Empretec, Triangle of Hope and Joint Ventures...Any Economic Value for Youth?

Empretec for Entrepreneurship Growth
By Clive Siachiyako
For decades, development structures of developing economies largely ignored the role of entrepreneurship in economic development and wealth creation. Zambia’s economic development structure for instance steepened towards attracting foreign investment mainly in mining and manufacturing sectors and support industries. But economic dynamics show that the ticket to faster and broader income growth is through entrepreneurial innovation. New economic systems put a premium on “adaptive efficiency,” which refers to the ability of institutions to innovate, continuously learn, and productively change.
As markets fragment, technology accelerates and competition comes from unexpected places, learning, creativity, and adaptation have become the principal sources of competitive advantage in many industries. Enabling constant innovation needs to become the goal of all organisations committed to prospering. These efforts need to be proactive and designed for the long term. Government and business leaders need to challenge all economic sectors and institutions to become cultures of innovation. The consequences for any sector that does not respond to this challenge are low productivity, stagnant living standards, and reduced opportunity for its citizens, Empretec Zambia has noted.

Background of Empretec

Entrepreneur and Technology (Empretec) is a new programme in the Zambia. The programme is an integrated capacity-building programme of the United Nations Conference on Trade and Development (UNCTAD) and is coordinated by the Zambia Development Agency. The programme promotes the creation of sustainable support structures that help promising entrepreneurs build innovative and internationally competitive small and medium sized enterprises (SMEs). It encourages the formation of mutually beneficial business linkages among SMEs and Trans-national Corporations (TNCs). As a result, it contributes to the creation of a dynamic private sector and an open entrepreneurial culture. It is therefore a vital complement to effective macroeconomic policies and enabling legal and regulatory framework.
The term Empretec is a Spanish acronym for emprendedores (entrepreneurs) and tecnologìa (technology). It was first introduced in Argentina in 1988, with the core objective of holding entrepreneurship training workshops. These entrepreneurship training workshops encourage individual entrepreneurs to focus on their role as entrepreneurs and challenge them to critically examine their personal strengths and weaknesses and learn how to sustain their businesses. Since inception, the Empretec programme has been initiated in twenty-seven countries, assisting more than 80 000 entrepreneurs through local market-driven business support centres.

Programme Methodology

The Empretec programme strives to identify and reinforce entrepreneurial competencies that are associated with successful traits, through self-assessment and individual transformation and business stimulation activities during entrepreneurship training workshops. These ‘motivation achievement’ workshops encourage individuals to focus on their role as entrepreneurs and challenge them to critically examine their personal strengthens and weaknesses. This is meant to provide an opportunity for participants to become more familiar with personality competencies of successful entrepreneurs, strengthen and enhance those personalities in themselves, and eventually be able to apply the personalities in their own businesses.
The training method is highly interactive. It involves structured exercises, group dynamics, diagnostic tools, business events and other activities, which are designed to challenge the participants to focus on such issues as their ability and willingness to seek and attain continuous improvements in quality, efficiency, growth, and profitability. This is achieved through learning by doing. The training enables participants to become aware of the need for continuous improvement as a competitive strategy in every aspect of their business.
Successful graduates of the programme obtain a clear vision of what they want to do with their businesses in the short and long term. In the words of many participants, Empretec is a "culture of entrepreneurship" common to entrepreneurs who are open minded, forward thinking, look for win-win situations, want to improve and "speak the same language". Therefore, they trust each other and are more likely to do business among themselves.
Generally, Empretec is a programme that focuses on improving the core entrepreneurial behaviours of business owners that influence their conduct, and above all, the results of their business.

Target Beneficiaries

Empretec does not define its target group by assets, turnover, or number of employees. The beneficiaries are identified on the basis of both their personal entrepreneurial competencies and their innovative approach to business. The direct beneficiaries of the Empretec programme include existing SMEs that have a track record of good business performance, potential entrepreneurs with promising business ideas, and start-up companies with good bankable project proposals. It is expected that the individual development of the entrepreneurs that takes place during an entrepreneur training workshop will lead to SME growth, linkages with larger enterprises including transnational corporations (TNCs), job creation, increased investment, and regional economic development.

To effect the programme activities in Zambia, UNCTAD recently trained eleven local empretecos (trainer of trainers) to spearhead the activities of the programme in the country. The eleven were drawn from the Zambia Development Agency, International Labour Organisation, Zambia Chamber of Small and Medium Business Associations, Young Women Christian Association, Future Search, and the Technical Educational, Vocational and Entrepreneurship Training Authority. The training was meant to help the Empretec Zambia Programme to get organised and established before it could start running on its own. Zambia Development Agency will coordinate all the programme activities in the country.

Economic Hope through the Triangle of Hope

Currently, the real challenge of investment promotion agencies is being close to investors. They are struggling to be major partners of investors, taking care of their business needs and sustaining their future development plans.
Being close to investors means being able to provide a conducive environment that match investors’ activities. This requires a strong political support. It requires legal, regulatory and institutional reforms necessary in the creation of a conducive investor environment and a myriad of other essentials.

