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NDC deregistration seen as an attempt to reinforce PF’s hold on power – EIU

THE National Democratic Congress’ deregistration was seen as an attempt to reinforce the ruling PF’s hold on power, says the Economist Intelligence Unit.

The EIU predicts that simmering popular frustration over economic and political grievances could quickly turn violent in the run-up to the 2021 elections.

In its latest country outlook for the period, the EIU states that President Edgar Lungu is expected to retain power in elections scheduled for August 2021.

“Zambia will, however, face substantial threats to underlying political stability in 2019-23 and simmering popular frustration over economic and political grievances, which could quickly turn violent,” it states.

“The run-up to the 2021 legislative and presidential elections will be an especially unstable period, during which a vulnerable government will narrow the political space aggressively and escalate crackdowns.”

The report notes that last month, the Registrar of Societies banned the National Democratic Congress (NDC), “a small opposition party, which broke away” from the PF in 2016.

“The Zambian authorities are frequently accused by opposition parties of influencing the agency’s decisions. The NDC unsettled the PF in April by winning a by-election for the Luanshya parliamentary constituency [Roan] in Copperbelt Province, a PF stronghold. Its deregistration was therefore seen as an attempt to reinforce the ruling party’s hold on power,” reports the EIU.

“Such moves will undermine political stability by feeding into public fears that Zambia is staggering towards autocracy, exacerbating underlying social tensions.”

It further states that another layer of potential risk emanates from the burgeoning influence of China in Zambia’s affairs, with growing popular suspicion that to secure debt relief, the government plans to sell key state assets to China.

The report adds that by the time of the elections in 2021, the possibility of Zambia being caught in a debt trap – a loss of economic sovereignty to creditors – will be a key concern among voters.

“With high debt-servicing costs, fiscal space will also have been tightened, causing salaries to be frozen and subsidies cut. … The Economist Intelligence Unit therefore expects the elections to be neither free nor fair, with other repressive actions likely,” reads the report.

“The United Party for National Development (UPND), and other opposition parties, will have to surmount the challenge of an uneven playing field. The UPND’s candidate (likely to be its current leader, Hakainde Hichilema) will be a formidable threat to Mr Lungu in the presidential election. However, the party has lost its way since the 2016 election, and with the government likely to make maximum use of incumbency advantages, our baseline forecast remains for Mr Lungu to win in 2021.”

The report adds that Zambia’s economic growth for the period 2019-23 will be considerably below its long-term potential.

“Most significantly, higher mining royalty rates, a scrapping of value-added tax (VAT) rebates and the forced liquidation of KCM will hold back investment in the vital copper mining sector,” states the EIU.

“The fallout from higher operating costs, low copper prices and problems facing KCM have reached a scale whereby a contraction in the mining sector is forecast in 2019.”

The EIU forecasts that with monetary conditions tighter, agricultural production hit by drought and a weakened mining sector, economic growth will be 0.8 per cent in 2019.

“That we expect a positive rate at all is only because of 2.8 per cent year-on-year growth in the first quarter. In August the government was forced to introduce a cap on the price of maize at ZK2,600/tonne (US$198/tonne) after a drought. Low prices will add to the negative impact on agricultural output caused by dry weather,” it noted. “Drought has likewise affected power generation at the Kariba hydroelectric dam, forcing Zesco, Zambia’s state utility company, to import power from South Africa – at an estimated US$21m per month – and pass the cost along to consumers. It was already restricting power to consumers nationwide (although these power-supply gaps do not yet affect industry). Volatile and rising inflation affecting consumers and producers (with electricity tariff hikes expected in late 2019) will affect the services sector.”

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