Zambia: Opposition leader unexpectedly wins landslide victory in presidential election

Event

Opposition leader Hakainde Hichilema of the United Party of National Development (UPND) was declared the winner of Zambia’s presidential elections held on 12 August. Hichilema won 59% of the votes, against 38% for the incumbent President Edgar Lungu of the Patriotic Front (PF), with a margin of about 1 million votes. Also in the simultaneous legislative election, the UPND secured a sweeping victory. Notwithstanding rising authoritarianism under incumbent President Lungu and the worst economic crisis in decades, the election outcome marks Zambia’s third democratic power transition in three decades. Despite the tense campaign, voter intimidation and several events of political violence, Lungu and his PF seem prepared to comply with constitutional provisions for a peaceful transfer of power. However, should the PF nevertheless challenge the result and call for protests, the outlook could turn on the downside. 

Impact

Since President Lungu came to power in 2015, corruption, oppression and human rights abuses increased significantly, while double-digits inflation raised the cost of living. Economic mismanagement, volatile commodity prices and unsustainable borrowing plans for a series of opaque Chinese-built infrastructure projects pushed the country into a debt crisis. In fact, nominal external borrowing tripled during that period, raising the total public debt stock from merely 36% of GDP in 2014 to 117% in 2020. Negotiations over an IMF financial support programme have been stalled for years due to lack of efforts towards fiscal discipline and debt transparency, especially with regard to Chinese loans to state-owned entities. In November 2020, Zambia became the first African country to default on its external debt since the outbreak of the Covid-19 pandemic. Engaging in an IMF programme remains a key requirement for restructuring the USD 12 billion debt owed to external creditors (with China being the major creditor). 

Newly elected President Hichilema is a businessman, viewed as more market-oriented, with the ambition to put the country’s public finances back on a sustainable path while regaining investor confidence in Africa’s second largest copper exporter. As a reaction to the election result, the Zambian kwacha strengthened while the sovereign dollar bonds rallied. During the campaign, Hichilema promised to tackle corruption, open serious talks with the IMF, restore financial market access and review disruptive policies like those that enabled the seizure of mines. Hichilema’s UPND government is expected to finalise an IMF reform programme within 6 months and activate Zambia’s debt restructuring negotiations under the G20’s Common Framework for Debt Relief beyond the Debt Service Suspension Initiative (DSSI). Credendo classified Zambia in the highest MLT political risk category 7/7 in May 2020 (coming from 5/7 in 2014), while the ST political risk classification has been in category 6/7 since 2019 (coming from 3/7 in 2014). The recent political shift improves Zambia’s outlook again following 6 years of successive downgrades.

Analyst: Louise Van Cauwenbergh – l.vancauwenbergh@credendo.com