Keeping in conformity with these demands, Zambia has been implementing various sector reforms intended to create a conducive environment for the private sector to thrive. In this regard, recent expenditure frameworks are gravitated towards infrastructure development. These initiatives are meant to create a firm foundation for economic growth for the country by having an improved investment and business environment in Zambia. Among the most prominent of these reforms are the Private Sector Development Programme, Financial Sector Development Plan and the Strategic Action Initiative for Economic Development, commonly referred to as the Triangle of Hope (ToH).
The genesis of the Triangle of Hope dates back to January 2005 when the Zambian government asked the Japan International Cooperation Agency (JICA) for help in investment promotion. In agreement, JICA engaged a Malaysian consultant to come up with terms of promoting investment for Zambia under the Action for Africa programme. This gave birth to the Strategic Action Initiatives for Economic Development or simply the Triangle of Hope.
The core of ToH is to assist in the creation of an environment in which the private sector creates more jobs and generate greater wealth in Zambia. The initiative takes after the Malaysian and Far Eastern Experience with economic development. It illustrates how Malaysia, a multi racial nation and basically raw material exporter in the early 1960s was convulsed in racial violence in 1967 and threatened to become another basket case Developing Nation. It brings lessons on how by stint of national unity, political will, civil service efficiency and private sector dynamism the nation within 10 years, Malaysia became the worlds largest exporter of electronic semiconductors and the 3rd largest country in the world exporting room air conditioners. To bring to effect the Malaysian Miracles, the initiative encourages the creation of a conducive investment and business environment by government for the private sector to increase its levels of investment. The Zambian government committed itself to the parametres of the initiative in trying to increase private sector investment flows. The government thus pledged to provide the required environment for the attainment of the Triangle of Hope targets.
These requirements include the provision of efficient, effective public services and facilities and performance-based and time-bound incentives. This involved private sector reforms like the streamlining of government approval and licencing procedures, and transparent incentives to all prospective investors.
The Triangle of Hope investment promotion initiative employs the Quadrant Strategy to attain the ultimate objective of job and wealth creation. The entry point into the four stages is about putting in place the best investment and business environment through improved policies, streamlined government machinery, rules, regulations, laws and incentives that conform to international best practices. These reforms embrace all government functionaries in order to have well-coordinated investment promotion information packages on the services, facilities and incentives government offers. The strategy is meant to help Zambia offer the competitive advantage that drive down the cost of doing business in the country.
The second stage looks at how government and private sector entities interested in accessing capital through joint ventures or technology and equipment should prepare Project or Business Profiles. Further, government is mandated to develop and implement an investment promotion strategy where the information on available business opportunities in the country will be distributed to investors at home and abroad. And lastly, the Quadrant Strategy mandates government agencies to use knowledge gained on the best practices to facilitate the quick implementation of approved projects through the entire government system from national level to the grassroots level so that jobs and wealth can be created at all levels. This would in turn give businesses in Zambia attain profits in being in a globally competitive environment and thereby contribute to the expansion of the Zambian economy.
The implementation process of the ToH involved the formation of task forces composed of members of the civil service and the private sector. The task forces were mandated to prepare recommendations for cabinet consideration on the creation of favourable business environment. The ToH steering committees that were formed included those for the agriculture, banking and finance, education, health, mining, multi-facility economic zones, micro and small enterprises, among others. The aim for inclusiveness was to generate the sense of belonging by all stakeholders.
The Triangle of Hope has since increased the spirit of collaboration among government agencies and cooperating partners in dealing with programmes that are aimed at improving the environment for doing business in Zambia. Such efforts are expected to stimulate further collaborations in pursuing strategies that make Zambia an all weather investment destination. The private sector development programme has since already dedicated resources for the identification of land banks that will be used for various business purposes. The ToH itself has also been given another lease for three years by JICA having came to an end last year. The net effect of the programme is the creation of business-oriented environment in the country.

Joint Ventures: A Tool for Zambian Businesses’ Growth

“You can resist an invading army, but you cannot resist an idea whose time has come,” think-tanks remark. 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 economic demands (efficiency, innovativeness and creativity) is dictating joint ventures at a cracking pace. Even micro and small enterprises 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. The initiative offers affluent platforms for business growth and it has become an important strategic option for many businesses. Due to the increase in receptive business strategies to the market economy, businesses are now operating in a world without borders even amid cultural and language barriers. And these changes require firm business muscles to remain afloat.
It is against this backdrop that the Zambia Development Agency (ZDA) finds a niche in promoting Greenfield investments through joint ventures between local and foreign investors. The Agency considers forging such 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 ventures 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 refers to 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.
Businesses form joint ventures for many reasons which include business expansion, development of new products or moving into new markets. Other benefits to the host economy include the introduction of new technology, the establishment distribution set ups and available financial resource. Contacts are also established within the host economy, a trend which can help to smoothen the process of setting up operations. The joint ventures are also meant for growth, stability and survival of the businesses from economic uncertainties. When businesses join forces, they attain 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.
Although the setting-up of a joint venture depends on what is to be achieved by the parties involved, there are three basic structures that can be used. 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. This entails that businesses of any size can use joint ventures to strengthen long-term relationships or to collaborate on short-term projects.
The formation of a joint venture can be complex. However, successful joint ventures offer affluent business break through opportunities such as access to new markets, distribution networks, and increased business capacity; as risks are shared with a partner. Thus the intensity of business risks is reduced. Partners also have greater access to resources, including specialised staff and technology. The joint ventures offer partners channels by which they can reduce costs, increase productivity, enhance reputation and licence to operate. The partners also access local knowledge/ or and integrate into foreign markets – while at the same time helping to create economic opportunity in underdeveloped regions.
Expanding and accelerating business partnership activities should therefore be a shared priority to increase the growth platform for the domestic economy that could have otherwise remained stagnant. In this view, ZDA creates awareness among Zambian businesses to enable them participate in joint ventures. The objectives of the Agency are to enable Zambian businesses understand the concept of joint ventures, acquire skills to manage the selection and negotiation of such initiatives and identify capacity challenges in forming those joint ventures. ZDA often conduct workshops to educate businesses on the selection of a joint venture, negotiating for it, preparing documents and on the registration process of such joint ventures with the Agency’s mandated division.
Such joint venture workshops provide valuable and enriching experience for Zambian businesses to learn more about the joint venture concept. Thus, anyone interested in a joint venture can visit the ZDA so that they can fill in a standard application form and submit their business profile and business plan as per requirement. ZDA will then present such information to interested foreign or local investors through various media such as its website and in its publications that are sent to various missions abroad.

Impact of the Global Economic Crisis on Africa...Youths.

Global Economic Crisis Impact on Africa

By Clive M. Siachiyako

All over the world today, countries are grappling with the current economic crisis and how to deal with it. Recently, the G-20 leaders met in London to share ideas on how to respond to the impact of a potential contraction in the global economy of 1.7 percent and a 6 percent drop in the volume of global trade. While it is true that the crisis didn’t originate in Africa, it is certain that African leaders should play a part in planning how to deal with it. In September 2008, the world economy officially entered a major economic down turn . The down turn was caused by a severe shock in financial markets of developed countries particularly the United State of America and Europe. The down turn in economic productivity that began in January 2008 persisted and was later declared a crisis towards the end of 2008. The economic crisis has ever since culminated into an ongoing slowdown in production indicators in major sectors of industrialised economies such as UK, USA, Japan, Germany, Australia and other Asian countries. This has led to a sudden reduction in demand for consumption and industrial commodities at both national and international markets. Decreases in demand for goods and services affected supply. Logically, the ripple effects of this constriction have permeated almost all economies of the world with varied intensity depending on the level of integration of domestic sectors in the international system.

