Debt, Graft And Jobs: HH’s Top Three Priorities For Restoring Zambia’s Economy

It’s been just under a month since President Hakainde Hichilema was sworn into office, promising to get Zambia back on the road to becoming a prosperous, middle-income country. His election has seen bond markets rebound and the Kwacha’s value soar but the challenge ahead of him is nonetheless immense. Chief among the former-businessman’s concerns is getting the economy back on track, which means tackling the three biggest challenges to Zambia’s finances: debt, corruption and jobs. 

Under the previous government Zambia’s debt as a share of GDP nearly doubled, rising from 66% in 2011 to 113% by the end of 2020. The Lungu government drove the country to near financial ruin, racking up foreign debts of over $12 billion and becoming the first African country to default on a loan during the pandemic in November 2020. 

It is estimated that the government now spends roughly 30% of its income on servicing these debts, with the rest of tax revenue being largely spent on civil servant’s wages. This leaves almost nothing left for infrastructure or services such as healthcare and education.

Following the appointment of former IMF advisor Situmbeko Musokotwane as Finance Minister, HH has reiterated that he is serious about approaching the Fund for a potential bailout. However, talks have not yet resumed. The president has also said he is willing to sit down with Zambia’s Chinese creditors to discuss a potential restructuring of the country’s debts, however this hasn’t materialised yet either. If President Hichilema is as serious as he says about restoring Zambia to prosperity he will need to work on getting the country out from under this pile of debt as quickly as possible.

The second major obstacle the president will have to face is the rampant corruption that has become endemic in government during the past ten years of Patriotic Front rule. Upon arriving in office, Hichilema reported to the BBC that the country’s treasury was “literally empty” and that some officials were still working to move money offshore before they were noticed. The president also noted that many PF supporters were still receiving government salaries, despite not doing any work to deserve them. 

Shortly after this, at his inauguration, HH promised to adopt a “zero tolerance” attitude towards corruption and pledged to strengthen the powers of investigative agencies, as well as set up special courts to deal with corruption. On Wednesday, the president tasked his Vice President Mutale Nalumango and Cabinet Secretary Simon Miti with tackling abuses in the public procurement system before his return from New York at the end of next week. This initiative is certainly admirable but the extent of corruption is so rampant within Zambia’s government, that it will take more than a week of work to avoid another scandal like the Honey Bee fiasco. 

Finally, if President Hichilema is to set Zambia squarely on the track towards middle-income status, he will need to ensure that there are enough well-paying jobs around to help lift working families out of poverty. At the end of 2020, the International Labor organisation estimated that unemployment in Zambia had reached 12% - the highest it had been since 2011. HH won his landslide election victory on a ticket of more jobs for young Zambians, a promise he says he intends to honour by creating a stable environment for industry to flourish. 

Translating this promise into real jobs will require the government to engage quickly with the country’s largest employers - the mining companies. To this end, the Zambian Chamber of Mines has already put forward policy proposals to boost investment and take advantage of the favourable conditions in global markets. While HH and his finance minister have both spoken about reviewing mining policy to increase employment and output, neither they nor ZCCM have reached out to companies such as Glencore or Vedanta to achieve these goals.

Following the PF’s disastrous decision to buy Mopani Mines from Glencore in January, the facility is still lacking a new financial backer and is unable to make a profit until further investment is found - likely from a foreign company. Meanwhile production at Konkola Copper Mines has plummeted by nearly 70% since the government-appointed liquidator took over control from Vedanta Resources. Yet ZCCM has still not engaged Vedanta or dropped the liquidation proceedings, even when the mining company offered up a further $1.5 billion in investment if the mine was returned to them. 

These companies have the potential to create thousands of new jobs in Zambia, not only in the mines themselves but across the entire value chain: from transportation to marketing to exportation. However, the government is moving too slowly in engaging with the big mining companies in order to ensure that these jobs come back to Zambia. If President Hichilema is serious about turning the country around financially, this must be where he starts.