Copper accounts for over 70% of Zambian exports. This means that copper prices directly affect the country’s currency and inflation.
When world copper prices fell during Lungu’s term, 15,000 mineworkers lost their jobs. This sparked violent protests, in which workers blamed Lungu for failing to protect them. This was a factor in Lungu’s poor results in the Copperbelt.
Hichilema ran his campaign on promises of slowing down inflation, which has hit record highs above 25%. Since January last year, the kwacha has fallen by 40%.
The crisis in the mines has also been worsened by low tax payments from big mining companies.
Even when copper prices peaked in the early 2010s, Zambia received little from the mines. Lungu tried to fix this by raising mining royalties, but this worked against him as large mining investors protested by holding off on new investment and threatening to shut down operations.
This February, under pressure from miners, Lungu approved a lower mining royalty scheme, halving royalty rates for open-pit mines. But relations between Lungu and miners were already damaged, beyond repair.
Hichilema pledged to mend ties with the big mining investors, winning himself more investor support.
Zambia’s state mining investment arm ZCCM-IH agreed in January to take on US$1.5 billion in debt in exchange for full control of Mopani Copper Mines. This was because Glencore, the company that owned the mine, had threatened to shut it down. Lungu said this step was good for workers, but Hichilema said it added more debt.
At one time, Zambian authorities had even detained Mopani’s CEO, Nathan Bullock, as he attempted to leave the country.
In 2019, Lungu placed Vedanta Resources’ Konkola Copper Mines in provisional liquidation, accusing Vedanta of underpaying taxes and lying about the scale of its investment. Solving this standoff will be one of the Hichilema’s key priorities.
While Lungu ran for re-election on vast infrastructure projects, the Hichilema campaign countered by saying the projects were paid for by debt, such as Chinese loans and Eurobonds.
Foreign debt has risen from under US$2 billion to over US$12 billion, up from 35% of GDP to 110%.
Last year, Zambia defaulted on US$3 billion of foreign bonds. Hichilema has pledged to immediately start talks for a quick aid package from the International Monetary Fund (IMF), as he negotiates debt restructuring with other lenders.
The IMF expects Zambia to be among the countries to see slow economic recovery this year, with growth of 0.6% after a 3.5% contraction last year. Newzwire