Mozambique Corridor

The recent opening of the Chipata-Mchinji railway link opens up some new and exciting opportunities for the private sector players in the three three affected countries namely; Zambia, Malawi, and Mozambique.

Although the Chipata-Mchinji railway link is only 24 kilometres long, it provides connectivity into the Malawi railway network and further connects Zambia to the northern Mozambique railway network.

The Malawi railway network runs for 797 kilometres from Mchinji in the north to Nsanje in the south. Midway between Salima and Blantyre the railway line forks to the east and heads into Mozambique via the town of Cuamba. The Malawi railway network touches Lilongwe, Salima and Senga along Lake Malawi, and Blantyre the commercial capital. There are no railway lines in the northern part of Malawi.

In Mozambique, the railway system is generally confined to the northern part of the country. The Cuamba line coming in from Malawi runs about 900 kilometres from the Malawi border at Entre Lagos to the port of Nacala on the Indian Ocean. On route is the major town of Nampula and the seaside town of Lumbo.

The railway line from Nsanje in Malawi enters Mo

zambique via the junction town of Vila de Sena where the railway system then goes up north and down south. In the northern direction the railway extends for about 300 kilometres to Vila Moatize very close the Tete the provincial capital of Tete province. Tete is only about 150 kilometres from the Cahora Bassa dam. Towards the south, the line runs for about 400 kilometres from Vila de Sena to the port city of Beira via Inhaminga. Interestingly though, Vila de Sena is also located on the banks of the Zambezi river that pours out of the Cahora Bassa dam and heads south east to the Indian Ocean. This offers an option for river barges and other marine vessels to transport goods and people to and from the ocean along the Zambezi river.

The Chipata-Mchinji railway link therefore offers railway and marine transportation links to the port of Nacala, to the central and northern parts of Mozambique, to the Zambezi Delta midway between Beira and Quelimane, and to the port of Beira.

The options for cross border trade and more substantial exports and imports are now much wider for Zambia, Malawi, and Mozambique.

Zambia’s access to the railway and waterway networks of Malawi and Mozambique should trigger some new ideas for business and trade as all three countries sign up to the COMESA Customs Union and are challenged to be more productive, more efficient, and open up more opportunities.

Currently the port of Nacala exports sugar, tobacco, peas and tea to the rest of the world. This port handles imports fertilizer, oil based fuels, and containerised shipments. A passenger service currently runs thrice per week ferry people from Blantyre in Malawi to and from the port of Nacala.

The rail line from Moatize to Beira has focussed on transporting coal fro the mines in the Tete province for export across the Indian Ocean.

The private sector in Zambia, Malawi, and Mozambique now have the option to use the Nacala Corridor and Beira route to spread regional trade in the Growth Triangle formed by the three countries.

Key opportunities lie in the movement of bulk products such as cement, mealie meal, and other processed dry foods.

The motivation for Zambia to extend the railway line from Chipata to Petauke and then through to join the Tazara railway network at Serenje becomes more interesting as an effort to remove the road transportation from the rest of Zambia to Chipata. This 300 kilometre railway line will integrate the Mozambique, Malawi, Tanzania, and Zambia railway networks.

The net result will be that big trucks will no longer be the best way of transporting goods across the country because the railway system will do a better job and much cheaper.

The Zambian government has considered a project to build a dry port in Chipata as mechanism for storage of goods that are either to be exported or for goods to be imported. It is imperative that this infrastructure is built as soon as possible to support, promote, and facilitate trade via this new railway linkage.

It is quite clear that competition leads to lower prices and high levels of efficiencies. To this end, it is important for Zambia to have as many routes to the oceans as possible to generate the necessary competition amongst bulk cargo movers such that the exporter or importer gets the best deal. Goods will move across the region efficiently and at affordable costs as the transport infrastructure is developed.

This new door to the ocean adds to the competition amongst our traditional routes wherein Dar-es-Salaam competes with Durban and Walvis Bay. The addition of the ports of Nacala and Beria intensifies the completion in respect to costs, efficiencies, safety, and accessibility.

