IMF VISIT TO ZAMBIA

Statement by the IMF Staff Mission at the Conclusion of a Visit to Zambia

Press Release No. 12/77
March 13, 2012

An International Monetary Fund (IMF) mission visited Lusaka February 29–March 13, 2012 to conduct discussions for the Article IV consultation.¹ The mission had fruitful discussions with Hon. Alexander Chikwanda, Minister of Finance and National Planning; Dr. Michael Gondwe, Governor of the Bank of Zambia, and other senior officials as well as representatives from the private sector, civil society and labor unions.

At the conclusion of the visit in Lusaka today, Mr. Trevor Alleyne, mission chief for Zambia, released the following statement:

“Macroeconomic performance in 2011 was positive and is expected to remain robust this year. Real GDP growth is estimated at 6½ percent in 2011 and is projected at 7.7 percent this year, reflecting strong growth in copper production and non-maize agriculture, and an expansionary fiscal policy. Inflation declined to 7.2 percent at end-2011, broadly in line with the authorities’ target, and is projected to end this year close to its February 2012 level of 6.0 percent. The 2012 budget targets a widening of the fiscal deficit to 4.1 percent of GDP driven by a significant ramp up of investment. Despite copper prices rising to record highs, the external current account surplus narrowed substantially last year, mainly reflecting a strong expansion in imports and a decline in grants. For 2012, the current account surplus is projected to remain broadly unchanged, while gross international reserves are expected to continue to grow, reaching the equivalent of 3.3 months of prospective imports.

“There are near-term downside risks arising from the uncertain prospects for the global economy and from domestic policies.Although the crisis in Europe has had little spillover to the Zambian economy to date, a further deterioration in global economic conditions could squeeze trade credit lines; reduce demand for Zambian exports; and lower copper prices. On the domestic front, policy measures will be needed to ensure that fiscal targets are met; and careful implementation of the planned financial sector reforms will be necessary to safeguard financial sector stability. On the other hand, Zambia’s solid macroeconomic management, the large investments in the copper sector, and recent strong growth in non-maize agriculture all auger well for the country’s ability to withstand global shocks and sustain the growth momentum into the future.

“Maintaining a positive investment climate for current and potential investors should be an important component of Zambia’s growth strategy. As traditional concessional financing phases out and Zambia relies increasingly on international markets and foreign direct investment, it will be important for the government to implement and communicate clearly a consistent set of policies related to foreign investment. This will enhance Zambia’s international reputation as a destination for investment flows by reducing uncertainty.

“Despite the favorable macroeconomic results, there is an urgent need to re-orient policies to ensure that economic growth and macroeconomic stability are accompanied by strong employment growth and poverty reduction. Looking forward, it will be important for the Government to implement policies to diversify the economy and ensure that growth is more inclusive. Key areas will include: (1) tax policy, tax administration, and public financial management to create fiscal space for increased infrastructure spending and improve technical capacity to efficiently administer a larger capital budget; (2) maize marketing and pricing policies and the development of a broad-based reform strategy for the agricultural sector; (3) increasing access to financial services by small and medium enterprises without jeopardizing financial sector stability; and (4) removing the incentives for the proliferation of informal business and employment arrangements.”

The 2012 Article IV discussion by the IMF’s Executive Board is expected to take place in May, 2012.

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¹ Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.

Funding Opportunity

The Cities Alliance, a global partnership for urban poverty reduction and the promotion of the role of cities in sustainable development has issued its second call for proposals under its Catalytic Fund.

The theme under which the funding would be provided is “Youth and the City: Challenges of and Visions for Demographic Change.”

The thematic call has three main objectives in line with the ‘catalytic’ nature of the Fund:

• To raise awareness of the role of youth in urban development at a time when cities, grappling with an historic urbanisation process, appear ill-prepared to provide improved governance, meaningful representation, or economic and social roles for their youthful populations.
• To select and support, both technically and financially, innovative youth-focused urban projects and to revisit traditional Cities Alliance areas such as city development strategies, slum upgrading and national policies on urban development with an emphasis on youth.
• To provide a flexible platform for successful projects to develop peer-to-peer learning networks and to systematically extract and share knowledge that both informs and influences urban practices as well as policy dialogues at the local, national and global level.

The proposed project must be implemented in countries that are on the OECD DAC List of Aid Recipients.

Grant size requests must be limited to between US $50,000 – US $250,000.

