Executive Focus: Robert K Sichinga, Minister of Commerce, Trade & Industry, Zambia

Executive Focus: Robert K Sichinga, Minister of Commerce, Trade & Industry, Zambia

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Transcript

How would you describe Zambia's economic performance over the last two to three years?

SICHINGA: Normally, the growth of an economy is measured in terms of GDP growth. It looks at issues of exports, issues of inflation, and issues of interest levels. These are economic fundamentals. Over the last five years, Zambia has consistently shown that it has been achieving growth rates of about 5%. In 2008 our growth rate was at 6.1%. In 2010, this had gone up to 6.4%. As of last year, 2011, this figure had grown to 7.1%. We are projecting for 2012, to achieve 8% GDP growth. Against this background, there is also the issue of inflation. In the beginning of 2009, our inflation was at 18.1%. This was contained by large measure in 2009, and by the end of 2009 this had dropped quite considerably to 9.9%, so we went into single digit inflation. Since then, it has continued to drop, with the latest figure for the end of 2011, showing a further downward trend on inflation to around 6.4%. As we hold this conference, it's 6.2%. If you look at the economic fundamentals, we seem to have gotten it right. Interest levels were very high. The best rates were determined by the individual banks, and it varied between 18% and 27%. What the Central Bank has done now, is the Bank of Zambia has to give a reference number which has been put down by9%. So with this, we have aligned the levels of inflation and GDP growth. Hence, in terms of performance, I think Zambia has done quite well.

Our total exports have averaged around $8bn. Of which, the bulk is coming from the sale of copper. There has been a boom of commodity prices, in particular, metal prices, and this has obviously benefitted Zambia, even with the fluctuations that have taken place. With exports of $8bn, on average, $7bn of that has come from the metal prices, mostly copper and cobalt. These proceeds have been complimented by agriculture exports which we are calling non-traditional exports. These have come to about $1bn. These are figures that have shown a very positive position. 2011 was a difficult year for us because we had elections, so the investment side has sort of slowed down. In general for investments, if you go back in the last five years, we had a figure of just under $1bn in 2008. Then in 2009, the figure shot up to $1bn. In 2011, we had pledges of investment of $5.4bn. Our target for 2012 is to do about $5bn, as well. There is an interest in terms of exploration work of metals in our country. There is cobalt, copper, and also nickel. There are also other metals and semi-precious stones that have been discovered. Also, there is oil exploration that is going on at the moment. We have been advised that they have found shale oil and since we border with Angola this might be an indication of the same oil bed. We are hoping that this will lead to further expenditure and contribute towards the GDP.

Our target is that, since we have a very young population, we need to develop industries that are sustainable over a long time. Metals are exhaustible. They will come to an end and as will oil deposits. We are looking to increase our investment in renewables, specifically agriculture and the timber industry. We have huge tracks of land which have not been utilized. We have 754,000 square kilometers of land, most of it sufficiently fertile which needs to be exploited. We are hoping that we can do not only agriculture but also irrigated agriculture. Some of the areas that we have are enclosed in game parks, and we have 22 game parks in our country. The bulk of land is in fact in game parks and game management areas. Outside the game parks and game management areas we have; about 6% of the land has been exploited. The rest of it has not been exploited. Over the last five years we have had an excess production of the main crops, grain and maize, which have been the mainstay. In terms of food security, we do not really have a problem at the national level. We are also more than self-sufficient in terms of wheat production, and generally speaking, Zambia is not importing food from anywhere other than products that cannot grow in our environment, such as apples and other fruit, because of the weather conditions. Our target is towards sustainability.

