Zambia private sector reforms bear fruit

Published on: Wednesday, August 11th, 2010

Growth in foreign and local direct investment, wealth creation, poverty alleviation, employment creation and the ease of doing business are the fruits of a private sector-driven economy.

It is this realization that prompted Government to launch the Private Sector Development Reform Programme (PSDRP)  in 2004 with a view to reducing the cost of doing business in the country and encouraging competitiveness. The rationale for the setting up of the PSDRP was to lay a strong foundation for faster, sustained and private sector led growth by implementing a comprehensive action plan for enhancing the investment climate  and restoring investor confidence. PSD reform programme also enables businesses to grow, expand and become more competitive both on the regional and global markets.

The foundation for participation of a strong private-sector (the major ingredient in the developmental process of any country) was laid by the liberalization and privatization policies of the 1990s.

Government believes that improving the business environment  will smoothen the way business is done, increase investment and create more opportunities for Zambians to participate in economic activities.

“The main objective of the programme was to create a competitive environment. To create a competitive environment, first, we had to break down the bureaucracy in company registration, VAT, border processes, land legislation and transfers. Second,  we had to identify the processes that were making it expensive for business to run; the cost of money, the cost of transportation, etc. Third, we had to work on a policy framework to address these issues on a sector-by-sector basis. Fourth, we had to come up with a supportive legal framework to address  those issues. And then of course, there was the whole issue of supportive infrastructure to push business forward. Lastly, there was the question of the skills component which needs to be developed.

Prior to this five associations came together in 2002 to challenge the business policies which impeded business development in the country. These were the Zambia National Farmers Union (ZNFU), Zambia Association of Chambers of Commerce and Industry, Chamber of Mines, Zambia Association of Manufacturers and the Tourism Council of Zambia. This later expanded to include the Zambia Chamber of Small and Medium Business Association, Zambia Indigenous Business Association and the Bankers Association of Zambia. This culminated in the formation of the Zambia Business Forum under Cap 119 in August 2003.

A private sector driven economy is critical to the attainment of sustainable economic development as it is the private sector that produces goods and services while the overarching role of Government is to create an enabling environment for business to flourish.

At the Private Sector Development conference held in 2004 in Livingstone, Government and the private sector agreed to collaborate on six reform areas considered to be important in cleaning up the economic environment for the private sector. These encompass Policy Environment and Institutions to enhance the macroeconomic environment, strengthen institutions that support private sector development and enhance public private dialogue. Most of the PSD actions under this reform area are being implemented through the Financial Sector Development Plan (FSDP) driven by the Bank of Zambia (BOZ).

Laws and Regulation to improve regulatory frameworks, the investment code and tackle critical administrative barriers in order to foster private sector led development in Zambia.

Infrastructure with focus on the development of a comprehensive (private participation infrastructure) roadmap that provides a favourable policy environment and assures investors of government’s position. Emphasis is on reducing the high costs associated with transportation, energy and telecommunications  in order to enhance productivity and competitiveness of businesses.

Business Facilitation and Economic Diversification to remove administrative barriers to business entry and operation and administrative hiccups that weigh heavily on productivity of businesses.

Trade  Expansion with the objective of increasing access to regional and international markets by Zambian markets. This largely tackles Zambia’s trade needs, particularly the supply side constraints.

Local Empowerment with the aim of unlocking the growth potential  of micro, small and medium enterprises (MSMEs) sector through business development support and empowerment initiatives.

Priorities for reform covered administrative barriers, citizen economic empowerment, energy, immigration, infrastructure, labour, lands, livestock disease contro, municipal housing bonds, telecommunication, tourism and trade expansion.

Despite the initial slow start, some impressive headway has been made. Achievements worth noting include the formation of the Zambia Development Agency (ZDA) as a one-stop shop  for investment and export promotion. The  Citizen  Economic Empowerment Commission (CEEC) has also been set up to spearhead the local empowerment initiative. At Chirundu, a one-stop-border  point has been introduced  and has greatly reduced the time taken to  clear goods which lessens the cost of doing business in the country.

Business registration has been simplified and made easier with time taken to register a business at the Patents and Companies Registration Office (PACRO) being drastically reduced from 21 to two days. Other achievements through the reform programme include the ICT Policy , the Public Private Partnerships (PPPs)policy; the Market Bill, and the Credit Reference Bureau which have  been put in place.

From the onset, it was identified that there were a number of policy lapses and institutional reforms  that needed to be undertaken to promote private sector development. It was observed that the macroeconomic policy uncertainty and high cost of capital.  Government  borrowing was also identified as a  factor  that was crowding out the private sector from  accessing capital. The lack of credit culture was also another thorny issue that needed  to be addressed. Long delays in dispute settlement, corruption and weak corporate governance were also undermining effective private sector reform. Development of an HIV/AIDS workplace policy guidelines for both the private and public sectors was also seen as a priority area.

To address these issues , it was agreed that the Government implements the Financial Sector Development Program (FSDP) and establishing the Credit Reference Bureau. Guidelines on workplace  HIV/AIDS policy has now been formulated. The Small Claims Court is now operational to facilitate faster dispute settlement.

Through the years, the Zambia Business Council meetings have been held  bringinging together the president, cabinet ministers, and representatives of the private sector  for assured and sustained Government and private sector support and commitment to reforms.

Another success has been the implementation of Public Private Partnerships  (PPPs) which are contractual arrangements whereby private sector performs Government service delivery or uses state property, assumes associated risks for a period and in return receives financial remuneration in exchange. This has been a resounding success, especially in the construction industry. A case in point is the National Housing Authority (NHA) – MKP partnership which has scored success in the Presidential Housing Initiative (PHI) scheme. PPPs should be encouraged as they have the capacity to deliver on time and ensure quality works, providing adequate and effective returns for investors. A national policy on PPPs was developed under the PSD program and launched in 2008.

During 2009, Government accelerated the regulatory reform process so as to achieve an even simple , easier and more cost-effective business-licensing regime. The program is now in its second phase – Private Sector Development Reform Program II under the auspices of the Ministry of Commerce, Trade and Industry. Government strongly believes that the private sector is the engine for growth and the establishment of this framework called the PSDRP is a testament of this belief, an expression and demonstration of how it is enhancing a competitive business environment.

These reforms embrace the effective coordination of investment promotion information packages on the services, facilities and incentives Government offers; preparation of bankable project/business proposals or business plans (profiles) by Government and private sector entities interested in accessing capital through joint ventures (JVs) or technology/equipment; the distribution of available business opportunities to investors both home and abroad; and the use of knowledge gained on the best practices to facilitate the quick implementation of approved projects through the entire Government (national) spectrum for jobs and wealth to trickle at all levels.

The way forward is to add value to products in the anchor sectors of mining and agriculture, and also tourism, with a view to enhance industrialization and provide a greater potential for job and wealth creation through economic zones that are supportive to the buoyant sectors of the economy.

The Zambia Business Forum (ZBF) has been collaborating with the European Development Fund (EDF) over the years to strengthen its member organizations’ capacity to improve the delivery of services to its member enterprises. The European Union provided Euro 3 million to increase services and improve capacity of private sector intermediary organisations.

It goes without saying that a private sector driven economy is critical to the attainment of sustainable economic development as it is the private sector which produces goods and services while government’s role should be confined to creating an enabling environment for business to flourish.

That the private sector has grown over the years is true. After doing many different things on this economic route, we need to do things different. Then, we shall overcome someday!


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