DEYOS-ZAMBIA
Network Dept
deyos.zambia@gmail.com

Funding opportunity

The Government of Sweden has decided to continue the special initiative for democratisation and freedom of expression launched in 2009. The initiative aims at supporting actors for change, individuals, groups and civil society organisations working for democratisation and freedom of expression.

The objective of this Call for Proposals is improved conditions for actors for change to work for enhanced democratisation and freedom of expression. The interventions shall contribute to improved conditions and increased opportunities for actors for change to work for enhanced democratisation and freedom of expression and the reduction of various forms of discrimination and oppression.

Sida invites organisations and other relevant actors to submit a Full Application for programmes/projects which might be considered under this support mechanism. Please read theGuidelines for Applicants (pdf). The Full Application Format and its Annexes can be downloaded from this page, to the right.

Application deadline April, 15

This Call for Proposals is open 9 March – 15 April 2012. Applications submitted beyond this deadline will not be considered.

Questions can be sent to callforproposals_demo1@sida.se

DEYOS-ZAMBIA

NETWORKING DEPT

Zambia – the new bread basket of Africa?

A recent Reuters article reports that Zambia has enough maize stocks to help partly fill a regional gap as a supply crunch looms in southern Africa, pushing up futures prices for the staple and accelerating food inflation.

It is exporting to South Africa, Zimbabwe, Democratic Republic of Congo, Kenya, Mozambique, Botswana, Burundi and Namibia. “We are monitoring the situation very carefully to ensure that we don’t end up importing maize. I think we are standing on very firm ground in terms of food security,” Zambia’s agriculture minister Emmanuel Chenda said, striking a rather cautionary tone. “We had more than one million tonnes of surplus maize. We decided to export 600,000 tonnes because we didn’t have storage space and so far we have sold 200,000 tonnes,” he said.

Analysts are, however, concerned about Lusaka’s costly spend on maize purchases from farmers, done via the Food Reserve Agency. Brian Tembo, an Economics Association of Zambia analyst, said the government was buying the maize at above market prices and selling it at reduced prices. He said this meant the government was effectively using “treasury funds to subsidise the region”.

Zambia harvested 3m tonnes of maize in the 2010/11 season, from 2.8m tonnes the previous season. Zambia’s maize season runs from October to August. The country’s big yields have been attributed to government subsidies to peasant farmers in the form of fertiliser and seeds. However, the crop ultimately depends on rain and the agriculture minister has said the 2011/12 season had gotten off to a bad start because of erratic weather.

South African maize prices are around record highs as stocks remain tight until the next marketing season starts in May. South Africa has so far imported from Zambia and Romania and producers say the country may need to import about 700,000 tonnes of white and yellow maize to make up for shortfalls. “There are some people that are getting desperate to try and find some maize … On the white maize side, we are definitely in for a very tough time between now and May,” Jannie de Villiers, Grain SA’s chief executive, said.

South Africa previously had a surplus, but new demand came from outside of the region and so the market overcommitted itself.

Over in Malawi, maize exports have been suspended after reports that 10 of its 28 districts faced food shortages. “We want to make sure that we have enough in stock for distribution to the affected families. We have set aside 400,000 tonnes to distribute to an estimated 200,000 families,” said Erica Maganga, principal secretary in ministry of agriculture.

Malawi’s maize harvest fell to 3.2m tonnes in the 2010/11 season from 3.5m tonnes the season before. Maize prices have jumped by almost 50% to USD 18 per 50 kg bag.

It is clear that food security remains a challenge that sub-Saharan African governments need to address. Zambia’s effort towards increasing yields by subsidising small-scale farmers is commendable and perhaps other regional governments should follow suit. However, bumper harvests should also be managed well to ensure consistent food supply in future periods.

In a presentation by MACO MLF-Zambia in January 2010, they highlighted Zambia’s agricultural potential, stating that only 14% of arable land was being utilised. Moreover, the country has abundant water resources to ensure all-year round agricultural production. We believe the country should develop the agricultural sector further so as to reduce its dependence on copper mining.

DEYOS-ZAMBIA

DIRECTORATE OF POLICY ANALYSIS.

