ENTREPENEURSHIP DEVELOPMENT IN ZAMBIA FROM 1964

BY

NOEL SIAME
noelmsiame@gmail.com

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INTRODUCTION

Prior to gaining independence in 1964, Zambia had a very small number of indigenous
businessmen. By the time of Independence, Zambia did not have businessmen and women who
were experienced in managing complex businesses. Zambian business started growing when the
cash economy became the standard for business transactions. Zambia gained its independence with
a less educated workforce, ill-equipped to administer the economy. Zambia was also a member of
the frontline states, this meant that a lot of resources were used to help in the liberation of its
neighbors. In the years after independence, the copper price was fetching a high price on the
international market and the oil price was favorable. The majority of the citizens were working in
the mines and as such, entrepreneurship was limited to a few who could not find decent jobs.

The leadership of President Kenneth Kaunda brought in the policy of Zambianization immediately
after independence where most major industries were put under state control. Policies of this
nature coupled with the leadership style reduced the culture of entrepreneurship amongst the
Zambians. Zambia saw the growth of state-controlled enterprises and conglomerates like Zambia
Industrial and Mining Corporation (ZIMCO), The Industrial Development Corporation
(INDECO), the Mining Development Corporation (MINDECO), and Financial Development
Corporation (FINDECO). Other corporations in different fields were created. All these
corporations and enterprises where top-heavy organizations that drained the national coffers
(Mumba, 2017). Apart from the Mines, these organizations created much-needed employment in
the country especially during the period of rapid urbanization. The majority of these corporations
were not making a profit hence when the International price of copper dropped, the national coffers
could not sustain them. The economic growth was affected negatively. This led to the closure of
business houses and loss of employment. Entrepreneurship in Zambia rose due to a number of
reasons. Some started enterprises due to the retrenchments as a result of the closure of mines and
businesses as well as privatization of parasternal firms that occurred between 1992 and 1999
(Konayuma, 2006: 29). Others became entrepreneurs to supplement their income in order to meet
family expenses.

Since then, entrepreneurship has become the backbone of the Zambian economy, as many people
no longer depend on the government for their survival except in certain situations. Small and
medium enterprises (SME) play a critical role in the economic development of Zambia. According
to research from the Bank of Zambia (BoZ) and the International Labor Organization (ILO), SMEs
account for 70% of Zambia’s Gross Domestic Production and 88% of the employment
(Zambiainvest, 2017).

Doug McCullough defined entrepreneurship as the endeavor of creating, owning, and

commercializing an idea, technology, product, or service, as well as assuming the risks and
rewards associated with that enterprise (McCullough, 2019). This endeavor comes with

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uncertainty and it offers no guarantees. Hisrich (1990) defined an entrepreneur as “someone who
demonstrates initiative and creative thinking, is able to organize social and mechanisms to turn
resources and situations to practical account and accept risk and failure”. Opportunities for
Entrepreneurship exist because people have different ideas on the relative values of resources or
when resources are developed into finished products. This paper will show the stages in which
Zambia has undergone in order to reach where it is in the process of entrepreneurship development
and factors that have delayed its progression from the colonial era.

STAGES THAT ZAMBIA HAS UNDERGONE TO REACH WHERE IT IS IN

ENTREPRENEURSHIP DEVELOPMENT

After attaining independence in 1964, Zambia was among the most prosperous nations in Africa.
With a rich endowment of arable land, water and mineral resources, it held great potential for
sustainable development and improving the living standards of all Zambians. The new government
of the United National Independence Party (UNIP) led by President Kenneth Kaunda inherited a
country with inadequate infrastructure and less skilled human capital. Andrew Sardanis mentioned
that at independence Zambia only had one black engineer, three black doctors and three black
lawyers and 90 other black university graduates, working mainly as teachers and senior civil
servants (Sardinis, 2014). The wealth and the economy of the nation was in the hands of foreigners,
as well as the skills. The black Zambians had no experience in governance such that when the
British civil servants started departing as their contracts with the colonial Office expired, many
services started coming apart. Apart from that, the ordinary Zambian citizen had no formal
education and access to the market, this limited them to substantive farming and transactions of
easily sourced goods. Entrepreneurship was in its infancy.

Initially, the government followed a liberal political and economic policy like the first national
plan of 1966 -1971 that focused on the provision of infrastructure, investment in manufacturing
and services to the majority of people especially in towns along the line rail (Britannica, 2020).
This plan proved to be successful in that majority of Zambians got employed in these new
industries and the buying power of the people increased, small businesses began to mushroom
across towns and cities. Demand for foreign goods necessitated cross-border trade among the
locals with foreign countries even though majority of the neighbor states where not yet
independent. The policies that came after the first National Development plan did not promote
entrepreneurship and were not as effective as the first one.

