Increasingly, debate among various development players around the world has prominently centred on how best to launch economic development in Africa. Economic development entails improved living standards and a quality of life that among other things reflects a higher life expectancy and reduced poverty. Despite being rich in natural resources and having favourable weather conditions, Africa remains poor.
In a 2020 article titled “What is the Future of Poverty in Africa” the Institute of Security Studies states that roughly 40% of Africa’s population is regarded as poor, as they are living below the poverty line determined by the United Nations of US$ 1.90 a day. Zambia continues to have a substantial number of its population still poor. The last Living Conditions Monitoring Survey of 2015 showed that 54.4% of Zambians were living below the poverty line.
Alleviation of this poverty has eluded Zambia despite the country’s copper exports. Heavy dependence on raw copper exports has presented an unsustainable path for poverty alleviation and job creation in the country. According to the Zambia Statistics Agency, as of November 2020, Copper anodes and cathodes accounted for 79.9% of the country’s major exports.
Although copper mining remains the main driver for exports and economic growth, the sector’s contribution to employment creation continues to lag behind. The 2019 Labour force survey shows that, the mining and quarrying industry contributed 2.4% to total employment in 2019 compared to manufacturing that contributed 8.1% of jobs in the same year. By this account alone, Zambia needs to develop its manufacturing sector.
Why is development of the manufacturing sector imperative? Economic history shows that no country has reached a level of high economic growth that transcends into economic development and improve the lives of people without an advanced manufacturing industrial sector. This is evident in the development path taken by both the early industrialisers (Britain, Spain and the USA) and the newly industrialised countries (Japan, South Korea, Taiwan and China) who focussed on growing the manufacturing sectors.
It goes without saying that for Zambia to achieve the same development outcome, the country needs to create jobs and sustainably improve the lives of its people. Innovatively, a development path that factors its natural resource base and focuses on the growth of its industrial sectors must be created.
Notably, trade in industrial goods has helped countries such as China significantly reduce its levels of poverty. Manufacturing growth played a central role through its backward and forward linkages that impacted other sectors of the economy positively. The production of necessary machinery enhanced necessary production and other sectors provided a market for their manufacturing produce.
Further, advancements in the manufacturing sector fostered opportunities for new employment through increased demand for labour as economic activity increased promoting job creation and economic growth. This is in line with Keldors argument in which he asserts that manufacturing is the engine for economic growth.
As more people got into employment, household heads were enabled to earn an income uplifting their livelihoods and moving them above the poverty line. The well-functioning manufacturing sector also grew other sectors such as the agriculture sector through its demand for raw materials as well as the transport sector as the commodities need to be transported to trading sites.
Similarly, the manufacturing sector in Zambia could help the country achieve economic recovery and development in 2021 and beyond. However, the performance of the manufacturing sector in Zambia has continued to deteriorate and its contribution to GDP has remained stagnant in the range of 8% in the last 5 years as reported by the Zambia Statistics Agency. The manufacturing sector is yet to reach its peak contribution of 30% to GDP last achieved in 1992.
The sector faces many challenges that prohibit its growth and limits its contribution to GDP. Challenges include limited market access in the regional and international markets as a result of little value addition and difficulties to adhere with international standards.
Additionally, production has been limited by inadequate power supply and limited alternative power sources to fully support the activities of the sector. Lastly, limited foreign direct investments in the last few years due to poor economic performance, exchange rate volatility and the removal of investment incentives has affected the growth of the sector.
Ultimately, increasing the manufacturing sector’s contribution to GDP and creating employment through the manufacturing sector has the capability to translate Zambia’s trajectory into economic development. With Government’s investment attraction and policy support to the sector, manufacturing can record the necessary growth.
The Government should promote investment attraction and boost FDI investments in the manufacturing sector through the Zambia Development Agency and the Multi facility Economic Zones. For the development of value chains and help manufacturing effectively transform local raw materials into finished goods.
Moreover, the Zambia Development Agency should work closely with ZAM to nurture local companies by training them both on business and technical matters relevant for manufacturing, to make Zambian products competitive on the export market.
Zambia needs to further diversify its energy mix of clean energy sources to guarantee a consistent energy supply necessary for the well-functioning of the manufacturing sector to promote its growth.
Lastly and quite importantly, the Development Bank of Zambia should take a lead in the provision of long tenor and cheaper finances to manufacturing companies in the country.
