Development Strategies in the New Millenniumhttp://elastus.blogspot.com

By Clive Siachiyako

Zambia Development Agency’s role to Zambia’s economy

The free market economy model has radically changed the approach to development today. The competitiveness of foreign direct investment (FDI) and the pursuit of favourable business climates by investors have further steepened the approach. These trends make the pursuance and attainment of development sustainably more challenging. This entails that each country requires a strategic overseer of the development vision. To Zambia, the creation of Zambia Development Agency (ZDA) fits well in this position of shaping the country’s development outline.Through ZDA government has committed itself to creating a business environment that benchmarks Zambia as the best among dynamic developing economies. ZDA is tasked to promote growth and investment in Zambia. It is an institution that is client focused and creates confidence in the public sector’s support for business. The Agency facilitates overall private sector growth. The ZDA promotes development by providing effective and comprehensive facilitation and aftercare services. It also promotes business development services and market information in order to attract investment and promote Zambian exports efficiently and in a competitive manner. The Agency supports Greenfield investments through joint ventures and partnerships between local and foreign investors, as well as ensuring speedy approval of all licenses by all government agencies. It also assists in obtaining land for economic projects and assists in obtaining work permits for expatriate staff.The Agency mainly promotes growth of the Micro and Small Enterprises (MSEs) sector, which cuts across all sectors of Zambia’s economy and provides one of the most prolific sources of employment. The MSE sector serves as a fibre of wealth creation for most Zambians and a breeding ground for industries. The emphasis on SMEs by the ZDA has been to shift Zambia's economic development direction, which has been geared towards the promotion of medium and large-scale enterprises mainly in the mining and manufacturing sectors. However, current wisdom shows that SME involvement in the economy has become essential. Thus, ZDA creates market linkages for SME players with trans-national corporations to enable them realise meaningful profit from their economic activities.Export earnings are another stimulant ZDA sees crucial in propelling Zambia’s economic development. The Agency thus markets Zambia’s exports abroad to increase earnings from the sector. It promotes export and competitive international trade from Zambia and assists Zambian businesses and entrepreneurs in accessing new markets and expanding existing ones for their products within the region and beyond. The Agency also assists entrepreneurs to source inputs at competitive rates.The promotion of exports involves research. The Agency thus research what different markets offer Zambian exporters. Based on market access offers, ZDA advises the Minister of Commerce, Trade and Industry on matters relating to International Trade and Development through export of goods and services. The Agency largely utilises market access offers received from trading partners under COMESA, SADC, the European Union and other Regional Trading Blocks as well as National Initiatives and from the World Trade Organisation. This is to ensure that Zambian businesses take advantage of the opportunities generated by those offers.To bolster the growth of domestic industries to enhance export earnings, ZDA promotes investments into the county. Indeed, Zambia has formulated an industrial policy vision that is meant to improve the country’s earnings from exports. The industrial policy embraces the promotion of investments into zoned areas for industrial parks. Accordingly, ZDA promotes both local (domestic direct investment –DDI) and foreign investments in different sectors of the economy. Specifically, the Agency establishes Multi-Facility Economic Zones (MFEZ) to bolster FDI and DDI. The MFEZ programme serves as a catalyst to Zambia’s industrial and economic development through facilitation of investment in Multi-Facility Economic Zones. The objective of the programme is to catalyse industrial and economic development in the manufacturing sector for the purpose of enhancing both domestic and export oriented business. The zones provide an environment that is competitive enough for a manufacturer to process within the borders of Zambia with relative ease. They are designed to make Zambia have a robust and viable manufacturing sector in the region through increased activity. The MFEZ initiative is crucial to Zambia, as it increases the country’s realisation of foreign exchange earnings. These earnings easily flow in when exports are value-rich; especially that Zambia is a member of various regional and international organisations such as World Trade Organisation, COMESA, SADC and various market access agreements. These provide ready markets for the export of value–added manufactured products. The MFEZ programme has several incentives that are meant to attract investors in the zones, such as exemption from tax on dividends for five years from first of declaration; corporate tax is at zero percent for the first five years from the first year profits are made, among many others.The ZDA mainly builds and enhances the country’s investment profile for increased investment inflow to be realised and promotes the country’s exports. It also promotes the growth of the MSE sector by providing incentives that can propel the growth of the sector sustainably. The Agency is simply the pioneer of Zambia’s development agenda.

