The Need for Radical economic Reforms for Zambia
By Choolwe Muzyamba
Zambia, a country blessed with abundant natural resources and arable land, plenty of water bodies and favorable climatic conditions yet its population is still entangled in a vicious circle of unimaginable suffering. Poverty in Zambia is still a huge challenge; most of the population is still struggling to live a decent life. With the soaring food prices, housing, electricity and water bills. One wonders what the significance of the much talked about economic growth is,which is estimated at 7%GDP for the year 2011, making Zambia one of the fastest growing economies in the world.
Zambia’s Rosy Economic Indicators
Zambia’s GDP in 2010 was 6.6% indicating a growth in GDP from 6.4% in 2009. Agriculture, tourism, construction, manufacturing and mining are driving growth which is expected to expand by 6.5% and 6.7% in 2011 and 2012 respectively.
Overall, primary industries performed well in 2010 with agriculture growing by 7.6%. In 2011 and 2012 agriculture growth is projected at 3.2% and 4.6%, respectively. The largest contribution to 2010 growth came from maize production. The harvest reached 2.8 million tonnes compared to 1.9 million tonnes in the previous season. Zambia is Africa’s biggest copper producer and the mining sector’s big recovery was due to improved global copper prices. The sector is estimated to have grown by 7.4% in 2010.
Manufacturing, which historically has contributed about 10% of GDP, grew by 2.5% in 2010. The government has made substantial progress in infrastructure construction and has invested in manufacturing through the establishment of Multi Facility Economic Zones. Tourism, which was hard hit by the financial crisis, is expected to rebound strongly with estimated growth of 25% in 2010. Construction was expected to expand by 10% in 2010 and maintain double-digit growth in the next few years.
Monetary policy focused on sustaining stability by maintaining single digit inflation while ensuring adequate liquidity for the growing economy. Annual inflation declined to an estimated 7.9% at the end of 2010, down from 9.9% in December 2009. Annual food inflation declined sharply from 8.0% in December 2009 to 2.8% in September 2010.
THE REAL PICTURE ON THE GROUND
The analysis by FSRP shows that the number of poor rural households in Zambia went up by about 1%, from 88.7% to 89.6%. The authors conclude that, “the results indicate the challenges that Zambia faces in her poverty reduction quest recording very minimal poverty reduction over the seven years period”.
Income inequality also remains very high in Zambia. Levels of inequality remain very high, with the Gini coefficient, having increased from 0.64 in 2001 and 2004 to 0.67 in 2008. The conclusion is inescapable,
The gains from general economic growth in the country are not helping close the inequality gap. If these findings are corroborated by other studies then they have very important policy implications. The question remains, what kind of investments are required to close the inequality gap and raise the majority of rural Zambians out of poverty.
Zambia’s Cosmetic Mining Sector
All the mines in Zambia are in foreign hands, yet 80% of Zambia’s revenue comes from the mining industry. So in short, Zambia’s economy is largely run and controlled by foreigners. Towns housing the mines are in ruins, infrastructure is in a dilapidated state and the local people are living in abject poverty yet on a daily basis their land produces millions of dollars.
Zambia has, till now, shied away from benefit sharing. This has resulted in the country’s richest regions (Copper belt, Solwezi, Sinazongwe, Maambaect) – holding most of its minerals – becoming the homes to extremely poor people. Mining in Zambia has, contrary to claims, done little for the development of the mineral-bearing regions of the country. This has led to this disturbing situation am calling rich lands, poor land owners!
1) We need to fight the foreignization of Zambia’s economy. We need a mining policy which aims to strike a balance between making the best use of the economic benefits for the country and Zambian citizens, while allowing investors to earn competitive returns.
2) Mining industry should be run by a partnership of Government, Local Investors and Foreign Investors
3) A law should be passed to force Mining companies to not only rehabilitate existing infrastructure but also construct new roads, schools and hospitals. If a tiny country like Guinea can have a Mining Act dictates that owners of private land will receive 20 per cent of the total royalty paid for mining leases on the land. Why can’t we do the same? South Africa’s Mineral and Petroleum Resources Development Act includes provisions that give local communities powers to benefit substantially from mining projects. And Peru follows a system of royalty tax, payable to the Central government, which is then distributed among local administrations and communities. Surely, towns housing mines should be seen to benefit.
4) There is need to renegotiate the current tax regime and have one which is more inclined to benefiting Zambians as opposed to one which shows our fear of losing foreign investors.
5) Government should have a substantial hand in the running of the economy (We need to do away with the notion of “government having no business in business”)
6) The government should start subsidizing the production of goods produced by locals and not subsidize consumption
7) The government should only borrow to invest in infrastructure that will build the productive capacity of Zambia e.g. Borrow to build a factory to finish copper into cathodes, ammunition and wires etc. (not where they borrow to consume)
“Generally there is need to understand that unless the country can evolve an inclusive growth model, there will be no development at all.”