Zambians lost the opportunity to find out whether Michael Sata’s tenure would end with economic prosperity when he died three years into his five-year tenure. This subsequently brought up the need for a by-election, which is currently ongoing.

While the ruling Patriotic Front (PF) are campaigning to finish their five-year tenure and “finish all our developmental programs,” according to acting President Guy Scott, Zambians are looking at something bigger; they need someone who would address their rising debt and falling copper prices. They also need someone who would resolve tax issues between the government and the miners.

Tax Hike

Zambia is Africa’s second largest copper producer. The red metal accounts for about 10 percent of GDP and a quarter of government revenue, but a hike in mining royalties by the government spooked investors. The late president increased mining royalties from six percent to 20 percent, straining relations between miners and the government. Just a few years ago, he raised the royalties from 3 percent to 6 percent. Mining royalties are charged on miners’ gross revenue regardless of profitability.

Zambia's presidential frontrunner
Zambia’s presidential frontrunner

Some workers’ representatives are concerned that the tax reform may lead to the closure of mines. “It will be difficult for government to collect revenue from closed mines,” president of the Zambia Congress of Trade Unions, Chishimba Nkole told AFP.

Canadian-based miner, Barrick Gold Corp. last year announced plans to shut its Lumwana Copper Mine in Zambia due to increased royalty rate. “The introduction of this royalty has left us with no choice but to initiate the process of suspending operations at Lumwana,” a statement by Barrick co-president, Kelvin Dushnisky said. The company said the new regime would challenge the economic viability of the mine, which has been described a low-grade operation.

A dispute over VAT returns amounting to $600 million has also forced Swiss company, Glencore, to close down its Kabwe Zinc Mine. First Quantum Minerals has also put expansion projects on hold. With copper prices falling, a stable local mining industry is essential for Zambia, so as to ensure it reaps the full benefits when prices rebound.

One thing Zambians do not want now is a continued shutting down of mines, which could lead to loss of thousands of jobs. They are thinking about this as they cast their votes today.

Rising debts

Zambia’s foreign and domestic debts currently stands at a sum of $7.7 billion. Such amount is putting the country’s economy under pressure as higher interest rates begin to creep in. The ruling party has been condemned by the opposition for the government’s impulsive borrowing.

President of the Movement for Multiparty Democracy (MMD), Nevers Mumba is one of the Zambians to have criticised the government. He said the government was misusing the willingness of lenders to offer loans, which he said was due to Zambia’s prudence in the past. “The PF has shown dangerous appetite for borrowing. At the rate they are going, this government could borrow from everyone willing to lend,” he told local news outfit, Lusaka Times last April.  Threshold of domestic borrowing was earlier raised from K200 million ($30.5 million) to K13 billion ($2 billion).

Private Sector Development Association (PSDA) chairman Yusuf Dodia says the biggest challenge facing the next president is the country’s huge debt. He told Zambia’s Daily Mail that infrastructural development was key to the economic transformation of the country. He therefore urged whoever wins the election to ensure existing projects are completed and new one embarked on.

Vice President of the Economics Association of Zambia (EAZ), Robert Liebenthal also advised the next president to improve on the administration of revenue and get rid of waste.

Likely winner

The presidential candidate of the ruling party, Edgar Lungu, who is also the justice and defense minister stands a great chance of winning today’s election. Although his victory may not only be because Zambians think he can change the economic fortunes on the country, it will largely be because he received support from the late president. Showing the ability to address the very important economic issues will be an added advantage for the 58-year-old.

Lungu’s closest rival and the only serious rival is United Party for National Development (UPND) leader Hakainde Hichilema. He has been in the political scene of Zambia for over a decade, during which he contested for presidency thrice and lost. He however says he is not a career politician like Sata.

The business community can be considered firmly behind Hichilema, who owns the second largest ranch in the country and promised to reverse the controversial mining tax if he wins.

There are other nine candidates, but according to reports from Zambia, the biggest threat to Lungu’s victory is Hichilema.

The country’s general election holds next year. The winner of today’s by-election will therefore only serve out Sata’s remaining 18 months.

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