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Zambia |
ECONOMY
A stifled industry, steep unemployment, unprecedented poverty, shallow productivity, falling metal earnings. Can President Levy Mwanawasa do anything to overcome the situation?
As the dust from the controversial presidential election on 27 December 2001, still continues to cloud the local atmosphere, Zambia’s third president faces his stiffest challenge — the economy. After a decade of implementing an IMF/World Bank-designed Structural Adjustment Programme (SAP), Zambia’s economy has, largely, gone to the wall.
The statistics speak for themselves. On average, GDP has expanded by a paltry 2% per annum in the last nine years when the 3.5% population annual growth rate is taken into account. Meanwhile, the domestic industry is limping. Output is less than 30%, while exports have declined drastically — indicating low competitive levels of local producers.
Peter Armond, Chief Executive Officer at the Zambia Association of Chambers of Commerce and Industry, says soaring tariffs on electricity, transport and fuel, compound industry’s woes. High commercial bank interest rates, averaging 50%, and double-digit inflation, further increase production costs, regarded as the highest in the sub-region.
For example, local producers spend US $0.10 on transport per tonne per kilometre compared to South Africa’s rate of $0.02 per tonne per kilometre, according to studies by the Zambia National Farmers Union. At the same time, the pump price of diesel in Zambia is nearly three times higher than in South Africa. For many ordinary Zambians, life is unbearable. Per capita income has slumped to less than US $200 from around $500 in 1991.
Promises
President Mwanawasa faces the challenge to create new jobs, fight poverty, inspire investor confidence and raise production to reverse the dominant bias towards trading. Performance in these areas will depend, partly, on the capabilities of Mwanawasa’s ministers, including Emmanuel Kasonde, the finance minister, who is expected to steer the government’s economic policy, towards improving agriculture and manufacturing.
But Mwanawasa’s broad economic agenda is mostly unknown —perhaps understandable in an election campaign that concentrated, not so much on issues, as on personalities.
To his credit, President Mwanawasa appears prepared to deviate, albeit modestly, from the Movement for Multiparty Democracy (MMD)’s misguided economic orthodoxy.
To create employment and food security, he promises to provide subsidies, particularly to agriculture, despite the party’s past record of frowning on such incentives, and to provide incentives to the manufacturing sector.
Can Mwanawasa deliver?
Some stakeholders are sceptical. They say a rehash of the old party policies will not work; a new blueprint is required to resuscitate the economy. «We need to start from scratch, in order to build this country,» says losing presidential candidate, Yobert Shamapande, a development economist. «There is no economy to talk about now.»
Former president Frederick Chiluba has insisted that the austerity measures adopted by the MMD have been a success, arguing that the SAP was the only alternative.
«The reforms have done their work,» Chiluba said. «They were a choiceless choice.» He claimed that Zambia has undertaken the most successful privatisation programme in Africa, particularly the complete sale of the country’s mining units.
Venkatesh Seshamani, professor of economics at the University of Zambia, however, says the SAP has done more harm than good.
Statistics bear witness to this statement. Life expectancy, estimated at 54 in 1990, fell to 35 in 2000. Formal employment is down, too, as a result of worker cutbacks and the collapse of some privatised companies. At least 60,000 jobs are estimated to have been lost since 1992. Foreign reserves tumbled to US $185.8 million by last November, according to the Central Bank, from nearly twice that amount in 1989.
«If Zambia was a company, it would have been closed a long time ago. This is a bankrupt country,» Seshamani says. It is not just the abject poverty that Seshamani finds appalling, but the manner the reforms have been implemented. «The pace and the sequencing were wrong,» he argues. «Stabilisation and liberalisation taking place simultaneously has been disastrous.»
Such a gloomy assessment deeply contradicts prospects of renewal, held out by the MMD government in 1991, riding the crest of a popular wave acquired at the expense of the former United National Independence Party (UNIP) regime.
Disturbing portents
Mwanawasa, a 53-year lawyer-turned-politician, might have been lucky to win the presidency; but the economy is unlikely to make his tenure comfortable. Already, the portents are disturbing.
Zambia continues to rely heavily on copper mining for her economic survival. Output has improved since the mining units were privatised. However, falling international prices have compelled some of the country’s major mining firms to suspend further expansion programmes.
Anglo-American Corporation has withdrawn its majority shareholding in Konkola Copper Mines (KCM), a joint venture that operates three mines in Zambia, including Nchanga, the country’s largest open-pit mine that accounts for nearly half of Zambia’s copper output.
This is on the back of weak metal prices compounded by operational difficulties. Anglo’s pull-out is widely feared to result in the closure of KCM, putting on the line the jobs of at least 11,000 workers directly employed by the firm, and thousands others in indirect employment.
A volatile political climate, resulting from opposition-inspired mass protests against Mwanawasa’s electoral victory (27 December 2001), and an anti-Western line adopted by the new President, could also raise security fears, leading to capital flight and suspension of foreign investment plans. Zambia’s precarious financial position could further be worsened by a probable halt in balance of payment (BOP) support — particularly from the European Union, a major BOP provider — as a result of donor concerns about the conduct of the December elections.
Whether the new government’s economic approach will placate the international lenders, remains to be seen. The government appears intent on implementing a number of reforms to turn the battered economy around, including the elimination of corruption. Its 2002 Budget announced on 1 March primarily aims to achieve: Real GDP growth rate; a lower annual inflation; to limit budget deficit; to increase foreign international reserves.
Certainly, Zambians will be keenly watching whether their new President can overcome what appears to be a sick economy.
- Wilcliff Sakala, Zambia, October 2002 — © Reproduction authorised, with usual acknowledgment
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