ZAMBIA JULY 2007 ECONOMIC ROUNDUP

UNCLAS SECTION 01 OF 02 LUSAKA 000894

SIPDIS

DEPARTMENT FOR AF/S (TREGER)
COMMERCE FOR ROBERT TELCHIN

SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV ZA
SUBJECT: ZAMBIA JULY 2007 ECONOMIC ROUNDUP


1) SUMMARY
-- Malaysian Delegation Makes Plans for Economic Park
-- GRZ Finalizing Uranium Mining Policy
-- U.S, UK Portfolio Investors Court Zambian Entrepreneurs
-- Zambia International Business Advisory Council Meets
-- Mining Giants Sign 5-Year Sale Agreement
-- High Court Requires ZAMEFA to Pay Withholding Tax
-- Zambia to Export Over 300,000 Tons of Maize
-- Lusaka Stock Exchange Offers High Returns
-- Annual Inflation Rate Increases

2) Malaysian Delegation Makes Plans for Economic Park

A Malaysian business delegation visited Lusaka on July 21, to follow
up on the proposed development of a Multi-Facility Economic Zone
(MFEZ). Commerce Minister Felix Mutati met with the investors and
representatives from the Japanese International Cooperation Agency
(JICA),which was responsible for advising the GRZ on the most
viable sectors for the MFEZ. Mutati reportedly told them that the
GRZ has acquired 200 hectares of land south of Lusaka for this
project. The MFEZs are an important part of the GRZ's strategy to
attract investment by offering incentives to large investors. This
will be the second MFEZ in Zambia after Chambishi, which Chinese
companies are establishing on the Copperbelt.




3) GRZ Finalizing Uranium Mining Policy

During President Mwanawasa's July 14 visit to Lumwana Copper Mine,
the company's Chief Executive Officer Craig Williams announced that
they had found significant deposits of uranium that Lumwana intends
to extract. At the same event, Minister of Mines and Mineral
Resources Kalombo Mwansa told reporters that preliminary exploration
works in Southern Province confirmed "huge deposits" of uranium in
Kariba. Mwansa went further to say that the Ministry is finalizing
a document on its uranium policy. "This document is currently with
the Ministry of Justice and after the process is over, people will
be invited to (apply for) licenses for the mining of uranium."

4) U.S, UK Portfolio Investors Court Zambian Entrepreneurs

On July 25, Pangaea/EMI Securities Limited and Renaissance Capital
Investments, in conjunction with the Ministry of Commerce, Trade and
Industry, hosted a group of leading institutional investors and
portfolio managers. The investors, who collectively manage over USD
1 trillion in U.S. and European funds, met with Zambian
entrepreneurs and medium-size companies to learn about market
challenges and opportunities.

5) Zambia International Business Advisory Council Meets

The Zambia International Business Advisory Council (ZIBAC),a
high-level advisory group of senior executives that advises the
President on foreign investment, held its fifth meeting in
Livingstone. ZIBAC Chairman, Lord Simon Cairns, criticized the GRZ
for not implementing previous commitments, such as liberalizing the
telecommunications sector. He also challenged the private sector
and foreign cooperating partners to make more effort to track GRZ
progress on private sector development and hold the Zambian
government accountable. President Mwanawasa had a more positive
view of developments to date, and differed with Cairns on the GRZ's
progress. However, he also announced that the International Voice
Gateway would remain under GRZ parastatal Zamtel's control and would
not be liberalized in the near future. In addition, the
presentation on the telecommunications sector at the conference was
cancelled. The President said that Government was working on
implementing several of the resolutions passed in the previous
meeting.

6) Mining Giants Sign 5-Year Sale Agreement

Lumwana Mine, Africa's largest new copper mine and Zambia's largest
investment, signed a five-year Concentrate and Purchase Agreement
with Mopani Copper Mines and Glencore International AG. According
to the agreement, Lumwana Mine will prove a minimum of 400,000 dry
metric tons of copper concentrates per year to Mopani, which it will
use for toll production at the Mufulira smelter, and 200,000 tons to
Glencore, which it intends to trade on the global market.

7) High Court Requires ZAMEFA to Pay Withholding Tax

A Zambian High Court has found Metal Fabricators of Zambia Limited
(ZAMEFA),a leading producer of copper cathodes, cables, and
telecommunications wires, liable for approximately USD 875,000 in
unpaid taxes. ZAMEFA, which was acquired by Phelps Dodge in 1996,
neglected to pay withholding tax to the Zambia Revenue Authority
(ZRA) on behalf of Phelps Dodge for technical assistance between

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1998 and 2004. In 2005, the ZRA took ZAMEFA to the Revenue Appeals
Tribunal to recover the money. When ZAMEFA lost the case, it
appealed to the High Court of Zambia, on the basis that there is a
Double Taxation Treaty between Zambia and the U.S. The High Court
dismissed the appeal after the ZRA showed that the Double Tax Treaty
of 1945 between the U.S. and the UK, which was extended to Zambia,
expired on January 1, 1975.

8) Zambia to Export Over 300,000 tons of Maize

The GRZ has granted export permits of 50,000 metric tons each to the
Millers Association of Zambia, Zambia National Farmers Union, Grain
Traders Association, and the Food Reserve Agency. According to
Agriculture and Co-operatives Minister Ben Kapita, the GRZ exported
234,000 metric tons of maize to the Democratic Republic of Congo,
South Africa, and Zimbabwe in 2006. He estimated that the 2007
export figures were likely to be higher. The GRZ introduced a ban
on maize exports in March 2005, following severe droughts in some
parts of Zambia. This ban has impacted negatively on farmers, who
are denied export markets, particularly in in surplus years like
this current season. Additionally, the restrictions (and GRZ
mandated maize prices),cause the maize prices to be artificially
low, making it difficult for farmers to earn profits or raise enough
money to plan for the subsequent farming seasons.

9) Lusaka Stock Exchange Offers High Returns

The Lusaka Stock Exchange (LuSe) index rose by 2.29 percent in July,
ending at 3,058.20 points. Over the past year, the index increased
by over 66 percent in kwacha terms and 78 percent in dollar terms.
The LuSe was formed in 1993 as part of the GRZ's economic reform
program aimed at developing financial and capital markets,
attracting foreign portfolio investment, and facilitating the
divestiture of Government ownership in parastatals. There are 17
companies trading on the LuSe. Since 1997, the index has increased
1,800 percent.

10) Annual Inflation Rate Increases

The Central Statistical Office (CSO) reported a monthly increase in
the Consumer Price Index. According to CSO, the inflation rate for
July has risen by 0.1 percent from June, to 11.2 percent. Compared
with the same period last year, the annual inflation rate has
increased by 2.5 percent from 8.7 percent in July 2006. CSO Acting
Director Elfrida Chulu attributed the recent increase (from June
2007) to a rise in the cost of food products. Although this marks a
slight increase, inflation rates are dramatically down from their
historic average of 32 percent, recorded in the last five years.
Zambia's Central Bank Governor, Dr. Caleb Fundanga, is optimistic
that the inflation rate will decline because of increased copper
production, coupled with high copper prices on the international
market, and an increase in food reserves.


MARTINEZ