Zambia’s Diversification Efforts In Set Back, As Current Account Deficit Widens

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Copperbelt cathode processing at a Zambian mine. Picture sourced from Mining News Magazine.

The much talked about diversification efforts by the Zambian government is not bearing fruits as the latest report from both the Bank of Zambia (BOZ) and Central Statistics Office (CSO) show that Zambia’s non-copper exports declined in the second quarter (April to June) of 2017.

The country’s current account is an important indicator about an economy’s health. It is defined as the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers.

A positive or surplus current account balance indicates that the nation is a net lender or exporter to the rest of the world, while a negative or deficit current account balance indicates that it is a net borrower/importer from the rest of the world.

BOZ Governor Dr Denny Kalyalya in his Monetary Policy statement made available to ZBT on Thursday stated that the current account deficit widened and almost doubled to US$274 million in the second quarter, from US$146 million in the first quarter (January to March 2017).

Dr. Kalyalya stated that Imports expanded by 8.5% while Exports contracted by 3%, mainly on account of a fall in non-traditional (Non-copper) exports. Copper exports however slightly expanded due to higher realized prices.

We have a terrible tendency in Zambia that needs to be gotten rid of, as we seem to make diversification efforts only when copper prices are in depression and soon forget our drive when the copper prices pick up.

There is need for the country to identify at most five key products or services that should be driven as the country’s export diversification agenda to at least mute the impact of Copper exports that now account for over 80% of the country’s export earnings.

It is much better to identify specific key products or services to drive the country’s export diversification agenda than targeting a broad sector like Agriculture, Tourism etc. The identified products/services should also be counter cyclical to Copper prices to protect the nation in terms of economic security.

Our local unit, the Kwacha becomes so volatile and wipes out international economic value for our people savings and earnings in local currency every downturn in copper prices that Zambia experiences. This is what perhaps makes our people to value the foreign convertible currencies more than their own local unit.

If its in Agriculture, the country needs to be clear weather its Maize, Cotton, Tobacco etc that we will drive to deliver specific economic export and foreign exchange earnings targets. If it is tourism, we need specifics such as becoming a International conference centre or nature tourism with specific targets for number of tourists and their spending targets in Foreign exchange etc.

We also have countries like South Africa (SA) which Zambia is currently running a huge and widening trade deficit. Zambia has a well exposed Trade Minister in Hon Magerate Mwanakatwe, what tangible trade deals has she scored with SA to cut down the deficit? We also have Saudi Arabia/Kuwait were we import our commingled oil, is the export of Goat meat viable? Is this deal adequate to close the yawning trade deficit gap with that country?? What options trade does the country have?

Continuing to shoot in the dark and expecting the private sector to drive this diversification agenda without direct state involvement and guidance is a fallacy, the private sectors main motive is profit, economic diversification is a secondary after-thought to them, luxury that can be engaged after declaration of healthy profits.

Its the elected Government and the technocrats employed in Government at a great cost to the treasury that are letting down our humble Zambian people who depend on the state performance for the betterment of their livelihood.We need more effort and keeping the eye on the ball on this diversification efforts. Its been with Zambia from as far back as the 1970’s when the country experienced some export earnings problems, this is now 2017.

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