INSTITUTE FOR DEMOCRACY,

CITIZENSHIP AND PUBLIC POLICY

IN AFRICA

The Economic History of Zambia

Jeremy Seekings (UCT) and

Alfred Tembo (UNZA and University of the Free
State)
IDCPPA Working Paper No. 28
April 2022
 Published by the Institute for Democracy, Citizenship and Public Policy in Africa
University of Cape Town
2022

http://www.idcppa.uct.ac.za

This Working Paper can be downloaded from:

http://idcppa.uct.ac.za/pubs/wps/28

ISBN: 978-1-77011-458-6

© Institute for Democracy, Citizenship and Public Policy in Africa, UCT, 2022

About the authors:

Jeremy Seekings is Professor of Political Studies and Sociology and Acting Director of
the Institute for Democracy, Citizenship and Public Policy in Africa at the University of
Cape Town. His most recent books are Inclusive Dualism: Labour-Intensive
Development, Decent Work, and Surplus Labour in Southern Africa (2019, with Nicoli
Nattrass) and a co-edited volume, The Politics of Social Protection in Eastern and
Southern Africa (2019). ORCID id: https://orcid.org/0000-0002-8029-412X.

Alfred Tembo is a lecturer of history at the University of Zambia. He is also a Research

Associate with the International Studies Group, University of the Free State. His book
on War and Society in Colonial Zambia, 1939-1953 was published in 2021.
The economic history of Zambia

Abstract
From the 1930s the economic history of Zambia has been dominated by the
fortunes of its copper industry. In the middle of the twentieth century, copper-
mining generated rapid export-led economic growth, raising real GDP per capita
three-fold and transforming Zambia into a semi-industrial economy. At
independence, Zambia had a higher GDP per capita than almost any other
country in Sub-Saharan Africa apart from South Africa. Over the thirty-five years
from 1965, however, Zambia’s economy contracted, reducing GDP per capita by
one half. This collapse followed the decline in value of copper exports, as
production shrank (especially as a share of global production) and the copper
price fell. The weak demand for copper combined with government
mismanagement. Only in the 2000s did the economy begin to grow again.

1. Introduction
The economic history of Northern Rhodesia and Zambia has been dominated by
the fortunes of its copper industry for almost a full century. In the middle of the
twentieth century, copper-mining generated rapid export-led economic growth as
the demand for the territory’s output far exceeded what was possible from the
very limited domestic market. Over thirty-five years, from about 1931 to 1965,
copper exports raised real Gross Domestic Product (GDP) per capita in Zambia
three-fold, transforming Zambia from a pre-industrial into a semi-industrial
economy. Zambia continued to lag behind South Africa, but it had overtaken (in
terms of GDP per capita) both Southern Rhodesia and Kenya. African
mineworkers on the copper mines were among the best-paid African workers on
the continent. By 1965 – the year after independence – Zambia’s GDP per capita
was higher than almost every other country in Sub-Saharan Africa (with the
notable exception of South Africa).
Over the thirty-five years from 1965, however, Zambia’s economy contracted,
reducing GDP per capita by one half. This collapse followed the decline in value
of copper exports, as production shrank (especially as a share of global
production) whilst the global copper price fell. Zambia dropped out of the ranks
of ‘middle income’ countries (as categorized by the World Bank) into the ‘lower

1
income’ category. The rise and fall of Zambia’s economy were clearly shaped by
the global demand for copper. The fall was also shaped by mismanagement on the
part of the Zambian government. Only in the 2000s did the economy begin to
grow again, returning to the ‘lower middle income’ category in 2010. The
experience of Zambia contrasted dramatically with the experience of
neighbouring Botswana, whose rapid economic growth was also fueled by
mining. Botswana’s GDP per capita rose as Zambia’s declined. In 1965, GDP per
capita in Botswana was only one half of Zambia’s. By 2010, it was nine times
higher.
The early economic historiography of Zambia viewed copper mining and export
as the engine of economic and cultural ‘modernization’. Mitchell wrote in 1951
of the ‘revolution’ transforming the country (1951: 20). ‘Where once there was
only bush with scattered African villages linked by a network of winding paths’,
wrote Epstein, ‘there are now large towns of multi-racial composition, linked with
one another, and with the outside world, by road and rail, telephone and wireless’
(Epstein, 1958/1973: xi). ‘Tribesmen’ became ‘townsmen’, creating a new, urban
culture and identity (Mitchell, 1956; Epstein, 1958; Powdermaker, 1962;
Magubane, 1971). Whilst later scholars focused more on the conflicts and
ambiguities inherent in these processes of social and economic change (Perrings,
1979; Chauncey, 1981; Parpart, 1986, 1994; Sakala, 2001), they too focused on
the transformation driven by copper mining.
Economic decline after independence coincided with more critical perspectives.
Copper was widely seen as a brake on economic growth, inhibiting the growth of
other sectors, exposing the economy to the vicissitudes of the global copper
market, and allowing foreign-owned companies to steal the country’s wealth. The
result was ‘underdevelopment’ (Shaw, 1976; Biermann, 1979; Turok, 1979;
Gertzel, Baylies and Szeftel, 1984; Sardanis, 2003, 2014; Haglund, 2010). At the
same time, other scholars pointed to mismanagement by successive governments,
which viewed the industry as both a cash cow (generating resources to be used to
promote development or the political interests of the ruling party) and a
convenient scapegoat to blame for the politicians’ own failures (Bates, 1981;
Sardanis, 2003, 2014). As the economy shrank, the concept of ‘modernisation’
itself was cast into doubt (Ferguson, 1999).
This paper assesses the role of copper in the rise, fall and faltering recovery of the
Zambian economy over the century since the 1910s. Copper mining might have
distinguished the Zambian economy from some of its more completely agrarian
neighbours, but copper was not the only element in the country’s economic
history. Through most of the century covered in this paper, most people in

2
Zambian depended primarily and directly on agricultural production. Scholars
have closely studied production by both settler and (increasingly differentiated)
indigenous farmers (Makings, 1966; Dixon-McFyle, 1976; Muntemba, 1977;
Bates, 1981; Vickery, 1986; Moomba, 1989; Chipungu, 1992; Moore and
Vaughan, 1994; Chabatama, 1999; Tembo, 2010). The paper compares the
economic histories of Zambia and neighbouring countries with respect to both
mining and other sectors.

2. Economic growth and change in colonial

Northern Rhodesia
Copper, along with gold, iron and salt, was mined for at least a millennium before
capitalist exploitation began on a large scale in the 1930s. Mined minerals were
used in local, regional and even international trade (through the east coast of
Africa). The local people also used the minerals as a form of currency, and for the
manufacture of such items as ornaments, hoes, axes and knives (Roberts, 1976).
Capitalist mining started in the form of zinc and lead mining at Broken Hill
(Kabwe) where a mine was opened in 1904 (Mufinda, 2015: 23). This
development prompted the construction of the first railway in the protectorate in
order to ease the transportation of lead and zinc to the export market (Bancroft,
1961; Mufinda, 2015). But mining remained of much lesser importance to the
early colonial economy than agriculture.
Peasant agriculture production dominated the pre-colonial and early pre-colonial
economies. Farmers grew maize, millet, sorghum, cassava, beans, and
groundnuts, and raised poultry, sheep, goats and cattle. Among the most
productive farmers were the Tonga and Lenje on the southern plateau and the
Lenje in the midlands (Chipungu, 1992; Muntemba, 1977).
The construction of the railway made farming by European settlers possible,
almost all within 20 miles of the railway line. Elsewhere, European farmers also
settled around Abercorn (later Mbala), which was ideal for coffee production and
ranching, and Fort Jameson (Chipata), where they cultivated cotton and then
tobacco (sponsored by the United Tobacco Company). By 1910 there were 54
settler farmers in different parts of the country. By 1926, there were 343. These
settler farmers produced primarily food for export, especially maize and beef for
the Belgium Congo. Only in the 1930s did the internal market on the Copperbelt
outgrow the export market (Pim, 1938). The one non-food export of importance
was tobacco. By 1925, tobacco worth £94,500 was sold in Fort Jameson; by 1943,
the value had risen to £225,600 (Kanduza, 1983). Coffee was also exported from
Abercorn, at least until the pest infestation in 1937. As in South Africa and

