Africa South of the Sahara 2013 - Zambia's Economy

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Peoples Organisation of Namibia (SWAPO), allowing it tooperate from Zambian territory, and the African NationalCongress of South Africa (ANC), which, until its return toSouth Africa in mid-1990, maintained its headquarters inLusaka. Owing to Kaundas support for SWAPO and theANC, Zambia was frequently subjected to military reprisalsby SouthAfrica. However, SouthAfrican political reforms from1990 onwards eased relations, and in mid-1993 the SouthAfrican President, F. W. de Klerk, made an official visit toZambia (the first by a South African Head of State). The South

African Government endorsed Mwanawasas controversialfirst election victory and, in return, Mwanawasa supportedThabo Mbekis proposal for the New Partnership for AfricasDevelopment. Relations between Banda and Jacob Zuma, whowas elected President of South Africa in April 2009, appearedwarm, with Banda being oneof thefew African heads of state toattend the World Economic Forum in Cape Town, hosted byZuma, in June 2009. The South African Government wasreported to be concerned at the reversal of the sale of FinanceBank Zambia to South Africas FirstRand Bank, althoughthere was no formal protest.

The Namibian and Zambian authorities have co-operatedsince SWAPO came to power to suppress Lozi nationalism. In1999 Lozi nationalists from the Caprivi strip in Namibia fled toZambia seeking asylum, but were detained in Lusaka andsubsequently returned to Namibia by the Zambian Govern-ment. Lozi nationalists clashed with Namibian troops inCaprivi that year, and the Zambia-based Lozi nationalistImasiku Mutangelwa, the leaderof theBarotse PatrioticFront(a militant group based in Zambia), was arrested by theZambian authorities for allegedly declaring his support fortheir actions. Mutangelwa had initially sought refuge in theSouth African High Commission in Lusaka, but the SouthAfricans handed him over to the Zambian police.

Zambias support for the Governments of Angola andMozambique during the Kaunda era resulted in retaliatoryattacks by Uniao Nacional para a Independencia Total deAngola (UNITA) rebels and by Mozambican guerrillas of theResistencia Nacional Mocambicana (Renamo). Renamoattacks ceased after a peace agreement was reached betweenRenamo and the Government of Mozambique in October 1992.Zambia subsequently contributed 950 troops for a UN peace-keeping force that was deployed in Mozambique. It was fre-

quently alleged by the Angolan Government during the

Chiluba presidency that senior members of the Zambian Gov-ernment were supporting UNITA.Chiluba deniedthe charges,which were never proved, but it was none the less widelysuspected that covert Zambian assistance for UNITA wastaking place, even though in early 1996 Zambia contributedsome 1,000 troops to the UN Angola Verification Mission. Inearly 1999 tensions between the two countries peaked whenthe Angolan Government accused Chilubas administration ofcomplicity in a mysterious bomb blast that severely damagedthe Angolan embassy in Lusaka. The two Governments latersigned an agreement aimed at resolving their differences, butthe Angolan Government was angered that Chiluba refused toallow its troops to pursue UNITA forces onto Zambian terri-tory, and in December 1999 Angolan military aircraft bombedborderareas of Zambias North-Western Province.The UNITAleader, Jonas Savimbi, was killed in early 2002, and a peaceagreementwas reached between theAngolan Government andUNITA in April. Following the agreement, relations easedconsiderably between the two countries as peace largelyreturned to the border region and the refugees began to gohome. Over 20,000 Angolan refugees, however, have declinedto return to Angola, and many still remain in camps in Zambia.

The Zambian Government became involved in regionalefforts to find a political solution to the conflict in the Demo-cratic Republic of the Congo (DRC), after a rebellion wasmounted against its Government in August 1998, and Chiluba

was appointed to co-ordinate SADC peace initiatives on thecrisis. A summit held in Lusaka in JuneJuly 1999 resulted ina cease-fire document that provided a timetable for the with-drawal of foreign forces from the DRC and for political reformin the country, which was hailed at the time as a majordiplomatic achievement by Chiluba. The diplomatic initiativeto end the war was subsequently taken by South Africa;Mwanawasa played only a minimal role in later diplomacy.Mwanawasas relations with Congolese President JosephKabila, while cordial, showed little evidence of warmth, butMwanawasa remained careful not to offend the DRC Govern-ment. Meanwhile, Zambia continues to host thousands ofCongolese refugees who fled the DRC during the conflict orsubsequently,most of whom live in camps assisted by the officeof the UN High Commissioner for Refugees. Efforts by thatorganization at voluntary repatriation have yielded disap-

pointing results, and the majority have remained in Zambia.

EconomyLINDA VAN BUREN

Revised for this edition by OBI IHEME

INTRODUCTION

The Zambianeconomy has demonstrated significant resilienceas the world has begun to recover from the global economicdownturn of 2008 and 2009. According to the IMF in its June

