9.5 C
Alba Iulia
Thursday, August 6, 2020

Zambia:Rentier State Collecting Cash From Copper But refusing to Diversify Economy

Economy Zambia:Rentier State Collecting Cash From Copper But refusing to Diversify Economy

We must spend more time on fixing the overly copper dependence. Members of parliament have different things that they spend most of their time on but certainly less on export diversification and value addition. Politicians spend more time discussing politics, and often combatant views against each other than how to mend the economy. Opposition parties have spent more time criticizing the ruling Government than putting on the table how to diversify this economy.
Yet, the truth is that the economy is sick. The sickness manifests itself in several forms. But, as an expert in international trade, I want us to focus on the performance of copper, the golden cow that produces the milk on which the whole Zambian economy is founded. But that too is the very basis of its own destruction. Hence, why Zambians should spend more time productively debating export diversification.

Zambia has lost global competitiveness in trade

First, Zambia is slowly losing global competitiveness that the country enjoyed soon after independence. Since the first six years after independence, Zambia’s share in international trade in goods has significantly dropped, from 0.4 per cent for exports and 0.5 per cent for imports to less than 0.1 per cent in 2016 (Figure 1). While trade in absolute values of course went up global competitiveness and integration in global trade has been on the downturn. In 2016 even trade in absolute values slumped from $10.5 billion in 2013 to half ($5.8 billion) in 2016. Countries trade in order to gain surpluses to leverage external revenue for development. The more trade surpluses, the more revenue and its contribution to development. However, in 2016 Zambia recorded a trade deficit of $ 1.2 billion, meaning external revenue was not forthcoming this year for possible diversification. The situation for trade in copper is not as encouraging as the Minister of Finance wants us to believe. When exports go down from $10 billion to half, the message to the nation cannot be, “Economy so far so good” because any increases of today are mere payments for past declines. Fall in exports of copper affect several other economic activities. Zambia’s per capita fell from $1,725 in 2012 to $1,292 in 2016 and am sure there are other things affected. Therefore, the message should be frank and warn that exports may never get back to their $10 billion level hence, the need to work harder. “Economy so far so good” may incite complacency.

The golden cow that produces golden milk is showing signs of tiredness
Second, in order to reap more economic benefits from trade, and given that it is a major source of finance for the country, trade must grow substantially. But, measured in absolute dollar values, Zambia’s international trade is not growing. In fact, the last six years, there has been a major persistent drop in growth, from about $3.0 billion in 2010 to -$1.4 billion in 2016. In 2015 the drop was about $2.8 billion. More seriously, the golden cow that produces the golden milk that all Zambians drink is not growing either. For five decades, this cow has been overused and is now showing signs of unreliability. Threatened by global price rise, it easily recoils into submission and can no longer produce the cash essential for all of us to continue to send our children to school, to each three meals a day and to do other business. From 1996 to 2005 the annual growth trend of exports of copper was almost flat at less than $300 million on average with reasonable growth of $1.4 billion and $2.4 billion taking place only in 2005 and 2010 respectively (Figure 2). Since 2011, export growth of copper has experienced nothing but immense slump even going into the negative. Yes, this is largely due to the global downturn of copper prices. Although the situation is showing signs of improvement, disaster will strike again because Zambia is trapped into a rentier state where the business sector cannot use the cash that comes from the cow to diversify its exports, at least when copper prices are favorable.

Efforts to diversify into manufactured exports are too weak

Three, there have been efforts to diversify exports but these are largely weak and insignificant. We are still clinging to sectors that others are abandoning. Exports of manufactured goods as a percentage of total have remained largely flat for many years with an insignificant share of less than 20 per cent while the share of exports of primary commodities is equally flat but at 80 per cent (Figure 3). Zambia exports about 250 merchandize products to the world out of which only 24 products account for 90 per cent exports. It means, about 226 products account for only 10 per cent with almost insignificant individual monetary values. Tobacco, maize, sugar, lime and cotton are some of the few non-traditional export fetching very low export values annually. For example in 2016, exports of tobacco, the highest non-traditional earner totaled less than $200 million. That is too low compared with Viet Nam’s $13 billion for footwear only. We must embrace the culture of competitiveness and comparing what we do with others.

Taking advantage of the Zambia – China development partnership

Four, of course export diversification is a country-owned affair. But China is an important development partner. When China has overtaken the USA in exports of manufactured goods, who else would you want to talk to? When Viet Nam has overtaken Africa in exports of manufactured goods, who else do you want to talk to? I would propose a partnership aimed at building non-material capabilities and infrastructure. That means establishing a strategic trade-off that puts China at the spot to support Zambia to build relevant skills and competences at the level of the labour force; enhancing new technological and organizational procedures at the level of enterprises, enhancing exchange programs of sending potential labour force from Zambia to China to learn from experienced workers in industrial centres and competitive enterprises or the Silicon Valley of China; building capabilities to invest and innovate, integrating Zambia’s labour force and domestic enterprises into targeted new products and technologies in order to produce and export an increasing range of higher value added manufactured products. China has the capabilities and the know-how for managing the processes of change, diversification of exports and transforming the Zambian economy. Do not send students to China to learn economics, maths or history. Send them to learn industrial skills in exchange for raw copper given to China.

