New Zambian President Michael Sata fired his respected central bank governor on Thursday and his new mines minister floated plans to boost tax receipts from mining companies, rattling investors in Africa's biggest copper producer.
But the appointments of Alexander Chikwanda, an economist with a long track record in government, as finance minister and Guy Scott as vice-president may calm fears of radical policy shifts under Sata, who was sworn in on Friday.
Scott, a Cambridge graduate with a doctorate in cognitive science, is a former agriculture minister and is credited with steering the southern African country out of a food crisis after a drought in the early 1990s.
Central Bank governor Caleb Fundanga, who according to Citibank still had six months to go on his contract, informed staff of his dismissal in an email obtained by Reuters.
This serves to advise you all that my appointment as governor of the Bank of Zambia has been terminated with immediate effect, he said in the memo, dated Sept. 28.
Citi said the dismissal of Fundanga, who had been central bank governor since 2002 and was known for his openness with foreign analysts and investors, may set alarm bells ringing among those worried about shifts in policy.
We are concerned that this surprising announcement may signal that President Sata wants a quick change in monetary policy in Zambia, bearing in mind that his party has been very critical of high interest rates, Citi said in a note.
Although it remains to be seen who the new BoZ Governor will be, we are worried about a drastic and too quick a shift in monetary policy.
Earlier, new Mines Minister Wilbur Simusa said the tax Zambia was getting from mining companies was not enough and might need to be reconsidered -- remarks seemingly at odds with Sata's campaign assurances that he would not bring back a mining windfall tax.
The money we are getting from the mines in form of tax is not adequate and we are going to sit down with them and discuss so that we reach a win-win situation, said Simusa, a mine engineer.
Copper mining is Zambia's economic mainstay and any plans to increase the tax could affect the target of doubling annual copper output to 1.5 million tonnes by 2016.
Copper accounts for three-quarters of Zambia's export earnings, but the mining industry contributes only about 10 percent of its tax revenue.
Former President Rupiah Banda told Reuters in March audits had revealed that the Zambian mining sector owed up to $200 million in unpaid taxes.
Banda's administration had already begun to boost tax revenue from mining companies and a more even distribution of the nation's mineral wealth could improve social stability.
While attempts to extract back taxes from miners may signal continuity with Banda, it does not mean the industry will like it. A well-known anti-corruption campaigner, Sata has also questioned copper export data and some experts say his concerns are legitimate.
Miners operating in Zambia include Canada's First Quantum Minerals, London-listed Vedanta Resources, Glencore International AG and Metorex of South Africa.