This philosophy is embraced in the North South Corridor that aims to develop a communication and trade infrastructure network along the Great Rift Valley and beyond. The goal of this program is to foster regional integration which brings about social and economic connectivity amongst neighbouring countries.

The private sector in Zambia is now challenged to take advantage of the new route to the south east coast of Africa and prevent the Chipata-Mchinji railway link from becoming the proverbial White Elephant project that has been the fate of many regional collaboration initiatives.

Published 31 August 2010

Investment And Development

Recent reports from the Ministry of Commerce Trade and Industry highlight that Zambia’s Foreign Direct Investment will exceed USD3 billion by this year end.

It is quite evident that much for this expectation is targeted for the capital hungry mining industry with some measurable investments possibly going to the manufacturing and tourism sectors.

Many of our investment targets are based on memorandums of understanding or pledges made by prospective investors during our international marketing endeavours.

The only substantive investments that can be reliably reported on, are those that have actually taken place.

It is commendable that Zambia has now acknowledged the need to focus on private sector business development through the initiatives to develop One-Stop-Shop Customs units at the strategic borders of Kasumbalesa, Nakonde, and Kasangula.

Socio-Economic infrastructure which includes new bridges at border crossings and improved roads to facilitate investment and trade, are high on the government agenda.

The weakness in our economic development model is anchored on the sidelining of the SME sector, and the lack of acknowledgement of human resources as a tradable and marketable commodity.

Zambia is challenged to link the foreign direct investments to domestic businesses so that some form of equity in development is established to create a balance between foreign investment and local investment. This goes a long way to ensure sustainable business activity during the good times, and the bad times.

Zambia is also challenged to support and facilitate the SME sector to grow and engage with every part of the economy as is the case in most developed and developing economies.

Zambia is further challenged to re-consider our philosophy in respect to the value and role of human resources as an investment in national development.

Zambia is too pre-occupied with negative clichés such as ‘brain drain’ and ‘capital flight’ and is beginning to lose the ability to see the opportunities at our doorsteps which include the COMESA Customs Union, and alternate trading partners that are more in line with our own development agenda.

Discussions on the global economic status often categorize the world into several major camps.

The developed west is branded as sophisticated, technologically advanced, and possess the highest quality of human resources in the world.

The Asian continent is often labelled semi-sophisticated, over populated with low quality of human resources, and prone to natural disasters.

South America is painted as sub continent with vast natural resources, poor governance, wide spread corruption, and low quality human resources.

Africa is the continent that is still indirectly managed by past colonial rulers, possesses vast natural resources, has the poorest human resources on the planet, and is open for exploitation by all and sundry.

The Asian continent, and more specifically China, has turned these perceptions upside down as they do not subscribe to labels that undermine their social and economic development.

As a consequence, Asia and China in particular, have continued to attract investment and have developed exponentially to the level whereby Asia is the most productive continent on the planet.

China has even gone further to acknowledge that her vast population is just as important a resource as oil, gold, diamonds, or copper. The question is how does China exploit this resource in the global trading system?

While Zambia jealously takes stock of our mineral resources and the Western world tabulates the power of its technology and knowledge, China has acknowledged its over one billion citizens as an evolving resource that responds to the changing demands of the world.

This may be the one philosophy that accounts for China rising up to be the world’s top producer, the world’s biggest depositor of disposable foreign reserves, and the world’s most productive country.

As the rest of the world looks to bigger spending budgets at the personal level, China strategizes to be a producer of the cheapest labour on the planet. This strategy ensures that China stays ahead of the competition when it comes to production of goods and services because the cost of labour is kept as low as possible.

This is an interesting concept because the rest of the world looks to improving the lot for employees by ever increasing salary scales. This has led to the current scenario whereby most of the large conglomerates of the world have now moved their production bases to Asia so as to avoid high salaries and to increase profitability due to the low wages paid in developing economies.

