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An Easy Look at Zambia’s Poverty Reduction Strategy Paper 2002-2004
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4. PRSP and Economic Growth
Sectors for Economic Growth
In the past, the Zambian economy depended too much on copper mining. We now know that this was not a good approach for two reasons. Firstly, it is risky to build the nation on a single industry, in case the copper price falls again. Secondly, not all of us can be miners! Depending on copper means we ignore many other potentially profitable activities throughout the country. The PRSP supports the expansion of national economic activities beyond mining, to other areas where Zambia has potential for growth.
Economic Growth 1: Agriculture
Agriculture is the “sleeping giant” of Zambia’s economy. Agriculture could be a driving force for economic growth and development in the nation, but in reality it is failing. Production is low and the use of natural resources is inefficient. Zambia uses only 14% of its potential arable land, and less than 10% of its irrigation potential. Most rural households suffer from poverty and hunger.
Many farmers complain that Government no longer supplies inputs and buys maize from them. But this system had to end, because it cost the Government too much money and forced farmers to grow maize even where other crops were more suitable. So even if Government now steps in to assist farmers, it cannot go back to the old system. The new “liberalised” system has challenged farmers, because fertiliser and other inputs are expensive. Some farmers cannot afford them, because their production levels are too low to meet the costs of repayment. The new system has also suffered from constant changes, where Government has not stuck to clear policies on inputs and marketing.
Farmers in remote areas find it particularly difficult to access credit and inputs. Poor infrastructure means that their access to markets is very limited.
Agricultural extension services have not assisted farmers to expand, diversify or respond to the challenges of the new agricultural sector.
Zambia’s farmers have also suffered from cheap imports from neighbouring countries. Our towns fill up with “dumped” produce, sent here because of our liberal foreign exchange regulations. Regional agreements stop us from charging tax on these imports, which end up cheaper than local produce.
Discussion point:
Do you agree that these are the main problems for agriculture?
What will PRSP do for Agriculture?
PRSP will strengthen the liberalisation process. First, the Government will set (and stick to) a transparent, level playing field. Clear policies will be widely publicised, so we know how inputs and marketing will be managed, and how the sector will operate. Barriers to agricultural development will be removed, including legal problems with land tenure, loan repayments / contracts.
PRSP identifies increased production of food crops, export crops and produce that can be processed or value-added in Zambia. The PRSP will identify local opportunities for farmers, to promote appropriate programmes in each place, whether remote or not. The result will be improved household food security, increased incomes and a reduction in poverty.
Activities for Agriculture
PRSP activities are organised in five groups:
Targeted Food Security
Some poor farmers could produce food for their families, but lack adequate inputs and knowledge. The PRSP will provide them with inputs and training / extension for household food security.
Promote Improved Technology,
Farmers can benefit from using appropriate technology to increase crop and animal production. These include animal draft power, and techniques to reduce disease and increase production. New ideas for irrigation, crop storage and soil and water conservation will help farmers improve efficiency and profit.
Land Utilisation and Infrastructure Development
The PRSP will expand the land used for agriculture by identifying new farm blocks. This land can benefit local, resettled and even commercial farmers. Activities will include land demarcation, and the construction of roads, power, dams and irrigation facilities.
Strengthen Markets, Trade and Agri-Business
The PRSP will support the creation of agricultural export zones, where trade in profitable export crops is promoted through extension services, business skills development, market information, incentives for investors and the promotion of outgrower schemes.
Improve Finance and Investment Climate
The PRSP includes an “Agricultural Development Fund” (ADF) to provide credit at affordable rates to a greater number of farmers. The ADF strictly enforce repayment. As farmers start to repay, more private investment in outgrower schemes will be encouraged.
Economic Growth 2: Tourism
Zambia has fallen far behind our neighbouring countries in tourism development. As a nation, we could earn significant income from tourism. And Zambia enjoys natural advantages in this business – we have the Victoria Falls as well as world-class National Parks, which can attract many international tourists.
