Saturday, November 29, 2008

Low copper prices threaten Zambia’s economic growth

Low copper prices threaten Zambia’s economic growth
Written by Mwala Kalaluka
Saturday, November 29, 2008 4:28:02 PM

FINANCE minister Dr Situmbeko Musokotwane yesterday said the low copper prices pose a significant threat to the continued strong economic growth experienced over the last five years.

And Mapatizya UPND member of parliament Ackson Sejani asked the government if it had not learnt lessons over its capitalist dictum that the government has no business in business following the global economic crisis.

Delivering a ministerial statement on the global developments on the country's economy before Parliament adjourned sine die, Dr Musokotwane said if these low copper prices persist, future investment in copper mining, which has been very robust in recent years, may slow down or even decline.

"This is not good for our economy and job creation," Dr Musokotwane said. "While the situation warrants serious concern, we also need to put the effects of the global crisis in context, at least on the basis of current prices of copper."

He noted that although the prices of copper had drastically fallen from their peak of US$930 per tonne in July 2008 [actually about $9000 per metric tonne - MrK], the present level is still much higher than the worst that the country had seen in the last decade.

"About a decade ago, a pound of copper was US$ 60 cents. Today, it is about US$1.7 per pound," Dr Musokotwane said. "The situation is therefore not yet a disaster and as such we should not lose confidence."

However, Dr Musokotwane said the government would have to realign certain expenditures next year, in view of the expected lower mining revenues, to ensure that priority programmes aimed at poverty reduction were safeguarded.

He said the government had already initiated dialogue with the mining companies to assess how best the impact of the current global crisis could be mitigated.

"Notwithstanding, the projected slowdown in the global economy and the fall in copper prices, the fundamentals in the Zambian economy remain strong in the medium term," Dr Musokotwane said. "Government views these events as a short-term phenomenon."

He said it was against this background that the government still expects growth for the year 2008 as well as 2009, even though at a lower rate for the latter.

And Sejani asked what lessons the government had derived from the global financial downturn in line with some of the capitalist policies it was pursuing.

Dr Situmbeko responded that some of the points he had made in his ministerial statement indicate to how the government was moving out to attract investment into the country.

Meanwhile, commerce minister Felix Mutati said none of the conditionalities set in the Citizens Economic Empowerment Policy (CEEP) is exploitative.

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