CHANGING ZAMBIA’S ECONOMIC ARCHITECTURE

The NAREP National Economic Plan 2011-2030

(Summary and Justification)

Introduction

The economic architecture that was in place to support Zambia’s national development ambitions in
1964 still dominates the country’s economic landscape. There is need for a radical revision of this
state of affairs. The reason is simple: post-independence development planning has continued to
rely on copper exports and the associated colonial infrastructure. As a result, although the
arguments for economic diversification have long been understood, little progress has been made
towards attaining this goal and poverty remains the stark reality for the marginalised majority.

The time is long overdue for us to carry out a thorough assessment of our national economic
infrastructure in order to determine whether it is really capable of responding to current and future
development challenges. It is not too far-fetched to suggest that the failure to address this issue has
resulted in sustained rural poverty and massive urban underdevelopment. With visionary and
values-based leadership, however, this can all change. The NAREP National Economic Plan
summarised herein, addresses why the change must occur and how it will be achieved.

Background

In a recent meeting in Lusaka with the president of the World Bank, our 4 th Republican President,
Rupiah Banda, declared that in order for the country to achieve its vision of becoming a prosperous
middle income country by the year 2030, we need to diversify the economy from its dependence on
copper. Sadly, this observation has been doing the rounds consistently for over 40 years. In a major
address to the UNIP National Council in 1976, Zambia’s 1 st Republican President, Kenneth Kaunda,
asserted boldly that the country had waited 5 years too long to implement a diversification plan and
called for a concerted move away from reliance on copper. Clearly, this concern is not new.

Although the case for economic diversification should be self-evident, it is probably worth restating
for two reasons. First of all, simply talking about a problem does not make it go away. We have
consistently ignored the responsibility to drastically reduce our dependence on a commodity that is
subject to the vagaries of international demand. Volatility in world demand leads to volatility in
pricing which in turn leads to economic volatility. Given that 40 years or more have elapsed since
this problem was identified, it is time that we elected leadership that will be committed to
successfully addressing this long-standing concern.

The second reason to restate the case for diversification is the current international benchmark price
for copper. The price of Zambia’s main export commodity has broken all previous records and the
trend looks set to continue for a while. As has been the case so often in the past, a high copper price
is likely to breed only complacency. Therefore, rather than seek comfort from this turn of events,
we should be making every effort to ensure that we can capitalise on the opportunity that the

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current surge in price presents while we prepare ourselves for the impact of the downturn that will
surely follow at some point in the future.

How should we address this challenge? We can begin by doing three things: (1) we need to
understand the nature of the foundation supporting the economic infrastructure we have been
relying on to drive our development agenda; (2) once we are able to appreciate that the current
framework is not adequately addressing our social and economic objectives (i.e. accept that current
policies have failed to address long-standing development problems), we can then agree on the
need to reshape and re-order it; and (3) we need to stimulate quantum economic growth with a
plan that makes the development of communities beyond the line of rail (the rural areas) a
necessary and integral part of the growth and development of the overall economy. Let us look at
each of these issues more closely.

Factors that underpin our current economic infrastructure

The mentality underpinning Zambia’s economic philosophy can be summed up in three words: “line-
of-rail”. In the early 1900’s, the railway was an essential means of access to the country’s mineral
wealth. The railway also served to facilitate the export of mine products and allowed for the
importation of supplies that would ensure the industry’s sustainability. Built broadly around line of
rail infrastructure, the economic framework we inherited at independence was designed to achieve
three primary objectives: (1) to enable access to the country’s mineral wealth and secure a route for
shipment of mine products to industrialised nations; (2) to facilitate the distribution of goods
manufactured in industrialised countries; and (3) to foster the development of industrial, financial,
commercial, agricultural and social support services to the mining industry.

Because our national development planning has consistently tied our economic future to the
rehabilitation of infrastructure built to promote a predominantly mining-based economy, we have
inadvertently become trapped in “line-of-rail” thinking for nearly half a century. This static approach
has meant that we have continued to develop policies that ignore the fundamental and structural
causes of the problems associated with underdevelopment and which continue to plague the nation.
In part, this explains why we can have positive macro-economic indicators (low inflation, higher
growth rates) in the midst of persistent levels of poverty across the country. The lack of visionary
leadership has meant that the growth of the economy has benefitted relatively few – many of the
beneficiaries being mining companies and investors hand-picked to justify a seemingly insatiable
appetite for presidential travel.

Although the attainment of political independence in 1964 presented an opportunity to address the
anomaly of uneven and inconsistent national development, the sad truth is that Zambia has never
managed to create a viable alternative blueprint for the economy. The outlook shaped in the
colonial era for the primary benefit of the industrialised world still dictates the terms of our
economic thinking. Post-independence development plans, including the recently launched Sixth
National Development Plan 2011-2015 (SNDP), have tended to promote more local participation of
urban and peri-urban residents in certain types of economic activity rather than offer radical steps
towards deliberately and sustainably lifting the majority out of poverty.