3
Southern Rhodesia, settler farmers benefited from privileged access to credit,
markets, extension services and discounted railway tariffs. They were also
provided with free labour in wartime (Gann, 1965; Vickery, 1986).
As in South Africa and elsewhere, productive land was ‘alienated’ for settler use
– and the indigenous population was often resettled into ‘reserves’. The number
of settler farmers in Northern Rhodesia was, however, a small fraction of the
number in either South Africa or Southern Rhodesia, so the extent of land
alienation – and resettlement into reserves – was correspondingly small. As of
1927, only about 12 million acres of land – or 6.5% of the total – was under
European occupation (Pim, 1938; Mvunga, 1977, 1981; Tembo; 2010).
Migrant labour constituted a major export in the pre-colonial and early colonial
periods. From the 1860s men had migrated to South African mines, where they
were popularly known as the “Zambezi boys” (Gann, 1964; Pim 1938). Migrants
remitted some of their earnings as cash and returned home with bicycles, bedding,
cooking utensils, clothes and other manufactured goods. Prior to the 1930s,
colonial authorities encouraged labour migration to the Belgian Congo,
Tanganyika and Southern Rhodesia, as well as to South Africa, in part to generate
tax revenues to pay for the administration of the colony. Hut and poll taxes were
imposed in the early 1900s (Pim, 1938; Gann, 1964; Gardner, 2012). Labour was
recruited and channeled through various agencies: the Southern Rhodesia Native
Labour Bureau, Robert Williams and Company (on behalf of the Katanga mines)
and the Witwatersrand Native Labour Association (for South Africa, especially in
Barotseland).
Economic development only took off after the Colonial Office took over the
administration of the territory from the British South Africa Company in 1924.
This was a contrast with neighbouring Katanga, where copper was already being
mined on a large scale. Rising global demand for copper, driven by the automobile
and electrical industries, transformed the economy and, as elsewhere in Africa,
laid the foundations for the “managerial capitalism” associated with large firms
with long-term business strategies (Butler, 2007).
The first indication of the large-scale development of capitalist mining was the
reopening of the Bwana Mkubwa mine. With fresh injections of foreign finance,
the company included some of the most prominent and influential figures in
southern African mining. By the late 1920s, four other mines – Roan Antelope,
Mufulira, Nkana and Nchanga – were being developed. Blister copper was
exported from the 1920s and electrolytic copper from the 1930s. By 1931, about
30,000 men were employed on the mines (Gann, 1964, Baldwin, 1966; Butler,
2007).

4
The new mines in Northern Rhodesia were faced with two models for managing
labour. The mines in Katanga had already introduced a policy of labour
stabilisation, employing men on three-year contracts, allowing their wives and
children to settle around the mines and providing educational, social and other
amenities. South Africa and Southern Rhodesia provided a very different model:
Unskilled labour was employed on short contracts, families were not tolerated,
and few amenities were provided; migrant workers were required to return to their
rural areas after each contract. The Northern Rhodesian mines initially adopted
the South African model, but from 1935 some of the mines shifted to a policy of
labour stabilisation. This policy was first adopted at the Roan Antelope and
Mufulira mines owned by the Roan/Rhodesia Selection Trust (RST). Later, the
mines owned by Rhodesian Anglo American (Nkana, Nchanga and Bwana
Mkubwa) followed suit (Parpart, 1986, 1994; Chauncey, 1981; Sakala, 2001;
Dandule, 2012).

4000

3500

3000

2500

South Africa

2000 Zambia
Kenya
Malawi
1500

1000

500

0
1906 1913 1920 1927 1934 1941 1948 1955 1962

Figure 1: GDP per capita ($ 1990), 1906-65.

Source: Broadberry and Gardner, 2022 dataset.

5
Although Northern Rhodesia was poorer than countries such as Kenya and
Uganda on the eve of the First World War, the country’s fortunes drastically
changed once the first copper mine began operations (Broadberry and Gardner,
2022: 12; see Figure 1). GDP per capita in Northern Rhodesia was only a little
higher than in Malawi in the early twentieth century, but from the 1930s it
accelerated ahead (see Figure 1). The copper mines generated not only export
revenues but were also a crucial market for local agricultural producers. This
distinguished Northern Rhodesia from Malawi, where tobacco and tea exports
fuelled a temporary boom in the 1930s but without growing the internal market
for other produce (ibid.: 13).
No sooner had the first mines started producing copper, than the Great Depression
struck in October 1929. The global Depression led to a drastic curtailment of mine
development. Some 58 per cent of the workforce lost their jobs by 1932. The
country’s development work was suspended, and plans for expansion were
temporarily shelved due to reduced government revenue. Despite the shock of the
slump, its effects in Northern Rhodesia were less severe than those experienced
by producers of copper elsewhere. A key advantage was that the Copperbelt
companies were relatively low-cost producers. For instance, Roan and Nkana
worked at only around half capacity during 1932–3, and both Mufulira and
Nchanga remained closed (Butler, 2007; Munene, 2022).

3. The colonial copper boom and embrace of

‘development’
Between the 1930s and 1960s, Northern Rhodesia benefitted from steadily rising
global copper prices (with some short-lived drops) and expanding production (see
Figure 2), which meant that export revenues improved rapidly. This boom began,
strongly, in the 1930s. A striking feature of the Copperbelt producers’ response
to the Depression was that once prices began to recover by the late 1930s, they
opted, like other low-cost producers in Canada and the Belgian Congo, to increase
production. Northern Rhodesian copper production rose from 6,400 tonnes to
211,500 tonnes in the 1930s. Approximately one half was exported to Britain as
it recovered from recession. British demand was driven by its automobile and
electrical industries and, from 1937, rearmament. Rearmament also fuelled
demand in Germany, which accounted for one-third of Northern Rhodesian
exports (Kanduza, 1984; Butler, 2007: 20-21).

6
 800 400

700 350

600 300

500 250

400 200

300 150

200 100

100 50

0 0
1925 1930 1935 1940 1945 1950 1955 1960

production ('000 tons, left-hand axis) £ per ton (right-hand axis)

Figure 2: Copper price and production, 1925-64.

