Story By BEN PHIRI - Times of Zambia

ZAMBIA’S economic performance for the current year is  so far on course. Maintaining the course  is the  bigger  question that is on the horizon,  there  are a number of permutations that may come into  play to affect this course  for the remainder of the year.

Among them is the recent  increase in fuel prices and the proposed 36 per cent hike in electricity tariffs which would definitely lead to  increased cost of production  and ultimately  derail the  eight per cent economic growth target.

Economist and Premier Consult managing director Oliver Saasa  hopes that these increases in fuel and electricity tariffs, would not cause that much  effect on the growth prospects.

He, however, acknowledged  the fact that the increases in fuel prices and proposed increase in electricity tariffs are too high to bear and might cause some ripple effects in  the economy.

Professor Saasa was of the view that the government especially, should play a major role in helping to bring down the ever rising cost of production in various sectors which helps to drive the economy.

“At the end of the day, it is the Government that must play a role in helping to bring down the cost of production. This can be done by way of tax reduction on the other side of the equation. For instance, the government can reduce on the fuel levy in order to balance things for producers,” Professor Saasa said.

Some economists were hopeful   that the economy would  perform well and of the view that, despite all odds, the Zambian economy could still make steady progress to maintain steady growth provided that the country sticks to strict management of the macro economic fundamentals.

“The economy could probably achieve the projected growth as long as there were increased activities in the mining, Agriculture and construction sectors,” commented a South African based Zambian economist Kenneth Kafulubiti.  

Mr Kafulubiti said although there would be a slight change in the earlier projections such as maintaining inflation levels as low as 8 per cent, and real Gross Domestic Product (GDP) growth at 6.3 per cent, indications were that the country could make positive strides as long as it keeps on course in as far as prudent economic management was concerned.

He said there are increased activities in the mining sector which has seen new mining projects coming on stream and mining giants such as Konkola Copper Mines (KCM) launching the Konkola Deep Mining Project (KDMP), and coupled with good metal prices on the international market, will help to strengthen the value of the Kwacha and keep inflation levels in check and aid the economy to grow.

Mr Kafulubiti said with good rainfall the country would  be able to produce   more food and boost the agricultural sector which was a major component of determining the percentage rate of inflation in a positive perspective.

Sectors such as the Zambia Association of Manufacturers, the Zambia National Farmers Union (ZNFU), as well as the mining sector  all voiced concerns and were looking up to the government to ensure that measures were put in place to cushion the impact of increases of key essential drivers of the economy such as fuel and electricity.

 
It is anticipated that more efforts would be made by the Government and all stakeholders to devise a new approach to the unfolding events in the in respect to the global economy which could many times have an influence in the overall performance of the local economy.

Another economist Chibamba Kanyama, who is  Economics Association of Zambia (EAZ) national secretary, observed that the competitiveness of the economy in almost every sector was weak even at regional level.
The variations and steep increases in key inputs such as energy have made the cost of doing business in Zambia quite high despite the economy doing well especially in the reduction of government borrowing and the subsequent reduction in base rate lending by the banks.  

“We have done extremely well in reducing Government borrowing and the subsequent reduction in base lending rates. However, the economy remains weak in key macro-economic variables due to frequent increases in energy costs,” Mr Kanyama explained.

He noted that the most fertile ground for industrial investment and expansion was predictability  of policy and that where this was lacking  the result could be  failure  to anticipate the actual cost structure that may be experienced in the short, medium and long term.  

The impact with the new and expected increases in fuel  and  electricity tariffs  would have  some effect  on  inflation levels  and the  reduction in competitiveness for the local industries .

Mr Kanyama also pointed out that the critical problem with the Zambian economy was that the country has not fully embraced the role of the private sector.

He explained that the level of economic reform aimed at facilitating private sector initiatives was not enough to generate the required level of economic growth, economic diversification as well as, industrialisation that could positively affect the labour market.

Mr Kayama cited the example of the copper mining industry which was still facing a lot of uncertainties.
“We have to make a decision as a country on how best to leverage the fortunes in the sector without jettisoning the long term investment goals of the country. We need a fine balance in our taxation requirements because the country needs more than just the taxes.

We have to create an investment profile that should attract the real big players in every sector of the economy. We should all remember that we have a history of socialism and state control in almost every sector of the economy,” he added.

In order to move away from state control to a private-sector driven economy takes many years of policy consistency and the country should embrace such a policy change wholeheartedly so that Government can manage the economy with the private sector as the main economic driver.

This should act as a signal to the international investment market that the pace of economic reform was consistent with overall expectations.

Mr Kanyama said it was also important for the government to continue engaging all stakeholders such as trade unions, political players and the general public on the need to continually reform the economy in areas of taxation and fiscal incentives granted to private investors.

This also goes with legislation and improvements in the legal environment, privatisation of critical sectors such as Zesco and Zamtel and the limitation of government involvement in running businesses as well as labour law reforms.

“As long as the country does not fully support some of these initiatives, the Zambian economy will continue to grow at a slow pace,” Mr Kanyama said.