Bloomberg reports Zambia is shelving projects that aren’t almost complete and will renegotiate loans as it seeks to contain ballooning debt and entice the International Monetary Fund to restart talks on a support package.

The IMF has warned the southern African nation is at high risk of debt distress, while investors have grown skeptical about the amount of external loans the country claims it has incurred, saying it may be significantly more than the $9.3 billion announced.

Eurobonds of Zambia, Africa’s second-biggest copper producer, have been the worst performers this year.

“We did a three-week deep dive into our debt sustainability assessment, we know what debt we have and also we have shared the facts and figures with the IMF,” Zambian Finance Minister Margaret Mwanakatwe said in an interview in her office in the capital, Lusaka, on Thursday.

“We have reached a situation where we have given them everything that they require with the possibility of re-engaging.”

Zambia approached the multilateral lender in 2014 after a plunge in copper prices hit economic growth and curbed income from mining companies that are a major source of revenue.

The government is now seeking to roll back on large-scale infrastructure projects and debt that it continued to accrue.

Praying for IMF

Mwanakatwe, 56, said while the assessment wouldn’t be released to the public, it has given the government confidence in its debt numbers. It’s hopeful that this will be enough to appease the IMF and that it can be considered at the Washington-based lender’s September board meetings, she said.

“I am praying for a visit” by the IMF team, Mwanakatwe said in her first interview with an international news agency since being appointed in February. “I need the IMF, I need the IMF because they bring confidence to my private sector here, to my external investors.”

The government is battling to convince investors that it can control its debt.

While the IMF welcomed a plan released last month to postpone taking on new liabilities and cancel some loans that haven’t been disbursed, yields on Eurobonds due in July 2027 remain near 11 percent, having climbed 400 basis points this year.

They fell 14 basis points, the most since June 22, to 10.99 percent at 11:45 a.m. in Lusaka Friday.

The government should consider releasing the debt assessment to the public to show how confident it is in its numbers, and their expectations for IMF talks may be overly optimistic, according to Trevor Simumba, an independent business consultant.

“For me, I think it’s a pipe dream right now,” he said by phone. “There are a lot of hoops that the government has to go through in order to re-engage.”

The government won’t do anything that risks an economic recovery and will keep projects that boost expansion and offer social benefits, Mwanakatwe said.

Higher copper prices have helped support the economy, with growth rebounding to 4.1 percent last year, according to a government report.

Copper accounts for more than 70 percent of exports.

Mwanakatwe said the pace of debt accumulation will reduce significantly going forward and talks with Chinese investors to restructure the terms of loans are proceeding “quite well.”

Chinese Loans

“I’m looking at China, China has got about 30 percent of my debt stock,” Mwanakatwe said. “I want to ensure that anything that is commercial in terms of debt is renegotiated and probably re-profiled as well — make it longer, make it cheaper.”

Zambia also has about $3 billion in Eurobonds outstanding, with the first of $750 million due for repayment in 2022.

“I’m not worried about the interest payments,” she said. “When it comes to the actual debt itself, we intend to set aside a sinking fund so that we can be ready for 2022, 2024 and 2025 to 2027.”

The government is seeking to keep the budget deficit to less than 9 percent of gross domestic product this year, but is sticking to its longer term target of a fiscal shortfall of 3 percent. The gap was “currently” at 7.8 percent of GDP, Mwanakatwe said.

“I’m looking at the longer term, I would love to bring it down to 3 percent but certainly not this year or next year, that’s not going to be possible,” Mwanakatwe said. “If at the very least, at the very least I can stay where I am now, I think that would be an achievement. And, if I can come down, even better.”

Souce:Bloomberg

Zambia agreed to give First Quantum Minerals more time to complete its analysis of what the company might owe the Zambia Revenue Authority after it was slapped with a $7.9 billion tax bill.

The Vancouver-based company is challenging the ZRA, which claims First Quantum incorrectly declared imports for one of its two mines in Zambia.

