Zambia bounces back on growth path

Published Jul 5, 2011

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Ayanda Mdluli

A country previously brought low by nationalisation and the decimation of the copper price has bounced back onto the global economic scene with an optimistic outlook.

Zambia, a landlocked country that bases its income mostly on copper mining, is looking at ways to diversify its economy through the upgrading of infrastructure and the involvement of women in entrepreneurship.

In an interview with Business Report at the presidential palace in Lusaka last week, President Rupiah Banda said Zambia’s main challenge was to look at ways that would sustain growth, especially if the copper price were to drop.

In search of a sustainable plan, the country had established that in order to grow in the current economic climate, the economy had to diversify. However, even though the need was established, Banda conceded that the country was far from achieving this objective.

After world commodity prices declined during the global recession and demand slowed gross domestic product (GDP) growth in 2008, Zambia was handed a lifeline by a sharp rebound in copper prices. A bumper maize crop also aided recovery.

“When I was elected president in 2008, the copper price dropped significantly, it was traumatic, it was difficult. The mines had to shut down. We took steps, met with workers and assured them that we would not allow the mines to shut down,” explained Banda.

After finding Chinese companies to invest in the failing mines, the economic focus was turned to agriculture and entrepreneurship.

Banda said the country produced enough maize – the staple food – to feed its population of 12.9 million.

Maize is just one of the crops that make up the agricultural sector in Zambia. Other crops such as cotton, tobacco, wheat and soybeans are being produced at an accelerating rate that has seen new processing plants being built, and farms being established.

More than 90 billion kwacha (R12.3 million) was invested by the Zambian government in the Mpongwe region for agricultural development. The construction of transport infrastructure has connected small-scale farmers to mini depots, large silos and grain companies. A Chinese company was appointed to construct the 70km road that connects Mpongwe and Lusaka.

Local companies were subcontracted, said Thomas Josaya Zimba, a regional engineer at the Road Development Agency in Zambia. “The road is now more cost effective and it is cheaper to transport goods. It connects with other roads that lead to major cities,” he said.

According to Zimba, the construction of the road was the first step to realising an effective transport infrastructure in the country. Prior to the upgrade, producers struggled to transport goods on the gravel road. They had to use other routes, which increased the cost of doing business.

Gregory Sigame, a 25-year-old local entrepreneur, has made a living selling grain. He agreed with Zimba that the new road had made doing business much easier for the local community, who thrive on selling grain to milling companies. Sigame said he sold his maize at 6 000 kwacha a kilogram and, with a whole bag selling for 30 000 kwacha. Each bag of maize weighs approximately 5.4kg and the government sets the prices for each kilogram of maize.

“I usually buy over 350 bags from small-scale farmers and resell each one to the big milling companies in Ndola for about 30 000 kwacha. Before the road was built, business was not as good as it is now, the prices have come down and things are moving a lot faster than they used to,” he said.

The bigger players in the sector have also experienced a boom, with most of the country’s produce consumed across all spheres of society.

Guy Changole, the human resources manager at ETC Bio Energy, said countries such as Tanzania, Mozambique and the Democratic Republic of Congo were the big roleplayers that bought agricultural goods.

The company, which grows maize, wheat and soya beans, employs close to 500 workers who are mostly women. ETC Bio recently entered a deal to grow barley for brewing. It had so far planted 88ha of barley, which was equivalent to 742 tons.

Changole said all Zambian land belonged to the government and occupants were given a 100-year lease, which had to be renewed in the 99th year.

Under the Zambian land ownership system, people were encouraged to participate in agriculture, where the government owned land, on behalf of the people.

The occupant paid a monthly fee to the government, which was used for other purposes in the economy. However, traditional land was in the hands of chiefs and they allocated land to businesses and individuals, based on the need and economic viability.

According to the CIA World Fact Book, Zambia’s economy has experienced strong growth in recent years, with real GDP growth from 2005 to 2008 at approximately 6 percent a year.

The privatisation of state-owned copper mines in the early 1990s, under the leadership of Frederick Chiluba, improved the chances for copper mining to return to profitability and brought about economic growth.

The country’s copper output has increased since 2004, which could be attributed to higher copper prices and foreign investment.

Ayanda Mdluli travelled to Zambia as a guest of Bell Pottinger, a UK-based public relations company which has investments in Zambia.

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