By Economic Governance

9 COMMENTS

  1. From the time I was at primary school taking social studies in the late 80’s I have been hearing about diversifying the economy.Is there a valid reason every crop of leadership we have had since then has shown no commitment to this? all we do is as Zambians is politik and carry out donor funded projects whilst our finance ministers get cozy with IMF and World bank.Zambia is supposed to be food basket to reckon with by now.

    • Just read Kaunda’s mulungushi reforms and you will realise that we’ve been paying lip service to the concept since the 60s

  2. Mr Expert, all this jargon and statistics you have put here have less impact as far as improving the economy is concerned. I will very much appreciate if people like you start pushing agendas or principles that brought Dhubai, China, Singapore, South Korea etal from the chains of poverty to a stage of economic power house. Also to say the zambian economy is sick is not being sincere. Zambia was never like USA or Britain and now it has dropped to where we are no at all. From independence the successive governments have been building infrastructure and empowering Zambians. In UNIP Zambians never engaged in business like the do after liberalisation of the economy. This time we have more tarred roads ever since independence.

  3. CON’T: We have more primary and secondary schools and universities ever since independence. If you say we need to do more or we need to increase the pace or rate of development I will agree with 101% but to critisize our country using exchange rates and economic indicators in my view its being unfair. The village economy compared to the city economy is less in value but I can’t say the economy of the village is sick because I can’t find a shopping mall or thousand cars on the roads. It is the stage of life at which we are we should talk of improving. The western countries citizens sacrificed to build their nations economies which some Africans who have refused to bare the pain of building their economies criticize their nations from.

  4. do you know that poor economy is direct proportional to poverty, if as Zambians we can not accept that we are Zambian things wont change, first thing first we are good on talking for instance like coming up with good solutions but we usually fail to implement them in reality. lets learn to be practical in life we should asses our goals in terms of is it measurable, realistic, achievable……

  5. After spending $10 billion on infrastructure and you want to go begging back to the IMF, something is wrong……PF have very thick people in key positions……we had an electricity deficit ,a clever GRZ would have invested in solar panel and solar water heater assembly plants that could have gone on to exports……we had a construction boom and we still import all safety cloths we should have been manufacturing these leading on to exports.. ..right now we have critically lacking firesaftey record…a clever GRZ would be looking at assembling smoke alarms and fire extinguishers knowing demand is coming…

    But you see this involves hard work something PF are shy of , but borrowing they can win awards.

    • But again they won’t update the fire safety record to start fire detection and prevention industry as they won’t be able to blame UPND and they wont be able to find any excuses for prosecuting the opposition.. …

  6. As usual there is a tendency in Zambia to obfuscate straight issues. The main issue is that economic diversification amounts to making a declaration that our best natural resource will be our brains and not copper or agriculture. It means changing the mindset and converting Zambia into a mentally nimble and agile country where citizens are encouraged and actually tasked to be people of ideas. Ideas to use our brains to convert the forces of nature including electrons, molecules such as water and phenomena such as gravity to generate wealth. This is what will make the difference, not copper, agriculture or PF.

  7. We have people in power who only care about their own interests, no interest in helping poor Zambians to get work and feed their families. This is why I am upset at how Mr. Kasolo is running the STATE mining company ZCCM. zccmminerhateskasolo.blogspot.co.za

Comments are closed.

- Advertisement -
Loading...
- Advertisement -

Latest News

It’ll be very difficult to unseat PF because of the unprecedented development Countrywide-Antonio

The ruling Patriotic Front (PF) Deputy Media Director Antonio Mwanza says it will be very difficult to unseat his...

Government to soon fix the over 145 Km Mutanda-Mwinilunga Road in North Western Province

President Lungu has responded to concerns about the poor state of Mutanda/Mwinilunga road. And government says plans to reconstruct damaged sections to motorable standard have...

I have now been Certified Covid-19 Negative-Lusambo

By Bowman Lusambo After weeks of anguish, sickness and pain, I am delighted to announce that I have now been certified Covid-19 negative. The...

Chamber of Mines should put the interest of the Zambia First-ZRA Chief

The Zambia Revenue Authority (ZRA) Commissioner General Kingsley Chanda says the Chamber of mines should put the interest of the country first before issuing...

Why is Dr. Chilufya’s case in Court, Judge asks ACC Investigations Officer

A witness has told the Lusaka Magistrates Court that the total assets for Health Minister Chitalu Chilufya were more than the assets that he...

More Articles In This Category