The mechanism has actually played into the China development agenda very profitably. Low wages and a billion citizens has been one of the most productive elements of the national development program. With the addition of some FDI incentives, China has managed to rake in a huge amount of sustainable investments from the West and stands today as the fastest developing economy of the world.

The method in the madness of China’s cheap labour includes the government efforts to ensure that the cost of living goes down successively thereby having the same impact on employees as that of salaries going up. The major difference is that the cost of production remains low as the wage bill does not increase, and the cost of food, transport, and shelter goes down.

As long as China will consider her people as resources that give the country a comparative and competitive advantage, the social and economic future of the country is well set.

Zambia hosts a nation of capable people with potential to be human resources that can propel the country into prosperity. It is necessary to take stock and chart a strategy that encompasses the SME sector and the people as resources that have a useful role to play in delivering investment and development in the nation.

Published 24 August 2010

Sweet Surrender

Zambia is at it again with efforts to woo investors from Asia.

Last week we noted that a company from India was quite keen to invest in the sugar industry in Zambia. The company is targeting the Nansanga farming block which was created years ago to facilitate the agriculture investments as detailed in the Fifth National Development Plan.

It is true that the big investors already on the ground in the sugar industry may have the muscle to churn out huge stocks of sugar so as to not only satisfy the local market, but to also export to the region. This does not in any way guarantee market dominance when new investors come into the sugar sector with the right quantity, quality, and price.

Studies show that customers are driven by better prices rather than marketing gibberish.

Competition is healthy and works in the best interests of consumers. We have seen how the hospitality sector has developed over the years such that in Lusaka one can find guest house accommodation from as low as K100,000 to a high of K500,000 per night. This phenomenon is driven by wide active competition and the same can be realized for sugar too. Let the competition grow and let the quality improve while prices come down.

This clarion call also goes to Agriculture Minister Peter Daka who has spent some time in Beijing at the China-Africa Agriculture forum where he solicited for investment in the Zambian agriculture sector.

Much of the marketing in agriculture has been to attract investment in food production through framing activities targeted on maize and other cash crops. Food processing is the next logical step in order to preserve the national production. Zambia may have done very well with sugar and maize meal, but the nation needs much more food crops to be processed and packaged to ensure food security throughout the year.

China underlines food security and food availability to her people as a national priority. This top of the agenda priority has been the bedrock on which China then launched the Industrial Revolution that developed the country to become the world’s largest producer of goods within 50 years. Statistics indicate that China tops the world production in poultry, pork, and rice. Interestingly though, is that China processes and consumes all the poultry, pork and rice that she produces in an effort to provide adequate and affordable food to the mass population.

The China experience is a good lesson for Zambia and the region. Zambia can take advantage of her centralized geographical location and grow more food to not only feed the nation, but to export to the region as is evidenced by the vibrant sugar industry.

Opportunities exist for the mass production of ground nuts that can be exported in raw form and as finished products. The range of products includes peanut butter, oil, sweets, roasted nuts, and a host of ground nut food products.

Other crops include Soya Bean, Cashew Nuts, and Cassava. All of these crops can be cultivated on large tracts of land and harvested for processing into various food products and animal feed stocks.

Cassava has the potential of being processed into more than twenty different food products that range from cakes and biscuits, to chips and cereals. Evidence of Cassava products in the daily diet can be seen in Brazil and other South American countries where cassava has been cultivated for hundreds of years.

Zambia is blessed with seasonal fruit crops that include Mangoes, Guavas, and Pineapples. There are options for producing these fruits in large quantities and processing them into either fresh fruit products or dried fruit products for export to the regional markets.

Zambia has grown mangoes for decades if not centuries, and still we note that imports of dried mangoes are coming into the country every day until we are able to process our own fruit to supply our own markets.

It is therefore true to conclude that the regional markets are open for marketing our food products even though many countries in the region may grow some of the fruit and other products produced in Zambia. The determining factors are quantity, quality, and processing capacity. These factors decide whether a country has the capacity to supply itself with food products or if they have to import from another country.

