|The Courier N° 121 March-april 1990- Dossier Refugees - Country Reports: Botswana - Zambia (EC Courier, 1990, 104 p.)|
|Zambia: Copper, a fickle friend|
The Interim National Development Plan was launched for the period I July 1987 to December 1988. The underlying message was a reorientation of the economy in a way that best achieves structural adjustment while bearing in mind the basic needs of those in the lower income bracket.
How did it work? Last year, in June, President Kenneth Kaunda addressing the nation, explained the Plan. This is what he said:
I must point out that the Fourth National Development Plan launched in January 1989 carries on the need to continue meaningful economic adjustments and at the same time take into account the social aspect of adjustment. It is still the intention of the Party and its Government to continue to find ways and means of making the economic adjustment process bearable, particularly to the vulnerable sections of our society.
With this approach to economic policy formulation, we have already made considerable progress. In 1987, when the New Economic Recovery Programme was initiated, gross domestic product grew by 2.2% in real terms. This has risen to 6.7 % in 1988, with agriculture growing at 21 % and the manufacturing sector at 15%.
The significant growth in agriculture is attributable to incentives the Party and its Government have put in place such as increased producer prices; timely provision of inputs; availability of credit and foreign exchange; adequate provision of extension services and improved marketing. Good weather conditions also complemented the efforts of the farmers. Record harvests were scored in maize, our staple food, sorghum, cotton and tobacco.
In the short period, Zambia has moved from a maize deficit country to a surplus and net exporter of maize.
The encouraging performance of the manufacturing sector is attributable to the deliberate policy by the Party and its Government to increase allocation of foreign exchange to this sector. This led to increased industrial capacity utilisation. The role of FEMAC in achieving this objective has been positive.
Mineral production has remained at reasonable levels. This has been achieved through the rehabilitation programme which ZCCM has implemented.
Non-traditional exports have picked up and reached US $ 118 million in 1988 compared to US $80 million in 1987. This is an encouraging outcome. However, more still needs to be done in this area of our economic activity.
Subsidies on consumption have been reduced. The savings achieved through this reduction will be channelled into productive activities.
The transport sector which had virtually collapsed in 1987 showed signs of recovery in 1988. Public transport has started to ease with the importation of buses and mini-buses by United Bus Company of Zambia, Mulungushi Traveller and the private sector. This programme is continuing and it is my hope that the problem will be contained soon.
In the health sector, the supply of drugs has improved considerably. Essential drugs are now readily available at most of the hospitals, clinics and rural health centres. This has been achieved despite the economic constraints the nation is facing.
I should hasten to say that, notwithstanding these encouraging developments, there continues to be a number of problems militating against a sustained economic recovery and diversification of the Zambian economy.
Unemployment has remained high with formal employment stagnating at below 360000 for over a decade now. Inflation is raging on and the latest estimates for 1988 put inflation at 70% compared to 60% in 1987. The fiscal deficit in 1988 stood at 12% compared to 14.6% in 1987. The deficit recorded in 1988, while lower than in 1987, exceeded the budget target of 9.5%. The increase in the deficit is partly explained by the exceptionally good performance in the agricultural sector, particularly in maize production which entailed a large outlay in the handling of subsidies. The Party and its Government are nevertheless determined to bring down the deficit even further. The growth in money supply, which was above 60 % in 1988, is another source of worry. The debt burden continues to grow, largely on account of high interest charges that these debts attract.
After many years of inadequate rainfall we must thank God that there had been good rains for two consecutive seasons. However, the heavy rainfall experienced in the last season caused considerable damage to the roads and dams and indeed reduced the output in agriculture, particularly that of maize. As a result the yield of maize will more or less be at the 1988 level.
Consumption has remained high, representing 80% of gross domestic product, while investments have been declining. The causes of this imbalance are the high rates of inflation, negative real interest rates and lack of adequate foreign exchange.
The foreign exchange shortage has become one of the major constraints in the economy. The major source of foreign exchange is still copper, which accounts for over 90% of all foreign exchange earnings up to the end of the next century, albeit on a progressively reducing scale. However, the economic life of our mines based on existing infrastructure is limited to between 15 and 20 years.
The more the country looks to copper as the major source of foreign exchange, the more the economic life of the copper mines will be shortened. It is therefore desirable that each company strives hard to boost non-traditional exports and earn some foreign exchange. Only in this way will we be able to extend the economic life of our mines beyond 20 years.
The non-mining parastatals and the private sector utilise more foreign exchange than they generate. This is an unsatisfactory position. Both these sectors should take up the challenge of boosting non-traditional exports. Non-traditional exports should in the medium term be enhanced not only to fill the gap that will be left by earnings from basis of known copper ore reserves, copper but to levels that can mean-Zambia can continue to mine copperingfully sustain the economy.
Zambia: historical indicators, 1970-86