The Right Stuff

How will the Zambia Plus program contribute to Zambia’s immediate economic recovery and long-term growth?

On November 11, 2016, the Minister of Finance outlined the budgetary policy for 2017. In this speech, he announced the Zambia Plus economic recovery program. Driven by Zambia and Zambians, but supported by the IMF and other cooperating partners, the program is both sound and revolutionary. Zambia is looking inside itself, seeking those domestic resources to develop the economy, improving resource mobilization from within the country. Additionally, higher levels of accountability in public expenditure will encourage private investment in the country. Scaling up government social protection will ensure that any austerity measures taken by the government will not have adverse effects on the poor and vulnerable. All these packages put together will be instrumental for reengineering our economy and moving our country forward on the path to prosperity.

How confident are you about the new government’s promises to transform a long-standing rhetoric of diversification into policy, action, and results?

Economic diversification in Zambia has been on the cards for many years, though we have never really shown ourselves to be truly serious about it. Now, for the first time in the history of our country, we are seeing a more positive effort toward diversifying the economy. On November 26, 2015, the president held a press conference reiterating the drive to move Zambia from a copper mining economy to an agricultural economy. He announced a number of initiatives that have to do with improved agricultural activity, manufacturing, and value addition. Furthermore, in the past, our approach to economic diversification has been as volatile and as unpredictable as copper prices themselves. Each time we have slumps in commodity prices, especially copper, we start talking about the need to diversify the economy. Once the prices come back to higher levels, we forget about it. However, now, with the combined efforts from the government and external investors, we can see that there is more of a long-term and developmental approach. For example, a Zambian delegation has just returned from Israel, a country that is at the global forefront of agricultural development.

What are the main obstacles facing investors?

The principal issue facing foreign parties considering investing in Zambia is the issue of policy consistency. When we talk about investors we mean long-term investors, not simply portfolio investors: people looking at agriculture, value addition, forestry, infrastructure, water, and energy. These are the kinds of investors we should seek to attract, since this kind of investment will form a solid foundation for economic growth. Because the gestation periods for these investments are much longer, there needs to be stability in government and government policies. Secondly, we also have to agree on the key sectors we want to drive. The mining industry, for example, has until now been a key focus, though this has not really stimulated growth in other growth sectors. Indeed, the sector still relies heavily on imports, and has not even aided in boosting local manufacturing.

What can be done to boost local production in Zambia?

The first obstacle to boosting local production is access to financing. Innovation is high; we have many entrepreneurs coming up with radical ideas in terms of value addition and processing. However, for the past few years, access to capital has been highly constrained and basically unavailable. We have only been a liberal economy for about 25 years. In 1991, the economy was 80% in the hands of the public sector. Because of this history, there have been some natural constraints in terms of how the financial sector creates the framework to support entrepreneurship. Our financial community includes 19 financial institutions, of which only one is a development bank. All the other 18 banks only lend money across the table for 12 months, which does not sufficiently allow for investing in value addition or manufacturing. Furthermore, interest rates have been prohibitive.