Zambian opposition leader Hakainde Hichilema’s surprise win in the Aug. 16 presidential election may lead to a fresh start in the country’s relationship with the mining sector.
While it was still early days, the appointment of Hichilema was “a welcome surprise for investors and miners”, UK broker Liberum analyst Ben Davis said.
Hichilema won a landslide victory over incumbent President Edgar Lungu, winning by nearly 1 million votes with almost 60% support, the biggest margin in 25 years.
Africa’s second-largest copper-producer — the metal accounts for more than 70% of the country’s export earnings — had witnessed a noticeable deterioration in its mining investment climate during Lungu’s second term in office, “damaging relations between miners and the government beyond repair”, the CEO of Africa-focused strategic advisory firm Africa Practice, Marcus Courage, told S&P Global Platts.
“This also resulted in lower levels of investment, lower copper production and reduced receipts for the government, in spite of a rebound in global copper prices,” Courage said.
Hichilema’s pledge to create jobs and restore Zambia’s economy now hinges on his ability to restore confidence among investors and see stalled mining investments resume once more, Courage said.
“If he can get this right, then the Zambian Copperbelt can be competitive once more, and can become a hive of global mining activity, creating jobs.”
Africa analyst at risk intelligence company Verisk Maplecroft, Aleix Montana, told Platts that Hichilema’s victory had been welcomed by the mining sector since his promise of a business-friendly approach was “likely to reduce foreign miner’s exposure to resource nationalism risks”.
According to Montana, Lungu’s presidency was characterized by frequent disputes with foreign mining companies, including Canadian miner First Quantum Minerals, UK-incorporated commodities producer Vedanta Resources and global diversified natural resources company Glencore.
“The mining sector had grown weary of Lungu’s populist reforms, which gradually undermined relations between the government and foreign investors,” Montana said.
That meant the mining industry bore the brunt of the country’s fiscal difficulties, as Lungu aggressively targeted foreign mining companies for quick cash injections, Montana said.
With $12 billion of external debts looming over the Zambian economy, Montana said a deal with the International Monetary Fund had become “more likely” following Hichilema’s victory.
Montana said Lungu was reluctant to commit to the IMF’s fiscal reforms, since he calculated that investment in populist infrastructure projects would secure his re-election.
Courage said an early resumption of talks with the IMF would be a bellwether for investors.
Commerzbank commodities analyst Daniel Briesemann said the election of the new president seemed to have had no impact on metals markets so far.
The London Metal Exchange three-month spot copper price was trading at $9,150/mt ($4.15/lb) around 1230 GMT, against a closing price of $9,247.5/mt on Aug. 17.