23 August 1996
economic and trade reforms start to show benefits Back to top
Since late 1991, Zambia has
fundamentally changed its trade and economic policy. The trade regime has been
considerably liberalized and there has been substantial decentralization and deregulation
in other spheres of economic activity. A new WTO Secretariat report on Zambia's trade
policies and practices notes that the government has decontrolled prices, privatized many
state companies and lifted exchange controls on its currency, the kwacha.
The Secretariat report and one by the government of
Zambia will be the focus of two days of discussion at the Trade Policy Review Body on 9
and 10 September 1996. The Secretariat report notes that Zambia's reforms are now showing
some benefits. Inflation has dropped from over 100 per cent in 1992 and 1993 to around 35
per cent in 1995. Non-traditional exports, mainly from the manufacturing sector, have
doubled in the past four years and grew by about 35 per cent in 1995. The report also
notes that new agricultural policies, financial reform and a continued focus on
privatization and fiscal reform should help Zambia's export and growth prospects.
Zambia is among the top five nations in the world in
terms of copper reserves, refining capacity and production. Copper exports account for
over 70 per cent of Zambia's foreign exchange earnings while cobalt exports account for a
further 10 per cent. The report states that non-traditional exports, including engineering
and agricultural products, processed foods and textiles have grown rapidly recently,
contributing some 17 per cent of total merchandise export earnings in 1995, compared with
around 8 per cent in 1990.
Market-oriented reforms have resulted in the
liquidation or privatization of almost all state-owned companies. State trading activities
have also been considerably reduced. The report notes, however, that Zambia's Electrical
Supply Corporation, its telecommunications sector and the Zambian National Oil Company
still exercise monopoly rights in their respective fields. Plans are being examined to
privatize the Zambia Consolidated Copper Mines. A Competition and Fair Trading Act passed
in 1994 introduced a code of conduct for all businesses and prohibits anti-competitive
trade practices, such as the formation of cartels and collusive tendering. The 1993
Investment Act, which was amended in 1995, provides general incentives to investors and
offers a concession tax rate on earnings from farming and non-traditional exports. The Act
also ensures that private investments are protected from nationalization or other
During the Uruguay Round, Zambia bound all its
tariff lines on agricultural products, 97 per cent of which are bound at a ceiling rate of
125 per cent. More than 180 non-agricultural products have been bound at rates ranging
from 30 to 60 per cent. Its simple average m.f.n. tariff is 13.6 per cent, with averages
for agriculture at 18.2 and for mining and industrial products at 7.5 and 13.5 per cent,
respectively. The report states that Zambia's tariffs show no escalation from primary to
semi-processed products but go up to 16 per cent for finished goods. Escalation is most
pronounced in sectors such as paper products and textiles. Zambia applies no export taxes,
levies or charges and grants no direct subsidies to exports.
According to the report, Zambia's market access
commitments under the General Agreement on Trade in Services (GATS) include services
related to mining and exploitation, professional services and tourism and travel-related
services. Many formerly state-run hotels, banks and transport facilities have been
privatized and Zambia's national airline has been liquidated. Zambia is currently revising
its intellectual property legislation to bring it into conformity with the WTO Agreement.
In regard to its regional arrangements, Zambia
participates in the Common Market for Eastern and Southern Africa (COMESA), which in
December 1994, succeeded to the Preferential Trade Area for Eastern and Southern African
States (PTA). Imports from COMESA partners enter Zambia at 40 per cent of applicable
m.f.n. rate. Zambia is also a signatory of the Southern African Development Community
The report concludes that Zambia's adjustment
efforts have stimulated rapid growth in non-traditional exports and have begun to help
Zambia to diversify its economy away from its dependence on copper. The report notes that
Zambia's efforts to continue the implementation of reforms could well bolster confidence
and help attract foreign investment. It will also be critical, states the report, that
Zambia's non-traditional exports, including textile and engineering, floricultural and
food products do not meet new protective barriers and that the multilateral trading system
continues to support Zambia's efforts.
