The railway system in Zambia is comprised of an extensive network of surface transport with the potential to offer safe, efficient, and environmentally friendly transport across the country and the region, connecting all major centres of economic activity and facilitating growth.

There are two main players in the Zambian Rail Sector, namely, Zambian Railways Limited (ZRL) and Tanzania-Zambia Railway Authority Railway Authority (TAZARA). ZRL is wholly owned by the Zambian Government and manages a rail track covering almost 1,000 km. Since the time of concession from 2003 to 2012, the tonnage moved on rail had declined drastically from 1,323,191mt in 2004 to 690,793mt in 2009. This was due to a lack of investment in track rehabilitation and infrastructure upgrades by the concessionaire. After the cancellation of the concession on 10th September 2012, tonnage moved improved marginally to 702,603mt in 2017.

TAZARA on the other hand  is co-owned by the Governments of Zambia and Tanzania. It is a key railway that covers approximately 1,900 km from Kapiri-Mposhi in Zambia to Dar-es-Salaam in Tanzania. Amidst daunting operational challenges, TAZARA’s annual freight traffic volumes hit a low of 122,473mt in 2015 compared for instance to figures of over 530,000mt in 2010.

Challenges in the sector

The railway traffic dwindled to current levels following the deregulation of road transport in the region, due to high fixed costs, low investments in rail track infrastructure, working capital and rolling stock. There is also a lack of integration among railway companies within the region who have opted to operate as autonomous entities. The average speed of locomotives has also averaged 40km per hour, which is too slow for modern business.

Another challenge relates to the fact that TAZARA and ZRL have insufficient locomotives and wagons. For instance, in 2014, ZRL had a total locomotive fleet holding of 37, out of which 24 were operational while 13 were defective and extensively cannibalized.

Government interventions to increase rail freight

The Seventh National Development Plan (7NDP) prioritizes the construction of new rail spurs and the rehabilitation of existing lines to increase operational efficiency, reduce the cost of freight, and increase the tonnage being carried. Furthermore, the Government has pledged to encourage private investment in the construction of other rail spurs, including intra-city transit systems. Plans are also in place to migrate the rail gauge from the existing Cape gauge to Standard gauge to enable higher speeds and higher tonnage of freight. In 2012, Government nullified its concession with the Railway System of Zambia (RSZ) in 2012, leading to an 18% growth in the traffic of ZRL between 2012 and 2017. In October 2018, The Industrial Development Corporation (IDC) Board approved an investment of $850 million into rail infrastructure and rolling stock for ZRL. This investment is important because it is a wholesome package intended to alleviate capacity constraints of ZRL.

In January 2012, Government brought into effect a Statutory Instrument (SI) to compel transporters of heavy cargo to move 30% of bulk cargo from road to railway in order to optimize the transport sector and promote the sustainability of the rail subsector. The implementation of the 30% quota system is aimed at preserving road infrastructure as well as increasing revenue and efficiency in the railway operations.

Recommendations and way forward

  • There is need to unbundle the rail line operations through the creation of the Railway Development Agency, so that rail infrastructure development and management are separated from operations. ZRL will focus on running its business operations competitively and in a sustainable manner without focusing on maintenance and investment in rail track infrastructure.
  • Government is urged to continue with maintenance and upgrading of rail infrastructure to reach the desired speed of 80km per hour for freight trains and 120km per hour for passenger trains.
  • Zambia should engage in bilateral/multilateral railway route management groups with other countries to collaborate on rail use and infrastructure development to increase volumes and ensure the sustainability of the rail sector.
  • Government is urged to change the policy environment and encourage private train operators to join the Rail Sector industry. These operators can then be charged for use of rail track infrastructure, thereby boosting Government revenues.
  • After liberalization of the rail sector, Government would then need to institute a regulatory body to monitor market performance, competition and safety issues to complement the work of the General Inspector of Railways at the Ministry of Transport and communications.

 This article is an extract from a PMRC Analysis of Zambia Rail Sector – Structural Deficiencies & the Way Forward. . To access the analysis visit www.pmrczambia.com

Earlier this year, the Energy Regulation Board approved ZESCO Limited’s application for an upward tariff adjustment effective 1st January 2020 and since then there have been a number of positive power sector policy and regulatory reforms that have taken place. The Government of the Republic of Zambia approved the Revised National Energy Policy, 2019 which is anchored on the Seventh National Development Plan (7NDP) and Vision 2030 in order to guide the development and management of the energy sector by considering technological advancement and developments in the energy sector. The Electricity and Energy Regulation Acts were revised to provide for sale and purchase of electricity within and outside Zambia and improve the regulatory environment among other objectives.