We are also engaging right now into energy products. We are looking at Jatropha and Moringa. We are looking at products that will give us sustainable oil products. Zambia has 365 days of sunlight, so we think that solar power will be a major contributor to this. Wind power is going to be a major contributor to the energy sector. Generally, in terms of water resources, the country has 40% of the water resources for the southern African sub-continent. We have got six major perennial rivers including the biggest one, Zambezi. This river, starts from Zambia, goes into Angola, and comes back into Zambia. We border with Namibia, Botswana, and Zimbabwe then the river proceeds on to share with Mozambique on the southern side. There is a power station dam which we share with Zimbabwe called Kariba dam where we generate the equivalent of just under 700 megawatts of power. Zimbabwe also generates a similarly substantial amount from the other side of the border, so that is a major resource for us. Further down the stream, in terms of the Zambezi River, there is the Cahora Bassa Dam in Mozambique. Again, this is used for generation of power. After that, is the flows into the sea. We want to use this as a navigation channel to bring some of the products from the sea shore up inland so Malawi, Zambia, and Mozambique can benefit. This is one thing we are doing with infrastructure. We have a young population. Out of the 10.2 million of our people, about half of that would be people that are above 16 and below 35. This is the youth that is looking for jobs, and this would be the potential labor force for most of the industries. This is how Zambia looks at the moment.

What issues specific to agricultural investment is Zambia currently facing? How are you working to overcome these issues?

SICHINGA: Clearly it is a major issue in terms of investment. Land has always been a contentious issue; wars have been fought over land. We recognize that if a resource is not utilized, it is not worth anything to a nation. Zambia's 754,000 square kilometers is only useful if it is exploited in various ways However, because of sensitivities about land, the law that we have at the moment is that a foreign individual may not own land. All of us lease land from the state. However, if a foreign company comes to Zambia and wants land, as a company not as individuals, they can lease land like the rest of us. In this case we have demarcated specific areas which we are calling farming blocks. These farming blocks will not be in just one place but in all the provinces. We have ten provinces in our country and below the province are the districts. In total, we have about 75 districts, and we are creating more in order to bring services closer to the people. Each one of the ten provinces is going to have a farming block and that farming block is then demarcated for investment. We bring in power, we bring in water, and we bring in infrastructure in terms of roads and bridges. This enables those that want to invest to come into these localities. They can lease for fourteen years or they can lease for ninety nine years. It all depends on the kind of application, and this allows the government to have the benefit of reviewing how well people are utilizing the land rather than speculating with the land. The government has insisted that we must reduce the duration of these land leases according to what the paper says it is required. In most cases, when we do a PPP (Private and Public Partnership) we look at the objective. If the investor seeks to recover their money, for example after ten years, then you can give them a fifteen year lease. If they are to recover it in twenty years, according to the agreement they have with the government, then we can give them a twenty year lease or a twenty five year lease. This is how the government has dealt with it. Individuals may not buy land. Even I, as a national, I cannot buy land; I must lease.

There are also guarantees for the investor within the Constitution and the investment act, which is called the Zambia Development Agency Act, which we passed in 2006. It is currently operating for investment purposes. There is also the Local Districts Laws and Local Economic Empowerment Law which works in conjunction with the investment law. The PPP is a separate law under the Ministry of Finance. For the general investor, we have the IPPA (Investment Promotion and Protection Agreement). The IPPAs define the qualifications and the benefits that accrue to the investor. Most investors do not pay any taxes for the first five years. This may be extended for up to ten years depending on the nature of the investment and duration it takes to recover the investment that has been made. We have also been working on the registration of companies under PACRA (Patents and Company Registration Act) which is responsible for ensuring that a company does this registration. At the moment, our target is that we give a certificate within 24 hours which will be used to be registered for tax purposes, so that you are identified and may be entitled to the operation of the IPPA. Zambia is a signatory to all the international agreements in this particular respect. Both the constitution and the subsidiary laws protect the investor, so there should be no fear whatsoever unless the investment itself has been corruptly done. In this case we insist that we do not want to have the corruption aspect rearing its head.

