ECONOMIC ROUNDUP

UNCLAS SECTION 01 OF 02 LUSAKA 000338 DEPARTMENT FOR AF/S AND EEB/CBA - DENNIS WINSTEAD COMMERCE FOR 4510/ITA/IEP/ANESA/OA SIPDIS E.O. 12958: N/A TAGS: ENRG ETRD EMIN EINV ELAB ECON ZA SUBJECT: ECONOMIC ROUNDUP REF: A) LUSAKA 73 B) 08 LUSAKA 302 ¶1. SUMMARY -- Zambia's Inflation Rate Rises -- Chinese Mining Firm Takes Over Operations At Luanshya -- Zambian Airways Debt Position Before It Went Insolvent -- Counterfeit U.S. Dollars Hit the Zambian Market -- Mines Retrench More workers -- GRZ To Issue Oil Exploration Licenses -- Zambia Celebrates World Intellectual Property Day In Style Zambia's Inflation Rate Rises ¶2. Zambia's year-on-year inflation rate increased in April to 14.3 percent, marking a 1.2 percent increase from March. The Central Statistical Office attributed the rise to increases in food and transportation costs. Despite this increase, the year-on-year inflation rate is still below the 16.6 percent high that it reached in January. Chinese Mining Firm Takes Over Operations At Luanshya ¶3. The Government of Zambia (GRZ) awarded a tender to take over the Luanshya Copper Mine to China's Non-Ferrous Corporation Africa (NFC),a subsidiary of China Non-Ferrous Metals Corporation (CNMC), over bids from Luanshya Mineral Resources and the London-listed Vedanta Resources. The GRZ did not increase its 15 percent share of the mine, despite previous indications that it would do so at Luanshya and other mining operations. Luanshya Copper Mine's previous operators, Bein Stein Resources Group (BSG) and International Mineral Resources (IMR),put the mine under care and maintenance and walked away from their concession agreement in January, following declines in world metals prices. LCM produced 24,000 tons of copper and 2,100 tons of cobalt in 2007. NFC will also re-open the Baluba copper mine and return it to its pre-closure production levels. According to President Banda, who made the announcement of the award, NFC will start production at Luanshya by the close of May. Local suppliers expressed disappointment that a Chinese firm won the bid, as Chinese firms are less likely than other mining companies to contract local suppliers. Zambian Airways Debt Position Before It Went Insolvent ¶4. According to recent press reports, Zambian Airways (ZA) had been making progress toward resolving its outstanding liabilities prior to becoming insolvent earlier this year. Investrust Bank executive chairman Friday Ndhlovu told shareholders at an annual meeting that the bank had made a loan to ZA with numerous conditions. He noted that ZA had begun complying with these requirements, which included the resignation of chairman Mutembo Nchito, and had begun making repayments on schedule. Nchito confirmed this report to Emboff, noting that ZA's bankruptcy was due to the GRZ's unwillingness -- for political reasons -- to show flexibility regarding the repayment period of outstanding airport fees and taxes. Zambian authorities have begun seizing ZA assets, but have deregistered two leased Raytheon aircraft and are expected to deregister and release a third leased plane, a Boeing 737, in the immediate future. Counterfeit U.S. Dollars Hit the Zambian Market ¶5. Zambia Police raided a home in a Lusaka township and confiscated over USD 2.4 million in poor quality counterfeit 100 Dollar bills. A Zambian Army officer and his co-accused have since appeared in the Lusaka Magistrates Court on a charge of unlawful possession of counterfeit currency. A law enforcement advisor who participated in the raid told Emboffs that the accused had been using the counterfeit currency as bait in a series of scams against affluent Zambians. Mines Retrench More workers ¶6. Mineworkers Union of Zambia secretary general Mr. Oswell Munyenyembe confirmed to journalists that Mopani Copper Mines had retrenched 368 workers at Mufulira mine and another 568 workers at Nkana mine. He said Mopani did not expect to lay off additional workers and would maintain its current workforce of 7,500 permanent employees at its current level. Konkola Copper Mine (KCM) retrenched 1,300 employees out of a 12,200 person labor force. KCM stated that the move was in-line with management's effort to streamline the operations and increase productivity and production. GRZ To Issue Oil Exploration Licenses ¶7. The GRZ plans to invite international oil firms to submit bids for exploration along the borders of Angola. Under the new LUSAKA 00000338 002 OF 002 Petroleum Exploration and Production law, the GRZ will grant exploration licenses to international oil firms if their findings revealed large enough resources to sustain commercial production. The new law requires investors to begin production within two years of receiving production licenses. ¶8. The GRZ announced in October 2006 that laboratory tests confirmed a presence of oil and gas reserves in Chavuma and Zambezi districts of Northwestern province. A special cabinet committee headed by the minister of mines and mineral development was set up to draw up policies and guidelines to facilitate oil and gas exploration by private companies. Following the enactment of the Petroleum Exploration and Production Law in October 2008, government feels ready to invite the private sector through tender to explore and develop these resources. The Ministry of Mines confirms to have received inquiries from the USA, Russia, china and South Africa. A local petroleum engineer told Emboff, however, he doubted that Zambian reserves would prove to be commercially viable. Zambia Celebrates World Intellectual Property Day In Style ¶9. The GRZ and other stakeholders destroyed pirated and counterfeit goods worth K52 billion (approx. USD 9.1 million) in celebrations to mark World Intellectual Property Day on April 26. Minister of Information and Broadcasting Services Ronnie Shikapwasha destroyed the pirated goods using a steamroller. The minister announced that government was working on modalities for introducing holograms on audio and video products sold in Zambia to help law enforcement officers and consumers more easily distinguish between original and pirated media products. BOOTH