Blog Detail

EMPLOYMENT CREATION AND LABOR ISSUES IN ZAMBIA: CHALLENGES AND PROSPECTS

Dr. Haabazoka proposes a 24-hr Zambian economy, creation of national youth service, creation of jobs through local authorities and other government institutions for street kids, school drop outs and other interested citizens.

Economics Association of Zambia President  Dr.  Lubinda Haabazoka gives  inaugural  speech at the  first ever  dinner gala in Q4:18

Zambia like many countries in the world is faced with high unemployment levels especially among the youths. For any country to develop, most of its economically active citizens should be engaged in some form of employment. This article outlines the characteristics of the Zambian labor market as well as study the various job creation programs that are being implemented by government. The article also looks at the challenges Zambia is facing in creating jobs for its citizens and further offers recommendations on how to speed up employment creation.

Background

Zambia inherited a strong economy at independence, which was more skewed towards mining as a mainstay economic driver. The economy began to deteriorate in the 1970’s following a decline in global metal prices and a sharp rise in the price of crude, a commodity that Zambia is a net importer of.

Zambia’s labor industry was bullish post-independence attributed mostly to the centralized nature of the economy. Pre-liberalization era, before 1991 precisely, Zambia boasted a lot of industries such as the Mwinilunga pineapple scheme, Mansa batteries, a thriving textile and a well-organized mining industry.  

Post 1991, with the introduction of a market economy, over 220 companies were privatized. Most of them, shut down because their products could not compete favorably on the international markets. The shutting down of most factories was the genesis of the unemployment plague in Zambia, a trend that still persists.

Overview of Zambia’s Labour Market

Zambia has an estimated population of 16 million and stands as one of Sub-Saharan Africa’s (SSA) most highly urbanized jurisdictions. Despite a doubling in Gross Domestic Product (GDP) post-independence, the southern African nation’s unemployment rate continue to climb, with sharp increases recorded post 1991 (CIA 2012). For example, employment in the formal sector declined in absolute terms from 543,300 in 1990 to 415,984 in 2003 (LFS, 2008) representing a 23.4% plummet. The trend has however changed as people employment in the formal sector in 2018 are now closer to a million. The quality of employment has also waned since privatization with about 90% of all employed persons in the informal sector compared to 10% that are in the formal sector. This entails that 90% of the employed persons in Zambia do not remit any form of income tax, do not benefit from any form of social security, gratuity and are not entitled to annual paid leave benefits.  

Table 1 below gives a country comparison of unemployment rates. 

Country comparison of unemployment rates

From the table we can see that Zambia’s unemployment rate is far lower than that of its southern African peers such as Lesotho, South Africa and Namibia. Though Zambia’s unemployment rate is lower than that of most of its peers, the informal sector remains he major employer meaning that governments tax revenues from the employment lines is understated and that workers have no form of social security or constant income sources. If much of the informal sector was formalized, government could increase its tax revenue base.

Summary of Zambia’s employment creation policies and strategies

The Zambian government currently has a number of policies and strategies that aimed at addressing the challenges of unemployment. These policies and strategies are run by various ministries and departments of government to curb unemployment in various sectors of the economy. Notable policies aimed at stimulating employment in Zambia include:

  • The Employment and Labor Market Policy;
  • The Micro, Small and Medium Enterprises Development Policy;
  • The National Youth Policy;
  • The TEVET Policy;
  • The Gender Policy;
  • Various Agricultural Policies; and
  • The Decentralization Policy.

The Zambian government through various institutions is also implementing strategies aimed at addressing unemployment. And these strategies include:

  • The Citizens Economic Empowerment Fund;
  • The Youth Empowerment Fund;
  • Business Development Support program under various Ministries such as Community Development, Commerce, Agriculture, Gender, Youth and Sport, Mines, Education, Science and Technology among others.

Although the government has been implementing various policies and strategies as mentioned above, Zambia still grapples with high unemployment levels especially among the youths. The following challenges need to be addressed in order to have effective and working job creation policies:

  • Lack of a government co-coordinating job creation body hence duplication in employment creation efforts;
  • Most government loans are perceived to be grants by citizens hence the lack of responsibility on the part of the beneficiary; 
  • Relatively decreased funding towards the job creation initiatives;
  • Implementation of strategies that result in over-dependence on government as opposed to real empowerment.

Recent Zambian Government’s Job creation initiatives

The current government pledged in its election campaigns that to have job creation as its top priority. It has so far instituted the following policies or initiatives aimed at curbing youth unemployment as shown in table 2.

