Looking at Zambia in 2010
By Nawa Mutumweno
Economic Overview
Under the backdrop of economic resilience, the Government has decided to focus on, inter alia, the following principles in 2010:-
– To overcome the current dip in economic growth and restore GDP growth to the pre-crisis trend levels of about 6%
– To continue with the economic diversification programme
– To continue the poverty alleviation measures
– Continue to pursue business-friendly macroeconmic policies
– Protect key social expenditures in sectors, such as education, health and road infrastructure
– Continue to support the domestic growth drivers of Mining, Construction, Agriculture, Tourism and Wholesale and Retail Trade
To achieve the budget objectives and targets for targets for 2010, the Government has proposed to spend K16.7 trillion. The major beneficiaries are stakeholders in Agriculture, Education, Health, Tourism and Construction.
Overall Performance
The Government’s macroeconomic objectives in 2010 are to exceed 5 percent growth; to reduce end-year inflation to 8 percent; and limit domestic borrowing to 2 percent of GDP. In 2010, the Government seeks to protect the expenditure in the social sectors and infrastructure development, promote diversification of the economy by infrastructure development in the Multi Facility Economic Zones, the new farming blocks and the Northern Tourism Circuit. Growth in the economy will be driven by a pick-up in the tourism and transport sectors, and continued growth in mining, construction and agriculture. It is expected that increased private investment levels, particularly in the energy, tourism, manufacturing and agriculture sectors will drive growth in line with the Government’s diversification strategy.
The economy grew at 4.3 percent in 2009, as a result of a weaker than expected economic activity and domestic demand. This is 0.7 percentage points below the earlier Medium Term Expenditure Framework (MTEF) forecast of 5.0 percent. Strong performances were projected in the mining and agriculture sectors in 2009, with a 13 percent increase in copper production, and a bumper agricultural harvest of 1.8 million tones. Inflation was at 12 percent while domestic borrowing to GDP stood at 3 percent.
Outlook 2010 -2012
The impact of the global economic crisis on domestic economic growth has been significant, with lower growth rates projected for the period 2009 to 2011. One of the key macroeconomic objectives of Government over the next two years will be to restore growth rates to trend levels of around 6 percent.
Sectoral Highlights & Economic Performance
Agriculture
The Government intends to continue the productivity of the agriculture and livestock sector and raise the incomes of millions of Zambian farmers. Government intends to introduce the Agriculture Marketing Bill which should enhance access by small scale farmers to markets and will include provisions for warehouse receipting.
Mining and Quarrying
The mining sector was projected to grow by 13.1 percent in 2009 compared to 2.4 percent attained in 2008. Copper production reached 662 000 tonnes in 2009 compared with 575 000 tonnes the previous year.
The sector recorded a marked slow down in the period 2008-2009 due to the global economic recession which led to reduced copper prices and closure of some mining operations.
Energy
Improvement of supply and access to electricity remains a key strategic focus for Government. To this end, a number of electricity projects are expected to commence this year. Currently work is in progress at the Kariba North Bank Extension Project and feasibility studies have been completed at the Kafue Gorge Lower and Itezhi Tezhi. Due to financial constraints, the public private partnership framework will be exploited in this sphere.
2009 was characterized by erratic supply of electricity mainly due to increased levels of load shedding which later reduced following restoration of machines at Kafue Gorge and Kariba North Bank stations.
The Energy Regulation Board (ERB) approved an average tariff increase by ZESCO of 35 percent of the 66 percent earlier applied for effective August 1, 2009.
Manufacturing
Government continues to support the construction of arterial infrastructure and investment facilitation through the Zambia Development Agency (ZDA).
In order to expand the manufacturing base, Government continued with the development on Multi-Facility Economic Zones (MFEZs) on the Copperbelt (Chambishi) and Lusaka (Lusaka South and East).
Social
The key policy objectives in this sector continues to be activities meant to improve the livelihoods of citizens and the attainment of the Millenium Developent Goals (MDGs).
Education
The country is on track to meeting the Millenium Development Goals of providing universal education by 2015. There will be continued support for development of community schools and education centres under the PPPs framework.
Health
Due to the suspension of some donor funding to the Ministry of Health after some alleged fraud, the health sector received a 25.3 percent reduction in fund allocation.
Tourism
The tourism sector is expected to recover from the adverse effects of the receding global economic crisis. The 2010 World Cup in South Africa is poised to have spill over effects in terms of revenue to be earned from teams, soccer fans, officials, journalists, etc. who may wish to reside in Zambia during the one month sports extravaganza which kicks off in June 2010. Construction of vital infrastructure in tourism areas continues to be the main focus of Government’s interventions in this sector.
Monetary and Financial Sector
Global economic and financial crisis has necessitated the review of the monetary policy framework with a view to shifting from the strict use of monetary aggregates to short term interest rates as the anchor for the monetary policy.
Bank of Zambia will introduce an overnight lending facility to commercial banks to increase liquidity and improve the effectiveness of monetary policy.
A framework to facilitate secondary market trading of Government and other debt securities to provide additional liquidity to members is being introduced.
The Second Phase of the Financial Sector Development Plan to improve access to credit and reduce the high cost of borrowing will be launched during the year.
Structural Reforms and Public Sector
Infrastructure provision remains a priority and focus is on building and rehabilitating roads, bridges, electricity generation projects, schools and hospitals, among others. Together with cooperating partners and regional Governments, GRZ is working to improve and expand regional transportation networks to further reduce the cost of doing business.
Implementation of the Private Sector Development Reform Programme (PSDRP) continued in 2009 with priority areas identified as Labour Laws, Business Licensing Reform and Small and Medium Enterprises Development.
Expansion of access to financial services in rural areas was undertaken by Government through the Rural Finance Programme.
Small and Medium Enterprises (SMEs)
The National Policy aimed at unlocking the potential of micro, small and medium enterprises was approved by Government.
Construction
Construction activities in the country have remained fairly robust with growth projected at 10 percent in 2009. This growth is attributed to increased public and commercial infrastructure investments and continued high demand for housing. The expanded production of cement by local manufacturers, which has led to improved and sustained supply, will also aid growth in the sector.
Privatisation
Government recently announced its intention to divest up to 75 percent of its equity in Zamtel. Government may consider divesting the remaining 25 percent through sale of shares on the Lusaka Stock Exchange (LuSE). This decision will facilitate improvement in the quality of service and reduce high costs in the telecommunications sector.
Capital Market
Market capitalization shrunk by 19.36 percent due to investor uncertainties caused by the global economic crunch.
Telecommunication (ICT)
The Information and Communication Technology Act was assented to by President Rupiah Banda in August 2009. The enactment of the Act is expected to encourage an influx of new market players offering a variety of services based on emergent technologies which are deployed with ease.
The telecommunication industry maintained the same segments as in the past, i.e. fixed network, mobile cellular communication network and internet service provision with fixed network being dominated by Zamtel and the mobile cellular market by the three market players – Zain, MTN and Cell Z, with Zain being the market leader followed by MTN and Cell Z, in that order.
Conclusion
Government is taking comprehensive steps to reduce the absolute number of Zambians living in poor and food-insecure households with inadequate access to basic public services, especially education and health services, roads, water and sanitation infrastructure, and agricultural input supply and markets. Zambia’s economic targets set in the Vision 2030 and Fifth National Development Plant (FNDP) are attainable and should dovetail into the Sixth National Development Plan (SNDP) which is underway.
