HEAVY METAL
The free fall in copper prices in the last several years left a significant impact on the Zambian economy, and as the market recovers, experts are urging the country not to abandon its diversification program.
Zambia flourished in the commodity boom of 2004-2011, with the economy reaping the benefits and growing an average of 7% YoY. Copper exports are Zambia's number one source of foreign exchange, and as receipts reduced starting from 2011, the local currency slipped into depression, which in turn increased inflation because the Zambian CPI features a large proportion of imported goods. The global surplus of copper, compounded with the difficulties related to production in Zambia, meant Zambian mines have been unable to match their counterparts in other parts of the world in providing cheaper copper. Furthermore, Zambia has been suffering from its own supply problems, as the Honorable Minister of Energy David Mabumba told TBY: “Between early 2015 and up to October 2016, Zambia's rainfall pattern was poor, and with low water levels in many of our hydro plants, generation capacity—of which 95% comes from water sources—fell almost 50%.” Or, as resident Director of Maamba Collieries, Ashwin Devineni, put it: “Mining companies in Zambia are not getting their due share of energy owing to the severe power deficit.” The global surplus then, compounded with the difficulties related to production in Zambia, meant Zambian mines have been unable to match their counterparts in other parts of the world in providing cheaper and cheaper copper.
In addition, high interest rates limit the amount of capital that can be borrowed by firms such as logistics and transportation companies, which deal directly and indirectly with the mining industry, looking to mitigate a forced downsizing of their operations.
However, since late 2016, there has been somewhat of a reversal of fortunes for commodity markets, particularly the copper industry. In 4Q2016, global copper prices jumped 10%, reaching USD6,101 a ton by 1Q2017. The current uptick in prices has much to do with recent events tipping the scales of supply and demand. The first of these is increased manufacturing activity in China. The official China manufacturing Purchasing Managers' Index (PMI) from late 2016 came in at 51.2, nudging over the halfway mark to indicate expansionary activity, as opposed to contraction. This was the fastest rate of improvement since March 2011, and was great news for copper sales. A second important factor is the possibility of high demand in the US following Donald Trump's promise to pump a significant amount into funding infrastructure projects. Economists in Zambia are keenly tracing the so-called “Trump effect” on copper prices, claiming increased spends on structural projects, as well as the growing likelihood of another war on ISIS, should keep prices up well into the year.
Herryman Moono, the National Secretary of the Economics Association of Zambia (EAZ), explained, “The key message for a country like Zambia is that there is a need to diversify the economy if we are to be insulated from copper price volatility. In addition to this, it is important to make proper use of revenues from copper during periods of copper booms by setting up a stabilization fund.” Such a mineral stabilization fund, like the one established by the Chilean government in 2007, was advocated by the EAZ late 2016 as a way of protecting the country from further fluctuations in the copper price.
It was not until the slump that diversification was placed back on the agenda with any serious momentum. In his inauguration speech on September 13, 2016, HE President Lungu stressed the need for Zambia to diversify away from copper into agriculture, manufacturing, and tourism, calling for the public sector to improve policy relating to these areas, and for the private sector to seize opportunities as they were made available.
As the mining community begins to celebrate the bright outlook at the beginning of 2017, others are advocating for caution. There is the real danger that Zambia will make hay while the sun shines and forget about all its wet-weather contingency plans. Indeed, if these ups and downs in the copper price have taught us anything, it is that where copper prices are concerned, the only thing that we can be certain of is uncertainty.

TABLE OF CONTENTS
Year In Review
What A Year
Zambia has long been a bastion of stability in Southern Africa, and while its economy has been rocked in recent years by the falling value of copper prices, a devaluating kwacha, and high inflation, through the Economic Recovery Program the government has bold ambitions to right the ship.
read articleReview
Convoke, Confound & Collect
Squeezed between a rock and a rather hard place by the slowdown in Chinese demand for copper, by far Zambia's biggest export and government-revenue generator, President Lungu has been forced to get creative in his country's alliances to broaden revenue streams and lessen its dependence on the vagaries of one foreign market.
read articleGuest Speaker
Dr. Stergomena L. Tax, Executive Secretary, Southern African Development Community (SADC)
TBY talks to Dr. Stergomena L. Tax, Executive Secretary of the Southern African Development Community (SADC), on regional economic development, boosting pan-continental free trade agreements, and improving security through mutual development.
read articleInterview
Susan Sikaneta, Ambassador, Zambia to Ethiopia & Permanent Representative to the African Union and Economic Commission for Africa
TBY talks to Susan Sikaneta, Ambassador of Zambia to Ethiopia & Permanent Representative to the African Union and Economic Commission for Africa, on championing peace across the continent, advancing women's rights, and promoting Pan-Africanism.
read articleInterview
Sebastian C. Kopulande, CEO, Zambian International Trade & Investment Centre (ZITIC)
TBY talks to Sebastian C. Kopulande, CEO of Zambian International Trade & Investment Centre (ZITIC), on taming austerity, stimulating sustainable growth, and creating the framework to support entrepreneurship
read articleFocus: Zambia Plus
Adding it All Up
On October 20, 2016, at the 2017 Budget Address, Finance Minister Felix Mutati launched the government's economic recovery program, christened "Zambia Plus." The program is designed to spur domestic productivity, through strengthening ties and collaborating with external donors and developers.
read articleReview: Banking
Macroeconomics Rule the Roost
In its ongoing efforts to diversify away from one principal commodity, copper, the government fosters the development, standardization, and efficacy of the private sector. In doing so the systematic support of the financial universe, especially banks, is vital, as is the goal of financial inclusion.
read articleFocus: SME Growth
IMF support program
An IMF support program stands to provide Zambia with some much-needed discipline on its expenditure and operational efficiencies; however, many caution the need for Zambia to determine what it wants to achieve and how the program will benefit the country.
read articleInterview
Christabel M. Banda, Executive Director, Insurers Association of Zambia (IAZ)
TBY talks to Christabel M. Banda, Executive Director of Insurers Association of Zambia (IAZ), on the evolution of the local insurance landscape, raising awareness, and tackling challenges in the sector.
read articleFocus: Solar
Sunny Side Up
As power demand continues to rise and power production continues to fall behind, it's the same old story for Zambia, still wrestling with an ongoing energy crisis. Public- and private-sector drives are seeking to mitigate this deficit by activating the country's solar industry.
read articleInterview
Margaret K. Chalwe-Mudenda, Director General, Zambia Information and Communications Technology Authority (ZICTA)
TBY talks to Margaret K. Chalwe-Mudenda, Director General of Zambia Information and Communications Technology Authority (ZICTA), on new projects, the ZNDC, and expectations for the year ahead.
read articleInterview
Hon. Dora Siliya, Minister, Agriculture
TBY talks to Hon. Dora Siliya, Minister of Agriculture, on the investments being made in agriculture to enable agricultural households, diversifying Zambia's basket of produce, and making international markets more accessible for local producers.
read articleInterview
Hon. Charles R. Banda, Minister, Tourism and Arts
TBY talks to Hon. Charles R. Banda, Minister of Tourism and Arts, on the wealth of tourism destinations within Zambia, efforts to bring more visitors to the country, and what the Tourism Development Fund will contribute to developments.
read article