The sugar challenge may be the tip of the agriculture and food processing ice berg. Beneath this discussion lie the many opportunities and options that can unlock potential in the nation to rapidly support economic development as has been the case in China and other South East Asian countries.

What may seem as a trivial challenge to new investors in the sugar sector, could be the catalyst for agricultural expansion and food production at unprecedented levels that would tilt the country profile away from fighting hunger and address the nation to the challenge of economic growth that puts the private sector in the forefront of wealth creation and the opening up of new jobs across the nation.

Keeping the population well fed and healthy is a pre-requisite for economic development. The sugar story should be the flag off for competitive investment in all types of food production. One hopes to see the day when the current big players will throw their hands up in sweet surrender as they lose their dominance of traditional markets. The signs are already there. New players are strategically positioning themselves to take on the dominant heavyweights. Complacency will cost existing companies dearly. Proactive re-positioning will be the best route as the inevitable surge of new competition gears itself to challenge the status quo.

Published 17 August 2010

Ambuya One Year Gone Today

Ambuya (Grandma) died peacefully in her sleep on the morning of 16 August 2009.

It was when they carried her body out of her room and into the hearse that I knew that, in this life, I would never see her again. She was gone forever. As the hearse disappeared into the driveway, I noticed the trees swaying in the wind and I recalled how she used to talk about the wind. She would lie in her bed by the window and listen to the breeze. She'd look out the window and watch the swaying trees and whisper, "God is here..." I used to look out with her and, of course, never saw anything but swaying trees. Today I understood.

Today I walked out and retraced the path her and I used to take for her to show me what leaves and berries we could and could not eat.

The bushes were there no more. I stared out where we used to walk and, perhaps, hoped to see her but there was simply lifeless, dull, dry grass and weeds. The wind was blowing so loud! Louder than usual, I thought. I couldn't think. I shut my eyes to pray and it was then, at that moment, that I heard The Celebration. This was not noise! This was not the bewailing of the wind! This was a fanfare! This was an ovation!

I opened my eyes and noticed the dancing white cattails scattered across the field. I noticed the tall, dark green tree in the distance waltzing with the brilliant purple bourgainvillea that had cradled into its midst. I noticed the tall grass frolicking to the music that the heavens composed. And I noticed the tree that she watched from her window that participated in this grand symphony by rustling its lyrical leaves. I could hear what she heard and I understood.

Khalil Gibran once said that the trees are the poems that the earth writes upon the sky...today I heard an ochestra. Khalil Gibran once said :

For what is it to die but to stand naked in the wind and to melt into the sun?
And what is it to cease breathing, but to free the breath from its restless tides,

that it may rise and expand and seek God unencumbered?


Only when you drink from the river of silence shall you indeed sing.
And when you have reached the mountain top, then you shall begin to climb.
And when the earth shall claim your limbs, then shall you truly dance.

It was then that I understood that Ambuya never really left ...she was there the whole time.

Candy Morrell (Great Grand Daughter)

Heading AGOA

Ten years after the African Growth Opportunity Act was enacted, Zambia has stepped in to take over the AGOA Forum chairmanship for the next twelve months.

The Kenya Minister of Trade Amos Kimunya passed on the chairmanship to Zambia Commerce Trade and Industry Minister Felix Mutati in Washington DC recently.

Mr Mutati in his usual orator’s speech highlighted the importance of AGOA in promoting trade and economic development in sub-Saharan Africa. He went on further to emphasize the opportunities presented by the United States of America markets, where good financial returns could be made as Africa experiences positive growth.

In his never ending effort to market Zambia, Mr Mutati made reference to the abundant raw materials and minerals that Africa possesses, the cost effective labour force, the reduction in corruption, the introduction of business reforms, and the stable macro economic environment.

There is much ceremony and pomp at these occasions and we seldom see the subtle positioning of our trade partners to drive the processes to achieve their own desired goals.