According to the World Bank economic growth projections, developed countries in 2009 will grow by only 0.3 percent from 2.7 percent in 2007, while developing countries’ growth is expected to tumble to 4.5 percent in 2009 from 7.9 percent in 2007. Unlike in the previous economic recessions when low income countries (LICs) were not integrated in the world economy, they are now to a great extent more integrated through trade, foreign direct investment and remittances. With heavy dependency on one or two commodity exports, LICs are destined to face harder times as the economic depression continues.

Causes of the down turn

There are a lot of views to what actually precipitated the current crisis. Depending on the presumed cause of the crisis, the economic situation has emerged with different terms that are sometimes confusing especially to the lay person. In order to enhance an evaluation of the causes of the crisis, it is important to analyse in detail how possible subprime lending could have led to the crisis.

Subprime lending – International thoughts have come to hold that among others, the roots of the crisis can be traced directly to subprime lending by Fannie Mae and Freddie Mac, which are government sponsored entities to expand mortgage loans to low and mid level income borrowers. This was done to help boost a stagnated home ownership proportion that had hovered around 65 percent for many years.

The result was a push by the administration for greater investment by financial institutions into riskier loans. The inability of homeowners to make their mortgage payments due to primarily to adjusted rate mortgage resetting, borrowers overextending, speculation and overbuilding during the boom period eventually triggered the crisis. In addition, a 2000 US Department of the Treasury study of lending trends for 305 cities from 1993 to 1998 showed that US$467 billion of mortgage credit was poured out to low and mid level income borrowers. Two important catalysts of the subprime crisis were the influx of monies from the private sector and banks entering into the mortgage bond market and the predatory lending practices of mortgage brokers, especially the adjusted rate mortgage. Ultimately, the hazard lay at the core of many of the causes.
Deregulation – This again is pointing to weak financial systems in the USA. In 1992, Congress weakened regulation of Fannie Mae and Freddie Mac, the nation’s biggest underwriter of home mortgages, with the goal of making available more money for the issuance of home loans. The pair was allowed to keep a much smaller share of their funds on hand than other financial institutions in order to buy mortgage loans. Where banks that held US$100 could spend US$90 buying mortgage loans, Fannie Mae and Freddie Mac could spend US$97.50. Finally, Congress ordered that the companies be required to keep more capital as a cushion against losses if they invested in riskier securities. But the rule was never set and was only put in place mine years later. That was the housing bubble in the making.

Credit Creation – As a result of the following initiatives, the central bank of the United States artificially kept interest rates very low for a long period of time. This fiscal measure resulted in ill-investment and overconsumption of investors and consumers which prompted the development of the now famous “housing bubble” that ultimately burst, precipitating the financial crisis. This crisis together with much needed financial control and cutbacks by consumer spending, businesses and banks led to the recession.
Over Leveraging – Another factor that unquestionably amplified the magnitude of the economic downturn was widespread miscalculation by industrialised countries’ banks and investors of the level of risk inherent in the unregulated collateralised debt obligation.
Impact of the downturn on LICs

The impact of the global economic crisis is being transmitted to low-income countries (LICs) through at least four different channels: rapid decline in commodity prices; reduced investment; decline in remittances – exacerbated by reverse migration and unemployment; and the specter of a decline in aid. While developed countries have experienced and are still experiencing acute contractions, households in low-income countries have become much more vulnerable and at higher risk of experiencing serious consequences of the economic downturn in the short and medium term. The crisis in low-income countries has signaled the end of the 8-year commodity boom that began around the year 2000. The past few months in 2009 have clearly revealed that LICs are far from being immune to the effects of the global economic crisis. Cases below give a synopsis on how low-income countries have been impacted.
Bangladesh – The crisis has threatened the country’s biggest export sector, the textile industry which produces ready-made garments greatly dependent on western markets. This industry which employs over 2.5 million people, mainly women earned Bangladesh US$10.7 billion equivalent to two-thirds of the country’s annual export income in the fiscal year 2007-2008. In September 2008, before the crisis deepened, buying orders from Europe and the USA had dropped by a stunning 7 percent. Worse still, over 700 chain stores of major US apparel brands that outsourced to Bangladesh have either wound up or plan to do so if the crisis prolongs.
Ethiopia – Two Israeli-owned flower farms have been put up for auction for failing to service bank loans due to reduced export sales at the end of 2008. Thus, income from flower exports reached only 60 percent of a targeted US$298 million. The widespread crisis poses a threat on the Horn of Africa achieving its targets to earn US$207 million from flower exports in 2009 as consumers in Europe and the USA cut back on luxury purchases.
Uganda – A country which depends on foreign assistance (approximately) 60 percent of direct budget support) now faces a significant drop in funding. It is also expected that due to reduced demand on Ugandan exports from the USA and Europe, Uganda’s major export markets, the economy is anticipated to grow by between 5 percent and 6 percent instead of the expected 8 percent in 2009.
Congo DR – The country has suffered major job losses rising over 300,000 mainly due to closures of copper mines since September 2008, (JCTR 2009). Investors have pulled out and the ripple effects continue to deepen in severity.
Latin America – Migrant workers from Latin America were recorded to have sent less money home in 2008 after strong growth in remittance flows for several decades. Remittance flows slowed totaling US$69.2 billion in 2008 only slightly more than in 2007. Flows will definitely be affected by the length and severity of the crisis in 2009. It is not yet predictable by how much remittance flows would fall, though the first quarter of 2009 has already shown massive reductions. In Latin America and Caribbean, remittance flows reflect a strong commitment to family and community, and are a vital source of income. Seven countries in this region receive 12 percent or more of their Gross Domestic Product from workers abroad.
The impact of the global economic downturn on low-income countries has been substantial and significantly varied from one country to the other within the low-income group. Scores of these economies have been faced with massive job cuts, declining remittances, possible reductions in foreign direct budget support and steep falling exports and subsequently major decline in national incomes. In essence, the above situation exemplifies that countries are different from one another and as such solutions to mitigate the impact of the economic downturn must be country specific to achieve success.

