Letter from Zambia

Addressing the 59th United Nations General Assembly in New York recently, Zambian President, Levy Mwanawasa, highlighted the growing realisation that the Highly Indebted Poor Countries (HIPC) Initiative, in its current form, has problems. He said the Initiative makes it difficult for countries to realise full benefits. These remarks are buttressed by a UN Conference on Trade and Development (UNCTAD) report discussed by the Group of Seven finance ministers before the Assembly. Further, according to a mid-September report assessing progress in NEPAD, while 23 African countries have had debt relief under HIPC, there is no hope of debt sustainability for the 11 that have reached HIPC stage.

Despite serious economic reforms such as privatisation, trade liberalisation, adoption of poverty reduction and strategy programmes, coupled with opening up investment opportunities, Zambia's debt remains a drawback to attracting investment. However, new reforms are yielding results which have seen investments trickling in. For years, consistent and sustained economic growth remained elusive in Zambia. Poverty and unemployment worsened. Agricultural production dwindled while copper production and exports declined amidst an unstable exchange rate. Against this background, the Government embarked on reforms to diversify the economy, restore investors' confidence and enhance macroeconomic indicators. The Government identified agriculture, tourism and mining as key areas for growth and poverty reduction.

To address weaknesses in the financial sector, the Government is preparing a financial sector development plan and reducing its expenditure patterns to help lower interest rates. The Government has also adopted a plan for the development of unexplored tourism potential in the Kafue National Park. This is complemented by upgrading key infrastructure. A 10-year plan on Road Sector investment Programme (RoadSIP II) approved by the Government and donors to cost about US$198.5m was launched on 4 October.

New investment

These efforts are already paying dividends. The Zambia Investment Centre (ZIC) has awarded 25 investment certificates to South African investors, pledging to invest US$69.5m from 2001 to 2003 in agriculture, construction and manufacturing. About 2,401 jobs would be created.

Also, the privatisation programme has seen 259 companies sold under the Zambia Privatisation Agency (ZPA) from a total of 284 firms. Twenty-one other firms are under preparation and four companies are ready for sale. About US$400m was raised from the exercise as at 2003 but the figure is higher when the US$990m derived from selling the mines is added. ZPA chief executive, Andrew Chipwende, said there have been more successes in privatisation than failures.

Besides these efforts, donors continue to play a vital role in the economic development of Zambia. This role comes in the form of grant aid, infrastructure support and balance of payments support. EU delegation leader to Zambia, Henry Sprietsma, said support to Zambia is crucial in helping the country overcome balance of payment problems. The EU direct budgetary support amounts to e180 in grants. Other projects supported in the country include infrastructure development, the Private Sector Development Programme (PSDP) and the Mining Sector Diversification Programme (MSDP). In March, the World Bank launched a four-year Country Assistance Strategy (CAS), a business plan aimed at assisting the Government in efforts to develop the country, enhance growth and reduce poverty. While progress has been made in the reforms recently, much still has to be done. This includes addressing unemployment levels and enhancing investor-friendly policies such as reducing the number of days before a business is registered. Addressing all major constraints to investment and growth will ensure a sustained economic growth which could eventually be felt by ordinary Zambians.

Nancy Kalindi Mwape works for the Zambia Daily Mail. She was a winner in the ACCA Zambia business and financial writers annual awards in June 2004.