Zambia’s economy grew at 5.7% per annum over the last decade with the country being among the 10 fastest growing economies of Sub-Saharan Africa in 2012. This has enabled it to attain lower middle income country (MIC) status with a nominal per capita income of US$1,299 (2011). Investor confidence has been high as evidenced by the successful issue of the US$750 million Euro bond. Prospects for 2013 look encouraging and the economy is expected to register another year of growth. However the economy remains largely undiversified and mainly dependent on copper with economic activity concentrated mostly in the urban areas. Poverty, particularly in the rural areas remains stubbornly high. The effect of economic growth on overall poverty reduction has been small, because most of the benefits of growth have accrued to those already above the poverty line.
Mining, construction and financial services drove the growth and did little to create jobs and expand opportunities beyond the small labor force employed in these industries. The urban-centered growth also did not generate better incomes, health, nutrition and key services for the majority of Zambians living in the rural areas and dependent on agriculture. Reducing poverty is the greatest development challenge for Zambia. Zambia therefore needs to press ahead to diversify its economy with particular focus on agriculture to achieve inclusive growth.
Government development plan and Country Partnership Strategy alignment
The new government, in power since September 2011, aims for “a better Zambia for all” and has identified poverty reduction, jobs creation and improving governance as its main priorities. The Sixth National Development Plan identifies the following overarching objectives; to accelerate infrastructure development, economic growth and diversification, promote rural investment, accelerate poverty reduction, and enhance human development. The Country Partnership Strategy 2013-2016 (CPS) is aligned to the government’s development priorities. In a country that displays both low income and middle income characteristics, the CPS will support three objectives that speak to the dual nature of Zambia’s development challenges and opportunities; reducing poverty and the vulnerability of the poor, improving competitiveness and infrastructure for growth and employment and improving governance and strengthening economic management.
Government recognizes agriculture as a principle sector for poverty reduction and for promoting economic diversification. Increased agricultural productivity will not only improve the income of women as the majority (68%) of those who are economically active work in that sector, but also the nutritional intake of children. Bank interventions include the Livestock Development and Animal Health Project to improve the productivity of key livestock systems for female and male smallholder producers. The Irrigation Development and Support Project increases yields per hectare and value of products and commercialization of smallholder agriculture projects that support infrastructure development, market linkages, access to electricity and better management of water resources and contribute to agriculture development. A regional project involving Malawi, Mozambique and Zambia will strengthen regional approaches to agricultural technology generation and dissemination by establishing regional centers of research leadership.
The Zambian governments instituted health sector reforms, to provide cost-effective and quality health services to the population. The reforms centered on the delivery of primary health care through a decentralized health system. Malaria control has been impressive, but achieving the health-related MDGs by 2015 remains a key development challenge, particularly among children.
Forty seven percent of children under-five years are stunted. Inadequate dietary intake resulting from suboptimal maternal and infant feeding practices, diarrheal diseases, acute respiratory infections and the heavy burden of malaria are some of the causes of this situation. The Bank is supporting the government to strengthen health systems by scaling up activities to expand access to malaria prevention and treatment. The Bank is also supporting improving the capacity of the Ministry of Health to implement the National Health Care Waste Management Plan and the capacity of local communities to effectively prevent, control and treat malaria based on community demand-driven interventions. As part of the Malaria Booster Project, the Bank is also supporting innovative ways of improving the supply chain system of essential medicines by introducing Information Communication Technology (ICT) for health initiatives in the public sector. A follow-on intervention in the health sector focused on health system strengthening to accelerate improvement in maternal and child health outcomes
Since 2003, the government has been implementing a ten-year road development program, known as ROADSIP II, partially financed by the World Bank and partners. The government recently announced a further paved road construction program, Link 8000, planned for implementation in the next five-to-10 years in which it is investing a significant amount of its own resources. However, connecting remote rural areas still remains a challenge. The Bank, through the performance-based road contracting is helping to remove the road infrastructure gap and allow meaningful agricultural development to take place. The rail and road network also needs attention as service has continued to deteriorate. The railway concession was cancelled in September 2012, with commitment from the government to recapitalize the railway service.
Inadequate electricity supply is a constraint to growth. The mining industry accounts for about 50% of national electricity consumption. The overall national electrification rate is 23%, with 47% of the population in urban and peri-urban areas, and only three percent in rural areas having access to electricity.
The electrification strategy focus is to open the transmission network to private electricity providers in addition to the state-owned ZESCO, improving its operational and financial performance. At the same time, the strategy focuses on phasing out the need to subsidize new capital investments and raising electricity tariffs to total cost recovery levels in order to attract private investors to the market. The Bank interventions include Increased Access to Electricity Services Project to enhance access, the Transmission Line Reinforcement Project to facilitate bulk power transmission to the improve reliability of power to satisfy the growing domestic power demands in Southern Province.
The World Bank group is contributing to a Chamber of Mines and International Council on Mining and Metals collaborative study on nation-wide benefits to the economy from the mining sector. World Bank Group is also facilitating the Zambian Mining Local Content Initiative (ZMLCI) with representatives of the large-scale mining industry, the Zambian manufacturing and small and medium enterprises (SME) sectors and key government agencies to ensure that local manufacturers can become an integral part of mining supply chains, ultimately leading to greater industrialization in the country. The World Bank’s TA program for Zambia EITI is in its post compliance phase and is emphasizing these “beyond EITI” goals. Another trust fund is providing technical assistance to support the efficiency of mineral revenue collection and investment in Zambia. Through an EITI Trust Fund the World Bank will continue to support the capacity-building of non-state actors to engage in the EITI process.
Strengthened Climate Resilience
Frequent floods and droughts have cost Zambia an estimated US$13.8 billion over the past three decades. In its Sixth National Development Plan, the government is aware of the need to strengthen climate resilience. The Pilot Program for Climate Resilience (PPCR) Phase II interventions are focused in some of the poorest districts of Western and Southern Provinces, working at the community and district level through improved climate information, access to credit and weather-index insurance , better planning for floods and droughts, and diversification of sources of income to address the root causes of vulnerability. The PPCR is also promoting climate risk financing, including preparing the government to eventually receive financing from the Green Climate Fund and supporting the establishment of a new inter-sectoral institutional framework to improve coordination amongst the growing number of climate change mitigation and adaptation projects in Zambia.
Finance and Private Sector
Despite the general economic growth, Zambia’s investment climate remains challenging. The poor productivity of Zambian firms undermines their ability to generate income and jobs. The government therefore has two programs underway to improve the business environment: The Financial Sector Development Program addresses market infrastructure, competition, and broadens financial inclusion. The Private Sector Development Reform Program has begun to streamline business registration, licensing, cross border trade, labor reforms and facilitate micro, small and medium enterprises (MSMEs) to increase competition in tourism, agriculture and manufacturing. The WBG is assisting government regain the reform momentum. Further, Growth and Equity program is supporting improvement of financial literacy and consumer protection to build consumer trust in the financial sector and expand the confidence of households to wisely use financial services.
The government has initiated numerous actions to improve governance including a new Anti-Corruption Policy, new Procurement Act, a multi-year program aimed at strengthening integrated financial management through a process of computerization, introducing a single treasury account, strengthening institutions of accountability, and drafting and passing the Freedom of Information legislation. However, numerous implementation challenges remain. Bank interventions include a Public Sector Reform Project, a Governance Partnership Facility (GPF) Trust Fund to improve governance through Improving Beneficiary Feedback in Bank Project, Coalition B and Citizenry monitoring and Building Public Interest Media.
Last updated October 2013