Notes to Editors:
The WTO Secretariat's report, together with a
report prepared by Zambia, will be discussed by the WTO Trade Policy Review Body (TPRB) on
9 and 10 September 1996. The WTO's TPRB conducts a collective evaluation of the full range
of trade policies and practices of each WTO member at regular periodic intervals and
monitors significant trends and developments which may have an impact on the global
Two reports, together with a report of the TPRB's
discussion and of the Chairman's summing up, will be published in due course as the
complete Trade Policy Review of Zambia and will be available from the WTO Secretariat,
Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
The reports cover development of all aspects of
Zambia's trade policies, including domestic laws and regulations, the institutional
framework, trade policies by measure and by sector. Since the WTO came into force, the
"new areas" of services trade and trade-related aspects of intellectual property
rights are also covered. Attached are the summary observations from the Secretariat and
government reports. Full reports will be available for journalists from the WTO
Secretariat on request.
Since December 1989, the following reports have been
completed: Argentina (1992), Australia (1989
& 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon
(1995), Canada (1990, 1992 & 1994), Chile (1991), Colombia (1990), Costa Rica (1995),
Côte d'Ivoire (1995), Czech Republic (1996), Dominican Republic (1996), Egypt (1992), the
European Communities (1991, 1993 & 1995), Finland (1992), Ghana (1992), Hong Kong
(1990 & 1994), Hungary (1991), Iceland (1994), India (1993), Indonesia (1991 and
1994), Israel (1994), Japan (1990, 1992 and 1995), Kenya (1993), Korea, Rep. of (1992),
Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993), Morocco (1989 & 1996),
New Zealand (1990), Nigeria (1991), Norway (1991 & 1996), Pakistan (1995), Peru
(1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore
(1992 & 1996), Slovak Republic (1995), South Africa (1993), Sri Lanka (1995), Sweden
(1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Tunisia
(1994), Turkey (1994), the United States (1989, 1992 & 1994), Uganda (1995), Uruguay
(1992), Venezuela (1996) and Zimbabwe (1994).
Secretariats report: summary Back to top
TRADE POLICY REVIEW BODY: ZAMBIA
Report by the Secretariat Summary Observations
The Economic Environment
The Republic of Zambia has implemented a
fundamental change in policy direction. Since late 1991, it has moved decisively away from
import substitution to outward orientation as the base of its growth strategy. The trade
régime has been considerably liberalized and tariffs are now the main instrument of trade
Trade reform has been accompanied by
decentralization and deregulation in other spheres of economic activity: domestic prices
have been de-controlled and government intervention in marketing steadily reduced;
parastatal reform and privatization are significantly decreasing government involvement in
business activity; exchange controls have been lifted and the exchange rate of Zambia's
currency, the kwacha, is now market-determined. The programme of structural reform has
been supported by a macroeconomic stabilization effort.
The reforms followed a long period of steady
economic decline since the mid-1970s, marked in particular by a fall in per capita income
of some 30 per cent, bringing Zambia among the least-developed countries, and a slowing of
gross domestic investment from over 40 to under 15 per cent of GDP. These developments
reflected not only lower prices and output of Zambia's predominant export, copper, but
also the growth-inhibiting effect of pervasive State controls over economic activity.
Zambia's reforms have yet to show their full
benefits, influenced by droughts in three of the four years through 1995 and by falling
copper output (exacerbated by efficiency problems). Thus positive growth was recorded only
in 1993. However, some favourable signs are starting to show. In particular, inflation is
down significantly, from well over 100 per cent in 1992 and 1993 to around 35 per cent in
1995, indicating a more stable macroeconomic environment. In addition, non-traditional
exports, mainly from the manufacturing sector, have doubled in the past four years,
growing by some 35 per cent in 1995. Manufacturing remains subject to high production
costs, including for inputs of basic infrastructural services such as finance and
telecommunication. However, continued liberalization, including recent cuts in tariffs and
reform of financial markets, pursuit of privatization, planned improvements in mining, and
fiscal reforms such as the introduction of value-added tax in place of the former sales
tax are expected to improve Zambia's export and growth prospects.
Zambia is among the world's major copper producers.
Mining and quarrying account for over 80 per cent of Zambia's merchandise exports; the
sector produces about 6 per cent of GDP and provides employment for some 10 per cent of
the formal work force. Agriculture accounts for over 20 per cent of GDP and about 17 per
cent of employment. Manufacturing, with some 14 per cent of Zambia's exports of goods, is
the source of almost a quarter of GDP and just over 11 per cent of employment. With over
60 per cent of the labour force, services are Zambia's largest employer, accounting for
about half of GDP.
