Casting the dice for the sixth time, Hakainde Hichilema—fondly referred to as HH—was last week sworn in as Zambia’s seventh president. A few days into the role, he is already making sweeping reforms in leadership with a new team of economic advisers reviewing Zambia’s tax regime, a newly-appointed cabinet and changing the top military and police officials.
For Zambians though, what they are keenly watching for is to see if the man who ran under the slogan, “Bally (rich father) will fix it” can indeed fix Zambia. During his years of trying for the presidency he was derided as “calculator boy,” because he’s a trained accountant whose campaigns have always been strong on the economy.
Hichilema has promised he can bring the country out of its $12.8 billion debt mess and bring growth of 10% per annum to the southern African nation within five years. The road ahead requires him to focus on some priority areas and will call for austerity measures that will affect the struggling population.
Getting Zambia out of its economic and debt crises
The youth who were a major component of his landslide victory against the incumbent Edgar Lungu were driven by unemployment, political disenchantment, and economic hardship. Dealing with larger economic issues will require austerity measures that will further squeeze a struggling population.
The key challenge that they will face is that the restructuring required by the IMF will likely be unpopular, including rolling back subsidies in electricity, petrol prices and reconfiguring the civil service wage bill.
Zambia’s economic challenges are massive. Last year, Zambia became the first African country to default on repayments to lenders. Growth contracted by 4.9% and inflation rose to 17.4% in 2020 partly due to the Covid-19 pandemic and the increasingly unsustainable national debt. But with international confidence in Hichilema’s presidency and the strengthening of the local Kwacha since his election, securing a debt restructuring plan with the IMF may be on the horizon. This however will not be a silver bullet for the challenges plaguing Zambians.
Despite the promise of a new dawn, fixing the southern African nation’s greater economy may see Hichilema and the United Party for National Development (UPND) make some unpopular decisions, according to Nicole Beardsworth, a politics lecturer at the University of Witwatersrand, South Africa.
“The key challenge that they will face is that the restructuring required by the IMF will likely be unpopular, including rolling back subsidies in electricity, petrol prices and reconfiguring the civil service wage bill.”
“The administration will need to find a way to ring-fence social spending, which declined year-on-year under the previous administration, and mitigate the negative consequences for the country’s poorest,” she says.
Reconfiguring Zambia’s relationship with mining companies
As the continent’s second largest producer of copper, Zambia could be in a fortuitous position as the world shifts to electric cars to reduce global carbon emissions. Electric vehicles use much more copper than fuel consuming cars which use combustion engines and this is expected to increase demand and production of the metal. While investment may increase with the rising global demand for copper, relations with mining investors from China, India, and the West may need to be reconfigured in Zambia’s favor.
The extractives industry accounts for more than 75% of the country’s export earnings and 10% of its GDP according to the Zambia Extractive Industries Transparency Initiative (EITI). However, after decades of haphazard changes, industry experts urge stability in the country’s mining tax regime in order to gain investor confidence. Since 2001, mining taxes have changed at least once every 18 months according to Zambia Chamber of Mines (ZCM.)
“Hichilema’s likely to offer more policy stability because he comes from a background of fiscal discipline, but the people have been saying we need to tax the mines more so Hichilema’s likely to do that because he has to put Zambia’s interests first. However he’ll do it with much more stability and consistency than what we’ve seen in his predecessor,” says Chelwa.
Facilitating local ownership in the mining sector
Across the Copperbelt, the political and economic heartland of the country, hundreds of artisanal miners, locally known as ‘jerabos,’ have occupied at least two open mine pits at Luanshya Copper Mines since June claiming they were granted access by a government official as part of a youth empowerment program. Jerabos’ occupation of various open mines has in the past disrupted various government deals with mining companies.
Under the previous administration, the government’s relationships with the jerabos were oftentimes mutually beneficial. Gangs of jerabos, who are known to use violence to stake their claims, were part of the patronage network designed to strengthen the PF’s grip on power in the east, as occasionally, the small-scale miners were granted access and licenses to disused mines, which analysts say, helped the Patriotic Front sustain political support in a key voter region. But with Lungu out of power, the relationship of convenience presents a challenge for Hichilema who wants to boost investor confidence and empower the people.
Hichilema has promised to “facilitate local ownership”, implying that artisanal miners will have to be licensed and formalized, but according to Grieve Chelwa, a Zambian economist with the New School of New York, this will not be an easy process.
“These are people who feel they have indigenous rights to the land and these are people who’ve found a source of livelihood at a time when there’s huge youth unemployment in the country. Formalizing them is a challenge because they must mine according to regulations and not occupy [the mines.]”
Balancing free markets with Zambian resource nationalism
Historically, resource nationalism has been the modus operandi of governments in an effort to ensure greater control and benefit from foreign mineral exploitation. In pursuit of socialist ideals and populism, Zambia’s founder, President Kenneth Kaunda nationalized the mines in the late 1960s and ‘70s by acquiring equity holding in a number of foreign-owned firms, but a global slump in oil prices created a ripple effect in the copper market and prices took a nosedive and remained low for decades.
For years Zambia battled deep economic recession, but with copper prices rebounding and power changing hands in 1991 and 2002, the country embarked on a privatization program which saw multinational companies buying up stakes, but it was not without controversy as companies challenged the late President Levy Mwanawasa over changing taxes.
Earlier this year, the government stirred controversy when it announced a full takeover of operations at Mopani Copper Mines. While details of the $1,5 billion purchase of the copper and cobalt exporting mine were sketchy, it seemed to allow Zambia more control over it’s resources, but it sank the country deeper into debt. Murkiness around the deal cut with the majority Swiss and Canadian shareholders caused unease over the country’s burgeoning debt.
Chelwa says, “HH has been criticized in the past for having a free market approach that favors private business and capitalist needs over public interest, but over the years there’s been a big change in HH. His campaign was focused on putting Zambians first so we can expect to see more of that in his presidency.”
There is cautious optimism for the new regime even though it is clear that some of the tough decisions that must be made will leave his voters disappointed. Only time will tell whether Bally—one of the country’s wealthiest millionaires—can ensure “no Zambian should go to bed hungry” as he vowed to a roaring stadium audience in his inaugural speech.
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