In the past decade, the Zambian government made an essential move towards privatized and open market economy.
This reduced Zambia’s heavy dependence on copper, leading to a growing trend towards non-traditional exports including agro-processing, primary products and textiles.
This trend has transformed the Zambian economy that has seen strong growth in recent years with GDP growth more than 6% in the time period of 2005 to 2013.
The GDP composition by sector of origin of Zambia includes agriculture industry that accounts for 19.8% of the GDP, industry for 33.8% and services for 46.5%.
Major industries of Zambia include copper mining and processing, construction, emerald mining, beverages, food, textiles, chemicals, fertilizer and horticulture.
The main contributors to overall growth of Zambian industry include manufacturing industry, agriculture industry, transport and communication, construction and wholesale and trade.
These industries collectively accounted for more than 70% of gross domestic product.
Balance of trade in Zambia averaged ZMW 156.72 million during the time period of 2003 to 2014 reaching an all-time high of 1484 million in 2011 January.
In December of 2014, the trade deficit of Zambia was recorded ZMW 81.90 million Zambian Kwacha. The trade surplus of Zambia is a result of cooper exports.
The country also exports tobacco, sugar, gemstones and cotton. Zambia is an importer of machinery and fuel. The main trading partner of Zambia is China followed by Congo-Kinshasa and South Africa.
Some other trading partners of Zambia include Canada, Germany, France, Italy, Indonesia, japan, Mexico, Russia, Spain, Turkey, United Kingdom and India.
The Zambian industry hasn’t been affected by the European debt crisis but the economy is vulnerable to slowdown which could ultimately have an impact on exports of Zambia.
The agriculture sector in Zambia has been robust in past few years by producing bumper harvest since 2009, with maize and staples leading the produce.
Although agriculture is the main contributor of Zambian growth but it remains affected by inefficient rural infrastructure and droughts.
In order to increase the efficiency of infrastructure, the government increased budget allocation for agriculture in 2012 by 6.1% with major part of the funding going to the Farmer Input Support Programme.
Other important areas of development in agriculture include livestock, irrigation infrastructure, aquaculture development and fisheries.
In the mining industry of Zambia, the output fell in 2011 to 0.7% as there was an uncertainty due to presidential elections due to which major investment projects were deferred.
With the 2011 elections gone smoothly, the mining investment picked up the pace with a growth of 10.6% and 10.3% in 2012 and 2013.
In the recent years, the construction industry has been pivotal in economic growth of Zambia with the construction sector has contributed some 21.1% of the economy in 2011.
The rebound witnessed in mining activity along with increased expenditure on infrastructure development are expected to further boost the construction sector and lead to a growth rate of 17% in 2015.
As Zambia is moving towards diversified economy, the manufacturing sector is becoming much more important to long-term growth and employment strategy of Zambia.
In 2011, the manufacturing industry of Zambia witnessed growth of 5% but the sector overall accounted for 9.1% compared to 1102% in 2006.
Growth in this sector is mainly driven by increase in investment especially in agro-processing in response to business reforms and prudent economic management.
For growth to be sustainable in manufacturing and other industries there is a need for improved access to finance and continued implementation of reforms to increase participation of private sector.
However high interest rates in Zambia remain challenge to accessing credit as far as small businesses are concerned.
To reduce lending rates, the Zambian government reduced the corporate tax rate from 40% to 35% in the banking sector.
In addition, the central bank of Zambia also cut the statutory reserve ratio to 5% from 8% to free resources of commercial banks for private sector lending.
The government has also increased minimum capital base to ZMW 104 billion for local banks and ZMK 520 billion for foreign bank.
Considering the small domestic market of Zambia, the government is promoting trade diversification through participation in regional, multilateral and bilateral trade.
In the WTO Doha Development Agenda negotiations, Zambia coordinated with group of 50 LDCs.
Zambia is also a member of the Common Market for Eastern and Southern Africa and the Southern Africa Development Community but these trading agreements haven’t produced the desired impacts.
The trade policy of Zambia has remained predominantly unchanged since the country introduced comprehensive reform programme in 1990s including removing exchange controls, eliminating export import license, reducing import duties, abolishing export bans and introducing export incentives, decontrolling prices and removing subsidies.
Although trade policy has remained unchanged but the large gap between the bound rate (105%) and average applied MFN tariff rate (13%) along with absence of bindings for over 83% tariff lines have create degree of uncertainty for traders.
Trade is playing a very significant role in economic development of Zambia. The country has moved from import substitution to export promotion in order to increase emphasis on external and internal markets.
Zambia’s vision 2030 is based on the trade policies that anchors the overall framework of long term vision for Zambia along with setting social and economic targets to be achieved by 2030.
The Government of Zambia will invest USD15m in re-establishing the Mulungushi textile factory, located in Kabwe, Central Zambia.
President Edgar Lungu made the announcement during the reopening ceremony of the textile mill on August 1st 2016.
The factory is expected to create over 20,000 jobs in the next 5 years, boost the cotton industry in Zambia and increase its exports.
Andrew Chipwende, Director General of the Industrial Development Corporation (IDC) of Zambia said that a technical team has concluded the operation assessment in readiness for a full-fledged production.
He further explained that the plant will be manufacturing various garments including military and police uniforms.
The Government of Zambia concluded the takeover of the Mulungushi factory in 2016, 9 years after it closed in 2007 due to operational and financial difficulties.
Zambia Textile Industry
The Government of Zambia identifies textile as one of the priority sectors for the country’s industrialization and economic development.
The Zambian textile industry is considered to be labor intensive with potential to greatly contribute to employment and wealth creation at all stages of its value chain.
Currently (2016), the sector employs over 670 people across Zambia, while the Government is putting up deliberate measures to further support the growth of the sector.
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