Zambia Lusaka key figures • Land area, thousands of km2 753 • Population, thousands (2005) 11 668 • GDP per capita, $ PPP valuation (2005) 1 270 • Life expectancy (2000-2005) 37.4 • Illiteracy rate (2005) 17.8 African Economic Outlook 2005-2006 www.oecd.org/dev/publications/africanoutlook All tables and graphs in this section are available in Excel format at: http://dx.doi.org/10.1787/027626641102 Zambia A BUOYANTCOPPERSECTORANDSTRONGgrowth in increase in the proportion provided in the form of tourism and construction underpinned moderate direct budgetary support. Improved fundamentals, growth in 2005. GDP growth of 4.5 per cent was, coupled with high world copper prices, led to a surge however, slower than expected, reflecting the drought in capital inflows and foreign reserves and an experienced in many parts of the country, the high appreciation of the kwacha. price of imported oil and fuel shortages, and a non- The main challenge in 2006 Good overall performance expansionary fiscal policy. Stable fuel supplies, better will be to ensure that funds does not excuse the country rainfall and continuing investment in mining are generated by debt relief are from ensuring that funds expected to boost growth to 5 and 5.5 per cent in dedicated to priority sectors. generated by debt relief 2006 and 2007 respectively. Achieving broad-based are used for poverty reduction. growth is a major challenge, since mining generates few The new National spill-over effects for the rest of the economy, while Development Plan for the period 2006-10 will form about 70 per cent of the population still live below the the basis of the authorities’ development agenda and poverty line. poverty reduction programme. Reducing vulnerability to drought, improving resilience to terms of trade In 2004, the authorities undertook a major fiscal shocks and raising the employment-generation and consolidation effort and began reforms to improve poverty-reduction impact of growth are the main 521 public administration and expenditure management. objectives of the plan. Great emphasis is placed on This contributed to achievement of the Heavily investment in rural infrastructure and labour intensive Indebted Poor Countries (HIPC) Initiative completion sectors. point in April 2005 which triggered the cancellation of $3.9 billion of external debt. Restored donor The outcome of the 2006 presidential elections confidence translated into larger flows of aid and an is not expected to change policy framework since Figure 1 - Real GDP Growth and Per Capita GDP ($ PPP at current prices) Real GDP Growth (%) Per Capita GDP ($ PPP) 6 3500 5 3000 4 2500 3 2 2000 1 1500 0 1000 -1 -2 500 -3 0 1997 1998 1999 2000 2001 2002 2003 2004 2005(e) 2006(p) 2007(p) Source: IMF and Central Statistical Office data; estimates(e) and projections(p) based on authors’ calculations. © AfDB/OECD 2006 African Economic Outlook Zambia the opposition remains divided and has not yet floriculture, regarded as highly promising activities, announced what policy changes it would introduce. suffered from the financial collapse of the largest player Nevertheless, the fight against corruption, President in the sector which had provided input credit to 7 000 Mwanawasa’s battle-cry, has run out of steam as the farmers. The volume of fresh fruit and vegetables fell Presidential Anti-Corruption Task Force has not from about 8 500 tonnes in 2004 to 6 500 tonnes in managed to bring any successful case to court and 2005. The output of cut flowers in 2005 was estimated efforts to prosecute former President Chiluba have to be about 4 000 tonnes. The sub-sector remains small reached a standstill. – the total turnover of all Zambian firms is about equivalent to that of the largest Kenyan exporter – and, because of the low volumes produced, exporters Recent Economic Developments are paying substantially higher freight rates than in other African flower-producing countries. The The recovery in agricultural production registered Association of Export Growers forecasts that production over the last two years was brought to a sudden stop should regain the 2004 level in two years thanks to new by the poor rainfall in the southern and western regions investment. In one recent transaction, for example, during the 2004/05 season. Although the planted area Chalimbana Fresh Produce, a subsidiary of the UK’s increased by one third (from 631 000 to 835 000 Plantation & General Investments Plc, acquired hectares), production of maize – the main staple food Agriflora’s vegetable production assets. Continuing its – stood at 866 187 tonnes – a 28 per cent reduction strong growth performance, tobacco production over the previous season. The Ministry of Agriculture – mainly for export – reached 58 000 tonnes in 2005, has attributed the decline in output to the reduced up from 37 000 in 2004. 