Impact of the downturn on Zambia

Zambia is one country that has been hit quite severely with reduced international commodity prices. The global recession has reduced job opportunities from abroad and remittances from repatriates working in rich countries who are under pressure in the job market. These negative effects confirm that Zambia has not been spared of the consequential effects of reduced productivity in industrialised countries. The 5 percent growth forecasted in the 2009 national budget will certainly be challenging to achieve in the current economic environment.
Positive economic performance recorded in the first half of 2008 was on account of high copper prices and increased copper production especially with increased capacity utilization by Kansanshi mine in Solwezi. Copper prices reached a record high of US$8, 985 per tone in July 2008 before falling to US$2, 902 per tone at the close of the year as a result of the global economic slowdown that reduced demand for copper and the articles thereof. As such, the year 2009 kicked off with a severe trade deficit of K237.8 billion at the end of January, meaning that the country’s exports were outweighed by imports causing a trade imbalance. Statistics further reflect a deeper cumulative trade deficit of K401.1 billion for January and February 2009 compared to a trade surplus of K126.1 billion at the same period in 2008.
Therefore, the situation in Zambia as regards the impact of the crisis on the economy has been a daunting experience as most mining companies have completely suspended operations and laid-off thousands of workers. Towards the end of the 2008 fourth quarter, as metal prices on the London Metal Exchange market experienced their all time lows since 2001, massive job cuts in mines were announced. Luanshya Copper Mine withdrew from the sector by putting the companies on care and maintenance. This action declared over 2000 mine jobs redundant.
Given that Zambia is largely dependent on copper exports for its national revenue, copper mining industry is one of the largest employing sectors in the country absorbing nearly 50, 000 people. The decline in macroeconomic activity has had a direct impact on several sectors but chief among them, the tourism and mining sectors. An outline below gives a sense of what has transpired.

Mining Industry

The Zambian flagship industry and a major income earner for the economy have withered with the economic downturn. The industry has until recently accounted for about 90 percent of Zambian’s exports. Using the scope of the Jesuit Center for Theological Reflection Basic Needs Basket for estimating, it can be assumed that each of the 50, 000 workers is a bread winner for a family of six. It would right therefore to infer that the sector provides a source of livelihood to about 300, 000 Zambians. But as per Zambian culture and tradition, nuclear families always have to provide financial support to members of the extended family. In this case, a single family would probably be offering direct support to more than two members of the extended family, so 3000 is a bare minimum population directly dependent on the sector.

According to Ministry of Labour officials, at the beginning of March 2009, close to 19, 000 of the approximately 50, 000 mine workers had lost jobs. From the Basic Needs Basket point of the JCTR’s view, about 120,000 people of the 300,000 people typically dependent on mining jobs for their livelihood have been affected. In a ministerial statement, the Minister of Mines and Mineral Development highlighted that Bwana Mkubwa Processing Plant closed down in the fourth quarter of 2008 and laid off over 345 workers, Luanshya Copper Mine and Chambishi Metals suspended mining metallurgical operations respectively in January 2008 and laid off 1, 716 and 1, 011 respectively. In addition, other job cuts from Kansanshi, Mazabuka Nickel and Chililabombwe mines have undoubtedly pushed these figures to staggering levels.

On a macro level, in spite of the crisis, copper still accounts for the major export product in Zambia. This depicts how grossly dependent the economy is on the commodity. In a period of nine months from May 2008 to February 2009, the country experienced a sharp decrease of 40 percent in copper export earnings. Whereas K1, 109, 924 million was earned from exports of copper and articles thereof May 2008, nearly half of these earnings were recorded in February 2009 export earnings. This substantial loss in export earnings has caused a strain on the economy’s stable fiscal position which has manifested in high inflation and consequently deep currency depreciation. The further deepening of the financial crisis in the developed world has increased volatility in the local currency against other major currencies giving rise to higher lending rates. At the end of 2008, the local currency depreciated by 27.3 percent against the US dollar to an average of K, 882.3 per US dollar from K3, 835.7 per US dollar in December 2007. The situation has worsened as the currency was trading t an average of K5, 680.5 at the end of March 2009.

Tourism Industry

The sector is among the worst hit sectors in the country and there are probably two major reasons that could be attributed to the rapid growth the sector experienced over the past five-year period of economic boom prior to the 2008 downturn. Firstly, the success in the mining sector and the general stable economic outlook stimulated much interest in foreign nationals to visit the country with United State, the United Kingdom and recently Asia accounting for the greater part of Zambia’s tourist market. Secondly, Zambia seems to have “unfortunately” benefited significantly from Zimbabwe’s political and economic turmoil. Meaning that whereas in the past Zimbabwe received more tourists than Zambia, the situation changed after the year 2000 when President Mugabe and his government institutionalised the land policy that repossessed massive land owned by white farmers. This situation spelt the beginning of better days for the Zambian tourism sector.

Several lodges and hotels had sprung up predominately in Livingstone and Lusaka and recently in Solwezi to accommodate an influx of tourist most of whom would have previously preferred to visit Zimbabwe. Solwezi and other mining areas registered positive growth in the sector owing to the hype in the mining activity. In terms of accommodation in lodges, the areas almost always had 100 percent occupancy which perceptibly meant more jobs and more foreign exchange.
The favourable environment in the sector had created jobs, businesses and incomes and improved people’s livelihoods. Now with the credit crunch in the developed countries, the sector has already recorded massive job losses. It is estimated that whereas lodges and tourist centres had before the crisis recorded nearly 100 percent accommodation occupancy, the percentage sharply dropped to about 20 percent. This entails that there are no messed beds to make, no bath and bed sheets to launder, no dirty rooms to clean, no customers to eat the food and hire vehicles for sightseeing. Hence, there are no jobs for housekeepers, for cleaners, for cooks and no business for food suppliers and lodge and hotel owners. The above is indicative of the social severity of the crisis on individual households as poignant life stories being told by affected families have revealed.

