Alert 121 – Economic outlook grim as Zambia bucks Covid-19 lockdown trend

While President Edgar Lungu has now instituted only limited restrictive measures in response to the coronavirus (Covid-19) pandemic that has seen many other African countries institute strict lockdowns, on 11 May, Zambia closed its joint border with neighbouring Tanzania. With Tanzania home to 509 cases, the move came as the Zambian border town of Nakonde recorded 76 of 85 new cases in the country on 10 May, taking the total number of cases to 267. Zambia’s caseload has since risen to 446 as at 13 May. The move will, critically, delay Zambia’s main copper exports via Dar es Salaam, Tanzania, where business has picked up substantially as South Africa’s strict lockdown has seen more miners divert copper from its ports to others in Africa.

With priority now going to be given to trucks carrying essential goods, the duration of the shutdown is unclear, but the economic impact will be striking. As Africa’s second largest copper producer after the Democratic Republic of the Congo (DRC), Zambia gets over 80% of its exports and foreign exchange earnings from copper with 25 March prices already down 23% from January (from US$6.165/ton to US$4.754/ton). Finance Minister Bwalya Ng’andu has confirmed the dire outlook and expects copper export earnings to drop by over US$1 billion in 2020 if the situation continues. With mineral royalty tax collection also going to drop, Ng’andu lowered his 2020 growth prediction from 3.2% to around 2%, while the devastating effects on Zambian tourism have yet to be measured. The country’s fastest-growing sector, contributing 6% of gross domestic product (GDP), it was also a crucial job spinner – employing an estimated 300 000 people. By late March, the sector already lost US$6.9 million just in 2020.

With the value of the local Kwacha falling in parallel; the majority of Zambians still living below the poverty line; and massive drought fuelled food insecurity in parts of the country threatening famine, there are concerns that here, as elsewhere in Africa, the economic impact on livelihoods will be worse than the coronavirus itself. It won’t help that supply chains could be severely disrupted if South Africa (which accounts for 30% of Zambia’s imports) sustains its own harsh lockdown.

How this will all pan out for President Lungu’s efforts to hold on to power for a constitutionally contentious third term remains to be seen, with the opposition United Party for National Development (UPND) leader, Hakainde Hichilema, in March calling for a complete lockdown. Lungu, however, announced only partial restrictions on 20 and 26 March and rescinded most of these on 8 May. Addressing the nation he said that, due to severe revenue losses and to avoid plunging the economy into its worst-ever crisis, he was easing confinement measures and allowing cinemas, restaurants and gyms to reopen, while hotels and lodges could consider “getting back to normal operations”.  At it stands, only bars remain closed, with strict health protocols still in place, including wearing face masks in public places.

Hence, despite a brief lockdown of the Kafue district in mid-April, and the latest border closure, Zambia is more or less back to “normal”. The merits of balancing the health and economic impacts of Covid-19 aside, it seems that Lungu’s determination to follow a “business as usual” approach does not extend to democratic process, with critics worried about his calls to reschedule next year’s general election calendar due to Covid-19. With Lungu likely hoping that he can use the delay to cling to power, he is also expected to exploit Covid-19 fears as it suits him to contain opposition activities in the interim.

He will, however, struggle to convince the nation he should be re-elected if Zambia’s economy goes any further into the red, making external assistance vital. This makes help from the International Monetary Fund (IMF) essential for both Zambia and Lungu, although this could be tricky given the country’s growing debt burden – government debt will reach 110% of GDP in 2020. Amid the IMF’s strained relations with Zambia in the past, and warnings that it won’t lend money to governments if it’s not sure it will be repaid, talks on an emergency loan are ongoing, with the ruling party likely hoping that signs that it is starting debt restructuring negotiations will be enough to convince the IMF.

Lockdown or no lockdown, Zambia’s already precarious economy is in for a rough ride in the coming year, with dire human security implications likely to overshadow concerns about the erosion of democracy.