VZCZCXRO6857
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLS #0493/01 1951246
ZNR UUUUU ZZH
R 141246Z JUL 09
FM AMEMBASSY LUSAKA
TO RUEHC/SECSTATE WASHDC 7146
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HQ USAFRICOM STUTTGART GE
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC

UNCLAS SECTION 01 OF 02 LUSAKA 000493 
 
DEPARTMENT FOR AF/S AND EEB/CBA - DENNIS WINSTEAD 
COMMERCE FOR 4510/ITA/IEP/ANESA/OA 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG ETRD EMIN EINV ELAB ECON ZA
SUBJECT: ECONOMIC ROUNDUP 
 
REF: A) LUSAKA 73 
B) 08 LUSAKA 302 
 
LUSAKA 00000493  001.2 OF 002 
 
 
¶1. SUMMARY 
-- June Inflation Rate Declines Marginally 
-- GRZ Invites Bids For Oil and Gas Exploration 
-- Munali Nickel Mine Resumes Operations 
-- Zambezi Airlines Acquires Two Boeing Aircraft 
-- Horticultural Sector Performance Falls 
-- GRZ Reviews First National Development Plan 
 
June Inflation Rate Declines Marginally 
 
¶2. The year-on-year inflation rate declined marginally from 14.7 
percent in May 2009 to 14.4 percent in June 2009.  The Central 
Statistical office attributed the decline to reduced prices of some 
food products such as the staple corn meal.  The Minister of Finance 
asserted on July 13 that year-on-year inflation by end 2009 would be 
10 percent. 
 
GRZ Invites Bids For Oil And Gas Exploration 
 
¶3. The GRZ has invited bids for 23 oil and gas exploration licenses 
in Northwestern, Western, and Eastern Provinces.  Bidders are 
required to pay a non-refundable fee of USD 10,000 (Kwacha 
equivalent) in advance of the August 7 closing date. Separate from 
the application fee is the mandatory information packages, which can 
be purchased for USD 10,000 each from the Zambian Geological Survey 
Department or Ministry of Mines headquarters.  The Director of 
Geological Surveys Kenneth Liyungu told Emboff that the response is 
positive from local and international firms. 
 
Closed Munali Nickel Mine Resumes Operations 
 
¶4. Munali nickel mine, which owner Albidon put under care and 
maintenance in January, will resume operations immediately following 
a seven million dollar recapitalization and restructuring payment 
from Chinese Jinchuan Group, China's largest nickel producer, which 
has a life-of-mine off-take agreement with Albidon.  Munali nickel 
mine was commissioned in 2008 and is important to the GRZ's efforts 
to diversify the mining sector from over-reliance on copper. 
 
Zambezi Airlines Acquires Two Boeing Aircraft 
 
¶5.  Zambezi Airlines, which started operations in May 2008, leased 
two Boeing 737-500 planes from General Electric for its regional 
flights to Johannesburg and Dar es Salaam.  The airline will operate 
daily flights between Lusaka and Johannesburg and four flights 
weekly between Ndola and Johannesburg.  The company chairman, 
Maurice Jangulo, announced in Lusaka during the launch of regional 
flights that the airline intends to list shares on the Lusaka Stock 
Exchange (LuSE) within the next three years. 
 
¶6. (SBU) Zambezi Airlines has formed an alliance with Proflight 
Commuter Services Limited, a local flight company offering charter 
and domestic flights.  Under the agreement, Proflight will run all 
domestic flights under the branding of Zambezi Airlines, while the 
latter will only operate regional flights.  The deal is a blow to 
competition in the already overpriced domestic market. 
 
¶7. (SBU) According to Embassy contacts, Maurice Chaaba Jangulo has a 
majority sharehold in Zambezi Airlines, together with airline chief 
executive officer Cornwell Muleya (who is married to the niece of 
prominent politician and chief government whip Vernon Johnson 
Mwaanga) and President Rupiah Banda (who is using his eldest son 
James Banda as a front).  Maurice Jangulo was previously managing 
director of Omnia Fertilizer and moved on to establish Nyiombo 
Investment Limited. Nyiombo and Omnia are the main suppliers and 
distributors of fertilizer and other farming inputs under the 
Ministry of Agriculture Fertilizer Support Program through single 
sourcing, a position that has continued to raise concerns amongst 
other players in the market and donor community. 
 
Horticultural Sector Performance Falls 
 
¶8. Zambia Export Growers Association (ZEGA) Chief Executive Officer 
Luke Mbewe announced at the African Caribbean and Pacific - European 
Union conference that the horticultural industry in Zambia has 
fallen by 50 percent due in part to high air freight costs, 
inadequate electricity supply, and the global economic crisis.  He 
pointed out that jet fuel in Zambia is about 40 percent higher than 
the regional average.  According to Mbewe, these constraints have 
led to a drop in employment from 12,000 in 2005 to 6,000 in the 
commercial horticultural industry. 
 
 
LUSAKA 00000493  002.2 OF 002 
 
 
GRZ Reviews Fifth National Development Plan (FNDP) 
 
¶9.  The GRZ held a mid-term review of the FNDP, which covers the 
years 2006-2010, to evaluate the performance of the plan, identify 
challenges, and determine a way forward.  A review of the economic 
sector showed a decline in agricultural growth for three consecutive 
years (from 2.2 percent in 2006 to 0.4 percent in 2007 and 0.2 
percent in 2008) due to unfavorable weather conditions, late 
distribution of inputs especially fertilizer under the GRZ's 
"Fertilizer Support Program", and livestock diseases.  However, 
crops such as rice, sunflower, groundnuts, and mixed beans 
registered a favorable growth during this same period. 
 
¶10.  Former Ministry of Agriculture and Cooperatives (MACO) 
Permanent Secretary Bernard Namachila revealed that 76 percent of 
the MACO budget goes to support the Food Reserve Agency (FRA) and 
Fertilizer Support Program (FSP).  He also mentioned that the 
agriculture sector suffers from policy reversal by Government. 
Namachila cited as an example the Ministry of Finance's transfer of 
MACO's contract to manage the irrigation fund from Finance Bank to 
the Citizens Economic Empowerment Commission.  (Over the course of 
the FNDP review, the GRZ determined to move the fund back to Finance 
Bank.)  The overall performance of the agriculture sector was deemed 
unsatisfactory and therefore unlikely to meet the FNDP targets. 
 
¶11.  The overall performance of the energy sector from 2005-2008 was 
considered unsatisfactory with growth registered at negative 1.2 
percent at the end of 2008.  Ministry of Energy and Water 
Development Permanent Secretary Peter Mumba blamed controlling 
officers for the GRZ's overall poor performance due what he termed 
misplaced priorities such as spending monthly allocations on fuel 
allowance, buying office furniture and hosting workshops instead of 
priority sectors of the ministry. 
 
BOOTH