Source: Drawn using data provided by Juif and Frankema, 2018.
By 1939, Northern Rhodesia was the world’s fourth largest producer of copper,
adding not only to the Copperbelt’s economic value to Britain, but also to its
strategic importance, at a time of heightened international tension. In these
circumstances, after a lengthy period of development, the mining companies
began to earn healthy profits. In 1933, for example, the profits of the Rhokana
Corporation – which operated the Nkana mine – rose from £831,221 to
£2,175,057. In 1935, both Roan Antelope and Rhokana were in a position to pay
their first dividends (Butler, 2007: 23). Thus, by the 1930s these extraordinary
developments on the Copperbelt had clearly established copper mining as the
dominant sector of the colony’s economy, far outstripping settler agriculture.
Copper production was capital and skill intensive (Baldwin, 1966: 9). As a result,
thousands of skilled and semi-skilled miners migrated to the Copperbelt from all
over the world, attracted by high wages (Phimister 2011a, 2011b; Money, 2021).
In the mid-1930s, skilled European workers were paid, on average, twenty times
the wages paid to unskilled, African workers. Real wages for European workers
rose slowly in the 1950s. Real wages for African workers rose faster, but by 1960
were still only one-tenth of the European average (Baldwin, 1966: 87). Juif and
Frankema (2018) show that the purchasing power of African mineworkers’ wages
rose steadily in the country, more than doubling between the 1930s and 1950s. As
such the purchasing power of their wages was substantially higher than that for

7
comparable workers in the major towns of East and West Africa (Juif and
Frankema, 2018: 327).
Whilst copper mining dominated the economy, the colonial government began to
worry about the welfare of its colonial subjects in rural areas. As the Second
World War neared its end, the British government cautiously proposed that
colonial governments implement ‘development’ and welfare schemes, framed by
multi-year ‘development plans’. These were intended to enhance economic
efficiency and productivity, improve living standards, and thus reduce socio-
political unrest in the colonies, while demonstrating to the USA and other critics
Britain’s commitment to ‘constructive imperialism’. British officials were also
concerned about Britain’s economic and political power relative to the USA after
the war. For its part, the USA was eager to see colonial markets opened up to its
own trade goods (Tembo, 2016). Under the 1945 Colonial Development and
Welfare Act, Britain provided for grants to the colonial empire totaling £120
million over ten years.
In response, the Northern Rhodesia government published its first Ten-Year
Development Plan in 1947, drawing on provincial and district plans prepared over
the preceding four years. The plan proposed that £13 million be spent over ten
years on various social and economic programmes. It soon became apparent that
far less money was available, and budgets were adjusted downwards (Tembo,
2016).
Peasant agriculture was prioritized for the first time under the 1947 plan. Officials
in London envisioned a ‘revolution in African productivity’ in agriculture as well
as industry, through improved farming methods (Tembo 2016). Close to
£1 million was allocated to peasant agriculture (Tembo, 2010). The first
programme to be funded was the African Farming Improvement Scheme (AFIS)
in Southern province. Through this scheme, peasant farmers were resettled in
arable areas and were given access to extension services from the Department of
Agriculture. The goal was to improve peasant farming methods by encouraging
the use of manure and ploughs, the adoption of weed destruction strategies, and
the conservation of natural resources (Chipungu, 1992; Chabatama, 1999; Tembo,
2010). The Department of Agriculture started another programme, the Peasant
Farming Scheme (PFS), in Katete district in the Eastern Province in 1948.
Overcrowding in the ‘reserves’ in the area inhibited agricultural production. The
government provided farmers with loans for livestock, implements and land-
clearing. The scheme was extended to neighbouring districts in 1949 and later to
the rest of the territory (Tembo, 2010).

8
In encouraging peasant agriculture, the Northern Rhodesia government was acting
in line with colonial administrations elsewhere in East and Southern Africa. This
was the period that Low and Lonsdale (1976) famously described as ‘the second
colonial occupation’, as agricultural extension officers (and other ‘development’
personnel) fanned out across Africa. Across much of British Africa, also,
‘welfare’ officers sought to tackle the social ‘problems’ of ‘detribalisation’ that
accompanied economic and social change, such as urban juvenile delinquency
(Lewis, 2000). Much of the developmental effort was misguided, as expatriate
colonial officers imposed inappropriate 'solutions’ to local problems.
Following the devaluation of sterling in 1947, the Northern Rhodesian copper
mines acquired a new importance to Britain. As the price for copper was now
based on the American dollar price, devaluation raised the value of copper in
terms of British pounds. Whilst the dollar price of copper rose – by almost half
between 1949 and 1953 – most of the mines’ inputs (including wages, transport,
and fuel) were priced in British pounds. The production of colonial commodities
such as copper reduced Britain’s dependence on the USA, upheld the international
value of sterling, and enabled the country to earn dollars. Production expanded
further on the Northern Rhodesian mines (Roberts, 1976; Tembo, 2021).
Global demand for copper was buoyant, especially in the electrical and
automotive industries that were rebuilt after the war. In 1947 The Economist
estimated that as much as 50 per cent and 40 per cent of all copper imported by
the US and Britain respectively was consumed by the automobile industry, with
ship-building accounting for another 20 per cent. The demand for copper also rose
in other sectors, including construction (for roofing and plumbing) (Tembo, 2016,
2021). The American government’s creation of a strategic copper reserve also
aided the market’s buoyancy. This benefitted producers by keeping surplus war
stocks from coming back onto the market and adding to available supplies
(Phillips, 2000: 228-9). The Korean War and the deepening of the Cold War
further boosted demand for copper for weapons in the 1950s, resulting in a sharp
rise in the price of the metal (Coleman, 1971: 146). Northern Rhodesian mines
later benefitted from disruptions to American and Chilean production. Faced with
strong demand, the mines invested heavily in expanded production – in some
cases using American government loan finance, specifically for the RST’s new
Chibuluma mine (Butler, 2007: 131) and to Rhokana for the establishment of a
cobalt refinery. Another new copper mine, owned by Rhodesian Anglo American,
opened at Bancroft whilst a new open-pit mine was opened at Nchanga (Berger,
1974).

9
While all these developments were taking place, the balance of power in the
region took a new shape. For some time, the political influence in the region had
been shifting from London to members of the European population in central
Africa. White politicians in Southern Rhodesia wanted to benefit from the
prosperous copper mining industry in the north, and renewed their efforts aimed
at amalgamating Northern Rhodesia, Southern Rhodesia and Nyasaland (Malawi)
(Gann, 1964: 397-439). In the meantime, the RST and Rhodesian Anglo
American made another significant administrative change by moving their head
offices from London to Lusaka in 1951 (with Rhodesian Anglo American
relocating to Kitwe in 1953) (Gann, 1964: 14).
The establishment of the new Central African Federation in 1953 worked to the
primary benefit of the white settler population in Southern Rhodesia. Resentment
over the flow of copper revenues to other parts of the Federation shapes Zambian
nationalism (Larmer, 2010: 34). Whilst Zambian nationalism had much in
common with parallel movements across the continent, as Africans agitated for
indigenous control of political institutions, it also acted as a deterrent to foreign
business entities in the country.
Following the creation of the federal government, the copper mining companies
moved their headquarters to Salisbury in 1955 in order to be close to the new
centre of political power. In the Federation’s first seven years, the Northern
Rhodesian copper industry contributed around £70 million in tax revenue towards
the infrastructural development of the other two territories. Of this amount, by far
the greater share went to Southern Rhodesia. In addition to the taxes they paid, the
mining groups assisted in the Federation’s development by providing loans, on
very favourable terms, to the Federal and territorial governments. In 1956, for
example, the Mufulira mine agreed to lend the Northern Rhodesian government
£1 million, and the Nyasaland government £0.5 million. These sums were to be
used exclusively to finance rural development (Butler 2007).
The largest project under federation was directly linked to the Northern Rhodesian
economy. Despite the 1947 plan’s emphasis on agriculture, the Federation
government proceeded to construct a massive dam on the Zambezi River at
Kariba, creating the world’s largest man-made lake. The Federation government
was enthused with modernist ideology and imagined that massive electricity
supplies would literally fuel mining-led industrialisation and economic growth.
The dam did generate the electricity required for industrial growth on the
Copperbelt (and in Southern Rhodesia). At the same time, a total of 57,000 people
were evicted from their farms and villages along the western (or Northern