Zambia in World Trade
Zambia's vulnerability to external shocks is
reflected in its external trade account, where the price of copper and the weather-related
need for maize imports play an important rôle. A further significant factor in the
current account is interest on Zambia's external debt, with such scheduled payments
averaging over 25 per cent of merchandise exports in the past five years.
Copper accounts for over 70 per cent of Zambia's
foreign exchange earnings from goods, and cobalt for a further 10 per cent. Zambia ranked
as the world's second-largest producer of cobalt in 1992 and is among the top five nations
in terms of reserves, refining capacity and production of copper. Non-traditional exports,
including engineering and agricultural products, processed foods, and textiles, have grown
rapidly; they contributed some 17 per cent of total merchandise export earnings in 1995
compared to around 8 per cent in 1990.
Major imports to Zambia include capital equipment
for the mining sector, crude oil, fertilizer and maize. The share of maize in total
imports reflects the intensity of droughts: maize accounted for nearly 20 per cent of
total merchandise imports in 1992, 2 per cent in 1994 and 8.6 per cent in 1995. A recent
increase in fertilizer imports partly reflects an increased emphasis by the private sector
on agricultural products as non-traditional exports. Other imports, including consumer
goods and intermediate inputs, have increased as a share of total imports - from 40 to
around 60 per cent - since 1992, reflecting in part the considerable liberalization of the
trade régime and the growth of exports of manufactures.
Japan, which buys much of Zambia's copper, is the
single largest market for Zambia's exports, followed closely by the European Union (EU).
Textiles, which are among the more important of Zambia's non-traditional exports, find a
market mainly in the EU and Switzerland. Zambia's agricultural exports, mainly
floricultural, are marketed largely out of the region as many neighbouring countries
produce similar items. Within the region, Zaire is the main importer of Zambia's products,
followed by Zimbabwe. South Africa is Zambia's major supplier, with a share in Zambia's
total imports of almost 30 per cent, followed in order by the EU, Zimbabwe, Japan and the
Institutional and Legislative Framework
In August 1991, the Republic of Zambia became a
multi-party democracy headed by an executive President, whose tenure may not run beyond
two five-year terms. Legislative power is vested in Parliament, which consists of the
President and the National Assembly. The President and most members of the Assembly are
elected by universal adult suffrage. A Cabinet consisting of the President, the
Vice-President and Ministers appointed by the President, formulates Government policy.
Zambia's laws comprise the Constitution, Acts of
Parliament and Statutory Instruments, which are generally issued by members of the
Cabinet. Bills, including those dealing with trade, are initiated by the competent
Ministries and submitted for approval to the Cabinet before submission to Parliament. The
1995 Customs and Excise Act is the main legislation governing Zambia's foreign trade,
including importation and exportation of goods, rules of origin, customs valuation, tariff
concessions, excise taxes, and anti-dumping and countervailing duties. The 1994
Competition and Fair Trading Act introduced a code of conduct for all business entities
and prohibits anti-competitive trade practices, such as the formation of cartels and
collusive tendering. Under the 1993 Investment Act, as amended in 1995, general incentives
are provided to investors, including a concessional tax rate on earnings from farming and
non-traditional exports; private investments are protected from nationalization or any
other compulsory acquisitions. All investment applications are processed by a one-stop
Investment Centre, except for investment in mining and financial services, which are
respectively under the authority of the Ministers of Mines and Finance.
In accord with the market-oriented reforms, almost
all State-owned companies have either been liquidated, privatized, or earmarked for
privatization, through the Zambia Privatization Agency. State trading and participation in
productive activities have been considerably reduced. However, the Zambia Consolidated
Copper Mines, for which privatization modalities are under study, the Zambia Electricity
Supply Corporation, the Zambia Telecommunications and the Zambia National Oil Company hold
monopolies or exercise rights in their respective field of activity.
