Focus on economic reforms

More urgency is being accorded to the diversification of Zambia's economy, according to the latest pronouncements by the country's president and finance minister. Uninformed visitors to the Zambian capital, Lusaka, could be excused for thinking the country was in the midst of an economic boom. In the last few weeks there has been an unprecedented flurry of high-level economic meetings and announcements. Last Thursday, the World Bank's Vice President for Africa, Callisto Madavo, was on an official visit to the country. He pledged continued support to the country's development programmes in the wake of an unprecedented crisis in the all-important copper industry that will see the pullout of a strategic international investor. On the same day, the International Monetary Fund (IMF) said it had approved US $317 million for the country's Poverty Reduction and Growth Facility, including US $150 million in interim assistance under the Highly Indebted Poor Countries (HIPC) initiative and US $167 million in balance of payments support. At the same time, a cross section of international donor and investor representatives were arriving in the country for a three-day consultative conference on the prospects of an economic diversification programme in the Copperbelt region. The conference, which started on 3 June, was expected to draw economic experts and donor and investor representatives from across Europe as well as from East Asian and African countries that have successfully tackled poverty through economic diversification. Political analysts attribute the apparent new interest in Zambia's economic prospects to concern that a decade of far-reaching economic reforms, designed by western donors, could force the Zambian economy to its knees. Western donors led by the IMF and World Bank prodded the reformist government of former president Frederick Chiluba to sell some 300 state-run firms and entities. That included Zambia Consolidated Copper Mines (ZCCM), which was responsible for around 80 percent of the country's foreign earnings. It was widely assumed that privatisation of the mines would boost copper production, which dropped from a peak of around 750,000 mt in the 1960s to under 400,000 mt in the 1990s. It was expected that their sale would stimulate overall economic activity in the Copperbelt as the mines' demand for support services rose. However, the copper industry has performed poorly since privatisation, largely as a result of poor international metal prices. The industry suffered its worst setback earlier this year when South Africa's Anglo-American Corporation resolved to cut back its investments in the strategic Konkola Copper Mines. Other mining houses in the country have indicated that they, too, may cut down or suspend their investment. Earlier last year, Anglo suspended plans to develop the Konkola Deep Mining Project, a more ambitious project which sought to extend the life of the country's copper mines by an estimated 40 years. Economic observers, including key donor institutions, now admit that much of the energies invested in the copper industry during the 1990s may have been misplaced. "Copper may have been king before, but it will certainly not be king in the future," Madavo told economists in Lusaka last week. Analysts, both local and foreign, increasingly see Zambia's economic future as lying in modernised agriculture and food processing, tourism and gemstone mining. "We are in problems today because we put all our eggs in one basket. The answer lies in diversifying the economy, in much the same way that countries such as Malaysia, Thailand, Botswana and South Africa have done," said Economic Association of Zambia chairman, Muna Haantuba. The government of President Levy Mwanawasa has, in an attempt to stop a two decade long economic decline that has seen an estimated 80 percent of the country's 10.3 million people living in desperate poverty, reverted to some unorthodox economic strategies. Among other things, it has scrapped cost-sharing fees in primary schools and reintroduced agricultural subsidies for peasant farmers. It has also delayed the privatisation of the few remaining state-run enterprises, including the loss-making Zambia National Commercial Bank. While the donor institutions frown upon such reversals of the structural adjustment programme, the Zambian experience appears to have altered their previously hard-line stance a little. "The gesture by the IMF [in awarding the country a new aid package] is a tremendous testimony to its shift in addressing poverty in the least developed countries," Finance Minister Emmanuel Kasonde said in a statement last week. Local newspaper, The Post, quoted Mwanawasa as saying he regretted Zambia's mono-economy which had since independence in 1964 placed copper mining as the country's main economic activity. "While the mining industry has been a great benefit to the country, its dominance has rendered the economy vulnerable," the newspaper quoted him as saying. Mwanawasa was opening the conference on economic diversification in Kitwe when he told delegates that the government's Poverty Reduction Strategy Paper had identified agriculture and the production of goods for export as priorities.