Report praises Zambia’s growth – but urges ‘lighter regulatory load’ on business

AfDB’s Development Effectiveness Review 2013 for Zambia, published this week, said “strategic investments in overcoming transport and energy bottlenecks” have contributed to sound macroeconomic management.

However, the report warned that as a landlocked nation, Zambia must strive for greater regional integration and the government must continue to “lighten the regulatory burden on business”.

The report is the third country-focused publication of its kind issued by the AfDB’s Quality Assurance and Results Department and is indicative of Zambia’s development progress, “particularly in terms of strong economic growth and social stability”, AfDB said. The department’s director, Simon Mizrahi, said: “Evidence suggests that Zambia is on track to achieve greater diversification towards labour-intensive sectors such as manufacturing and commercial agriculture.”

Mizrahi added: “In recent years there have been encouraging signs of diversification in the Zambian economy, with a five-fold increase of non-traditional exports, from $566 million in 2005 to $2,852m in 2012.”

According to the report, Zambia has achieved levels of growth averaging more than 6% per year over the past decade, and recorded a gross domestic product (GDP) per capita increase from $330 in 2002 to $1,469 in 2012. By 2010, this strong performance had moved Zambia from the ranks of least-developed countries.

The report said AfDB has worked closely with Zambia’s government to increase the quality and speed of project implementation. In 2010, the percentage of procurement documents rejected fell from 55% to 45%, and the time taken to process procurement documents was “dramatically reduced” from 12 days to five.

AfDB is also planning training, in conjunction with Zambia’s finance ministry, to “strengthen capacity in procurement, contract management and disbursement management for project executing agencies”.

However, the report said Zambia needs to pay “close attention to the quality of development, and to press ahead with structural change in its economy”.

The World Bank, which published its economic update for Zambia towards the end of 2013, said high commodity prices had induced large foreign direct investment (FDI) flows, mainly in extractive industries but also in the services sector, which supports growth.

According to the World Bank, Zambia's mining sector has benefited from FDI, receiving almost $1 billion in 2011 alone. However, the bank warned: “The government has raised fuel prices and reduced maize and fertiliser subsidies, but the medium-term fiscal impact of these initiatives is uncertain. These reforms aimed to create space for expanding better targeted spending programmes. Zambia's economy has seen far too many unexpected policy changes in recent years. Persistent and even escalating perceptions of an uncertain policy environment can weaken investment, thereby reducing GDP growth.”