Effects of the downturn on the macroeconomic front – Public Debt

The past four years have seen debt indicators, specifically external debt indicators, in Zambia improve significantly. Debt relief through highly indebted poor countries (HIPC) and multi-lateral debt relief (MDR) initiatives of 2005 and 2006 respectively, had significantly reduced the large external debts and the debt service burden by about 86 percent. Whereas nearly US$200 million was used to service public debts annually, the amount was noticeably reduced to about US$50 million annual debt service. The improved debt sustainably has helped create investor and donor confidence as can be evidenced by sizeable FDI and to some extent aid flows in the recent past. A lower debt servicing burden has also freed up resources for development programmes. With the deepening of the international financial crunch, LICs will be advised by IFIs like in the past to borrow externally which is likely to pose serious risks on debt sustainability. For instance, in February 2009, the government received a US$200 million loan from the IMF to boost national reserves that fell so drastically. If this borrowing desire continues, public debt will soon rise way beyond the 1.8 percent of GDP expected in the 2009 budget. This situation will possibly lead to accumulation of once again unsustainable debts and the resulting adverse repercussions. At the close of 2008, inflation for Zambia hit 16.6 percent from 12.2 percent in June 2008. The deepening currency depreciation and its direct effect on exchange rates indicate that debt servicing specifically on external debt with short maturities has become more costly.

Conclusion

A country is considered to be more exposed to the global economic downturn if before the crisis, poverty was a big problem. While in the short term, developed countries may seem to be the most hit, past experience from past economic crises suggest that the adverse impacts are likely to spread in the medium-term to poor countries infiltrating vulnerable households. For all intents-and-purposes, this means that millions of households in LICs face hard times ahead with the economic downturn. The poor have no assets, limited risk coping strategies, and less access to capital markets. Realizing the heterogeneity of poverty dynamics in LICs; innovation, commitment and dialogue within countries is the way to achieve success in formulating country-specific offsetting mechanisms against debilitating effects of the downturn. LICs, specifically Zambia need to realise that the current crisis also presents itself as an opportunity in disguise for governments and states to carry out an introspection of development goals and get rid of archaic and clichéd initiatives. In Zambia for example, global crisis or not, the country has been in a reprehensive state for a long time which in itself is a crisis. Huge sums of public funds misappropriated year in year out, increased litigations of senior government officials abusing authority for self gain, high levels of corruption are all signs of deterrents to growth in the system that need to be fixed.

References

Jesuit Centre for Theological Reflection 2009, The Global Economic Downturn: Impact on Low Income Countries – the case of ZambiaWorld Bank November 2008, Weathering the storm: Economic Policy Responses to the Financial CrisisIMF March 2009, The Implications of the Global Financial Crisis for Low Income Countries.The Community Reinvestment Act After Financial Modernisation (April 2000)MoFNP February 2009: Economic Report 2008 CSO December 2008 and January to March 2009 Monthly Bulletins MoFNP February 2009: Economic Report 2008
Clive M. SiachiyakoZDA Fellow

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.

Exports...Development....and Job Creation for Young Age

By Clive Siachiyako

Exports: A Booster to Development.

In today’s interconnected global economy, expansion into international markets becomes a serious question for any economy. Exports generate reasonable foreign exchange into the exporting economy. The net effects of such foreign exchange injections ignite great economic progress, which can translate into job and wealth creation in the economies of exporting countries. Endowed with certain resources, countries depend on each other’s comparative advantage for economic sustenance. Trade therefore becomes crucial in that equation.
Zambia being a resource-rich country in terms of mineral wealth as well as plentiful arable land, abundant water, affordable electricity from coal reserves as well as hydroelectric power, has a lot of potential to export globally. The country has a lot of other existing opportunities for processing of natural resources in sectors such as textiles, agro-industries and gemstone processing, all of which offer opportunities for more external trade. Since the early 1990s, Zambia’s external trade has become progressively liberalised in response to the globalisation phenomenon. Government incentives to develop export industries in favour of import substitution have led to improved foreign exchange earnings.

The country’s most successful traditional exports remain its metals and minerals, in particular copper and cobalt. However, there has been steady growth of non-traditional exports (NTEs), which continue to be promoted by government. The significance of non-traditional exports to Zambia’s economy cannot be overstated. To reduce the economy’s reliance on traditional mineral exports such as raw copper and cobalt, NTE’s are vital in increasing economic diversification and promoting growth. Zambia’s non traditional exports include sugar, cotton lint, floriculture, soya beans and other primary agricultural produce with textile, engineering products, cement and handcrafts also proving lucrative. Other significant export products are fertilisers, hydrated lime, coal, tea, maize, skin leather, asbestos pipes/sheets, groundnuts, mushrooms, fresh eggs and day old chicks, paper, aluminium wires and cables, sorghum, clothing and blankets. Manufacturing exports have grown significantly, and there is room for further export production considering the great demand of the country’s products on the international market.

The success of the NTE sector has manifested itself in improved export earnings and increased contributions to total exports. In recent years, NTE earnings increased, accounting for some 35 percent of export earnings, with fresh flowers, gemstones, cotton lint, sugar, copper wire and gold bar exports all contributing to this strong performance. The South African market continues to be by far the largest for Zambia’s NTEs. Principal export products to the EU, USA and Far East are cut flowers, fresh vegetables and fruits, cotton yarn, coffee, sugar, paprika, game trophies, tobacco, cotton lint and honey products. Markets within the SADC and COMESA region are mostly supplied with sugar, cotton lint, electricity, cement, soya beans, animal feeds, tobacco, meat/poultry/dairy products, paprika, chemicals and petroleum products.