In 1972, there was a major switch in the structure of the country’s economy to a more restrictive
policy environment with the Mulungushi Reforms of April 1968. The government declared
intention to become the majority shareholders in a number of key foreign-owned firms, this was
to be controlled by the Industrial Development Corporation (INDECO). The government acquired
majority shareholding in two foreign mining corporations, the Anglo American Corporation and

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the Rhodesia Selection Trust which became the Nchanga Consolidated Copper Mines and Roan
Consolidated Mines, respectively. Government control extended to insurance companies and
building societies, these where placed in a newly established parastatal body called FINDECO.
The banks resisted this take over and succeeded. Several Parastatal bodies where merged to form
the Zambia Industrial and Mining Corporation (ZIMCO), this became one of the largest companies
in sub-Saharan Africa. This process of taking over key corporations and merging them into state
controlled parastatals was called Zambianisation. The government imposed high tariffs for
protection. The buying and selling of goods became much controlled. Consumables became
heavily subsidized, prices were controlled and agriculture inputs and credit became the
responsibility of the government.

All these changes were detrimental to the growth of entrepreneurship in Zambia. Having a
controlled price environment affected business negatively, the creative aspects of doing business
was at its lowest. The majority of the people followed the path of seeking formal employment in
government-owned institutions. It was lucrative to work in the government because of the stable
economy which was mainly affected by the booming copper industry. In 1973, the management
contracts that were agreed upon to continue with the smooth running of the mines by Anglo
American and the Rhodesia Selection Trust came to an end.

The policy to nationalize the mines was not timed very well. In the period after 1973, there was a
massive increase in oil price which greatly increased the cost of importations coupled with the
failing copper prices in 1975 and also political turmoil in neighbouring countries. Initially, the
government thought the falling copper price was temporal, with that the government anticipated a
rise in price, hence, borrowed excessively to sustain the economy. There was little hope of putting
The Third national development plan of 1978 to 1983 into practice (Britannica, 2020). By the early
1980s, it became clear that the reforms which started in 1968 had failed. The reforms lacked
diversification of the economy from copper dependence to agriculture and entrepreneurship. From
1983 to 1985, the government attempted an IMF/World Bank Structural Adjustment Programme
(SAP) that came with tough conditions such that it was abandoned in May 1987 due to food riots
in the major cities. The government introduced a new program that re-imposed the controls of the
1970s to replace SAP. Despite this, the economy continued to decline, more people lost their Jobs,
poverty levels kept on rising and the national debt increased to $7.1 billion by 1991 (Henriot,
2020).

In October 1991, the Movement for Multi-party Democracy (MMD) was elected by the Zambian
people. This was the resultant of the discontent that the people had with the performance of the
reforms of the previous government. The new government began to push liberal policies with the
support of the IMF and the World Bank SAP, with the hope of having an efficient private sector
to lead the economy. This was the beginning of the massive expansion of entrepreneurship in
Zambia. The role of the state remained in creating an enabling environment for the private sector

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to thrive. There was massive liberalization of trade, exchange rates, and interest rates, subsidies
removed and most of the parastatal companies were privatised. The market became an ideal
environment for entrepreneurship to flourish, demand, and supply would determine the price of
goods and Services. Apart from that, the government had to reduce the civil service workforce to
the right size. Those that got retrenched were given some money that they used to start up Small
and Medium Enterprise. Ordinary Zambians started using their creative abilities to buy goods and
resale for a profit. The Zambian dream was now pushed into the hands of the citizens, a new dawn
of entrepreneurship and entrepreneurship tendency had come alive. The majority of Zambia’s
neighbours were liberated and trade between them and Zambia increased. This increased the need
for entrepreneurship training to keep up with the rising levels of entrepreneurship.

During the first 10 years in power, the MMD government was committed to making sure the
measures are put in place quickly. However, their approach failed to yield the desired goal of
making the economy grow so as to have a prosperous nation. Poverty levels kept on going up and
the economic growth was sluggish. A lot of factors contributed to the slow growth of SMEs. There
was little support from the government and deliberate policies were not in place to make the
environment conducive. Nonetheless, the entrepreneurship growth was far much better than under
the one-party state of the UNIP government. The MMD government decided to make changes to
the failed policy as well as make stringent measures to stabilize the depreciating kwacha. The
economic condition was not favorable for businesses, the cost of borrowing was too high coupled
with high inflation. The situation got worse such that the IMF and the World Bank allowed Zambia
to qualify for the Highly Indebted Poor Countries (HIPC) initiative in December 2000 (Henriot,
2020). This symbolized that the government was limited to how much they could borrow while
the debt stock was halved or forgiven in its totality.

