In a country where 63% of government revenue comes from two primary resources, copper and cobalt, fluctuations in demand for these products internationally bear consequences.
Zambia is not directly affected by the global financial crisis, since it doesn't have any stake in the troubled Western banks and lending institutions, but it is suffering from decreased copper demand. While surging Chinese demand for primary resources contributed to a boom in Zambia's mining sector, with $900 million in Chinese investments pledged up to 2010, reductions in Chinese demand as a result of the financial crisis have equally far-reaching effects.
The current selling price for copper is $1.69 per pound (October 27, 2008), as weak as it's been in three years. The monthly average for September was nearly double that at $3.17 per pound. Zambia's currency, the Kwacha, has lost 25% of its value to the dollar in the two months I've been here (4,500 Kwacha to the dollar, from 3,500), which bodes well for my spending powers but not for the 13 million Zambians who lack the luxury of foreign currency.
If the impending global recession lasts as long as people are saying it will, American homeowners won't be the only ones to suffer. On Thursday, Zambians will elect a new president to lead the country through these tumultuous times, setting him up for a challenging term indeed.
Thanks to Alex for this story.
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1 comment:
Great write up!
What happens next? I'm inclined to think that when I described the situation as 'doom' I was a little affected by my hangover (aah, the role of alcohol in the construction of crisis). The immediate consequence on the Kwacha is surely a very bad thing, but I wonder if China, which has $2 trillion in foreign reserves http://news.bbc.co.uk/2/hi/business/7676957.stm and no doubt has the political and financial capacity to use government expenditure to get out of trouble, will take advantage of the situation and get itself some more copper to feed its infrastructure-project-hungry belly, hence bringing prices back up again. That said, it's growing monopsony position will be consolidated which probably doesn't bode well for copper prices.
Unfortunately, at the moment prediction is very unwise for the predictor.
P.S. Enjoy the new era of Chinese dominance with this catchy Anglo-Chinese number! http://www.youtube.com/watch?v=Yr5ZWYRaAyw
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