of scaring investors who might now be scared they can’t trust any contract signed with GRZ.Everybody tied to RB is treated as a monster and anybody Sata appoints is seen as an angel.Say it ain’t so chi Sata you’re just a bitter old man using police to fight your dirty political battles.

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  4. Enaka [email protected]………………When and what was Dr Mumba charged with?.Get your facts right, don,t just show your ignorance badala, you probably have a poster oh HH you use for**********

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  5. Quote the investors who have said they are rattled, otherwise we will conclude that you are just expressing another mediocre hateful delusional opinionated ungrateful antagonistic retrogressive redundant piece of malicious propaganda.

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  6. Unfortunately what appears like positive steps in moving the country forward, will be futile and quib unless the president addresses the apparent tribalist and nepotistic inclinations that he has exhibited. At the last election Zambians, voted en mass for change, and for a leader they thought was all embracing and a nation builder, but alas they got lumbered with “a wolf in a sheepskin”. Those in leadership should face reality and appreciate that they can’t count on as many non bemba votes at the next election if the president is going to be a blatant tribalist. There are many progressive and nationalistic bemba who are dismayed by our leader whose style is detrimental to the unity of our nation – and will vote otherwise. PF may choose not to heed this timely advise at their own peril.

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  7. @11 

    Clearly you are not in Zambia or you are a die-hard PFooter without a sense of what is happening in the Zambian economy.  The upbeat economic mood that was there before the elections has evaporated.  You can posture as much as you want, but I think FDI into Zambia is gone.  Expect higher unemployment as your “infestors” take their money elsewhere where they are more welcome and appreciated.

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  8. Only Mpika primary school graduates will miss the point here. SATA and PF should realise that they need all zambians to develop the country. Bembas appointmnts alone will not change anything.

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  9. Really? Give us an opinion poll to support your subjective opinion. Please work with facts. Only investors who are not playing by the rules are jittery, do not air our an opinion without substantive sufficient evidence! Zambian journalism is one of the most unethical, marred by bootlicking and political frustration!

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  10. The PF government should not be content with “crumbs off the table”, but should work to have legislation in place and affirmative policies to benefit the Zambian people. They should encourage and legislate for joint ventures between so called investors and indigenous people, that way the locals are empowered. In the present arrangement the Zambian will always remain a “worker” for the infestor who pockets all the profits in the business and externalises it his country of origin. on all contracts that are awarded, a chunk should be reserved for Zambians. What isthe meaning of development is the Zambian remains in subjugation????

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  11. this is the opinion of the writer and i guess its a wrong and negative propagated opinion….get your facts right before addressing the nation…shaaaaaaaah

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  12. Please those of you complaing with tribalististic reoteric, please deal with it. We can’t all be in goverment. Am sure I have seen all the tribes included in this goverment. Check all positions. Those in Top Jobs are those who worked for it and those who won the favour of the president. Belonging to a certain will not buy bread at home. Most of these complaining are just talking. Reflect a bit, will your complaining improve your lives??? Work hard so that next time, your party is voted in and you can get that top Job. For now, allow democracy to rule. Stop showing your typical africanism here on hearsay from some politicians who have no directions apart from selfishness.

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  13. SATA and false pretence!!

    . When someone says that when you give them money they can buy and deliver you a car and when they get the money from you they fail to do so you can take them to police and they will be charged with “Obtaining Money by False Pretence”.

    . The same should apply when a politician says if you vote for me I will give you development in 90 days, I will give you constitution in 90 days, I will introduce the windfall tax; but when you vote for him he does not give you the things promissed in exchange for the vote, then you can take them to police and they will be charged with “Obtaining Votes by False Pretence”

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    SATA has one of the above cases to answer to the Zambian public!!!!

    .
    I hope the police can take it up!!!

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  14. UPND Bantustans at work. Haters, there is no investor who is jittery apart from the dubious exploitative ones. So you under fives who are complaining about Bemba’s how many PF candidates did you vote for in your areas so that we can appoint them? you want to reap were u did not sow in the name of tribalism.

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  15. @Fine- Am sorry but you are out of touch with reality. Sata was voted for by the Zambian public and that’s a clear indication that the public agree that he owes them to answers. It’s RB, the person you seem to be religiously attached to who has questions to answer.
    If anything, even to get to 900,000 votes, RB and the MMD did a lot of questionable things. One thing Sata can never steal is votes, he has a talent for pulling crowds, at least give him that!

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  16. Useless and very dull article….any way I respect your opinion dear. If you thought as Investors they would be raping Zambia with impunity you were mistaken bwana. Let those Investors who want to continue raping our God given resources go and invest else where where they will pay nothing? Look at the thousands of chinese working as wheelbarow pushers, painters, sweepers…cant Zambians do these jobs? You dull creatures wake up….

