Identifier
Created
Classification
Origin
08LUSAKA1004
2008-10-10 05:47:00
UNCLASSIFIED
Embassy Lusaka
Cable title:  

ZAMBIA SEPTEMBER 2008 ECONOMIC ROUNDUP

Tags:  ETRD EMIN ENRG EINV ECON ZA 
pdf how-to read a cable
VZCZCXRO2856
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLS #1004 2840547
ZNR UUUUU ZZH
P 100547Z OCT 08
FM AMEMBASSY LUSAKA
TO RUEHC/SECSTATE WASHDC PRIORITY 6354
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HQ USAFRICOM STUTTGART GE
UNCLAS LUSAKA 001004 

DEPARTMENT FOR AF/S AND EEB/CBA - DENNIS WINSTEAD
COMMERCE FOR 4510/ITA/IEP/ANESA/OA

SIPDIS

E.O. 12958: N/A
TAGS: ETRD EMIN ENRG EINV ECON ZA
SUBJECT: ZAMBIA SEPTEMBER 2008 ECONOMIC ROUNDUP

REF: LUSAKA 302

UNCLAS LUSAKA 001004

DEPARTMENT FOR AF/S AND EEB/CBA - DENNIS WINSTEAD
COMMERCE FOR 4510/ITA/IEP/ANESA/OA

SIPDIS

E.O. 12958: N/A
TAGS: ETRD EMIN ENRG EINV ECON ZA
SUBJECT: ZAMBIA SEPTEMBER 2008 ECONOMIC ROUNDUP

REF: LUSAKA 302


1. SUMMARY
-- Inflation Continues to Rise
-- Money Markets Face Challenges
-- Zambian Airways Liable for Unpaid Fees
-- GRZ Defers Payment Of Windfall Mining Tax
-- Zambia-Zimbabwe Power Interconnector Disconnected
-- International Gateway License Fee Goes Up

Inflation Continues to Rise


2. Year-on-year inflation in September rose to 14.2 percent, driven
by high fuel and food prices. According to new Zambian Government
(GRZ) estimates, the annual inflation rate for CY 2008 will be 12.7
percent. Although the GRZ will not meet its 2008 target of
single-digit inflation, a visiting delegation from the International
Monetary Fund thought it likely that the GRZ could contain inflation
to nine percent in 2009.

Money Markets Face Challenges


3. Trading in government bonds declined in September, with investors
under-subscribing in two mid-September treasury bill auctions.
Dwindling enthusiasm may be due in part to political uncertainty in
advance of the October 30 presidential by-election, particularly
given the popularity of opposition leader Michael Sata, who in the
past has made strong anti-investor statements. A stock broker told
Emboff that she anticipates renewed international portfolio
investment after the election. Zambia's high inflation rate may
also account for some of the decline, given that bond yields--at
14.85 and 16.49 percent on two- and five-year bonds
respectively--only provide for a modest (real) return.

Zambian Airways Liable for Unpaid Fees


4. Despite efforts by Minister of Finance to defer Zambian Airways'
debt payments to the National Airports Corporation Limited (NACL),
the Ministry of Communications and Transport determined that the
partly American-owned Zambian Airways should begin honoring this
debt immediately. Ministry of Transport officials argued that
Zambian Airways, which owes NACL USD 1.9 million in unpaid passenger
service charges, ground handling, aircraft landing, and parking
fees, should not receive preferential treatment. Until the debt is
liquidated, NACL is requiring Zambian Airways to pay its airport
fees on a daily (cash) basis.

GRZ Defers Payment of Windfall Mining Tax


5. The GRZ has deferred collection of the windfall mining tax as it
continues to assess the new taxation regime's impact on the mining
sector. Mining companies with development agreements (that prohibit
tax increases) are prepared to take legal action unless the dispute
can be resolved harmoniously. One mining executive told Emboff that
his company is making tax payments to an escrow account in the
interim. In September, the Zambia Chamber of Mines and other
stakeholders re-opened dialogue with the GRZ. Secretary to the
Treasury Evans Chibiliti told the Parliamentary Committee on
Estimates that the GRZ will continue to defer the windfall tax until
it concludes its discussions with mining sector representatives.

Zambia-Zimbabwe Power Interconnector Disconnected


6. Zambia's state-owned power company ZESCO disconnected from the
Southern African Power Pool in early September after several days of
power disruption that ZESCO officials attributed to "external
factors." With domestic power generation capacity (currently at
1200 MW, due to ongoing rehabilitation projects) below domestic
demand (estimated at 1500 MW),the utility company has increased its
load shedding in most parts of the country. This is the second time
this year that ZESCO has shut down its connection to Zimbabwe.

International Gateway License Fee Goes Up


7. Minister of Communications and Transport Dora Siliya told
parliamentarians that the GRZ increased its international
telecommunication gateway license fees (from USD 12 million to USD
19 million) for security reasons. Despite calls for liberalization,
telecom providers must continue to route their international calls
through the state-owned Zambia Telecommunications Limited (Zamtel).
The GRZ allegedly monitors all international calls made through
Zamtel. Private sector representatives have repeatedly emphasized
that Zambia's inefficient and expensive communications technology
services constrain foreign investment.

KOPLOVSKY