Zambia may be Africa’s largest producer of copper, but the impact of this red metal on the country‘s economy still remains a mixed blessing. In the Mail and Guardian article posited on the Zambian Watch website at http://www.zambianwatchdog.com/2010/08/23/zambia-on-red-metal-alert/, it is argued that Zambia’s heavy reliance on copper is exactly what’s wrong with Zambia’s economy.
To be precisely, since 2000, Zambia’s economy has been growing, but much of that growth can be attributed to foreign investment in the copper mining industry as a result of higher copper price. Copper mining accounts for 70% of the country’s economic earnings. The truth is, higher copper price is good for Zambia because it means increased foreign reserves and increased economic activities in the country.
However, as a good economist would tell you, market does not occur in a linear fashion, so the reverse is also possible as we have witnessed during the recession of 2008 and 2009. When the copper price on the international market nosedived, the Zambian economy shrunk, copper mines closed, and unemployment rate skyrocketed. If this sounds like dejavu all over again, it does because it brings to mind the oil crisis and subsequent stock market crash of 1973 which took Zambia’s economy down due to lower copper price. Zambia’s solution then was borrowing its way out, a process that saw the country spiral into IMF and World Bank debt-trap.
The good news, Zambia’s mining industry is booming again. This time the solution is not binge borrowing, but China. Chinese investors have come to fill the vacuum left by Western mining companies that scaled their operations or departed when the recession hit last year.
What does all this mean for the long-term growth of Zambia’s economy? Can Zambia survive on an economy that is foreign driven, even in the case where Chinese are seen as friends? Here is what it means: Reliance on the copper industry could overexpose the Zambian economy, therefore negatively affecting the stability of the local industries, including the currency, if not poisoning (due to the copper ore smelting processes) the environment.
The answer: The Government of Zambia should speed up the diversification programme in order to reduce its economy’s dependency on the copper industry.
