An insight into Zambia’s 2012 economic performance
By Nawa Mutumweno – The Zambian government continues with measures to diversify the economy through development of infrastructure and support to productive sectors, in particular agriculture, manufacturing and tourism.
Preliminary data indicate that the overall performance of the economy was favourable in 2012, as real Domestic Product grew by 7.3 percent from 6.8 percent in 2011, This was mainly driven by growth in construction, manufacturing, and wholesale and retail trade sectors, according to the Bank of Zambia (BoZ) Annual Report 2012.
Agriculture, Forestry and Fisheries
Growth in the agriculture, forestry and fisheries sector slowed down to 7.1 percent from 7.7 percent in 2011 and contributed 0.9 percentage points to national output. Growth in the agriculture sub-sector decreased to 11.6 percent from 13.3 percent in 2011. This outturn was largely explained by a decline of 5.6 percent in maize output to 2.9 million metric tonnes during the 2011/12 agricultural season from 3.0 million metric tonnes the previous season. Further, output of tobacco, groundnuts, sorghum and rice declined. Poor rainfall in Southern, Eastern, Lusaka, Central and Western provinces largely explained this outturn. However, output of wheat, soya beans and sweet potatoes rose by 6.8 percent, 74.2 percent and 11.5 percent, respectively.
Significant headway has been made in the diversification of the agricultural sector away from maize to the promotion of other sub-sectors – others crops, livestock, fisheries and poultry.
In 2012, Government aimed at boosting livestock production, through enhanced livestock restocking, scaled up animal disease research and development, and implementation of disease-free zones.
Mining and Quarrying
Output in mining and quarrying sector declined by 13.2 percent compared with a contraction of 5.2 percent in 2011. The sector contributed negative 1.2 percentage points to real GDP compared to negative 0.5 percentage points the previous year.
This was largely on account of a fall in production of copper. Copper output fell by 6.4 percent to 824 976.6 metric tonnes from 879 445.0 metric tonnes while cobalt output grew by 6.9 percent to 8 123.38 metric tonnes from 7 701.57 metric tonnes. Lower copper output was largely attributed to low grade ore and low copper prices.
However, the other mining and quarrying sub-sector grew by 4 percent compared with 1.3 percent in 2011, mainly driven by higher construction activities.
Manufacturing
The performance of the manufacturing sector remained favourable, recording a growth of 11.2 percent compared with 7.7 percent in the previous year, contributing 1.0 percentage points to growth in real GDP. Growth in the sector was mainly driven by the following sub-sectors: food, beverages and tobacco, paper and paper products; wood and wood products; non-metallic mineral products; chemicals, rubber and plastic products; and fabricated metal products. However, unfavourable performance continued to characterise the textile and leather sub-sector, which contracted by 9.1 percent on account of inability to compete with cheaper imports.
Tourism
The growth in the tourism sector slowed down to 2.1 percent in 2012 from 7.8 percent posted the previous year, contributing 0.1 percentage point to growth in real GDP. The slowdown, in part, reflected lower tourist arrivals mainly attributed to the weak global economy.
Total international arrivals through Harry Mwaanga Nkumbula and Mfuwe international airports were 74 170 passengers, 13.0 percent lower than 85 318 passengers recorded in 2011. Further, tourists entries into the country’s national parks decreased by 2.2 percent to 62 434 tourists from 63 807 tourists recorded in 2011. However, this slowdown was moderated by aggressive marketing and promotional strategies coupled with increased investments in supportive infrastructure, such as roads, airport and telecommunication facilities.
Zambia’s tourism is among the most diverse in the world, boasting of the Victoria Falls, one of the ‘Seven Wonders of the World’, a host of traditional ceremonies that unveil its rich culture, including the ‘Likumbi Lya Mize’ which has been declared ‘Masterpiece of the Oral and Intangible Heritage of Humanity’ by UNESCO and a rich game resource. The country recently co-hosted the successful UNWTO general assembly with its southern neighbour, Zimbabwe.
Construction
The construction industry registered a positive growth of 15.3 percent in 2012, up from 8.5 percent in 2011. This was partly reflected in increased production of cement at Lafarge Cement Zambia Plc, Oriental Quarries Ltd and Zambezi Portland Plc. Cement output rose by 10.3 percent to 1 575 771.1 metric tonnes from 1 428 854.9 metric tonnes in 2011. Growth in this sector continued to be driven by public and private infrastructure projects across the country.
The Dangote Group of Nigeria commenced the construction of Zambia’s fourth cement plant in Ndola on the Copperbelt.
In its continued efforts to unlock the country’s growth potential and alleviate poverty, particularly in rural Zambia, the Government has embarked on massive road network development under the Link Zambia 8000 project. Further, urban areas will also see facelifts under the Pave Zambia 2000 project.
Transport, Storage and Communications
The transport, storage and communications sector continued with strong performance, growing by 11.3 percent compared with 12.9 percent in 2011, thus contributing 1.2 percentage points to real GDP, down from 1.3 percentage points the previous year. Favourable performance in the sector was largely reflected by growth in road, air and communications sub-sectors.
The communications sub-sector grew by 13.0 percent, largely driven by strong investment by mobile service providers and a subsequent rise in the subscriber base, Road transport grew by 10.9 percent in line with increased economic activity. However, rail transport contracted by 34.1 percent, largely on account of operational challenges coupled with stiff competition from road transport.
Electricity, Gas and Water
During the period under review, the sector grew by 2.3 percent compared to 8.2 percent in 2011. The positive growth in the sector was sustained by continued increase in economic activities.
Investment pledges
Total investment pledges increased to $10 089.1 million in 2012 from $4 798.7 million recorded in the previous year. This outturn partly reflected continued favourable economic performance. Investment pledges were broad-based and targeted at the growth sectors of the economy with potential for high job creation. The pledges when fully executed were expected to generate 30 908 jobs compared to 36 298 jobs in 2011.
Banking sector
As at end-December 2012, the banking sector had 19 operating banks and of these, 13 were locally incorporated subsidiaries of foreign banks, two were partially owned by the Government of the Republic of Zambia and four were locally owned.
The overall financial performance and condition of the banking sector in the year ended December 31, 2012 was rated satisfactory with 10 of them being rated ‘satisfactory’ while the remainder were rated ‘fair’.
A major milestone on the financial front was the Currency Rebasing exercise which involved dividing each unit of the Kwacha by 1 000. The rebasing was aimed at addressing the costs associated with the loss in the value of the currency due to high inflation between the early 1990s and the early 2000s. The Bank of Zambia (BoZ) established a transition period of six months, from January 1 to June 30, 2013 during which both old and rebased versions of the Kwacha would be in circulation. The rebased currency was officially launched on December 31, 2012 following a country-wide sensitisation programme.
Additionally, the central bank in collaboration with the Bankers Association of Zambia (BAZ) and the Zambia Electronic Clearing House Limited continued developing the infrastructure for the implementation of the Cheque Truncation System (CTS).
The CTS involves the process of clearing cheques using images between banks as opposed to using physical cheques. The system would shorten and standardise the clearing period across the country and thus facilitate early access to funds by customers. Further, it would reduce the scope for clearing related frauds and minimise the cost of clearing cheques. To this end, the BoZ and BAZ introduced new cheques with enhanced security features consistent with the new clearing system.
On the whole, the Zambian economy has made tremendous progress over the last few years and if the current momentum is maintained, the glory days of Zambia are on the horizon.
