Strike threat if wage deal rescinded

There is good news and bad news for Zambia's economic managers who hope to grow the economy by 4 percent this year and cut inflation by four points to 17.9 percent. The good news is that a surplus in the production of maize amounting to 1.2 million mt will result in a drop in food inflation, while an increase in copper and cobalt production - the country's main foreign exchange earner - may see better economic growth figures. Copper production increased by 18 percent to 87,392 mt in the second quarter of the year, from 74,310 mt in the first quarter. Cobalt output climbed by 15 percent, from 742 mt to 854 mt over the same period, according to the Central Bank. The bad news, however, is that a projected 600 billion kwacha (about US $124 million) budget overrun and looming mass action by unions may reverse most of the gains, analysts warn. "The trade union movement insists that they will down tools if the government halts the wage increment and the housing allowances it promised them. If the government has to honour its promise, it may have to borrow money from the open market by selling Treasury Bills and this may see an increase in interest rates, and it may also create instability in the kwacha, therefore reversing most of the good things they (the government) stand to gain if all things were equal," Ignatius Chicha, a senior economic analyst at Citibank Zambia told IRIN. The International Monetary Fund (IMF) has also withheld $100 million meant for Zambia until the government finds a solution to the projected budget overrun, adding to the government's woes. Finance and National Planning Minister Patrick Magande and a visiting IMF team said in a joint statement last week that the increment awarded to public workers had to be revisited if the economic targets in the budget were to be met. But Darrison Chaala, head of the 120,000-member Civil Servants Union of Zambia (CSUZ), has warned that if President Levy Mwanawasa fails to honour the promised wage increase, nationwide industrial action aimed at crippling government would follow. Currently, the average public sector salary is about $60. Union leaders demanded $300 across the board, but earlier this year settled for an increase to $123 for the lowest paid public worker and $220 for the highest paid. The Jesuit Centre for Theological Reflection, which collects monthly cost of living statistics, estimates that a family of six spends $160 on basic household items alone. Mwelwa Muleya, an analyst at the NGO the Foundation for a Democratic Process, says the government has found itself "between a rock and a hard place", as they choose between placating labour or the IMF. "It's a recipe for political upheaval, considering that the political temperature in the country is already highly charged. The government and the IMF should seriously consider the political and economic consequences of industrial strife and reach an acceptable agreement over this matter," Muleya said. The government's decision earlier this year to order luxury cars for its 66-member cabinet, while calling for sacrifice from workers, has not helped its cause. "They (the government) cannot honestly ask us to sacrifice when they are ordering new cars, they have awarded themselves huge perks and they are constantly embarking on expensive foreign trips ... we cannot sacrifice any more, it's their turn," Chaala said. Judging from the performance last week of the Minister of Legal Affairs and Attorney-General George Kunda at a public discussion organised by the Media Institute of Southern Africa Zambia Chapter, the government may not yet grasp the level of dissatisfaction over the issue. In response to a question on the cars, foreign travel and the size of the cabinet, Kunda said: "Those cars are not even comfortable, they are just ordinary cars and I don't see why there's so much talk about them." A member of the public had to tell Kunda that the comfort of the cars was not the issue, but their expense. Ordinary Zambians do have some things going their way. Food inflation has reduced from 35 percent in December, at the height of a drought-induced food crisis that threatened 2.9 million people, to a record low of 21.9 percent, according to Citibank's monthly Treasury Newsletter. Zambians can now buy a 25 kg bag of the staple maize meal for about $5, down from about $8 at the height of the food crisis. But Mwanawasa's battles are not all economic. He is in a constitutional wrangle in parliament, where one-third of the 158 deputies have objected to his decision to appoint a former opposition leader as his vice-president, a move they say is illegal. During the last three sittings of the house the opposition has walked out, leaving only their former party colleagues who have accepted positions in government, and six deputies from the United National Independence Party, now in alliance with the ruling Movement for Multiparty Democracy. "Whichever way you look at the walkouts, one thing for sure is that it creates a crisis of confidence in his (Mwanawasa's) competence to govern and to bring the economy back on track, because it's a distraction he cannot avoid but has to live with," political analyst Robby Makayi told IRIN.