COMPARATIVE ADVANTAGE

Zambia 2017 | ECONOMY | VIP INTERVIEW

TBY talks to Hon. Margaret Mwanakatwe, Minister of Commerce, Trade and Industry, on international trade, incentives for SMEs, and the Triangle of Hope.

What is your assessment of the meetings in Egypt recently regarding the Tripartite FTA?

The launch of the TFTA and the signing of the TFTA Agreement signify an important political milestone towards the establishment and operation of a fully-fledged Free Trade Area. It represents free movement of goods and services from Cape to Cairo, bringing together a market of over 625 million people, living in one of the fastest growth areas of the world with a booming middle class in 26 countries and a combined GDP of USD1.3 trillion, about 60% of the African Continent's GDP. For Zambia, the TFTA represents a significant market for Zambian goods and services once effectively exploited. Total merchandise exports by TFTA members was USD145 billion and merchandise imports of USD211 billion as of 2014. This is a massive market for our finished and semi-processed goods and gives us the market access to our producers, who are struggling to secure a share in developed markets due to Non-Tariff Barriers. The establishment of the Tripartite Free Trade Area will undoubtedly boost trade among the participating countries as a result of market expansion and contribute to the African Union Agenda of boosting intra-Africa Trade.

What is the status of the 11 bills presented to parliament to consolidate private sector participation?

The eleven bills represent my ministry's aggressive agenda to reform the business environment. The bills relate to strengthening intellectual property rights, trade facilitation, re-engineering of the national quality infrastructure; aligning company law to international best practices and expanding access to finance for micro, small, and medium enterprises. The bills are at different stages in the legislative process. Most of these bills have been approved by cabinet and are now undergoing legislative drafting.

How do you expect the international trade to evolve in Zambia in the next five years?

The evolution of Zambia's trade in next five years will be dictated by regional integration. The phase II negotiations under the Tripartite FTA framework and the Continental Free Trade Area negotiations will change the trade arena in Africa. Zambia needs to position herself to capitalize on this expanded market. If we don't position our industry to become a key regional player, we will be faced with high levels of imports into our country, which can lead to the death of local industry. We are confident that our experiences with COMESA and SADC FTAs have made us stronger. At the international level, the Economic Partnership Agreements with the European Union and the implementation of the Trade Facilitation Agreement present new challenges we must be prepared for even as we consolidate ourselves as a middle-income country.

What incentives should be provided to move small entrepreneurs into the formal market?

One of the key drivers of business informality is the high cost of doing business. When the procedures for starting a business and the licenses are expensive with tedious procedures, entrepreneurs avoid that cost by operating informally. This is why the Private Sector Development Reform Program is an important national priority. The measures to reduce the cost of doing business are bearing fruit as registration of SMEs at the Patents and Companies Registration Agency has grown substantially. Local authorities are now implementing single licensing systems to make it cheaper and more effective to formalize small businesses. We have now put in place a Business Regulatory Act and institutional framework that will mainstream tools such as Regulatory Impact Assessment into our policy-making systems. We will also be expanding the use of Regulatory Services Centers or One Stop Shops for business registration in all provinces and e-Platforms for business licensing across all regulatory agencies. As we make it easier and cheaper to operate in the formal sector, more small businesses will formalize.

What are the comparative advantages of Zambia over neighboring countries and why should an investor choose Zambia?

Zambia's comparative advantages lie primarily in its abundant resources. It has vast land, 752,614 sqkm, with a population of approximately 15 million people, with over 70% of the population below the age of 40. We have vast natural resources in terms of minerals, tourist sites, water, and land for agriculture. The country has had a stable economy with growth averaging 6% over the last decade, stable inflation averaging 7% over the last five years as well as a stable political and social environment since the country gained independence in 1964. In terms of doing business, we are ranked 5th in Sub Saharan Africa and 3rd among the SADC Countries, 4th in COMESA and 8th in the whole of Africa, pointing to the attractiveness of our business environment over most of our neighbors. We share borders with eight Countries making us landlocked. The country's central location in the region gives it a competitive market. Zambia has no controls on prices, interest rates, foreign exchange transactions, free repatriation of earnings and repayments as well as security and guarantees of full and fair compensation for investors. The country has banking, financial, legal and insurance services meeting international standard as well as a Stock Exchange. Investors can join other major corporations such as Barclays, Standard Chartered, Lafarge, Vedanta, and Barrick Gold who now call Zambia home.

What industries hold the biggest potential for investment in Zambia?

We have investment opportunities in the agricultural, energy, mining, manufacturing, and tourism sectors. These sectors have been prioritized by the government for wealth and job creation. In the agriculture sector, our potential lies in the cultivation of bananas, pineapples, tea, beans, rice, maize, wheat, oilseeds, coffee, cotton, tobacco, sugar, bio fuels, and livestock. Other key areas are the aquaculture subsector and the export of vegetables and flowers. Zambia has about 40% of the total water resources of the Southern African Region with the potential for 5,000MW of hydro-electricity generation. We also have proven coal reserves exceeding 30 million tons. In tourism, investment opportunities include natural sites and wild life. We have abundant minerals such as copper and gemstones. The vast agricultural and mining potential provides raw materials for value addition.

How do you describe the evolution of Multi-Facility Zones (MFEZs) and their role in achieving the three objectives of the Triangle of Hope?

The main objective of the Multi-Facility Economic Zones (MFEZ) program in Zambia is to catalyze industrial and economic development through increased activity in the manufacturing sector with value addition to the numerous natural and agricultural raw materials present. The zones are designed to provide a superior industrial and business platform. To date three MFEZs have been established and operationalized. These are the Chambishi MFEZ on the Copperbelt, the Lusaka East and Lusaka South MFEZ's in Lusaka. The Chambishi and Lusaka East MFEZs are privately developed, while the Lusaka MFEZ is publicly owned. Over USD1.5 billion has been invested in MFEZs by developers and enterprises operating in the MFEZs and in excess of 9,000 jobs have been created. More MFEZs are to be established. These include an MFEZ in Maamba in Southern Province, Kalumbila, and Lumwana in North-Western Province and Chembe in Luapula Province.