Zambia’s import economy versus withdrawal of subsidies

By Hicks Sikazwe

Despite that Zambia for a long time has been copper production leader in Africa (now second to the Democratic Republic of the Congo), the country has largely been an importing nation.

The country imports anything from toothpicks to clothing rendering the population a consumer lot more than  anything else.

Government has just unwrapped an ambitious programme to withdraw subsidies on electricity and fuel with its products.  This will not only impact on domestic consequences but affect the country’s import costs.

Under colonialism,  copper was mainly used to the benefit of the settler community and Europe the region of their origin. In Zambia much of the wealth mopped from mineral revenues was pumped into Southern Rhodesia (now Zimbabwe), especially under the federation.

Proportionally most goods including sweets used to be brought in from European outlets or their satellite units in South Africa or Southern Rhodesia.

When the federation of Rhodesia and Nyasaland broke up, the countries which belonged to that political and economic yoke Nyasaland (Malawi), July 1964, Northern Rhodesia (Zambia) October 1964, and Southern Rhodesia (Zimbabwe) April 1980, gained independence.

Here at home  soon after  “Uhuru” the new government embarked on an ambitious country-wide infrastructure development programme. Using copper revenues then enjoying buoyant prices, Zambia built schools, hospitals roads and others.

The bulk of materials used in the construction exercise were all not available at home. We kept importing briefly from Rhodesia and South Africa even Europe and elsewhere. Later politics could not allow Zambia to import from nearby Rhodesia and South Africa-but went further than the continent.

So as an  independent country, Zambia continued importing to an extent that at one point crude oil could be air freighted from as far as the middle east.

At Chingola secondary school where this author attended in the early 1970s even uniforms used to be imported by the school administration from Britain.

Meanwhile as the country continued to import   goods  needed at home, copper revenues were defrayed in some of the most frivolous expenses. Those for instance who attended indepedence celebrations will recall the partying that went with the event.

Truckloads of  bread from a state enterprise, Supaloaf, others staffed with   countless crates  of coca cola , some more laden with milk sachets  would ply into football grounds to distribute the named foods to cheering crowds from townships.

One of the celebrations which recorded as the most opulent was the tenth anniversary just a year  after turbulence began in the oil industry and a fall in copper prices. That was a drop in the ocean compared to the amounts sunk in the political agenda coupled with a devastating foreign policy.

All this was happening without putting much thought to diversification from the copper economy. Very little was done to improve agriculture, manufacturing and other industries.

Fifty two years after Independence Zambia is  still importing even secondhand clothes, vehicles and foods stuffs. Just recently, there was an economic crunch when stocks collapsed in China a country which buys the bulk of Zambia’s copper.

According to the British Broadcasting Corporation (BBC) the worst hit countries in Africa whose currencies have been affected by the events in China were South Africa Uganda and Zambia. The analogy is very  clear; Beijing is no longer buying the same quantity of Copper, the country’s major foreign exchange earner.

Zambia continues to be a consuming country; there is nothing home to write about in terms of exports. The few items that we do export cannot equal a fraction of foreign exchange from copper revenues. As a result our local currency the Kwacha has fallen to the lowest levels (K10 at the time of writing) against the United States dollar.

As if that is not bad enough the country has been hit by another extreme, the  power deficit following the drop in the water levels at the Kariba hydro-electric power station. With low power in put in industry, production including on the mines has gone down drastically.

There is very little copper production while the low quantities coming out from the mines   is not being bought in bulky by the market, the result is the crisis Zambia is gripped in today.

After 1991, Zambia witnessed one of the most unbridled rates of privatization. Yes some development came in. For example there is a flurry of shopping malls constructed, but sadly the goods being sold there are from South Africa, Thailand China, Bangladesh, India, and other Far East nations.

Therefore much of the money raked from there is not being used in Zambia. Clearly   the funds mopped up in Zambia are creating jobs elsewhere than a few established at home. The story of the mining industry is not very different.

In retrospect, the above examples are hard and brutal lessons from the past. Imagine if operators of the malls were manufacturers of clothing and other goods, they deal in some of which could have been exported, the country would not be depending on copper as the only foreign exchange earner.

Beyond that if the country encouraged investment in agriculture, and manufacturing  Zambia would not be where it is today. We have seen from the surging construction industries, it is one of the most successful of sectors in recent years.

Imagine if the infrastructure being rolled out country wide were exportable, how much foreign exchange was going to come into Zambia to support the copper economy?

The current economic scenario is bad but it is a result of where we have come from as a country. The greater challenge is to pick up something from the hard lessons of the past to curb the dangers of an import economy.

Encouraging to see are moves and pledges being made to boost agriculture. This is not an easy task. Massive investment is needed in crop production, setting up huge storage facilities, transport, ready competitive markets, if anything is to be achieved in the new drive.

The problem is that as a country we seem to have invested more in politics than any other industry. However, there is still time to make amends. Finger pointing and political accusations have never fixed an economy anywhere in the world. Accepting hard lessons from the past can help all shape the country’s future.

Admittedly withdrawal of subsidies may be a tough decision with ghastly consequences on the population but ultimately long term benefits can be rewarding, that is if  the money saved from subsidies is properly used and programmes  award targeted and needy communities. Comments

This entry was posted in Main, Zambia News. Bookmark the permalink.

Comments are closed.