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Diversifying Zambia’s Copperbelt economy with post-copper era in mind

Most developing countries that are rich in natural resources and are dependent on such resources have generally experienced poor economic performance. A strategy that has been useful in improving the economic performance of such economies is economic diversification. However, employing successful economic diversification strategies has been a challenge for many African Countries. Zambia is one of the African countries that have not been successful in diversifying their economies. In its case, Zambia has not satisfactorily diversified its economy from copper mining. With the conditions in the Copperbelt region indicating that the era of copper mining in this region is fast approaching its end, it has become even more urgent to identify and implement measures for diversifying this regional economy in preparation for this eventuality. This paper sets out by discussing Zambia’s economic diversification record at the national level since its independence in the early 1960s before it turns to discussing the diversification record of the Copperbelt region. The discussion reveals that on relative basis, Zambia’s diversification record at the national level is better, although it still needs improvement, and that at the Copperbelt regional level the record is poor and urgently needs improvement because of the nature of conditions prevailing in the region. The paper then uses a case study of the Black Country region in the United Kingdom to extract lessons for diversifying the Copperbelt region from its success record in economic diversification that saved the region from the depression that followed the collapse of coal mining on which its economy had depended for a long time.

1. Introduction

The importance of economic diversification for developing countries endowed with respective rich natural resources may trace its roots to the 1940s when development economists like Raul Prebisch (1949) [35] voiced concern that the trend of poor economic performance of Developing Countries could, in one way or another, be related to their rich endowment of natural resources. While several theories have been developed over the years to try and prescribe strategies for dealing with this, diversifying the economies away from dependency on one (or few) natural resource(s) has been the preferable strategy for most researchers mostly on account of ease of implementation and sustainability (Efavi and Kuwornu, 2013, Tisdell, 1997) [11, 38]. In recent years, the subject of diversification has received renewed emphasis following extensive empirical evidence that those resource rich developing countries that had diversified their economies from earlier dominant natural resources performed better even in the face of such occurrences as volatility in prices of natural resources at the world level and global financial and economic crises (Papageorgiou and Spatafora, 2012) [32].

In the case of Zambia, copper mining has been its dominant natural resource on which the country has depended since independence in 1964 resulting in the economy being negatively affected each time there has been a shock to the copper mining industry. Of particular importance for Zambia is the Copperbelt Region, an urban area that started forming from the late 1920s when the first commercial mine was opened in 1928 in Luanshya, which is one of the many towns in the region. Zambia today is the second most urbanized country in Africa, after South Africa, with an urban population of 44 per cent of the estimated total population of thirteen million people in 2013.

International Journal of Applied Research

There are important reasons why there is urgent need, even more urgent than for the country as a whole, for identifying and implementing measures for diversifying the Copperbelt economy. These reasons are discussed later in the paper. However, a serious call to urgently consider ways for diversifying the Copperbelt urgently came from the then President of Zambia Patrick Mwanawasa, who in 2002 called upon economists in the country to organize a conference that would discuss how diversification of the Copperbelt economy could be done and be done as soon as possible. The result was the Economics Association of Zambia organized conference on the diversification of the Copperbelt at which the World Bank played a leading role in the deliberations (Economics Association of Zambia, 2002) [10]. A push factor for the 2002 Conference was the collapse of the copper mining industry that followed the collapse of copper price on the world market and the subsequent exit of Anglo-American Corporation from Zambia. Anglo-American Corporation was the largest mining company in Zambia. The recommendations of the conference were expected to be implemented within six months. However, to date no follow-up action has been done on this and no formal explanation has been given for this. Some observers have speculated that the failure to make a follow up was due to the fact that soon after the year 2002 the price of copper started to rise on the world market leading to the mining industry performing relatively well and turning the government’s attention to finding ways of maximizing revenue from copper mining, an observation that was strengthened by the fact that the next country-wide workshop on mining after the 2002 organised by the Economics Association of Zambia was on how to maximize revenue from copper mining, held on 9th may in Kitwe in 2008. According to other observers (e.g. Zambia Civil Society, 2002) [43], the implementation of the recommendations could not be implemented because they were not any different from what had been prescribed for diversifying the entire economy; so there was no added incentive from what was already there.

Partly because of the global financial and economic crisis that started towards the end of 2008 and hit Zambia negatively again because of its continued dependency dependence on copper mining, the School of Business of the Copperbelt University took advantage of the Education Partnership Agreement (EPA) Project with the British Council to propose a project that would study how the Copperbelt economy could best be diversified, with a clear view that such diversification was required to sustain this regional economy when copper would be out of the picture in the region. It is this EPA Project that financed the case study of the Black Country in the West Midlands of the United Kingdom that is discussed later.

The rest of this paper is structured as follows. Section Two gives a definition of economic diversification and outlines some of the most important determinants of this process. Section Three discusses Zambia’s diversification record since its political independence in 1964. This section gives a background and context in which to discuss the proposal to urgently consider diversifying the Copperbelt economy. More precisely, the discussion of the economic diversification at the country level shows that although the country has not done as well as it should have done in this area, at least it has made some headway and continues to do so. This is in contrast with the Copperbelt Region.

Furthermore, discussing economic diversification at the country level has revealed that there is a coherent theory and conceptual framework that Zambia has been following notably because it is well integrated into the world economy as well as being a member of several African Economic Development Groupings that have agreed to work with such world economic development organizations as the World Bank/International Monetary Fund and various United Nations Organisations that have prescribed frameworks of diversification to consider (Ben Hammouda, et al., 2006) [2]. By contrast, the Copperbelt as a region, does not have such privilege and hence lacks any coherent theoretical or conceptual frameworks in which to study its diversification. Section Four presents the reasons that justify the urgency of identifying and implementing the measures for diversifying the Copperbelt A few of the reasons presented apply also to the need to diversify the economy as a whole in view of the impending post-copper era. In addition factors that would facilitate economic diversification in the Copperbelt Region have been presented.

Section Five discusses the case study made by Copperbelt University School of Business of the Black Country region of the West Midlands of England in the United Kingdom. The section starts with an introduction that gives a general description of the EPA Project as the source of finance for the research project and also describes the ground work that was done before the researchers undertook the study tour of the Black Country. Then the methodology that was used in the case study is described. Thereafter, results are discussed, followed by recommendations and conclusion of the paper. In making recommendations, reference is made to relevant issues in the policy of the Zambian government and discussed either as facilitating factors or aspects that would need improvement in view of the lessons learned from the Black Country case study.

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