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By Shapi Shacinda

LUSAKA (Reuters) – Whoever wins Zambia’s presidential election next week will be hard pressed to balance campaign promises to improve the lives of the poor with the country’s record as a rare African economic success story.

Acting President Rupiah Banda and chief opposition leader Michael Sata, the main contenders in the October 30 ballot, have both promised tax cuts and more farm subsidies to help the poor.

But they are acutely aware that former President Levy Mwanawasa’s economic management — which won Zambia billions of dollars in debt relief and slashed inflation to single-digits after three decades of sky-high inflation — will be vital to continued economic success.

Mwanawasa died in August after a stroke, throwing Africa’s biggest copper producer into political uncertainty.

Adding to the challenges for his successor, a government program to diversify away from the copper industry to generate more wealth and jobs is moving too slowly, analysts say.

International investors are not expecting any surprises from the election.

“The uncertainty around the election is much lower than during the previous election,” said Leon Myburgh, a specialist in sub-Saharan Africa at Citigroup in Johannesburg. “Everybody expects Banda to win and that means policy continuity.”

In the last presidential election, in 2006, Sata portrayed himself as a champion of Zambian workers in an unsuccessful challenge.

This time, the policies of the two candidates are very similar, with both promising tax cuts and more farm subsidies to help the poor, who say not enough of the 5 percent economic growth of the last five years has trickled down to them.

WEAK COPPER PRICES

Some analysts are already crying foul.

“We are headed for serious macroeconomic misalignment which will cause the budget deficit to rise if these policies are implemented,” said prominent Lusaka economist Chibamba Kanyama. “This will cause a huge reverse in economic growth.”

Despite the pressure to create opportunities for Zambians, the candidates know foreign cash needs to keep flowing to maintain economic growth and create more job openings beyond copper mining, which employs 55,000 people.

Under Mwanawasa, foreign investment surged from $71.7 million in 2001 to $1.4 billion in 2007. The government expects inflows of foreign direct investment to top $3 billion in 2008.

Adding to the challenges, weaker copper prices, dented by the global financial crisis, have already put the kwacha currency under pressure and may reduce foreign exchange earnings, which would cut spending on infrastructure, schools and health and slow the fight against poverty.

In 2002, the World Bank and the European Union helped Zambia come up with the “Copperbelt Diversification” plan, to promote tourism, manufacturing and agriculture after copper mines suffered operational problems and global metals prices fell.

While the idea was promising in theory, some analysts said the program failed because Zambians were unable to make it work on their own, keeping the country heavily reliant on mining, which earns 63 percent of foreign exchange.

Recognizing the problems, the authorities have tried to channel investment to the medical and education sectors.

“There are major tax incentives being given in these areas as part of the diversification plans,” said Andrew Chipwende, head of the Zambia Development Agency.

‘LACK OF JOBS’

In one of Lusaka’s slums, there is no sign of economic improvement or the benefits of diversification.

Mothers with babies strapped on their backs queued for several hours for water at a communal tap. In one house, 25 people share one toilet.

“The pain of seeing our children roaming the streets for lack of jobs is unbearable,” said 61-year old Daina Mwanza, a mother of six who makes $40 a month selling vegetables at a market stall.

Banda, who owns a company that supplies mining equipment in the copper belt, would be unlikely to stray from current policies of waiving taxes and customs duties to woo foreign investors.

And Sata, who once accused Chinese investors of exploiting Zambian workers and threatened to deny permits to Chinese workers, has warmed to Chinese involvement in copper mining.

“If you look at Sata’s campaign principles, he has become much more moderate than during the last election,” Citigroup’s Myburgh said.

It will take much more than tough talk and promises to gain the confidence of the 65 percent of Zambians who live on less than $1 a day.

“I have to think hard on how best to use 5,000 kwacha ($1.20) on food every day,” said John Mwanza, 38, a bricklayer whose children walk six kilometers (3.8 miles) to school because he cannot afford transport fees.

“The politicians are asking for our votes,” said Stephen Hamuchenje, 52, who scratches out a living by selling bananas and oranges from a wheelbarrow.

“But they will immediately forget our pleas for lower food prices and transport costs as soon as elections are over.”

(Reporting by Shapi Shacinda; Editing by Michael Georgy, Marius Bosch and Eddie Evans)

 

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