“They are doing their own analysis and they have asked for a bit more time,” Finance Minister Margaret Mwanakatwe, 56, said in an interview with Bloomberg in her office in Lusaka, the capital, on Thursday.

“We have given them a month so that they can complete the analysis.”

Mrs. Mwanakatwe said the government is seeking to expand revenue collection as it moves to keep its budget deficit to gross domestic product ratio under 10 percent, while ensuring it maintains its obligations to businesses.

Copper accounts for more than 70 percent of exports in a nation that’s battling to contain ballooning external debt after spending on projects to boost infrastructure.

Higher copper prices have helped support the economy after a slump from 2014 curbed income, added to debt and prompted the government to ask for assistance from the International Monetary Fund.

On VAT refunds, while the Zambia Chamber of Mines says the government owes mining companies more than $350 million in value-added tax refunds, the revenue authority has warned it won’t pay out where liabilities are outstanding.

First Quantum estimated it is owed $368 million in unpaid VAT refunds.

First Quantum, which operates the Kansanshi and Kalumbila mines in the country, accounted for more than half of Zambia’s copper production last year and is the biggest individual taxpayer.

The company’s shares were 0.8 percent lower at 10:45 a.m. in Toronto on Thursday.

The Minister of Finance Mrs Margaret Mwanakatwe has said that Zambia’s current stock of domestic debt arrears (K12.7 billion as at end-December 2017) has adversely affected economic activity through elevated non-performing loans and subsequently contributed to reduce private sector financing.

Speaking about the action taken by the Government to address fiscal and debt challenges in Zambia, the Finance said that Government directed all Ministries to concentrate arrears dismantling to areas that will significantly reduce non-performing loans and release liquidity to the private sector.

The Minister further said that the Zambia Revenue Authority(ZRA) has also be directed to come-up with profiles to liquidate current and non-contentious VAT claims.

Mrs Mwanakatwe also said that debt contraction is guided mainly by the Loans and Guarantees (Authorization) Act Cap 366 of the Laws of Zambia. Cap 366 vests powers of debt contraction in the Minister of Finance. In this respect, other than the Minister of Finance, NO ONE HAS THE LEGAL POWERS TO CONTRACT LOANS and that the Ministry of Finance is expected to enforce commitment controls to curb accumulation of new arrears.

Further, under cap 349, the Minister of Finance is a corporate body, being an office that can be sued and thus on which loan obligations enforcement can be carried out.

Meanwhile, the Zambia Government and World Bank yesterday conferred to exchange notes on preparations for the 18th International Development Association [IDA] High-Level Mid-Term Review Meeting which will be hosted by the country in the tourist resort town of LIVINGSTONE, from 13th to 15th November, 2018.

The selection of Zambia as host for the meeting was announced in April, 2018, in Washington DC, United States of America, by World Bank Vice President AXEL VAN TROTSENBURG during an IDA 18 implementation update that was held on the sidelines of the IMF/World Bank Annual Meetings.

MINISTER OF FINANCE MARGARET MWANAKATWE has reiterated the Zambian Governments gratitude to the World Bank for the opportunity to host the high-level event, which will provide the nation with the prospect of showcasing the long history of IDA’s work in the country.

WORLD BANK COUNTRY MANAGER INA MARIE RUTHENBERG took the opportunity to commend the Zambian Government for taking steps to consolidate fiscal prudence.

During the April 2018 Washington meeting, United Kingdom Department for International Development Head of International Financial Institutions RICHARD TEUTEN backed Zambia and said the United Kingdom was happy that the country would become the first in the Southern African Region to host the High-Level IDA Mid-Term Review Meeting, and further added that, “the choice of Livingstone as the host city is a great one.”

And an additional compliment was expressed by JEAN-CLAUDE TCHATCHOUANG, Africa Group 2 Constituency Alternate Executive Director at the World Bank Group who said, April 2018, that Zambia deserved to host the High-Level event because of her good credentials in implementing World Bank programmes.

