COUNTRY REPORT Zambia Democratic Republic of Congo The full publishing schedule for Country Reports is now available on our web site at http://www.eiu.com/schedule. 3rd quarter 1999 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group. 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ISSN 1369-4839 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Contents 3 Summary Zambia 5 Political structure 6 Economic structure 7 Outlook for 1999-2000 11 The political scene 14 Economic policy 16 The domestic economy 17 Mining and energy 19 Agriculture 19 Infrastructure and services 20 Foreign trade and payments Democratic Republic of Congo 22 Political structure 23 Economic structure 26 The political scene 31 The domestic economy 32 Mining 34 Quarterly indicators and trade data List of tables 9 Zambia: forecast summary (domestic) 10 Zambia: forecast summary (external) 33 Zambia: quarterly indicators of economic activity 34 Democratic Republic of Congo: quarterly indicators of economic activity 35 Zambia: foreign trade 36 Zambia: direction of trade 37 Zambia: refined copper exports 37 Zambia: UK trade 38 Zambia: Japanese trade 38 Democratic Republic of Congo: trade with major partners EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 2 List of figures 11 Zambia: gross domestic product 11 Zambia: kwacha real exchange rates 16 Zambia: inflation 17 Zambia: international copper prices 25 DRC: gross domestic product EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 3 August 2nd 1999 Summary 3rd quarter 1999 Zambia Outlook for 1999-2000 The ruling Multiparty Movement for Democracy will pay lip service to improving its governance record in order to impress donors. Pledges worth $630m are therefore likely to be fulfilled. The president, Frederick Chiluba, looks set to resign in 2001 as he focuses on securing a diplomatic victory in the Democratic Republic of Congo (DRC) by which he can be remembered. The new finance minister, Katele Kalumba, will be well received but government spending targets will be exceeded this year as civil service wage demands increase. The sale of the main copper mines is now likely to go ahead in early 2000 but the continued delay will constrain real GDP growth to 1.5% this year before rebounding to 5% in 2000. Large wage and energy price increases will push up average inflation to 28% in 1999 but it should fall to 23% in 2000. Falling copper prices and production will subdue export earnings over the forecast period, but donor transfers should narrow the current-account deficit to $251m in 1999 and $240m in 2000. The political scene Donors demanded action on human rights and transparency at a meeting in Paris and the government promised to respond. The finance minister, Edith Nawakwi, has been replaced by Mr Kaluma, possibly in a move to appease donors. The ZAP coalition has faced problems in registering which, it claims, are politically motivated. As opposition parties woo the Lozi vote, the issue of secession for Barotseland has taken on new impetus as Namibian Lozis have taken direct action against their government. The first steps towards a new understanding with Angola have been taken, but Mr Chiluba’s ceasefire agreement for the DRC may yet fail. Economic policy Civil servants have won a court action awarding them a 40% wage increase and local council workers have demanded the payment of wage arrears. The tax authorities have been criticised for being heavy handed. The domestic economy • Inflation is on the rise again. The stock exchange has been performing well and its first rights issue has been released. Two local airlines are to start operating and the railways are likely to be leased. • Copper and cobalt production have been falling as talks on the privatisation of Nkana and Nchanga have continued. Energy prices went up in June, while the government has invited new private investment into the sector. The food import requirement is down in 1999 but corridor disease has affected cattle farmers. Foreign trade and Two new tourism projects are under way. Donors have pledged $630m and payments heavily indebted poor countries debt relief could be worth $900m. EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 4 Democratic Republic of Congo Outlook for 1999-2000 Despite the signing of a peace accord in July by all countries involved in the war in the DRC, peace is not yet at hand. Rwanda's commitment remains doubtful, as highlighted by the refusal of the rebel Rassemblement congolais pour la démocratie (RCD), which it supports, to sign the accord. Uganda, however, may be willing to respect the accord, now that the rebel Mouvement pour la libération du Congo (MLC) has signed it. Even if all rebels sign, implementing the accord will be difficult, particularly as no provision has been made for the many groups fighting Rwanda in the east, such as the Hutu interahamwe. If the war drags on, President Laurent Kabila's position will become more fragile, particularly as the economy will continue to deteriorate, as illustrated by the unhalted slide of the franc congolais. The political scene A peace accord was signed in July in Lusaka by all countries involved in the war. The accord includes a cessation of hostilities, the deployment of a UN peacekeeping force, the withdrawal of all foreign forces, the disarming of all militias and the holding of a national dialogue. However, the RCD has so far refused to sign, owing to factional infighting. Fighting has therefore continued on the ground, although the MLC signed the accord in August in a surprise turnaround, reflecting the growing rift between Uganda, which supports the MLC, and Rwanda, which supports the RCD. Congo's internal opposition has supported the peace accord, but has continued to be harassed, while the signing of the accord means that the "national debate" has been put on hold. The UN High Commissioner for Refugees, Sadako Ogata, has visited Congo, as refugee numbers have continued to swell. The international community has supported the peace process, and Mr Kabila has improved relations with the new South African president, Thabo Mbeki. The domestic economy • The free-fall of the franc congolais has continued. Fuel shortages have erupted again, prompting the arrest of several oil company directors. Civil servants have started a strike for higher salaries. • Gécamines has been embroiled in a legal dispute with its former trading agent. Editors: Piers Haben; Markus Scheuermaier All queries: Tel: (44.20) 7830 1007 Fax: (44.20) 7830 1023 Next report: Our next Country Report will be published in December EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Zambia 5 Zambia Political structure Official name Republic of Zambia Form of state Unitary republic Legal system Based on the 1996 constitution National legislature National Assembly; 150 members elected by universal suffrage; all serve a five-year term National elections November 1996 (presidential and legislative); next elections due in 2001 Head of state President elected by universal suffrage for a term of five years National government The president and his appointed cabinet Main political parties The Movement for Multiparty Democracy (MMD) is the ruling party, with a huge parliamentary majority. The National Party (NP), Zambia Democratic Congress (ZDC) and Agenda for Zambia (AZ) also have seats in parliament.