Economic Watch

According to the World Trade Organization, trade represented 74.5% of Zambia’s GDP from 2005-2007.  In 2008, merchandise exports totaled over $5 billion while merchandise imports totaled over $5.1 billion.  In 2007, commercial services exports totaled $279 million while commercial services imports totaled $886 million.
Note:  The information in this snapshot can help identify trade factors that may impact investments in Zambia.  For example, the higher the Trade-to-GDP ratio the greater sensitivity Zambia’s economy might have to global economic, trade, and financial fluctuations. Also, changes in economies or industries of key trading partners may trigger changes in Zambia’s economy and industries. RT AfriBiZ.
Major Imports and Exports
According to the International Trade Centre, the top five export categories for Zambia in 2008, along with percentage of total exports, were:

1. Copper and articles of copper (64.3%)
2. Ores, slag, and ash (15.1%)
3. Other base metals, cermets, and articles thereof (5.9%)
4. Tobaccco and manufactured tobacco substitutes (1.4%)
5. Sugars and sugar confectionery (1.3%)

According to the International Trade Centre, the top five import categories for Zambia in 2008, along with percentage of total imports, were:

1. Boilers, machinery, nuclear reactors, etc. (16.6%)
2. Mineral fuels, oils, distillation products, etc. (16.1%)
3. Vehicles other than railway (9.7%)
4. Ores, slag, and ash (8.4%)
5. Electrical and electronic equipment (9.5%)

Major Trading Partners
The top three countries to which Zambia exports merchandise, along with percentage of exports, are:

1. China (14.2%)
2. South Africa (8.5%)
3. Democratic Republic of Congo (8.1%)

The top three countries which import merchandise to Zambia, along with percentage of imports, are:

1. South Africa (51.7%)
2. United Arab Emirates (8%)
3. China (6.8%)

Please note that DRC is yet another important trading partner with Zambia, we would be doing ourselves a big favor if we continued to help DRC get on its feet, its a huge market for Zambian products.

Can Africa Solve its Development Challenges?

Extracts of CRAIG EISELE Writes...
Thus despite the recent euphoria about Africa’s economic growth by the World Bank and others, the reality is that Africa today is going through a period of de-industrialisation. It is becoming more dependent on raw materials exports. Even the countries that had achieved a significant degree of industrialisation such as South Africa and Zimbabwe are de-industrialising as well. The Zimbabwe economy has halved since 2000, while South Africa’s manufacturing sector has declined from 25% of GDP in 1990 to 16% today. China’s manufacturing sector on the other hand is 50% of GDP while India’s is 35%.

The surge in commodity prices over the last few years has created an illusion that African economies are growing and restructuring. To illustrate the depth of Africa’s under-development let me give the example of Nigeria, Africa’s largest crude oil producer. Nigeria has no petro-chemical industries and therefore imports most of its refined petroleum products such as petrol and diesel. Nigeria’s manufacturing industry is virtually non existent accounting for only 3% of GDP according to the African Economic Outlook for 2006/2007 published by the African Development Bank and the Organisation for Economic Co-Operation and Development.

Industrial and Green Revolutions transformed the ability of labour to produce a surplus through the application of knowledge especially of science and technology. Labour became capable of producing value many times that it required for its survival and reproduction.

There are many pre-requisites for Industrial and Green Revolutions to occur. Principal amongst these are the liberation of private property from political domination. The second pre-requisite of the Industrial Revolution is the liberation of the great majority from individual access to certain means of production especially land. These pre-conditions have not occurred in Sub-Saharan Africa.

The stunted and fossilised subsistence economic systems established by the colonialists and perpetuated since their departure by successive groups of political elites are unable to absorb new technologies and new management methods. Over time these stunted subsistence systems begin to literally eat up their own foundation leading to all the ills that Sub-Saharan Africa has became notorious for – declining life expectancy; falling school enrolment; capital flight; brain drain; deforestation; desertification; unpredictable conflicts; massive and growing inequalities and endemic and growing poverty; manipulation by outside forces; growing dependence of the African states on foreign patronage; dependence on foreign initiated solutions.

Secondly Sub-Saharan Africa does not have an established and stable social class structure and stable ruling classes that are legitimate in the eyes of most of the citizens. 

Africa thus lacks a leadership with the continuity necessary to sustain and implement developmental economic programmes. This seems destined to carry on for a long time to come because of the mass emigration of African professionals. The World Bank estimates that 20 000 African graduates leave the continent annually.