10
Rhodesian) side of the Gwembe valley before the reservoir filled in 1962-63, on
the eve of independence (Tischler, 2014).
Had it not been bound to the Federation, Zambia might have undergone a very
different path of economic development. Business interests in Northern Rhodesia
preferred to build an electric power station on the Kafue River rather than at
Kariba. The location at Kariba and the allocation of electricity benefitted
secondary industrialization around the Federal capital, Salisbury (in Southern
Rhodesia), even though the Copperbelt arguably offered a larger market.
Moreover, the Copperbelt mining companies were heavily taxed. Most
importantly, the Kariba dam project locked the soon-to-be-independent Zambia
into an understanding of modernization that centered on the mines and paid little
attention to the countryside, except as a source of labour (Butler, 2007; Tischler,
2014). companies were heavily taxed.
A lower copper price and reduced production in the late 1950s proved temporary.
By 1960 copper production had reached a record level. Northern Rhodesia
overtook Chile as the world’s largest exporter of copper. In the early 1960s, also,
the copper price wobbled and Northern Rhodesian production fluctuated, but by
1964 – when Zambia became independent of British rule – production was once
again at maximum (Butler, 2007). Zambia was thus born on the back of a highly
buoyant mining sector.

4. Independence and copper-fueled

overambition
Zambia became independent in 1964 with an economy dominated by copper
mining. Copper (with cobalt) accounted for 47% of GDP, 92% of exports, more
than one half of government revenue and 18% of formal employment;
industrialisation had also resulted in more than 20% of the population living in
urban areas. This placed Zambia in a unique position in the region. No other
country in East, Central or Southern Africa – not even South Africa – enjoyed
similarly strong flows of either foreign exchange or government revenues.
Conversely, no other country was as reliant on exports, let alone a specific
commodity export. Gold-mining was integral to the South African economy, but
even it accounted for only 60% of South African exports and about 20% of GDP
in the first decades of the twentieth century (and less thereafter).
At the same time, a large majority of the population of Zambia remained in rural
areas. Many urban workers later returned to rural areas. Productivity in agriculture
was low and poverty was widespread. The ‘structural inefficiency’ of agriculture

11
meant that Zambia had to import food. As Elliott commented, ‘no other country
in Africa faces such a contrast between, on the one hand, an urban industrial sector
that is growing and developing very rapidly, and on the other, a semi-stagnant
rural economy which seems to defy, often at very considerable expense, all
attempts at restructuring it in the process of growth’ (1971: 9).
Economic growth in Zambia depended on maintaining a balance between
protecting the copper industry and using it as a source of revenues to be used to
promote economic diversification and social development. In South Africa, the
state was largely successful in the middle part of the twentieth century in
expanding production in both manufacturing and large-scale agriculture, in part
through the judicious use of revenues and foreign exchange generated by the gold
mining industry. By the 1950s South Africa had a substantial manufacturing
sector as well as a competitive agricultural sector (although, of course, the benefits
of this growth were distributed very unequally). Zambia, in contrast, remained
‘under-industrialised’ in terms of manufacturing industry (Elliott, 1971: 5). The
slow growth of manufacturing was in part the result of colonial policy (especially
under federation). It was also widely attributed to the dominance of mining
(through ‘Dutch disease’): Exports of copper over-strengthened the kwacha,
reducing the price of imports and undermining the competitiveness of domestic
producers in other sectors (especially manufacturing); and there were said to be
few linkages between the copper mines and other sectors.
The new Zambian government took office determined to use exports of copper to
drive industrial diversification and economic growth, as South Africa had already
done. Conditions seemed propitious: The global copper price had recovered from
a dip to reach a new record level, whilst production had expanded rapidly through
the postwar boom (see Figure 2). The new government – and its advisors –
imagined that this boom would continue, and based their economic strategy on
this. Through the late 1960s and early 1970s this was not obviously a mistake:
The copper price fluctuated, intermittently reaching new heights but without any
clear trend (see Figure 3), whilst production remained stable (see Figure 4). But
Zambia failed to take advantage of strong global demand to expand production,
so that its share of global production fell steadily (see Figure 4). The government
undermined the industry through both raising production costs and maintaining
the currency at too strong an exchange rate, even when the trade balance was
negative and foreign exchange reserves were depleted. It failed to prepare for any
downturn in the copper price. Finally, it embarked on public expenditure
programmes that assumed implausible earnings and tax revenues into the future.
In short, the long postwar boom lulled the new government into the traps of over-
confidence and over-ambition.

12
0,6

0,5

0,4

0,3

0,2

0,1

0
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Figure 3: Global copper price (US$ per pound, constant 1964 prices).
Source: https://pubs.usgs.gov/sir/2012/5188/tables/

900 0,16
800 0,14
Production ('000 tonnes)

700 0,12
600 Production
0,1
500 (left axis)
0,08
400
0,06
300
Share of
200 0,04 global
0,02 production
100
(right axis)
0 0
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Figure 4: Copper production in Zambia, 1965-2010.

Source: Minerals Yearbooks.

The new government’s initial economic strategy was framed by the

recommendations of an international team of development economists led by
Dudley Seers (UN/ECA/FAO, 1964), which in turn reflected the hegemonic
statism of left-wing economic policy-makers in Britain and elsewhere. The Seers

13
Report informed the 1964 Transitional Development Plan and – eighteen months
later (in 1966) – the First National Development Plan (NDP). This initial
economic strategy aimed to diversify the economy and reduce the dependence on
mining through a combination of expanded manufacturing production behind
tariff barriers (substituting for imports) and the ‘modernization’ of agriculture.
New industry would be spread across the country. This would be achieved through
increased public revenues and massive public expenditure on education (to reduce
skill shortages) and transport, as well as sectoral investments (including
agricultural credit policies, mechanization and marketing). The strategy was
predicated on the expansion of copper production, from about 680,000 tonnes p.a.
to at least 800,000 tonnes p.a. by 1970, and a high global copper price. The Seers
mission anticipated that production would expand in all sectors, including
commercial and subsistence agriculture. GDP would rise (in real terms) by 6%
p.a. (or 37% in total) between 1965 and 1970. Output would grow twice as fast as
the population, so that GDP per capita would rise at a steady 3% p.a. (Seers, nd).
The First NDP was even bolder, anticipating a 94% real increase in output
between 1964 and 1970.
This was – as a sympathetic review later put it – a ‘time of great confidence in the
development of the country’ (ILO-JASPA, 1981: 211). Policy-makers believed
that rapid growth was possible once the shackles of colonialism were removed.
Sardanis recalls the optimism that accompanied independence: ‘We were free,
determined and very enthusiastic, and blissfully ignorant of the pitfalls that lay
ahead. There was no problem we could not handle, we thought’ (2014: 21). The
Transitional National Development Plan envisaged a strong expansion of
developmental expenditure on the basis of Zambia’s ‘sound’ financial position
(quoted in ibid.). Governments across Africa were embracing statist models of
‘development’ and socialist rhetoric. Zambia’s new government apparently
imagined that copper prices would remain high indefinitely and responded half-
heartedly to the Seers team’s recommendations for a mineral stabilisation fund
that would accumulate reserves during booms and spend them during downswings
(Auty, 1991: 172). Kaunda also envisaged the establishment of a cartel of the
world’s copper producers, to fix prices and quotas (as the Organisation of the
Petroleum Exporting Countries, OPEC, did for oil).
Nationalist leaders had made bold promises during their campaign for
independence, raising expectations that Zambian managers and mineworkers
would achieve the living standards of expatriate staff whilst the living standards
of other Zambians would rise towards those of mineworkers. Policy-makers and
ordinary Zambians alike were caught up in the belief that copper mining would
drive ‘modernisation’ as the population shifted from low-productivity and low-