Zambia’s strategic advantages have laid the foundations for the establishment of sector export promotion strategies in order to stimulating further production and facilitate diversification in the export base. Trade agreements such as COMESA have opened up regional markets, with Zambia reaping the financial rewards of the region’s free trade area. In addition, Zambia is expected to realise tremendous benefits from the currently launched COMESA Customs Union’s external common tariff, including increased Foreign Direct Investment flows, export diversification and a stronger negotiation position in multilateral negotiations, among others. Further opportunities exist to broaden Zambia’s export markets and products with the Southern Africa Customs Union (SACU) market, in particular South Africa, being seen as having huge potential. To assist the penetration of Zambian products abroad, two trade fairs are organised every year. Held in Lusaka, the internationally recognised Zambia Agriculture and Commercial Show exhibits agricultural equipment, produce and manufactured goods, while Ndola’s Zambia International Trade Fair has an impressive variety of products and draws exhibitors from the region as well as abroad.

From a rich natural resource base covering minerals as well as agricultural resources, Zambia is broadening its export basket to include other important opportunities deriving from export growth. The economic diversification strategy of Zambia includes; diversifying the range of markets into which existing products are exported (geographic diversification); upgrading the quality of existing products; and taking advantage of opportunities to expand exports of services. The emphasis of Zambia’s diversification strategy is tailored to the country’s niche in the global market especially towards emerging large economies, such as Brazil, China and India.
Shifting from the traditional exports of copper and cobalt, the country is utilising available opportunities in several sub-sectors such as the food processing and beverages; clothing and textiles; metal processing; agro-processing – including fertilisers, pesticides and herbicides; wood and wood products, paper products and packaging; and cement and explosives; as well as leather and leather products. Others are processing and polishing of gemstones and jewellery making, engineering products, plastic and glass containers, and many others. Manufacturing industries are cardinal in the diversification of the economy away from raw copper and into NTEs, including the downstream processing of many primary products. A reduction in customs duty rates for some misclassified finished items has been made to boost the manufacturing sector.

Zambia’s Export Opportunities –AGOA

Zambia is a signatory to several trade agreements including the umbrella trade organisation, the World Trade Organisation. These trade agreements play a leading role in the promotion of Zambia’s exports and economic development and the reduction of poverty, which are essential tenets in attaining development targets. Each trade agreement focuses on boosting export earnings of key sectors in the economy. Among the trade agreements to which Zambia is a signatory is the African Growth and Opportunities Act (AGOA). The African Growth and Opportunities Act is part of the United State Trade and Development Act, which allows more than 4,600 products from 144 designated countries and territories, mainly in the developing world to enter the United States market tariff-free. Currently, there are 38 Sub-Saharan countries that are eligible for benefits under AGOA. Over the last seven years, AGOA has succeeded in stimulating increases in United States-Africa trade, creating new jobs and spurring investment worth millions of Dollars. In Zambia, AGOA focuses on horticulture and handcrafts. The United States government plays a great role in assisting the Zambian horticulture industry to take advantage of the African Growth Opportunity Act. Initially, only baby corn, baby carrots and snow peas were the only fresh vegetables that were exported to the US market from Zambia. But with the commissioning of the Pest Risk Assessment in 2003, other products are eligible to enter the US market under AGOA. Candidate products eligible for the US market under the Pest Risk Assessment include fine beans, asparagus, courgettes, chilies, baby melons, leeks and okra. This has been possible through the support from the Common Market for Eastern and Southern Africa (COMESA).

The increase in the number of products eligible into the United States market entails increased market opportunities for the Zambian horticultural products. Zambia’s agricultural-based industries are thus benefiting from the African Growth and Opportunities Act trade initiatives.
The African Growth Opportunities Act focuses on the handicraft industry as well. Although the initial focus was on hand made products, the current AGOA legislation includes crafts products produced from machines. This legislation adds more benefits to the Zambian players in the handicraft industry whose market size has been broadened. This current AGOA legislation includes the textile industry. This entails that Zambian companies in the textile industry can export garments of different nature to the US market quota and duty free. Only quality matters may limit the exporters. However, some Zambian exports into the AGOA market have been induced through exports to countries eligible to export such products to the AGOA market. For instance, in the textile sub-sectors, Zambian exports not eligible into the US market under AGOA have been exported to AGOA eligible countries in such exports for onward garment production for the AGOA market. Cotton yarn is one such product which Zambian exporters are not eligible under AGOA to export to the US market. To that effect, Zambian cotton yarn exporters sell abroad to eligible countries who later export to the US market. Mauritius, Lesotho, Botswana and South Africa have been principle AGOA induced export markets for Zambia. With the opening up of new garment factories as well as the increase in production capacity of the existing factories, Mauritius is particularly drawing a lot of cotton yarn from Zambia companies.
To boost African Growth Opportunities Act exports and aid for the diversification of export products to the US market, COMESA with funding from the United States Agency for International Development, came up with AGOA linkages in COMESA (ALINC) programme. The ALINC programme promotes African Growth Opportunities Act in member states of COMESA, which are AGOA eligible. Apart from facilitating trade between Africa and the United States, ALINC disseminates information on the African Growth Opportunities Act.