2010 review, the Zambian economy has performed well in theaftermathof a sharp decline in copperprices in late 2008early2009, thanks to prudent macro-economic policies and struc-tural reforms. Growth is high; inflation has moderated; thecurrent account deficit has narrowed; international reserveshave strengthened. . .; and the economic outlook is positive.The World Bank also praised the countrys economic manage-ment in April 2011. Generally, theperformanceof theZambianeconomy reflects fluctuations in the global copper market, andthe world copper price is not known for its stability, even in theabsence of global financial difficulties. The year 2008 turnedout to be an annus horribilis for many economies around theworld, but few more so than Zambias, and the reasons for thiswere almost entirely external. The global price for copperdecreased by two-thirds in four months, resulting in a heavyreduction in Zambias terms of trade. Severe declines occurred

in Zambias government revenue, export revenue, balance of

payments and currency exchange rate, while inflation rose to16.6%. Production declined, mines closed (although oneimportantmine opened), more than 12,000 Zambians losttheirjobs and investment projects were postponed. These difficultieswere further compounded by a poor domestic maize harvest in2008.Nevertheless, despite the external pressures of the globaleconomic recession of 2008 and 2009, Zambias economicgrowth remained strong. According to the IMF, gross domesticproduct (GDP) grewby 6%in 2008,by 6.4%in 2009and by7.6%in 2010.An important factor in this growth rate was that after2008s disappointing maize crop, 2009and 2010saw successivebumper harvests. Increased supply of maize in the countrysmarkets brought prices down and reduced inflation to 9.9% inDecember 2009 and to 7.7% in September 2010. These reduc-tions resulted mainly from a decrease in foodinflation from 8%in December 2009 to 2.8% in September 2010.

Whereas in 199873% of allZambians lived below thepovertyline, this figure had been reduced to 59% by 2010. However,even in that year, 80% of rural Zambians still lived in poverty,and the 37% of the population who lived in extreme povertywere mostly located in rural areas. With a GDP per caput of

US $1,512 in 2010 according to the IMF, Zambia was ranked

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above 27 other countries in the world. However, by otherbenchmarks it fared much worse, with, for example, a lifeexpectancy in 2010 of 42.4 years, the third lowest in the world,according to the UN. Relations between the IMF and theGovernment remained cordial and in June 2008 the IMFapproved a new three-year Poverty Reduction and GrowthFacility (PRGF) initially worth $79.2m. The IMF later aug-mented this PRGF facility (renamed the Extended CreditFacility), increasing it in May 2009 to $329.7m. Actual dis-bursements under the facility were $10.5m. in June 2008,

$160.1m. in May 2009, $81.2m. in December 2009, $27.1m. inJune 2010 and $29.3m. in June 2011. Although the 21stcentury has so far been a period of sustained positive economicgrowth for Zambia, a higher level of growthof 7% or morewas required if poverty and joblessness were to be reduced.

Economic growth in Zambia in 2011 was 6.6%, representinga deceleration from 7.6% in 2010, largely because of a poorerperformance by the critical mining industry. However, eco-nomic performance in the medium term is promising, mainlyowing to the expected gains from continued enlargements ofthe countrys main sectors, such as agriculture, construction,manufacturing, transportation and communications, and alsoto a recovery in the mining sector. Infrastructure develop-ments will also underpin this growth, particularly in theagricultural sector, where improvements are expected thatwill enable better delivery of products to market. Improvedinfrastructure is also expected to help the mining sector, withincreases in power generation, transmission and distribution(hitherto weak areas that have hampered development in thesector). The Government intends to issue bonds to raiseUS $700m. to finance these infrastructure investments.

The African Economic Outlook (AEO) projects economicgrowth of 6.9% for Zambia in 2012, and an increase to a rateof 7.3% in 2013. As the country depends heavily on miningexports, however, the realization of these optimistic forecastsis conditional on continued high demand from its usual exportdestinations, which is in turn dependent on those countrieseconomic revivals.

AGRICULTURE

Agriculture accounted for 26% of GDP in 2010 and employed85% of the economically active population in that year; how-

ever, in 2011 the sectors contribution contracted to 21% ofGDP. Despite this slowdown, agriculture remains an import-antsector of theeconomy.Zambias topography, with itsvariedelevation, enables a variety of crops to be grown, although onlyabout 7% of the surface area is under cultivation, while some40% serves as permanent pasture and 43% is under forest. TheGovernment estimates that, of the countrys 60m. ha of arableland, only about 15% is currently being exploited. Maize is thestaple food crop of Zambia, consumed in the form of nshima, aporridge-like dish. The national annual requirement for maizewas 1.26m. metric tons in 2009. Maize production varies withweather conditions. A poor growing season in 2007/08 coin-cided with the global economic downturn. However, the 2008/09 season produced a bumper crop of 1.89m. tons, a 31%increase from 2007/08. This was particularly welcome news,as theagriculturesector hadexperiencednegativegrowth overthe previous four years, especially in 2007/08, when the sectorcontracted by 4%. Zambian farmers harvested a record maizecrop of 2.8m. tons in 2010. There has been a drive to diversifythe agricultural sector, which has yielded gains in the growthin output of crops other than maize.

Besides maize, Zambia also produces cassava, wheat, millet,vegetables, sugar cane, groundnuts, sweet potatoes, melons,fruits, cotton, sorghum, barley, pulses, soya beans, tobacco,sunflower seeds and paddy rice. Zambia has several hundredlarge commercial farms, situated mostly near the railwaylines,which accountfor about 45%of thecountrys agriculturaloutput. In maize, the proportion is smaller; large-scale farmsproduced only about 12% of the maize crop in 2008/09. Thenumber of smallholders is increasing and stood at about820,000 in 2011. Most subsistence farmers use traditionalmethods, without adequate inputs or infrastructural support,although some improvement has taken place through such

schemes as a Fertilizer Support Programme (FSP), food-

security packs, outgrower programmes and improved accessto agricultural credit. Nevertheless, the 2009/10budget speechlamented that the FSP had weaknesses and that access tocredit was still limited. Other constraints itemized wereinadequate infrastructure, limited access to inputs and exten-sion services, the high cost of inputs, poor livestock manage-ment and a failure to attract adequate private investment intothe sector.

