Making Progress: Zambia's Improving Condition
Li, Janet, Harvard International Review
A midst African stagnation, Zambia's economy is making progress. The nation has experienced annual average growth of 4.5 percent over the last six years. On President Levy Mwanawasa's invitation, foreign investments are pouring into the mining, tourism, and agricultural sectors. For example, to build relations with Africa and promote long-term growth, a Chinese hydro company is investing US$600 million to assist the development of Kariba, an important Zambian dam. Similarly, the Indian Vendanta Mineral Resources will invest US$1 billion in the Konkola Copper Mine, the largest mine in Zambia, over the next three to four years. The Zambian economy has indisputably improved--quite the contrast with the past two decades of decline that it experienced. Nevertheless, for success to become long term and for its comparatively rapid economic growth to become even more impressive, Zambia must nurture its domestic economy, reform the tax structure, and strengthen the government's accountability.
To achieve lasting economic gains, the Zambian government must shape a better environment for domestic businesses. Rapid currency appreciation makes the exports sector vulnerable; domestic products are more expensive for international buyers, which in turn makes Zambian businesses less competitive in the international market. To strengthen an economy that relies so heavily on foreign investment, the Zambian government should implement policies that will reduce the cost of production and increase productivity for domestic businesses. For example, improving infrastructure would reduce systematic costs. The difficulty imposed by poorly maintained roadways on the transportation of goods directly contributes to these costs, and the government should establish a project to enhance the condition of its roads. Also, maintaining a nonvolatile political environment for business would undoubtedly increase worker morale and productivity as well as increase consumer confidence in domestically produced goods. With these improvements, Zambian exporters will be more competitive in the global marketplace and will realize greater profits, which can be channeled into the domestic economy.
An imbalanced taxation system is also hindering economic growth. For example, the struggling agricultural industry suffers from heavy taxation, yet the mining industry, the most profitable sector, gives only 0.5 percent of revenue to the government. …