Adequate and reliable power supply underpins any successful economy and Zambia has struggled to generate enough electricity to meet growing demand as the country has developed.

Load management has in the past and present time led to severe consequences for the economy as businesses and small to medium sized enterprises have scaled back production and households have had to grapple with long hours of darkness. As demand continues to grow it is essential that Zambia gets the power sector generation mix right for the country to fulfil its potential for growth.

Under investment in the power sector over the years has been largely due to below cost tariffs and a bureaucratic regulatory environment which has slowed private sector investment. Some of the challenges identified include;

  • Over dependence on Hydrological sources of power which made up 80.45 percent of installed capacity as of 2019. The remainder of the generation mix comprised of coal (10.06%); HFO (3.69%); diesel (2.80%); and solar (2.99%).
  • Modelling trends from Zambia’s river basins suggest that hydropower potential will gradually decline in the future due to climate change and increasing water demand from other sources.
  • Low rates of access to electricity in rural areas at around 4.4%. Despite this the Rural Electrification Authority successfully completed the implementation of ten carry-over projects in six provinces across Zambia consisting nine Grid Extension Projects and One Mini Hydro Power Project
  • Below cost tariffs which have constrained ZESCO’s ability to undertake new investments and to a degree its ability to raise capital which in turn is linked to its financial situation.

This mix of factors point to the need for Zambia to focus on attracting private investment in the power sector and speeding up projects that are near completion through;

  • Prioritization of projects that have potential to yield high economic returns in the short to medium term and stemming cost escalation.
  • Establishment of a central planning function in the Ministry of Energy, to develop a strategic vision and delivery plan for increasing and diversifying power capacity in the country through investment in Independent Power Producers.
  • Establishment of a central procurement function to sit alongside the planning function and secure investment in line with the Government’s strategic vision. The procurement process is lengthy and opaque, which has discouraged investment across the board. The planning function should look to centralise commercial capability, run more competitive tenders and streamline the procurement process, which will lower barriers to entry for investors and deliver value for money for consumers.
  • Improve the credit-worthiness of ZESCO: as an off-taker, it is essential that investors have confidence that the organization can purchase the energy generated, which can be improved through increased financial transparency and providing more secure guarantees. ZESCO further needs to revisit the administration of its lifeline tariff by exploring viable options for reforming the current subsidy policy whose targeting is poor (The lifeline subsidy policy currently covers all households regardless of income status)

Conclusion

Historically, Zambia’s approach for power development has been for the Government, via ZESCO, to undertake investment in capacity. The Government has also led the recent Zambia Power Rehabilitation Project which involved various capacity and transmission upgrades as well as demand side management measures. Recently, ZESCO Limited and Power China signed three contracts to develop 600MW (AC) grid-connected Solar PV Power Plants to be located in Chibombo, Chirundu, and Siavonga Districts. This marks a giant step in ZESCO’s efforts to diversify the energy mix in the wake of climate change.

As noted in the 7NDP, Zambia has plentiful resources for electricity generation, including hydropower, solar, biomass, geothermal. The challenge is getting investment in power plants that can convert these resources into useful electricity. There is no shortage of potential pipeline projects.  However, many of these projects can only reach completion if the correct policy framework is developed and supported.

This article is an extract from PMRC Energy Policy Reform Series.  To access the analysis visit www.pmrczambia.com

Zambia has made substantial efforts in trying to mainstream gender and promote women’s participation in political leadership.  However, women continue to be under-represented in the formulation of national policies as well as in the political and economic decision-making spheres due to the various social barriers. One such barrier relates to how the political landscape is characterized and often portrayed with a male ‘face’. Additionally, the political space also tends to be marred with violence and character assassination which poses a major challenge for women to navigate.