Wheat is grown almost exclusively on large commercialfarms, usually under irrigation. The countrys flour mills

require some 140,000 metric tons per year to keep the nationsupplied with bread; even in very productive seasons, wheathas to be imported.

The harvest of sugar cane amounted to an average of about2.5m. metric tons per annum in 200408. An expansionbrought 2,085 ha of land into irrigated cane production in2009 and increased the capacity of the sugar factory atNakambala by 10%. The coffee sector produces Arabica. Out-putof coffeehas been declining: 2004 sawproduction of 110,00060-kg bags, but by 2010/11 output had fallen to 21,000 bags.Exports of green coffee declined from 137,333 60-kg bags in2003/04 (based on a coffee year of June to May) to just 31,463bags in 2010/11, according to International Coffee Organiza-tion figures.

The horticultural sector has experienced strong growth,with the export of fruits, vegetables and flowers to Europe.The sectors interests are overseen by the Zambia ExportGrowers Association, which, among other things, lobbies foraffordable airfreight charges. Zambia has more than 30 flowerfarms,covering135 ha,growing more than 50 varietiesof rosesand some 20 kinds of summer flowers for export. The chiefclient is the flower markets of the Netherlands.

About 70% of livestock is owned by traditional farmers. Thenational cattle herd numbered about 3.0m. head in 2010. Asmall amount of beef is generally exported. Foot-and-mouthdiseaseconstitutesa problem in some areas of thecountry. TheCentral Veterinary Research Institute in Chilanga produceslivestock vaccines for the local market and for export. ZambeefProducts PLC, the largest meat company in Zambia, has anannual turnover of some K200,000m. and employs over 1,400workers throughout thecountry. Allof its shares arequotedonthe Lusaka Stock Exchange (LuSE). Zambeef slaughters60,000 head of cattle annually, produces 8m. litres of milk,

processes 3.5m. chickens,producesover 20m. eggs, tans 60,000hides for export (earning an annual US $1.2m. in foreignexchange), distributes meat in the Zambian marketplacethrough 85 outlets and even makes shoes. It also grows maize,wheat, lucerne (alfalfa) and soya beans on 4,200 ha of land, ofwhich 2,700 ha are under irrigation.

Land-locked Zambia has a number of lakes and rivers,particularly Lake Kariba on the southern border with Zim-babwe and those in the Northern Province; these all offerconsiderable potential for fishing. The total catch was 86,700metric tons in 2010.

Zambia has 323,000 sq km of forested land, 265,000sq km ofwhichis opento exploitation. Commercialforestryis importanton the Copperbelt, where there are numerous softwood treeplantations, and in the hardwood areas of the south-west,which are rich in African teak. Total roundwood removalsamount to more than 10m. cu m per year, but over 9m. cu m is

consumed locally in the form of wood fuel.Even though growth was forecast in the agricultural sector

in 2011, it wasnot expected toequal theaverage of thepreviousthree years, since late rainfall and poor infrastructure pre-vented the efficient delivery of products. However, the Gov-ernment expanded the 2012 budgetary allocation foragriculture by 6.1%, the largest share of which was allocatedto the Farmer Input Support Programme, and to buying cropsfor the countrys strategic food reserve. Additionally, irriga-tion, livestock, fisheries, and aquaculture were also to bedeveloped.

MINING

Zambias mining and quarrying sector grew by 15.7% during2009, according to the African Development Bank (AfDB).

Currently, Zambia has 6% of theworlds copperreserves, is the

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seventh largest copper producer, with 3.3% of global output,and is the second largest miner of cobalt, with 20% of theworlds production. The mining sector contributed 18.8% ofGDP in 1990 but just 1.3% in 2009, down from 4.3% in 2008.The sector employed nearly 50,000 people in 2007. Zambia isthe largest copper producer in Africa. Copper accounted forabout 70% of the countrys total export revenue in 2009. Theglobal copper price in 2010 reached a 37-year high, andZambian copper exports grew to 720,000 metric tons. Copperexport receipts were 41% higher in 2010, compared with the

previous year. The price of copper in July 2011 was US $9,411per ton. Exclusive Analysis reported that the countrys copperproduction rose from 260,000 tons in 2002 to about 790,000tons in 2011, and forecast outputof 980,000tons in 2012. Otherminerals exploited include zinc, lead, gold, silver, selenium,marble, emeralds, amethysts, aquamarines, tourmalines andgarnets. The AEO projected growth in the mining sector to be10.6% in 2012 and 10.3% in 2013.

Zambia Consolidated Copper Mines-Investment Holdings(ZCCM-IH) is the government-owned operator of mines, andowns between 10% and 20% of virtually all copper mines. TheGovernment controls some 87% of the company, and 12.4% ofthe shares are traded on the Lusaka, Euronext and Londonstock exchanges.

