Stalled hopes of Zambian entrepreneurs

By Paul Moss
BBC World Tonight, Zambia

Douglas Tembo feels business is being stifled by government bureaucracy

David Nama has the kind of enthusiasm that's infectious.

He is dead proud of the business he has built up in Zambia, keen to show off to you all the different sectors where he's now an influential player.

And you have to admire the way he's taken a simple opportunity, and used it to great effect.

"We supplied chemicals and lubricants to the copper mines, and then we've reinvested the payments into other industries.

"We're in leisure, we're making tractors - we are going to great heights!"

There are similar tales to be told across Zambia, and indeed, across Africa.

Commodity prices are at record levels, driven largely by demand from China. And with that comes a spill-over, cash in some cases rolling in for those who do business directly or indirectly with mining companies, or with other companies that deal in natural resources.

The question though is whether there are enough David Namas out there using this opportunity and whether sufficient businesses are trying to diversify.

"We want to ensure that the income from copper will be channelled into other activities that are more sustainable," says Yusuf Dodia, a leading Zambian economist, "but my fear is that we will miss the boat."

Obstacles to expansion

It is a well-recognised phenomenon.

While times are good, and money is coming in, businesses and national economic planners tend to relax.

But this is when they need to be making urgent provision for when the good times end.

Copper and other commodity prices are notoriously volatile - nobody knows how long they will stay this high.

Douglas Tembo wants to act now, and be part of a new Zambian economy. It is just that the obstacles are overwhelming.

Last year, he and a friend opened a brewery in the capital Lusaka.

When the bubble bursts, we'll be back knocking at the World Bank and IMF doors looking for loans we can't pay back Yusuf Dodia, economist

At its peak, it produced 20,000 litres of beer a day. Now, it is sitting unused, its great tanks and machinery idle - a victim, Douglas says, of bureaucracy and corruption.

"In this business, you have to have five licences," he complains.

"Just to get a single licence, the City Council or Government Department have to inspect you. They will say they don't have a car, or don't have fuel. You have to provide for them. Then they will say 'we get very low salaries.' They force you to give them something."

Douglas looks battered by the experience, and he is not alone.

Across Zambia I met energetic business people full of ideas, but with no optimism they would ever see the light of day.

"The situation favours big companies" one told me, "not small start-ups."

Foreign influence

And when it comes to big companies, one kind seems to be doing particularly well. Multinationals are now investing in Zambia, trying to get a share of the emerging manufacturing and service sector.

The Chinese are here, as are Indian companies, and the growing retail sector is dominated by South African firms. They have been given generous tax-breaks, duty free imports, and other inducements.

Their presence has been welcomed by many Zambians, particularly those who get to shop in the nice new malls and international brand name stores that have opened.

But these are a serious worry for some observers who fear the multinationals provide unfair competition to local business people.

"They pay less tax, and so for that reason they are more competitive, they have an advantage against the local firms, and then they wipe them out," says Savior Mwambwa from the Civil Society Trade Network.

He also doubts the multinationals' profits will ever help raise Zambia's government revenues.

"Some of these companies will use the incentive period just to make as much profit as they can. Two or three years before they have to start paying tax, they will shift to another country."

History repeating?

We have been here before - at the time of Independence, in 1964,

Zambia had a huge income from copper then. But when prices dropped in the early 1970s, the country found itself unprepared to earn money through any other route.

Yusuf Dodia fears that history may well repeat itself:

"The copper boom will not last very long," he warns.

"And when the bubble bursts, we'll be back knocking at the World Bank and IMF doors looking for loans we can't pay back."