The Zambian Government has noted that equal participation of men and women in decision making is a precondition of a functional democracy. To this effect, the Government continues to express strong political will to enhance women’s political participation in the overall national development agenda. Early this year, the Minister of Gender, Hon. Elizabeth Phiri expressed concern over the significantly low numbers of women in politics and leadership positions. She called for the adoption of a Zebra List that seeks to achieve gender parity. A Zebra List is a strategy that will subject all political parties to adopt an equal number of women as men to various positions in order to increase women’s seats in parliament and in decision making positions. In essence, the Zebra list is a marker of good governance because it addresses the gender-power dynamics and structural issues that act as barriers to the political advancement of women.

What needs to be done?

  1. Women need to mentor and capacitate each other in order to build their self-esteem, self-awareness and skills. These factors are critical in raising women’s confidence levels to take up leadership positions and political roles.
  2. Equally, the media needs to change the narrative of how women are perceived by highlighting their strengths and dismantling negative traditional norms and attitudes. The media is a strong tool that can perpetuate potentially harmful representations of women which could in-turn impact women’s leadership outcomes.
  3. Building strategic partnerships with institutions that seeks to develop the leadership capacity of women is of significant importance as they also seek to change how women view themselves and each other in politics.
  4. It has been found that engaging men as agents of change and dismantling gender stereotypes equally yields positive results for women wishing to take up political and leadership roles.
  5. Additionally, creating an enabling environment for women; which entails creating safe spaces for women to converge, consult, share their experiences and knowledge with other women, increasing their civic and technical knowledge as well as securing their access to general education and information on political and national issues.

In the build-up to the 2021 elections, stakeholders such as civil society organisations, non-governmental organisations, the media, individuals, political parties and the Government should strive to create a conducive environment to encourage more women to aspire to leadership roles across all party structures. It is through these efforts that gender parity will be achieved and more women will transcend the various barriers that exist in barring them from fully participating in national development and politics.

Conclusion

In spite of significant efforts by the Government, a number of barriers still exist that limit the political participation of women and their advancement to leadership roles. However, various policies and enablers could enhance women’s influence and willingness to take up these roles. At a policy level, the Zebra List will help achieve gender parity by increasing the number of seats women hold in parliament and in decision making positions. Equally, there is need for key stakeholders to continue raising women’s consciousness to take keen interest in politics and national development as equal partners in governance and the development agenda.

This article is an extract from a PMRC analysis titled: “Assessing levels of participation among women in policy formulation”. To access the analysis visit www.pmrczambia.com

Children are one of the most vulnerable groups in society and are therefore at risk of many social and economic challenges that negatively impact them due to their age and inability to provide or access basic social amenities. For this reason, Zambia has endeavoured to develop ‘child protection systems’ comprising of; sets of laws, policies, regulations and services needed across all social sectors – especially social welfare, education, health, security and justice – to support prevention and response to protection-related risks.

Evidence indicates that household and community level poverty are among the risk factors for child protection violations. Poverty leads to early engagement in sexual deviance, transactional sex and child marriages since children have no means to meet their basic needs. Evidence further suggests that certain child protection issues, including sexual exploitation, unnecessary family separation, child labour and child marriage have a more direct link to poverty. Children also tend to be most susceptible to hunger and disease, among many other social ills. These vulnerabilities are further heightened among children with disabilities. Thus, most children often resort to begging on the streets for survival, increasing their risk of physical, sexual and emotional abuse.

In recognition of these factors, the Government has strived to advance the rights of children through the Constitution, the National Social Protection Policy and the National Child Policy. Similarly, social protection programming has been strengthened as a response to the various challenges children face. These commitments have resulted in rolling out social safety net programmes that include the Social Cash Transfer (SCT), Home-Grown School Feeding Programme (HGSFP) and Public Welfare Assistance Scheme (PWAS). These programmes have been initiated in order to mitigate the impact of poverty among vulnerable populations with a special focus on improving child-wellbeing. Furthermore, the programmes have been formulated to enhance equitable access to basic social amenities that impact the quality of life for all. They have equally emerged as a primary policy tool to address poverty and vulnerability.

One clear example of an impactful social safety net mechanism is the SCT programme. It has been commonly linked to well-being outcomes for children such as improved nutrition, improved resilience to economic shocks, management of illness, improved school enrolment and mental health among beneficiary households.