In order to improve Zambia’s chances of taking advantage of AGOA, the Ministry of Commerce, Trade and Industry in conjunction with partners such as Zambia Development Agency; Market Access, Trade and Enabling Policy; COMESA and Mount Makulu have continued with country wide sensetisation programmes, capacity building of producers and exporters as well as institutions rendering services to the private sector on the characteristics and needs of the US market. The initiative is meant to provide Zambian exporters with training on export development, packaging and on how to reduce the cost of transportation of their exports.
The African Growth Opportunity Act initiative is a real opportunity for Zambia. The government must thus build on those opportunities in conjunction with farmers, manufacturers and the business community to ensure that trade under the Act continues to flow between Zambia and USA. This entails more export earnings for Zambia, a phenomenon cardinal to job and wealth creation as well as poverty reduction.
Foreign Markets: - Zambian Exports’ Opportunities.Market expansion is vital for any exporter to increase returns. To broaden its regional and international market share, Zambia is a signatory to a number of bilateral, regional and multilateral trade agreements. Trading partners within the southern Africa include South Africa, Malawi, Zimbabwe, and Congo DR. In addition, vital international trade partners comprise EU countries such as Germany, USA and the United Kingdom.
Within the southern region, Zambia is a member of the Southern African Development Community (SADC), a grouping of 14 countries with a combined population of about 200 million people. And the country’s active participation in the SADC Trade Protocol as well as the Africa wide 20 countries Common Market for Eastern and Southern Africa (COMESA)/ Free Trade Area (FTA) offers preferential tariff access to total market potential of nearly 380 million people.
Similarly, with the advent of Africa Growth and Opportunity Act (AGOA) duty free access to the huge USA market has become a reality.
AGOA-Africa Growth and Opportunity ActThis Act provides trade preferences for quota and duty-free entry into the United States market for certain goods. Notably, AGOA expanded market access for textile and apparel goods into the United States for eligible countries. Some AGOA countries have begun to export new products to the United States, such as cut flowers, horticultural products, automotives and steel. Initially, AGOA was set to expire in 2008. In 2004, the United States Congress passed the AGOA Acceleration Act of 2004, which extended the legislation to 2015. The Act’s apparel special provision, which permits lesser-developed countries to set foreign fabric for their garment exports, was to expire in September 2007. However, the legislation passed by Congress in December 2006 extended it through 2012.
Contonou Agreement The Continou Agreement provides for reciprocal trade agreements, meaning that not only the European Union (EU) provides duty-free access to its markets for African, Caribbean and Pacific Nations (ACP) exports, but ACP countries also provide duty-free access to their own markets for EU exports. True to the Continou principle of differentiation, however, not all ACP countries have to open their markets to EU products after 2008. The group of least developed countries is able to either continue cooperation of non-reciprocal trade preferences or the “Everything But Arms” regulation.

Zambia is also a signatory to the Continou Agreement, which aims to achieve free trade arrangements between the EU and the ACP regional groupings. EBA- Everything But ArmsEverything But Arms (EBA) is an initiative of the European Union under which all imports to the EU from the Least Developed Countries are duty free and quota free, with the exception of armaments. EBA entered into force on 5 March2001. There are transitional arrangements for bananas, sugar and rice until January 2006, July 2009 and September 2009 respectively. COMESA- Common Market for Eastern and Southern AfricaCOMESA was founded in 1994 to replace the former Preferential Trade Area (PTA) and forms a formidable market (both external and internal trading) with over 20 member states with a population of more than 374 million and an annual import bill of around USD 32 billion. COMESA member states are; Angola, Burundi, Congo DR, Comoros, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Malawi and Madagascar. Other members are Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.

SADC- Southern Africa Development CommunityThe Southern Africa Development Community was formed with the objective of building a region of high levels of harmonisation and rationalisation that enable pooling of resources to achieve self reliance and ultimately improve the living standard and quality of people in this region. The SADC member states include Angola, Botswana, Congo DR, Lesotho, Madagascar, Mauritius, Malawi, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia as well as Zimbabwe. To accelerate economic growth, SADC member states are individually intensifying their efforts to implement comprehensive economic and social reforms within the organ’s development framework of pursuing poverty reduction oriented policies, addressing good governance issues, infrastructure and production capacity constraints, all of which are cardinal in the facilitation of economic development and attracting investment. Zambia’s membership to regional organisations such as COMESA and SADC has buoyed the country’s export market. And the country’s participation in international trade has also boosted the country’s competitiveness in global trade. Currently the European Union countries, China, South Africa, Democratic Republic of Congo, Kuwait, United Arab Emirates, India, Japan and the USA remain Zambia’s major trading partners. Although Zambia is a landlocked country, it has easy access to the sea ports of Durban in South Africa, Dar-es-salaam in Tanzania and Walvis Bay in Namibia.

Micro and Small Enterprises...Wealth Creation Strategy for Youths.

By Clive Siachiyako
MSEs: A Precursor to Vision 2030’s Goal of Wealth and Job Creation
Zambia’s long-term development objective, as articulated in the National Vision 2030, is “to become a prosperous middle income country by the year 2030.” The associated goals call for policies that accelerate and sustain economic growth, and which enable the poor to participate in, and benefit from, the growth process. The theme of the Fifth National Development Plan is achieving Broad Based Wealth and Job Creation. The aim of the programme is to stimulate investment, entrepreneurship and employment creation within the micro, small and medium enterprise (MSME) sector.
The Broad Based Wealth and Job Creation programme has a mix of interventions that focus on specific sub-groups in the MSME sector. It is based on a systemic enterprise development approach, which recognises the need for interventions at micro, medium and macro levels. In the process, the programme aims to better coordination of United Nations support on private sector development in Zambia. It is led by the International Labour Organisation on behalf of the UN System in Zambia. It consolidates and strengthens the activities of multiple United Nations agencies including United Nations Conference on Trade and Development, United Nations Development Programme and the United Nations Global Compact, within the context of the UN Development Assistance Framework and the recommendations of the High Level Panel report on United Nations System coherence at the country level.

Situation AnalysisThe Zambian economy has recorded impressive growth over recent years, but this positive development is yet to translate into broad-based wealth and employment creation. Wealth creation is limited to a minority of the population (particularly in urban areas) and income inequalities are rising. The Fifth National Development Plan (FNDP) notes that “the improved economic performance since 1999 has not significantly reduced poverty”, due to weak linkages between the capital intensive sectors which have driven growth and the rest of the economy. Neither has growth translated into a commensurate increase in jobs. Of the 6,184,000 people in the labour force, only about 700,000 are formally employed, and the remainder is either engaged in the informal economy or unemployed. This lack of opportunities for decent employment holds back human development, perpetuates inequality, exacerbates poverty, and limits the prospects for achieving Millennium Development Goals.