Zambia grants at least m.f.n. treatment to all its
trading partners. After independence, Zambia applied the GATT on a de facto basis
until it became a Contracting Party in February 1982. Zambia is a founding member of the
World Trade Organization (WTO). Like other WTO members, Zambia has bound all its tariff
lines on agricultural products. About 97 per cent of such lines are bound at a ceiling
rate of 125 per cent; bindings on remaining lines range from 45 to 60 per cent. Some 186
lines on non-agricultural products were also bound, at ceiling rates ranging from 30 to 60
per cent. Subject to limitations concerning the presence of foreign natural persons,
Zambia bound market access under the General Agreement on Trade in Services (GATS) for
some services, including those incidental to mining and exploration, and professional,
tourism and travel-related services. Zambia is revising its trade-related legislation,
including for intellectual property, to bring it into conformity with the WTO Agreements.
Zambia participates in the Common Market for Eastern
and Southern Africa (COMESA), which in December 1994, succeeded to the Preferential Trade
Area for Eastern and Southern African States (PTA). Imports from COMESA partners enter
Zambia at 40 per cent of the applicable m.f.n. rate. Zambia is also a signatory to the
Southern African Development Community (SADC).
Features of trade policy and trade policy
instruments and their effects
Since late 1991, trade barriers have been
substantially reduced in Zambia. Quantitative import restrictions have been eliminated and
import controls are maintained only for health, security and associated reasons. Customs
duties are now the main trade policy instrument.
Zambia's tariff has also been considerably
simplified. Over the past five years the maximum rate has been lowered from 100 to 25 per
cent; tariff categories have been reduced from 12 to four, with rates of zero, 5, 15 and
25 per cent; and virtually all suspensions and exemptions have been eliminated. Almost all
rates are ad valorem. Customs valuation is based on the Brussels Definition of
Value but the authorities intend soon to move to a "transactions value" basis
for these purposes.
Zambia's simple average m.f.n tariff is 13.6 per
cent. The average rate is highest in agriculture, where it is 18.2 per cent; averages in
mining and industry are 7.5 and 13.5 per cent, respectively. About two-thirds of all
tariff lines bear rates of 15 or 25 per cent, while some 20 per cent of lines, mainly for
raw materials and productive machinery, have zero rates. In aggregate, Zambia's tariff
displays negative escalation from primary to semi-processed products but rates escalate to
over 16 per cent for finished goods, with escalation most pronounced in sectors such as
paper products and textiles.
The authorities hope to lower tariffs in 1997 and
1998, particularly on intermediate and consumer goods. However, border duties account for
well over 50 per cent of government revenue, a factor that may slow further tariff
reductions. An independent body, the Zambia Revenue Authority, was established in 1994, in
order to improve revenue performance.
In addition to tariffs, imports are subject to an
Import Declaration Fee, introduced in October 1995 for fiscal reasons, and levied at a
rate of 5 per cent on commercial goods worth at least US$500. Excise duties ranging from
10 to 125 per cent apply to a limited number of goods, whether imported or locally
produced, including sugar, beverages, petroleum products, tobacco, tyres and tubes. A
value-added tax (VAT) of 20 per cent replaced a 23 per cent sales tax in July 1995 and is
collected on both goods and services, locally supplied or imported.
Since the early 1970s, Zambia has applied an
anti-dumping duty of 15 per cent on imports of windows and doors, and window and door
frames of iron or steel, irrespective of the country of origin. Zambia, which intends to
update its antidumping and countervail legislation, applies no other "emergency"
measure. Nor does Zambia maintain any local content requirements; the last such measures
were eliminated by the 1996 Budget.
Zambia applies no export taxes, levies or charges
and grants no direct subsidies to exports. A drawback scheme is in place for exporters and
is being reviewed with a view to reducing delays related to refunds. Non-traditional
exporters are exempt from customs duty and VAT on imports of machinery and equipment, and
are entitled to a concessional income tax rate of 15 per cent on their export earnings,
compared to the standard rate of 35 per cent. The establishment of export-processing zones
is under study. Except for prohibitions maintained for environmental reasons, restrictions
on exports have been eliminated. However, exports of maize are banned from time to time
depending on the domestic harvest, and scrap metal is subject to export limitations. All
exporters have full foreign-exchange retention rights.
Zambia eliminated all its direct product and
consumer subsidies in 1991. Price regulations and controls were abolished for almost all
goods and services in 1992, including for staple foods, pharmaceuticals, and
telecommunications; administered prices remain for petroleum products, electricity and
Sectoral aspects of trade policy
The signals for resource allocation in Zambia
have changed significantly since 1991, away from State-control toward market orientation.
