Zim, Zambia offer study in African contrasts

ZAMBIA and Zimbabwe share one of southern Africa’s longest rivers, the mighty Zambezi, but their economies couldn’t be further apart.

After years in Zimbabwe’s shadow, Zambia is now praised by the International Monetary Fund and Western donors for its ec

onomic management, while its southern neighbour — once the regional economic star — is viewed as a “pariah”.

Zambia’s thriving economy and stable politics stand in sharp contrast to the economic chaos and political travails engulfing the government of President Robert Mugabe.

Zimbabwe’s annual inflation tops 1 000%, the highest in the world, while its people struggle through regular shortages of everything from petrol to basic food staples in an economy which has shrunk by almost a third since 2000.

Zambians, who once flocked to Zimbabwe for work, have seen their kwacha currency make steady gains against the US dollar as inflation remains low and economic growth speeds up.

The currency’s gains have mainly been driven by surging prices for copper, the economic mainstay and chief export.

Analysts say Zambia is one of the few beneficiaries of Zimbabwe’s woes, which many blame on mismanagement by Mugabe.

“Even if Zimbabwe recovers, Zambia has become the main destination (for foreign investors) because it has established itself,” said Ignatius Chicha, head of treasury at Citibank in Lusaka, adding debt relief granted under the Highly-Indebted Poor Countries (HIPC) initiative had added to the attraction.

The two former British colonies’ diverging fortunes come to life on the shores of the Zambezi, where Zambia and Zimbabwe share one of the world’s tourism wonders, Victoria Falls.

Zambian pleasure boats packed with foreign tourists from new luxury hotels drift among the hippos, while on the Zimbabwean side most boats remain anchored with no paying customers.

In nearby Zimbabwean curio markets, prices fluctuate wildly, with a stone sculpture originally advertised as costing US$50 quickly offered for 50 South African rand (US$8) and finally bartered for a second-hand pair of running shoes.

Zambia’s tourist arrivals rose to 649 867 last year from about 412 675 in 2003 and officials say the numbers will grow to over a million in two year’s time, roughly matching Zimbabwe.

Zimbabwe, once the main regional tourist draw, has seen visitor traffic and earnings drop by 60% over the last five years, and some former white Zimbabwe hotel owners have relocated across the river to Zambia’s Livingstone.

Hoteliers are not alone in taking a fresh look at Zambia.

The World Bank is due to reward Lusaka this year for improved economic management by coordinating a massive debt write-off, reducing Zambia’s foreign debt to just US$502 million from US$7,1 billion a year ago.

Until recently, the kwacha was the poor relation to Zimbabwe’s dollar. In the 1990s, when Zimbabwe was still riding high, one Zimbabwe dollar could fetch 78 000 kwacha. But in today’s market the exchange rate is almost exactly reversed.

“The economic erosion in Zimbabwe is both amazing and saddening because that is a country many of us used to rush to to buy merchandise during our economic depression, but it is now in ruins,” said James Dube, a Zambian trader whose parents originally came from Zimbabwe.

“It is now a reverse of things as Zimbabweans buy most of their goods from Zambia. The only difference is that we don’t harass them as their customs and immigration officers used to harass us,” Dube said.”

However, the strong kwacha could cause problems for Zambia, with some analysts saying it poses a major threat to plans to diversify the economy from copper and cobalt mining.

“Zambia still has a narrow economic base. It remains vulnerable to any future correction in copper prices, and the possibility of related portfolio capital outflows,” said Razia Khan, head economist at Standard Chartered Bank in London.

By some measurements, Zambia still lags Zimbabwe, once one of the most developed countries in the region.
Zimbabwe’s average life expectancy, infant mortality rate, school enrolment and literacy rate are all better than those of its northern neighbour. But in some areas, the gap is closing.

Zambia’s economic growth rate, in decline for most of the 1990s, rose to average 4,8% over the last four years, hitting 5,4% in 2005 and forecast at 6% in 2006.

Zimbabwe, by contrast, has seen its economy shrink over the last six years, with output falling by almost a third amid the collapse of commercial agriculture following Mugabe’s move to seize white-owned farms to give to landless blacks.

“Mugabe has indeed ruined Zimbabwe’s economy,” said Chileshe Mulenga, a professor of economics who heads Lusaka’s Institute of Economic and Social Research. He said Zimbabwe’s crisis would have a spillover effect on its neighbour.

“Zimbabwe’s land policy has harmed the entire region because tourists and investors look at the Zimbabwe crisis not in isolation but as a regional problem,” Mulenga said.

Some Zambians are also worried.

“I am not proud to see Zimbabwe in ruins and hope things can change for the better because I can feel the impact of their economic problems,” said John Mayeya, a Lusaka trader who has taken in two young relatives from Zimbabwe.

“We will have more economic refugees if things get completely out of hand in Zimbabwe,” he said. ­— Reuter.