OCTOBER ECONOMIC ROUNDUP

UNCLAS LUSAKA 000799 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: OCTOBER ECONOMIC ROUNDUP REF: LUSAKA 529 ¶1. SUMMARY -- October Inflation Rate Continues To Decline -- Eight Firms Interested in Gas Fields In Zambia -- China's Chambishi Copper Smelter Commissioned -- Acute Fuel Shortages Disrupt production -- GRZ Announces Sale Of Zamtel Shares October Inflation Rate Continues To Decline ¶1. (U) The year-on-year inflation rate slowed to 12.4 percent in October, down from 13.1 percent in September. The Central Statistical Office (CSO) attributed the decline to price reductions in some food products. The CSO indicated that preliminary estimates of real GDP shows that the country's economy is expected to grow by 6.3 percent by year end due to expected growth in agriculture, mining and construction industries. (Note: An IMF team that recently concluded its visit here projected 5.3 percent GDP Growth in 2009.) In value terms, real GDP is expected to be K4 trillion in 2009 compared to K3.8 trillion in 2008 while in nominal terms, GDP is expected to increase to k64 trillion from K55 trillion in ¶2008. Eight Firms Interested in Gas Fields In Zambia ¶2. (U) In June 2009, the GRZ invited bids from companies for oil and gas exploration in 23 demarcated oil blocks in Northwestern, Western and Eastern Provinces. The original deadline of August 7 was extended to November 6, 2009 to allow the widest possible participation by bidders. The Ministry of Mines and Metals unsealed the bids on November 6 in the presence of the Zambia Public Procurement Authority and representatives from bidding companies. Eight firms submitted bids to explore for gas in 14 of the 23 blocks. Zambian firms that submitted bids are Metrosol, Barotse Petroleum Company, Chat Milling Company and Majutu. Foreign bidders are GB Petroleum from the United Kingdom, Glint Energy from Texas, Petrodel Resources of Isle of Man in the United Kingdom and Exile Resources from Toronto. A technical team appointed by the Minister of Mines will review the bids and successful bidders will be announced at a later date. China's Chambishi Copper Smelter Commissioned ¶3. (U) President Rupiah Banda commissioned the multi-million dollar Chambishi Copper Smelter on October 19. The smelter will process about 150,000 tons of copper per year from the Lumwana, Chambishi, Chibuluma and Kansanshi mines, and will employ 600 people. President Banda stressed that the new smelter was an example of Government success in attracting direct foreign investment and creating jobs for its people. Smelter employees earn less than the K800,000 minimum (about USD 175) per month tax threshold so will not contribute income tax to the national government. Acute Fuel Shortages Disrupt Production ¶4. (U) Zambia was gripped by fuel shortages in October, paralyzing operations in heavy industries and transportation and inconveniencing motorists. The shortage was caused, in part, by the closure of the Indeni refinery for maintenance. Total International announced that it was pulling out of its 50-50 partnership in Indeni with the GRZ over disagreement on how to re-capitalize the refinery. The GRZ acquired Total's 50 percent stake for USD 5.5 million, and is looking for a strategic investor with whom to partner. ¶5. (U) Zambia consumes 1,700,000 liters of diesel and petrol per day. At full capacity, Indeni can process about 600,000 liters of fuel per day. The remaining demand is met by importing refined petrol and diesel through various suppliers. GRZ Announces Sale Of Zamtel Shares ¶6. (U) On October 21 The Zambia Development Agency (ZDA) named eight companies and consortia that were short-listed to bid for partial ownership of state-run Zambia Telecommunications Limited (Zamtel). The bidders are Altimo Holdings/Vimpelcom of Russia, Bharat Sanchar Nigam Limited of India, LAP Greencom Limited/LAP Green Networks of Libya, Mahanagar telecom, SGPS S.A. of Portugal, Telkom SA Limited of South Africa, Orascom Telecom Holdings S.A.E./Telecel Globe Limited of Egypt and UNITEL of Angola. ZDA received 30 expressions of interest in the prequalification process. Due diligence will end on December 23, at which time final bids for between 51 and 75 percent of Zamtel will be due. BOOTH