The AGOA discussions on ‘New Strategies for Expanding US sub-Saharan African Trade’ was not developed by African countries endeavoring to trade with the USA. The topic and theme were the brainchild of the American civil service to ensure that the USA gets the best deal from the dialogue.

It is not a bad thing to do. We must remember however, that it was an engagement for the benefit of the USA and not necessarily for Africa or Zambia in particular.

It is said that the goal of the annual AGOA forum is to expand trade and investment with the USA, to review the implementation of the AGOA program, and to explore new ways to enhance trade across the Atlantic.

It goes without saying that the USA dialogue teams at the AGOA forum were adequately supported by their private sector representatives that put their trade agenda for Africa on the table to be discussed and negotiated with our government representatives.

The question is; did we do the same? Did Mr Mutati take with him a dossier of private sector concerns and positions that he needed to place on the discussion table? Did he take a team of private sector advisors to keep him on target?

If he did, then Zambia is on the right path and can use the AGOA route to enhance trade with the USA in a manner that will grow the domestic economy and provide opportunities to the Zambian private sector.

If he did not, then we will have yet again played into the hands of the smarter and more organized west that always takes advantage of our weakness in collaborating, partnering, and co-operating when it comes to tackling the outside world.

This may even be true of the African Ministerial Consultative Group meeting that took place in Washington DC. After all the meeting was in the USA, on USA terms, and hosted by the USA. We all know about the old saying that goes ‘He who pays the piper calls the tune’.

Did we consult on issues that we are concerned about? Did we bring out the statistics on how AGOA has not worked for us so far? Did we share experiences and try to assess what the failure root causes have been? Did we have a chance to openly brain storm and innovate some good ideas on how we can make AGOA work for our individual countries? I suspect not.

Zambia’s Ambassador to the USA Ms Shiela Siwela coined the event quite well when she noted that the AGOA forum could be used as a platform for the Zambian delegation to engage with American decision makers and their private sector in developing productive business networks.

The media reports indicate that Mr Mutati was the driver of the AGOA forum for Zambia, but no mention is made of the private sector voices that may have been present, and may have had something useful to contribute towards making AGOA work for Zambia.

It is typical for developing economies including Zambia to invest in the politicking, posturing, and signing ceremonies as an end in itself, and leave the real business of doing business out of the equation.

This tongue twisting and unproductive priority setting situation often leaves Zambia on the side lines waiting for something positive to happen by default, rather than spurring the economy ahead with a well developed and articulated response and implementation program that has the full backing of the private sector and the various government organs.

Now that Zambia is in the chair, we may be smart to peer review ourselves with outgoing chair Kenya, and possiblyUganda, to measure our AGOA successes over the next twelve months.

Accepting the AGOA chair has a momentary glory at the hand over ceremony when the spotlight is on Zambia. The 2010 to 2011 AGOA season can either be considered as an opportunity to propel Zambia into substantial trade with the USA, or it can be a waiting period that assures us of being invited to yet another AGOA forum where we joyously exhibit that we have survived the year and finally hand over to a new chair.

The Ministry of Commerce, Trade and Industry have now taken on the new responsibility of deciding what to do with AGOA. The private sector is now aware of Zambia’s special position of sitting in the AGOA chair. We all anticipate that there will be exaggerated interaction and engagement between government and the private sector, even if only to avoid media reports next year that will hold us all accountable for any failures in AGOA when the program was tightly set in our hands.

Published 10 August 2010

ADB Steps In

This week the African Development Bank wraps up a mission visit to Zambia that paid special emphasis on enhancing the ADB’s support strategy for Zambia.

The private sector in Zambia put their cards on the table by highlighting the various barriers to doing business that were a consequence of the high cost of accessing funding, inconsistent domestic economic development policies, poor infrastructure, high energy costs, and insufficient skilled human resources.

