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Friday, 21 January 2011

The Growth Debate (A Response to Simumba & Shenton) (Guest Blog)

Zambia is a rich but poor country. I mean, Zambia is greatly endowed with minerals, fertile land and fresh water yet it is gifted with bad culture. Zambia in the pre-colonial days experienced mining activities at minimal scale, subsistence farming and fruit gathering. My interest is fruit gathering which inculcated a lazy culture because things come on a silver place. Adverse conditions are what shake people out of their comfort zone.

As fate would have it then come colonialization that taught Zambians to get educated for white-collar jobs. There was no deliberate policy to insure self-employment for school leavers. This developed unhealthy culture of job seekers. As a matter of fact stigmatization of people who wanted to venture into business upon finishing school was such that these people were viewed as school failures. From psychology of deindividuation in the mines where leadership was dominated by whites, we also learn that Africans believed that big businesses could only be run by whites. To date the inferiority complex still lingers in many citizens. Little wonder that entrepreneurship is not proficient in such an environment where individuals deindividualise themselves?

After colonialization come KK. Alas, inherent laziness culture of the pre-colonial days was gladly welcomed and enhanced by KK’s socialist policies in form of economic handouts. It’s no surprise that the following statistics are consistent with our bad culture. I mean when I look at the following statistics of world ranking of GDP per capita of some sampled years as seen below:

# 59 Zambia: $231.67 per capita 1964
# 70 Zambia: $404.91 per capita 1972
# 102 Zambia: $640.97 per capita 1980
# 148 Zambia: $391.81 per capita 1991
# 158 Zambia: $333.88 per capita 1996
# 159 Zambia: $315.45 per capita 1998
# 123 Zambia: $919.50 per capita 2006

I would say the Gross Domestic Product (GDP) as is a value of all final goods and services produced within a nation in a given year, has little or nothing to do with the standard of living of the people in Zambia. Since independence, nothing much has changed in terms of the standard of living of the Zambians except for sanitation, literate levels and perhaps medical services right up to 1991. For some of us who lived under KK’s era, at the pick of his performance in terms of GDP in 1980, the standard of living of the Zambians was far greater than it is now despite that the current DGP is higher. This can be attributed to KK’s policies of free education and health services which regrettably is not sustainable in a long run as history the world over has proved. But if you look at the period 2006 to 2010 there is virtually no change in the aspects that can much up to the corresponding positive change in GDP. Therefore as a layman, I will say, GDP is not a good measure for the economic wellbeing of an average Zambian. A bigger chunk of the money is in the hands of a few individuals and some of it is actually a direct donor input and indirectly debt relief.

Talk about debt, donors argue that although balance-of-payment payments are not the answer to Zambia's long-term debt problems, it will in the short term provide the government some breathing room to implement further economic reforms. However, although we have heard that balance of payment is donor funded, we should not be fooled or mistaken by verbiage. There is no donating here. The thing to lament about this mechanism is that to finance debt payment, the government borrows more to pay debt and its interest. What results is more-less like drilling another hole in the boat in order to drain out the water. The conclusion is that a country sinks deep into the savaging waters of endemic debt. Only wealth-creation can and should address the debt problem.

The reality on the ground is that more than 80% of Zambians live below the poverty datum line. It’s no surprise that the GDP is increasing in the light of high copper output and prices. But a pathetic tax system and low wages enables mining firms not to significantly add wealth to this country in terms of improving standards of living of the citizens. This country can do better with the current economic conditions but bad policies waste the opportunities of our prime time of today. Little wonder swings in microeconomics hardly affect a common man. I mean the price of copper on which the Zambian economy is over-dependent has experienced its customary wild swings, plunging at the onset of the global recession in 2008 before recovering close to previous levels with very little impact on a common man. While you might argue that this setback was countered by excellent harvests of the staple maize crop in 2009 and 2010 but at what cost of a peasant farmer when there has not been significant improvement of agriculture market? What value is there to write home about as far as the peasant farmer is concerned? We seem to be good at preaching mathematics at macroeconomic level yet the algebra of what it costs to meet the average and modest domestic needs of a common Zambian are neglected.