By moving toward a more neutral incentive structure, the Government hopes that the private
sector, in allocating resources according to comparative advantage, will diversify the
economy away from its dependence on copper, and Zambia's attendant vulnerability to
changes in copper output and prices. There are some indications of success. In the period
since 1991, the decline in the value of copper exports, due to a reduction in output, has
been more than fully compensated by an increase in non-traditional exports. This increase
has been mainly in manufactures but agriculture has also responded to the reform effort,
particularly in floriculture where there has been a recent seven-fold increase in exports.
The Government has reoriented its objectives for
agriculture away from the narrower aim of food security, particularly for the urban
population, to the broader goal of a contribution from agriculture to national income and
employment. In this context, a sectoral liberalization programme has removed quantitative
restrictions on imports, eliminated subsidies and monopoly marketing boards, deregulated
prices, and initiated the privatization of all public enterprises in the sector.
Government assistance to the sector is limited to research, infrastructure, agricultural
extension services and the maintenance of a strategic food reserve, mainly in maize, the
national staple. Larger-scale projects, such as the Emergency Seed Distribution Programme,
which is aimed at diversification toward drought-resistant crops, are largely financed by
foreign donors. Tariffs are virtually the sector's only trade policy instrument but they
remain relatively high: the maximum rate of 25 per cent applies to more than half the
lines in the sector.
The authorities also intend to substantially reduce
the rôle of the State in mining, essentially to that of a facilitator and regulator.
Thus, recent legislation eliminated the mandatory participation of the Government in
mining ventures, established the freedom of commercial operations and guaranteed the
security of title to mining rights. In addition, in 1994 monopoly marketing rights on
metals were abolished, and in 1995 a new royalty scheme was introduced to encourage
vertical diversification of mineral products. Authority is now readily granted to the
private sector for a wide range of activities, including exploration and prospecting.
However, the sector remains dominated by the State-controlled Zambia Consolidated Copper
Mines (ZCCM). Productivity in copper production is relatively low, in part resulting from
the depth of ZCCM's mines, depleting ore reserves, lack of skilled labour and management
problems. Cost-cutting efforts are underway and the authorities hope that this together
with the planned privatization of ZCCM, the prospective entry into production of new
sites, and improved extraction methods will stabilize production at close to current
In Zambia's manufacturing sector, reform has led to
a shake-out of the more inefficient firms. In particular, the Government has liquidated
the Zambia Industrial and Mining Corporation, which as a State-controlled holding company
dominated the sector. Resources would now seem to be starting to move toward more
efficient use; new investment appears to have been attracted by privatization and some
established companies are expanding capacity. Certainly manufacturing exports have
responded to the more liberal environment, doubling over the past four years. However, the
sector remains one of relatively low productivity, partly because of weaknesses in
infrastructural services, including occasional drought-induced energy shortages. Border
protection for the sector is relatively moderate; there are no quantitative import
restrictions but tariffs on some final products, including certain processed foods and
textiles range to 25 per cent.
Since the initiation of reform many service-oriented
State-owned service providers have been privatized, including hotels, banks and transport
facilities. In the latter area, the national airline has been liquidated. Except for
limitations in telecommunications, financial services and energy, services are open to
foreign investment. In banking, foreign-owned branches or subsidiaries are free to enter
the market provided they incorporate locally and at least half their directors are
established residents in Zambia. Monopolies or exclusive rights remain in certain areas,
including telecommunications and energy. Further planned reforms in the sector are
expected to give momentum to other sectors, including manufacturing, by reducing
telecommunication, financial and transport costs. Moreover, areas such as tourism, where
deregulation and privatization are well advanced, are expected to start showing improved
Trade policies and foreign trading partners
Zambia has undertaken profound change in its
policy orientation. Supported by a macroeconomic stabilization effort, it has implemented
a series of bold structural measures designed to reestablish stable, sustainable growth.
Trade liberalization is integral, indeed central, to Zambia's reform effort, thus
indicating its confidence in the efficacy of open, competitive markets and its adherence
to WTO principles
Zambia's adjustment effort is beginning to show
signs of success. In particular, its non-traditional exports have grown rapidly, and are
starting to lead a diversification of the economy away from its dependence on copper. In
this context, continued steadfast policy implementation will help to bolster confidence
and could serve to attract the needed foreign investment. It will also be critical that
Zambia's non-traditional exports, including textile and engineering, floricultural and
food products, not meet new protective barriers and that the multilateral system supports
Zambia's efforts with open markets.
report Back to top
TRADE POLICY REVIEW BODY: ZAMBIA
Report by the Government - Summary Extracts
The Zambian economy has always been dominated by
the Copper mining industry. The country's economic performance and policy making have been
heavily influenced by copper for its incomes, employment and exports.
For many years the Copper industry has accounted for
over 90 per cent of foreign exchange earnings and a substantial proportion of output. In
1995 the industry contributed 5.5 per cent to real Gross Domestic Product (GDP), about 80
per cent to total export earnings and employed an average of about 59,8000 workers. This
is 11.9 per cent of total wage employment.
During the past decade the production of copper has
declined steadily. In 1965, Zambia produced about 680,000 metric tons of copper. This rose
to 700,000 tons in 1977. By 1991 the production had fallen to about 380,000 tons and it
was 307,181 tons in 1995. This is less than 50 per cent of the 1969 production.
This decline in copper production, compounded by
falling copper prices since 1974, the depletion of ore reserves and the increasing cost of
production have adversely affected the performance and growth prospects of the Zambian
economy. This has led to significant drop in GDP and living standards.
Since 1989 for instance, real GDP growth rates have
been negative except for 1993 when it shot up to 9.2% gross. Output growth was boosted by
mainly the significant increase in agricultural production brought about, largely by the
favourable weather conditions during the 1992/93 season.
Zambia, has had adjustment problems before. Between
1983 and 1987, she operated under structural adjustment programme. The aim was similar to
the current adjustment measures. The programmes were, as today supported by the
International Monetary Fund. Unfortunately, due to inconsistence in implementation, the
programmes failed to accomplish their objectives. They were abandoned in 1987.
Since 1992 the new Government has made progressive
efforts to try and improve the economy. Macroeconomic and other reform measures have been
put in place for that purpose. These have included freeing interest and exchange rates;
fighting inflation through prudent fiscal management; trade liberalisation; public sector
reform; privatisation of state companies etc.
The main objectives of Government's economic
1. Restoration of the Zambian economy.
2. Acceleration of the manufacturing and
3. Improving and expanding economic infrastructure
for FDI, tourism and others.
4. Improving and expanding social infrastructure to
improve living standards.
Achievement of these objectives however, has met
with obstacles such as drought which has hit the country the past three consecutive years.
Performance of some sectors of the economy has also
been affected negatively by both internal and external factors. Internally, the
liberalisation of interest rates in the presence of high inflation led to a rapid increase
in nominal interest rates particularly in the period 1992 and 1993. For instance, by
August, 1993, the average lending rates of banks had gone up to 139 per cent, from 85 per
cent in January, 1993. High, interest rates have discouraged borrowing by the business
sector, hence prolonging opportunities of investment and output growth.
Stabilisation measures, have also caused the
exchange rates to appreciate and cause problems for Zambia's exporters including the
copper industry. Economic liberalisation has also caused problems for the domestic
industries debilitating many while resulting into several closures of others.
International factors causing major problems for the
economy includes the substantial decline in metal prices on the world market since 1990.
Inspite of all the odds against the economy, reform
measures have produced some good results.
The macro economy is now more stable than it was
before new Government took over four years ago. Inflation is low, interest rates have
declined, staple food prices have been stable, the balance of payments situation is
viable, and Zambia's external financial relationships have been normalized. The successes
reflect improved economic polices, enhanced financial management, and the Zambian
population's willingness to make the sacrifices needed to restore the economic growth
The economy has moved towards a situation of
external and internal financial balance. This has begun to lead to a recovery in average
per capita real incomes.
Over the period 1991-1994 as a whole, real GDP
increased by 3.2 per cent and real per capita GDP declined by about 7 per cent. These
achievements have to be seen against the background of almost two decades of economic
Numerous changes signal the economic turnaround.
Construction activity is increasing; local cement sales are rising; energy use (petroleum
and electricity) is expanding; tourism is growing; new businesses are being formed;
investment, funded from both local and foreign sources is rising; small non-traditional
exports have until recently been increasing; Zambian asset-holders are repatriating
foreign exchange; basic consumer and investment goods are no longer in short supply; the
physical infrastructure is being repaired; and the private transport sector has expanded
markedly because of encouraging policies by Government.
