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Copper, Debt and Urbanization as Zambia votes
Article by Thuo TK
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Not long ago I drove from Lilongwe to Lusaka, a scenic drive of 728km. Right after the Mchinji/Mwami border between Malawi and Zambia is Chipata, the 5th city in Zambia. The others are Lusaka the capital, Ndola, Kitwe and Livingstone. Chipata looks busy with all the signs. From a well-marked double lane highway to modern shopping malls, South African brands, with significant vehicle and human traffic.
In Summary
However, this is what surprised me. From Chipata to Lusaka, a distance of 573km, except for a few collections of roadside shops, there is no major town. It was the same case as I drove north again from Lusaka to Nakonde on the Tanzanian border.
Zambia is highly urbanized with a rapidly growing rate of urbanization. As of 2010 national census showed 39% of Zambia’s population of 13 million living in urban areas, an increase of nearly 5% since 2000. Latest estimates indicate 44% of Zambia’s total population lived in urban areas and cities as of 2020.
Zambia’s rate of urbanization in the last 10 years.
Such a rate of urbanization is not a heartening reflection of economic status of an emerging country as Zambia. Rapid urbanization in any country around the globe brings with it a straining of resources in urban areas and inefficiencies in housing, public transportation, pollution and crime. Centralization of resources in urban areas deprives rural areas of development. In return more people relocate to cities.
Urbanization and Politics
Yohane Tembo in a 2014 essay puts it this way. “Expectations of the urban dwellers in Zambia are pretty high, and this has always been demonstrated in the pattern of voting, where the opposition parties scoop most of the urban votes while the ruling party thrives in rural Zambia. This is reflective of the low satisfaction levels which our citizens in town have had with the performance of any ruling party in recent years.”
I sought to draw a comparison between Zambia’s case of urbanization and its politics as it heads to general elections on 12 August 2021. While 16 candidates will be on the ballot for presidency, the race is between the incumbent Edgar Lungu of the Patriotic Front (PF) and his long time contender Hakainde Hichilema of the United Party for National Development (UPND). Both were candidates in the 2015 and 2016 presidential elections. The 2015 elections which were occasioned by the death of President Michael Sata saw Lungu defeat Hichilema with a very narrow margin of just 27,757 votes (1.68%). In 2016 Lungu won by another small margin 50.35% to 47.63%, just enough to avoid a re-run.
Campaign Situation
While I saw posters and banners in the streets, lively campaigning was missing as one would expect for a contested poll. The Electoral Commission of Zambia barred campaign rallies and roadshows in Lusaka due to rising cases of Covid-19 and limited door-to-door campaigns to groups of 3 people only.
The opposition has alleged intimidation by the government. Lungu’s main rival Hichilema has been detained a number of times since he declared his run for presidency. A fortnight ago the President deployed the military to help the police maintain law and order as political violence was reported in various locations.
To quote Al Jazeera “pockets of violence have been reported in the Zambian capital, Lusaka, as well as northern, southern and Muchinga provinces where supporters of the governing Patriotic Front (PF) and the opposition United Party for National Development (UPND) have clashed using machetes, axes, slashers, catapults and other objects.”
The two major candidates out of 16 challengers
Presidential Candidate
Running mate
Political Party
Edgar Lungu
Nkandu Luo
Patriotic Front
Hakainde Hichilema
Mutale Nalumango
United Party for National Development
The current scenario is a copy-paste of the 2016 elections in which PF and UPND parties counter-accused each other of rousing violence and tension in the country. The then UPND vice president Geoffrey Bwalya Mwamba and other party officials were at one point arrested allegedly for planning to start a private militia. Traditionally however, Zambians have generally voted peacefully and this will not change.
Issues at Hand
Poverty, inequality, rising foreign debt, corruption and economic missteps are major challenges that have defined this contest.
Staggering Foreign Debt
Foreign debt is a major concern to Zambia’s economy. It was deemed unsustainable before pre-pandemic, with the treasury missing a coupon payment on a $3-billion-dollar commercial bond in November 2020 which put the country officially into default. To Chinese entities Zambia owes around $3 billion and has been accused of a lack of debt transparency.
Debt-to-GDP ratios, a measure of how much a country is indebted in relation to its production (Gross Domestic Product), is to the north of 100%. Worrying.
The commitments arising from debt and interest repayments mean national spending on health, education, infrastructure is reduced. Citizens have been the first to pay the price of poor fiscal policies with a weakened Kwacha, the Zambia currency and rising food inflation.
Of the four countries I drove through, Zambia, Tanzania, Malawi, Kenya, Zambia surprised me as an outlier with poor major roads. From the border with Malawi on the Great East Road it’s a smooth drive. However, half of it from Luangwa to Lusaka chokes with portholes. The busy Great North Road that links the landlocked country to Dar es Salaam sea port is in tatters in several sections from Pensulo to Tanzania border, a distance of 553km. Despite the ongoing construction in some zones, this is a critical import and export corridor that should have received attention earlier.
