Question

QUESTION ONE

(a) Discuss the upside and downside of Zambia’s economy from independence to date.                             

(b) Advise the economic measures that can be taken enhance Zambia’s economy.                                      

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Answer 1

a) Zambia is one of the fastest growing economies in Africa and its capital, Lusaka is the fastest growing city in the Southern African Development Community (SADC). About one-half of the country's 16 million people are concentrated in a few urban zones strung along the major transportation corridors, while rural areas are under-populated. For the first time since 1989 Zambia's economic growth reached the 6%-7% mark (in 2007) needed to reduce poverty significantly.  Copper output has increased steadily since 2004, due to higher copper prices and the opening of new mines.

A major switch in the structure of Zambia's economy came with the Mulungushi Reforms of April 1968: the government declared its intention to acquire equity holdings (usually 51% or more) in a number of key foreign-owned firms, to be controlled by a parastatal conglomerate named the Industrial Development Corporation (INDECO).

The Zambian economy has historically been based on the copper-mining industry. But Lack of balance-of-payment support meant the Zambian government did not have resources for capital investment and periodically had to issue bonds or otherwise expand the money supply to try to meet its spending and debt obligations.

The agriculture sector represented 20% GDP in 2000. Agriculture accounted for 85% of total employment There are, however, positive macroeconomic signs open capital markets have provided useful discipline on the government, while at the same time allowing continued diversification of Zambia's export sector, growth in the tourist industry, and procurement of inputs for growing businesses. Some parts of the Copper Belthave experienced a significant revival as spin-off effects from the massive capital reinvestment are experienced.

b) Integrating the mineral sector into national development planning is a crucial driver for sustainable development in Zambia, Priority areas for improvement include stability of its mining and fiscal policy; the development of domestic procurement policies; improved budget transparency; and frameworks for improved infrastructure development, particularly energy infrastructure,  political stability; low risk of expropriation; high levels of security; and a relatively favorable economic environment.

Given this rich endowment of natural resources, an array of stakeholders in Zambia, including investors, government agencies, and civil society organizations, have long questioned why minerals are not bringing as much benefit as they should. Growth in the agriculture sector will enable Zambia to achieve sustainableeconomic growth and reduce poverty in Zambia the goal to increase and diversify agriculture production and productivity so as to raise the share of itscontribution to 20 percent of GDP.

Zambia believes that Information and Communications Technology (ICT) and Meteorology play a vital role in its socio-economic development. Growth of ICT is a precursor to wealth creation and attainment of a well informed and knowledgeable society. Zambia's vision in this sector is an information and knowledge based society. The goal for the sector is to increase coverage, access and efficiency in the provision of Information and Communications Technology and meteorological services in order to contribute to sustainable national economic growth.

The energy sector shoulduniversal access to clean, reliable and affordable energy at the lowest total economic, financial, social and environmental cost. The main thrust of the energy sector will be to expand electricity generation and transmission capacities and enhance cost-effectiveness in fuel supply.

Zambia's manufacturing sector is a pivot of economic development through its backward and forward linkages to economic growth, exports and employment creation. It provides a market for primary products and sets the basis for exports with employment generation capacity.Zambia's vision for the Manufacturing sector is technology-based and export-focused manufacturing sector, which is dynamic and competitive with effective entities that add value to the locally abundant natural resources. Zambia's goal is to develop a diversified and competitive export led value adding manufacturing sector which will contribute 12.5 percent to GDP.

To enhance economic development of the prioritized economic sectors through provision of improved quality of transport infrastructure. This includes water, rail, air and road. The key focus will be on construction, rehabilitation and maintenance of physical infrastructure.