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How Africa’s newest President plans to dig a copper powerhouse out of a mountain of debt

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Africa’s second-biggest copper producer, Zambia, is buckling under billions of dollars in debt, and its new President has a plan to get out from underneath it: stop borrowing so much, and mine harder.

Hakainde Hichilema was elected last month—a triumph that followed five failed attempts at the presidency, and a 2017 spell behind bars for “treason” after the tycoon failed to give way to the motorcade of now–former President Edgar Lungu.

The new President entered office with the task of finding out just how much debt the country has. With its GDP shrinking nearly 5% in 2020, Zambia last year became the first African country to default during the pandemic. This was partly owing to depressed copper prices in recent years, which made debt-servicing harder, but it was also a function of Zambia’s level of borrowing under China’s Belt and Road infrastructure initiative. Zambia’s debt pile is officially $12.7 billion, with around 30% of its external debt being owed to China, but Hichilema and others suspect it’s actually bigger.

Climbing out from under that pile will require restructuring, which will in turn require transparency about the size of the problem, plus a degree of goodwill: Analysts expect to see lenders agreeing to widespread haircuts. But the effort would be greatly aided by the “accelerated economic recovery” that Hichilema, whose liberal party is called the United Party for National Development, is promising.

“Our administration commits itself to immediately stop excessive public expenditure as a way of halting further accumulation of debt,” the new President said Friday, opening a new session of the Zambian Parliament for the first time. He promised better reporting of debt in the future so as to “ensure full disclosure and strengthen public investment management.”

“Harnessing the opportunities available in the mining sector will be crucial to our economic revival,” Hichilema said. “We will ensure increased copper and other mineral production, as well as maximizing the benefits from various minerals such as gold, cobalt, manganese, among others. We will also promote further exploration, as well as value addition.”

The finance ministry wants to boost the country's annual copper output from 882,000 tons last year to 2 million tons by 2026, which would propel Zambia to the No. 3 spot in copper production, behind Chile and Peru.

Copper demand

With copper prices up 26.6% year to date, a rise that has bested gold, silver, and platinum, a copper boom will help Hichilema’s recovery plan. Copper is in increasing demand these days, particularly owing to the rise of renewable-energy infrastructure and electric vehicles, and this increased demand has coincided with a lack of supply resulting from an underinvestment in copper that extends far beyond Zambian borders.

But Lungu’s government had a fractious relationship with mining giants such as Glencore, a relationship that Hichilema will have to work to heal.

In April 2020, when the COVID-19 pandemic struck and copper prices were low, Glencore declared force majeure and temporarily shuttered its mines in Zambia’s Copperbelt province. Lungu’s government responded by threatening to take away the company’s mining license, and Glencore ended up selling the government its majority stake in the Mopani mine for $1—in the process saddling it with an extra $1.5 billion in debt.

On Friday, Hichilema signaled greater stability. “To ensure predictable and sustained investment in the sector, government, in consultation with stakeholders, will review the mining tax policy framework,” he said. “This is aimed at introducing a stable mining tax regime necessary to increase investment in the sector. We will ensure that our people receive their fair share from our mineral wealth.”

The mining sector greeted Hichilema’s words warmly. “This election was a game changer for the industry,” Chamber of Mines CEO Godwin Beene told Reuters.

Green energy

Hichilema also said his government would step up Zambia’s own transition to green energy, and not only by using water. Just before the August election, Lungu green-lit a $2 billion hydropower project, to be built by China’s Sinohydro using Chinese funding, but Hichilema is keen on alternatives that will “cushion the country from the negative effects of climate change on hydroelectricity generation.”

“We shall make Zambia a global beacon for environmental sustainability and indeed a champion of the green economy,” he said. “We must safeguard ecosystems, protect natural habitats, and keep carbon out of the atmosphere.”

Hichilema’s reestablishment of Zambia’s environment ministry could also affect the mining industry, with environmentalists saying they expect his government to revoke mining licenses granted in national parks and other sensitive spots under the previous administration.

Hichilema, a former “cattle boy” who is these days one of Zambia’s biggest ranchers—though his wealth also comes from work in finance, property, and other sectors—is also pushing hard for reform in the agricultural sector. He wants to diversify crop production that is currently heavily focused on corn; build out breeding centers for livestock; and boost the aquaculture industry.

This story was originally featured on Fortune.com