ZAMBIA NOVEMBER 2007 ECONOMIC ROUNDUP

UNCLAS SECTION 01 OF 02 LUSAKA 001318

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 ETRD EAIR ECIN ZA
SUBJECT: ZAMBIA NOVEMBER 2007 ECONOMIC ROUNDUP



1. SUMMARY
-- ZAMBIAN AIRWAYS SUSPENDS FLIGHT SERVICES TO HARARE
-- ANNUAL INFLATION RATE FALLS IN NOVEMBER
-- LUSAKA INTERNATIONAL AIRPORT IN NEED OF NEW RADAR CONTROL SYSTEM
-- KARIBA NORTH BANK EXTENSION PROJECT TAKES OFF
-- SOUTH KOREAN MINERALS COMPANY ENTERS MARKET
-- COMESA TRADE MINISTERS MEET IN LUSAKA

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Zambian Airways suspends flight services to Harare
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2. Zambian Airways suspended its flights to Harare, effective
December 1, due to high fuel prices and currency volatility in
Zimbabwe. Air Zimbabwe will continue to operate its daily flights
between the two cities, although some Zambians express concern about
flying on the airline, questioning whether it is adequately
addressing safety issues, given the country's economic difficulties.
Travel to Harare is also possible on South African Airways (via
Johannesburg) or by road (a six-hour journey).

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Annual inflation rate falls in November
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3. According to the Central Statistical Office's (CSO's) Consumer
Price Index, Zambia's year-on-year inflation rate for November to be
8.7 percent. This marks a slight decline from the October
year-on-year rate of 9.0 percent. The CSO Acting Director
attributed the inflation rate change to declining food prices.

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Lusaka Airport in need of new radar system
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4. The National Airport Corporation has requested K8.2 billion
(approximately USD two million) to rehabilitate and upgrade its
radar system or K96 billion (approximately USD 24 million) to
replace it. Currently, air traffic controllers at all designated
international airports in Zambia use the Procedural Air Traffic
Control system to manage traffic in the Zambian air space. Lusaka
Airport's air traffic control radar system, a donation from the
Italian Government in 1995, has never been operational because it
was struck by lightening shortly after its installation.

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Kariba North Bank power project takes off
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5. ZESCO Limited and Synohydro Corporation of China signed a USD 243
million engineering, procurement, and construction contract to
expand the Kariba North Bank power station. The Export Import
Bank of China will finance 85 percent of the total project cost,
which is expected to be completed by 2011. The power station's
output will increase from its current capacity of 600 mega watts
(MW) to 720 MW. ZESCO will also create an underground 360MW
capacity plant adjacent to the existing facility, increasing the
capacity to 1080 MW. Zambia's current total power generation is
1,640 mega watts, which is inadequate in the face of new mining
projects and increased demand by commercial farmers. ZESCO has
resorted to load shading, especially with domestic consumers, in
order to meet increased commercial demand.

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South Korean minerals company enters market
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6. Zamkor, a Zambian mining prospecting company, signed an agreement
with the Korean Government owned Korean Resource Corporation (KORES)
to explore for copper and uranium deposits in Mufumbwe district in
Northwestern Province. The Chief Executive Officer of Hetro Mining
Company, which previously held the mining concession for Mufumbwe
district, has cried foul. He alleges that the Ministry of Mines and
Mineral Development cancelled Hetro's mining license in order to
benefit Zamkor's owners, which include a Mufumbwe chief as well as a
GRZ deputy minister.

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COMESA Trade Ministers meet in Lusaka
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7. COMESA trade ministers met in Lusaka on November 26-27 to discus
issues related to the bloc's economic integration goals. The
ministers also reaffirmed their commitment to harmonizing their
agenda with other regional economic communities, particularly SADC
and the EAC (East African Community). The organization appears to
be on track to launch its Customs Union in December 2008. COMESA
Secretary General Erastus Mwencha announced that his contract will

SIPDIS
end in June 2008 after a successful 25 years career with COMESA.

LUSAKA 00001318 002 OF 002


According to COMESA officials, his replacement will be named at the
COMESA Summit in Harare in May 2008. It is widely expected to be
his deputy, Zimbabwean national Sindiso Ngwenya.

MARTINEZ