14
income peasant agriculture into high-productivity and high-income industrial and
urban employment (Ferguson, 1999). For its part, the mining industry steadily
expanded the benefits associated with employment, beyond high and rising wages
to free or subsidized housing and utilities, food, education, and even diapers for
children and burials of the deceased (Fraser, 2010: 9).
Rising copper prices and production drove rising GDP in 1964-65, but this
expansion soon faltered. Copper production did not expand as fast as anticipated,
although this was disguised by the high price and hence high income despite the
slow growth in expansion (Fry, 1980: 53). Kaunda’s attempt to organize an
international copper producers’ cartel failed. The overall Zambian economy grew
much slower than Seers anticipated, with real GDP growing by only 25% by 1970
(despite strong global demand for copper). GDP per capita remained stagnant due
to population growth (see Figure 5). Meanwhile, government expenditure rose.
By 1970 it was four times higher in real terms than in 1964. The government failed
to increase taxation in line with expenditure. It also failed to diversify taxation
away from the copper industry, leaving public finance very vulnerable to any
decline in copper exports. By 1970 economists were warning that the government
had reached the limit of domestic borrowing and would henceforth have to borrow
abroad (Harvey, 1971a; see also Harvey, 1971b; ILO-JASPA, 1981; Simson,
1985).

700

600

500
Constant 2000 US$

400 Zambia
Zimbabwe
300 Kenya
Malawi
200

100

0
1964 1969 1974 1979 1984 1989 1994 1999 2004 2009

Figure 5: Real GDP per capita, 1964-2010.

Source: World Development Indicators.

15
The government’s bold – or over-confident – strategy was criticized at the time.
Elliott (1971) charged that the strategy underestimated the constraints on growth
in Zambia. He (and Jolly, 1971) argued that economic diversification would be
constrained by the shortage of skilled labour and the balance of payments (given
that manufacturing would also require at the outset substantial imports), as well
as by domestic tax revenues and savings. These were constraints in the dual sense
that they were in short supply at the time and there was little likelihood that the
supply could be expanded to reduce the shortfall in the near future.
Exogenous political factors contributed to derailing the government’s intended
strategy. In 1965, Southern Rhodesia declared a Unilateral Declaration of
Independence (UDI). The Zambian government responded by trying to reduce its
dependence on Southern Rhodesia as well as Angola (still under Portuguese
control) and South Africa by routing its trade through the Congo or Tanzania. The
government – together with the government of Tanzania, funded by China –
constructed first a fuel pipeline from Dar es Salaam on the East African coast and
then, between 1970 and 1975, the 1860 km-long Tanzania-Zambia Railway
Authority (TAZARA) railway from Kapiri Mposhi (in central Zambia) to Dar es
Salaam (Monson, 2009). TAZARA, imagined as a symbol of economic
independence, was doomed to become instead a symbol of the government’s
economic mismanagement.

5. Nationalisation and economic decline in the

1970s
The Zambian government also expanded its direct control over the economy, not
only to expand domestic capacity but also to reduce the power of expatriate and
settler interests. The ‘Mulungushi reforms’ of 1968 included the partial
nationalisation of most major companies in the construction, road transport and
commerce sectors, with the state taking 51% ownership. The following year, the
‘Matero reforms’ included the state’s purchase of 51% shares in the mining
companies, whilst leaving management in the hands of the former owners under
ten-year contracts. Sardanis, who was at the time Permanent Secretary in the
Ministry of Trade, Industry and Mines, recalls that the decision was made by
Kaunda himself, whilst Sardanis was trying to draft an improved mining tax
regime (2014: 62-6). The government similarly proceeded to part-nationalise the
insurance companies and building societies (but not banks). The government also
pushed for the ‘Zambianisation’ of skilled labour and management, including on
the mines. Whilst Seers had envisaged that the number of expatriate employees
on the mines would remain steady, the government moved quickly to replace

16
expatriate with Zambian employees. Sardanis denounced economic decision-
making that was driven by the short-term political interests of governing elite, and
resigned as Principal Secretary in 1970 (ibid.: 67-9). In 1974, the government
cancelled its agreements with Anglo American and RST to manage the copper
mines (co-owned since 1970), took direct control of the management of the mines
and established a monopolistic parastatal copper marketing agency.
Compensation to the companies was funded through foreign debt. Control was
later vested in the Zambia Consolidated Copper Mines (ZCCM) Limited.
Nationalisation came at a ‘very high financial cost’ in terms of foregone revenues
in the short-run (Stoever, 1985) as well as reduced production in the medium term.
Sardanis was then and later withering in his criticism of the government’s actions,
which plunged Zambia into debt and undercut the economy’s potential to grow:
‘Paralysis and stagnation set in ...’ (Sardanis, 2014: 86).
The Zambian government’s approach was in stark contrast to the government in
neighbouring Botswana. In 1969, after the discovery of diamonds, the
government of Botswana entered into a 50:50 deal with De Beers. The
arrangement generated massive revenues for the state. The government of
Botswana also contained increases in public expenditure and built up foreign
reserves, so as to be able to cope with periods of lower prices. It also avoided
over-appreciation of the currency. The Botswana approach is widely described as
shrewd and wise. Whilst mining exports inhibited economic diversification and
reproduced inequality, the economy grew rapidly and the state benefitted from
abundant resources for social and other programmes (Hillbom and Bolt, 2018).
The Kaunda government’s approach – neither shrewd nor wise – was rooted in
Kaunda’s blanket rejection of foreign capitalist enterprise and in the political
benefits of wielding more extensive patronage over employment. Kaunda was no
‘orthodox socialist’, aiming instead at the creation of an indigenous and politically
loyal Zambian bourgeoisie. The result, however, as Kaunda himself came to
recognize, was a form of state capitalism dominated by a ‘techno-bureaucratic’
Zambian elite or ‘bureaucratic bourgeoisie’, many of whom had been to the same
school (Munali) (Simson, 1985: 25) and who used their positions in the state or
parastatals to accumulate wealth through business activities, despite a leadership
code (Baylies and Szeftel, 1982). Critics were marginalized. In 1972, for example,
Kaunda fired Valentine Musakanya as Governor of the Bank of Zambia.
The emerging vision of statist development was set out in the Second and
especially Third National Development Plans, published in 1972 and 1979
respectively. As the Third Plan stated, the public sector would play the
‘commanding role ... both in the mobilization and in the allocation of investment