Zambia’s Success Story on MSE-TNC Market LinkagesThe Prince of Wales once said “no business can survive for long as an island of wealth, in a sea of poverty.” According to the Prince of Wales, this phrase stresses the importance of business linkages for any enterprise to survive the business tornados. It is about the strength gained by businesses when they forge stronger ties into the domestic economy. It is about how much business linkages can contribute to the growth of the domestic economy and induce additional Domestic Direct Investment, which is a vital component of national development. The micro and small enterprise sector’s significance to poverty reduction and wealth and job creation is current gaining momentum cross-cuttingly. As the champion of the sector’s growth, Zambia Development Agency with cooperating partners is brokering business linkages for micro and small enterprises (MSEs) with trans-national corporations (TNCs) to enhance MSEs’ contribution to the economy. The United Nations Conference for Trade and Development (UNCTAD) and the International Labour Organisation (ILO) play a crucial role in the formulation of such business linkages. This initiative in one way of increasing market access for MSEs via forward and backward linkages – being suppliers and buyers of services and products induced by the linkages from TNCs.

And recognising the central role of a dynamic SME sector in local economic development, many companies are taking SME development and linkage programmes beyond their own value chains in the country. TATA, Zambia Sugar, Zambia Breweries and Zain are some of the companies that are joining forces with government to present supplier opportunities to MSEs. The business linkages initiative may seem unattainable to some MSEs. But Zam-Vizwear (Z) Limited recently attested to its viability when it clinched a multi-dollar project with Lumwana and Marli Investments (Z) Limited to undertake Jatropha Curcas Linn seedling farming and supply the Linn-seedlings to Lumwana Mines. In the agreement, Zam-Vizwear (Z) Limited is undertaking the project under the out grower scheme initiative with Marli Investment Zambia. This has broadened the Zam-Vizwear’s market base. Primarily, Zam-Vizwear’s core business has been the supply of industrial safety requirements, protective clothing and reflective materials to the mines on the Copperbelt and North Western provinces. The new deal with Lumwana Mines and Marli Investments thus means new business avenues for the Zam-Vizwear.

Apparently, Zam-Vizwear has been experiencing poor cash flow due to poor performance of the mining sector amid global economic uncertainties. To that effect, the company opted to venture into agro-related project such as Jatropha seedling farming and selling. The project is located in Kapiri Mposhi in central province. In that vain, Zam-Vizwear acquired a 10 hectares land for the project at an estimated total investment of US$38,000. The US$38,000 covered expenses for land acquisition and preparation, creation of a water reservoiur, designing and laying-out the irrigation system, purchase of Jatropha seeds, water pumps and two horse power engines for irrigation.
To kick-start the project, Zam-Vizwear purchased 10×25kg bags of Jatropha Curcas Linn seeds from Marli Investments (Z) Limited with each bag containing 40,000 seeds at a total cost of US$5,454. Further, the company acquired some more 10×25 bags of seed, bringing the total seeds to 800, 000 which require 800 hectares of land for planting after the nursery period. And upon satisfactory production of the seedlings in accordance with the terms of reference and specifications, Marli Investment (Z) Limited bought the entire Jatropha seedlings off the nursery on behalf of Lumwana Mines at US$290,909.09.

