Energy sector powering growth in Zambia

Hanson Sindowe

In this interview, Hanson Sindowe, Executive Chairman of Copperbelt Energy Corporation, sounds an optimistic note about investment opportunities in the country.

How has the Zambian economy been performing during the past few years?

Zambia’s economy appears to have withstood the worst effects of the global financial crisis reasonably well. Preliminary data suggests that Zambia’s Gross Domestic Product (GDP) grew by a provisional 6.3 percent during 2010, and real GDP growth since 2005 has been a fairly consistent 6 percent per year. Privatisation of governmentowned copper mines in the 1990s relieved the government from covering mammoth losses generated by the industry and greatly improved the chances for copper mining to return to profitability and spur economic growth. Copper output has increased steadily since 2004, due to higher copper prices and foreign investment. In 2005, Zambia qualified for debt relief under the Highly Indebted Poor Country Initiative, consisting of approximately USD 6 billion in debt relief. However, poverty remains a significant problem in Zambia despite a stronger economy. The decline in world commodity prices and demand hurt GDP growth in 2009, but a sharp rebound in copper prices and a bumper maize crop have helped Zambia begin to recover.

Zambia has shown itself to be resilient throughout 2009 and into 2010. Do you think that the level of growth attained over the past 18 months is sustainable?

Well, the 2009 economic indicators were the direct result of pre-planned and funded capital spending programmes, the ramping up of production at Lumwana Copper Mine and an unexpected rise in copper prices. These oneoff items in the GDP picture will exhaust themselves over the coming two years.

Long-term, Zambia must position itself to move onto a more permanent recession proof footing – chiefly by a large focus on infrastructure spending. This will include accelerating progress towards obtaining a sovereign rating to potentially tap into international markets as sources of funding for infrastructure programmes and improving the regulatory environment for investors in the energy sector of the economy.

Do you see the energy sector becoming increasingly important to the Zambian economy?

The mining and energy sector are definitely the two most important drivers of growth in the country, although the energy sector can have a more transformative impact as it has a direct bearing on all avenues of society.

Zambia has abundant hydroelectric resources and meets most of its energy needs from its own hydroelectric stations, with 99.9 percent of produced electricity coming from hydro sources. Installed electricity generation capacity in Zambia is at about 1,789 MW out of which 1,676 is hydropower despite the nation’s undeveloped generation capacity of about over 6,000 MW.

Zambia depends heavily on imported oil. To what extent is energy security a concern for the country?

Yes, there is an overdependence on crude oil imports and this is exacerbated by a deepening energy crunch and accelerated growth in economic sectors like manufacturing, construction, mining, tourism and agriculture. With the ever-rising cost of crude oil and increasing demand for energy, there is substantial demand for cheaper, quicker and environmentally friendly forms of energy that can be produced locally – Zambians are energy hungry people! And there is plenty of activity in this area: geothermal sources are currently being prospected, and the country has also explored resources like woodlands and forests as well as other renewable energy forms such as solar and wind.

Who are the major players in the Zambian energy sector?

Of course, in terms of supplying electricity directly to customers, there is the major parastatal – Zambia Electricity Supply Corporation (ZESCO), but we also have Copperbelt Energy Corporation Plc (CEC) that powers the mines and mining companies, and Lunsemfwa Hydropower Company that is an electricity generation company.

What opportunities are available for prospective investors in Zambia?

Zambia provides an attractive investment destination offering various lucrative investment pportunities in tourism, agriculture, anufacturing, energy and mining, ll within a stable macroeconomic environment.

The power deficit that has been aused by the rapidly growing economy in he past few years provides an opportunity or investors to venture in power generation nd transmission projects. Investment opportunities also exist in the exploration nd production of petroleum resources, oal exploration and mining, and in the evelopment of renewable energy sources hat are supported by the National Energy Policy.

About the author:

Hanson Sindowe, one of Zambia’s most prominent businessmen Hanson Sindowe is the Executive Chairman of Copperbelt Energy Corporation Plc

www.cecinvestor.com

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