PRIVATIZATION PIVOTAL TO NEW APPROACH
The privatization process has been a top priority of the government’s economic policy

A range of companies have been privatized over the past decade and handed over to businesses that are able to manage them efficiently while contribut¡ng the funds needed for them to flourish

The privatization process and the establishment of a free market in Zambia has been rapid; transforming the economic landscape within a decade.

“We are one of the most liberal countries in the region - we have a very liberal foreign exchange regime and the movement of goods and money is relatively free,” says Dipak Patel, Minister of Commerce, Trade and Industry. “In the region, our privatization program has been one of the fastest.”

Parastatal enterprises were not contributing to sustainable growth, so the private sector was promoted as the new impetus for development. The move was designed to create opportunities for investors and has succeeded in attracting overseas business, which has significantly strengthened the economy.

The Zambia Privatization Agency (ZPA) - an autonomous body which reports to parliament - was set up by the government in 1992 to control and monitor the process of selling off state-owned companies and properties. The agency assesses the assets, debts, and viability of each business and aims to sell it for the maximum benefit of the country.

The World Bank, USAID, Britain’s Overseas Development Agency, and the German aid agency GTZ all collaborated on the establishment of ZPA, providing technical and financial support.

Since 1992 ZPA has organized the privatization of 254 companies - attracting more than US$990 million in investment - and is preparing a further 24 firms. The businesses are sold to firms whose structure is more competent to run them and who possess the capital required to do so, whilst ZPA aims to ensure the process is transparent and efficient. Its goals are to stimulate economic growth, speed up development, ease the transformation of the economy, generate capital for the government, and create long-term potential for employment.

ANDREW CHIPWENDE
ANDREW CHIPWENDE
CEO of ZPA
STUART CRUICKSHANK
STUART CRUICKSHANK
Advisor at ZPA

The last stage of privatization has seen the government opt for concessions or commercialization rather than the outright sale of shares, say ZPA’s CEO Andrew Chipwende and the agency’s Advisor Stuart Cruickshank. However, ZPA is still pursuing the privatization of some remaining state-owned enterprises which the government is unable to refinance.

Privatization has had positive effects on the economy, with GDP growing 4 percent in 2002 compared with 2.4 percent in 1999. In order to consolidate this progress, Zambia needs to attract more foreign investment to increase production, modernize its infrastructure, and boost employment.

“The key areas for investment are tourism, energy, agriculture, and mining for metals like cobalt and copper as well as gemstones. These are our strengths,” says Mr. Patel. “We could get involved in many other industries, but we would not achieve added value because we would have to import most of the inputs.”

To facilitate and promote investment, the Zambia Investment Center (ZIC) was founded in 1991 as part of the state’s ambitious strategy to attract national, regional, and overseas investors.

ZIC provides information to domestic and foreign businesses on investment opportunities in specific sectors, as well as on the incentives the government has put in place. These include duty-free imports of agricultural machinery and equipment, wear and tear allowances for buildings used for manufacturing, mining or hotels, and income tax deduction for expenditures on research, technical education or further training related to a company’s business activity. The center also tries to cut through red-tape, enabling the acquisition of licenses or immigration and employment permits.

JACOB LUSHINGA
JACOB LUSHINGA
Dir. General of ZIC

“We are trying to make this place a one-stop facility for investors so that when they walk out of here they have all the licenses they need and can concentrate on the core business they are in Zambia for,” says Jacob Lushinga, Director General of ZIC.

Since its creation, ZIC has handled around US$2.9 billion worth of investment, but it now wants toaccelerate the pace. Building confidence is essental for its future success, Mr. Lushinga emphasizes.

“Confidence cannot be achieved unless we are accurate in the reports and advice that we give. When people pick up the phone and call the investment center, they know they will be told the truth and will be able to make a decision based on that information.”

Zambia is eager to attract more U.S. investors, and Mr. Lushinga assures American entrepreneurs that they will reap the benefits of Zambia’s favorable investment climate. “They will maximize their profits by investing here and production costs are low. They will also find a safe destination for their investment, since they can be sure they will be able to repatriate their profits.”

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