17
funds and the creation of socialist economic relations necessary for humanist
construction’ (Zambia, 1979). Already by 1978, the state employed 75% of all
waged employees. Among the parastatals was the Zambia Industrial and Mining
Corporation (ZIMCO) and its subsidiary, the Industrial Development Corporation
of Zambia (INDECO). INDECO, which was initially headed by Sardanis and
renovated or constructed hotels, facilitated the new transport initiatives and
established (mostly in partnership with private capital) a series of manufacturing
and agricultural projects. These latter projects included Kafue Textiles (and, later,
a second mill in Kabwe), Nitrogen Chemicals of Zambia (NCZ, which produced
ammonium nitrate for use in fertilizer and mining explosives), Zambia Sugar
(which operated the Nakambala Sugar Estate in Mazabuka) and Chilanga Cement.
Most of these enterprises produced goods previously imported from Southern
Rhodesia or South Africa. Some of the proposed projects were impossible,
‘dreamed up by all sorts of fantasists who were attracted to our freshness – like
inswa (flying ants) to the lights – and were bombarding us with countless ideas
on how to race into a new ideal society of their own imagination’ (Sardanis, 2014:
35).
The NDPs remained, however, statements of intent rather than practical guides.
A World Bank mission dismissed the Second Plan as ‘a (mostly expatriate)
technocrats’ plan that ... lacked practical relevance’ because it ‘was not adequately
related to realistic estimates of revenues, did not make provision for or give
guidance as to where expenditure cuts should come within the plan framework, in
the event of a shortage of resources, and was not backed by enough well-prepared
and economically justified projects’ (World Bank, 1972: para 24). The planning
agencies had little power over the other ministries, which continued to spend
money on projects that were not part of the plans (see Musiker, 2020: 30-31). The
ambitious outcomes envisaged in the plans could only have been achieved given
the best possible combination of circumstances.
Expanded state ownership did not generate the anticipated expansion of either
production or government revenues. The Second NDP, for example, envisaged
real growth of output of 7.5% p.a. between 1971 and 1976. In reality, output grew
by only 3% p.a. (Fry, 1980: 55-7). Whenever copper prices and hence government
revenues rose (as in 1973-74 and 1979-80), government expenditure was
increased rapidly, to levels that could only be maintained when the copper price
fell again through massive and unsustainable borrowing. By 1975, the budget
deficit was about 23% of GDP, whilst the external current account deficit was the
equivalent of 27% of GDP (Auty, 1991: 175). Too much of the expanded
government expenditure entailed consumption rather than investment, including

18
substantial subsidies for urban consumers (in addition to price controls that
favoured them).
Rather than expanding, as anticipated in the NDPs, copper production declined
steadily from its peak in 1969, by almost one-third by 1979 (see Figure 4).
Through the 1960s Zambia and Chile produced almost equal quantities of copper,
vying for second place in the global production ranking behind the USA. But
whereas Zambia delayed major reforms, Chile implemented them. The result was
that production in Chile expanded at the same time as Zambia’s contracted. By
the early 1980s, Chile was producing twice as much copper as Zambia (see Figure
6). Zambia’s share of global production fell from 14% at Independence to 8% by
1980 (see Figure 4), and it had slipped to fifth place in the global production
rankings.

Figure 6: Copper production in Zambia, Chile and Peru, 1965-2010.

Source: Minerals Yearbooks.

The decline of copper production was the result of insufficient investment (in part
because of restricted access to foreign exchange), increased costs (in part because
of high labour costs) and poor management (at least in part because of
nationalisation), in the face of the decline trend in the real price (see Figure 3).
Given high fixed costs, production needed to expand, not contract. Across the
1970s, mining’s contribution to GDP fell by more than half and its contribution
to government revenues shrank to nothing (Burdette, 1984). The industry – and
Zambia’s economy as a whole – would probably have fared better had the
government negotiated higher tax revenues rather than nationalize the industry (as
the Seers Report had envisaged).

19
Despite rhetorical praise for rural development and agriculture, the government
did little to improve agricultural productivity. The state set low producer prices
for maize (through the parastatal National Agricultural Marketing Board,
NAMBOARD). A mechanization programme that focused on tractors collapsed
due to poor maintenance. Road infrastructure remained poor. The living standards
of the rural population stagnated or declined (Evans, 1984). Migration to towns
continued, especially to the Copperbelt, heightening the pressure on the
government to pacify the urban population through subsidies on maize meal and
other goods. When in 1977 a Parliamentary Select Committee chaired by former
Finance Minister John Mwanakatwe recommended economic liberalization,
Kaunda rejected most of the proposals. Only when the government had to borrow
from the International Monetary Fund (IMF) – and import expensive maize
because of insufficient local production – did the government raise producer
prices and promise to reduce subsidies amidst a general reduction in public
expenditure.
Manufacturing grew slowly, driven by INDECO, with the objective of import
substitution. But most of the new enterprises produced consumer goods for the
elite market. Many of the new enterprises were capital-intensive and heavily
dependent on imports and foreign capital. Profitability was low (Tangri, 1984).
Economic mismanagement combined with exogenous economic and political
pressures. The falling real price of copper and oil price hikes resulted in worse
terms of trade. UDI in Southern Rhodesia (and civil war in Angola) raised the
costs of trade. The government’s capacity to cope with these challenges had been
undercut, however, by its pursuit of a development strategy that entailed an
overly-extravagant programme of public expenditure, much of it politically
convenient but economically misguided, whilst mishandling the copper industry
on which it relied. Government debt had risen just as revenues from copper
mining dried up. By 1980, GDP per capita was 25% below its peak in 1965. GDP
per capita was, however, to fall further in the 1980s.

6. Mismanagement of crisis in the 1980s

The government’s economic growth strategy depended on an expansion of copper
production and income, to generate the foreign exchange and tax revenues
required to sustain further investment in the copper industry, sectoral
diversification, and the expansion of public education and health care. Rather than
expand, however, copper production had contracted. This was not because of any
lack of demand, given that global demand – and supply – grew steadily. Rather,
Zambia accounted for a smaller and smaller share of global production (whilst the

20
global price continued to fall in real terms) (see Figures 4 and 3). By 1980, copper
production in Zambia had declined by almost one-quarter from its peak in 1969.
Copper production continued to decline through the 1980s. By 1990, it had fallen
to about one half from its peak (see Figure 4). Meanwhile, production in Chile
continued to grow (see Figure 6).
Declining production combined with low copper prices (despite picking up in the
late 1980s, see Figure 3). With rising oil prices and deteriorating terms of trade
(Simson, 1985: 31-2), deficits on the balance of payments worsened. Investment
collapsed (ibid.: 33; see also Figure 7). Employment and real earnings declined.
The decline in GDP was startling: Between 1970 and 1975 the economy grew
slowly in real terms, but not as fast as the population, so real GDP per capita
shrank slightly. Between 1975 and 1980 real GDP shrank by about 4% whilst real
GDP per capita shrank by about 15%. This rate of shrinkage continued through
the early 1980s. By 1985, after twenty years of independence, real GDP per capita
was about one-third lower than it had been at independence (see Figure 5).

Figure 7: Manufacturing and investment (% of GDP) and external debt (%

of GNI), 1964-2010.
Source: World Development Indicators.

The crisis required ‘structural adjustment’ to reinvigorate the copper industry.

