Rating agency Moody’s says the suspension of operations at Glencore’s Mopani mine and at the Chinese-operated Luanshya mine will depress growth and reduce proceeds from exports and royalties.
In a research report released today, Moody’s says reduced copper production will put further pressure on the country’s fiscal and external positions.
Moody’s Vice President Senior Analyst Zuzana Brixiova said the suspension of some mining operations now introduces downside risk to the government’s revised growth projections.
Ms. Zuzana Brixiova said Zambia’s growth prospects already face challenges from subdued global copper demand, depressed copper prices which she said Moody’s expects to persist and drought-induced electricity shortages.
“Zambia’s growth which has averaged more than 7% per year over the past decade — is now at risk of falling to the Sub-Saharan Africa median, Moody’s estimates that next year’s fiscal deficit will widen by additional 0.75-1.00 percentage points of GDP owing to the reduced copper tax base alone,” She said.
Ms. Brixiova estimated that next year’s fiscal deficit will widen by an additional 0.75-1.00 percentage points of GDP owing to the reduced copper tax base alone.
“Lower growth and tax revenues will negatively pressure the government’s already rising budget deficit and debt levels, continuing a trend of missed fiscal targets that were among factors behind our 29 May decision to assign a negative outlook,” Ms. Brixiova said.
She said reduced export proceeds will exacerbate the trade deficits that have emerged in recent months further widening the current account deficit beyond the projected 3% of GDP for 2015, and add to the forces driving the recent rapid depreciation of currency.
“During the past five months, the kwacha has depreciated by 30% against the US dollar, more than any other currency in the region,” Mrs Ms. Brixiova said.
Last Monday, Glencore International AG announced that it would suspend operations at its Mopani Copper Mine in Zambia for 18 months.
Glencore’s suspension follows a recent decision by China’s Luanshya to place the mine on care and maintenance.
I feel for PF 70% but the other 30% is theirs to shoulder. These guys only know how to spend
What i do not understand is, the threat by our Government to suspend or refuse to renew the licence is meant to ‘sort’ these companies- Well they are doing that because of the potential loss of the workers’ jobs. What difference will that maneouvre acheive if, as what i can deduce either methods will mean workers will not have jobs anyway.
On what basis does our president elect these ministers, because some of them have limited capacities to think beyond basic issues.
You elect the Bank of Governor based on people who have experience and have worked with finances and congratulation for that- on what basis do you elect or put people such as Kambwili, or Shamenda ( who has failed in his duties and was cited for contempt last year)
Why not remove people who have failed in their…
long time Mushota I greet you. You have raised a very important point here. Most of these Ministers are not elected based on a merit of delivering but rather politicking. I see nothing in the man called kambwili rather than unnecessary threats and politicking.
It’ll all come out in the wash! Certain people like scare mongering that’s for certain. Predictions are rarely correct, take it with a pinch of salt.
Very sad times for our Country whether some of you acknowledge that or not. Surely we must now conclude that the current regime has failed and needs to be replaced as soon as possible. If GRZ is so concerned about the mines why wont they do a Zamtel and see how things go?? As it stands the precedence set by this government has been a complete shambles. People like Kambwili are just dull animals who spout nonsense with no credible plan on how to arrest the problems facing the nation. Have not heard any clear plan from the so called God appointed leaders of the country. Perhaps we should blame God for the misfortune happening in our country. But despite all these troubles they is no doubt in mind that Zambians will choose the same hyenas to lead our country. Why? Because we are docile and…
For matter of record Australia has just removed it prime minister for failing to handle the currently affairs of the economy due to the commodity crisis.
I need help understanding something. The most negative outlook on the oil industries has them trading at $20 a barrel during the next year which hasn’t happened since 2002… the job losses in the industry are ongoing. Now in the mining sector we know if your buyers are not buying then you have to lower prices to sell elsewhere… these companies prefer to wait until they can get more bang for their buck… so can someone very kindly and gently explain to me the pricing of fuel in Zed because it seems to me that had we passed on the price drop to consumers then the government would have had support on the ground. So what happened? Why did oily fingers get back in business? That extra taxation from inflated pricing…where is the money?
These PF chaps are professional scamers. They sleep, wakeup, work, thinking of how to scam Zambia.
So non-Zambians like Moody’s understand Zambia’s economic parameters, how come our opposition leaders do not understand these simple metrics?
