ZAMBIA OCTOBER 2007 ECONOMIC ROUNDUP

UNCLAS SECTION 01 OF 02 LUSAKA 001246 SIPDIS DEPARTMENT FOR AF/S AND EB/CBA - DENNIS WINSTEAD COMMERCE FOR 4510/ITA/IEP/ANESA/OA SIPDIS E.O. 12958: N/A TAGS: ECON EINV BEXP EAIR ZA SUBJECT: ZAMBIA OCTOBER 2007 ECONOMIC ROUNDUP ¶1. SUMMARY -- MWANAWASA HEADS TRADE DELEGATION TO SEATTLE -- CRITICAL FUEL SHORTAGE HITS ZAMBIA -- DIAMOND PROSPECTING VENTURE DOES NOT PAN OUT -- TRADING LICENSING ACT AMENDED -- THE ZAMBIA DEVELOPMENT ACT 2006 UNDERGOES REVISION -- NORTHERN PROVINCIAL AIRPORT CONSTRUCTION ON CARDS -- GRZ SUBMITS DRAFT TENDER BILL -- ZAMBIA TO PARTICIPATE IN THE KATANGA MINING EXPO -------------- Mwanawasa heads trade delegation to Seattle -------------- ¶2. President Mwanawasa led a delegation of senior government officials and business leaders to Seattle after attending and addressing the 62nd United Nations General Assembly. He was in Seattle at the invitation of the Initiative for Global Development, a network of business leaders that promotes policies to end poverty. Mwanawasa also delivered a speech at the University of Washington, organized by the World Affairs Council. Noting Zambia's economic reforms, plentiful natural resources, and his government's fight against corruption, he appealed for additional U.S. investment in Zambia. The delegation also met with the Bill & Melinda Gates Foundation, PATH, Microsoft, Boeing, and Starbucks. -------------- Critical fuel shortage hits Zambia -------------- ¶3. Zambia experienced a severe fuel shortage in the first two weeks of October when its only oil refinery unexpectedly remained shut down for repairs. This was not the first time that Indeni Oil Refinery, a joint venture between the GRZ and the French-owned oil giant Total, experienced closures due to obsolete infrastructure and lax maintenance. Finance Minister Ng'andu Magande commented that the fuel shortage was "compounded by the refusal by an American bank to finance the GRZ's purchase of 60,000 tons of crude oil, because it came from Iran." According to press reports, President Mwanawasa intervened, securing funds from the Zambia-based Finance Bank. By month's end, the shortages have been resolved. -------------- Diamond prospecting venture does not pan out -------------- ¶4. Spirit of the River, a Canadian firm that had announced in January 2007 that it had discovered diamonds in Zambia's Western Province and would invest USD 3.5 million to develop diamond mining, allegedly has closed its offices after failing to settle debts with banks, local businesses, and residents. According to media reports, court bailiffs have seized the company's office equipment in the provincial capital, Mongu, and Spirit of the River has terminated its mining activities. -------------- Trading Licensing Act amended -------------- ¶5. The GRZ has amended the Trade and Licensing Act, following Parliament's recommendation to repeal the law. Trade Minister Felix Mutati said that the new Act will clarify the types of business that can be conducted by Zambians and foreigners and also prescribe the fees for each business entity. Comment: In recent years, GRZ officials often stated--without legal foundation--that only Zambians could participate in the retail sector. The amendment may impact Chinese nationals who run many of the small retail outlets in Kamwala, a lower-end commercial area in Lusaka. End comment. -------------- The Zambia Development Act undergoes revision -------------- ¶6. The GRZ will revise the Zambia Development Agency Act of 2006, in response to stakeholder concerns on such issues as the minimum investment amounts to qualify for investment licenses, incentives, and work permits. Comment: The revision of the ZDA Act should facilitate more small-scale investment, and help larger investors with skilled employment issues. The Act has been deemed vague and open to misinterpretation by government agencies, mostly notably the Immigration Department. The issuance of work permits has been cumbersome and a disincentive to serious investors. The revision will most likely be done in the first quarter of 2008. End comment. -------------- -------------- Northern provincial airport construction on cards -------------- -------------- LUSAKA 00001246 002 OF 002 ¶7. The GRZ has allocated K1.1 billion (approximately USD 250 million) for the construction of a modern terminal at Kasama Airport in Zambia's Northern Province. Built during the Second World War, Kasama Airport is in disrepair and is unsuitable for commercial flights. The construction of the Kasama terminal is part of the GRZ's "Visit Zambia Tourism Campaign." -------------- GRZ submits draft Tender Bill -------------- ¶8. The Zambia National Tender Board (ZNTB),a statutory body that regulates and controls public procurement, submitted a draft bill to Cabinet that will enhance its independence. The bill proposes that authority to appoint the organization's board members and Director General be removed from the President. ZNTB has also made recommendations on the composition of the Central Tender Committee, which requests tenders and awards contracts. The proposal--if accepted--could mean greater inclusion of the private sector and non-governmental institutions in tender decision-making. -------------- New rural financing programs launched -------------- ¶9. The GRZ launched a K542.2 billion (approximately USD 134 million) five-year revolving Irrigation Development Fund. The Fund will help local farmers increase their productivity using improved irrigation technologies and services. In a separate development, the International Fund for Agricultural Development (IFAD) launched the Rural Finance Program, a USD 13.8 million concessionary loan facility for entrepreneurs in rural areas where access to financial services is almost non-existent. Comment: Financing for irrigation is a big improvement on the standard GRZ support for agriculture, which has traditionally involved provision of seeds and fertilizer. Also, financing for rural entrepreneurs will fill a critical market gap. End comment. -------------- --- Zambia to participate in the Katanga Mining Expo -------------- --- ¶10. The Zambia Development Agency, in conjunction with the USAID funded Market Access Trade and Enabling Policies (MATEP) program and the Mining Suppliers and Contractors Association, is organizing a trade mission to the Katanga Mining Expo, Congo DR, from November 26-28, 2007. The expo will offer opportunities to showcase Zambian mining and processing equipment, protective clothing, food products, and building materials. Over 50 Zambian companies have registered to participate in this mission. Comment: The mining sector in Katanga province poses a great opportunity for Zambian companies who are working with U.S.-based and foreign suppliers to grow in this market. Congo DR also offers Zambian suppliers a huge market for consumer goods. End comment. MARTINEZ