This presentation briefly discusses Zambian's political and economic history and its relation to aid, and copper mining industries since its independence in 1964. The presentation, however, doesn't deal with policy implications adopted by the different governments including Kaunda's government till 1990.

1. Zambia’s
Economic
Dilemma
What was Right
andWhat went
Wrong?
NIKUNJA BHANDARI
MICD: First Sem

2. Outline
In reference to aid, this presentation discusses:
– Zambia’s Country Profile
– Zambia’s Economic Profile
– Zambia’s Economic History
– Brief Political History
– What went wrong?
– What was right?

3. CountryProfile
The Republic of Zambia, is a
landlocked country in Southern
Africa, surrounded by 8
countries: the Democratic
Republic of Congo to the north;
Tanzania to the north-east;
Malawi to the east;
Mozambique; Zimbabwe;
Botswana; and Namibia to the
south; and Angola to the west.
The administrative and
economic capital city is Lusaka
(pop. 1.8 million), located in the
south-central part of the
country. The population is
concentrated mainly around
Lusaka, south-eastern, the
Copperbelt to the northwest
and the main highway to the
south-west all the way to
Livingstone.

4. EconomicProfile

5. Economic
History of
Zambia
Pre-Colonization
(till 19th Century)
Indigenous trade
and traditional
economic system.
Unexploited
resources.
Chieftaincies and
monarchies that
developed a
network of trading
in copper, ivory,
rhino horn and
slaves.
Colonization (till
1964)
Traders in
minerals, ivory
and slaves and
missionaries from
Europe. British
were to rule for
extended period
since mid of 19th
century, extracting
copper and
exploiting local
labor.
Post-Independence
Nationalist opposition under the
leadership of Kenneth Kaunda
formed the govt. and continued to
rule for the next 27 years. Kaunda
adopted a Socialist economic
model, nationalized. the mining
industry and the creation of large
state owned conglomerates.
Central planning, a large civil
service, and relatively prosperous
as the earnings from mineral
exploitation grew as copper prices
increased.

6. Economic
History of
Zambia
Economic Decline
(1975-1990)
Fall in world price of copper, surge in world price of oil
and energy, its dependence on imported
manufactured goods were exposed. Balance of
payments deteriorated and borrowing from overseas
grew significantly. Trade routes were closed due to
involvement in African’s freedom fighting movement.
In the period between 1975 and 1990 the level of real
GDP per capita declined by almost 30%.
The government, believing in self sufficiency and
import substitution, reacted by commercial and public
borrowing and saw no need to restructure the
economy. They believed that the market for copper
would pick up and the economy would be kick started.
Finally in 1985 due to the worsening economic climate
the donor organizations put pressure on the Zambian
government to attempt to restructure the economy
through the introduction of a structural adjustment
programme ended in 1987 due to public riots.

7. Economic
History of
Zambia
Sustained Economic
Reform of the 1990s
The 1990s saw a move to a more outward oriented
economy centered on a market based system. The
newly elected government of Frederick Chiluba in
1991 adopted a structural adjustment programme.
Privatization had a very result. Although some failing
state run enterprises began to operate more
effectively after privatization, many companies
collapsed, jobs were lost and welfare programs
originally performed through parastatal were not
continued by private companies. Also, manufacturing
industries, such as textiles, suffered. Paid employment
in mining, manufacturing and agriculture fell by nearly
40% during the 1990s. Government revenues which
fell by more than 30% in real terms. Agricultural
market reform had a similarly poor record.
In 2003 Zambia was the fourth worst performing
economy in Africa with a 'growth' rate of -1.7% per
capita per year. The HIV/Aids pandemic had an
enormous effect on life expectancy, which fell from
54.4 in 1990 to 33.4 in 2001, the lowest life expectancy
of any country in the world (UNDP, 2003).

8. Post-Chiluba
Levy Mwanawasa became president in 2002.He
continued liberalization efforts of his predecessor
and ran an anti-corruption drive. During his
presidency, Zambia started getting FDI, especially
on minerals. His policies were also instrumental in
lowering inflation and extending some benefits to
the poor. He started tourism in the country, and
helped modernize agriculture. Zambia also
received significant amount of aid and debt relief
due to his policies. Overall economic growth
reached to 6 percent per annum. He died during
his term in 2008.

9. Presidents
then-after
The successors: Rupiah Banda, Guy Scott (Acting for 89 days), and
Edgar Lungu were mixed on the economic policies. FDI, particularly
of Chinese were protected and sometimes denounced.The country
still lacks diversification in terms of its revenue and exports from
Copper.The country received net of around 1 billion USD in 2017 in
foreign assistance.

10. What went
wrong?
– Zambia has received foreign aid since the
mid-1960s. There was a significant increase in
the 1970s and again in the early 1990s in both
per capita and on a percentage of GDP basis.
This increase was due to the poor
performance of the Zambian economy, due in
part to the decline in copper prices. The
importance of foreign aid during the early
1990s was enormous. In 1992 Overseas
Development Assistance amounted to 67% of
export earnings and 77% of total public
expenditure. About 80% of all Zambia's
capital expenditure was financed through
foreign aid.
– HIV/AIDS Pandemic – once infecting as high
as 19% of the total population/Drought in
2002.
– Long corrupt and autocratic government of
Kaunda. Command economy-style planning,
state-led industrialization, nationalization and
protectionism were major backlashes.
– Inconsistent policies/ heavy dependency on
copper.

11. What went
wrong?
– Aid was primarily targeted to improve
the investment climate, develop human
capital, promote entrepreneurship, as
well as provide direct support in fostering
trade. The case, however, is opposite. The
country never boosted SMEs.
– Aid became a valuable source of foreign
exchange to help reduce balance of
payments deficits worsened by debt
servicing and poor terms of trade. With a
large parallel economy and narrow tax
base, foreign aid became an important
addition to government income.
– Resources were 'wasted' on military
goods or supporting inefficient
bureaucratic government enterprises or
being corruptly appropriated by
government officials.

12. What went
right?
– Post 1990, the structural
adjustments, austerity
measures taken to follow the
adjustments, liberalization
and market-based economy
helped relieved what was like
worn-out economy.
– Copper prices became stable
and competing which
strongly supported the
country.
– Kariba Dam, a large dam for
cheap hydroelectricity
started during 1950s helped
the country for its increasing
need of power. The colossal
loss of social capital due to
the dam is, however, still
questioned.

13. What was
right?
– Though not followed well, opening up
economy during Chiluba’s term and
market based economy led country to
attract FDI.
– Diversification is tried on economy, but
the efforts have been sluggish. Failed
industries like textiles were noted, but
opportunities to flourish in other sector
were poorly explored.
– Positive macroeconomic signs, rooted
in reforms implemented in the early
and mid-1990s. Zambia's floating
exchange rate and open capital
markets have provided useful discipline
on the government, while at the same
time allowing continued diversification
of Zambia's export sector, growth in
the tourist industry, and procurement
of inputs for growing businesses.

14. Please feel free
to disagree!