By Bright Chizonde
On Thursday, 6 June 2024, the World Bank Zambia country office launched the Zambia Country Economic Memorandum under the theme “Unlocking Productivity and Economic Transformation for Better Jobs.” As part of the report, the World Bank conducted a comprehensive economic diagnosis of the economic growth performance of Zambia during the period 2001 to 2021. Notably, Zambia’s economic growth increased significantly between 2003 and 2012, from around USD$5 billion to USD$25.5 billion, something that was impossible in the previous 40 years. However, the period 2012 to 2021 was characterized by a significant drop in economic growth, even before the impact of the COVID-19 pandemic.
In explaining the economic growth path, the World Bank noted that a robust expansion in the mining sector accelerated economic growth during the 2000s, but it was weighed down by the collapse in copper prices in the following decade. Further, they noted that investment in public consumption rose rapidly in the 2000s, driven by an ambitious infrastructure development agenda. Rather than deliver economic growth, the public investment boom widened the fiscal deficit and elevated debt burdens. Consequently, the macroeconomic imbalances mounted as capital inflows weakened during the second half of the 2010s, triggering the 2020 external debt default when the COVID-19 pandemic hit. Finally, the report also notes that during the 2010s, productivity was on a declining trend, limiting its contribution to economic growth.
The World Bank does present a compelling and evidence-based account of Zambia’s economic performance. However, there is a missing link. The analysis does not acknowledge the impact of governance related factors such as corruption on this economic growth story. During the period 2003 to 2012, when the economy expanded by over USD$20 billion there was an escalated campaign to fight corruption. It is also during this period that Zambia embarked on an extensive legislative review in order to strengthen the legal framework for the fight against corruption. In sharp contrast, corruption rose during the period 2011 to 2021. Zambia’s Corruption Perception Index (CPI) dropped from 37/100 in 2012 to 33/100 in 2021. The International Monetary Fund, in the Diagnostic Report on Governance and Corruption, noted that Corruption became particularly entrenched and institutionalized during the period 2016 to 2021, which further eroded public trust in institutions.
Given that the IMF Diagnostic report also noted that Corruption is generally associated with weak economic growth, lower investment and fiscal revenue, higher inequality, and worsens inclusive growth performance, it is surprising that this was not incorporated into the World Bank analysis. The fact of the matter is that Corruption can almost perfectly explain Zambia’s economic challenges during the 2010s. This postulation is premised on two major conclusions. First, rent seeking in public resources allocations, in favor of infrastructural development, and corruption in the public procurement system contributed to the widening of the fiscal deficit and elevation of the debt burden. In this context, rent seeking is the allocation of public resources to activities that lead to unproductive use and cause a social loss or what is known as wasteful expenditure. It is now well established that there was significant waste of government spending in multi-year infrastructure contracts during the period 2011 to 2021. This waste of resources was however by design as it is clear from the Financial Intelligence Centre reports that Prominent Influential persons (PIPs) collected huge kickbacks from these infrastructure projects as public procurement corruption became one major driver of the generation of proceeds of crime.
Second, the period is also associated with an increase in political patronage, clientelism and nepotism as Zambia’s PRS Group International Country Risk Guide Index, which measures corruption in the form of excessive patronage, nepotism and job reservations, dropped from 50/100 in 2012 to 36/100 in 2020. This means that there was an increase in the ability of Prominent Influential Persons (PIPs) to derive financial benefits from government programmes and economic activities as validated by the prominence of PIPs in the case studies presented by the Financial Intelligence Centre during this period. Consequently, it made less sense for the highly skilled workers, bearing a heavy tax burden, to increase their productivity when the less skilled PIPs were getting most of the economic gains.
In conclusion, as we look back to the past decade of economic regression, it is important to conduct a more comprehensive diagnosis, considering both economic and governance-related factors. Any analysis of Zambia’s economic growth story, with no reference to governance challenges such as corruption, is unlikely to provide a full picture of the real problems, and consequently lead to superficial recommendations. It is critical to note that reducing corruption vulnerabilities in Zambia can have significant impact on macroeconomic performance in the medium- and long-term and on the ability of the government to pursue policies to achieve external viability and sustainable growth.
About the Author
Mr. Bright Chizonde is the Advocacy, Policy and Research Manager at Transparency international Zambia. He is an economist and governance expert with experience in macro econometric and macroeconomic analysis as well as anti-corruption research. For more information on this article, please email bchizonde@tizambia.org.zm or visit the TI-Z Resource Library.