Zambia must strategically place itself for economic gains once electric cars are eventually introduced onto the African continent says Dr Albert Muchanga, the Commissioner for Trade and Industry at the African Union.

Dr Muchanga was speaking in response to a question from Zambia’s Ambassador to Germany Mr. Anthony Mukwita who sought to know what Zambia could gain as a land linked country, as continents economy continues to expand with technological advancements.

This is according to a statement issued by First Secretary Press Kellys Kaunda on the side-lines of a high-level German-Africa Business day hosted by the influential German Southern Africa Business Association also known as African Verein in Berlin.

“As a copper producing country on the continent,” Dr Muchanga said, “Zambia could gain a lot by upping its game as electric cars eventually reach Africa. Zambia could be a hub and its economy could grow and jobs would be created.”

The conference dubbed ‘German Africa Business Day, Engaging in Smart Africa’ has drawn high-level participants from the diplomatic corps and business leaders from around the world.

“The idea is to plan for the future today and see how German and Africa could further business in the future and I think Commissioner Muchanga’s bait must be closely followed by economic think tanks back in our country Zambia.

Commissioner Muchanga is one of the few top exports of Zambia to the Africa Union, having worked previously as a diplomat in the United Kingdom and other countries.

Latest reports on the electric car front state that, increasingly as more and more companies and governments move to reduce dependence on fossil fuels, electric car ranges will increase.

Evidence say there will be need to expand the battery life and output of these cars in order to both contend with and surpass gas-powered vehicles.

Reports state that leading vehicle manufacturing nations in Europe have decided to forego diesel and petrol engines for electric ones.

This will be the single biggest technological leap since the introduction of the internal combustion engine by Nikolaus Otto in 1876 according to the same report.

GAS BAN

Here in German and France for instance governments have voted to ban diesel and petrol-powered vehicles in 10 years according to one report.

To ensure this happens, Germany is offering subsidies valued at €1.2 billion to manufacturers on a first-come-first served basis.

In Norway, Consumers will receive a subsidy of €4,000 (Sh500,000) when buying an electric vehicle until 2020 Paris aims to outlaw diesel cars from the city starting from 2024.

While the sale of electric cars is still low, this is expected to change rapidly over the next decade.

Some countries like Norway have done extremely well with 32.5 per cent of cars on the road being either Battery Electric Vehicles (BEV) or Plug-In Hybrid Electric Vehicles (PHEV).

In December 2017, Norwegians put 42 per cent of the country’s electric vehicles on the road, thanks to charging infrastructure and tax incentives.

They intend to phase petrol and diesel vehicles by 2025.

The growing number of electric vehicles hitting roads is set to fuel a nine-fold increase in copper demand from the sector over the coming decade, according to an industry report on Tuesday.

Increasing demand

Electric or hybrid cars and buses are expected to reach 27 million by 2027 globally, up from 3 million this year, according to a report by consultancy IDTechEx, commissioned by the International Copper Association (ICA).

“Demand for electric vehicles is forecast to increase significantly over the next ten years as technology improves, the price gap with petrol cars is closed and more electric chargers are deployed,” IDTechEx Senior Technology Analyst Franco Gonzalez said in the report.

Good news for copper countries

“Our research predicts this increase will raise copper demand for electric cars and buses from 185,000 tonnes in 2017 to 1.74 million tonnes in 2027,” Gonzalez said.

Zambia could gain from this surge once value addition is executed according to Ambassador Mukwita.

Electric vehicles use a substantial amount of copper in their batteries and in the windings and copper rotors used in electric motors. A single car can have up to six kilometers of copper wiring, according to the ICA.

The global market for copper is around 23.9 million tonnes, according to the International Copper Study Group.

That suggests electric vehicles could account for about 6 percent of global copper demand in ten years, according to analyst estimates, rising from less than 1 percent this year.

Ambassador Mukwita said although hybrids may appear like a pipe dream when spoken to some Africans, “it is better to dream big than think small if we are to develop as a copper nation, even as diversification is discussed.