Government created Zambia Revenue Authorities a
result of which has improved revenue collection. This has led to an improvement in
budgetary deficits. Export Board of Zambia is in place to promote and improve export
performance. The investment Centre was also created to improve investment. Zambia
Privatisation Agency is in place to promote sales of state companies. On the financial
side, a Lusaka Stock Exchange was created two years ago to develop the financial markets
and promote equity investment. These institutional support mechanisms for export and
investment effectively used should improve the economy. All direct controls on trade have
been removed, except for a short list of items controlled for environmental, health or
security reasons. Levels and dispersion of import duties have also been reduced.
The engine of economic growth is private sector. To
achieve that, Government is in the advanced stage of privatising all state companies
including the Zambia Consolidated Copper Mines which produces Copper.
Trade Policy and Practices - General Trade Policy
In 1991/1992 the new Government of Movement for
Multi Party Democracy (MMD) embarked on the new economic recovery programme driven by
Structural Adjustment Programme (SAP) supported by IMF. Under these new economic measures,
Trade Policy aims at creating a competitive and productive economy driven by private
sector initiative which will foster living standards for Zambians. Specific objectives
include the following:
1. Complete trade liberalisation.
2. Trade promotion and diversification through
exports of non-traditional goods.
3. Creating conducive domestic environment for
investment, growth and improved living standards.
Government emphasis in its trade policy is to
encourage export diversification in order to move away from Copper dependence. In this
regard sectors other than mining are being encouraged to export. The floricultural and
horticultural sectors are currently doing quite well.
In the process of improving the economy, private
sector emphasis remains key. The Zambia Privatization Agency continues to sell state
companies to private individuals and companies. Government is no longer supporting state
companies through subsidies as was the case previously. Monopolies in public sector are
gone as demonstrated in the liquidation of the national airline and marketing boards.
International macroeconomic situation affecting
Zambia's external sector
The twin processes of liberalisation and
globalisation are presenting adequate opportunities for international trade. Government
intentions are to participate fully into the international trade system by unlocking all
bureaucratic impediments and other obstacles of entry.
Demand for copper, Zambia's mainstay of the economy,
according to current forecasts and projections by UNCTAD, "point to an overall
increase in the rhythm of consumption growth in the coming years". This bright
picture is based on assumption that developing countries of Asia and others keep the
momentum of economic growth, and if the larger Eastern Europe countries achieve a success
transition and their economies succeed in recovering from the present slump. For developed
countries, it is hoped that they do not undergo a major recession in the years to the end
of the century.
The current trend in the international market is to
create prospects for debt relief and even cancellation for developing countries
particularly LDCs. Zambia, having done so well so far in terms of implementation of
structural adjustment programme should take advantage of international donors for debt
Problems in External Markets
To appreciate the problems faced by Zambia in
the External market, it is necessary to take into account the country's geographical
location and the pattern of her trade. Zambia is a landlocked country. As a result of this
predicament, it incurs high freight costs which result into uncompetitive pricing of her
Furthermore, the world copper prices are subject to
major price fluctuations. This makes the economy vulnerable to major external shocks due
to its dependence on copper which contributes about 94 per cent of foreign exchange
earnings over the 1990-1994 period.
Regulations and standards are also major obstacles
faced by Zambian exporters. This is especially so in the export of agriculture products.
These are subjected to stringent rules and regulations.
Zambia benefits from the Generalised Systems of
Preferences Schemes offered by Developed countries. However, not all exports qualify for
preferential treatment under these schemes.
Zambia is a member of SADC to which all Southern
African Customs Union (SACU) member states are also members. South Africa, which is a
member of both SACU and SADC, is Zambia's major supplier in the region. It supplies about
40 per cent of Zambia's total imports requirements, while Zambia supplies only about 1.5
per cent of South Africa's total imports.
South Africa and the other SACU members maintain
high protective tariff rates and non tariff barriers as well as subsidising their
exporters. This creates unfair competition to Zambia products in the regional market. The
improvement of market access to Zambian products in the region will contribute
significantly to improving Zambia's trade balance. Back to top