The best economic policies are those that target and seek to improve the wellbeing of the middle income group. If you target the lower income group you’ll tend to fall into socialistic approach full of handouts, and we need not to go there again as we have had enough lessons with KK’s failed state-run enterprises. On the other hand, If you target the upper class, undoubtedly, you will be highly capitalistic which tends to alienate high GDP values from a common man and that is what I feel we are currently doing. A balance is to target the middle group whose earning can trickle down to other income groups. The easiest way to do this is to focus on entrepreneurship, revisit our tax system and minimum wages so that such instruments can increase the purchasing power of the citizens. We have to come strong on value addition to goods and services produced in this country and create jobs in so doing. Underutilization of human resources is perhaps the greatest factor contributing to Zambia’s underdevelopment. Without the human element, all other resources like capital, land and nature cannot be of any use. However human resource can only be effective if and only if it is provided with technique and skills to do so. These have to be relevant to entrepreneurship. In this light also we can make sure we also make efforts first to satisfy our domestic market. Timber and minerals are being looted out of this country and foolish enough we are proud to add this loot to GDP. Imagine if we were to do the right things, how much more could we improve our miserable lives in this rich country which has poor policies?

This country is rich and I wouldn’t be surprised that favourable GDP values will continue to show yet the majority of the people will remain wallowing in abject poverty. Building confidence in the people and making them believe in themselves and think innovatively is not an easy task. It requires a holistic approach to unlearn the core values of society. This can be done if we make a policy to use schools, churches and the media. And what is this big army doing? Don’t resize it but make it productive. We need to revolutionize our way of doing things.

Potpher Mbulo
The guest author is a resident of Lusaka

(The Zambian Economist encourages guest contributions from leading Zambian thinkers on matters relevant to national development. The purpose of these notes is to stimulate discussion and ensure logic and impartial critique plays a leading role in shaping public debate. See the guest authors page for more information).


  1. Potpher Mbulo, fantastic response and you have argued your points well. this is what I was hoping to engender. Please note that GDP does not measure the economic well being it only measures the total output as you have rightly pointed out. For economic wellbeing we would need to look at other indicators such as HDI but overall there are more pupils in school, GDP per capita (PPP)of $1,625 has also improved from $1,036 in 1990. In terms of HDI again Zambia has improved somewhat but has a long way to go. The HDI represents a push for a broader definition of well-being and provides a composite measure of three basic dimensions of human development: health, education and income. Between 1980 and 2010 Zambia's HDI rose by 0.1% annually from 0.382 to 0.395 today, which gives the country a rank of 150 out of 169 countries with comparable data. The HDI of Sub-Saharan Africa as a region increased from 0.293 in 1980 to 0.389 today, placing Zambia above the regional average. So again lets not be so pessimistic about our growth as a country what we need is to double up efforts and get our economy growing at least at minimum 10% per year if we are to make inroads into the poverty status of our people.

    On the issue of culture I agree wholeheartedly with you and thats why before I left to come to the UK, I used to do radio and tv programmes to encourage zambians to take up enterprise as a way of living rather than to be employed. Mr. Mbulo I would wish to link up with you next time I am in Zambia. Your view that we target the middle class is absolutely correct and i have been cmapaigning for many years for lower PAYE taxes and a flat rate of tax for corporates to encourage more zambians to start their own businesses. But we still have high interest rates fromt he banks and the banks prefer dealing with Government bonds and treasury bills and with big commercial companies while leaving the middle to struggle. This what we call in economics 'the missing middle'. In fact if you look closely at the success of Asia you will find that those economies are driven by the middle classes and SME's apread out that supply the big manufacturers and also export themselves to specialist markets in europe and the usa.

  2. Trevor S, your comments add hope to many of us and thanks for your kind offer – a gesture to meet me when you come back from the diaspora upon which then we can discuss Zambian economy’s major problem which is not unique knowing African’s industries at large might exhibit varying symptoms but have the same disease i.e. the colonial masters left an indelible filthy mark by way of the Ricardian Law of comparative advantage.

    Sadly enough post independent governments also over-emphasize development of agriculture and mining in Africa at the expense of industrial development even in the long run. This indeed has been the trend since the colonial era. Given Africa’s large endowment of land it is perceived that its comparative advantage is inevitably natural resources and so Africa should forget about manufacturing. But African leaders should realize that real return on investment is in adding value to raw materials to transform them into finished goods because at each value chain you can rep monies though direct taxes of the profits. Failure to do this will insure that Africa will continue to wallow in poverty, being parasitic and dictated to at the world stage.

    At one time in KK’s era we commenced well with import-substitution strategies to replace imports by manufacturing goods domestically essentially in order to meet domestic demand. But with the advent of Structured Adjustment Programmes (SAPs), intensive international competition and globalization forced the country to shift to export-oriented strategy which requires production of quality products for exports at low prices. This proves that IMF and the World Bank are just “quack doctor” who prescribed one and the same medicine for every patient, however different their ailments are.

