Zambia’s new president and the next 90 days

The Times of Zambia yesterday reported that opposition Patriotic Front (PF) president Michael Sata maintained his lead from the previous day and has been declared the winner of the election and Zambia’s new president by Chief Justice Ernest Sakala after beating his closest rival Rupiah Banda by a margin of 188,249 votes.

Electoral Commission of Zambia chairperson Ireen Mambilima said Sata received 1,150,045 votes, representing 43% from 143 constituencies counted while Banda polled 969,796 votes, representing 36.1%. Justice Mambilima said results from the remaining seven constituencies would not have changed the status even if they were given to Banda. The seven constituencies had a total of 157,710 votes.

The next closest challenger for the presidency was United Party for National Development president Hakainde Hichilema, who had polled 489,944, with the next (non)-contender far behind, as Alliance for Development and Democracy’s Charles Milupi had 13,382 votes.

Positively, reports say that incumbent Rupiah Banda has accepted the result and will step down.

What are the potential implications for the economy of this power shift? Following the recent performance of the Zambian economy, which has averaged over 6% GDP growth over the last 3 years and is expected to top 7.6% in 2011, the resultant growth has been a combination of a buoyant copper mining industry, and a government that has been perceived as pro-investment. The Movement for Multi-party Democracy (MMD) government has also had close ties with China (estimated US$2 billion worth of investment into Zambia), which has been a significant investment partner and source of FDI for the Zambian economy in recent years.

However, despite the inherent growth, there has been some domestic disquiet with the MMD government primarily
with respect to:

  • Its mining policy regarding fostering domestic benefit and in particular the matter of windfall taxes on the prevailing high copper prices;
  • Chinese investors regarding concerns around labour conditions;
  • High unemployment amongst the youth; and
  • Collapse in basic services of health and education.

In prior election campaigns, the PF had driven its campaign around providing labour market reforms, a sterner approach towards foreign investors (particularly Chinese investors), lower personal taxes, and a more equitable distribution of wealth. Notably, however, the current campaign had toned down on the anti-Chinese rhetoric and focused more on increasing the prosperity of the poor in the country.

The victory implies that after 20 years in power, and despite the recent economic performance of the Zambian economy, a majority of the Zambian voting population was dissatisfied with MMD government policy. In short, this election appears to have been primarily a call by Zambians that:

  • They want a stake in the national economy via tangible and direct economic empowerment to improve their livelihoods; and
  • The youth want a future, they want jobs.

Market’s response

The Lusaka Stock Exchange (LuSE) was expectedly somewhat restrained this week, with total volumes traded and turnover for Monday, Wednesday and Thursday totalling 2.8 million and ZMK 985 million respectively, versus total volume of 4.8 million shares and total turnover of ZMK 4.3 billion last week. However, on this limited activity, the index rose consecutively day-on-day by 0.03% on Wednesday 21st and 0.47% on Thursday 22nd.

The LuSE has not been negatively affected in terms of direction this year by the prospects of an election, generally maintaining its upward trajectory and perhaps being reflective of the expectation of a peaceful election and continued economic stability. Interestingly enough, it has also shown very little correlation with the copper price, suggesting that investors view the long term prospects for the listed companies to be positive, despite any short term negative fluctuations in the price of Zambia’s key commodity.


President Sata campaigned on the basis of change and benefit within 90 days. We expect cautious trading on the LuSE over the next few weeks, primarily from foreign investors, which will be a combination of recent uncertainty in the greater global economy, as well as uncertainty around the implications of the new president, and primarily the structure of any policy adjustments especially with regard to foreign investment in Zambia.

We are of the view that there will likely be a divergence in policy from that of the MMD with respect to mining in particular given Sata’s leftist leanings, although we expect this to largely be carried out via a renegotiation of terms with current investors. The first 90 days will be telling regarding the new appointments expected in key government ministries and institutions such as the Finance Ministry and the Reserve Bank. However, we are still positive on the Zambian economy, and maintain our favourable outlook for the LuSE.

Imara is an investment banking and asset management group renowned for its knowledge of African markets.