522 harvests of small- and medium-sized farms. Taking into account the current levels of reserves, the maize Mining and quarrying output increased by 5 per deficit is estimated at 271 000 tonnes, in marked cent in the first two quarters of 2005 compared with contrast to the surplus of 185 000 tonnes in the 2003/04 the same period of 2004, mainly reflecting positive season. The government has allowed importation of up growth in stone quarrying and coal mining. Buoyant to 200 000 tonnes of maize and removed the 15 per demand and record-high prices boosted investment cent duty on imports to improve their flow. Other and production in the copper sector, continuing the crops were similarly affected, with the exception of 2004 trend. However, copper production suffered from more drought-resistant ones, such as cassava, which oil shortages, strikes at Konkola Copper Mine (KCM), registered 18 per cent growth in volume, continuing the largest copper producer, and floods at Mopani the booming trend sparked by improved seed varieties. Copper Mines (MCM), the second largest. Preliminary Wheat production increased considerably (by 65 per figures indicate that copper production increased by cent), as did rice, but these are minor crops in terms only 5 per cent in 2005 against 12 per cent in 2004. of volume. Better rains in the 2005/06 season and an This contributed to the slowdown in the sector’s growth, increase in the area planted are expected to boost from 13.9 per cent in 2004 to 2.8 per cent in 2005. agriculture production and ensure a good performance Production shortfalls at the biggest mines are expected for maize and cash crops in 2006-07. to be offset by reinvestment in the Copperbelt mines and new production from two mines opened in 2005. Livestock and dairy products showed considerable Kansanshi, owned by First Quantum Minerals dynamism in 2005. Better animal disease control and (Canada), is expected to produce 91 000 tonnes, while processing earned Zambian beef an “A” quality grade, Luanshya, owned by J&W Investments (Switzerland), which makes it suitable for export. Consumption of set a target of 50 000 tonnes for 2005, and plans to dairy products, a sector in which foreign investment expand it to 67 000 tonnes in 2006. Total copper has played a key role in expanding production and production is expected to increase to about 600 000 quality, is constantly increasing. Horticulture and tonnes in 2006. African Economic Outlook © AfDB/OECD 2006 Zambia Figure 2 - GDP by Sector in 2004 (percentage) Government services Agriculture, forestry and fishing 9% 22% Finance and business services 16% 3% Mining and quarrying Transport, storage and communications 6% 11% Manufacturing Trade, hotels and restaurants 3% 3% 19% 8% Gas, electricity and water Wholesale and retail trade Construction Source: Authors’ estimates based on Central Statistical Office data. Figure 3 - Sectoral Contribution to GDP Growth in 2004 (percentage) Agriculture, forestry and fishing Mining and quarrying Manufacturing Gas, electricity and water 523 Construction Wholesale and retail trade Hotels and restaurants Transport, storage and communications Finance and business services Government services GDP at market prices -10123456 Source: Authors’ estimates based on Central Statistical Office data. The manufacturing sector, dominated by food, supported double-digit growth of 19.9 per cent in beverages and tobacco processing, grew by 3.7 per cent 2005, about the same as in 2004. This has created in 2005, somewhat less than in 2004. Its contribution employment opportunities for skilled artisans like to overall GDP remains modest and is highly dependent bricklayers, blacksmiths, plumbers and electricians. on the performance of the upstream agriculture sector. Official figures underestimate the size of the sector since investment in private commercial and residential In the construction sector, continuing investment housing estates is mainly informal. The sector is polarised in mining and donor-funded work in road rehabilitation around a few large foreign contractors and many small © AfDB/OECD 2006 African Economic Outlook Zambia enterprises which lack financial and technical capacity Against a background of increasing investment in and mainly work as subcontractors. Strong growth the mining, tourism and transport sectors, private gross should continue in 2006 as new infrastructure capital formation was the main driver of growth in rehabilitation and housing projects are expected to 2005 and is expected to continue to be so in 2006 and start. 2007. In parallel, copper exports will increase, although less rapidly than imports of capital goods, so that a slight Tourism recorded double-digit growth of 12.1 per deterioration in external demand is expected in 2006 cent in 2005 compared to 6.4 in 2004, thanks in part and 2007. to the “Visit Zambia Campaign,” which marked the 150th anniversary of the first sighting of the Victoria Growth in private consumption appears to have Falls. The country’s four international airports – Lusaka, slowed in 2005, due to the poor performance in the Livingstone, Mfuwe and Ndola – recorded an increase agricultural sector.