The main opposition candidate’s win in Zambia’s just-ended elections will lead to a change in policy towards more business-friendly reforms over the coming quarters, Fitch Solutions predicts.

Zambia’s Hakainde Hichilema, leader of the opposition United Party for National Development (UPND) won the presidential race with 59.4 per cent of the counted votes. The incumbent, Edgar Lungu of the patriotic Front (PF) only won 38.3 per cent of the votes. This comes after a two times victory over Hichilema in both 2015 and 2016 elections with a thin margin.

“We expect that the victory for opposition candidate Hakainde Hichilema in Zambia’s August 12 elections will lead to a change in policy towards more business-friendly reforms over the coming quarters.

“A strong parliamentary majority for the United Party for National Development, formerly in the opposition, will allow the government to pass legislation smoothly.”
Fitch Solutions

While Fitch Solutions expect that the content and predictability of policy will improve under Hichilema’s administration, it currently regards Zambia’s policy environment as fluid.

The research firm has for the mean time scored Zambia moderately high under the ‘policy continuity’ component of its Short-Term Political Risk Index (STPRI). Zambia now has a score of 45.0 out of 100, until more concrete policy measures emerge once Hichilema becomes President.

That said, Fitch Solutions anticipates tailwinds for reforms following this victory. Accordingly, with a comfortable majority in the National Assembly, this will enable Hichilema to pursue a business-friendly policy agenda without major obstacles, Fitch Solutions asserts.

For this reason, Fitch Solutions has revised up Zambia’s score in the ‘policy-making process’ component of its STPRI from 56.7 to 60.0, causing the overall STPRI score to rise from 52.5 to 52.7.

Basis for Fitch Solutions’ predictions on Zambia’s policy reforms

During his campaigns, Hichilema’s pledges have included: speeding up talks with foreign creditors to restructure of Zambia’s public external debts; agreeing a financial programme with the IMF to ease pressure on public finances; and a renewed fight against corruption.

Considering his success as a businessman, Fitch Solutions indicates that this and his pledges to improve Zambia’s business environment, taken together, will be viewed positively by investors.

Also, Fitch Solutions avers that Zambia’s risks to social stability will linger in the near term. During the build up to the vote, clashes emerged between PF and UPND supporters in Lusaka.

A disturbing situation which the government responded by deploying the army to the capital. Lungu had already declared the election ‘not free and fair’ halfway through vote counting due to some alleged episodes of violence against some PF supporters.

Fitch solutions further says about Lungu, “while his latest intentions will still have seven days to file a legal compliant with the Constitutional Court. The Possibility of Lungu legally challenging the validity of the elections could exacerbate risks of further clashes…

“Against this backdrop, we have decided not to raise Zambia’s low score of 35.0 in the ‘social stability’ component of our STPRI yet.”
Fitch Solutions

Similarly, Fitch Solutions further notes that Hichilema’s presidency could also alter the country’s long-term political outlook for the better. Furthermore, there is no precedent for a UPND parliamentary majority or a Hichilema presidency, Fitch Solutions adds.

Fitch Solutions indicates that it has left Zambia’s score in our Long-Term Political Risk Index (LTPRI) at 51.8 for now, but more likely to review it once Hichilema’s stance on reforms becomes clearer.