Prospects

As the figure below demonstrates, Zambian economic growth since the reform era in the early 1990s has been both strong and consistent. Over the past decade the Zambian economy has averaged 6.2-percent growth with a slight uptick over this average in the last few years. Zambia has also gone from a country that typically experienced annual double-digit inflation rates during the 1980s to one where, today, inflation has been kept in the high single digits through sounder macroeconomic management of the economy. So, in real terms, this growth has delivered substantial improvements to Zambians.

Figure 3:

Zambian Economic Growth,

Percent Increase, 2003 – 2013

That said, Zambia remains an underdeveloped economy in every sense of the word. Like with many such countries, Zambia is dependent upon one primary product – copper – for export earnings. With Chinese growth over the past two decades having exploded copper prices, this has greatly enriched the Zambian economy. Unfortunately, while the copper-mining industry is by far the most important sector, it is very capital intensive and as a result employs relatively few people – certainly not enough to provide jobs for all those who need them. As a result most Zambians are employed in low-end services and agriculture, the latter of which is particularly low in productivity due to a lack of capital, modern technology, and, ironically, labor.

Agriculture’s labor shortage, however, has a silver lining as it is caused by the fact that Zambia is one of Africa’s most urbanized countries, with fully half the population living in towns and cities that have grown up along transport corridors that link Zambia’s copper mines with export markets in neighboring countries. While putting the squeeze on agriculture, this shift of population from rural to urban is a critical development as it has pooled and made accessible to entrepreneurs large amounts of relatively inexpensive labor that could be easily directed into light manufacturing.

For that to happen, though, further reforms and investments need to be made. As noted above in the discussion of business conditions in Zambia, obtaining construction permits is inordinately difficult – making property improvement, let alone the construction of factories an expensive endeavor. Clearly this situation needs to be improved before manufacturing can develop fully.

Transport, too, needs to be radically improved. Being landlocked, Zambia must necessarily transport its goods to export ports in other countries. Unfortunately, its neighbors have equally bad transport networks that desperately need investment, which explains the high cost of engaging in cross-border trade.

This transport bottleneck not only limits Zambia’s ability to export copper, but also limits the manufacturing potential of its growing cities. Without better links to the outside world, it is thus difficult to see how Zambian manufacturing could be competitive with the rest of the world.

Fortunately, demand for copper is such that outsiders may actually be the ones to improve Zambia’s, and the region’s, export infrastructure.

China, for instance, has gone on something of a railway-building spree throughout Africa, Zambia included. Chinese firms, supported by the government in Beijing, have invested in Zambia’s state-owned railway network, particularly in TAZARA – the Tanzania Zambia Railway that links Zambia’s copper belt with ports in Tanzania.

First built in the 1970s as Chinese foreign aid for a socialist ally in the Third World, today the railway has become a strategic part of China’s bid to source desperately-needed raw materials and develop markets in Africa. Indeed, as Zambia’s largest trade partner China would appear to have a vested interest in ensuring the country’s copper continues to flow unimpeded to copper-hungry Chinese factories.

Finally, Zambia also has problems typical of most recently democratized country. Though power was turned over freely to the opposition in free-and-fair election in 2011, concern has nonetheless developed over the degree to which Zambia seems to be backsliding on democracy.

Corruption, for instance, remains a problem that is seen as diminishing the rule of law in Zambia, while dissent critical of the government has led to a something of a crackdown by the authorities.

Moreover, the rising Chinese influence in Zambia has lessened Lusaka’s appetite for Western aid that might otherwise have been used as a leverage for further democratic reform.

Given this, what can investors expect out Zambia? In the short run, current market uncertainty over short-run Chinese growth prospects and a continued lackluster economic performance in the West is likely to put a further damper on the all-important price of copper. As a result, there may be some delay in large-scale transport investments that are needed to bring Zambia closer to world markets.

In the long run, however, the need for copper will no doubt rebound and better transport links with the outside world – if they are ever built – could make Zambian-sourced manufacturing more competitive. Coupled with political stability and the outside chance of further improvements in democratic governance, Zambia’s future could be as bright as its copper.

Jeffrey Cavanaugh holds a Ph.D in political science with a specialization in international relations from the University of Illinois at Urbana-Champaign. Formerly an assistant professor of political science and public administration at Mississippi State University, he writes on global affairs and international economics for AFK Insider, Mint Press News and BAM South.