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Zambia 2014 | ECONOMY | INTERVIEW

TBY talks to Siazongo D. Siakalenge, Permanent Secretary at the Ministry of Commerce, Trade, & Industry, on the increasing attractiveness of Zambia for foreign investors.

Siazongo D. Siakalenge
BIOGRAPHY
Siazongo D. Siakalenge is Permanent Secretary at the Ministry of Commerce, Trade, & Industry.

Fitch Ratings has just upgraded Zambia's long-term debt outlook to positive, and in 2014 the country has jumped up seven places in the World Bank's Ease of Doing Business index. To what do you attribute increasing recognition of Zambia's competitiveness?

Going back to 2004, the government started to engage the World Bank and the IMF in creating a program aimed at competitiveness and creating a more conducive investment climate. Inefficiencies and leakages were identified at the Zambia Investment Centre (ZIC) and the Zambia Export Processing Zones Authority (ZEPZA). However, abolishing those institutions would leave us as the only country in the region without statutory institutions to promote FDI and exports. We decided to propose to the World Bank and the IMF merging all of the promotional agencies into what is now the Zambia Development Agency (ZDA). This included the ZIC, ZEPZA, the Zambia Privatization Agency (ZPA), the Export Board of Zambia (EBZ), and the Small Enterprises Development Board (SEDB). After that, the government came up with the Private Sector Development Reform Programme (PSDRP), which included 79 action points to improve competitiveness and promote micro-, small-, and medium-sized enterprises. As soon as that was done, we started to see FDI increasing, not only in mining but also in manufacturing, agriculture, energy, and ICT.

Today, which sectors do you think are most ripe for opportunities?

I think there is tremendous potential in all sectors of the economy at this moment. Let me highlight agriculture primarily. A hallmark of this government is the concept of farm blocks. We have identified 10 farm blocks in 10 provinces, each one of approximately 100,000 hectares. That means all together, there are one million hectares of fertile land with significant sources of surface and underground water. Zambia holds about 40% of the water resources in the Southern African Development Community (SADC) region, which includes 15 countries. This spells tremendous potential for agriculture.

Given these water resources, what is Zambia's potential to become a net exporter of electricity?

Zambia can certainly become a net exporter of energy to the southern power pool. If the new Kafue Gorge project has the potential to produce 750 MW, then the Batoka Gorge Hydroelectric Power station has the potential to deliver 1,600 MW (800 MW on the Zambian side and 800 MW on the Zimbabwean side). In the north of the country there have been a number of large-capacity potential projects identified. If all those sites where developed, we could deliver 6,000 MW using hydroelectricity. In addition, we have the prospective of coal-fired thermal stations. In fact, before the end of 2014 or in early 2015, they will commission a coal-fired power station in my village of Maamba that will produce 300 MW. That will be phase one, and there will be a phase two to produce a similar number of megawatts.

Promoting industrialization is one of this Ministry's stated objectives. Where does this process currently stand?

This Ministry, in conjunction with other ministries, has created an industrialization and job creation strategy, which has been formally approved by cabinet. Some of the programs within this strategy are already being implemented, and we are seeing new projects, from both the public and private sectors, coming on stream. We are saying that one million jobs need to be created between 2H2014 and 2016. These jobs are not supposed to come from the government, but rather from the real economy, hence the strategy calls for enterprises to be created and for those to be the primary drivers of employment.

How would you rate the success of this administration's mission to change Zambia from being landlocked to “land-linked," and what impact is that having on the investment climate?

This program is on and moving forward. The government has embarked on an ambitious project known as Link Zambia 8000, which will improve regional interconnectedness. That is not to say we do not already have important linkages in both road and rail. For example, there is both road and rail access into the DRC as well as Tanzania to use the port of Dar es Salaam. There is also road and now rail access to Malawi. There is a rail line from Malawi into the Port of Nacala in Mozambique, and Zambia is committed to putting a link between Chipata, where that line terminates in the Eastern Province of Zambia, and Tazara, the railway that connects Dar es Salaam with the town of Kapiri Mposhi in Zambia's Central Province. By doing so, the rail link between Nacala and Tazara will be complete, which will substantially reduce transport costs. There is also the potential for additional linkages between Eastern Province and Mozambique. We are connected to Namibia by road with a provision to put in a rail link. We are also connected to Zimbabwe both by road and rail. Now a bridge is going to be constructed between Botswana and Zambia. Additionally, we trade by vessel with the countries of the Great Lakes region via Lake Tanganyika. There are now discussions about connecting the Tazara Railway to Mpulungu, the harbor in Northern Province at the southern tip of Lake Tanganyika. And there are attempts to link Zambia to Angola, which will have a huge impact on competitiveness, since the Port of Lobito is geographically the closest one to Zambia. Zambia of course has eight neighbors, and with the right infrastructure those eight countries are all potential markets for us. When you look at the cost composition of products from Zambia, transport costs are the most significant component. Once Zambia reduces transport costs, its competitiveness will increase significantly.

What role does regional integration play in your vision of Zambia's future?

Zambia is an active member in both the Common Market for Eastern and Southern Africa (COMESA) and the SADC. We take regional integration very seriously. Once all of these programs related to regional integration are completed, the market for Zambia will be much larger. Right now, unfortunately, those markets are small because we need to develop our industrial base. Trade in commodities is not that high because we need to develop our capacity to process these goods. For example, if we want to export copper regionally, our neighbors may not have the factories to process copper cathodes into end products. We need to develop manufacturing in order to add value for regional trade and regional markets, hence the importance of the industrialization and job-creation strategy.

How are Multi-Facility Economic Zones (MFEZs) contributing to this strategy?

They are a vital component of our objectives to facilitate industrialization as well as create jobs. It is assumed that once we provide world-class infrastructure in the MFEZs, we will attract local investors as well as FDI. These zones have world-class roads, communications infrastructure, water and sold-waste management, and electricity. In fact, the electricity is connected through multiple power stations, hence there is no risk of disruption if one substation goes down. These zones are like a mini-city where everything you need is already there, and the standards are higher than the local standards you generally find in the country. We have three operational MFEZs. The first is Chambishi MFEZ, which is being promoted by the Zambia-China Economic & Trade Cooperation Zone (ZCCZ), a local arm of the China Nonferrous Metal Mining Corporation (CNMC). Chambishi has about 28 zone enterprises and employs close to 8,000 people, and they have already started exporting. They have provided a road network, bulk water supply pipeline from the Kafue River, power, and shells for companies to move into and start operations from immediately. They are on target to have another seven enterprises operating there by the end of 2014. The second zone is the Lusaka East MFEZ, also being promoted by ZCCZ. It has four zone enterprises and is strategically located next to the Kenneth Kaunda International Airport. A third zone, the Lusaka South MFEZ, is being promoted by the Zambian government and development works are underway. The first company to locate here, a pharmaceutical company, may commence production by the end of 2014. There are four more companies planning to operate here, and we hope to have around 12 by the end of 2015. Additionally, there are companies that have applied to develop their own multi-facility economic zones, including sites in Lumwana in Northwestern Province, Maamba in Southern Province, and Kalumbila in Northwestern Province. There are also two industrial parks: one in Ndola and one in Lusaka. The latter is operational, although they have started mainly with residential accommodation. This is an example of how such zones open up an area that was previously undeveloped. You are not only attracting companies, but also people who go there to live because there are sections with high-quality accommodation, as well as learning institutions.