Zambia cut its trade deficit by 92%, a move that is expected to shore up the country’s economic outlook of sustained. The copper rich country recorded a trade deficit in May 2016 valued at K 65.2 Million, representing a 91.5 percent drop in the trade deficit from K765.3 Million recorded in April 2016.
The Trade deficit or surplus country position is an important economic performance barometer as it measures the net position of the countries total export compared to the total imports. A trade deficit shows that the country imported more than it exported while a trade surplus which is ideal for the country is we’re the country exports more than it imports. The excess forex can then be used as reserves and a war chest for a countries economic goals.
According to the monthly update by the Central Statistics Office (CSO), Zambia recorded an increase in its major export products of Intermediate goods category (mainly comprising Cathodes and sections of cathodes of refined copper). There has been 11.4 percent increase in the total value of Metal exports from K3, 614.8 Million in April to K4, 025.3 Million in May, 2016. The overall contribution of Metals and their products to the total export earnings in May and April 2016 averaged 71.9 percent.
The government had announced an ambitious economic diversification plan which is expected to reduce the dependency and resultant impact of the country’s concentration risk on the copper mining industry. In Zambia today, the economy is a direct reflection of the performance of the red metal. Efforts to diversify have been on the discussion table from the time the country gained independence and resurfaces every time the global copper prices become depressed or during elections time.
In terms of imports, the major source country of imports in May 2016 was South Africa, accounting for 33.3 percent. The major products are consumer goods that are mainly stocked in the South African owned retail outlets operating mostly from the shopping malls that have sprung up in most major cities and towns in Zambia.The second main source of Zambia’s imports was Kuwait which accounted for 11.2 percent. The major import products were Petroleum oils and oils obtained from bituminous minerals & crude.
A two pronged approach can be adopted, the first is that Zambia can target the country’s industrialization drive at import substitution production and manufacturing. Secondly, the Zambian government and our top local businessleaders need to engage South African authorities and agree major trade deals that could see some of our Zambian non traditional products being exported to South Africa to offset our huge import bill from that country.
For the Kuwait/Saudi Arabia oil imports, we have a lot of arable land that can be used to grow bio-energy products and have a program to move the country to use of bio-fuels for our motor and vehicle energy industry. This a a medium to long term project that should be started now to ensure we not only creat local employment in the Agro sector, but also cut our import bill which would lead to stable macro economic indicators such as trade surplus and stable foreign exchange regime. Angola oil is also one area of possible breakthrough.
ZBT executive director lauded the move but cautioned the state to sustain the measures with both short, medium and long term actions. If you look at copper, there is still more room for further refining and production of final goods within Zambia. The government (with a substantive stake of around 20% in all copper mines in Zambia through ZCCM-IH) needs to engage with the other major stakeholders of the copper mines in Zambia to either set up (through IDC) or invite more down stream copper value chain companies such as cable manufactures and other copper final products manufactures to set up in Zambia and export finished products. We already have General Cable (Zamefa) which are models we can replicate and promote to drive the economy to the next level.
We are not saying that these are simple things to do, but with genuine and nationalistic interest, it can be done. Governments work is through legislation and not merely talk shows and seminars, we need credible policies and legislation with stakeholder involvement passed that will ensure steer the economy to benefit the majority of our citizens.