Furthermore, the Government recognises that the foundation of an effective social protection system that sustainably lifts children out of poverty and enhances their inclusion and resilience requires an even balance between social grants such as social cash transfers as well as care through social welfare services that provide the care and protection of vulnerable children. Poverty is a complex phenomenon which consists of various overlapping deprivations that re-enforce one-another to create a complex matrix that includes but is not limited to; lack of income, limited access to information, housing, sanitation, health care, education, as well as sexual, physical or substance abuse. It is therefore imperative to provide a range of adequate cash and care interventions to address the challenges faced by vulnerable children and enhance child social protection.

In conclusion, the impact of these social safety nets has been immense leading to an improvement in all socio-economic indicators: schooling, health, general well-being, possession of shoes and blankets, and the regularity of meals. However, challenges such as high administrative costs, delays in disbursements of funds, limited human resource capacity at district and community levels (under the Department of Social Welfare) continue to undermine the impact of various programmes and the ability of households to cope and maintain a basic standard of living; forcing children into risky coping mechanisms.

 

This article is an extract from a PMRC analysis titled: “Assessing the Responsiveness of Social Safety Nets Towards Reducing Vulnerability Among Child Headed Households”. To access the analysis visit www.pmrczambia.com

Poverty is a socioeconomic ill that has continued to affect a significant portion of the population in Zambia. About half of the population currently lives below the poverty line. The situation is even worse in rural areas where an estimated 76.6% are classified as poor. The Government through the Ministry of Community Development and Social Services implemented the Social Cash Transfer (SCT) Programme as one of the measures for reducing poverty levels in Zambia in line with the second pillar of the Seventh National Development Plan.

The SCT programme is a component of the Social Protection mechanism, which seeks to reduce the vulnerability of low- income households with regard to consumption and access to basic services, among others. The Scheme is a response to the HIV and AIDS Pandemic, which had led to a growing number of households with no adult breadwinner and to households headed by elderly persons, children and chronically ill persons.

The Office of the Auditor General in accordance with Article 250 of Constitution of Zambia (Amendment) Act No. 2 of 2016, the Public Audit Act and the Public Finance Management Act conducted an audit to assess the efficiency and effectiveness of the Social Cash Transfer Programme towards the reduction of extreme poverty among beneficiary households. The following were the audit findings;

The extent to which the Social Cash Transfer (SCT) Programme has been rolled out to the various districts

As of 31st December 2017, the programme had been rolled out to eighty (80) districts representing a coverage of 76.9% of the targeted districts. The Ministry had reached 574,663 out of the targeted 590,000 beneficiaries representing a coverage of 97.4%.

The extent to which the Ministry had ensured that only eligible people benefit from the SCT Programme.

The Ministry paid a total of K2,053,800 to 2,284 ineligible beneficiaries for periods ranging two to one hundred and forty months. Only 76 out of 8,558 of the purported to be disabled had a medical or certification from the Zambia Agency for Persons Living with Disabilities to confirm their disability.

The extent to which the Ministry has implemented the SCT programme in an efficient manner

Payments to beneficiaries were delayed for periods ranging eight to three hundred and thirty-two days. The Ministry did not regularly review the transfer amount in the period under review to reflect the inflationary adjusted amounts on an annual basis. Furthermore, between 2014-2017 the Ministry spent administration cost of K317,748,992.42, which was 42% of the transfer value of K760,516,736.29.

The development that have been made on the beneficiaries of the SCT programme

A Case Study carried out in Gwembe district showed the SCT made improvement in a number of parameters among beneficiaries namely; the number of meals taken per day, agricultural assets, house dwelling, sanitation and lighting among others.

Conclusion

Zambia has made tremendous strides with regards to the rolling out of the SCT programme which is a clear illustration of how political will and a favourable political space can sustain the scale-up process of a cash transfer programme. The major challenges that the SCT programme is facing are high administration costs, delayed transfers as well as inclusion of ineligible beneficiaries. These challenges can be curbed by migrating the SCT programme from the traditional cash transfers to an electronic platform which has the potential to cut costs, reduce leakage, improve accessibility and provide better security compared to physically delivering cash to fixed pay points.

