Business hopes for continuity after 'mixed bag' Zambian election

Zambia President Hakainde Hichilema has secured a second term in office after winning 60% of the vote, in an election that has been overshadowed by the arrest of opposition figures. Hichilema’s main rival – Brian Mundubile of the NRPUP party who came second with 38% – has said he will commence legal proceedings against the result, which he argued were not a “true reflection of what took place across this election.” Mundubile has since gone into hiding following the arrest of 11 opposition figures, which took place on 13 August after the vote but before the official results were announced. Top civil servant Patrick Kangwa said the arrests were in connection to “military plans involving foreign nationals and illegal military training camps”. The opposition has denied any wrongdoing. ‘Mixed bag’ Joseph Siegle, director of research at the Africa Center for Strategic Studies in Washington DC, tells African Business that the election was “a mixed bag.” “The election itself was exemplary – the election commission seemed to be doing all the right things, there was a lot of voter outreach, they expanded the voter rolls. This was a reflection of Zambian’s efforts to build democratic norms,” he says. “While it was a generally well-run process with minimal violence, the vote tallying and the conclusion of the process was disappointing for all sides,” Siegle adds. “We are still not exactly clear what has gone on but the raid on opposition party headquarters raises so many questions.” Businesses see continuity Nonetheless, Hichilema’s victory has largely been welcomed by business leaders and investors. Upon coming to office in August 2021, following Zambia’s debt default in 2020 amid the Covid-19 pandemic, Hichilema successfully restructured Zambia’s debt with the assistance of the International Monetary Fund (IMF) and the country’s international partners. Public debt stood at 112% of GDP in 2021, according to the IMF, but is forecast to be down to 78% this year. Inflation also halved in the first two years of his presidency, from 22% in 2021 to 10.9% in 2023, and now stands at 6.5%. This stronger macroeconomic position has helped attract greater foreign direct investment (FDI) flows: FDI was only 0.7% of GDP in 2022 but reached 4.5% last year. Stuart Culverhouse, chief economist and head of fixed income research at Tellimer, has said that “for investors, Hichilema offers continuity” and that his re-election means the country could pursue further IMF initiatives. “His government has already said they would seek a new IMF programme if re-elected, so that may be the first test for investors.” Despite Zambia’s stronger macroeconomic position, opposition parties garnered some support during the election, particularly among younger voters, as a result of concerns over the cost of living. While inflation has fallen overall during Hichilema’s presidency, prices for essential goods still remain high: in August last year, for example, annual food inflation stood at 14.9%. Furthermore, while Zambia has managed to attract significant FDI flows – particularly in the mining sector which has seen around $10bn in investment under Hichilema – this has not necessarily translated into more jobs for local workers. Broadening growth a challenge The World Bank notes that “Zambia faces challenges in turning copper investments into broad employment and productivity due to weak supplier networks, low local involvement, and limited support services.” Siegle says that “the affordability and jobs question is an issue we are seeing throughout Africa as part of the youth bulge…even in strongly performing economies, you have a lot of youth who cannot get jobs, or at least the types of jobs they want, and are facing other pressures on prices for goods like food and fuel.” Looking ahead to Hichilema’s second term, Siegle suggests that a priority must be ensuring that macro reforms and mining-related investments are leveraged to generate more broad-based growth. “Part of the strategy has to be using the revenues Zambia is gaining from mining operations to diversify and stimulate other parts of the economy.”