Zambia Needs Much More Than MIC Status

By Mutale Kapekele

The Zambian government says the country’s upgrade to a lower middle-income status is not enough success for the country, as it would like to see prosperous citizens.

Speaking when he addressed the From Low To Middle Income Status: Preparing Zambia to Create The Future Conference, organised by Oxfam, Ministry of Finance Deputy Director Crane Muleya, said there was still need for economic growth to translate into success for citizens.

“Much as we have achieved the lower middle income status, we also want to be prosperous, which means a lot of things,” Muleya said. “Currently, we are working towards achieving the aspirations of the Sixth National Development Plan (SNDP 2011 - 2016). This is been done through annual budgets. We want to see growth that cuts across sectors. For instance the agricultural sector has not been doing well until three years ago.”

Zambia graduated from a low income to a lower middle-income country in 2011 but statistics show a high levels of poverty which is estimated at 60 percent or 7.9 million of the close to 14 million population.
Muleya, in his presentation titled ‘Government of Zambia strategy for poverty reduction and inclusive growth,’ named poverty determinants as low agriculture productivity, lack of social security schemes, high illiteracy levels, large family sizes in rural areas, inadequate labour capacities and natural disasters.

He also said other contributing included poor access to education after the seventh grade and the inability to contract finance.

He said the Government was working towards removing structural barriers and reducing domestic borrowing to less than one percent to “leave the finances for the private sector.”

According to Muleya, Zambia desired to create an investor friendly destination by insuring political stability and a good business environment.

He said the low taxes that the government is collecting from the mines, the backbone of the Zambian economy, was an historical issue.

“The mines were on their knees at some point forcing some of them to close down,” he said. “This forced the government to negotiate the current development agreements, specifically the tax regime. Personally,

I don’t believe that tax incentives should be used to attract investment.
What is important is creating a conducive business environment and the government can work out particular legal requirements to get tax from the mines.”

In November 2012, the Zambian Government announced that the country was losing US$ 2 billion in tax avoidance with the mines winning the spot of the biggest culprit.