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Zambia

Sekondi Accra

President Michael Sata portrays himself as "a man of action" but his critics say he is nothing but a thug. Many Zambians see the 69-year-old as a man who gets things done, from his time as a minister under both of Zambia's former presidents - Kenneth Kaunda and Frederick Chiluba. His nickname (King Cobra) conjures up two views on him - ready to strike or slippery and dangerous. Some recall that when he was local government minister, the country's roads were clean and the councils worked properly. He was later moved to the health ministry, where he once more shook things up. But others associate him with political thuggery after his days as minister without portfolio, a position the man himself admits "was the ministry for the MMD [ruling party]". Be that as it may, the Zambia's economy is promising.

On the increase of real 6.6% GDP growth in 2010, Musokotwane projects growth of 6.4% in 2011. Consistently high copper prices throughout 2010 and no sign of a decrease in demand have raised production to its highest level in four decades, with output predicted at over 720,000 tons in 2010, bringing in export earnings of $4.6 billion dollars, up from $3.2 billion dollars in 2009. The goal now is for 1 million tons annually.

During a visit to Beijing, China in May 2010, former President Banda received assurances of $5 billion dollars in Chinese loans to mining companies, reinforcing China's centrality to the sector's future. China Nonferrous Metals Company (CNMC), which manages the Luanshya copper mine and Chambishi smelter, plans to invest $600 million dollars in 2010 and 2011. It was the CNMC that rescued Luanshya, purchasing an 85% stake for $50 million dollars in June 2009 after production was suspended following the post-crisis drop in demand.

There is still an ongoing debate over the decision in March 2009 to withdraw a 25% mining windfall tax that the government introduced during the price increase in 2008. However, there are no signs that it will be reintroduced. Criticisms have lingered that other tax changes in 2008-such as the increase in mineral royalty tax from 0.6% to 3%-did not go far enough. Even the opposition PF is calling on the government to restore more generous mining terms for foreign companies. As Copperbelt Province is a PF power center, any job losses caused by exiting investors are politically unpalatable. In October 2010, Sata was again quick to score political points when 12 coal miners were shot and injured by their Chinese manager, exacerbating anti-Chinese sentiment.

A huge maize harvest of 2.8 tons, Zambia's largest ever, should increase consumer demand. The government cites the $100 million dollars it spent on improving extension services and providing affordable fertilisers and seeds to farmers, a program that it intends to increase in 2011.

Zambians had to adjust to a 25.6% increase in electricity prices in April 2010 to help the state managed Zambia Electricity Supply Corporation (Zesco) fund new investments. Construction on the 600 megawatt (MW) Kafue Gorge Lower Hydropower Project between Zesco and China's Sinohydro is expected to begin in mid-2011, but it will not be completed until 2016.

Food/price inflation was at 2.8% in September 2010, down from 8% in 2009, but higher electricity and fuel prices have maintained inflationary pressures. However, the government is optimistic that it will reach its goal of 8% inflation by 2010-2011. The kwacha is likely to strengthen on the increase of copper prices, though this will be to the detriment of other exporters.

The country's financial sector has increased. Market capitalization of the Lusaka Stock Exchange rose by 23% in the first nine months of 2010. Zambia's banks have also managed to stabilize their non-performing loans, but high lending rates-at 26.8% in September 2010-remain prohibitive for smaller businesses.

Half the government's 2011 budget will be spent on infrastructure and the social sector. Education projects will receive 18.6% of the total and will target the recruitment of 5,000 new teachers. Renewed efforts are being made to improve rail links with Zambia's neighbors. Discussions have begun with Angola to construct a line passing through Northwestern Province to the Copperbelt.

Telecoms will receive increases in 2011. Plans by operators to invest in a fibre-optic system in 2011 will increase connectivity. In June 2010, the government sold 75% of underperforming telecoms parastatal Zamtel to Libyan firm LAP Green for $257 million dollars. Civil society and opposition groups questioned the role of an advisory firm that helped establish Zamtel's valuation, and the issue is still in abeyance. A flurry of job losses following the privatization also caused political fallout. Next on the privatization agenda are the state media. The government owns one TV station and two newspapers. It has been preoccupied with trying to convince African media groups to purchase one of its print editions.

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The U.S. Embassy in Zambia is at the eastern end of Kabulonga Road, Ibex Hill (P.O. Box 31617), Lusaka (tel: +260 (0) 211-357-000; fax +260 (0) 211-357-224).
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