Konkola is potentially the richest of Zambias copper mines,possessing reserves of 44.3m. metric tons, with a copper con-tent of 3.9%, while reserves at Nchanga have a copper contentof 3.8% and those at Mufulira have a content of 3.2%; Nkana isthe largest mine, with 95.5m. tons of reserves, but with acopper content of only 2.3%. Konkola Copper Mines PLC(KCM), 51% of which is owned by Vedanta Resources of Indiaand 28.4% by Anglos Zambia Copper Investments Limited ofBermuda, was already the largest mining company in Zambiawhen, in 2007, it announced plans to mine even deeper.Vedanta also owns two mines at Nchanga and one at Nam-pundwe, plus smelters at Nkana and Nchanga. The KonkolaDeep Mining Project (KDMP), the largest-ever single mininginvestment in Zambia, was to cost US $674m. and was to takethe mine down to a depth of 1,505 m. The sinking of the mainshaft was completed in June 2011, and the mine was expectedtoenterproductionbytheendof2011.KDMPwastoextendthelife of the mineto 2035 andwasto increase its throughput from2m. tons of copper ore to 7.5m. tons per annum. Zambias

Kansanshi, situated near Solwezi, in North-Western Province,is the eighth largest copper mine in the world. The project wasexpected to last until 2019, and would produce 1.6m. tons ofcopper, with a by-product of 25,000 oz of gold annually. Thetotal cost of the project was estimated at between $200m. and$300m., and the mine entered production in December 2004,with the creation of 1,300new jobs.The work-force at Kansan-shi as of 31 December 2011 was 1,635, compared with 3,500 at31 December 2009. Also in North-Western Province,the 1,355-sq km open-pit Lumwana copper mine, 100% owned by Equi-nox Minerals Limited of Canada and Australia, was expectedto produce 172,000 tons of copper metal per year during thefirst six years of its projected 37-year life. Production began in2009. In June 2010 Equinox announced plans for a two-phaseexpansion at Lumwana. Phase 1 would increase throughputfrom 20m. tons per annum to 24m. tons per annum in 18months, and Phase 2, pending feasibility study results, wouldraise throughput from 24m. tons per annum to 35m. tons perannum over a period of 34 years at a projected cost of $300m.$400m. Uranium has also been discovered within Lumwanascopper pitshells.

ZambiaConsolidatedCopper Mines (B),or B Co, comprisingthe Luanshya and Baluba facilities, shut down in December2008 when copper prices plunged. In January 2009 the debt-ridden mine returned to the ownership of the Zambian Gov-ernment. In May the Banda Government sold its 85% stake inthe Chambeshi copper mine to China Non-Ferrous Metals(CNFM) for a reported US $50m. In August CNFM announceda $400m. investment that would create 4,000 jobs. The Chi-buluma mine assets were sold to a Canadian-South Africanconsortium led by South Africas Metorex for $17m. The newowners pledged to invest $34m. in the facility, the productioncapacity of which was described as 480,000 metric tons of ore

per year. In 2006 Metorex opened a new mine at Chibuluma

South, the first new underground mine to open on the Cop-perbelt in 30 years. According to Metorex, Chibuluma pro-duced 17,729 tons of copper in 2010.

Private sector investment has been actively in the miningsector. Incentives included a 10% reduction in the corporatetax rate for mining investors and also relief from several othertypes of tax, such as thewithholdingtax on dividends, royaltiesand management fees. The tax on mineral royalties wasreduced from 2.0% to 0.6%. The mining corporation taxdeclined from 35% to 25% for all companies, whereas previ-

ously only KCM and Mopani Copper Mines had enjoyed thelower rate. Meanwhile, the global copper price began a sus-tained rise, owing in large measure to increased demand fromthe Peoples Republic of China, which in 2002 had overtakenthe USA as the worlds largest importer of copper. However,during the 200809 global recession copper stocks mountedworld-wide; as a result, demand decreased sharply and theglobal copper price declined by two-thirds. Mining costs thathad been comfortably covered by the July 2008 price nowexceeded the December price, turning profits into losses andleading some Zambian mines to close in order to stem thoselosses. Exploration activity dwindled, mining investment pro-jects were shelved and numerous jobs in the sector were lost.

Zambias first nickel mine began producing ore in 2008, twomonths ahead of schedule. The Munali nickel-sulphide mine,located some 60 kmsouth of Lusaka, is 100% owned by AlbidonLimited of Australia. Munalis first focus is on two ore bodies,Enterprise and Voyager, but drilling in 2008 also explored twonearby areas, Intrepid and Defiant. Zambian output of cobaltrose from 4,414 metric tons in 2007 to 5,700 tons in 2010.Zambia mines gemstones such as emeralds, aquamarines,amethysts and some diamonds. Zambia boasts the worldssecond largest deposits of emeralds, after Colombia, andZambian emeralds account for a significant and growing shareof the coloured-gem market. Zambian emeralds are valuedalmost as highly as those from Colombia. Most gemstones aremined on a small scale, but the sector is thought to offersignificant potential for growth. Smuggling of gemstones is amajor problem.

Marble deposits in Lusaka Province and elsewhere in Zam-bia range from pure white to pale pink, deep salmon pink anddark green, and some varieties are hard-wearing enough foruse in flooring. Zambian granite tends to be dark and suitable

for kitchen counters in homes. A rare blue granite has beenfound near Solwezi. Metorex owns a marble-processing plantin Kabwe. Chilanga Cement, 84.5% of which is owned byLafarge of France, has plants in Lusaka and Ndola. Petroleumexploration took place after 2000, and in 2006traces of oil werefound in several locations, leading the Government to promul-gate a Petroleum Act in 2007 and to offer concessions forexploration. Tenders were invited in June 2009 for 23 blocks;bidding closed in November and concessions were awarded for11 of the 23 blocks, to eight companies, four of them Zambian,two from the United Kingdom, one from the USA and one fromCanada. A second round of bidding was opened in December,and again 23 blocks were offered, comprising the 12 that hadnot been sold in the first round plus 11 new blocks.

