Friday, June 14, 2024

President Hichilema needs help from Banks to finance value addition, not praises.



By Edward Chisanga

As he was opening the new Head Office and new Longacres branch of Zambia Industrial Commercial Bank this month, I read from Lusaka Times that Zambia’s Minister of Finance, Mr. Situmbeko Musokotwane lamented, “The number one obstacle to the growth of the businesses in Zambia is access to finance. Government wants to see enhanced growth and increased productivity of local businesses because it is the most sustainable way to create wealth and alleviate poverty among the people.”Yet, another Zambian newspaper if not the same Lusaka Times reported, “Ministry of Labor and Social Security Acting Permanent Secretary, Zechariah Luhanga, said labor productivity in Zambia contracted by 21 per cent between 2019 and 2020.” According to the International Labor Organization, labor productivity is an important indicator that is closely linked to economic growth, competitiveness, and living standards within an economy.

When productivity is robustly high, that means good times for citizens. When down, it means bad news as we see in our country. Hence, keeping a rising level of labor productivity is what represents a priority for Zambian leaders and that’s why Minister Musokotwane is distraught. He is worried that the country’s private sector is not financially robust enough to increase productivity and produce more. In my own words, lack of finance impedes Zambia’s private sector from entering global and regional value chains and networks. The private sector is not vibrant and competitive at regional and global levels. It’s continued tepidity is worrisome.

There are other multiplier effects of having weak and non-productive private sector. One is that it has failed to be noticed in the region and world by its counterparts seeking to invest in Zambia. Without a vibrant private sector, it’s difficult to attract foreign direct investment (FDI). We can hyperbolize all we want about our beautiful country and the so-called opportunities for FDI. We can give governments of the world all the pulchritudinous messages about our country. But investors are not governments. They’re private companies with their own conditions. perceptions and criteria. If conditions such as dynamic and honest private sector are absent, or if cheating that has plagued this country continues unabated, foreign business will not arrive in our country.

Foreign investors want to come to a country with a progressive local private sector. They began going to Asia from America and Europe when they saw mushrooming private sector which they use as a basis for their companies’ entry and development. If we want them to partner our local private sector, it’s extremely strenuous for them to do so in their current form whereby they’re weak and have almost nothing to offer in the partnership. On the other hand, we need to build a flourishing private sector as a foundation for productive inward FDI flows or regional and global integration.

When weak, our private sector is likely to be overwhelmed in decision-making. One time I asked a South African friend who was working at their Ministry of Trade, “How can Zambia’s private sector partner South African companies to do manufacturing?” His answer was that they should form value chains and networks. But how can they do this, say in motor manufacturing when they’ve no quality leather to use as input in manufactured car seats? How can they participate with confidence and as equal partners when they have no means? I doubt that its largely government’s blame that for almost sixty years since independence, our private sector has failed to live up to global, regional and even local expectations. It always blames government.

It begins with one growth pole. Ionela Gavrila-Paven and Loan Bele explain it as, “A point of economic growth; a central location of economic activity; a point where economic activity starts and spreads to surrounding areas, etc.” A famous Economic Development Expert, Dani Rodrik argues, “The marginalization of Africa in world trade is entirely due to the slow growth of African economies. “In Asia, economies of ASEAN of ten member states have been growing robustly for a long time, forming the basis of the boom of the digital and tech industries, which in turn attract huge inward FDI flows from the US and other rich countries. Inversely, in Zambia and Africa, economic growth measured by GDP and GDP per capita has largely been shrinking at an alarming rate. In the last ten years, GDP has been falling, down to about minus 3% in 2020 while real GDP per capita downed to minus 6%. Reversing this alone is a tall order while beginning to grow robustly thereafter is even more onerous.

Ionela Gavrila-Paven

Among other factors, productivity needs huge sums of financial investment. One source is Commercial Banks in the country. Yet Zambia’s Commercial Banks are the least helpful to the business sector. Despite the self-approbation and achievements sang daily and unceasingly by its CEOs Zambia’s Commercial Banks have not listed any single private company they’ve financially supported into value addition. They’ve told us how much profit they’ve made but not how much of it has been given to private business as affordable loans. The President is asked to open their glamorous and wasteful new Headquarter Offices but is never given financial support he needs to achieve his dream of bringing value addition in the country. They praise his policies but give him nothing in return. I would ask for a quid pro quo if I were him.

Minister Musokotwane informed citizens, “According to the World Bank’s 2019 enterprise survey, the number one obstacle to the growth of businesses in Zambia is access to finance (31% of firms that participated in the survey listed it as their biggest obstacle. The report further shows that shows that, in Zambia, only 10.1” of firms have a bank loan, compared to an average of 20.4% across sub-Sahara Africa. For SMEs, the number of firms that have a bank loan is even lower at 6.3% due to the presence of structural constraints, including firm informality, and high collateral requirements.”