In September 2011, there was a change of government administration from the Movement for
Multiparty Democracy to the Patriotic Front Government. The new administration revised the
Sixth National Development Plan OF 2011 TO 2015 to align it with their manifesto and policies.
The revised plan was primarily an investment plan that focused on capital investment areas with a
bias to rural development and job creation. The government wanted this development to be driven
by the private sector such as Tourism, Manufacturing, and Mining. In addition to this, new policies
were put in place for the sector to thrive. The strategic focus was to create jobs, rural development,
growth that encompasses all citizens while investing in human development to take care of the
macro-economic fundamentals (Ministry of Finance, 2014). The government created and
implemented monetary and financial sector polices that helped to maintain price and financial
stability. There was a positive growth in the private sector through small and medium scale
enterprise, more businesses opened up. The cost of borrowing was favorable and there was enough
money in circulation. Entrepreneurship growth was at its pick, all sectors had the private
companies operating, and the market attracted foreign investments. The capital base of banking

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and insurance system was strengthened and the government promoted the corporate debt market
in order to expand access to credit for SMEs (Ministry of Finance, 2014).

The government accelerated growth and diversification by increasing private investments through
encouraging the foreign direct investment (FDI). The country had a low level of domestic savings
which limited access to credit for SMEs. The foreign direct investments filled in the gap and
positively affected the entrepreneurship growth in Zambia. The development of Multi-Facility
Economic Zones and industrial Parks that have been created in Lusaka and on the Copperbelt
offered producers an enabling and competitive environment. The zones have created the link in
the economy for production of high value goods some of which are being exported to neighbouring
countries. Then came the Seventh National Development Plan of 2017 to 2021 which is aimed and
creating a more conducive environment so that Zambia can become a middle income country that
offers decent employment opportunities for all Zambians of different educational and skill
background in all industries. This is planned to be achieved by harnessing opportunities for
economic diversification and growth (Ministry of National Development Planning, 2017).

Apart from government organisations, other organisations and government agencies have setup
programs to promoted entrepreneurship in Zambia one example is the United States Embassy that
provides support to Zambian entrepreneurs through its program and events that are aimed at
promoting skill development, mentorship, business to business connections and partnerships, and
assist access to opportunities, resources and networks (U.S. Embassy in Zambia, 2020).

FACTORS THAT DELAYED ENTREPRENEURSHIP GROWTH IN ZAMBIA FROM

COLONIAL ERA

They are many factors that delayed entrepreneurship development in Zambia from colonial era,
some of the factors include; Economic factors, culture, technology development and Education.
These factors have been explained in detail below.

Economic factors

The lack of development of entrepreneurship in Zambia was caused by the economic policies that
were formulated soon after independence. Policies that came after the return of multiparty
democracy in 1991 proved to be more positive for entrepreneurship growth than those before. The
UNIP socialist economic policies from 1968 to 1991 where characterized by nationalization of
industries. The government took control of major companies and ran the economy through these
parastatals and enterprises. These parastatals and enterprises were state protected monopolies such
that they did not have competition for the market in their respective industries. The policies did
not encourage entrepreneurship at the time. Some of the state controlled enterprises which
protected monopolies include;

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 a. Zambia Airways in the aviation industry. It was the only Zambian airline allowed
to operate at the time. This limited the private sector from accessing the air transport
business and it also limited competition for pricing of aviation related services. Today, due
to favorable policies, the aviation industry is now controlled by the private sector.

b. United Bus Company of Zambia (UBZ) in the passage business.

c. Post and Telecommunication Corporation LTD (PTC) was a monopoly in the

telecommunication sector.

d. Zambia Electricity supply corporation in the energy and power sector (ZESCO).
The government also restricted importation and export of goods to the parastatals and enterprises
making it difficult for anybody else to do business. The price of goods and services were controlled
coupled with restrictions on foreign exchange transactions. The end results of these policies was
poor service due to lack of competition. Companies kept on doing business the same old ways
without any creativity and innovation. This resulting in poor performance of the economy. The
policies of the UNIP government cultivated the dependence syndrome in the minds of the citizens,
the habits of receiving handouts cultivated a lazy attitude in the citizens. This was evidenced in
the riots that occurred when the subsidies were removed in the 1980s.

The private sector could not embrace to use initiative and take risks for fear of the government.
After returning to multiparty democracy, the growth of entrepreneurship increased. The biggest
challenge to growth of entrepreneurship was not policies but access to capital.

