Zambia’s fortunes rise and fall with copper price

The fortunes of the Zambian logistics industry are a reflection of the country’s over-dependence on copper. About two-thirds of Zambian export earnings are generated by copper. The freight industry boomed and grew in 2008, when the price hit more than $8 000 a ton, and the Zambian economy grew by 5.8%. By December the price had fallen more than 60%. The kwacha fell by 70% against the dollar, and mines started making losses and closing – leading inevitably to retrenchments and consolidation of the freight industry. Things are looking rosier with a recovery in the copper price, but logistics companies continue to keep a wary eye on the copper prices. What happens in the freight industry is a good barometer of the economy, and Zambia has been warned since at least the 1990s that it is over-dependent on copper. Government has recognised this threat. Speaking at a Copperbelt business seminar on trade and investment opportunities earlier this year, Zambian finance and national planning minister Situmbeko Musokotwane said the country’s dependence on copper as the only large source of economic growth and foreign exchange earnings had led to tremendous economic volatility over the past decade. Government was attempting to grow sectors such as agriculture, tourism and manufacturing to diversify the economy. It also wanted to see more value being added to the copper before it was exported. “This can only be achieved through investment into processing that adds value in the sector. As government we will continue to focus on providing a welcoming environment to both domestic and foreign investment,” he said. Opportunities for Zambia and other commodity-rich African countries are highlighted in the United Nations Conference on Trade and Investment Economic Development in Africa Report 2010. It says Africa should take steps to ensure that its growing economic interactions with large developing countries, including China, India, and Brazil, result in economic diversification rather than simply the sale of African commodities and raw materials – the traditional pattern of the continent’s relations with the industrialised North. The study warns that so far, trade and investment flows with the South are reinforcing a longstanding trend in which African countries export farm produce, minerals, ores and crude oil, and import manufactured goods. It says this situation should be reversed while the South-South trend is still in its early stages. A repeat of the traditional pattern will not help African countries to reduce their traditional dependence on exports of commodities and low-value-added goods. In 2008, Africa’s total trade with developing countries, including African countries, for the first time exceeded Africa’s total trade with the EU, traditionally its major trading partner. With the continuing growth of large developing countries, together with weaker growth prospects in advanced economies, the economic relationships linking Africa to other developing regions can be expected to grow in relative importance, says the report.