Travel Reference
In-Depth Information
Economy
Poverty continues to plague Zambia despite the economy having experienced strong and
steady growth in the early part of the 21st century, including 6.5% GDP growth in 2011.
An estimated 64% of the population live on US$1 per day or less, and nearly the same
percentage is considered 'economically active.' The country is still very dependent on
world prices of its minerals (copper and cobalt). Knocking Zambia off its feet in the early
'70s, the whim of the market then brought about huge gains in wealth early in the new
millennium as world copper prices rose steadily. The full privatisation of the industry in
2001 also led to an increase in output and revenue.
However, the government didn't take advantage of the boom time to diversify the eco-
nomy, and in 2009, the global financial crisis had a serious impact. Foreign investors
pulled out of mines, Zambians who had enjoyed a brief period of prosperity were out of
work, consumer spending plummeted and there were concerns the country couldn't cope
with a collapse of copper prices. As well being subject to the whims of global markets, the
country's fortunes are also at the mercy of natural disasters, especially flooding that des-
troys crop yields.
In the years since there has been significant foreign investment in the mines (especially
from China), and South African-owned businesses are sprouting rapidly in towns across
the country. Other important sources of revenue are manufacturing and agriculture. Des-
pite foreign investment, the economy is still fragile, especially because the highly auto-
mated mining industry can't solve the unemployment crisis. In addition, it's widely ac-
knowledged that companies misreport their production numbers in order to minimise their
taxable income. But possibly equally important is the fact that potential entrepreneurs
can't borrow money because of excessively high interest rates within Zambia.
In July 2011 President Michael Sata declared a significant increase in the monthly min-
imum wage - from the equivalent of US$30 to US$105 for maids and household servants
and from US$50 to US$220 for non-unionised shopworkers. Some business owners ques-
tion the precipitousness of the decision and claim that the new wages are out of step with
their ability to meet payroll. The troubling increase in costs of staple food products and
transport has also been linked to the raise.
In July 2012, in an attempt to strengthen the currency and arguably as a symbolic na-
tionalistic gesture, Sata rendered the kwacha the sole legal tender. Equally important, he
announced its revaluing so that as of 1 January 2013 three zeros would be lopped off all
figures, so that, for example, ZK20,000 becomes ZMW20. There would be a six-month
transitional period, in part of an attempt to bring money outside the system back in, as
well as to ensure that every ATM in the country would issue the new currency expressed
as 'ZMW'.
