Zambia Journal: Industry Woes
Guest blogger Brian McBrearity will be reporting from time to time about his experiences working in Zambia on SME and financial services development. His Zambia Journal posts will appear about once a week here on NextBillion.net. This is the second in the series; read his previous post here.
I spent the last week traveling north of Lusaka to the Copperbelt Province, near the Congo (DRC) border. This is the heart of industrial Zambia?rather, was at one point.To put it bluntly, the manufacturing industry has collapsed. The southern side of Ndola?once the largest city in the country?is a ghost town of abandoned factories and industrial buildings. Not one seemed to be occupied, nor showed any signs of recent life. All of the ancillary businesses have disappeared as well. The normal entrepreneurial sights in Africa?local produce stands, variety shops, taxis, ?Talk Time? purveyors?were noticeably absent from the roadsides and alleyways.
Apparently, Chiluba (Zambia’s second president) embarked on a program to encourage foreign investment and open markets to foreign goods. He granted tax concessions on imports, which correspondingly increased competition for the local manufacturers. Thus began the downturn of Ndola’s economy, as well as the other industrial areas in the north of Zambia. For reasons unknown to me, the local manufacturers could not compete with the imports. This would be understandable, if the imported goods were coming from countries with a lower wage base, or lower cost structures than Zambia. However, Zambia’s costs are on par, if not lower, than other economies within the region. I have yet to determine why Zambia’s own manufacturers could not compete. Zambia is a country rich with resources, a low wage base, and a population willing to spend. The increased competition should have encouraged Zambian manufactures to produce more appealing and innovate goods. Why were imports so much more attractive than local alternatives?
During my stay in Ndola, I spoke with a taxi driver as he was driving me to my lodge. I asked, rather innocently, ?How’s business?? The response was a glum, ?Not good,? followed by a small dissertation on the sour state of the local economy. It appears that even the taxi drivers have other careers in mind, but there simply isn?t the economic vitality within the region to support a growing array of businesses. This particular gentleman clearly felt he was working below his means?he was a mechanic by training, but he was forced to drive a taxi because of economics. Seeing the number of taxis sitting idle around Ndola, this did not appear to be an attractive alternative.
Some colleagues and I met with a group of entrepreneurial women who owned businesses around Ndola. The women owned a transport company (mini-busses and taxis), boutiques, salons, cell phone shops, and general merchandise businesses. Most were traveling abroad to supply their small-scale businesses. They imported goods from Tanzania, South Africa, and Dubai. More than a few of the women were looking forward to traveling to China for future acquisitions.
The view from this group was quite a bit more encouraging. All within the group indicated that business was good and profits were healthy, yet they all agreed that Ndola was not the vibrant, robust town it used to be. However, none sourced their inventory from local suppliers, save the one farmer in the group who bought locally produced stock feeds and seeds. As the group discussed traveling to more exotic locations for bigger and better imports, one could hear the sounds of the cash registers in their heads. When I asked about Zambian suppliers, the reply was simple. There aren?t any.
Everyone agrees that unemployment is high. Street kids are pervasive. Many shops are filled with inventory but lacking customers. Locals argue that there ?is just nothing to do in Ndola.? Yet the women in the group feel that business is good, and they are looking for more products to sell. Again, this country of contradictions has me stumped. If unemployment is high, and wages are low?who is doing all of the spending? And where do they get the money?