Economic Crisis in Africa: Perspectives on Policy Responses

By Magnus Blomström; Mats Lundahl | Go to book overview

8

EXTERNAL SHOCKS AND THE SEARCH FOR DIVERSIFICATION IN ZAMBIA

Per-Åke Andersson and Steve Kayizzi-Mugerwa

INTRODUCTION

At independence in 1964 Zambia inherited an economy which was heavily dependent on the mining sector for employment, foreign exchange earnings and government revenue. Nevertheless, during the first decade the country enjoyed one of the highest rates of growth in Sub-Saharan Africa. Prices for its major export, copper, had an upward trend and the state was poised to take over the main commercial and industrial undertakings.

When the world-wide recession of the 1970s hit Zambia, mineral dependence proved to be a two-edged sword, however. Both foreign exchange reserves and government revenue fell drastically. To sustain the economic structures built in the affluent 1960s, mining, the main generator of foreign exchange, had to continue to receive the lion’s share of domestic resources.

This chapter analyses Zambia’s macroeconomic responses to economic crisis. The presentation is chronological and follows the sequence of measures taken in an effort to contain the economic decline. The next section presents a theoretical overview of the economic implications of mineral dependence. To put Zambia’s experience in perspective, the third section looks at the country’s colonial legacy and its social, political and economic impact. Subsequent developments are discussed in the following three sections under three headings: ten years of relative prosperity, 1964-74; shocks and decline, 1975-80; and a lost decade, the 1980s; respectively. In the seventh section we summarize Zambia’s experience and the last section concludes the chapter.


MINERAL DEPENDENCE IN THEORY

In retrospect, mineral affluence has not been the blessing that most developing countries had hoped it would be, that is a remover of the external

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