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