The particular advantage of the tourism business for poverty reduction is that uses remote rural areas, where most people are very poor. In remote areas, there are only limited opportunities for other activities like farming. There are natural resources (like wildlife) that should be conserved, and are attractive to tourists. Where tourism develops, local people get employment and business opportunities, as well as benefiting from improved communication, infrastructure and even social services. So tourism is the best means of raising local incomes and conserving Zambia’s wildlife at the same time.
Why hasn’t Tourism Developed in Zambia?
Some of the reasons why tourism has not developed in Zambia relate to other sectors too. It is hard to get loans to start any business, and extra problems are created by poor infrastructure and communications (especially in rural areas), and the lack of trained workers.
The tourism business also suffers from it own problems. The bureaucratic load of licenses, permits and fees etc are very burdensome. Customary land tenure and the system of leasing hunting areas for a few years only make any venture risky. Zambia is an expensive destination, and the complete lack of high quality hospitals reduces the number of tourists who are prepared to come. Since the sector is underdeveloped, there are few activities and choices for tourists, making other destinations more attractive.
Tourism Development Policy
The tourism development policy is based on the private sector leading the growth of the tourism sector. There are no plans for any more state-owned hotels and lodges! The role of the Government is to help the private sector to develop the tourism business, by improving infrastructure, making the investment process easier, and identifying where investors can get loans for developing new facilities.
PRSP Activities for Tourism
PRSP will undertake national programmes to promote the growth of the tourism industry, and will also carry out specific activities in five zones.
National Activities
The national activities will focus on attracting investors to Zambia, and ensuring that good tourism businesses thrive. This will include developing training opportunities in all necessary skills, to help Zambians to get skilled jobs in tourism. PRSP will encourage partnerships between international investors, local investors, and communities. PRSP will also support conservation of heritage sites, museums and natural resources.
Zonal Activities
PRSP has identified five key zones for investment, developing the major National Parks and surrounding Game Management Areas (GMAs).
Priority Zones for Tourism Development
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Livingstone & surroundings
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Kafue National Park & GMAs
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Lower Zambezi National Park & GMAs
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Luangwa National Parks & GMAs
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Lusaka & surroundings
In all of these, the key priority for PRSP will be improvement of infrastructure, particularly roads. A number of bridges and airstrips have also been identified. Other facilities will include visitors’ centres, improved water and sanitation, and (in Lusaka) conference facilities.
Economic Growth 3: Industry
Zambia’s industrial and manufacturing sector have only ever been small. In the 1970s, industries focused on making goods to reduce the need for imports. Unfortunately, the raw materials for most of these industries had to be imported. They did not use Zambian raw materials. So Zambia was still import dependent, and did not build strong markets for local products.
The industrial and manufacturing sectors have suffered from other problems too. It has been hard to compete in regional markets, because other countries try to block foreign products, or provide subsidies to their own producers that mean we can’t compete. Our skilled workers have left for work in other countries, and our remaining labour force is neither cheap nor exceptionally skilled.
Because Zambia’s industries were inefficient, many jobs have been lost. Since 1995, 86% of jobs in the manufacturing sector have been lost. The situation is very bad, but some encouraging signs can still be found. The future lies in industries based on the processing of Zambian raw materials, including agricultural produce. These are stable and have the potential to expand in future.
Future Directions in Industry
Industry and manufacturing can help to expand the Zambian economy, and can provide employment to many people. PRSP will invest in industries that process Zambian raw materials into export products. As well as facilitating large-scale investments, PRSP will also invest in small and medium scale enterprises. To support Zambian industry, Government must ensure that the regional playing field is level, so we can compete with neighbouring countries without unfair disadvantages from tariffs, duties, subsidies or the costs of services, power etc.
Activities in Industry
Investment Promotion
Zambia needs good investors in agriculture and industry. To attract local and international investors, the PRSP will set up attractive opportunities such as new farming blocks and industrial areas, with improved electricity, roads and telecommunications. The PRSP will also increase the monitoring of investors, to make sure that they stick to their licenses and agreed conditions.
