Kamala Harris meets Hakainde Hichilema at the White House. Photo credit Creative Commons

Zambia became the first Sub-saharan African country to default on Chinese loans in the Covid-19 era

The country’s newly formed governing body promises to settle the alarmingly enormous debt and revamp the country’s economic stability. 

On August 16, the streets of Zambia were lit after the declaration of Hakainde Hichilema as the seventh president of the republic consequent to five failed tries. The merriment echoed for the African leader because he steered the nation swiftly drowning in economic turbulence.

Popular among youth voters for his focus on social media engagement, more than half of the seven million registered voters for the recent elections were under the age of 35. On matters of equality, the president has selected a cabinet encompassing all Zambia‘s ten provinces while appointing their first female Speaker, Nelly Mutti. Moreover, Hakainde replaced top military commanders and police bosses to usher a more credible security force in a response to the regional cases of police brutality during his first week in office. Adding that bail should be on affordable terms. 

However, the celebrations hastily transitioned after the president zeroed in on claims of inheriting an “empty treasury” due to high levels of corruption. 

“When you look at the payroll, you will find many who are not working, but are still there,” Hakainde said. He continued to claim that the debt levels are more massive than they initially thought with no constant figure.

| Read: China-Africa economic relations continue to grow in billion dollar city development

Over the years, the Zambian economy has relied on Chinese settlement and large investments to suffice as debt collateral. An issue that has led them to be the first SubSaharan nation to default on a $42.5 million payment on a $1 billion 2024 Eurobond. 

Of Zambia’s external debt, some $3 billion is in Eurobonds and $3.5 billion is bilateral debt. Another $2.1 billion is owed to multilateral lending agencies and $2.9 billion is commercial bank debt. In that, a quarter of the total is held by either China or Chinese entities via deals shrouded in secrecy clauses. These claims have been authenticated by the 2020 default—an oddity, as Zambia is the second-largest copper producer in Africa. 

That said, the president has reassured his public that “[w]e will arrive at an amicable and mutually beneficial solution to our debt,” tweeted the president. As his first selection upon election, he set a precedent by establishing economist and former International Monetary Fund (IMF) adviser Musokotwane Situmbeko as the Minister of Finance in an attempt to show “the economy of the country comes first.” 

This all begs the question—how is Zambia theoretically rich but practically poor

Chinese invasion or investment?

Zambia has been one of the regions greatly affected by the Chinese influx, or what some local papers refer to as economic colonization. Yet, some do not see the big deal. On the contrary, they believe China could be going out of its way to help. 

“China is not taking anything away from Zambia, it has helped us more than the Western world,” affirmed Deputy Media Director for the Patriotic Front opposition party Amos Chanda in support of the investment projects. “It has invested its own money in our mining, communication, and Infrastructure.”

A point disputed by journalist Hara Mutasa who claimed that Zambian netizens thought differently. “The country has grown in infrastructure but the economy is bad, inflation is high, salaries are not increasing, but some citizens claim that they cannot eat roads,” she confirmed.

Indeed, small business owners stand their ground on the Chinese taking a hike. “You cannot compete with the Chinese, they are cheaper, our chickens are big and expensive, they sell at low prices and use a lot of medicine, we want them to go!” A vendor professed.

Dennis Sianyama, a social work student in Lusaka echoed Mutasa’s claim. They told Ark Republic, “everything changed from bad to worse, the people were starving, we also felt that the previous Government respected the Chinese more, there are shops set aside only for Chinese buyers. We look up to Rwanda, they sent them back.” 

Other opponents cite how the debt may not even be legitimate, supporting allegations that the debt process took on shifty paths. According to the United Party for National Development (UPND), which is headed by Hichilema Hikainde, spokesperson Anthony Bwalya commented that the debt was constructed illegally without parliament‘s approval. 

“A huge portion of public debt constructed from 2016 was never taken to court for approval,” he explained, continuing by quoting the constitution stating that, “all public debt needs to be approved by parliament.” 

Copper Mining

Zambia is Africa’s second greatest copper producer, a basis that should qualify the state to generate high tax revenue. Unfortunately, that’s just not the case. Zambia barely benefits from copper mining, gaining 2.3 percent in tax revenue while cooking up to 71 percent of Zambia’s exports. 

Copper prices tanked during the pandemic, making it difficult for the country to meet debt payments. Not only this, but Copper mines have been privatized by foreign investors, as is the case with Glencore, the company controlling Mopani mines. In Zambia, all copper is produced by Mopani then subsequently sold internally to Glencore and Switzerland.

Under the paper, Copper is being exported, but in actuality, the revenue generated does not experience light in a day in Zambia. 

Tax revenues from Glencore produced a surplus eight times more than the GDP of Zambia. However, the insanely large tax revenue from copper sales remains within Switzerland, Glencore’s headquarters. Nonetheless, the previous Government had already initiated moves to acquire direct control of the key mining sector.

Similarly, even with the debut of new policies, the new Government remains tongue-tied on the Chinese argument.

All in all, With many other neighboring countries clinging on to similar positions, Hakainde remains a point of focus attempting what divulges as impractical. An aspect that remains questionless, he is setting the pace, and the civilians appear content barely weeks into his presidency, fixedly hanging on to his every move.

Nyawira Mithayo is a Journalism graduate with an interest in Community activism.

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