Table 2: Government’s Job creation/ improvement Initiatives

 

As seen from table 2, the first initiative was to adjust the minimum wages for non unionized workers like maids, farm workers, shopkeepers among others. This measure has sparked immense debate with critics citing that the measure will increase unemployment because not all employers will have the ability to pay the salaries. As such they will resort to reducing their work force. The state on the other hand, has said the measure is aimed at protecting vulnerable workers from potential exploitation.   The second initiative highlighted is that the government has implemented the upward adjustment in the threshold for those workers who are exempt from PAYE from K1,000 in 2011 to K3,000 in 2018. This measure is aimed at easing the tax burden on employees in lower income brackets.

The third initiative manifests through massive infrastructure projects. In late September 2012, Zambia made a $750million debut in the international capital markets through a dollar debt sale whose proceeds according to government were earmarked for infrastructure development purposes. The state has also commissioned construction of an 8,000km road across Zambia. All these infrastructure projects are aimed at creating jobs especially for the youths as the development progresses. Creation of new districts is aimed at increasing the magnitude of local authorities. This is aimed at creating jobs for both skilled and unskilled labour because of the construction of district offices and also the need for governing authorities in those districts and provinces.  

 
Former Deputy Commerce Minister and Bank of Zambia Deputy Governor Operations Dr. Bwalya Ng’andu look at a Bloomberg screen when Zambia made a USD$750million debut in the international capital market.

The government through its borrowing agent the Bank of Zambia has also used monetary policy as a way of stimulating production and investments in general. The BOZ has introduced the monetary policy rate system (MPR) which acts as a benchmark rate to commercial banks to determine appropriate market lending rates. Using this reference rate the BOZ is able to influence credit pricing which stimulates growth of sectors such as SMEs. After all SMEs are the largest employment creators in the GDP equation. Over the last 2 years the BOZ has lowered the benchmark interest rate by 575bps (5.75%) and slashed the statutory reserve ratio over 1350bps (13.5%) to 5% in the quest to improve liquidity conditions aimed to stimulate private sector growth. Currently Zambia’s MPR is at 9.75% (from highs of 15.5%) while the SRR is at 5% (from 18%). Enhanced liquidity means banks have available resources which can be converted into investments thereby creating job opportunities.

Bank of Zambia Governor – Denny Kalyalya and Deputy Governor Operations – Dr. Kankasa Mabula at a workshop. Kalyalya has been at the helm of monetary policy for sometime now.

Government has also widened the retirement age bracket to 65 from 55. Such a measure especially in European countries is implemented as a way of deferring pension payments to the future and also keeping in employment citizens that are still economically active.

Recommendations

In order for Zambia’s economy to grow at a faster pace, with the participation of most of the economically active citizens, it is vital to formulate a strategy that will enhances job creation. Figure 1 below outlines the proposed job creation initiatives that are necessary in order to create jobs in Zambia. The initiatives can be divided into four quadrants namely: creation of temporary manual jobs, government internship programs, creation of Zambia youth service and making Zambia a 12-hour economy.

Figure 1: Proposed Job Creation initiatives

Proposed job creation initiatives.

Component one – entails the creation of jobs through local authorities and other government institutions for street kids, school drop outs and other interested citizens. The jobs should be temporary in nature and pay just the minimum wage so that the program does not compete with other jobs on the market. If this happens there could be potential market failure and resource reallocation consequences. Resources employed through this component should perform works such as water and soil conservation activities, afforestation, road maintenance, garbage collections and irrigation practices etc.

Component two – will address the problem of lack of experience among youths. Youths with certificates, diplomas, degrees and other qualifications should be placed into internships with private companies. Government should give incentives to participating private companies or pay for the time spent by these private companies in training the youths. Youth should be paid a minimum allowance. With the experience that youth will gain, it will be easier for them to secure jobs subsequently.

Component three: calls for the creation of the Zambia Youth Service – ZYS to replace the Zambia National Service -ZNS. The aim of the youth service is to equip the youths to serve the nation through participation in national development projects. Because of the cost implications, the youth service should be on a voluntary basis. The service should also include a component of military training so as to instill discipline in the youths. Such a program is being successfully implemented in jurisdictions such Kenya.

Component four – calls for the making of Zambia a 24-hour economy. Zambia’s unemployment numbers gravitate around the poor state of the economy. The nation has short business working hours and as such, it is practically impossible to have people adopt a shift system effectively. Government should introduce legislation that encourages businesses to work 24- hours. That will mean people working in 3- shifts thereby tripling the number of jobs. For a 24- hour economy to be attainable in Zambia, government should increase the size of the security force and also improve on lighting infrastructure to support this cause. The 24-hour system would work best with shopping malls, airports, airports, train and bus stations, restaurants etc.

 The writer is the President of The Economics Association of Zambia (EAZ) and also serves as Executive Director at the Graduate Business School (GSB) at University of Zambia 

Leave a Comment: