Zambia is in the process of implementing project to reach 66% electrification by 2030, and its mining sector is contributing a substantial portion. So is it any wonder that China is taking part?
The Zambian government opened the mining industry to foreign investment in 2000, and since then the mining industry contributes approximately 50% of the country’s generated revenue. A recently released report from Frost & Sullivan, the “2010 Updated Overview of the Zambian Electricity Industry,” said that the mining industry’s contribution to the country’s GDP was approximately $1.30 billion in 2009 and is estimated to hit $2.57 billion by 2015. “Robust industrial growth and consequently, the higher need for electricity have brightened the prospects of the country’s electricity industry,” said Frost & Sullivan Energy & Power Systems Research Analyst Salima Zyambo.
The CIA World Factbook notes that the lack of “economic diversity subjects Zambia to fluctuations in copper prices and in the weather.” The downturn of the global economy and world commodity prices hurt the southern African nation’s GDP growth in 2009, but a sharp rebound in copper prices and its maize has helped it recover. Frost & Sullivan said that despite market boosters, low foreign direct investment (FDI) and electricity tariffs could restrict the market’s expansion. “The fast-paced growth of Zambia’s economy is expected to cause power demand to outstrip supply, which will make it imperative to increase the country’s installed capacity,” Frost & Sullivan said in a release.
However, China is continuously investing in the country. China’s ExIm Bank and the Development Bank of Southern Africa (DBSA) agreed to finance Zambia’s state-owned power utility Zesco Ltd. for the Kariba North Bank hydropower station. The Chinese investment bank will lend $315 million with the DBSA providing $115 million for the 360-MW dam. In addition, Zambia signed an agreement with two Chinese companies to build the 600 MW Kafue Gorge Lower hydropower plant. China Development Bank will fund a JV with Zesco Corp., China Africa Development Fund, and Sino Hydro with a capital infusion of an initial $1 billion. Construction is expected to begin in April 2011 with completion to follow six years later.
And while China may be helping to diversify Zambia’s energy mix, China is also Zambia’s largest exporter coming in at 21.37%. While many might contest China’s ambitions throughout the African continent, it must be recognized that the Asian superpower is attempting to help other sectors progress and isn’t just offering financial aid.
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