Thursday, October 06, 2011

(BUSINESS DAY, BLOOMBERG) Zambia rating affirmed, despite uncertainty

Zambia rating affirmed, despite uncertainty
MIKE COHEN
Published: 2011/10/05 07:58:03 AM

STANDARD & Poor’s affirmed Zambia’s foreign and domestic credit ratings at B+ with a stable outlook yesterday, saying the country’s economic prospects were promising and newly elected President Michael Sata was likely to continue to court foreign investment.

Mr Sata defeated incumbent Rupiah Banda in a September 20 vote. Since taking control of Africa’s largest copper producer, he has fired the governor and board of the central bank, dissolved the boards of four state agencies, and scrapped the sale of a local bank to FirstRand .

"We view the smooth handover of power following the recent presidential elections in Zambia as indicative of a maturing of democracy," Standard & Poor’s said yesterday. "While Mr Sata’s victory has increased economic policy uncertainty, we expect any shifts to continue to broadly support investment."

Mr Sata has pledged to extract more money from mining companies to distribute to citizens, create jobs and tackle graft. Companies including Vedanta Resources , First Quantum Minerals and Glencore International operate in Zambia.

Standard & Poor’s warned that Mr Sata may reintroduce a windfall tax on mining companies, raise government spending and cut taxes.

It also expressed concern about political interference in monetary policy following the dismissal of central bank governor Caleb Fundanga last month. Appointed in 2002, he helped bring inflation below 10% for the first time in 30 years. Zambia’s economy has been bolstered by an increase in copper prices and production, with per-capita growth likely to exceed 4% this year and the inflation likely to remain slightly above 8%, Standard & Poor’s said.

Standard & Poor’s first assigned Zambia a B+ rating, the fourth- highest junk-grade rating, in March, which placed it on a par with Kenya and Nigeria. Fitch Ratings gave the country a similar rating the same month.

Bloomberg

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