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Last Updated: Monday, 12 June 2006, 10:05 GMT 11:05 UK
Poverty worries beset resurgent Zambia

Lusaka skyline
Lusaka is a city of contrasts

BBC News has been to Zambia as part of a special series looking at how Africa is faring one year on after the promises of increased aid made at the G8 summit in Gleneagles.

Jon Cronin reports on Zambia's efforts to build its economy.

The view from the top floor office of Lusaka Stock Exchange boss Joseph Chikolwa reveals widely contrasting sides to life in Zambia.

The towering, albeit slightly dated, office blocks lining the city's crowded Cairo Road are a testament to Zambia's embrace of modern business and free markets.

But in their shadow, following a rusty railway line, lies a scrap of wasteland that is home to street children and many other of Lusaka's poor and dispossessed.

Zambia, a country long associated with the ups and downs of the copper mining industry, has been experiencing something of economic boom in recent years.

Its successful completion of global initiatives aimed at freeing it from crushing international debts, following last year's G8 summit in Gleneagles, has further boosted confidence in business circles.

And yet, the vast majority of Zambia's 11 million people still live in abject poverty, waiting for a sign that the country's improved fortunes will start to change their lives.

After socialism

Homeless children in Lusaka
The vast majority of Zambians live below the poverty line

Mr Chikolwa believes the Zambian stock exchange he runs can help turn around one of Africa's poorest countries.

"Zambia is a fully liberalised economy, there is transparent business to be done here," he says.

Set up in 1994, and boasting British oil giant BP among its listed shares, the Lusaka Stock Exchange has seen its market capitalisation grow in value to $3bn.

While that may be small beer compared with the mighty bourses of America and Europe, Mr Chikolwa says it shows just how far Zambia has progressed in a few years.

"You have to remember that Zambia came out of 30 years of socialism, so the concept of private capital wasn't really appreciated," he says.

"When the stock exchange was set up, there were about 700 known individual shareholders. Now we have well over 30,000 shareholders, the majority of them Zambians."

Stagnation years

It wasn't always the way.

We can only address poverty if we create wealth, we won't have another round of debt cancellation
Caleb Fundanga, Bank of Zambia governor

When Zambia achieved independence from Britain in 1964, the country's founding president Kenneth Kaunda instituted a one-party state.

Control of the economy was centralised, and although the mines provided jobs for tens of thousands of workers, subsequent decades saw stagnation set in.

In 1991, Dr Kaunda was finally replaced following multi-party elections by Frederick Chiluba, who opened up the country and privatised its lumbering industries, but his rule was marked by widespread corruption.

His successor and Zambia's third president, Levy Mwanawasa, has committed himself to building a free-market economy.

Right direction

Despite a jump in the value of Zambia's currency, the Kwacha, compared with the US dollar - a factor that has made the country's exports more expensive - the mining industry has benefited from recent record copper prices.

Zambia's economy has averaged growth of about 4.5% over the past five years on the back of soaring production in copper mining and agriculture.

Magazine vendor on Lusaka's Cairo Road
Lusaka's bustling Cairo Road is home to many street vendors

But the economy needs to grow at an even faster pace if the desperate poverty seen in much of the country is to be eradicated, says senior business journalist Kingsley Kaswende of Zambia's Post newspaper.

"Current growth is not enough to make a dent in the poverty affecting a lot of people here," he says. "Zambia needs growth rates not less than 8% for it to make a difference in the everyday lives of our people."

Mr Kaswende is more upbeat about the effects multilateral debt relief will have upon Zambia's economy.

The country is one of a number of African nations to have its debts cancelled by the World Bank and the International Monetary Fund following agreements reached at last year's G8 summit in Gleneagles, Scotland.

His views are shared by Ngenda Nyambe, country treasurer for British-based bank Barclays, which has been investing heavily in Zambia.

"Zambia will see its debt reducing from $7.1bn a few years ago to about $500m by July this year," he says. "That's a massive reduction which should be able to see Zambia invest money in productive sectors that will help grow the economy."

"We are happy that the economy is going in the right direction and we just want to be a part of it."

'Major achievement'

Bank of Zambia governor Caleb Fundanga
The Bank of Zambia's governor is cautious about the future

At the heart of Lusaka's busy commercial district lies the grey, fortress-like headquarters of the Bank of Zambia.

The imposing building is one of the city's most heavily guarded places, doubling up as a storage base for much of Zambia's hard currency.

It is also the place where one of the country's most recent economic success stories has been masterminded.

Inflation, long the scourge of Zambia and its southern African neighbours, has been steadily falling - from high double digits a few years ago to below 9% in May.

"This for us has been a major achievement," says central bank governor Caleb Fundanga. "Generally, the economy has been improving and real growth has been going up."

Poverty worries

The scale of Zambia's achievement is thrown into sharp relief by neighbouring Zimbabwe, where inflation soared to almost 1,200% in May.

But from Mr Fundanga's large, air-conditioned top-floor office, the view down to the city below also mirrors that at the Lusaka Stock Exchange.

"I wouldn't like to portray Zambia as a success story. It is not. There is a lot of poverty if you look on the street," he says.

Zambia's central bank governor hopes that along with increased spending on health and education, some of the millions of dollars saved in servicing Zambia's debts will be diverted into infrastructure - and in particular roads.

"We can only address poverty if we create wealth. We won't have another round of debt cancellation."

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