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According to preliminary 2010 national census results, more than 61 per cent (8 million people) of
Zambia’s total population reside in rural areas. Given that economic planning has largely sought to
address challenges faced by agricultural and commercial undertakings along a narrow corridor of
settlements developed alongside line-of-rail infrastructure, vast swathes of highly productive land
remain inaccessible, cutting off hope and opportunity for masses of rural residents located away
from major centres of economic activity. Significant infrastructure challenges remain in urban and
peri-urban areas as well, although not to the same degree.

The pace of Zambia’s economic development since independence has been almost single-handedly
set by the mining industry. Through its sheer dominance, mining has consistently presented itself as
the “engine” powering Zambia’s economy. As is evident from the SNDP, the current administration
endorses this sentiment and intends to rely heavily on increased mine output to fund proposed
development plans over the next 5 years. Now while it is broadly true that mining has spearheaded
development in several parts of the interior, most of the country is devoid of such activity. As a
result, mining has not been a true engine of growth for the whole economy. The most obvious
sector through which more uniform national development could be achieved and through which
numerous attempts at diversification have been made is, of course, agriculture. Zambia is a country
with a land mass of 752,000 km 2. More than half of this (420,000 km 2) is of medium to high quality
arable potential. Yet only 15 per cent (60,000 km 2) of arable land is currently under cultivation.
These are familiar statistics.

As a nation that hosts possibly 40 per cent or more of Southern Africa’s fresh water; with quality
arable land in excess of several European countries put together; and with the most fertile areas of
the country offering up to three times the average crop yield within the region, Zambia lives with the
very real possibility of becoming the continent’s agricultural giant. In order to be realised, however,
this potential must be exploited through massive infrastructure development – primarily through the
construction of major new roads in currently inaccessible areas as opposed to simply rehabilitating
existing infrastructure. The country desperately needs a plan to ensure that access to arable land
can be dramatically and sustainably increased in order to turn Zambia into the continental epicentre
of agriculture it has always had the potential to be.

What about the recent bumper harvest?

The recent record maize harvest presents an interesting case study against which to assess whether
we really are beginning to move away from our legendary overdependence on copper. It is indeed
tempting to believe that the bumper maize harvest in 2010 is an indication that we are on the path
to attaining rural development and the elusive economic diversification. However, a close look at
how the record harvest was achieved reveals a very troubling return to a past approach that is likely
to leave the country bankrupt within a short period of time if a better approach is not adopted.

What the current government administration is trying to do in boosting maize production is not in
itself a bad thing. The real problem – the real danger – is how they are going about it. By supporting
a purchase price that is significantly higher than the market value of the commodity, the government
is negligently mortgaging the country’s future. In addition, the lack of transparency and efficiency in
procurement practices has greatly increased the cost at which the commodity is grown. Non-

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existent, poor and – in many cases – severely degraded infrastructure coupled with ineffective
marketing and storage arrangements add to the overall problem. The result is that we are being
collectively forced to squander precious resources and run excessive supplementary expenditures.
According to the government’s own figures, the additional expenditure in 2010 alone stands at a
staggering K680 billion! We are robbing future generations of resources that should be preserved
and utilised wisely to ensure that those generations will be able to sustain themselves.

Does anyone remember NAMBOARD?

Sustainability was defined in 1987 by the World Commission on Environment and Development in its
report to the United Nations as: “the ability to meet current needs without compromising the ability
of future generations to meet their own needs”. If we want to understand what the effect of the
MMD government’s spending policy will be on current and future generations, we need only to
reflect on the fate of the long-defunct National Agricultural Marketing Board (NAMBOARD).

After independence, a marketing organisation which had serviced white commercial farms along the
line of rail was merged with a new agency that was set up to extend marketing services to African
peasant farmers. The combined entity was called NAMBOARD. During this time, NAMBOARD
heavily subsidised maize production and supported the marketing of the commodity by paying
above prevailing market prices. Unsurprisingly, maize production reached record levels. Predictably,
however, NAMBOARD did not survive. It only ended up creating a bigger problem than it was
supposed to solve. If one examines the pricing on inputs like fertiliser (to name just one), it is easy to
see how some acquired unprecedented wealth at the expense of the nation. This story is repeating
itself today, only on a much larger scale.

It should now be clear that we have reverted to the tactics of the past to provide a temporary boost
to maize production and continued to allow mining to play a limited role in fast-tracking broader and
more consistent national development. In the short term this may not appear to be inappropriate.
It is, however, a dangerously wrong strategy. Few may notice the impending danger – particularly if
copper prices remain high; and while we are able to borrow or dip into our national current account
to support an artificial maize price. We are in this situation because of the collision of two factors: (i)
poor quality national leadership; and (ii) the pressure of a looming general election.