A new mining tax regime came into force on 1 April 2008.Among its main features were an increase in the mineralroyalty accruing to the Zambian Government from 0.6% to3.0%; a rise in the corporate income tax rate from 25% to 30%;and a windfall tax that was to be activated if the global copperprice should rise above US $2.50 per lb (in July 2011 the pricewas $4.28 per lb). Given that the global copper price had beenabove $3.50 per lb throughout the regimes first four months inpower, both the Mwanawasa Government and the IMF wereexpecting a major revenue boost; however, they were to besorely disappointed. At its launch, the mining tax regime hadbeen forecast to contribute K917,300m. in the nine monthsfrom 1 April to 31 December 2008; however, in the event, theamount collected was just K319,500m. Undoubtedly, signifi-cantlylowertaxable miningrevenue was a contributing factor,but the Banda Governments first budget speech, delivered on30 January 2009 and covering 2009/10, made no excuses. Thereason for the 65% shortfall, Minister of Finance and NationalPlanning Dr Situmbeko Musokotwane admitted, was admin-

istrative challenges in implementing the regime during the

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year. This budget also removed the windfall tax. However, inJanuary 2012 the Government announced that it would seekan increase in copper royalties from 3% to 6%.

The main risk to the mining sector is the paucity of energysupply; growth in mining is expected to be hampered over thenext three to five years by production stoppages. Demand forpower will exceed supply over the next few years, as morehouseholds are connected to the power grid and more miningprojects enter into operation. This is despite priority of energysupply already being granted to mining companies.

INDUSTRY

Manufacturings share of GDP has changed little over theyears; it contributed 9.1% of GDP in both 1990 and 2011.Growth in the manufacturing sector was for many years verymoderate, rarely achieving a whole percentage point; but in2007 manufacturing grew by 5.0%, primarily owing to theGovernments decision to reduce the duty on imported rawmaterials. The 2009/10 budget address indicated that theBanda Government intended to continue with this policy. Itrecognized that stimulating growth in the manufacturingsector is a critical element of any diversification drive, thatthe high cost of doing business has been a major impedimentand that Zambias narrow manufacturing base has signifi-cantly contributed to its high import bills over the years. Itconfirmed that it was to proceed with three multi-facility

economic zonesat Chambishi,Lusaka East andLusakaSouth.Construction at Chambishi began in 2008, with Chinese par-ticipation. Development of the 2,100-ha, US $130m. LusakaSouth Multi-facility Economic Zone was to take place over fivephases, with Phase1 beginning in 2011;the project waspart ofthe countrys Public-Private Partnership scheme.

By 2001 262 companies had been transferred to privatesector ownership or had completed the negotiation stage.However, the fact that no further privatizations had beencompleted by mid-2009 indicated a loss of momentum in theprogramme. In 2007 the Zambia Development Agency (ZDA)became the countrys privatization vehicle. ZDA was taskedwith investigating the high cost of doing business in Zambiaand with simplifying licensing procedures. In June 2010 a 75%stake in Zambia Telecommunications Co Ltd was privatized.The new owner was Lap Green Networks of Libya.

Nitrogen Chemicals of Zambia Ltd, which had ceased oper-ationsin 2008, wasrelaunched on 1 June2010,having receiveda contract from theBandaGovernment to supply20,000metrictons of fertilizers by 31 July.

According to the AEO, the construction sector was forecast togrow by about 17% over 201213, which was to be madepossible by the anticipated recovery in the mining and quar-rying sector, as well as by the growth in public infrastructurespending in the coming years. This was promising news, giventhe reliance of Zambias economy on the construction industry,which contributed 21.1% of GDP in 2011.

ENERGY

More than 99% of Zambias electricity is generated by hydro-electric installations. Electricity shortages affected Zambiarepeatedly during 200711. The Zambia Electricity SupplyCorpn (ZESCO) oversees the countrys power generation anddistribution. Zambia had 1,670 MW of electric-power capacityin 2007, the year in which national demand rose to meetnational supply. Only about 1,200 MW of its installed capacitywas available in 2007, compared with demand of 1,450 MW.Load-shedding led to frequent power cuts at peak demandtimes during 200711, while exports continued at off-peaktimes. According to ZESCO, rehabilitation work in 2007 and2008 added a further 210 MW to the national grid. Majorhydroelectric facilities are at Kafue Gorge, Kariba North andVictoria Falls. ZESCO has long-term plans to add 120 MW atItezhi-Tezhi, 360 MW through an extension at Kariba Northand 750 MW at Kafue Gorge Lower. In June 2010 Zambia hadto import 50 MW of power from the Democratic Republic of theCongo (DRC).

Rural electrification is a stated priority, and some extensionof the national grid has been achieved, butmanyareas of rural

Zambia still do not have access to mains power supply.

ZESCOs customer base was 310,000 in 2007, in a countrywith a population of well over 11m.; therefore, at that time only2.8% of Zambians were connected to the national grid. Char-coal and fuel wood remain the main sources of energy supplyforcooking and heating purposes formost peoplein both urbanand rural areas.

Zambias sole remaining colliery, at Maamba, has coalreserves of 78m. metric tons and a life span of more than 70years.

Power consumption in Zambia is dominated by mining

companies, the Government prioritizing their operationsabove all other industries, and even household consumption,resulting in frequent blackouts. The operation of new powerplants will continue, which is expected to increase domesticpower production, but some interim measures involve theimport of electricity from other southern African countries.For example, in 2009 Zambia imported between 150 MW and200 MW of electricity from the DRC and Mozambique. Fur-thermore, in January 2012 ZESCO, presumably in a bid toimprove its revenues, announced an increase in electricityprices of between 17% and 33%.