Capital

Capital is one of the main factors that is required to establish an enterprise. The access to capital
on the market was very hard because money was not easily accessible and majority of people could
not qualify to get a loan or funding for their business. The availability of capital facilitates the
entrepreneur to source different row materials to combine and produce goods. Without Capital, the
private sector failed to flourish. Zambians lacked the capital immediately after the independence
to setup businesses.

Lack of skilled labour

The availability of skilled workers also affect entrepreneurship. The quality rather than quantity of
the workforce influences the emergence and growth of entrepreneurship. When Zambia got
independence, there were few trained and educated Zambians capable of running the government

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and businesses. The economy was controlled and run by foreign expertise. Ordinary Zambians had
little or no formal education, due to lack of exposure, Zambians could not setup formal businesses
that would compete with the already established business houses.

Lack of Machinery

The need of machinery hardly needs any emphasis for setting up any industrial activity and its
influence in the growth of entrepreneurship. Even after returning to multiparty system, access to
machinery was still a challenge. Buying such equipment requires capital and since access to capital
was a challenge. Entrepreneurs could only work with what they had. Those that were doing
farming business could sell the produce without adding extra value hence making less profit.
Zambia has good arable land and rich in mineral deposits, having access to machinery would have
helped in the expansion of the private sector in the years after independence.

Limited market

In the current competitive world, no entrepreneur can think of their business surviving without
knowledge of the latest happening in the market and marketing techniques. The problem that was
there during the UNIP government was that the market was available but supply of goods and
services was restricted to the parastatals and government owned enterprise. This resulted in queues
for even basic commodities. Markets creates a conducive environment for competition which
brings about innovation and economic growth. The change of policies in 1991 brought about
creativity, innovation and expansion of the private sector.

Poor Infrastructure

The growth of entrepreneurship requires a properly developed communication and transportation

network. The development of mobile money has both created employment and made it easy for
expansion of entrepreneurship. The UNIP government inherited a country that lacked
infrastructure, a good road network, and a railway network system.

Social Factors

Social factors play a vital role in the determination of entrepreneurship growth. In Europe, the
highly helpful society made the industrial revolution a success (Relivingmbadays, 2012). The
social setup of society shapes the basic beliefs, work ethics, values and norms of the people.
Mumba (2017) quoting Dinnwinddys says that the most probable challenge to the development of
the private sector in Zambia lies in the local traditions of the Zambian people. He noted that East
and Southern Africa's contact with western societies has been recent compared to West Africa.
The limited field of small scale farming, fishing, or cattle farming entrepreneurship is common in

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Zambia, and the majority of the entrepreneurship is largely imitative and lacks innovation. Many
go into business mainly because they lack formal education and as such, they are excluded from
more secure and prestigious forms of employments. Mumba goes on to mention that black
entrepreneurs in Africa are inhibited by a passive hostile environment. In the same vein, it is noted
that the majority of successful African businessmen have achieved that by foreign travel or
working closely with an expatriate company or government agency. Another social factor that has
affecting entrepreneurship growth is the extended family setup in Zambia. The extended family is
a drain on the successful businessman, the responsibility of supporting and employing relatives
usually affects the growth of the business negatively. Due to these responsibilities and managerial
inadequacies, the majority of Zambians do not return profits for reinvestment. Hence, the business
remains at the same level worst still the economic factors that may cause the business to reduce in
value or completely fail. Another social factor may include lack of support from relatives and the
community, there is a misconception that a product that is being sold by an indigenous person may
not be as strong as a western product, and the local prefer buying from foreign companies than
their own people. Apart from that, foreign companies are given better conditions of operations
than locals.

Incompetent Management

Management incompetence has contributed to the failure of businesses. According to Dollinger

(2008), scarcity of management capacity is the most limiting factor to business growth.
Unbalanced experience, lack of training, lack of experience in the line of business which is being
undertaken. Other factors include lack of managerial experience training, the government through
the Zambia Development Agency has been conducting training for entrepreneurs in management.

Inculcating a culture of entrepreneurship

Another cause of delay in entrepreneurship development is the failure of passing on the culture of
entrepreneurship from generation to generation. It is through existing enterprises that other and
future entrepreneurs get their inspiration sometimes. This type of tendency spreads the culture of
entrepreneurship which will result in economic growth.

CONCLUSION

Having gained independence in 1964 and now ranking as a lower middle-income country even
though the economy was highly rated at independence, Zambia has seen entrepreneurship growth
in all sectors. The history and economic policies of the past had a bearing on entrepreneurship
growth in the country. Political factors coupled with social factors have shaped the business
landscape of Zambia. The stages of economic changes from independence to 1991 were not

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favorable with entrepreneurship growth. However, the transformation came in when there was the
liberalization of the economy after the reintroduction of multiparty politics in Zambia

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