Overview of Zambian Economy

For the last nine years, the MMD Government has embarked on policies that are aimed at putting the economy on a sustainable growth path and attaining macro-economic stability. In March 1992, Zambia formally adopted a three-year structural adjustment programme to stabilize the economy and restore economic growth. The programme consists of market-oriented reforms and privatization of Government-owned enterprises. The pace of these reforms and privatization gained momentum with the liquidation of ZIMCO in 1995, a State enterprise that, as a holding company, had exercised control over a large part of Zambian economic activity.

By the end of 2000, preliminary growth rate of the economy was 3.5 percent compared to 2.4 percent in 1999 while inflation stood at 30.1 percent, reflecting a price rise from 1999 when inflation had dropped to 20.6 percent. The growth in the economy in 2000 was premised on a number of factors. These included receipt of additional assistance from the Cooperating Partners, a strong recovery of mining output following the completion of the privatization of Zambia Consolidated Copper Mining (ZCCM), and continued increase of output in agriculture due to favourable weather conditions. Other major sectors that contributed to the overall increase in aggregate output in 2000 included manufacturing, transport, communications, electricity, water, construction and retail trade. PRIVATE SECTOR DEVELOPMENT

The Government continues to pursue policies that are supportive to the growth of the private sector. The focus is on enhancing the growth and competitiveness of the private sector, especially in view of the launch of the COMESA Free Trade Area (FTA). In this regard, Government has reduced duty on imports on several items and has also continued with its divesture of public enterprises through the privatization programme. As at 31st December 2000, the cumulative total of privatized companies stood at 248 out of a working portfolio of 280 companies. Government finalized the privatization of the remaining major assets of ZCCM in March 2000.

The performance of the private sector in 2000 was constrained by a number of factors such as the prolonged privatization of ZCCM main asset packages and the attendant cash flow problems it created for all companies and institutions associated with it. In addition, civil strife in some neighbouring countries impacted adversely on private sector performance. Despite these setbacks, the private sector generally performed well and has continued to grow in importance in propelling the economy. INVESTMENT OPPORTUNITIES

Zambia has abundant labour, water, land, wild animals and gemstones in addition to the vast quantities of copper and other base metals. Opportunities abound in agriculture, tourism, manufacturing and mining sectors. For the latest numbers on economic performance, visit www.boz.zm.

1. Agriculture

   Good arable land, for both extensive and intensive cultivation of various crops exists in every province in Zambia. Some 56 percent of Zambia's total land area of 75 million hectares is available for agricultural production. Of this, 39 million hectares, or 92 percent, is classified as medium to high potential for agricultural production. Currently, just over 2 percent is being used for crop production.

   Under the privatization programme, large tracts of formerly State-owned farms are available, while the TAZARA corridor and the Mkushi Farming Block, recently opened up by the Government are available to potential investors.

   Zambia's agriculture has seen tremendous growth in high value crops previously untried and undeveloped in Zambia. These include export-driven floricultural and horticultural crops, which have attracted considerable investment and growth in recent years. The growing range of high value crops is increasingly finding ready markets in the region and in the ever-expanding local agro-industry.

2. Tourism

   

   With 19 national parks, Zambia has the essential prerequisites for a tourist destination. Zambia boasts of having the Victoria Falls, one of the natural wonders of the world, Lake Kariba, one of the largest man-made lakes, and Lochinvar, a bird park believed to contain the widest variety of species in the world, but two of its game parts, South Luangwa and Kafue, have among the largest concentrations of animals on the whole continent. Zambia's tourism potential is largely unexploited and has an average of only about 125,000 tourists per year. There is potential for investment in new high quality hotels and lodges in the main tourist centres. Other investment opportunities include game farming, outdoor sport and equestrian air and boat excursions.

   The recently drawn up strategy, National Tourism Strategy, has identified places such as Lake Kariba and Livingstone, adjacent to the Victoria Falls that could be developed for mass tourism. For more tourist attractions, visit www.zambiatourism.com

3. Manufacturing

   The manufacturing sector in Zambia accounts for approximately 25 percent of GDP. Real growth in the sector has slowed down over the past few years due mainly to growing competition from imported finished products in the sub-region. The sector, however, is responding well to the sound economic policies being pursued by the Government. In 2000, the sector registered 13.5 percent growth. Given Zambia's strategic location and the improving local infrastructure and conducive business environment, manufacturers have the scope to grow and improve their competitiveness to take advantage of the market of approximately 300 million inhabitants, which the COMESA region offers. There is potential for processed export and import-substitution industries based on Zambia's rich agricultural, horticultural and mineral production. Currently, most products being exported are in primary form.

4. Mining

   

   Mining plays an important role in the economy, accounting for about 90 percent of foreign exchange earnings, but only 10 percent of the country's GDP. The major minerals are copper, cobalt, lead and zinc. Other potential minerals include gold, nickel and manganese. Zambia is reputed to have some of the highest quality gemstone deposits in the world, which are still unexploited due to lack of investment. For more information on investment opportunities, visit the investment centre at www.zic.org.zm.

MAJOR EXPORTS AND IMPORTS

Zambia's major exports are copper, lead and zinc. Non-traditional exports include primary agricultural and horticultural products, gemstones, timber, cement and electricity. Major imports are crude oil, chemicals and machinery. Others are iron, steel, textiles, vehicles and manufactured goods.

DEBT PROBLEM

Zambia still has a large external debt. As at the end of 2000, the country's external debt was estimated at US$ 6.3 billion less than that of 1999, which stood at US$6.5 billion. The drop in the outstanding debt stock was largely attributed to debt service payments to Paris Club and multilateral creditors and debt cancellations from the Paris Club and some Non-Paris Club creditors. The large external debt overhang frustrates Government's efforts to develop and absorb vital resources that could best be used to support the development of the country. It is, however, a relief to note that in December 2000, the Boards of the International Monetary Fund (IMF) and the World Bank approved Zambia's access to the Enhanced Heavily Indebted Poor Countries (HIPC) initiative. Under this, the country would receive further debt relief from the Paris Club, and for the first time would also get debt relief from the multilateral institutions. The total expected debt relief is US$2.4 billion to be extended by all creditors, and this is effective 1st January 2001.

EFFORTS AIMED AT POVERTY ALLEVIATION

The high incidence of poverty is also a source of grave concern. The Zambian Government is, therefore, committed to the reduction and reduction of Poverty through the implementation of National Poverty Reduction Action Plan (NPRAP) formulated in 1998. In this regard, the Government continues to implement community programmes and social welfare schemes aimed at improving the standard of living of the vulnerable groups. The Government hopes to reduce poverty levels from 72.9 percent to 50 percent during the period 2000 to 2004.