These issues are notably pronounced among women, young people and people with disabilities. These groups face particularly acute challenges in relation to technical and business management skills; market access and information; and access to capital including collateral. This situation is incompatible with Zambia’s long-term development objective, as articulated in the National Vision 2030, of becoming a prosperous middle income country by the year 2030. Private sector development initiatives by Government and its development partners are yet to fully unlock the potential of MSME as the main engine for broad-based growth and employment creation. ngoing interventions to exploit the potential of large-scale businesses are brokering business linkages between MSMEs and large companies, to provide a market for MSMEs, as well as opportunities for upgrading through technology and knowledge transfer, and enhanced access to finance. In Zambia, these opportunities have not been fully exploited. The institutional framework tends to reinforce a disconnect between efforts to attract large investors and to encourage MSME development respectively. The establishment of the Zambia Development Agency (ZDA), which incorporates the functions of the former Small Enterprise Development Board as well as the Zambia Investment Centre, offers an opportunity to resolve this disconnect. Links to Development FrameworksThis BBJWC programme is a direct response to Zambia’s Fifth National Development Plan and a contribution to Zambia’s development objective, as articulated in the National Vision 2030, of becoming a ‘prosperous middle income country by the year 2030.”

The programme particularly relates to the Employment and Labour chapter of the FNDP, and to the Private Sector Development Reform Programme, which is described in the FNDP as the main instrument for improving the business and investment climate in Zambia during the FNDP period. The programme is also in line with the ZDA Act on Micro and Small Businesses. It works closely with the ZDA as its internal structures and capacities are defined and developed, in order to maximise synergies between the ZDA’s various elements and service offers. The programme particularly seeks to build alliances between the current ZDA’s MSE Division and the Investment Division in relation to business linkages by supporting a structured approach to pro-poor investment promotion and facilitation.
The programme also supports the implementation of aspects of the Citizens’ Economic Empowerment (CEE) Act. It works closely with the CEE Commission to ensure all programme activities are aligned with the framework of the CEE Act; monitor the impact of the Act on the MSME sector through collaboration with business associations including Zambia Chamber of Small and Medium Business Associations, identifying and recommending measures to enhance impact; and develop the capacity of the Commission through the provision of policy advice, drawing on international best practice.

The programme supports the Ministry of Commerce, Trade and Industry’s efforts to develop an MSME Development Policy, which relates to business development service support structure, entrepreneurial training, market facilitation including linkage programmes, and MSME financing. It is in line with the ministry’s policy proposal and planned intervention in support of Local Economic Development. All these interventions are meant to unlock the potential of MSMEs and enable Government attain its wealth and job creation targets.

Export Development Plans: Catalysts of Export Promotion and Finance
Endowed with rich-natural resource, but limited in financial and technical base to seize export opportunities the market offers, Zambian exports have been for long struggling to penetrate the global market. However, due to Zambia’s strategic advantages in exportable wares that are extractable from its rich-resource, a foundation has been laid for the establishment of export promotion strategies.

In the past few years, there have been a number of efforts aimed at increasing Zambia’s, exports especially non-traditional products. Consequently, a number of projects have been initiated to broaden Zambia’s export basket. Among these export facilitation initiatives is the Zambia Export Development Fund (ZEDEF). The Zambia Export Development Fund is a European Union funded project which succeeded the second phase of the Export Development Programme (EDP II). The EDP II programme ended in 2007 after running for five years from 2003 to the end of 2007. The activities of the EDP II were based on three pillars: the first one was the export financing facility that provided credit and grants to exporters through their respective producer associations.
Following the end of EDP II project in 2007, the fund was handed over to the Zambia Development Agency (ZDA), which is currently managing it under Zambia Export Development Fund. The core of ZEDEF is to assist in the expansion of Zambian non-traditional exports. The current beneficiaries from the fund include horticulture, floriculture, wood, leather, organic products, and crocodile industries. The fund’s parametres will be broadened in future with line with Zambia’s export diversification programme.
The EDP II project has been continued under the aegis of ZEDEF due to the successes that it scored. The mandate of ZEDEF is to expand non traditional exports to further the previous projects economic strides. ZDA’s Export Promotion and Market Development Division manage the Fund, which is operating as a loan funded and administered to Zambian registered producer associations.
The other export development initiative meant to bolster Zambia’s non-traditional exports is the Production Finance Technology (PROFIT). PROFIT is a five year USAID Private Sector Development Programme. It began operations in 2005. The programme centres on four key principles. These four pillars include export growth for the nations development; agriculture, natural resources and tourism which are the pillars of Zambian economic growth; export growth is also a major engine for Zambia’s development; and the private sector is a principle drive of sustainable growth. Although not directly linked to exporting, the project provides financial assistance business enterprises in terms of production inputs and also technology for use in the production chains.
The strategic goals of PROFIT are to improve inter-firm relationships and cooperation within industries in which it works and the development and improved functioning of critically important support markets. It also aims at creating an environment where its interventions can lead to greater confidence and credibility in agricultural market mechanisms. PROFIT sees lack of confidence and credibility in the market place as damaging to the participation of smallholders, a trend detrimental to the general growth of the agriculture sector. The programme generally operates under the broader agricultural economy and primarily through three grants.
The major focus of PROFIT grant programmes was on the development of the Zambia Agricultural Commodities Exchange (ZAMACE), which involved out of the initiative’s intention to support the development of a warehouse receipting system. The ware house receipting system is meant to create a transparent agricultural marketing structure which can foster the development of a platform that enhances market credibility.
By 2006, PROFIT grants were dedicated to the conservation farming unit, with the goal of providing direct and indirect training on a large scale to upgrade smallholder farmer sustainable production capacity. It also focused on the agribusiness forum. This is aimed at providing a level of support to the agribusiness forum to establish itself as an industry think tank on matters pertaining to the engagement of smallholder farmers and producers in commercial high value. Further, PROFIT grants aims to position the Zambia National Farmers’ Union in the rural economy as respected and strong advocacy body with the reputation for independence and lack of bias with diverse membership base and large geographical footprint to fill the critical gap in the Zambian market for farmers.
The other area of interest of PROFIT is the development of the Forest Fruits incentives internally and improving the honey value chain through improved technologies. The grant focuses on the Forest Fruits company, which engages about 5, 000 producers in North Western province and exports organic honey to Europe and United States of America. The programme also promotes proactive marketing through mobile phone technology by the agricultural retail sector using crop serve as a model to show farmers that cell phones can be tools to their business. The project was done through africannect sms system and savanncom.
The mission of PROFIT is turning competitive advantage into competitiveness. It just needs both donor and government distortionary activities, management and trust issues between market players and inexperience in dealing with a smallholder market at which the private sector can take on.