The private sector bemoaned the wide gap between the inflation rate which is currently running at around 8 per cent, and the bank lending rates which hover between 25 percent and 30 percent. This leaves hefty margins for financial institutions but seriously hampers the growth of the private sector, because the cost of borrowing becomes too high for most investments beyond trading.

The private sector lamented the current scenario whereby Zambia produces excess maize, wheat, milk, and soya bean that ensures food security for the country, but there are difficulties in exporting excess food without government authority. This becomes a disincentive to grow more food as the glut brings down commodity prices and farmers face losses which forces them not to grow as much food in subsequent years. The private sector noted that a mechanism must be urgently put in place to address this challenge.

It was highlighted that even though Zambia was embarking on the Multi Facility Economic Zones program, not much emphasis was being made to attract domestic investors to participate in the program as is evidenced by the lack of marketing within the country.

The private sector noted that the ADB set a threshold of USD10 million for direct lending to the private sector, and any figures below this threshold would have to be accessed through local partner commercial banks which have been given a line of credit for this purpose.

The private sector were interested to see a progress report from partner commercial banks that would be able to provide data on how successful the initiative has been so far, taking into account historical lessons of similar programs that did not yield the desired results.

The ADB recognised that a country such as Zambia required the development of good infrastructure which includes wide spread railway systems, roads, water and sanitation, and telecommunications, in order for the country to enhance economic and productive activity.

The ADB alluded to the low levels of skilled human resources in the country which need to be addressed as part of the development agenda for Zambia. Private sector comments noted that investments in various businesses and industries will drive the demand for specific skilled human resources that would fill the required gap. To this end, public institutions which include the Technical Education, Vocational and Entrepreneurial Training Authority, and other private sector investors in education were encouraged to keep a close eye on industry needs and trends, to be able to respond to the evolving demands of a developing economy.

The ADB reported that Zambia was not taking much advantage of the opportunities that the ADB offers to developing economies, and urged the private sector to engage them through their Zambia office so that Zambian based companies could benefit from the various products that are available through the ADB.

It was jointly acknowledged that when the COMESA Customs Union and indeed any other regional economic endeavour is implemented, some new challenges will immediately emerge which include access to wider markets, quality assurances, business barriers, and access to various developmental resources, including inexpensive financing.

The ADB operating in its capacity as a regional development bank highlighted that they were not a commercial bank but recognised the need for the banking sector to be more proactive in supporting the private sector. To this end, the ADB was requested to consider its partnership arrangements with commercial banks in an effort to channel more money into local businesses at the SME levels, which with time, should grow into large businesses that can then engage with the ADB on a direct basis.

Some of the current challenges for the Zambian private sector in respect to ADB funding, include broadening the scope of business projects to cover regional demands and markets. This re-focussing suggests that larger projects become more meaningful to service the bigger regional markets, and therefore qualify for direct funding from the ADB.

Opportunities exist in the education sector, health sector, agro processing sector, manufacturing sector, tourism sector, mining sector, transport sector, and services sector to name but a few. The ADB can be the financier of fairly large business initiatives that will rapidly grow the economy, create more jobs, compete favourably in the regional markets, and offer options for export out of the African continent.

As it has been made clear that the Zambian private sector has been shy to take advantage of the ADB products. The ADB mission to Zambia should be considered as a wake-up call for local businesses to take advantage of ADB products for the purposes of building their businesses to the next level, that will no doubt stimulate and motivate the commercial banks to step up their game and offer similar or better services to the private sector.

The ADB may have an office in Zambia with the aim of supporting Zambia on its development agenda, but it cannot force the private sector to take advantage of its services. The ADB may have a web site at www.afdb.org but cannot make our private sector visit it for information and details.

The opportunities are there. The ADB is in Zambia. All that remains is for the private sector to access the bank and put individual cases on the discussion table for consideration.

There is an old saying that goes ‘you can find a tree full of ripe fruit, but you have to climb the tree to eat the fruit’. This is the scenario in respect to the ADB in Zambia.

Published 3 August 2010