VZCZCXRO2606
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLS #0918 2590544
ZNR UUUUU ZZH
P 150544Z SEP 08
FM AMEMBASSY LUSAKA
TO RUEHC/SECSTATE WASHDC PRIORITY 6264
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUEHBJ/AMEMBASSY BEIJING 0140
RHMFISS/HQ USAFRICOM STUTTGART GE

UNCLAS LUSAKA 000918 
 
DEPARTMENT FOR AF/S AND EEB/CBA - DENNIS WINSTEAD 
COMMERCE FOR 4510/ITA/IEP/ANESA/OA 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD EMIN EINV ECON ZA
SUBJECT: ZAMBIA AUGUST 2008 ECONOMIC ROUNDUP 
 
REF: LUSAKA 302 
 
¶1. (U) SUMMARY 
-- Inflation Increases in August 
-- Government Holds Off on Windfall Tax 
-- Zambian Companies Participate in Chinese Trade Fair 
-- GRZ Develops Railway Infrastructure 
-- Zambian Airways Faces Economic Problems 
 
Inflation Increases in August 
 
¶2. (U) Year-on-year inflation continued its increase in August 2008, 
rising to 13.2 percent (from 12.6 percent in July).  The Bank of 
Zambia attributed the rise to high fuel, transportation, and food 
prices.  This upward movement makes it increasingly unlikely that 
the Zambian Government (GRZ) will achieve its inflation target of 
seven percent by December 2008, as outlined in the 2008 national 
budget. 
 
Government Holds Off on Windfall Tax 
 
¶3. (U) According to September 11 press reports, Secretary to the 
Treasury Evans Chibiliti told the Parliamentary Committee on 
Estimates that the GRZ had deferred the implementation of its new 
windfall tax on the mining sector.  He said the GRZ is reviewing the 
tax, in coordination with the private sector.  Industry experts 
suggest that the windfall tax will be introduced eventually, but at 
a reduced rate.  This will come as some relief to mining companies, 
who have pointed to the windfall tax as the most onerous portion of 
the GRZ's new mining tax regime.  To date, only two companies 
reportedly have made the windfall tax. 
 
 
Zambian Companies Participate Chinese Trade Fair 
 
¶4. (U) Over 90 Zambian companies registered with the Zambia 
Development Agency to participate in the 12th China International 
Fair for Investment and Trade (CIFIT) and Africa Commodities 
Exhibition scheduled for September 8-11 in China.  Their 
participation points to widespread interest in expanding commercial 
ties to China within the private sector. 
 
GRZ Develops Railway Infrastructure 
 
¶5. (U) The GRZ signed a memorandum of understanding with China Rail 
Engineering Corporation (CREC) to construct a 240-kilometer stretch 
of railway that will link mining towns in the North-Western and 
Copperbelt Provinces.  This follows a GRZ decision to cancel its 
railways development agreement with North-western Railway Company, 
owned by former Vice President Enock Kavindele, which failed to make 
progress over the past three years.  CREC constructed the 
Tanzania-Zambia Railways (Tazara) in 1978. 
 
Zambian Airways Faces Economic Problems 
 
¶6. (SBU) The GRZ is exploring ways to hold the privately-owned 
Zambian Airways accountable for a USD 1.6 million debt to the 
National Airport Corporation Limited (NACL), consisting primarily of 
landing fees and passenger taxes.  Zambian Airways' chief executive 
has expressed concerns to emboff of rising fuel costs, disappearing 
profit margins, and high interest rates.  The GRZ publicly announced 
that it will seek a solution that will hold Zambian Airways 
accountable for the liability, without causing insolvency.  Business 
organization representatives have voiced their concern and called 
for GRZ leniency on the airline, which they argue to be integral to 
Zambia's economic growth by offering increased competition in the 
transportation sector. 
 
KOPLOVSKY