Trade Policy & Export Promotion
Expanding the agricultural sector depends on exports. For this, we need to make sure that Zambian products have fair access to markets in other countries. The PRSP gives the opportunity for Zambia to ensure that regional and international trade agreements are used favourably. It also provides for improved testing and measurement facilities, to test Zambian products as well as checking on imports.
Micro, Small and Medium Enterprise Development
Developing small businesses is essential for poverty reduction. For this, the PRSP will support technical training, business management skills, credit facilities, product marketing and provision of necessary land / sites for various enterprises. Government is a big purchaser of services, and will purchase goods & services from small businesses where possible, especially in health and education.
Rural Industrialisation
Rural industries will focus on agro-processing. The PRSP will support viable projects, especially those that are labour intensive and close to farm blocks and outgrower schemes. PRSP will assist with road rehabilitation and power supplies to agreed sites.
Credit Facilities
For any business, getting funding is a problem. Medium and long-term loans are hard to find, and interest is very high. Key reasons for this are the regulations and risks facing the lending institutions. New policies will make it easier for them to lend money for development, and so improve access to loans for small and large-scale business.
Skills, Science & Technology
PRSP will improve skills amongst workers by re-introducing the apprenticeship system, and the Master Craftsman scheme. Incentives will be given to employers who invest in workers’ training. PRSP will rehabilitate scientific and technological institutions at our Universities as well as agencies such as the National Science & Technology Council, and the Technical Education, Vocational and Entrepreneurship Training Authority (TEVETA).
Economic Growth 4: Mining
Large Scale Copper Mining
When Zambians talk of mines, they think of the Copperbelt and its large-scale mining industry. Historically, this has been the heart of the Zambian economy. But in recent decades, production declined and prices fell, and the nation suffered from its over-dependence on a single industry.
The privatisation of the mines was intended to overcome problems with poor management and low levels of production. The privatisation process was completed in 2000, but in fact the story is not yet finished. Problems with the investors at Luanshya as well as the 2002 Anglo-American Corporation pull-out have forced Government to re-consider the future of these mines.
The second PRSP from 2004 will support the development of a new large-scale copper mine at Lumwana in North-Western Province. The benefits of this new mine will include new employment in impoverished areas, new infrastructure, power, road and rail networks, and new markets for the province’s farmers. The second PRSP will also fund rehabilitation of road and rail in key mining areas. However, the first PRSP focuses on the often-ignored small-scale mining sector.
Small Scale Mining
Mining is not only about copper. Zambia also has exciting potential in small-scale mining. Currently, this sector is mainly gemstones, but it could expand to include minerals for agricultural and industrial purposes (e.g. lime). There are various valuable deposits in many parts of Zambia, including many very remote areas. Developing small-scale mining in remote areas will be particularly valuable for poverty reduction, as economic activity always brings improvements in communications, markets and social services.
To date, small-scale mining has been plagued by illegal activities, including illegal mines, illegal traders and illegal exports. This exploits rural miners and the nation as a whole, as Government cannot collect taxes and fees that should be paid for our gemstones.
PRSP and the Mining Sector
The PRSP will focus its investments in mining on the small-scale sector, in four key programmes that aim to expand and regulate small-scale mining.
Sysmin “Sysmin” is the name of the mining diversification programme. Through Sysmin, PRSP will assist small-scale miners to increase production of gemstones, and of other minerals. This assistance will include information on where deposits can be found, business skills, finance and equipment, and infrastructure. Sysmin will build the proper regulation of small-scale mining, and ensure that illegal activities are stopped.
Gemstone Exchange Scheme
PRSP will reactivate the former Gemstone Exchange Scheme, which will help to ensure that markets are fair, profitable and legal. Producers will be able to get help in valuing their products, and to find competitive buyers. This will reduce the risk of exploitation by illegal traders, particularly of remote rural producers. The Gemstone Exchange will also check that all taxes and other fees are paid.
Mining Community Development
Gemstones and other mining products are Zambia’s natural resources. If a miner is selling this natural resource, the profits should be shared with the owners of the resource, which means the nation as well as the local community. Paying tax shares profits with the nation as a whole. For the local communities, PRSP will support a community development programme, where small-scale mining companies will also make payments to a local development fund.
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