061_G18_InFocus_Zambia

Global_18

In Focus Zambia case, copper. The government has pledged to reduce its dependence on copper exports, but there is no doubt that Zambia has benefi ted from its mineral wealth. China’s economic explosion and the long boom in the global telecoms industry has pushed up demand for Zambian copper, so the country now exports more and generates increased income per tonne of production. Annual copper production increased from 257,000 tonnes in 2000 to more than 900,000 tonnes last year, with the government setting a target of 1.5 million tonnes for 2015. Some progress was made on rebalancing the economy last year. The strongest performing sectors during the year were transport, storage and communications, with a 27.1 per cent rise in GDP; construction (24 per cent); community, social and personal services (17.4 per cent); fi nancial institutions and insurance (13.7 per cent); manufacturing (8.2 per cent); and mining (fi ve per cent). In common with the rest of the continent, most people are employed in agriculture and it is here that stronger growth had most effect on living standards. Following a continent-wide trend, the government is banking on infrastructural improvements to help drive private sector development. The country’s road network is being upgraded, in urban and rural areas, to enable farmers to transport their crops to market – even during the rainy season. A total of 8,000 km of road is to be surfaced and sealed by 2017, taking the total to 16,000 km. Much of the work is being carried out by Chinese companies and funded by Beijing or Lusaka itself. The country’s fi rst Eurobond issue in 2012 was 15 times oversubscribed and raised $750 million, but yields on the bond have increased as government spending has risen and another issue may be required later this year. In addition, Lusaka has taken out a wide range of loans with various Chinese state-owned organisations, probably on attractive terms, but whose details have not been published. The future of one of the country’s main export routes was assured in December, when the Government of China agreed to invest $221 million in the troubled Tanzania to Zambia Railway (Tazara). The acting managing director of Tazara, Ronald Phiri, said: “Now that the framework has been approved, we shall immediately embark on discussions with strategic partners in order to quickly secure suffi cient investment funding for key needy areas of operations.” A total of $90 million will be spent on rolling stock and it is anticipated that the volume of freight handled by the line will more than treble from 480,000 tonnes in DRC Zambia Tanzania Angola Malawi Mozambique • Lusaka Zimbabwe Botswana 2013 to 1.5 million tonnes in 2018. The railway was originally constructed with Chinese funding, technology and manpower in the 1970s in order to benefi t the two left-leaning countries and reduce Zambia’s dependence on Apartheid-era South Africa. A lack of investment and poor management in the intervening years, however, has reduced capacity and performance on the line. However, the Tanzanian and Zambian governments have now fi nalised a fi veyear rescue plan that they hope will secure Tazara’s future at a time when African railways are benefi ting from substantial investment for the fi rst time since the colonial period. The line runs from Zambia’s copper belt to the port of Dar es Salaam. Key data  Population: 14,075,000 (2012)  Ethnicity: There are 73 indigenous ethnic groups of Bantu origin. The largest, representing about 18% of the population, is the Bemba of the north-east and Copperbelt. Others include the Tonga of Southern Province, the Nyanja of Eastern Province and Lusaka, and the Lozi of the west.  Life expectancy: 49 years  Land area: 752,614 sq km  GDP: 6.8% p.a. 2008-12  Primary school enrolment: 95% While the general trend has been towards more market-driven African economies, Lusaka is pursuing a more interventionist policy, challenging the country’s biggest investor, Konkola Copper Mines, over plans to reduce its workforce. President Sata personally intervened to stop South African supermarket chain Shoprite from making workers redundant. His government has also increased the income threshold for paying income tax from 2,200 kwacha ($392) a month to 3,000 kwacha ($535) a month, thereby taking many middle-class Zambians out of income tax and reducing government revenues. Politically popular, such measures have generated some unease within the international fi nancial community. Credit ratings agency Fitch cut its rating on Zambian sovereign debt from B-plus to B last year and warned of “crumbling government fi nances”. The key to taking the economy on to the next level is encouraging domestic private enterprise. However, in common with most other African economies, bank lending rates are too high, averaging 16.3 per cent in 2013, although this was a 2.8 per cent reduction on the previous year. The country’s geographical location calls for trade liberalisation. Totally landlocked, it relies on access to ports on the Indian Ocean, Atlantic Ocean and South African coasts. As a committed member of the Southern African Development Community (SADC), it has more than most to gain from the success of Africa’s most successful regional trade body. The big question is whether Lusaka will continue to intervene as directly as it has done recently, while deregulating where genuine benefi ts can be generated. This would be a tough juggling act for any government. Tazara locomotive hauling freight global second quar ter 2014 www.global -br ief ing.org l 61


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