This article is an extract from a Report of the Auditor General on the Social Cash Transfer in Zambia for the Period 2014 to 2017 analysis. To access the analysis visit www.pmrczambia.com

The Zambian Government through the Seventh National Development Plan (7NDP) have identified the important role of Information and Communication Technology (ICT) in service delivery as part of its e-governance agenda. According to the 7NDP, ICTs are a catalyst for socio-economic development as they promote competitiveness and are an enabler of good governance. Though ICTs over the years have been adopted slowly by Government into the e-governance agenda compared to other countries in sub-Saharan Africa, Zambia has focussed on gradually developing ICTs to spur growth in the digital economy through technologies such as mobile phones, broadband internet and computers which have changed the way people work and access services in the Health, Agriculture, Education and Financial sectors. In the wake of the COVID-19 pandemic, teachers and learners have had to adapt to a world of almost universal online education that solely relies on ICT infrastructure as nearly 94% of all learners have faced closures and disruptions to their school calendar.

In the education sector, Zambian schools have over the years adopted the use of computers, projectors, photocopiers and other related ICT equipment by both teachers and learners. The adoption of ICTs in the sector has occurred on two levels. The first has been the introduction of computer studies as part of the curriculum for learners as a subject and the second level was the introduction of ICTs training in tertiary institutions for teachers as a way of facilitating for better knowledge transfer to learners.

One of the objectives of using ICTs in the education system in Zambia has been to improve and expand access to education, training and research but this process has not been without challenges as schools acquire and roll-out use of ICT equipment in various levels of teaching and learning. There are a large number of initiatives that are using ICTs in an attempt to improve the quality of school education. Whereas, children in urban areas have more access to laptops and the internet in schools and at home, children in rural areas are faced with a severe digital divide exacerbated by poor access to electricity and poverty.  Some of the challenges this process has faced stem from inadequate computers for use among learners leading to a higher computer-learner ratio, lack of infrastructure to support the delivery of subjects and in some instances other schools use semi-functional computer laboratories.  Another huge challenge is that of internet connectivity especially in rural areas while in urban areas the sustenance of the internet services is difficult due to budget constraints. Zambia’s current mobile broadband penetration currently stands at 51.3% while fixed internet penetration is 0.5% (ZICTA Q1-2020)

In order to actualise the e-governance agenda of improved service delivery in the education sector, the Government is urged to prioritize the formulation and implementation of an ICT policy which will guide implementation of efforts to improve ICTs in schools such as funding for ICTs equipment and infrastructure as well as teacher training for better delivery of subjects in schools.

In conclusion, the use of ICTs in the education sector may not be the solution for all the challenges that are currently faced in the education sector, many challenges still remain in ensuring universal access to education. However, the continued implementation of ICT education in both rural and urban areas in Zambia presents a great opportunity for the nation to have greater access to information and communication platforms that can foster new and better skills for the young generation and this will enable Zambia to make use of, contribute to and create international information platforms.  In order for Zambian schools to derive the benefits that come with the use of ICTs in schools, serious financial commitment and implementation frameworks are required especially for girls and other vulnerable groups to guarantee them successful ICT skills acquisition and quality education in order for them to be easily competitive in the global labour market.

This article is an extract from a PMRC Analysis titled; Implementation Status and Challenges of ICTs in Zambian Schools. To access the analysis visit www.pmrczambia.com

Zambia has been pursuing economic diversification ever since the first republic and copper mining has been the major forex earner but with notable fluctuating trends over the years. As early as the First National Development Plan (1966-1970), both the need to diversify away from copper, as well as the emphasis of growth of other sectors such as agriculture and manufacturing, were emphasized. Economic diversification is the process of shifting an economy away from a single or dominant revenue source towards multiple sources from a growing range of sectors and markets. Economic diversification is widely viewed as a positive objective in sustaining economic growth as it enables countries to be less vulnerable to adverse terms of shocks by stabilizing export revenues. According to the Seventh National Development Plan (7NDP 2017-2021), the key sectors towards Economic Diversification in Zambia include; Agriculture, Tourism, Energy, ICT and Manufacturing sectors. One of the primary benefits of diversification is that a diversified economy creates a sustainable cycle of economic activity where sectors and businesses continually interlink and share benefits even as the economy grows. This also increases prospects for employment and growth and is in alignment with the multi sectoral development approach being espoused in the 7NDP today.  Zambia has continued to pursue economic diversification with policy shift away from mining towards agriculture, manufacturing and tourism among other sectors. The focus of this article is the manufacturing sector.