Rather than do this, however, the Zambian government persisted with policies
that served to intensify rather than mitigate the economic crisis. Public finances
deteriorated dramatically, as revenues failed to match even recurrent
expenditures. The government responded not by reducing recurrent expenditure
but by slashing its capital expenditure. Public expenditure required continued
funding through debt, both external and locally. The deepening external debt crisis
forced the government to turn again to the IMF. The government reached a series

21
of agreements with the IMF, giving it access to concessionary finance, but
reneged on the agreed reductions of the burgeoning budget deficit. Meanwhile the
economic crisis continued to deepen. In 1981, the current account deficit (in the
balance of payments) reached 17% of GDP and the government’s budget deficit
reached 30% of GDP. The government borrowed massively, both abroad and at
home, to fund public expenditure. External debt exceeded gross national income
for the first time in 1982. Three years later it had doubled in relation to the
(shrinking) national income, and by 1986 it was four times larger. Inflation
accelerated. In 1982 and 1983, ZCCM incurred record losses. The government
concluded two further agreements with the IMF in 1981 and 1983, but these too
collapsed when the government failed to meet the conditions (Fundanga, 1989).
The government’s economic policies were the subject of strong criticism within
Zambia – and within the state – as well as by the country’s external creditors. Led
by the IMF and World Bank, critics pushed for economic stabilization and
restructuring, including devaluation, liberalization and (at least partial)
privatization, and budget deficit reduction. The government was compelled to
agree but only half-heartedly applied the IMF’s conditions, with limited benefits.
Half-baked attempts at structural adjustment floundered on the government’s
reluctance to change its expenditure patterns or to erode further the standard of
living in Lusaka and the Copperbelt. The government resisted the necessary
devaluation of the currency, whenever possible opting instead for price control
and other regulations. When the government removed subsidies on maize in
December 1986, riots broke out on the Copperbelt, which in turn led to the
government breaking with the IMF in 1987. The government proceeded to launch
its own New Economic Recovery Programme (NERP) that included the
revaluation of the kwacha, administrative rationing of foreign exchange and
reintroduction of price controls (including low producer prices, discouraging
domestic production).
When, inevitably, the NERP collapsed in 1989, the IMF insisted on much more
humiliating conditions, including the appointment of an IMF nominee as central
bank governor. By this time, most Zambians concurred with the country’s
creditors that fundamental changes were needed in Zambia – including in the
political system. Widespread protests, including protest votes in a referendum on
the one-party state, led to the reintroduction of multi-party politics, the defeat of
Kaunda and his United National Independence Party (UNIP) in the 1991 election
and a change of government.
The deepening economic crisis and ensuing attempts at structural adjustment
inevitably had some effects on manufacturing and agriculture also. Both

22
manufacturing and agriculture were constrained by ‘ill-conceived policy choices’
that had ‘imparted a profound anti-export bias’ (Adam and Simpasa, 2010: 82).
Protected, manufacturing grew (see Figure 7) – but only producing for the
domestic market, which ensured enduring inefficiency. Agriculture was also
almost all for domestic consumption. Government policy focused on providing
cheap food for urban consumers: On average, between 1967 and 1985, the subsidy
amounted to 70% of the retail price of maize. Agricultural policies were ostensibly
intended to improve the welfare of the rural population but ‘the underlying goal
was to capture the peasantry and tie them into an urban-oriented marketing
system, thereby improving urban food security’ (Kean and Wood, 1992: 68; see
also Bates, 1981). When falling maize production required massive and expensive
imports from 1979, the government launched an Operation Food Production – but
then lacked the resources to implement it. Farmers – and aid donors – pointed to
low producer prices and inefficient parastatal marketing, and pressure mounted.
Despite government neglect, an intermediate class of medium-sized market-
oriented farmers had emerged in the 1970s, especially in Southern, Central and
Eastern Provinces. By the early 1980s, about 20,000 such medium-scale farmers
were producing more than half of Zambia’s maize, with productivity per hectare
about one half of the mechanized and irrigated large-scale farmers, but several
times higher than the smaller farmers (Simson, 1985; Kean and Wood, 1992).
These farmers were hit hard by drought in the 1980s and again in the early 1900s.
Under pressure, the government partially deregulated agriculture in the 1980s,
with mixed effects (Kean and Wood, 1992).

7000

6000

5000
Constant 2000 US$

4000 Chile
Botswana
3000 Zambia
DRC
2000

1000

0
1964 1969 1974 1979 1984 1989 1994 1999 2004 2009

Figure 8: Real GDP per capita, 1964-2010.

Source: World Development Indicators.

23
When Kaunda left State House in 1991, twenty-seven years after Independence,
he left an economy that had grown far slower than the population, so that GDP
per capita had fallen by one-third. Servicing the public debt meant that the
government had to impose austere cuts in public expenditure but despite this ran
a significant budget deficit of about 6% of GDP. Copper output was about one
half of its level at Independence. Agricultural production had recovered somewhat
from the droughts of the 1980s but food production per capita remained at the
same level as at Independence. Manufacturing appeared strong, but it was heavily
dependent on state protection.
Zambia’s economic performance of this period contrasted with both most of its
neighbours’ and other copper-producers’ performance (see Figures 5 and 8). In
terms of GDP per capita, Zambia was overtaken by Botswana and Zimbabwe in
the 1970s and Kenya in the 1980s. Zambia’s economic decline was unmatched
until Zimbabwe’s government collapsed its economy in the 2000s. Comparison
with other copper-producers suggests that Zambia’s decline was far from
inevitable. The gap in GDP per capita between Zambia and Chile was already
wide in the 1960s, but widened much further in subsequent decades as the average
Zambian became steadily poorer and the average Chilean became steadily richer,
as a result of contrasting economic management.
The size of the copper industry precluded Zambia following the labour-intensive
and export-oriented growth path that drove rapid economic growth in East Asian
economies. Whereas (South) Korea, Taiwan, Hong Kong and later China,
Vietnam, Cambodia and Indonesia all industrialised through the production for
export of clothing and similar products, copper exports inevitably rendered the
kwacha too strong for a similar strategy. Zambia’s attempts to diversify through
manufacturing behind tariff barriers was sensible, but the sector failed to become
efficient enough to survive the removal of protection in the 1990s. The Zambian
government’s prioritization of urban consumers and ensuing neglect of
agricultural production inhibited any structural reforms in this sector. The crucial
flaw in the Zambian government’s strategy, however, was its excessive ambition
and poor management, which together resulted in the undermining of the copper
industry and chronic fiscal and debt crises.

7. Restructuring and renewed growth 1990-

2010
The election of the Movement for Multiparty Democracy (MMD) in 1991 led to
rapid and dramatic reforms. The MMD election manifesto had made clear its
commitment to scaling back the state and restoring ‘a basically private enterprise

24
economy’ (quoted in Rakner, 2003: 68). Newly-elected president Chiluba told the
National Assembly that the economy was ‘in ruins and even the ruins are in
danger’ (ibid.). The government immediately and boldly abolished the subsidy on
maize meal – which in 1990 had been substantially larger than the budget deficit
(Saasa, 1996: 8). This resulted in a seven-fold price increase but relieved pressure
on the budget. In 1993 the government implemented a ‘cash budget’ system,
meaning that public expenditure was limited to available revenues, preventing
further increases in public debt (although this was unevenly implemented). Taxes
were reformed, trade and foreign exchange were liberalised and agriculture was
deregulated. In the late 1990s, most government-owned companies apart from the
ZCCM and utilities were privatised (ibid.: 68-73). This ‘aggressive program of
macroeconomic stabilization and reform’ transformed Zambia ‘from one of
Africa’s most dirigiste economic regimes in the 1980s to one of the most liberal’
(Adam and Simpasa, 2010: 64).
ZCCM was not privatised until 1998, after several years of very heavy losses. The
low (and falling) price of copper and ZCCM’s heavy operating losses weakened
the government’s position in negotiations with prospective purchasers. The
ensuing ‘Development Agreements’ allowed the purchasers of the copper mines
to pay very low taxes. Anglo American became the primary shareholder in the
new Konkola Copper Mines in 2002 but two years later handed the mines back.
The government then sold a majority share to the Indian-owned Vedanta
Corporation at a discounted price and with massive tax concessions (Sardanis,
2014: 177; see also Levy, 2014: 85-7).
The government’s objectives in privatising ZCCM were to end its heavy
subsidisation of the industry’s operations and to facilitate much-needed new
private investment. Whilst the new mining companies did not pay much tax, they
did invest – and they did so more heavily than they had agreed to under the
Development Agreements. A new mine near Solwezi was projected to produce
about 125,000 tons p.a., which would make it the largest producer in Africa. By
the mid-2000s, the long-term viability of Zambia’s copper industry had been
restored (Adam and Simpasa, 2010: 68).
Economic liberalization proved fatal to most manufacturing enterprises. With
high duties on imported materials but low duties on imported finished goods,
privatised and other manufacturing enterprises were simply unable to compete
with imports. Manufacturing accounted for more than one-third of value added in
the economy in 1990. Just two years later this had crashed to barely more than
10 percent (see Figure 7). Enterprises such as the bicycle factory in Chipata, the
battery factory in Mansa and the fruit cannery in Mwinilunga collapsed.