Small-scale and largely rural farmers can and should be assisted by government and this ought to be
done in a smart and more sustainable manner. One idea that was previously mooted for boosting
stable maize production is interesting: identify several commercial farmers to grow maize for food
security and at the same time facilitate production of (non-maize) cash crops (such as cotton and
tobacco) by smallholder rural out-growers. Sensible as this may sound, this approach would not
address the requirement for massive improvements in infrastructure and small-scale farmer support
services. The main benefit might be a more decisive move towards a commercially viable base for
agricultural output. However, infrastructure constraints make it difficult to reproduce such a model
across all rural areas. For this reason, we need to consider other ways of addressing the challenge
we face in developing rural communities and promoting diversification through agriculture.

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A final point on this issue is that agriculture is clearly not the only means through which
diversification can be achieved. Tourism and services can also set a strong pace in an altered
economic framework. The SNDP does in fact aim to attain diversification through greater investment
in the agricultural, tourism, manufacturing and energy sectors. The problem is that this storyline is
all too familiar. The likelihood of failure remains high largely because there is no clear economic
vision to drive the plan set out within the SNDP, only an elusive notion of middle income prosperity.
However, if – as proposed by NAREP – agriculture is led by a clear and well-coordinated national bio-
fuels initiative, it is likely that we would see a more substantive and more comprehensive
improvements in infrastructure in both rural and urban areas.

Reshaping the current economic framework

It should be clear from the above that we need to reshape our national economic planning. We can
achieve this by excavating and re-designing the foundation that supports the current framework.
Three steps are proposed: (i) re-ordering our national priorities so that significantly greater emphasis
is placed on developing rural areas and the non-mining sectors of our economy – and doing so in an
economically and environmentally sustainable manner; (ii) expanding access to new areas of growth
and development well beyond the line of rail; and (iii) restoring a values-system that is suitable for
promoting leadership that will responsibly oversee the thinking, planning and implementation
associated with such an approach.

It is important that we do not continue to merely tinker at the edges of reform. We need to
completely transform our thinking when it comes to economic development. The key to our
economic success will lie in ensuring that we can stimulate quantum growth in the capability and
responsible output of local private enterprise. This can be achieved if government is proactive in
enhancing local ownership of new business projects and implementing unprecedented growth plans
on a national scale. This is exactly what the NAREP National Economic Plan is designed to achieve.

The NAREP National Economic Plan – stimulating quantum economic growth responsibly

NAREP believes that poverty will not be tackled by “tackling poverty”. Such an approach is focussed
on addressing symptoms rather than the underlying causes of poverty. We must move towards an
approach that is fully focussed on tackling the causes of poverty. In order to do this, we need to
create the environment that will fertilise growth and empowerment across the whole country so
that the potential of every Zambian can be given the chance to be more fully realised. This will
require us to rethink our whole approach to development delivery.

NAREP believes that effectively tackling the causes of poverty will require the construction of a
completely new economy; one that will move the nation away from its “line-of-rail” mentality to one
that is focussed on making rural communities a necessary and integral part of our overall economic
development. We can start by setting out a clear and simple path to national development.

The NAREP National Economic Plan is anchored on 4 pillars:

- Bio-fuels and clean local energy production

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- Agricultural production beyond the line of rail
- Trade of goods and services with Zambia serving as a regional inland hub
- Technological innovation

In line with the overall goal of moving Zambia away from its dependence on a single commodity, it is
possible for Zambia to become an alternative energy superpower following the example set by
Brazil. The opening up of land for the production of alternative energy on the strength of a bold new
national energy policy will positively impact agricultural production by facilitating the development
of infrastructure that will support the more effective use of our 420,000 km 2 of medium-to-high
potential arable land. Consequently, Zambia will be better able to take advantage of its strategic
geographic location and offer a convenient inland hub for regional trade, commerce and political as
well as social engagement. Being a regional trade and services centre would align well with Zambia’s
geographical location and its people’s nature, cultural orientation and historical experience.

If this approach is adopted, the following can be realistically achieved:

- 1,000,000 new jobs within 5 years in both rural and urban areas
- 10,000 new business owners in each province within 6 years
- Full rural electrification within 7 years
- Major new roads connecting all provinces to modern towns and cities within 10 years
- Dramatic reduction of taxes

 Jobs will be created through:

- building national infrastructure for water, sewerage and sanitation

- developing new rail and road links for mining and industrial operations
- developing concrete roads to link rural locations to line of rail infrastructure
- implementing policies to stimulate national demand for bio-fuels and alternative energy
- increased industrial productivity through local alternative energy initiatives
- increased activity in other growth sectors such as tourism, logistics and other services

Each of these initiatives will have a commercial foundation to ensure that they are
sustainable and can be fully supported through a combination of commercial and
concessional lending.

