Zambia Sees Glimmer of Hope as Copper Rebounds

DAKAR – MINISTER of Finance and National Planning, Situmbeko Musokotwane, said he sees a “glimmer of hope” for Africa’s largest copper producer as prices for the metal improves, prompting companies to re-open mines.

The resumption of production at Luanshya Copper Mines and continued output at Mopani Copper Mines Plc was a “positive indicator,” Musokotwane said last week in an interview in Dakar, Senegal, where he was attending the African Development Bank’s annual meeting.

Copper has gained 42 per cent in London this year, after plunging 64 per cent in the second half of 2008.

Copper makes up two-thirds of Zambia’s exports and the slump in prices slashed fiscal revenue and forced the government to seek more than US$200 million in emergency loans from the International Monetary Fund to boost foreign currency reserves.

“There are glimmers of hope,” Dr Musokotwane said. “With these mines resuming production, we can maintain production. Yes, growth won’t be as high as last year, but we are not talking about stagnation.” 
The government may not meet a five per cent economic growth target for the year, he added.

China Non-Ferrous Metals Mining Africa Corporation agreed this month to invest US$400 million in Luanshya to restart and expand operations, the minister said.

Mopani Copper Mines, which is majority-owned by Glencore International AG, said on April 29 that it was dropping plans to halt output at its Nkana and Mufulira operations. 
Copper traded as high as US$4,465 a metric tonne in London last week.

Zambia will probably earn only half of the US$140 million in mining taxes it estimated last year it would receive, Dr Musokotwane said. That will push the fiscal deficit to 1.8 per cent of gross domestic product, compared with 1.2 per cent in 2008, he added.

The IMF on May 1 agreed to loan Zambia an extra US$256.4 million over the next three years to boost foreign exchange reserves, with US$160.1 million to be disbursed immediately.

“It was front-loaded,” Dr Musokotwane said. 
“That will help to calm the financial markets. It is going to help improve the reserve position of the central bank, but it also gives them room to borrow more from the domestic market.”

Zambia will also seek funds from the World Bank, the African Development Bank, commercial lenders and private companies to help pay for the construction of roads, power networks and water facilities in agricultural areas, Dr Musokotwane said.

“We see this crisis as an opportunity to deal with the issue of diversifying our economy,” the minister said.

“We want to focus a lot on infrastructure. We need access roads, we need to take power there, to develop water resources so that these natural resources can be harnessed.” BLOOMBERG