We are mounting a major campaign against corruption. We want to benefit the investors, and we want their investment to be done without officers having to ask for payments to do their jobs. For Zambia, this is a very important area. Unless it was done in a corrupt manner or fraudulently, you do not have to expect any kind of interference from the government. This is the position of the government. We are mounting major investment campaigns throughout the world. We are headed to Turkey, and we are also going to go to Asia. This year, we are going to go to India, Malaysia, China, Korea, and Japan. We are attracting everybody to come in. As for Europe, this has been the traditional investor. Right now our doors are open to everybody. Whether investment is from the North, South, East, and West, we will treat everybody on the same basis. However, I want to emphasize that we are not waiting for a particular group to come and invest in our country. Whoever comes first will receive our attention and services. We welcome everybody, both in the private sector and investment through PPPs, as well as in general partnerships with the local citizens. We want to have a diverse economy that is not dependent on a particular country or dependent on a particular commodity.

How would you describe the climate for business in Zambia?

SICHINGA: I would like to assure investors that Zambia is ready to do business. This is a country that is dynamic. We are on the move. Zambia is experiencing a renaissance, and we do not seek investment from just one source. We will accept investment from the North, as we have traditionally done from European countries. We are also going to accept from the South, such as our neighbor South Africa. We are also looking for investment opportunities in the Middle East. In Dubai, Doha, Saudi Arabia, and Qatar, we are seeking to attract investment from the Arab world too. This is very important for us. Besides that, we are going to Asia. We are going to India, Malaysia, China, Japan, and Korea. In June we are headed to the United States, Canada, and Brazil. We are hoping we can attract investment depending on the strength of the particular countries to which we go in terms of their investment expectations. Zambia is doing this deliberately. We do not want to rely on one country or one commodity. We want to spread the investment. All the partners that come to our country are going to be treated on the same basis. We are increasing the efficiency of our investment institution and the Zambia Development Agency. We are opening up, locally, offices in all the ten provinces to ensure that the services can be provided for company registration, market access, and backup that is needed in terms of the loans that are required from the services and economic empowerment. This is to ensure that the locals participate. This is not exclusively for foreign investment. In fact, in 2008, local investment exceeded foreign investment, and we want to encourage that. We want Zambian citizens to participate; they should not be bystanders. They should be an integral part of what is taking place in their country.

Zambia is a very stable country. We have held free and fair elections since 1964 when we got independence, and we have had elections every five years. We now have the fifth president since our independence. Throughout, all these have been peaceful elections. We want to assure investors that we are talking about a politically stable country. Last year, in September, we had elections and no one probably observed that Zambia had elections because it was so peaceful. We had a very peaceful change. Our people expressed their desire for a new government and a new president through that election, and we achieved that. This is stability that an investor is looking for. There has never been any civil disobedience or civil disruption in our country for the last forty eight years. We are talking of a country that has a mature democracy. Our democracy has matured, and we want to assure those investors that would like to come to our country that we are a very stable country which is land linked to eight other neighbors. We are an integral part of the Southern African development grouping. We are also members of COMESA, the Common Market for Eastern and Southern Africa. COMESA, together with SADC and East Africa, is forming a tripartite. We are working towards creating a common market from Cape Town right through to Cairo. That area, comprising 26 countries, is going to be a common market. After we are finished with Turkey, we are headed toward Addis Ababa, which is the headquarters of the African Union.

We are working on this tripartite to bring about commonality and make it a common market. We are hoping by 2017 we can have a common monetary union but that is way ahead of us. We are working on that, and whether we achieve that or not is another matter. In the meantime, we are harmonizing investments and the way we do business. We want to encourage intra-Africa trade. We want to ensure that the non-tariff barriers, as much as possible, are removed. For the investors, this is good news because that means they can sell to the region besides overseas markets to Europe, United States, and Eastern Europe. We are also seeing a major investment surge on a southern basis. India, China, and South Africa are investing quite a bit. Mostly, what we are seeking at the moment is to get the products that are available locally to be value added so that jobs are created for our people. The young population requires to be employed, and our target is that we create a million jobs in the next five years. This is a major thrust that the country is going through and because we are a steady country with no civil unrest and plenty of resources, it is up to the investors to come and talk to us about what the opportunities are. We are increasing and boosting the efficiency of these units that are responding to investor requirements. Zambia is ready to do business with the rest of the world, and we invite the investors from all over the world. North, South, East and West, you are very welcome.