VZCZCXRO4216
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLS #0529/01 1351424
ZNR UUUUU ZZH
P 141424Z MAY 08
FM AMEMBASSY LUSAKA
TO RUEHC/SECSTATE WASHDC PRIORITY 5804
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HQ USAFRICOM STUTTGART GE

UNCLAS SECTION 01 OF 02 LUSAKA 000529 
 
DEPARTMENT FOR AF/S AND EEB/CBA - DENNIS WINSTEAD 
COMMERCE FOR 4510/ITA/IEP/ANESA/OA 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EMIN ECON EINV ENRG EPET EFIN ZA
SUBJECT: ZAMBIA APRIL 2008 ECONOMIC ROUNDUP 
 
REF:  A) LUSAKA 479 
B) LUSAKA 396 
C) LUSAKA 349 
 
¶1. SUMMARY 
-- Inflation Rises to Double Digits 
-- New Mineral Tax Regime Approved 
-- GRZ Revises Mines and Mineral Development Act 
-- GRZ Offers Uranium Mining Licenses 
-- GRZ Phases Out Leaded Fuel 
-- Celtel Offers Shares 
-- LuSe to Automate its Trading System 
 
Inflation Rises to Double Digits 
 
¶2. The Central Statistical Office (CSO) recorded a year-on-year 
inflation rate of 10.1 percent for the month of April, reflecting a 
slight increase from the March rate of 9.8 percent.  CSO Director 
Elfrida Chulu attributed the upward movement to food and energy 
price increases.  Rising fuel costs as well as localized food 
shortages, due to flooding earlier in the year, will continue to 
exert strong inflationary pressure.  By septel (Ref A), Post 
reported in greater detail on the impact of rising food and 
agricultural commodity prices in Zambia. 
 
New Mineral Tax Regime Approved 
 
¶3. The GRZ's new mineral tax regime (Ref C), which includes higher 
royalty and corporate tax rates and introduces a windfall tax, was 
approved by Parliament on April 1.  Although several mining 
companies have threatened to take legal action against the GRZ for 
introducing tax rates that violate the terms of their development 
agreements (Ref B), some companies now appear to have accepted the 
new regime.  Deb Bandyopadhyay, Director of Konkola Copper Mine, 
Zambia's largest copper mine, told reporters:  ?The new taxes are an 
Act of Parliament.  We cannot fight with Government over something 
that is law.  We shall not go to court or renegotiate the new tax." 
Despite high international prices, however, a Mopani Copper Mines 
representative announced that his company will have to reduce its 
workforce in order to meet the new tax obligations.  Other mine 
representatives told Embassy officers that until a statutory 
instrument is introduced, the new tax regime is not completely 
final, and discussions continue with the GRZ. 
 
GRZ Revises Mines and Mineral Development Act 
 
¶4. Parliament also approved a revised Mines and Mineral Development 
Act that terminates all existing mining development agreements and 
forbids the Minister of Mines from entering into future development 
agreements.  The law stipulates penalties to companies that fail to 
pay royalties on time.  It also limits non-Zambian ownership of 
mining enterprises to 49 percent in order to increase local 
participation in the mining sector.  The law calls for the 
establishment of a mining rights registry to facilitate mineral 
exploration, requires investors to provide plans for empowering 
Zambians, reserves industrial mineral mining to Zambians, and 
prohibits the renewal of prospecting licenses. 
 
GRZ Offers Uranium Mining Licenses 
 
¶5. Mines and Mineral Development Minister Kalombo Mwansa told 
reporters that the United Nations International Atomic Energy Agency 
(IAEA) has approved regulations for mining uranium in Zambia. 
Mwansa indicated that the GRZ will incorporate the IAEA guidelines 
into Zambian law by August, after which the Ministry will begin 
issuing uranium mining licenses.  Prospectors include OMEGA 
Corporation Minerals, AIM Resources, Energy Ventures, Equinox 
Resources, Zambezi Resources, African Energy Resources, Aldershot 
Resources, Lithic Metals and Energy, Kiwara Resources, and Globe 
Uranium.  According to press reports, Africa Energy Resources 
intends to produce enough uranium to generate one thousand mega 
watts of electricity annually. 
 
GRZ Phases Out Leaded Fuel 
 
¶6. The GRZ ban on leaded fuel took effect on April 1.  The 
government- controlled and private sector-operated Indeni Refinery, 
which is the principal supplier of fuel products throughout Zambia, 
shifted its production from leaded to unleaded fuel in March 2008. 
Many private sector representatives confirmed that they managed to 
deplete their supplies of leaded fuel by March 31.  To facilitate 
this process, the Energy Regulation Board hosted workshops in 2007. 
This development brings Zambia into belated compliance with SADC 
requirements that SADC member states phase out leaded fuel by 
January 2006. 
 
Celtel Offers Shares 
 
LUSAKA 00000529  002 OF 002 
 
 
 
¶7. Zambia's largest mobile telephone service provider has made an 
initial public offering on the Lusaka Stock Exchange (LuSE) of 1.04 
billion shares, which amounts to 20 percent of its total equity. 
Celtel Zambia, a subsidiary of Zain Group of Companies of Kuwait, 
currently has a 78 percent market share and a subscriber base of 1.9 
million customers.  Celtel is the first cellular company in Zambia 
to list its shares on the LuSE.  According to advisors managing the 
IPO, this share offering is five times larger than any previous 
offering on the LuSE. 
 
LuSE to Automate its Trading System 
 
¶8. LuSE General Manager Beatrice Nkanza announced in Lusaka that her 
company had engaged MIT, a Sri Lankan company, to install an 
automated trading system, which will offer cross listings and real 
time information sharing and will enable investors and brokers in 
outlying areas to engage in Internet trading.  The LuSE, which was 
established in 1993, currently has 17 listed companies. 
 
MARTINEZ