    Unbalanced industrial growth theory states that if any link in the value chain is broken the whole chain will suffer loss. It is wrong on the part of government to only emphasize micro, small and medium industries and consumer good industries. We are even proud to have the Manada Hill Accades shopping complexes yet virtually all the goods there are from South Africa. Well that’s an overstatement. Zambeaf products are doing fine in these shopping malls – a bit of hope there but how I wish such infrastructure was for manufacturing. There is need to balance these malls with intermediate and capital goods industries. No wonder also most foreign investors concentrate on consumer goods that have a relatively short pay-back period – a condition for quick profits. Capital goods industries, though they are expensive, they are strategic in ensuring industrial linkages, intensive use of domestic inputs and thereby breeding a lot of entrepreneurial activities to feed into them and thus enabling economic independence in the long run.

    Yes like you pointed out, Zambian government should learn from Japanese government which continues to support medium enterprise with a view to gradually decrease the support once the business has taken-off to sustainability. Also there is a deliberate policy that forces big companies to support a number of small companies. Small and medium industries are important in contributing to GDP and employment especially in rural areas where the majority of the poor live. These enterprises should also increase productivity and produce quality products and minimize costs. They may compete indirectly through niche marketing by identifying segments of markets that they can serve well than large firms. This is one way in which promotion of export to markets not tapped by global investors can be done such as exporting Zambian crafts and labour intensive products to USA, Europe and other parts of the world. I cry when I see tracks ferrying timber after looting it in Sesheke. Why can’t this government stop this legalized theft? We need to be exporting furniture not wood.

  3. A young friend of mine just finished his last year of school at Copperbelt University. I asked him what he wanted to do when he graduated and he said, "I want to start my own business." I was excited for him and asked what he learned about starting a business in school. He said "they teach us how to get jobs, not how to create them." Sad testimony. The issues are systemic and multifaceted. Mindset, policies, HIV and AIDS, and corruption are all major challenges. I agree that the church, schools and the media all need to more actively engage the issues. It would be beneficial if the 90% who regularly attend church were being taught that God cares about the economy instead of if you have enough faith you will get a new cell phone. Pardon the soap box.
    Smart to point out that pecuniary measures like GDP are not necessarily reflective of a countries quality of life anymore than my parents bank account is reflective of my quality of life...unless of course they share it with me.

  4. In tourism Zambia chose to specialise on high quality, low volume markets and now have some the best and most economically stable, low environment impact products on earth.

    Is there sense in following the same principle in manufacturing ie aim for high quality , long lasting goods for a consumer market that is being forced to reduce consumption for the sake of climate mitigation and resource scarcity?

  5. rolfshenton, wouldn't it be better in terms of revenue if we were to broaden our target market in tourism. China and India have large local markets and this has worked to their economic advantage. I thought we ought to also satisfy the local demand too. But alas, this sector is out of rich for an average Zambian even me who is an upper middle income group. Or do you mean to say volumes don’t work for this sector? I was privileged to visit the Taj-Mahal. The local tourists far outnumber the foreign tourists. The Indian government is well clued in economics. They have a higher visit fee for foreign tourists and a lower visit fee for local tourists and I can bet the Taj-Mahal generates directly or indirectly more than our Victoria falls. Your worry is the environmental concern. The issue of impact to the environment can be easily be mitigated through proper sanitation and green methods.

  6. Potpher, I agree and have always supported the three tier pricing systems that generally still prevail to try and ensure that local and region tourists can access our tourist facilities. However the reality is that Zambia remains un-competitive in the region with Zimbabwe easily poaching back much of our Livingstone arrivals to put them at 2 million tourist/year to our 800,000. The stats from ZNTB are misleading- business tourism and short- haul traffic flows have accounted for most of the recent increase in non-Zambian arrivals and I think you’ll find many of the large hotel investments outside Lusaka have disappointing low occupancy rates.
    The tourist market that weathered the financial downturn best is high-end wildlife which dominates off the line of rail. Developing anything off the line of rail is not for the feint hearted- infrastructure is poor, cost of business, goods and services highest in the region, regulations and bureaucracy debilitating.

    The elephant- in- the -room, though, is rising fuel prices forcing the package industry to be weary of new long- haul destinations.

    I agree, we should be looking east for new markets but with oil depleting quickly combined with emissions and austerity - related market resistance, I stand by my argument that Zambia should leave the bulk market to established players like Kenya and South Africa and concentrate on high- quality, low volume. I predict that in most remote areas safari hunting will continue to be the only viable tourism as the rich get richer. Hopefully we can entice more philanthropic NR management partnerships through this 100 year old industry like the successful conservancy investment made by the late Lebanese President Rafic Hariri
    Zawa is broke again, their donor sponsors packing their bags, their private sector partners already squeezed, ZNTB still arguing about a slogan to replace “the real Africa” and immigration rather hostile to investors and tourists alike - don’t hold your breath for any lead from government here! We need to be really creative

  7. well said, we need to work together and move forward.


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