TRANSPORT

Zambias 15-year Road Sector Investment Programme(ROAD-SIP), covering the period 19982013, entered its second phase(ROADSIP II) in 2004. The objective was to bring 40,113 km

into maintainable condition by 2013.Boosted by Danish devel-opment assistance, ROADSIP II, which was to cost an esti-mated US $1,600m., was to focus on improving the high-priority main road between Mongu and Shesheke. This roadwas to become a key segment in an international corridorlinking the DRC to the Namibian port of Walvis Bay. TheTanzaniaZambia Railway Authority (Tazara) railway lineleading to Tanzanias Indian Ocean port of Dar es Salaam wasbuilt and financed by China with an interest-free loan duringthe early 1970s. In 2005 the Governments of Tanzania andZambia agreed to privatize Tazara, with preference given to aChinese concern that would be chosen by the Chinese Govern-ment, but as of mid-2010 the Tazara management had beenreplaced, staff salaries reportedly had gone unpaid for at leastthree months, most of the locomotives were inoperative and nofurther progress towards privatization had beenannounced. InJanuary 2010 the Chinese Government extended a $39m. loanto Tazara to enable the purchase of six new locomotives andfour new wagons and to fund the repair of 120 wagons; how-ever, the Tazara management estimated that it would need$770m. to become commercially viable.

Railways Systems of Zambia is operated by a consortiumknown as NLPI Limited, comprising mainly South Africanbusiness interests, under a 20-year concession in exchange foran annual payment to the Zambian Government amounting toUS $253m. plus 5% of annual turnover. Zambias only port,Mpulungu, is on Lake Tanganyika. In 2000 the Government ofFrederick Chiluba concessionedMpulungu harbour, portoper-ations and assets to Mpulungu Harbour Management Ltd for25 years.

The BotZam Highway links Kazungula with Nata, in Bots-wana. A new German-financed 8.2m. road bridge across theZambezi river at Katima Mulilo opened in 2004, facilitating

cross-border passage. The 2008/09 budget allocatedK1,110,700m. to road construction, rehabilitation and main-tenance.

In July 2011 Proflight Zambiawas operatingdomesticflightsto 11 destinations. In addition, Zambezi Airlines operatesregional services from Lusaka, Livingstone and Ndola toCape Town and Johannesburg in South Africa, Harare inZimbabwe, Lubumbashi in the DRC, and Dar es Salaam inTanzania. The National Airports Corpn Ltd (NACL) operatesLusaka InternationalAirport,in addition to the Ndola,Living-stone and Mfuwe airports. The 2008/09 budget allocatedK40,000m. to upgrade the Solwezi and Kasama airports.

TOURISM

The Mwanawasa Government identified tourism as a growthsector. The number of tourist arrivals increased from 668,862

in 2005 to 897,413 in 2007, and tourism receipts rose from

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US$98m. in 2005 to$138m.in 2007.Thetourism sector, whichhad been badly affected by the global economic crisis in 2008(arrivals fell to 811,775 in that year) and 2009, recoveredstrongly in 2010. Arrivals grew by 25% in that year, aftercontracting by 13.4% in 2009. Zimbabwe and Zambia boast oneof the great tourist attractions of the world in Victoria Falls, onthe Zambezi river on their shared border. Until the recentcrisis in Zimbabwe, that country attracted a far larger share ofthe tourists visiting the Falls and had the more highlydeveloped tourism infrastructure. On the Zambian side of

the river, the town of Livingstone is the focus of renewedtourism development. Tourist interest in Zambia hasexpanded beyond Victoria Falls, to the countrys game parks.The Tourism Development Credit Facility, launched in 2004,facilitated private sector interest in rapidly building tourisminfrastructure such as lodges, guesthouses and camping sites,so that Zambia could capitalize on the boom opportunities.Tourism development in 2011 was focused on the NorthernTourism Circuit. In 2012 the Government also allocatedK15,000m. to recapitalize the Zambia Wildlife Authority(ZAWA), in order to improve wildlife resources for tourism.

FOREIGN TRADE AND PAYMENTS

Zambias policies designed to improve international tradehavebeen promising. The country has implemented a One StopBorder Post with Zimbabwe and one with the DRC, and a

Simplified Trade Regime with Malawi. Boosted by copperexports, Zambias trade balance is usually in surplus. Thevalue of total merchandise exports on a free-on-board (f.o.b.)basis increased by 59% from US $4,319m. in 2009 to anestimated $6,850m. in 2010, mainly due to copper exports,which rose by 71.6% over the same period from $3,179m. to$5,455m. Imports f.o.b. also rose, by 38.7%, from $3,413m. in2009 to an estimated $4,733m. in 2010. Oil imports accountedfor the largest share of the total butnot for the largest share oftheincrease;oilimportcostsroseby17.9%from$536m.in2009to an estimated $632m. in 2010. The resulting visible tradesurplus improved significantly, from $906m. in 2009 to anestimated $2,117m. in 2010.

The current account of the balance of payments recorded asurplus, of US $404m., in 2009. The surplus widened to$614.7m. in 2010 and to $951m. in 2011, equivalent to 5.4%ofGDP. This growthwas made possible largely becauseof a risein mining exports from $5,800m. to $7,000m. Despite anexpected increase in metal prices, the surplus on the currentaccount of the balance of payments was forecast by the AEO tofall to 3.6% of GDP in 2012, owing to the lower demand formining exports arising from the continuing global recession.

