2. GENERAL ECONOMIC CONTEXT

Zambia is a land-locked country covering 752,614 km² in the south-central part of Africa. Total population at the last census (september 1^st 1980) was 5,679,808; population density therefore was at that time 7.5 persons per km² which is low for a non-arid African country. The land is dominated by plateau surfaces “interrupted by localized downwarps (occupied by lakes and swamp areas, such as in the Bangweulu and Lukanga basins), and by the mid-Zambezi and Luangwa” (Africa Yearbook 1984–1985). Three quarters of the country is drained in the Indian Ocean by the Zambezi river and its two main tributaries the Kafue and the Luangwa. The northern part of the country is drained towards the Atlantic ocean by the Chambeshi and Luapula rivers which are tributaries of the Zaire river.

The climate of Zambia is characterized by three seasons: a cold dry season from April to August; a hot dry season from August to November and a warm wet season from November to April. Temperature can vary from 5°–10°C in July to 35°C in October. There can be frost in some low areas of the western part of the country. Annual rainfall varies from 705 mm in the south-west and the mid-Zambezi valley to more than 1,200 mm on the high plateau of the Northern province and west of the Copperbelt.

2.1 Population

The 1980 census showed that the population of Zambia was growing at a pace of 3.1% p.a.; 43% of total population was living in urban areas. The growth of urban population was 6.7% per year while rural population was growing at 1.0%. Out of ten Zambian cities with more than 50,000 population, seven were located in the Copperbelt area. They are Chililabombwe, Chingola, Kalulushi, Kitwe, Luanshya, Mufulira and N'dola. Other major cities of Lusaka, Kabwe and Livingstone are also located along the railway line. The three main cities are Lusaka (pop. 1980: 538,500), Kitwe (pop. 1980: 314,800) and Ndola (pop. 1980: 282,400).

2.2 Main economic sectors

Like most countries of sub-Saharan Africa, Zambia has a dual sector economy where the traditional subsistance sector dominated by agriculture and animal husbandry employs the majority of population in rural areas, and where a modern market-oriented sector employing a smaller proportion of population generates most of tax revenues and foreign exchange.

2.2.1 Agriculture

Zambian agriculture is oriented towards the following crops: maize (810,000 T in 1982), millet and sorghum (100,000 T in 1982) and cassava (180 T in 1982) as main food-crops and sugar cane (1,050,000 T in 1982) as main cash crop. Livestock production is another important agricultural activity with significant export potential. Major production in that sector for most years (in 000 T) were as follows:

Source: FAO, Production Yearbook

Present fisheries sector output is 55 000 T.

Overall, agriculture accounts for 14% of Gross Domestic Product (1983 figures). Some 60% of the agricultural output comes from the subsistance sector and the rest from commercial farms. About 20% of agricultural output is produced by European-owned farms. As a whole, the agricultural sector is divided in 4 major sectors:

1. A sector of some 740 large-scale farms covering more than 40 ha, heavily capitalized, who occupy stateland on lease hold basis. More than 90% of those farms are located in the Southern province the Central province and the province of Lusaka. According to the Commercial Farmers Bureau, more than ¾ of those farming enterprises are equipped with dams.

2. A sector of some 25,000 medium scale (10–40 ha) commercial farms, with mechanized equipment. Three out of four of those farms are in the three provinces aforementioned.

3. A sector of about 120,000 emergent farmers operating 1–10 ha farms and producing a marketable surplus.

4. The traditional sector comprising 459,000 units of less than 2 ha.

TABLE 2.1
ESTIMATION OF NUMBER OF FARM-UNITS PER PROVINCE

Source: IFAD: Report of the Special Programming Mission to Zambia. April 1984

Since 1975, there is no absolute property of land in Zambia. A commercial farmer can only lease land from the government for a 99 year period. Lease holds are renewable. There is important growth potential in the agricultural sector as only 16% of potentially arable and is now exploited. The main potentialities lie in the production of beef, coffee, tobacco, confectionary groundnuts, for export market, and in dairy product, poultry, cassava, sorghum, maize and sunflower as import substitutes.