 New business owners will emerge as a result of:

- implementation of policy initiatives to stimulate local demand for bio-fuels

- government-initiated private sector-driven construction projects
- support services to major government-driven public works projects

 Full rural electrification will be possible because of:

- extensive use of wide application and cost-effective solar systems

- cost effective and easily implementable mini-hydro systems
- use of locally developed bio-fuel resources

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  Major new roads will be developed on the back of the alternative energy programme and
the development of infrastructure to support mining and industrial operations

 Tax reduction will be achieved through a combination of the following:

- broadening the tax net

- improving efficiency in collection
- incentivising taxpayers
- transparency in application

In order to ensure the responsible development of this plan, as a Party in government, NAREP will
commit itself to introducing:

- a small cabinet of selfless and committed leaders

- accountability through performance-based monitoring of all government actions
- unprecedented transparency and new rules on tendering

The Narep National Economic Plan will be funded from 4 primary sources:

- implementation of an infrastructure tax for the mining sector

- limited use of reserves as guarantee on major infrastructure projects
- concessional infrastructure loans (bilateral, multilateral, DFI sources)
- financing mechanisms under the Kyoto Protocol Clean Development Funds facility

How does the NAREP vision differ from Vision 2030 and the MMD economic plans?

There are three main differences in policy focus between NAREP’s National Economic Plan and the
SNDP:

(a) NAREP’s National Economic Plan will create jobs as well as thousands of new business owners
and will dramatically improve the capacity of the local private sector while the SNDP is focussed
primarily on limited job creation and promoting foreign investment;

(b) NAREP’s National Economic Plan is ambitious and focussed on making Zambia a global energy
superpower while the SNDP copies a standard model of making Zambia a middle income earning
nation by 2030; and

(c) NAREP’s National Economic Plan is centred on the economic development of rural communities
while the SNDP has no specific plan to sustainably integrate rural communities into the overall
economy.

Although the SNDP highlights plans for the construction of railways and other infrastructure, these
plans are set out as a wish list without a clear supporting vision. It is this lack of clarity of vision
coupled with a lack of clear ownership of the plan that will render the intentions set out therein,
unattainable. Further, no matter how ambitious the plans, if fundamental capacity constraints

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within the public sector are not addressed – and these have been comprehensively identified in the
government-authored Mid-Term Review of the Fifth National Development Plan (FNDP) – the fate
that has befallen the FNDP (namely chronic underachievement of the plans objectives as the Mid-
Term Review itself points out) will be the same fate that will befall the new plan.

One of the major bottlenecks constraining development is not just the capacity challenges in the
public sector but also the lack of capacity within the local private sector to meet standards of output
expected in a modern society. NAREP’s ultimate aim is to raise the quality of local private sector
output to superior levels and to facilitate broad-based full-scale local ownership of both major and
small-scale economic projects. This will ensure broader and more comprehensive empowerment of
local businesses and communities. The NAREP National Economic Plan is deliberately structured to
address local private sector capacity problems by promoting Triple-P Partnerships (i.e.
public/private/private partnerships). With Triple P, the emphasis is on ensuring that government-
backed projects promote and strengthen local and not only foreign private sector interests.

Conclusion

NAREP’s National Economic Plan is both radical and ambitious but reflects the type of thinking that is
vital if we are to lift the majority out of poverty. The current approach to economic planning reflects
a consistent dependence on infrastructure developed during the colonial era. Whilst the most
recent National Development Plan covering the period 2011-2015 identifies the necessity of massive
new infrastructure development, it has no coherent and economically sustainable vision on which to
anchor its proposed projects. Such an approach will not promote the type of development that can
comprehensively address the problems of poverty being experienced by residents of rural
communities beyond the line of rail – where a majority of the population live. If Zambia is to stand a
chance of attaining quantum economic growth and tackling poverty, a new way of addressing the
country’s development challenges will need to be considered. How we fare in meeting this
challenge will be a test of the capability of a completely new generation of leaders for our country.

The challenge of implementing NAREP’s radical vision will require us to:

- recognise that there is no inherent contradiction between financial stability, economic growth
and improved social conditions for the majority – all three can be embraced within a well-
defined multilayer framework

- have clear and timely communication and be open about the serious challenges facing Zambia as
well as the sacrifice that will be required from everyone to overcome them

- have a clear strategic economic vision for the country and delegate implementation to a strong
civil service that will be encouraged to robustly challenge any deviation from the vision

We will not succeed in more uniformly developing the nation if we continue to rely on failed ideas
and the tired an ineffective leadership of the past. In 2011, we must put into office responsible,
values-based leadership that is determined to promote sound fiscal responsibility, strong
institutional integrity and clear accountability – leadership that truly has a heart for the people.