Rating agency Standard and Poor’s says the Zambian government’s financing position remains very tight, with access to external debt markets and available domestic capacity both limited.

And the agency has maintained the country’s ‘B/B’ credit rating with negative outlook.

It said the negative outlook reflects the downside risk that fiscal financing pressures could increase further in the face of high maturities over 2017, while economic growth momentum has weakened.

In its latest report on Zambia, S&P says it expects that fiscal deficits will remain wide over the forecast, in part because of high and increasing interest and other expenditures, but also as accrued arrears estimated at 9% of GDP are gradually cleared.

It however expects that an International Monetary Fund program, which should ease financing conditions and require the implementation of a firm fiscal consolidation plan, will be in place by the middle of 2017.

“We are therefore affirming our ‘B/B’ ratings on Zambia. The negative outlook reflects the downside risk that fiscal financing pressures will increase further in the face of high debt service over 2017 and weaker economic growth momentum,” it said in its analysis.

It said government revenues have increased only incrementally and the agency has revised its economic growth expectations downward.

“Domestic debt redemptions in 2017 are almost double that of 2016, at 1% of GDP, and Eurobond coupon payments are also estimated at just
over 1% of GDP. Offsetting these strains, we expect an International Monetary Fund (IMF) program to be in place by the middle of the year, bringing with it financing support and a firm policy anchor,” it said.

“If needed, we expect the government will meet maturities by diverting revenues earmarked for other purposes or, in extremis, by asking the central bank for an interim loan, although we note bridge loans are already close to their permitted maximum. The new government has stated that the clearance of arrears is a priority action as part of its “Zambia Plus” strategy for economic recovery.”

It says it expects that the IMF will require the estimated 9% of GDP of arrears
accrued over 2015 and 2016 to be cleared over the course of the program, and this will keep headline fiscal deficits wide over the forecast horizon.

It adds that it expects the underlying fiscal consolidation to act as a break on economic growth as public consumption reduces.

“Conversely, we expect that the recent climb in copper prices could be an impetus for growth, particularly after an IMF program is in place.

We view both as important for investor confidence, as the earning potential in mining operations becomes more tangible, and government policy over public finances firmer.”

It added, “As to government policy, we expect an IMF program to help deliver a decision on the final mining tax regime, which has been a key source of
uncertainty for a number of years and particularly since commodity prices
started to fall.”

It says the increase in copper prices could provide an important boost to government revenues and support foreign currency inflows into Zambia.

It however, the government’s fiscal position remains difficult with average interest rate on domestic debt issuance remains above 20% across all maturities.

“In terms of the consolidation path, we expect that capital expenditures, transfers, and subsidies (including to the Food Reserve Agency, which purchases corn from farmers) will be targets for cuts, despite social sensitivities surrounding them.”

“On the revenue side, we expect that changes to mining-related taxes are also likely to be finalized,” it said.

“The outlook is negative, reflecting the downside risk that fiscal financing pressures could increase further in the face of high maturities over 2017,
while economic growth momentum has weakened.”

It added, “We could lower the ratings over the next year if there are further material delays to plans to put public finances on a sustainable path, including
securing debt financing.”

“We could also lower the ratings if levels of investment, including FDI, remain low or worsen, increasing external financing needs and potentially compounding already weaker economic growth. We could affirm the ratings at their current levels if sustainable fiscal and economic policies are implemented efficiently, thereby leading to assured financing conditions and an acceleration of economic output.”

MUFULIRA residents have petitioned the council to pass a by-law authorising 10 percent of the total revenue collected from all mining activities to be allocated towards community development.

The residents have also petitioned the local authority to create a local mineral revenue sharing mechanism that will be managing and administering the 10 percent allocation.

Speaking on behalf of the 1,000 petitioners on Wednesday, representative Martin Kampamba said the allocation was expected to foster development in host mining communities.

Mr Kampamba said such communities had suffered negative effects such as water and air pollution, displacement and environmental degradation due to mining activities.

“Following a consultative meeting with stakeholders held on December 8, 2016, we agreed to petition our local authority to pass a by-law authorising 10 percent of revenue collected through property rates and annual business fees to be ploughed back to our communities for development,” he said.

Zambia’ s tourism industry has continued to attract worldwide brand hotels as French well-known Accor Hotels expresses interest in getting their brand into the country.

AccorHotels Senior Vice President and Head of Development for Africa and the Indian Ocean Mr. Philippe Baretaud paid a courtesy call on Zambia’s Ambassador to France Ambassador Humphrey Chibanda on Friday.

In the coming month AccorHotels will be undertaking a special visit to Zambia to meet with government officials and other strategic partners to forge the way forward.

Some of the investment projects of interest include the Hostels Board lodges and development of a five and three star hotels at Mulungushi International Conference Center.

In their bilateral meeting with the Zambian envoy, Mr. Baretaud said Zambia has come up as one of the strategic destination to expand the AccorHotels brand.

He said the decision by management to consider Zambia has been based on the fact that Zambia is one of the most politically stable country in Africa with positive economic prospects that the country continues to show.

He said Zambia has been on the company’s strategic expansion watch list for a while now and the time has come to bring the AccorHotels brand into the country for mutual benefit.

Mr. Baretaud said since setting up base in South Africa in 2016 the company has adopted a deliberate strategic plan to spread the Accor branded hotels across Africa and Zambia is one of the countries on top of the list.

In response, Ambassador Chibanda thanked Mr. Baretaud for taking the time to come and meet with him.

He said this indeed shows the commitment and passion the company has to bring the AccorHotels brand to Zambia.

