Economic situation Current economic reforms in Zambia are designed around the Public Sector Reform Programme (PSRP), the Privatisation Programme (PP) and Export and Investment Promotion (EIP). The PSRP aims to establish a leaner and more effective public service; current measures include the commercialisation of selected government departments, a hiring freeze in most of the public sector and a lowering of the percentage of casual employees in the civil service. Export and Investment Promotion involves a continuation of the liberalisation of the economy. Since the beginning of the 1990s, financial markets and services, trade and transport have increasingly been liberalised. Despite the programme of economic reforms, the economy has remained virtually stagnant during the last decade. The policy framework that has been put in place has failed to deliver the new impetus to economic growth and social progress that had been envisaged at the beginning of the decade. During 1991-98, average growth was negative, annual growth rates being positive in only three out of the eight years. GDP per capita declined from US$ 375 in 1980 to US$ 305 in 1990 and US$ 257 in 1995 (in 1987 US$). In 1998, the economy contracted by 2 per cent, thus lowering income per capita by around 5 per cent. Real GDP however grew by 2.4% and 3.6% in 1999 and 2000, respectively. The economy did not perform so well in 1999 largely because of mining's poor performance (almost 1 million USD was lost in subsidising the mines per day). The year 2001 saw the real GDP growing by 5.2%. The 2001 budget offered tax breaks for tourism and mining, but did little to cut the high indirect tax burden faced by manufacturing. Public spending is to rise to clear some of the state copper mining company's debts. However, some optimism prevails as First Quantum Minerals and Glencore bought the Nkana and Mufulira mines for $43m as of 1 April 2000. Copper production fell in the last two months of 1999. Like most countries in Southern Africa, Zambia was not spared by the 2001/2002 drought. Structural constraints and financial difficulties at the Food Reserve Agency have worsened prospects for subsistence farmers. Zambian consumers suffered high levels of inflation throughout the 1990s, with the rate peaking at 188% in 1993 before falling to annual average of 26% at the end of the decade. The kwacha fell by 22% and 53.8% against the US dollar in 1999 and 2000 respectively. This prompted the government to introduce temporary exchange controls (which were then removed in April 2001), which saw the inflation rate decelerating to 18.7% in December 2001. The exchange rate also appreciated by 8% between the year 2001 and June 2002. Despite the above positive developments the country still faces a number of macroeconomic problems ranging from fiscal deficit (4.7% of GDP in 2001). The high 2001 fiscal deficit was mainly as a result of expenditure overruns on account of hosting the OAU Heads of State Government Summit and tripartite elections as well as shortfalls in external budgetary support. The Mwanawasa-led government however, appears to have the political will to ensure macroeconomic stability. The food deficit ravaging the Southern Africa economies has serious implications for macroeconomic stability, particularly inflation and exchange rate stability. In March 1999 the IMF pledged US$350m under an enhanced structural adjustment facility (ESAF) over three years. In 2000 the IMF and the World Bank granted the country relief totalling US3.8bn for a period of over 20years. There is an increasing indication of donor fatigue in Zambia where the government has been good at mentioning the donor-popular issues (poverty plan, governance, decentralisation, privatisation and gender policies), but where most policies have never been implemented. The recent sales of the Zambia Consolidated Copper Mines (ZCCM) may have sidelined the issue, but it still prevails. The next such issue could be the poverty plan and governance programme for HIPC qualification. Agriculture has shown moderate growth rates in small-scale farming and highly specialised cash crop commercial farming has shown very impressive growth rates, but from a low initial level. For small-scale farmers poor infrastructure, both in terms of roads and feeder roads as well as delivery mechanisms and marketing systems, are still barriers to progress. Urban employment and incomes are still decreasing in real terms. Zambia has a very high untapped potential in tourism and agriculture, but stability in the region as well as a healthy investment climate are necessary pre-conditions for utilising this potential. Political and tripartism situation Since the economic shocks in the 1970s, notably the sharp fall of the price of copper, economic policy in Zambia has been characterised by a series of policy regimes that alternated between 'controlled regimes' and liberalisation of the economy. The initial response from government to the rapid deterioration of a range of economic indicators (the current account, public finance, foreign reserves, the rate of inflation), was to move further towards