2.2.2 Mining

Mining is the key sector of Zambian Economy, accounting for 16%–18% of Gross Domestic Product and providing 95% of foreign exchange earnings. The sector is dominated by production of copper and its by-products which account for 95% of mining output. Started in 1930, copper production reached a maximum of 747,500 T (unrefined) in 1969, making Zambia world's third copper producer. Copper production has since diminished to a level of 584,790 T (1982). At this level of production estimated reserves could last for 20 years.

The Zambian economy has been hurt during the past decade by the disruption of the world copper market which have brought drop in demand and world prices. Through the devaluation of the Kwacha, all sectors of the Zambian economy have suffered from the impact of that situation, depending on their dependency on imports.

Other important mineral productions include coal, cobalt, lead, tin, zinc and gold.

2.2.3 Manufacturing sector

Manufacturing sector accounted for 19% of Gross Domestic Product in 1983. Main activities of this sector include vehicle assembly, petroleum refining, production of chemical fertilizers, textile mills, fabrication of glass bottles, batteries, brickmaking, copperwire. Are also included all activities processing agricultural production.

Manufacturing sector is presently operating below capacity level, partly because of difficulties in obtaining imported inputs and spare parts due to the foreign exchange situation.

2.2.4 Energy

Zambia has massively invested in its hydroelectric resources so that it is relying on its own resources for its power needs. Electricity output reached 10,473 m kWh in 1982, out of which 40% is exported to neighbouring countries of Zaire and Zimbabwe. Of the remainder distributed on Zambian territory, 80% in consumed by the copper industry. The remainder of energy demand is met by coal (Zambian production: 550,000 T p.a.) and petroleum products, which meet 21% of the country's energy needs. Households needs mainly for cooking and heating are met by firewood and charcoal.

2.2.5 Transport

The transport network has been developed from the railway line linking the Copperbelt area to Zimbabwe, via Lusaka and Livingstone, along which most of the country's economic activities have been developed. The railway was coupled with a tarred road. After independence, the Zambian government expanded the transportation system by building a pipeline to Dar-es-Salaam and paving the road to Tanzania. The road to Malawi linking Zambia to the ports of Beira and Nacala was also paved. The completion in 1975 of the Tazara railway line, linking Zambia to the port of Dar-es-Salaam, provided a welcome outlet for Zambia's external trade although the benefits of the project will be fully reaped once the congestion problems at the port of Dar-es-Salaam are solved.

2.3 Recent Economic Trends

The most significant factor in Zambia's economic performance of the past ten years has been the evolution of the mining and mostly the copper sector. As well as strong world demand and prices for copper had helped Zambian Economy to develop at a fast pace during the first years of independence, the slagging demand and dropping prices have impaired its growth for the past decade. Reduced performance of the copper sector has negatively affected government revenues and balance of payments. Because of the situation of the balance of payments, the Kwacha has known a steady devaluation. Between the third quarter of 1982 and the last quarter of 1984, its value in U.S. dollars dropped from $1.05 to $0.45, a 57% drop in value. The cost of imports has increased, affecting all sectors of the economy, and also, due to government restrictions, there were shortages of imported goods, reducing production capacity of all economic sectors. For instance the hauling of the 1983/84 maize crop was impaired because of shortage of trucks and fuel. The losses which followed will oblige the country to import 1 million bags of maize. The stagnation of the economy, while population is growing at 3.2% per year has led to a reduction of GDP per capita from K382 in 1977 to K310 in 1984 (1977 prices).

2.4 Economic guidelines

In 1975, president Kaunda made a major policy announcement, stating that Zambia should base its economic security on agriculture rather than mining. Soon after, land was nationalized. In 1980 Operation Food Production was launched, including among other measures the development of two 20,000 ha mechanized state-farms in each province. In 1983, three state farms had been established. However the policy of direct government intervention in agricultural did not bring favorable results.

More positive measures included decontrol of wholesale and retail prices except for maize, wheat flour, bread and fertilizer, and the reduction of the role of National Agricultural Marketing Board in marketing agricultural products.

At the time of the mission, a new legislation was being enforced which forbids transfer of land to a non-Zambian except for a lease of 5 years. This legislation was reportedly affecting farm development and land value, and commercial farmers were trying to have it amended.

TABLE 2.2
ZAMBIA SELECTED ECONOMIC INDICATORS

Source: National Commission for Development Planning, Lusaka Economic Report 1984

TABLE 2.3
ZAMBIA: URBAN POPULATION 1980