Lungu win to hurt business

 Lungu win to hurt business

Lungu win to hurt business.

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With Zambia going for presidential elections this month, independent economic and political research firm NKC economics has predicted that if incumbent Edgar Lungu wins, he will continue to create a hostile business environment through nationalist and authoritarian policies.

Zambia is getting ready for the most unpredictable election since independence on August 12, when voters choose a president and Parliament.

There are 16 presidential candidates, but the contest will be another two-horse race between President Edgar Chagwa Lungu (ECL) and his main rival, Hakainde Hichilema, more popularly known as ‘HH’.

 Along with rigging, acts of violence and intimidation against opposition members raise concerns about the credibility and fairness of the polls.

“Since the ruling Patriotic Front (PF) came into power in 2011 on a wave of populist sentiment, the country’s economy has been on the decline. Reckless borrowing to fund populist demands has led to distrust in the government among citizens who are feeling the economic impacts of such action through higher cost of living,” NKC economics said in its report.

“Rights and democratic processes have been negatively affected by the intimidation of journalists, opposition activists, and business executives, in turn making the investment environment less attractive. Mr Hichilema’s liberal United Party for National Development (UPND) is campaigning on a manifesto of “visionary leadership and economic management skills for economic development.”

The Zambian government reached out to the International Monetary Fund(IMF) for a debt structuring deal after it defaulted on a Eurobond payment in November and NKC said  the deal is more likely than not once the outcome of the elections is clear.

“If government can be proactive in limiting expenses, the IMF’s role may make bondholders more cooperative. If Mr Lungu gets a victory this time, he will continue to create a hostile business environment through nationalist and authoritarian policies. By contrast, a victory for Mr Hichilema, an economist by training, will be positive for the recovery of the country’s economy and democracy, crowding in concessional creditors,” the research firm said.

According to the report lack of transparency about debt deals, especially with Chinese lenders, is what has contributed to the difficulty of negotiating a restructuring deal that could involve as much as $12,7bn in external debt.

After negotiations in May, Fund representatives refused to resume talks until the government implements policies “to address the macroeconomic imbalances currently facing Zambia and to enable a return to sustained growth with enhanced fiscal space”.

“If Mr Lungu wins in August, his administration will continue to create a hostile business environment for foreign companies and suppress civil liberties through the State apparatus. Additionally, if the legitimacy of his victory is in doubt, it will be a further blow to Zambians’ confidence in their institutions. Debt restructuring negotiations will be tough, but the successful negotiations towards an IMF deal will limit his administration’s scope to interfere with business,” NKC economics said.

On the other side the research firm said Hichilema’s  win  will  offer a more rational leadership style and to break with Mr Lungu’s confrontational attitude to business.

“He is also expected to comply with IMF requirements more willingly, which will support the debt restructuring deal with the creditor committee – undoubtedly a positive for macroeconomic stability and future foreign investment (especially at a time of high copper prices, which, if the environment is attractive, imply opportunity in the mining sector),” the research firm said.”

Fidelity Hamilton Mhlanga

Fidelity Hamilton Mhlanga has been writing finance and business news over the past 5 years. He earned a BSC in Media and Society Studies and Masters of Development Studies from Midlands State University, in Zimbabwe. He follows mining, insurance, banking and energy stories. He is passionate about development and growth.

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