Debt-Fueled Splurge May Cost Zambian President Lungu His Job

(Bloomberg) -- Zambian President Edgar Lungu’s biggest selling point in the past two elections has turned into a liability in the lead-up to next week’s vote, making it his toughest challenge yet.

His party has built thousands of miles of roads, airports and rural health-care facilities during its decade in power. The spending binge has left the southern African nation with about $13 billion of foreign debt and culminated in a default that’s made life harder for Zambia’s 18 million citizens.

The currency slumped last year, driving inflation to the highest level in nearly two decades at almost 25%, and gross domestic product shrank for the first time since 1998. Lungu’s main challenger, Hakainde Hichilema, who’s unsuccessfully contested five elections, stands his best chance of winning so far. A businessman, he’s promising to fix an economy that he says the ruling Patriotic Front has broken.

“In all my years in politics, I have never seen such an overwhelming thirst for change,” Hichilema told Bloomberg. “After years of suffering, the public is desperate for change and a new start.”

While the coronavirus pandemic has been a major contributor to the southern African nation’s malaise, its origins date back years. The PF has had an often-hostile relationship with private investors, including those in the copper mining industry -- which has historically been the bedrock of the economy.

Hichilema, 59, says he can achieve an economic growth rate of more than 10% within five years if he’s elected, mainly by growing the mining, agriculture, construction and manufacturing industries. He also intends to seal a financing deal with the International Monetary Fund as soon as is technically possible and initiate debt restructuring talks with external creditors.

“We believe that the conclusion of the IMF deal will coincide with the conclusion of the restructuring,” he said. “An IMF package is essential for our economic recovery due to the large fiscal deficit and the unsustainable debt level.”

Election Pledges

Hichilema’s United Party for National Development has also pledged to implement stable and predictable policies to lure investment, lower the cost of doing business and tackle graft.

The PF meanwhile intends to establish a new regulatory authority for the mining industry, refine the tax system to ensure the nation derives more benefit from its minerals and complete roads and other unfinished infrastructure projects.

The debt the government has taken on has enabled it to transform the country, and discussions are ongoing about how best to deal with it, said Isaac Chipampe, Lungu’s spokesman.

“If you ask a Zambian to choose Zambia circa 2011 and now, they will choose Zambia 2021,” he told Bloomberg. “The debt won’t hurt our chances because we have delivered.”

Lungu, a 64-year-old lawyer who took office in 2015 and has sought to portray himself as a humble and pious leader through frequently publicized church visits in a deeply religious nation, has notched up some notable successes. They include improving the distribution of fertilizer to small-scale corn farmers, which resulted in record production of the staple crop this year.

Expensive Roads

While the nation’s transport links have improved, many of the large infrastructure projects were initiated by Lungu’s predecessor, Michael Sata, who died in 2014. Their construction has been clouded in controversy, with a World Bank report showing that Zambia’s roads cost as much as double the continental average.

The nation has also paid a heavy price for Lungu’s mining policies. Copper producers including First Quantum Minerals Ltd. have held back on expansion plans, complaining about an onerous and unstable tax regime, and their output has dipped this year despite prices surging to a record. Zambia produced slightly more than half the copper that neighboring Democratic Republic of Congo did last year, compared to almost double as much in 2010, the year before the PF took power.

The government has protected jobs by ensuring that two of the country’s biggest mines remain open, according to Chipampe. “We shall continue talking to potential investors, but we only want those who will increase investment and production and take care of our people,” he said.

Opposition Edge

An opinion poll published by Afrobarometer in May indicated that Hichilema has the edge in the Aug. 12 election. Of the 1,200 people surveyed, 24.8% said they’d vote for his party and 22.8% for Lungu’s, while 38.9% declined to give their preference.

“These are the most unpredictable elections in Zambia since independence,” said Zaynab Mohamed, political analyst at South Africa-based NKC African Economics. “Along with rigging, acts of violence and intimidation against opposition members raise concerns about the credibility and fairness of the polls."

Lungu won 50.4% support in the 2016 election and Hichilema 47.6% -- a result the opposition said was rigged, but failed to overturn in court. While Lungu assured European Union ambassadors in April there would be no foul play in the upcoming vote and the electoral rules would be adhered to, Hichilema said he hadn’t stuck to his word.

The police have used teargas and rubber bullets against opposition supporters and restricted its leaders’ movement in some ruling-party strongholds, while Lungu has campaigned freely, using government aircraft to traverse the country.

Besides Lungu and Hichilema, 14 other candidates are contesting the presidential vote -- although none of them has a realistic chance of winning. A run-off must be held within 37 days if no candidate secures an outright majority in the first round.

©2021 Bloomberg L.P.