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A mother casts her vote with a baby on her back during the presidential election at a school in Chibolya September 20, 2011. REUTERS/Makson Wasamunu

Zambia election could be bad news for China

Fierce critic of foreign mining investment, especially from China, wins election

REUTERS

Published: 2011/09/23 12:28:04 PM

Zambia™s kwacha has fallen fell to a 12-month low of 5030 against the dollar on Friday after opposition leader Michael Sata, a fierce critic of foreign mining investment, especially from China, won a surprise election victory.

Traders said the currency of Africa™s biggest copper producer was likely to remain on the back foot until Sata provided clarity on his economic policies.

He told Reuters last week he would maintain strong commercial and diplomatic ties with China and would not introduce a minerals windfall tax. He also implied he might impose some form of capital controls to keep dollars in the country.

“Right now there™s a bit of uncertainty about what changes in policy we™re going to see with Sata,” said Coura Fall, an Africa analyst at Citi in Johannesburg.

“The kwacha will continue to be vulnerable, at least until there™s clarity about what™s going to happen. Everybody is trying to see what Sata is really about.”

Other factors weighing on the kwacha are a 17% decline in the last three weeks in the price of copper, which accounts for 80% of Zambia™s export revenue, and the more general global flight from risky emerging and frontier market assets.

Sata is due to be sworn in on Friday, only hours after the declaration of his election victory over incumbent Rupiah Banda, whose Movement for Multi-party Democracy had run the southern African country since the end of one-party rule in 1991.

China has poured an estimated $6.1 billion (4.3 billion euros) into the southern African nation since 2007, equivalent to more than one third of gross domestic product last year.

That investment has financed a boom in mining in Africa™s largest copper producer ” the seventh largest in the world ” but also stoked tensions with Zambians wary of Beijing™s rapid rise.

Nearly two thirds of Zambians live on less than two dollars a day, and Sata has vowed to ensure that the poor benefit from the booming economy, which grew 7.6% last year on the back of strong mining growth.

But in his campaign this year, Sata avoided singling out the Chinese, rather saying that he would review the tax regime for all mining houses “to promote rapid investment and employment in the industry”.

As Chinese banks and markets have opened on Lusaka™s streets, poor Zambians have accused Chinese companies of importing their own workers even for jobs that Zambians could do, and of mistreating those locals they do employ.

The anti-Chinese sentiment was evident as Sata™s supporters spilled into the streets during the night as his victory was announced.

“We are not happy about the Chinese!” one shirtless young man shouted over the din of car horns, chanting and singing.

“The condition of work is bad. We are in need of good salaries.

We need to get something from this country.” Another reveller told AFP:

“They bring their own people to do work that we can do. They paint. They dig graveyards. They™re taking away all our little salaries that we deserve.”

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