GOVERNMENT FINANCE

The 2011 budget, presented to the National Assembly inOctober 2010 by Musokotwane, appealed for total expenditureof K20,537,400m., while total revenue was forecast atK17,356,800m., leaving a deficitof K3,180,600m.This shortfallwas to be financed by borrowing, 62% of it from externalsources and the remaining 38% from the domestic market.The 2011 fiscal deficit was 2.6% of GDP, falling below thecountrys upper limit of 3%. Public spending was reduced from21.5% of GDP in 2010 to 19.3% of GDP in 2011. Much of thespending in 2011 was on higher-than-expected purchases ofmaize, and on the organization of elections. Recurrent expend-iture fell slightly, from 15.8% of GDP in 2010 to 15.4% in 2011,while the Governments increased infrastructure spending in2011 pushed capital expenditure slightly higher, from 2.8% ofGDP in 2010 to 3.0% of GDP in 2011. According to IMF figures,the budget deficit was projected to increase to K7,983,000m.(expenditure K27,803,000m., revenue K19,820,000m.) in2012.Increasingtax revenue willbe important for maintainingfiscal discipline. Zambiamust notonly expandthe taxbase,butalso increase taxes from mining companies and use the rev-enue efficiently, ideally in a manner that promotes furthergrowth, suchas on capital investments and socialprogrammes,and must tightly control recurrent expenditures. In 2006,owing to debt relief from the IMF, the World Bank and theAfrican Development Bank, Zambia was able to shed its status

as a heavily indebted poor country (HIPC). The IMF, through

itsMultilateral Debt ReliefInitiative (MDRI), in January2006announced that Zambia was eligible for 100% debt relief on alldebt incurred to the IMF prior to 1 January 2005 that was stilloutstanding. This MDRI was to have reduced Zambias totalexternal debt from US $4,500m. at the beginning of 2006 to$635m. However, this figure of $635m. was later revisedupward, to $1,019m., to reflect what the 2008/09 budgetstatement described as undeliveredHIPC initiative debt relieffromsomeof the bilateral creditors with whom we have not yetreached agreement. By 31 December 2009 government total

external debt stock had risen to $1,587m., equivalent to 12.4%of GDP. With the 2011 budget appealing for domestic borrow-ing of K1,219,800m. and for some foreign borrowing on non-concessional terms, Zambias indebtedness was again mount-ing up. The national currency, the kwacha, weakened againstthe US dollar by 11.4% in 2010/11, from K2,217.30 = US $1 inJuly 2010 to K2,510.28 = $1 in July2011.Overall,the kwachasdepreciation was 5.3% in 2011.

The Governments monetary policy in 2011 successfullytargeted low, single-digit inflationthis rose slightly, from8.5% in 2010 to 8.7% in 2011andthe AEO predicted inflationto reach 8.0% and 8.5%, respectively, in 2012 and 2013. Thecentral bankalso ensured in 2011 that easyaccessto financingfor private sector expansion was readily available. Further-more, in the first half of 2012 the Government made progresstowards its scheduled issue later that year of US $500m. of

Eurobonds, which attracted significant interest in view of thecountrys promising economic outlook and strong macroeco-nomics. These funds were to be used to invest in the countrysinfrastructure.

FUTURE PROSPECTS

Decades after copper became Zambias main source of foreignexchange, the economy is still heavily dependent on the com-modity. Some significant success has been achieved in encour-aging alternative exports, mostly of agricultural commodities,and strenuous efforts are being made to persuade Zambianfarmers to cultivate high-value crops such as paprika, cauli-flower, artichokes and roses. Trade figures indicate that thesenon-traditional exports have increased their share of exportearnings; however, these activities are still young and fragile,

and they face formidable competition in their distant intendedmarkets. The world copper price, long known for its volatility,reached a 37-year high in 2010, easing pressure on Zambiascurrent account. Every succeeding President has recognizedthat overdependence on copper renders the Zambian economyvulnerable. Every one of those Presidents has accordinglyintroduced measures to diversify the economy, but in 2011thecountry wasstill overdependent on copper, andany successin diversification has been much smaller than is needed. Suchdiversification has proved possible elsewhere in Africa;Uganda reduced its dependence on coffee exports from 97%in the mid-1980s to just 13.5% in 2002. The Banda Govern-ment, in its first two budget addresses, promised measuresaimed at achieving this long-sought diversification. The SixthNational Development Plan (20112015) set the goal of trans-forming Zambia into a prosperous middle-income nation by2030. The Plans launch coincided not only with record globalcopper prices and improved export volumes, but also with thelargest maize harvest in Zambias history and a boom period inthe countrys tourism sector. It will be a major challenge to lift59% of the population out of poverty and 37% out of extremepoverty, but the timing of the Plans commencement could nothave been more auspicious. The Government also beganimplementing private sector improvement reforms in 2004,as part of its Zambia Private Sector Development ReformProgramme (PSDRP), which aimed to create a more conducivebusiness environment, both on the domestic front and for thepromotion of exports.

Manufacturing is important to Zambias long-term diversi-fication; although the sectors contribution to GDP fell from11.2% in 2006 to 9.1% in 2011, manufacturing output grew by5% in the latter year, mainly owing to private sector reforms,efficient economic policies and greater investment in the sec-

tor, especially in agro-processing.

ZAMBIA Economy



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A major impediment to private sector growth is access tofinance, especially for small businesses. However, in Novem-ber 2011 Zambias central bank reduced banks statutoryreserve ratio requirement from 8% to 5% in order to liberatethe funds of commercial banks for lending to private enter-prises. The Government also lowered the corporate tax ratefrom 40% to 35%.

Zambias recent economic and private sector reforms havewon approval from international financial and credit institu-tions. In June 2011 the IMF began discussions with Zambiaregarding the introduction of a new Extended Credit Facilityfollowing the expiry of the previous arrangement. Also in mid-2011, the World Bank reclassified Zambia as a lower middle-income nation, and both the Standard & Poors and Fitchcredit-rating agencies awarded the country a B+ credit rating.