Moody’s even knows that the electricity shortage is due to “..drought-induced electricity shortages…”, but this simple knowledge has eluded even our very own able economic managers, Past news, Father luonde, Nawakwi, …..yes even even Bishop Mambo….and evenfather Chiti….and even Mulongoti …kikikikikiki
Our so called economic managers see Edgar Lungu instead of seeing the actual problem …..drought-induced water levels…awe shuwa muletusenbanya mwe ba economic managers … kanshi finshi mwalesambilila ku UNZA… we spent so much much money as a nation and this is all the “ignorant knowledge” that we get from you?
What drought, Lungu was boasting of exporting maize from the bumper harvest.
Which economy did they manage to be called economic managers? Talk is cheap. It’s easy to criticise. MCM predicted to turn around the economy in 90 days I’m sure you know the rest of the story. Economic managers my foot!
Spot on Hot fire, but look at the dislikes you have been given, for the simple reason that you have said the truth!
We have got mines.
How about if one day next year there were no mines.
What would we invent or invest in to build the economy, without fully relying on external investors?
Thinking mines again, do we really not have gold and or diamond deposits in Zambia so that we can make a bit more money there?
as long as we rely on foreign busineses to expploit it copper mining will always be an usustainable curse.it all sounds ridiculous everytime the bubble inflates every politician and economic quark become better managers and when it bursts they just waffle and run around like headless chickens.why shud we be ‘cppper robots?’ yes we ve been here befo and this isnt about any politicn being a good manager bt about us becoming truly nationaly independent.abash forces of internationl capital !
We have been here before! This time please my Zambia… May not panic but instead and most importantly this time around, let us put all those mines that will close under state care!
Investors come and go and the contemporary world economy swings like a pendulum… So we will still have our copper when the yuan, dollar, Euro and British pound start. Spending at the disco (global economy).
Chagwa and team are like kids playing with live grenades around their neck (though some have ceased to have necks). Zambians are nice and docile people but when they get mad can be very dangerous! Greater humiliation awaits Chagwa and his poor family. Just wait and see.
Kambwili started with threats yet they did nothing to counter the escalating circumstances. What different results did he expect?
Hot fire you have impressed many of us with your excellent, well articulated and informed piece of work. I only wish we had even, two people of your integrity and calibre on this blog. Most of the comments above from the so called very educated awe sure.
Investors will not go where there is instability. To add fuel to an already existing fire, Kambwili makes things worse with his untamed mouth. Has Kambwili heard the quote: empty tin cans make the most noise? People frown upon intimidation. I find it makes one look like a fool especially when not necessary. It’s about understanding the other person’s perspective and listening in order to make informed decisions. Such matters involve meetings and collaboration. Why do they not fire Kambwili??
Comment: Mwayumfwila.
And you have one silly BUFFOON Kambwili spewing utter nonsense to mines about licenses to secure his Roan constituency forgetting the message he is sending!!
Has lungu backed out of his much talked about trip Kenya?can someone even Amos clarify?
ANYTHING FROM PF IS A LIE. LUNGU IS A LIE, AND HE ASCENDED TO POWER THRU LIES. PF HAS DESTROYED OUR NATION IN A SPLIT OF A SECOND. LUNGU HAS SOLD OUR SOVEREIGN STATE. LUNGU SHOULD BE SEVERELY PUNISHED SOON OR LATER. LUNGU IS A SERIOUS CURSE TO ZAMBIA. GOD’S FAVOR IS NOT COVERING LUNGU IN HIS REIGN. PROBABLY LUNGU CONSULTS SANGOMAS IN HIS LIFE. LUNGU BELIEVES IN BLACK MAGIC.
If our debates were really serious about finding long-term solutions to create sustainable growth for our Country, we would have had ‘need for value addition’ feature very prominently throughout the discussion.
But instead, as can clearly be seen from most bloggers here, we are deeply ingrained in mining and selling copper and its by-products only. In fact we are so ingrained that we are now at the verge of deceiving ourselves that re-nationalisation is the solution for grow. Big mistake.
The real long-term solution is to beat China at its own game. i.e. Cottage industries and reverse engineering in copper related finished products etc. We already have an advantage over Chine because the raw material – Copper- is locally available, and is also next door in Congo DR.
Cont’d…If, to kick-starting the Chinese model of cottage industries, it means allowing a few smart Chinese families into our Country, then lets be practical and go get them!. Actually, the population demographics of China strongly suggest that they will be more than willing to come. By UN figures China has a population density of about 145 people per sq. km. Now, compare it with Zambia with a population of 20 people per sq.km. Plenty of unused space.