The Manufacturing sector in Zambia accounts for approximately 11% of the country’s GDP and has been growing at an average annual growth rate of three (3) percent in the last five years, based on figures available from the Zambia Development Agency (ZDA). Zambia’s Manufacturing sector has considerable investment potential as the domestic economy is relatively well endowed with resource factors such as raw materials, required labour force, abundant water and rich minerals. The priority areas for investment in the sector include; food processing, textiles and clothing, mineral processing, chemical products, engineering, leather products, electrical goods, pharmaceutical products and packaging materials. (ZDA, 2018). In a quest to diversify the economy in the manufacturing sector, the Government has been working on setting up Multi Facility Economic Zones, Industrial Parks and other support infrastructure to accelerate industrialization. The actualized investment into the Multi Facility Economic Zones is estimated at US$ 3.3 billion, with more than 15,000 jobs created. In a bid to promote local content, the Government is implementing the National Local Content Strategy aimed at fostering business linkages between micro, small, medium and large enterprises.  The strategy is also meant to enhance local content along the value chain, which will benefit Zambians as millions of dollars are spent annually on goods and services, which are imported into the country. The Government through the Zambia Development Agency is also implementing the business linkage programme aimed at creating synergies in industry and market access for micro, small and medium enterprises.

The success of diversification depends on the mix, sequencing, and timing of investments, policy reforms and institution building, and on the consistency with the underlying assets and related comparative advantages of the country. Investments in skills, infrastructure, institutions and governance quality (ie. enhancing the transparency, accountability, and predictability of Government decision-making) increase the likelihood of success of diversification but are in turn affected by the extent of diversification. Providing the foundations for structural transformation and private sector driven growth is an essential element in achieving a broader base of economic activities. Further, clear, transparent and predictable business regulations that provide a level playing field among investors (small and large, foreign and domestic) are essential for economic diversification.

Conclusion

Zambia has to make fundamental policy shifts if the country is to achieve the objectives of the Vision 2030. Achieving these objectives is essential to repositioning the Zambian economy onto growth and development, in a manner that makes the country less susceptible to both domestic and external shocks. This is seen as a critical area of focus midway before the expiry of the Vision 2030. The Seventh National Development Plan (7NDP) provides a clear roadmap of what needs to be done to diversify our country’s economy, going forward there is dire need for the mobilization of resources that will finance the various strategies and policies as outlined within the 7NDP towards the realization of economic diversification.

This article is an extract from a PMRC Analysis titled; “Economic Diversification in Zambia:” Are We Getting there? Assessing the Prospects for Economic Diversification In Zambia. To access the analysis visit www.pmrczambia.com

 

Public Financial Management (PFM) reforms entail changes to laws, systems and processes used by Governments, to mobilise revenue, allocate public funds, undertake public spending, account for funds and audit. A strong PFM system is essential for effective Governance because effective delivery of public services is associated with poverty reduction and growth. To this effect Government has made reforms to the Public Finance Management Act and has intentions of reviewing the Public Procurement and the Loans and Guarantees Act;

Public Financial Management (PFM) Act of 2018; From 2004 when the PFM of 2004 was enacted, few PFM legal reforms occurred. There had been challenges in achieving the intended purpose of the Act because of gaps such as absence of portions for handling cases of financial misconduct. The Revised PFM Act of 2018 came into effect due to stakeholder’s request as well as Government’s own realization to strengthen the legal framework aimed at improving management of public resources.

Public Procurement Act; In 2015, Government introduced an electronic Government Procurement (E-GP) system aimed at enhancing transparency, riding the Government system of corruption and supporting provisions of the PFM Act. The E-GP system is designed to enhance socio-economic development and adherence to the national development plan by reducing the procurement cycle and associated costs. However, the current procurement system features structural and content inadequacies to support the PFM Act leading to avoidable losses for the Government. There are inadequacies in fund release delays and inflated quotations, affecting project implementations and contract management. For this reason, there is need to revise the Public Procurement Act to  incorporate price referencing and bench marking to seal revenue leakages.

Enactment of the Planning and Budgeting Bill of 2019. Once enacted this legislation will help to ensure that there is an increase in transparency, accountability and citizens participation in public finance management. The poorest in society will be incorporated in decision making especially on matters that hinge on budgeting. The powers which lie in Cabinet and Parliament on budgets and plans will be equally distributed among citizens and their representatives.

Review of Loans and Guarantees legislation; This will empower Parliament to monitor debt contraction by the Executive. The Minister of Finance will be compelled to table before Parliament justifications for contracting debt. This will guarantee debt sustainability for continued economic growth and therefore enhanced public finance management.