controls. During the 1980s, however, a number of attempts were made to liberalise the economy, which was dominated by the State and an extensive network of parastatals. The State determined agricultural producer prices, the exchange rate and the interest rate, and owned the ZCCM, which provided for the bulk of the country's exports. It was not before the change of government in the beginning of the 1990s that full-fledged structural adjustment programmes were implemented and the economy was put on a path of sustained market liberalisation. The Movement for Multiparty Democracy (MMD) took over from the United National Independence Party (UNIP) in 1991, and has since then consistently implemented a major programme of economic reforms. With the death of UNITA leader, Jonas Savimbi, and the gradual development of peace in Angola, the relationship between Zambia and Angola is expected to improve. A further influx of Angolan refugees is unlikely to happen, thereby improving security in Western and Northwestern Provinces. Zambia's mines are unlikely to be affected by Congo's civil war. There was political unrest in the country in 2001 as the then President, Mr. Chiluba, tried to amend the constitution to allow him to contest for the third term in office against the stipulated maximum of two terms. After Chiluba’s failure to secure a third term Mr Levy Mwanawasa, who contested on an MMD ticket, narrowly secured a victory to become the third Zambian president in the December 2001 elections. Currently Mr Chiluba is being tried by the Mwanawasa regime for embezzling government funds during his term of office. Tripartism The unions are weak, although most of the splinter unions have come back to the umbrella union, ZCTU. Similarly, the employers, ZFE are rather weak and losing members to the chambers of commerce, ZACCI. In general the social partners have substantial ground to cover before a genuine tripartite system is in place. Although tripartite meeting are scheduled 2-3 times annually, the institution is weak and has no secretariat. Generally government unilaterally determines the interventions in the labour market and the partners are inexperienced in how to use the system to solve such conflicts. Social situation General dissatisfaction with the situation prevails, but there is no signs of long term in-stability. There seems to be a lack of trust to the entire political system, which is directly measurable on the participation rate in the 1999 local elections, where only 5-10 per cent of eligible voters decided to exercise their rights. The dismal economic performance has had clear negative effects on employment and the labour market. Formal sector employment has contracted to less than 10 per cent of the labour force, of which more than half consists of employment in the private sector. Besides the contraction of formal employment opportunities, demographic factors put pressure on Zambian labour markets. This has resulted in growing unemployment in the 1990s, especially among the youth. In 1996, the youth unemployment rate (32 per cent) was more than double the overall rate of unemployment (15 per cent). Poverty and income inequality also continue to pose major challenges in Zambia. According to a report from the Central Statistical Office (CSO), almost 70 per cent of the population were considered to be poor in 1996. The report shows that the incidence of poverty was highest among households whose heads were self-employed, which constitute most of the informal sector. Furthermore, many workers in the formal economy earn wages that are inadequate to sustain a living. The CSO-report shows that more than half of the persons living in households whose head is working in the formal sector are poor, as compared to almost eighty per cent of those living in households whose head is active in the informal sector. From a framework with an urban middle class (financed by copper) and where farming and traditional social safety nets were dissolved, Zambians now seem to be in a vacuum where potential and for some, survival are in production and agriculture. This requires a major emotional and social shift for many urban people. Furthermore it has policy implications, as for example the education system has been strongly biased towards urban formal employment, and in general, a richer economy. International Labour Standards: Ratifications: Generally Zambia's record is excellent. Zambia has ratified a total of 40 Conventions, a great number of which upon independence in the early 1960s, then at a regular pace over the 1970s and 1980s, with the most recent in October 2001. Having wished to denounce the ban on underground work by women (in the name of gender equality and given the changes in its national laws), it consulted NORMES and denounced Convention No. 45 in March 1998, following the advice of the Committee of Experts to ratify in parallel the more modern Convention on mines, No. 176. Zambia has ratified all the eight fundamental Conventions including Convention 182 on child labour. Conventions ratified by Zambia ILO Technical Cooperation:
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