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FACTBOX-Political risks to watch in Zambia

Source: Thomson Reuters Foundation - Wed, 20 Mar 2013 13:24 GMT
Author: Reuters
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By Chris Mfula

LUSAKA, March 20 (Reuters) - Rising political tension due to the impending arrest of Zambia's former president Rupiah Banda threatens the relative stability that Africa's top copper producer has enjoyed.

President Michael Sata whose rise to power in 2011 ended two decades of rule by the Movement for Multi-Party Democracy (MMD) has vowed to root out corruption in Zambia.

Frustration at higher prices of the staple maize meal could fuel discontent and spark widespread protests.

Plans to introduce a new law allowing the central bank to monitor foreign exchange flows to curb tax avoidance is likely to unsettle investors.

BANDA ARREST

Parliament passed a motion last week allowing investigators to arrest Banda on corruption-related charges, if there is merit to the charges. Banda was Zambian president 2008-2011.

The decision to strip Banda of his immunity from prosecution could result in violent protests from his supporters.

What to watch:

- Arrest of Banda heightening tension

MAIZE PRICES

Sata said in January he feared riots if maize meal prices remained unaffordable for the majority of people.

But the price of maize meal has remained high in some areas like the Copperbelt where a 25 kg bag is now pegged at 70 kwacha (${esc.dollar}13.01), angering millions of poor whose diet depends on it.

What to watch:

- Signs of discontent at high maize prices leading to riots

NEW LAW ON FOREX FLOWS

In order to improve monitoring, curb tax avoidance and protect the kwacha currency from depreciation, Zambia plans to introduce a new law for the central bank to regulate foreign exchange flows, which is unlikely to bode well with investors.

The Chamber of Mines of Zambia said in February the new law would effectively re-introduce foreign exchange controls and discourage investment flows into the southern African country.

What to watch:

- Investors abandoning some planned projects

ELECTRICITY SHORTAGE

Zambia's Copperbelt Energy Corporation (CEC), the largest supplier of power to mines, in February asked mining companies to ration electricity due to faults at two of the country's power stations.

Mining firms supplied with power by Copperbelt Energy include Konkola Copper Mines owned by London-listed Vedanta Resources and Mopani Copper Mines owned by Glencore of Switzerland.

What to watch:

- Mining firms reducing output due to power shortage

(${esc.dollar}1 = 5.3800 Zambian kwacha) (Editing by Paul Casciato)

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