Enhancing domestic Resource Mobilisation (DRM)

Legislative reforms from the expenditure side of the budget need to be matched with reforms to the revenue side through enhanced DRM. DRM refers to the generation of Government revenue from domestic resources. Tax revenue, as a percentage of GDP is one measure of the degree to which the Government controls the economy’s domestic resources.  In the 1970s Zambia’s tax revenue as a percentage of GDP was 42 % compared to 15.2% in 2017 and 19.1% earlier projected for 2021 [ this figure has since been downgraded in view of the COVID-19 pandemic]. The statistics mean a lot needs to be done to raise domestic revenues given the hard-to-tax informal sector in Zambia. The informal sector’s tax potential in Zambia is about 42% of total tax revenues. Amongst the several strategies that could be used to enhance DRM is the need to upscale the Massive Land Titling Programme which can enhance payment processes from ground rates.  There is also need to equip revenue administrators with knowledge and tools to raise revenue in the hard-to-tax sectors through the use of intermediaries.  The need to fight tax evasion through early detection cannot be overemphasied. This could be achived through , smarter auditing,effective investigation and prosecution that hold evaders accountable and thus create public confidence in the tax system.

This article is an extract from a PMRC Analysis of the Public Finance Management Act and the Domestic Resource Mobilisation infographics. To access the analysis visit www.pmrczambia.com

Brannen and Sheehan-Connor (2012) argue that savings groups have the potential to facilitate access to financial services in remote areas where formal financial services may not exist. Moreover, members can borrow up to three times their savings if funds are available, while interest is generated on an individual’s total savings. Thus, encouraging members with a higher capacity to save more while also discouraging members from borrowing for unproductive causes. Annan et al. (2013) also suggest that informal savings and lending initiatives could potentially alleviate rural poverty through access to affordable credit and encourage saving among members. This assertion proves true among women in rural parts of the country, who may be reluctant to access loans from formal lending facilities that charge high-interest rates and often require collateral to access credit. Hence, savings groups offer an alternative source of capital and financing for women seeking to participate in economic ventures.

Notably, is that savings groups are one of the most inclusive financial initiatives and are relatively easy to run and engage in. According to a survey conducted by FSD (2018), the uptake of savings groups was not dependent upon one’s level of education in comparison to other financial services such as banking, insurance, pension funds, and capital markets. This means that anyone was capable of running and joining this program. Data from the same survey also indicates that more female respondents reported being part of savings groups and Chilimbas than men. This can be attributed to the fact that these initiatives are community-centric and gendered social norms entail that women are more inclined to community social interactions than men, making them more attractive for women to save with such programs. Furthermore, the survey concluded that Savings Groups and Chilimbas were the most inclusive financial services for Zambian women and more rural women were willing to take up these services as opposed to formal financial services that required some level of education, as well as a higher socio-economic status.

In addition, eligibility for a loan with savings groups is fairly relaxed. There is no documentation or collateral required to access a loan, other than being a trusted member of the group. Another attractive feature is that interest generated is shared among group members thus, acting as a ‘return on investment’ even for borrowers. Furthermore, there are no delays in processing of loans since they are obtained during meetings at each saving, while banks and other formal financial service providers on the other hand, often delay the process due to documentation and bureaucratic procedures in assessing one’s eligibility for a loan. Some of the requirements by banks and other formal financial service providers include; a copy of National Registration Card (NRC), latest payslip, latest utility bill or confirmation from employer, salary account bank statements for the last 3 months, employment contract and collateral in some cases. It must be noted that many of these women do not engage in formal employment and often do not have formal contracts with employers. Moreover, many of them engage in small-scale agriculture and roadside businesses, making it challenging to have a steady and predictable flow of income. In addition, evidence from the 2015 Finscope Survey indicated that while 93.5% of adults had access to an NRC, only 15.9% had access to a proof of residential address document. These findings suggest that formal banking requirements to access loans do not take into consideration the circumstances of rural households, thus they are excluded from these services on this basis.