25
Privatisation provided only limited relief to public finances. The IMF and other
international finance institutions were keen to provide debt relief under the
Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief initiatives,
but insisted that the government contain the public sector wage bill. In the early
2000s the government began to implement new (and more transparent) financial
management procedures (including a Medium-Term Expenditure Framework)
(Stevens and Teggemann, 2004) as well as – at the IMF’s insistence – austerity
measures including a freeze on public sector wages and employment as well as
tax increases. This led to Zambia being relieved of almost all of its foreign debt
in 2005 (see Figure 7). Thereafter the government continued to contain public
expenditure, which increased slower than GDP, therefore falling as a proportion
of GDP from 31% in 2002 to 21% in 2009.
Soon after Anglo American’s withdrawal, the price of copper began to rise
rapidly. By 2005 it was at its highest real level in eighty years (see Figure 3).
Zambian copper production was already rising from its low point in 2000 and the
rising price encouraged further investment and expansion. Production in 2009 was
three times higher than in 2000 (see Figure 4). The result was a massive expansion
in exports and hence dollar earnings. The generous tax regime meant, however,
that a large share of the windfall revenues left the country as capital outflows, as
the mining companies paid dividends to their shareholders (although this did have
the side effect of maintaining a stable real exchange rate, reducing the extent of
‘Dutch disease’) (Adam and Simpasa, 2010; Gondwe and Pamu, 2014).
As the copper price rose it became clear that the government needed to review its
mining taxes. Like the South African state (which was slow to tax platinum mines
during the boom), the Zambian state was slow to act, missing out on possible
revenues to the tune of about 5% of GDP per annum (Adam, Lippert and Simpasa,
2014: 213). The Zambian government did not introduce a new tax regime until
2008 (Bigsten, Mulenga and Olsson, 2010; Lundstøl and Isaksen, 2018). Tax
revenues from mining rose rapidly. The average effective tax rate rose from an
estimated 31% prior to the reform to between 50 and 55 percent between 2008
and 2015 (Adam et al., 2014: 220; Lundstøl and Isaksen, 2018).
The wholesale economic liberalization of the 1990s gave way in the 2000s to a
more mixed approach to economic management. The government reintroduced
national development planning, publishing a Fifth National Development Plan in
late 2006. Despite this, as Fraser noted in 2010, state ‘regulatory bodies scramble
to define a useful role for the “modern” state in managing the [mining] companies’
whilst ‘government ministers and political parties appear utterly disoriented,
advocating policies that oscillate between extreme deregulation and greater state

26
interference, between increasing mining taxes and lowering them, between
nationalizing mining companies and bailing out struggling private firms, and
between continued dependence on Western donors and companies and a turn to
new sponsors in India and China’ (Fraser, 2010: 2).
With respect to energy, also, the government seemed indecisive. After initially
agreeing to privatise the parastatal Zambia Electricity Supply Corporation
(ZESCO), the government persuaded the IMF and World Bank to agree to
commercialization rather than privatization. ZESCO was plagued by underpricing
(which served to subsidise the mines and non-poor urban consumers), an inflated
payroll, and underinvestment in the maintenance of infrastructure. Economic
growth was not matched by expanded power generation and the government
resisted the price increases advocated by the World Bank. After considerable
prevarication, the government did finally (in 2007) sell a 49% share of the Zambia
National Commercial Bank (ZANACO) and the telecommunications parastatal
ZAMTEL (Levy and Palale, 2014).
The government was more decisive in addressing the crisis in agriculture, largely
because of a severe drought between 2000 and 2002. It introduced an initially
modest Fertiliser Subsidy Programme (FSP) for small farmers, funded in large
part by donors. In the late 2000s the programme was expanded, repackaged as the
Farmer Input Support Programme (FISP), and expanded further, reaching about
one in four smallholder households by 2010/11 (Resnick and Mason, 2016). In
the late 2000s the government also spent heavily on maize purchases through the
Food Reserve Agency, at a cost of almost 2% of GDP (Whitworth, 2012; World
Bank, 2018). Whilst maize production expanded, this appears to have been driven
more by an increase in the area cultivated rather than increased productivity
(World Bank, 2017). A World Bank study in 2008 found that, despite the FSP,
the indirect costs imposed by government on agriculture in Zambia remained
considerable – at a time when indirect costs were reduced greatly in most other
African countries (World Bank, 2008).
Manufacturing as well as agriculture were compromised by the strength of the
kwacha as copper exports increased. A strong kwacha helped to contain inflation
but cheapened imports whilst undermining exports. Despite this, Adam and
Simpasa assessed that the poor performance of these sectors was the result more
of ‘structural policies and weaknesses on the supply side’ than of the
overvaluation of the kwacha (2010: 84-5). Zambian producers were
uncompetitive because their production costs were pushed up by poor
infrastructure, unreliable energy and high real wages for skilled labour (ibid.).

27
Zambia’s economy nonetheless grew slightly faster during the 2000s (and 2010s)
than the economy of Sub-Saharan Africa as a whole. Zambia’s GDP per capita
rose from just over three times the continental average in the early 1990s to close
to five times the continental average by 2019. Population growth, however, meant
that real GDP per capita grew slower than the economy (see Figure 5 for the
period to 2009). Moreover, the benefits of economic growth were distributed very
unequally. The poverty headcount rate (using the standard poverty line of
US$1.90 per person in 2011 prices) was estimated at about 42% in 1996 and 1998.
The poverty headcount rate then rose steadily, reaching 64% in 2010. The growth
elasticity of poverty was low, meaning that episodes of economic growth had little
effect on poverty rates, because growth fuelled growing inequality. The benefits
of economic growth in the 2000s accrued primarily to the rich, with few benefits
trickling down to the poor. Economic growth in the 2000s did not entail the kind
of structural transformation required for sustained and more inclusive economic
development (World Bank, 2018). The poverty rate in Zambia was higher in
relation to GDP per capita than other African countries.

Conclusion
Sustained economic growth requires structural change. The expansion of
capitalist copper mining in Northern Rhodesia marked a fundamental change in
the structure of the economy. But the government failed to utilize the resources
generated by mining to drive sustainable economic diversification. Manufacturing
proved unable to survive economic liberalization, and agricultural productivity
remained low. The result was that the improved living standards of the 1940s
through to the 1960s were followed by declining living standards thereafter, and
only a slow recovery in the 2000s.

28
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