However, the market value for the seedling is projected to change by up to 20 percent as most farmers are closely following up the bio-fuels in the agro-sector. This follows the country’s projected land use of 2,000,000 hectares. This requires a substantial number of farmers for the country to meet its bio-fuel targets. Therefore, as a contingency plan, Zam-Vizwear is currently doing a comprehensive documentary on the nursery to ensure the wider farming community is not only well informed but also strategically market themselves to the potential prospective clients in the area of out grower schemes. The Jatropha project is Zam-Vizwear’s diversification strategy from its initial business of supplying industrial safety requirements, protective clothing and reflective materials to the Zambian business community and the surrounding Sub-Saharan African countries. With such a business boost, Zam-Vizwear aims to establish a reliable bio-fuel business that will provide a wide range of bio-fuel services to the Zambian community and to the sub-region. Taking advantage of supportive agro-schemes and services industry in the country, the company’s strategic business plan will strengthen its financial base. The company considers both Zambian and regional agro-schemes and services industries’ support for bio-fuel was on the exponential increase. And since the new business initiative with Lumwana Mines and Marli Investment will be implemented with great ties and re-financing, the potential market reputation for the regional area is expected to definitely undergo exponential growth.

This entails reinforced business resilience and more wealth and job opportunities for Zambians. Procurement, distribution, and sales benefits also accrue. These linkages thus allow MSEs and TNCs to reduce input costs while increasing specialisation and flexibility. They also increase domestic business integration and stimulate positive social and economic impacts in the wider community. Diversification becomes more viable with such linkages in effect, let alone economic gains. Joint Ventures“You can resist an invading army, but you cannot resist an idea whose time has come,” once remarked the Economist Magazine. Today, the concept of joint ventures is such an idea. The triumph of joint ventures is driven by profound market economic changes. A trio of the market economy demands (efficiency, innovativeness and creativity) is dictating joint ventures at a cracking pace. Even micro and small enterprises (MSE) register highly on the profit score card when they join forces, and they reach markets that were once the privilege of giant businesses.

Joint ventures provide abundant business reasons, such as complementary capabilities and resources by players in the partnerships. The initiative offers affluent platforms for business growth and it has become an important strategic option for many businesses. Due to increased globalisation, the proliferation of modern technology as the means of conducting business, and increased international travel, businesses are now operating in a world without borders even amid cultural and language barriers. Theses changes require stronger business muscles to remain afloat.
The Zambia Development Agency (ZDA) finds a niche in such an initiative. Accordingly, the Agency promotes Greenfield investments through joint ventures and partnerships between local and foreign investors. ZDA considers forging strategic partnerships with Zambian companies is one of the ways in which foreign companies can set up their operations in Zambia. The nature of these joint venture partnerships is co- ownership of a business, where there is joint decision making. The partnership is formed on the basis of each bringing assets into the business, in the form of capital, expertise or technology.
A Joint Venture is a contractual arrangement, subject to joint control, whereby two or more companies pool their resources together and collaborate in carrying out a business activity without necessarily creating a separate entity. The parties may also agree to share the risks involved but the degree to which they do so will vary depending on the particular structure of the venture they have chosen. Such companies can agree to share capital, technology, human resources, risks and rewards under shared control. The form of a joint venture can be determined by a number of factors including the nature and size of enterprise, the anticipated length of the venture, the identity and location of the parties and the commercial and financial objectives of the participants. Regardless of the determinants of the partnership, ZDA assists interested investors in identifying joint venture partners and offering matchmaking services for investors seeking cooperation in the areas of capital, technology, management and marketing. The Agency also advises and participates in the negotiation of joint ventures.

The reasons behind forming a joint venture include business expansion, development of new products or moving into new markets particularly overseas. Other benefits to the host economy include the provision or introduction of new technology, the Zambian partners gain established distribution/ marketing set ups and there is available financial resource of such local partners. Contacts are also established within the host economy, a trend which can help to smoothen the process of setting up of operations. The key motives behind joint ventures are growth, stability and survival of economic uncertainties. The business attains strong potential for growth and can have innovative ideas and products. This entails that businesses gain more resources, greater capacity, increased technical expertise and access to established markets as well as distribution channels are realised. The setting-up of a joint venture depends on what is to be achieved by the parties involved. However, notable are three basic legal structures that can be used for joint ventures. These are being: a limited liability company (a corporate vehicle); a partnership or limited partnership (an unincorporated vehicle); or a purely contractual co-operation agreement.