A baseline survey conducted by Rural Finance Expansion Programme (2018) found that women were better savers and less likely to default on paying back loans than men, however, they had limited access to financial services in comparison to men. The survey also suggests that the rise of mobile money presents great potential for enhanced financial inclusion of women. In relating financial inclusion through digital money services, at least 74% of survey respondents reported to have owned a phone and 95% that reported to use mobile money services indicated that they were ‘comfortable’ to ‘very comfortable’ with the use of these services. The same study found that Zoona was more popular in the rural areas than Airtel and MTN mobile money services with 58% having used it to receive, while 38% used it to send money. However, less than 4% indicated that they used the service to store money. Hence the need to integrate these services into how savings groups conduct their business and encourage the use of these services for saving purposes.

Earlier this year, the Energy Regulation Board approved ZESCO Limited’s application for an upward tariff adjustment effective 1st January 2020 and since then there have been a number of positive power sector policy and regulatory reforms that have taken place. The Government of the Republic of Zambia approved the Revised National Energy Policy, 2019 which is anchored on the Seventh National Development Plan (7NDP) and Vision 2030 in order to guide the development and management of the energy sector by considering technological advancement and developments in the energy sector. The Electricity and Energy Regulation Acts were revised to provide for sale and purchase of electricity within and outside Zambia and improve the regulatory environment among other objectives.

Adequate and reliable power supply underpins any successful economy and Zambia has struggled to generate enough electricity to meet growing demand as the country has developed.

Load management has in the past and present time led to severe consequences for the economy as businesses and small to medium sized enterprises have scaled back production and households have had to grapple with long hours of darkness. As demand continues to grow it is essential that Zambia gets the power sector generation mix right for the country to fulfill its potential for growth.

Under investment in the power sector over the years has been largely due to below cost tariffs and a bureaucratic regulatory environment which has slowed private sector investment. Some of the challenges identified include;

  • Over-dependence on Hydrological sources of power which made up 80.45 percent of installed capacity as of 2019. The remainder of the generation mix comprised of coal (10.06%); HFO (3.69%); diesel (2.80%); and solar (2.99%).
  • Modelling trends from Zambia’s river basins suggest that hydropower potential will gradually decline in the future due to climate change and increasing water demand from other sources.
  • Low rates of access to electricity in rural areas at around 4.4%. Despite this the Rural Electrification Authority successfully completed the implementation of ten carry-over projects in six provinces across Zambia consisting nine Grid Extension Projects and One Mini Hydro Power Project
  • Below cost tariffs which have constrained ZESCO’s ability to undertake new investments and to a degree its ability to raise capital which in turn is linked to its financial situation.

This mix of factors point to the need for Zambia to focus on attracting private investment in the power sector and speeding up projects that are near completion through;

  • Prioritization of projects that have potential to yield high economic returns in the short to medium term and stemming cost escalation.
  • Establishment of a central planning function in the Ministry of Energy, to develop a strategic vision and delivery plan for increasing and diversifying power capacity in the country through investment in Independent Power Producers.
  • Establishment of a central procurement function to sit alongside the planning function and secure investment in line with the Government’s strategic vision. The procurement process is lengthy and opaque, which has discouraged investment across the board. The planning function should look to centralise commercial capability, run more competitive tenders and streamline the procurement process, which will lower barriers to entry for investors and deliver value for money for consumers.
  • Improve the credit-worthiness of ZESCO: as an off-taker, it is essential that investors have confidence that the organization can purchase the energy generated, which can be improved through increased financial transparency and providing more secure guarantees. ZESCO further needs to revisit the administration of its lifeline tariff by exploring viable options for reforming the current subsidy policy whose targeting is poor (The lifeline subsidy policy currently covers all households regardless of income status).

Conclusion

Historically, Zambia’s approach for power development has been for the Government, via ZESCO, to undertake investment in capacity. The Government has also led the recent Zambia Power Rehabilitation Project which involved various capacity and transmission upgrades as well as demand-side management measures. Recently, ZESCO Limited and Power China signed three contracts to develop 600MW (AC) grid-connected Solar PV Power Plants to be located in Chibombo, Chirundu, and Siavonga Districts. This marks a giant step in ZESCO’s efforts to diversify the energy mix in the wake of climate change.

As noted in the 7NDP, Zambia has plentiful resources for electricity generation, including hydropower, solar, biomass, geothermal. The challenge is getting investment in power plants that can convert these resources into useful electricity. There is no shortage of potential pipeline projects.  However, many of these projects can only reach completion if the correct policy framework is developed and supported.