Page 5 - DMEA Week 04 2021

DMEA COMMENTARY DMEA

The shutdown of
Zambia’s only refinery
has exacerbated the
problem.

mining investment arm ZCCM-IH took out Copperbelt province in October and have
$1.5bn of loans last week to close the purchase now spread to the Southern, Muchinga and
of Glencore’s majority stake in Mopani Copper North-Western provinces. The lack of fuel
Mines. The acquisition follows a pledge by Pres- supply has weighed further down on the
ident Edgar Lungu last month to acquire “stra- economy, and weakened Lungu’s chances of
tegic” stakes in the country’s resources industry. re-election.
Connor Vasey, an analyst at Eurasia Group, Exacerbating the problem, Zambia’s only
commented that while the transaction was “a refinery closed down last summer, as it could
dream deal for Glencore”, for Zambia’s other not afford any more oil. The government helped
creditors and the IMF “it does send a pretty clear procure extra supplies at the start of November,
signal that the government’s fiscal priorities are but the 26,000 barrel per day (bpd) plant shut
a function of what will get it elected. down again in mid-December and has been
Zambia has made a number of failed attempts offline since then.
to secure IMF support since 2014. Talks will Zambian Energy Minister Matthew Nkhuwa
resume next month, according to the country’s told local radio late last week that the govern-
finance ministry. But the government’s recent ment was finalising a letter of credit (l/c) with
actions suggest that a breakthrough before the banks to guarantee payments, to ensure that the
August election is unlikely. refinery could receive additional crude within a
Zambia’s main opposition leader, Hakainde few weeks’ time.
Hichilema, of the United Party for National The refinery was built in the 1970s and needs
Development, has accused Lungu of “filling rehabilitation, and the government has been try-
the economy with more debt, expensive debt” ing to sell it to private investors for several years.
through deals like the Mopani acquisition. Five companies were shortlisted to buy the plant
Failure to cut a deal with the IMF will in turn but the process was put on hold after the corona-
cause problems in talks with the holders of $3bn virus (COVID-19) crisis began.
in Zambia-issued Eurobonds. Those lenders Nkhuwa estimated that the refinery’s debts
have demanded an IMF deal as a condition for had reached just under $500mn. “We are clear-
restructuring the debt. ing it. We are paying every week. So you know, it’s
going down,” he told the Hot FM radio station.
Fuel shortages The debt should be cleared completely by the end
Zambia has been struggling with fuel short- of 2021, he said. Zambia is also understood to
ages for months. Serious ones began in the owe close to $730mn to fuel importers. ™

Week 04 28•January•2021 www. NEWSBASE .com P5