Zambia Says Some Copper Sales to China to Be Settled in Renminbi

Zambia said Chinese buyers of its copper exports will start paying for some of their metal purchases in renminbi from next year, part of a growing move among African nations to use the Chinese currency instead of the dollar.

The plan will begin with Chinese producers, which already pay their Zambian taxes in renminbi, Denny Kalyalya, the central bank governor in Africa’s second-biggest copper exporter, said in an interview Tuesday on the sidelines of the International Monetary Fund Annual Meetings in Bangkok.

“That’s the starting point,” he said. “We also hope that new lending could also be denominated in renminbi. That would help a great deal.”

Zambia is in talks with China to do a currency swap, and it’s crucial to have sufficient flows for it to make sense, Kalyalya said. Mines selling their copper in renminbi could help crystallize those plans, he added.

Selling copper to Chinese buyers using yuan could cut currency conversion costs of using the dollar, and would also help reduce exchange rate volatility for Zambia’s kwacha, Kalyalya said.

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African countries are making greater use of the renminbi in their dealings with China. A growing list of African lenders are signing on to connect with China’s Cross-Border Interbank Payment System, Beijing’s yuan-based alternative to the SWIFT international payment system.

Kenya has swapped Chinese debt from dollars into yuan. The conversion will save Kenya $215 million annually in debt service, with interest rates on the new yuan loans dropping to as low as 3%.

Ethiopia is also converting a portion of its debt to China into renminbi. Central Bank Governor Eyob Tekalign said in an interview Wednesday that the process was ongoing, even as talks were concluded for the deal.

He declined to say how much of Ethiopia’s $5.4 billion debt to China was being included or when the process would be finalized.

“It’s really something we’re still working on,” he said on the sidelines of the IMF meetings.