Conclusion
In the four to five decades of its independence African countries have gone through a wrenching period as a result in which a number of negative factors became dominant:

1. African countries lost the key indigenous institutions that had been created by the Africans themselves to fight against colonialism. These were the nationalist parties, the independent trade unions, civil society organisations and independent institutions of learning. These institutions were crushed by the military dictators who took control of African governments in the 1960s in collaboration with Western powers.   Even in countries where the military did not take over nationalist parties degenerated into one man rule.
2. African economies failed to breakaway from the economic model created by colonialism. Consequently African producers did not regain their autonomy but continued as had happened under colonialism to be dominated by the political elite that controlled the state. The new political class thus used its dominance over the producers to siphon savings from the producers to the private consumption of the political elite and of the state especially its repressive instruments.   According to one source African countries jointly have over 2 million security forces that cost the continent an estimated $14-billion annually.
3. The combination of military dictatorships, civilian dictatorships and the subordination of producers to the political elites lead to the underdevelopment of a middle class of Africa as well as to a massive brain drain from Africa.

Can the New Partnership for Africa’s Development, NEPAD, change this lethal legacy that afflicts Sub-Saharan Africa? While NEPAD may address some of the worse excesses of the political elites through the African Peer Review Mechanism it does not address the fundamental malaise, that is, the enormous power imbalance between the political elite and key private sector producers.
If the driving force behind Sub-Saharan Africa’s underdevelopment is the structural powerlessness of producers and therefore their inability to retain and control their savings, it should be self-evident that until this equation is reversed there will be no development in the sub-region. But how is this to be reversed and by whom?
For Sub-Saharan Africa to develop, it therefore needs a new type of democracy, a democracy that will empower not just the political elite but that will empower Sub-Saharan Africa’s private sector producers as well, the great majority of whom are the peasants. The new democracy should be such as to restore the growth of an independent middle class as well as the development of autonomous civil society institutions.
In the first instance, it is necessary that peasants who constitute the core of the private sector in Sub-Saharan Africa must become the real owners of their primary asset, land. This is the only way that there can be land improvements in Sub-Saharan Africa instead of what is happening at present, that is, rampant deforestation and accelerating desertification. This means freehold must be introduced and the so-called communal land tenure system that in reality is state land ownership, must be abolished.
Secondly, peasant producers must gain direct access to world markets without the political elite, through state corporations, acting as the go-between. This means that internationally traded cash crops – coffee, tea, cotton, sugar, cocoa, rubber, etc. – must be auctioned by the producers themselves rather than being sold first to state controlled marketing boards.
Another important innovation that is needed are new financial institutions that are independent of the political elite that will address the financial needs of not just peasants but also other small to medium scale producers. These could be co-operatives, credit unions, savings banks etc. Besides providing financial services these institutions would undertake all the other technical services that are not being provided at present by the political elite such as crop research, extension services, livestock improvement, storage, transportation, distribution and many other services that would contribute to make agriculture in Sub-Saharan Africa more productive.

This is where foreign donors could play a constructive role. Donors could support these independent institutions by providing the expertise to manage them and to some extent help shield them from predators.
These changes would for the first time bring into being in Africa a capitalist market economy that answers to the needs of African producers and consumers. Up to now capitalism in Africa promoted the interests of colonialists, and since independence, it promoted the interests of parasitic political elites which saw its survival as been threatened by the emergence of an independent middle and professional class.
If NEPAD is to contribute to Africa’s economic development it should help to re-design Africa’s political economy so that it promotes the interests of producers instead of those of the rent-seeking political elites.
An important lesson Sub-Saharan Africa could draw from are the agricultural reforms that took place in China during the past 25 years or so. It was in the first instance changes in the agricultural sector that made it possible for China to embark on its current break-neck industrialisation process. This was followed by the recognition by the Chinese Communists that the state alone could not industrialise China. The Chinese government therefore opened the space for the emergence of an independent private sector driven by the middle and professional class.

DEYOS-ZAMBIA - recognizes these challenges mentioned however do not agree entirely with the content.

DEYOS-ZAMBIA
Policy Analysis Directorate

Zambia Among the 8 Countries Deutsche Bank identified in sub-Saharan Africa economies it believes will rival the BRICs

The investment house picked Angola, Ghana, Kenya, Nigeria, Senegal, Tanzania, Uganda, and Zambia to lead the "African Frontier." The eight nations represent 45% of sub-Saharan Africa and 61% of its economic output.  Combined, their GDP is roughly equivalent to that of Poland. Over the last ten years, real-GDP growth has increased from 3.0% to 6.6%, rivaling BRIC expansion at 6.6%, and tops the 4.9% growth seen in emerging Asia.

We continue to urge the Youths to prepare themselves and position themselves for this growth, we also encourage increased communication tools to help further integrate our regions and peoples.


DEYOS ZAMBIA