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ZAMBIA

AN INTERIM ECONOMIC UPDATE

AN EXPORT DESTINATION?

Background

This is a land locked country situated in Southern Africa which during colonial times was referred to as Northern Rhodesia. The country has a population of approximately 14 million, English is its official language and its government is a democracy.

The writer has had an earlier experience with this country as for three years he worked for the Meridian Group which was originally set up by an Andrew Sardanis with the backing of the first President Kaunda with is major income coming from the franchised rights to manage the running of the huge copper mines in the country. Meridian grew to be a worldwide organization and had offices in Africa, Europe the South Pacific and Asia. The late eighties, early nineties saw a new wind of change sweep through Africa and companies like Meridian were swept away with many countries in Africa embracing democratic government and severing links with the old colonial powers. (and the way business was done).

The Economy

Economic expansion is taking place in Zambia at a rapid pace with some negative pressures in selected areas of the economy. Overall growth is presently projected at 6 percent in 2013 which is a decline from the previous 7.2 percent in 2012 due in the main to lower agricultural production. The major export earner is copper which continues a strong increase in spite of lower prices on the international market.

The economy has also benefited from high levels of direct foreign investment with rapid growth in non-traditional exports. Inflation levels remain at 7.1 percent on-a –year - on - year basis.

Economic Challenges for the Zambian Economy

These lie in the fiscal area and in 2013 Government spending will be significantly above budget, in particular from fuel subsidies which were raised in May 1, 2013, but also from civil service wage increases and additional costs covering the Food Reserves Agency’s operations and outstanding debt.

The authorities intend taking steps in 2014 to address these fiscal challenges by increasing revenue collection, implementing tight expenditure control and to bring the deficit down to around 5 percent of GDP. If this is adhered to it should bring macroeconomic stability and form a platform for strong growth for the Zambian economy

ZAMBIA (CONTINUED)

Conclusion

There is a need in Zambia to maintain strong economic growth, ensure competitiveness remains and to build buffers against external shocks. Labour costs are being impacted as a result of upward pressure coming from large award payments to civil servants accompanied by higher labour costs in both the private sector and public sectors which could impact on competiveness if not matched by higher productivity.

A build up in reserves is needed as the current levels of three months imports is light, (those who have attended the Export Import Transaction and Risk Management Course , (Module 5) will be very aware of the implications of this ratio) particularly from possible risks stemming from a potentially deteriorating external environment.

A further report on the Zambian economy will be available in early December 2013.

Source of information : Central Bank of Zambia, IMF and Government authorities.

 

John Brooks

Trade Economist

The Auspacific Institute

25 September 2013

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