Statistical SurveySource (unless otherwise indicated): Central Statistical Office, POB 31908, Lusaka; tel. (21) 1211231; internet www.zamstats.gov.zm.

Area and PopulationAREA, POP ULATION AND DENSITY

Area (sq km) . . . . . . . . . . . . . 752,612*Population (census results)

25 October 2000 . . . . . . . . . . . 9,885,59115 October 2010

Males . . . . . . . . . . . . . . 6,454,647Females . . . . . . . . . . . . . 6,638,019Total . . . . . . . . . . . . . . 13,092,666

Population (UN estimates at mid-year)y . . . . .2011 . . . . . . . . . . . . . . 13,474,9602012 . . . . . . . . . . . . . . 13,883,575

Density (per sq km) at mid-2012 . . . . . . . 18.4

* 290,585 sq miles.y Source: UN, WorldPopulationProspects: The 2010 Revision; estimates not

adjusted to take account of 2010 census.

POPULATION BY AGE AND SEX(UN estimates at mid-2012)

Males Females Total

014 . . . . . . . . . 3,254,648 3,220,573 6,475,2211564 . . . . . . . . . 3,517,929 3,467,288 6,985,21765 and over . . . . . . . 188,860 234,277 423,137

Total . . . . . . . . . 6,961,437 6,922,138 13,883,575

Source: UN, World Population Prospects: The 2010 Revision.

PROVINCES(2010 census)

Area Population Density

Central . . . . . . . 94,394 1,307,111 13.8Copperbelt . . . . . . 31,328 1,972,317 63.0Eastern . . . . . . . 69,106 1,592,661 23.0Luapula . . . . . . . 50,567 991,927 19.6Lusaka . . . . . . . . 21,896 2,191,225 100.1Northern* . . . . . . . 147,826 1,817,481 12.3North-Western . . . . . 125,826 727,044 5.8Southern . . . . . . . 85,283 1,589,926 18.6Western . . . . . . . 126,386 902,974 7.1

Total . . . . . . . . 752,612 13,092,666 17.4

* Including 711,657 persons enumerated in districts which were separatedinto the new province of Muchinga in 2011.

PRINCIPAL TOWNS(population at 2000 census)

Lusaka (capital) . 1,084,703 Lundazi . . . . 236,833Kitwe . . . . 376,124 Petauke . . . . 235,879Ndola . . . . 374,757 Choma . . . . 204,898Chipata . . . . 367,539 Solwezi . . . . 203,797Chibombo . . . 241,612 Mazabuka . . . 203,219

Mid-2011 (incl. suburbs, UN estimate): Lusaka 1,802,470 (Source: UN,World Urbanization Prospects: The 2011 Revision).

BIRTHS AND DEATHS(annual averages, UN estimates)

19952000 200005 200510

Birth rate (per 1,000) . . . . 44.6 44.4 44.5Death rate (per 1,000) . . . . 19.6 19.6 16.7

Source: UN, World Population Prospects: The 2010 Revision.

Life expectancy (years at birth): 48.5 (males 48.0; females 48.9) in 2010

(Source: World Bank, World Development Indicators database).

EMPLOYMENT(Usually active population aged 12 years and over at 2000 census)

Agriculture, hunting, forestry and fishing . . . . . . 2,014,028Mining and quarrying . . . . . . . . . . . . 36,463Manufacturing . . . . . . . . . . . . . . 77,515Electricity, gas and water . . . . . . . . . . . 11,016Construction . . . . . . . . . . . . . . 36,790Wholesale and retail trade; restaurants and hotels . . . 190,354Transport, s torage and communications . . . . . . 53,736Financial, insurance, real estate and business services . . 29,151Community, s ocial and pers onal s ervices . . . . . . 363,375

Total . . . . . . . . . . . . . . . . . 2,812,428

Source: ILO.

2006 (persons in paid employment, labour force survey, January): Agri-culture, forestry and fishing 56,139; Mining and quarrying 26,253; Manu-facturing 55,709; Electricity and water 12,399; Construction 14,343;Wholesale and retail trade 65,012; Transport and communications19,378; Finance and insurance 54,032; Public administration 176,062;Total 479,327 (Source: IMF, Zambia: Statistical Appendix, January2008).

Mid-2012 (000, estimates): Agriculture, etc. 3,388; Total labour force5,466 (Source: FAO).

Health and WelfareKEY INDICATORS

Total fertility rate (children per woman, 2010) . . . . 6.3Under-5 mortality rate (per 1,000 live births, 2010) . . . 111

HIV/AIDS (% of persons aged 1549, 2009) . . . . . 13.5Physicians (per 1,000 head, 2006) . . . . . . . . 0.1Hospital beds (per 1,000 head, 2010) . . . . . . . 2.0Health expenditure (2009): US $ per head (PPP) . . . . 90Health expenditure (2009): % of GDP . . . . . . . 6.2Health expenditure (2009): public (% of total) . . . . . 58.6

Access to water (% of persons, 2010) . . . . . . . 61Access to sanitation (% of persons, 2010) . . . . . . 48Total carbon dioxide emissions (000 metric tons, 2008) . . 1,888.5Carbon dioxide emissions per head (metric tons, 2008) . . 0.2Human Development Index (2011): ranking . . . . . 164Human Development Index (2011): value . . . . . . 0.430

For sources and definitions, see explanatory note on p. vi.

ZAMBIA Statistical Survey


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Africa South of the Sahara 2013 - Zambia's Economy