Ambassador Chibanda briefed Mr. Baretaud that the government has adopted and started implementing policies aimed at diversifying the Zambian economy which for a long time has relied on mining.

He highlighted that government is now looking at other economic sectors such as Agriculture tourism and manufacturing.

The Ambassador said the decision by Accor Hotels to come to Zambia would not have come at a better time than now when the country has prioritized the tourism sector and looking at ensuring that the industry remains competitive.

He said one way of making the tourism industry competitive is by attracting internationally recognized brands such as Accor Hotels.

AccorHotels, formerly known as Accor S.A., is a French multinational hotel group, part of the CAC 40 index, operating in 95 countries around the globe.

Headquartered in Paris, France, the group owns, operates and franchises 4,100 hotels spanning in all continents of the world representing several brands, from budget and economy lodgings to five-star hotels.

The group started its operations in 1967, when the first Novotel hotel was opened in Lille Lesquin with some of its hotel brands such as Hotel F1, Ibis, Mercure, Novotel, Adagio, Mei Jue, Pullman, MGallery, Swissôtel, Sofitel.

In Africa, the group operates 111 hotels making up 19,675 rooms in 21 countries.

The group has more than 240,000 employees in Accor Hotels’ brand worldwide.

Zambia’s Finance Minister Honourable Felix Mutati has said the long-term answer to development of Africa in general and Zambia in particular is enhanced domestic resource mobilisation.

He said this during a meeting with the Commonwealth Development Corporation (CDC), the UK’s development finance arm that has expressed interest to invest in the Kalungwishi Hydro generation project. The project investment cost is estimated at US$690 million with an installed capacity of 247 MW.

In an exclusive interview after a meeting with CDC in London on Wednesday, Hon. Mutati said that aid dependence was not sustainable for Zambia and Africa in general. He stressed the significance of the complimentary role that investment plays in sustainable development.

“The key issue about the economic recovery in Zambia is that unless you get quality investments that contribute to the treasury through taxes, it is difficult to boost domestic revenues. We can get money from our cooperating partners such as DFID who are helping us with education, health and public finance, but the dependence on such support is necessary but not sustainable. You need to depend on yourself, and the future of Zambia and Africa in general is domestic resource mobilisation, which is going to be the long-term answer to development. For me it is the long term answer to recovery of the Zambian economy going forward, which will create jobs, create wealth and much more importantly, inclusive growth,” he said.

The Minister said that the answer to inclusive growth is investment such as that made by CDC in the agriculture sector, through Zambeef supporting out growers. He said that such investments could transform the economy and create inclusive growth.

“We are focusing on two sectors of Energy and Agriculture in line with the Seventh National Development. Last year, we suffered a 50 percent power deficit, which negatively impacted not only agriculture but also other major sectors such as industry and mining. Power is central to economic development and having answered to power then you have to answer to areas where you can generate and bring hope to the people, and agriculture becomes your number one choice because of the number of people that depend the sector,” he said.
And the Minister said that CDC investment in Zambia has created jobs and contributed to economic development in the country. He noted that CDC has been present in Zambia for over 50 years in Zambia through its investment in Chilanga Cement made in 1949 and remained involved in Chilanga Cement for a number of years and led the company to be the first business to be listed on the Lusaka Stock Exchange in 1995.
He said that apart from Chilanga Cement, CDC also invested in the Kariba Dam and last year invested $65 million in Zambeef. The investment will enable Zambeef to grow the business, in particular its cold chain food processing businesses as well as expanding its distribution and retailing platform within Zambia and adjoining markets. This will widen Zambian consumers’ access to Zambeef’s range of products.

“Recently CDC invested $65 million and what that has done is that it has provided the diversity in Zambeef, going into hatchery, therefore creating an opportunity of increasing the space for tax revenue collection. For me I see this as a cure for dealing with the disease called fiscal deficit, and is a key component for the recovery programme,” he said.
Mr. Mutati also said that CDC is considering investing in hydro generation and that the Group will reach out to its partners for possible co-financing some of the projects.
“On the Government side, we shall ensure that we facilitate by eliminating obstacles to the realization of the investment and will implement policies that support such investments,” he said.

He also said that CDC had agreed to come and hold an investment forum in Zambia in April, 2017 that will look at how it could make funds available, through the Commercial Banks, to support long term lending to SMEs and Medium sized companies and how it can support anchor investors such as Zambeef to expand their operations including out growers and how CDC can structure venture capital, to handle new investment ventures.

And CDC Chief Executive Officer Diana Noble said CDC was happy to work with Zambia and will continue partnering with the country because it was committed to economic development.
Earlier Hon. Mutati had a meeting with Hon. James Wharton, Minister of state for DFID, during which he said that DFID was a significant partner to Zambia which had supported the country in areas such as public finance management reforms, water and sanitation, health and social protection.

“We had a program with DFID which came to an end in December, so the purpose of the meeting was to agree the next round of discussions with DFID on another program. For us the programme should reflect the priorities in the recovery programme for Zambia mainly focusing on energy and agriculture as key pillars to turn the economy around” Mutati said. He also confirmed that the DFID Minister has agreed to meet in Lusaka in four weeks’ time at which the two countries will start discussions on construction of a new strategy for support that DFID will provide to Zambia.

The Minister was accompanied to DFID and CDC by: Mr. Mukuli Chikuba, Ministry of Finance Permanent Secretary (Economic Management and Finance), Zambia’s High Commissioner to the United Kingdom, His Excellency Mr. Muyeba Chikonde, officials from the Ministry of Finance and Zambia High Commission in London.