Debt-to-GDP ratios of sample DSSI countries with sovereign bonds
The Debt Service Suspension Initiative (DSSI) means that creditors are suspending debt service payments from the poorest countries that request the suspension for a limited period.
Mining Reforms
Zambia is the 7th largest producer of copper with 800,000mt of output per year and 900,000mt forecasted for 2021. It’s a country highly dependent on mining, with the industry contributing about 10% to its GDP. In 2019, the mining sector accounted for 28% of the government’s revenues and 77% of export earnings. Of these, copper accounted for over 90%, according to the Extractive Industries Transparency Initiative’s Zambia EITI Report 2019.
This high dependency has its disadvantages especially with oscillation global prices of copper. For instance, low prices from 2015 saw a crippling of Zambia towns and start of massive borrowing. With the high rate of urbanization mentioned above, that means profound effects for nearly half of the population. It’s also telling that the country’s debt-to-GDP ratio was less than 50% then and has doubled in just 5 years.
In recent times copper prices have risen on a record high – doubled – which has issued another problem around taxation and nationalization. Royalties are based on a sliding scale which royalties rise as commodity prices increase and drop as prices fall. The minimum royalties rate is 5.5% for $4,500/mt or less and maximum is 10% when prices rise to $9,000/mt or higher. In recent months, the prices have climbed to above $10,000/mt.
With the new mining tax regime that came into effect in January 2019, mining royalties are not counted as an expense. With an additional corporate income tax of 30% mining companies have raised a concern of double taxation which President Lungu promised to look into but is yet to.
Increased revenues from copper are a cushion to Zambia in the light of debt default and the lack of financial support from the International Monetary Fund. However, an unstable tax regime is not attractive to investors. Glencore, a major mining company with investments in the neighbouring Democratic Republic of Congo, Africa’s largest producer of copper, completed an exit from Zambia this year. There have been market uncertainties and fears of resource nationalism after the 2019 state seizure of the Konkola Copper Mines.
On the one hand, a rise in copper prices is seen as a boost to government revenue and creating an appetite for nationalization which some contend is good for Zambia. On the other hand, with an inconsistent tax regime, the risk on the country’s reputation in the light of foreign investors is glaring. Over-dependence on copper means a strained economy which has exposed this highly urbanized country to serious financial difficulties.
Threats to election credibility
Slightly over 12 months to this year’s polls, the Electoral Commission of Zambia announced that it was going to scrap the existing register and conduct fresh voter registration, with a target of 9 million voters. The commission allocated 37 days for this exercise. Civil right groups and the opposition decried the brevity of the registration window as well as the timing. It was set for November-December 2020, during the rainy season.
The commission was sued in August 2020 but a year later the case if yet to be determined, its urgency notwithstanding. While the commission gave in to calls to extend the registration exercise, which had fallen short of the target by 2 million voters, other serious allegations came out.
Concerns were raised that the exercise was crooked to capture a higher number of voters in areas considered ruling party strongholds. The Eastern region for instance, which is the birthplace of President Lungu registered more voters as compared to the old registers, while opposition support regions of Southern, Western and North-Western Zambia now has fewer voters.
The opposition strongly claims the new registered is a strategic way for the president to remain in power by excluding some voters, which serious casts doubts of having a free and fair general election.
In addition, the deployment of the military, ostensibly to ensure calm during elections is seen by many as counterproductive to voter turn-out. It is to be remembered that the Zambian Air Force was tasked with distributing ballots across the country in the 2016 polls, which also raised concerns by the opposition.
As I drove around Lusaka, I admired the new highways and underpass that have come up since I was last there 10 years ago. The city looked more modern and clean though quiet as the government had ordered closure of schools and restaurants following a spike in Covid-19 infections. Asking around about elections, I got varied responses on who the likely winner was. To some Hichilema was a clear cut winner and to others Lungu deserved re-election. Still as is expected, there are those who feel it’s uncertain until votes are held. They may be right not to call it early as the two candidates have nearly equally shared the vote in the elections they have come head to head. We wait.
Dr. Yohane Tembo on rapid urbanization in Zambia: https://www.grin.com/document/284524
Al Jazeera on Zambia elections: https://www.aljazeera.com/news/2021/8/1/zambia-deploys-army-to-curb-violence-ahead-of-elections
Statistical on rate of urbanization in Zambia: https://www.statista.com/statistics/455963/urbanization-in-zambia/
Reuters on debt-GDP ratios data: An election, a mine deal and China loom over Zambia’s IMF talks | Reuters