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  17. Genuine investors go even to places like iraq and congo whilest dodging roadside bombs and sniper fire. Only crooks will be scared away from Zambia because MCS does not condone corruption. Let them be very very scared! After all copper will remain in the ground and will not get rotten untill we learn how to dig and use it ourselves.

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  18. # 22 CHARACTER ASSASSIN 00
    You are saying “SATA has a talent of pulling crouds”; I agree that talent is there.
    But the question is how does that talent manifest itself?
    Is it not through lies???
    SATA prmissed the following:
    1) Deliver constitution in 90 days, did he tell the truth or he lied?
    2) Deliver development in 90 days, did he tell the truth or lie?
    3) Re-introduce windfall tax, did he tell the truth or lie?

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  19. It is always not easy to understand some articles what they stand for. In this case this article is not well aticulated. that having been siad, this govt still needs to clean up it act for the good of this nation. It will not do to fight against good advise such as balancing appointments, reducing on threatening citizens thro plot 1, having stable BoZ with a governor and many other areas which needs to be improved. Above all the president must find a way to tell the truth about the 90 days theory.

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  20. SATA refused to be part of Mwanawasa’s NCC, yet it passed thru parliament and was an act of parliament.
    Mwanawasa made the NCC bill to go thru parliament and and invited all major institution, Churches and NGOs to nominate and send members to be part of the NCC.
    SATA refused to be part of it saying it was government engeneered and that it was not all inclussive.
    But what has SATA done? Single-handedly he has picked 20 people to do the constitution and you can still much his words with his actions.
    You have to be like SATA to believe that there is no lie in what he says.
    Any liar will not see anything wrong in lying – that is just the way it is? If you eat ka monkey you will not see anything wrong when you find someone eating a ka monkey!!!
    That is how it is!!!

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  21. Agreed there are a number of questionable thingz the PF government haz done, but they cannot make someone miss the late MMD or indeed wish another party formz government in the next 25 yearz!

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  22. Wait and see what will happen if the rate at which they are moving is not checked.
    Some people have the capacity, through an analytical eye, to see things before they actually happen while other people can only see what has happened. For such we give time.
    It was on this same sight I told people that the promisses of 90 day this, 90 day that were lies, and SATA would, as usual, change and u-turn on each promiss.
    People were adamant and too royal to SATA’s promisses that they would not believe he was lying.
    Today, they can only say it’s Ok even if he lies because we like him.
    I know that there is no problem in liking a liar, especially when you too are a liar. You can love the person, no problem. I hope you wont love even his lies!!!

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  23. There are some difficulties outlined in the article which the PF govt will find hard to adjust to without being seen as liars. Yes, you can hoodwink Zambians as some think the same way PF cheats them and get supported on lies. However, when dealing with a complex international community its “Check You mate”. This will make PF backtrack and foreward like a willy willy yo yo not knowing what they stood for and what they are facing. We raised the issue of appointment BOZ governor, PF thought we were just jealous, now the international community is interested to know who takes over not corrupt Bwalya Ng’andu who was sacked at DBZ because of financial mismanagement. Fuel and energy, telecomms will not come from PF’s imaginations but internation companies who want clear vision on governance.

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  24. The increased royalty tax must be just.finance ministry officials must have done their homework. They would not want to kill the goose which lays the golden eggs. Even they are not that foolish.Although we have done it before in the Kaunda days when we chased anglo out ,after which our output dropped by 2/3.Hopefully we have learnt something from our mistakes ,if not oh well,next time we get the chance we will make better decisions

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  25. Typical of Zambians.Investors have stolen enough form you while working with corrupt govt leaders over the pats 20 yrs.Someone wants to correct the situation,people say investors will leave,investors are woried abt delay in appointing BOZ governor.No foreign country has the right to force a sovereign state to do what they feel is “right”.In some countries ministers have acted for close to a year before an appointment is made-its not investors’ business!!

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  26. ichichalo chafula fye bakabwalala. even those leaders who always claim that they know the governmnent system have now sidelined us. Zambians wake up

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  27. Just a thought! I am not in Zambia. But I think after taking out RB who is credited with ; the Mwanawasa Stadium, New Lusaka Stadium, Mchinji-Chipata rail, several trunk and feeder roads across the country, the highest growth rate of the Zambian economy in more that 30 years, Zambia as among the 4 fastest growing economies in Africa.
    It is imperative that the PF government aims at surpassing that. I think that’s the way to go.

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