Researching on this topic, the United Nations Conference on Trade and Development (UNCTAD), the organization I worked for based in Switzerland also says, “The financial system in most developing countries fails to adequately channel credit towards productive investment in the real sector.” The study says that reform at the national and global levels is needed, not only to improve financial and economic stability but also to ensure that sufficient investment finance goes into productive activities and helps developing countries to address the new development challenges that have emerged in the post-crisis environment.”

The study continues, “Supporting productive investment would include greater long-term financing for industry, agriculture, services, and infrastructure. Credit, both currently and in the years leading up to the 2008 financial crisis—has too often been directed to consumption rather than to investment, and to asset bubbles in sectors such as real estate rather than to innovation and production.” The study further advises, “Developing countries must organize and manage their financial systems in such a way that they provide sufficient and stable long-term financing for expansion of productive capacities and adaption of production to new demand patterns.”

Notes Mwansa Chalwe Snr, “On the basis of available evidence, therefore, Zambian Banks do not seem to be working in the best interests of the economy, but rather in their foreign shareholders only. They’re making money from borrowing risk free money from the government and providing very little credit for the private sector.”

This country lacks financial resources enough to deliver on value addition. Successive governments have lamentably failed to mobilize resources for structural transformation. Experts argue that total government revenue in Zambia as a percentage of GDP is very small. As our country continues to fail to mobilize enough resources this impacts on government’s expenditures including on value addition, job creation and others. Perhaps one way is to link up with Asian countries which are breaking through in value addition, to learn from them how they made it.


And I conclude that our government will do well to work with our lagging-behind private sector to improve local conditions for attracting inward FDI to raise financing for value addition. It will not help to always appeal to the USA government or others that we want value addition. Value addition is largely a product of local private sector and its partnership with foreign companies. It comes from local efforts, then complemented by foreign companies. It’s not created by foreign governments. You don’t bring value addition into Zambia by simply signing a bilateral trade or investment agreement with Turkey, USA or UK governments or by saying that Zambia has the best conditions. Foreign investors know much more about Zambia than Zambians themselves. Often, the perception of foreign investors about Zambia is not what they hear from us. Zambia must, with humility discuss with them to know exactly what their perceptions are. We should also work with international organizations some of which we know, and we can provide advice on contacting them.


  1. It’s interesting that the narrative now has shifted to …….

    “The president is surrounded by empty tins……..”

    ” the president needs help…….”

    ” the president must fire some ministers…..”

    From a pure HH must go……….

    Even the clique can see HH means wel for this country, except for a few die hard tribal supremacists…………

    If every body worked with HH, zambia would be Africa’s dubai……….

  2. When I last week saw Hon. Silvia Masebo meet with banks to solicit help for the health sector, especially in drugs procurement, it set the pace to bring on board the financial sector to do their best in funding some of these government programmes. They have championed sports and other causes. Greatfully and thankfully we are. How about huge government projects?

  3. Interesting article and well researched most all I would like to talk about the conclusion were you have mentioned about most foreign countries know more about Zambia than Zambians themselves maybe right or not but to my understanding working together from the roots to deal with how we can share ideas and what will be involved and how long the projects will take and the benefits for our people matters most. This is something we have witnessed in so called developed countries do business.

    • Zambians dont know about themselves because they are brainwashed. They think you are clever only if you know about Europe but not about Kafue basin and Luangwa Valley and Batoka plains. Just look at how those women are dressed. Only one of them is proud enough to wear Zambian dress. The rest are neo-colonial products that think that to be civilised is to look like a European. Look at Arabs and Naigerians. They proudly stick to their traditions no matter what.

  4. There is doubt that the Banking Industry is one this government should not be lamenting about like Finance Minister has been.They need to act on the market failure like USA and Brazil did as I pointed our in my article.How do you have inflation at 9.9%,Monetary policy rate at 9.25%, Treasury bills upper limit at 15.75% and Bank Lending rates at 25% plus! The bank margins are insane! Government needs to act now to correct this profiteering by these foreign banks.The profits are from Government paper and bank charges and not private sector lending!

  5. Zambian Commercial Banks,who are almost over 90% foreign owned are certainly not sufficiently contributing to the Zambia’s economic development.They are all earning millions of dollars of profit from risk free Treasury bills,government bonds and exorbitant bank charges.This fact. And here are the numbers: Monetary policy rate is 9.25%,Inflation is 9.9%, Treasury Bill higher limit 15.75% and their lending rates are above 25% and yet they mobilise deposits from savings who they pay 6-8%! Compare our banks’ profit margins with our neighbours and the government should have an answer what to do.Government should not buy the tired argument of high Non performing loans(NPLs) due to poor paying culture.It is up to them to develop better tools for risk assessment

    • Good to see your comment here Prosper. Your articles are so refreshing and well researched. I hope you provide these to the government somehow.

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