[stop-imf] Impt: Costs of Structural Adjustment in Zambia

[Robert Weissman]

The latest dispatch from theWashington Post's Jon Jeter, who is doing
unparalleled reporting from Africa.

--
Robert Weissman

The Dumping Ground  As Zambia Courts Western Markets, Used Goods Arrive
at a Heavy Price

By Jon Jeter
Washington Post Foreign Service
Monday, April 22, 2002; Page A01

LUSAKA, Zambia -- The flea market here is as dark and hazy as an opium
den, its flimsy tin roof turning back the midday sun as Edward Mansa
robotically unbundles the shipment of secondhand clothes that has just
arrived.

The dull, red DKNY T-shirt catches his eye. "This," he says admiringly
as he holds the shirt up to the dim light, "is not bad." He says he can
probably get a dollar for it.

The shapeless plaid skirt is another matter, however, as is the dowdy,
ruffled blouse and the banana-yellow sport coat that causes Mansa to
shudder. He'll be lucky to get anything for them, and chances are Mansa
will trade them with other vendors for some cooking oil or dried fish.
"You can't afford to let anything go to waste," he says.

Mansa provides for his wife, mother and baby daughter with the little
money he earns selling hand-me-downs, the old and unwanted clothes that
Canadians, Europeans and Americans donate to groups such as the
Salvation Army or Goodwill. With more donations than they can use, the
charities unload their surplus on wholesalers who buy the clothing in
the West for a few pennies a pound, then ship it here and sell bales of
it to Mansa and other street retailers at a markup of 300 percent to 400
percent.

As Mansa peels an oversize Orlando Magic basketball jersey from one such
bale, his eyes brighten. Even with its curious red smudges and loose
threads, the jersey can go for as much as $3.

"This is a gem," he says. "The young people really love the clothes they
see the American rappers and the athletes wearing, but everyone -- young
and old -- buys their clothes secondhand in Zambia. It is better-made
than what our own clothing industry used to make before they all closed
down, and it's certainly cheaper since it's used clothing. But is this
the way to develop your economy? I don't think so."

This southern African country once had a thriving clothing industry. But
when government officials began opening Zambia's economy to foreign
trade 10 years ago in exchange for loans from international donors, tons
of cheap, secondhand clothing began to pour into the country, virtually
duty free.

Not especially efficient, Zambia's textile factories were overmatched by
the wholesalers, who could deliver affordable, passable clothing without
paying production or labor costs or the tariffs that once protected
local manufacturers from foreign competition.

So, Zambia's clothing industry all but vanished. Within eight years,
about 30,000 jobs disappeared, replaced by a loose but crowded network
of roadside and flea-market vendors beckoning shoppers to "rummage
through the pile," or salaula in the language of Zambia's Bemba tribe.

The expansion of global trade following the end of the Cold War has
transformed Africa into a dumping ground for what the industrialized
world no longer needs or wants, a deluge of secondhand clothes, used
cars, old furniture and tools and weapons.

The used clothing shipped to sub-Saharan Africa by the United States
accounts for nearly $60 million in sales annually. The bales of old
clothing that appear on Africa's doorstep are now so familiar entirely
new idioms have been developed. Partly in derision, and partly because
many Africans once assumed the clothing belonged to the recently
deceased, Ghanaians refer to the imports as "dead white man's clothing."
Tanzanians dubbed the garments "dyed in America," and in Zambia the
used-clothing stands are called "bend-down boutiques."

"You can walk for miles at a time here and not see anyone wearing
anything remotely resembling African clothing," said Howard Gatchell,
chairman of the Chamber of Commerce in Zambia's second city, Ndola.

Hoping to undo the damage from decades of colonial rule, and the ruinous
civil wars and socialist economies that often followed, nearly 40
countries south of the Sahara have over the past two decades adopted the
free-market reforms -- "structural adjustment programs" in development
jargon -- prescribed by such lenders as the World Bank and International
Monetary Fund. But in the generation since independence, sub-Saharan
Africa has never been so poor.

The region accounts for only 2 percent of all international trade, a
share no greater than it was 20 years ago. New international trade rules
developed in the 1990s have since increased world income by nearly $510
billion, according to the World Trade Organization; the World Bank
reports that per capita income in sub-Saharan Africa has continued to
fall over the same period.

Why does the poorest continent continue to get poorer, even as the rest
of the developing world shows at least tentative signs of economic
expansion?

The disintegration of Zambia's textiles industry provides some answers.

Since Zambia's leaders embraced free-market policies in the 1990s, the
country's manufacturing base has been eviscerated, leaving the
government buried in more debt than it can repay and gradually replacing
a full-time workforce with a growing informal economy that offers low
wages, no benefits and no job security.

World Bank officials acknowledge that the collapse of Zambia's textile
industry is an unintended and regrettable consequence of the free-market
policies promoted by the organization. And since 1999, the bank has been
working with Zambia and other countries to integrate "poverty reduction
strategies" with their traditional approach.

"International trade is always evolving," said a World Bank spokesman,
Raymond Toye. "And there are all kinds of constraints to doing business
in Africa that maybe we haven't always accounted for. We want freer and
more open trade in Zambia, but the question is: How do we do that in a
way that recognizes and accommodates Zambia's -- Africa's -- unique
history and situation?"

To be sure, war and graft play a role in the inability of Zambia, a
landlocked country of 10 million people, and many of its neighbors to
capitalize on the trade-offs implicit in global trade. But much of the
problem lies in the economies of sub-Saharan Africa. Relative to those
of the developed world, they are still in their infancy, too fragile to
withstand foreign competition for their own turf, too underdeveloped to
produce much of anything the West values, beyond the raw materials that
attracted colonial powers but are worth increasingly less on the world
market today.

"We've made the mistake of confusing the free market with development,"
said Fred M'membe, executive editor of the Post, Zambia's only
independent daily newspaper.

"I'm not saying we should isolate ourselves from the world the way we
once did, but we are not looking at how to develop our country. We are
looking at how we can market our country to outsiders so they can come
develop it for us. We are getting back to the same colonial equation
where, in the land of our birth, Africans own nothing, control nothing,
run nothing. We are soon to be aliens in our own country."

Zambia surfaced from 75 years of British commercial and colonial rule in
1964, inheriting a workforce with fewer than 110 college graduates and
an economy dependent almost solely on mining. Copper, cobalt and zinc
accounted for more than a third of the country's gross domestic product
at independence and 80 percent of its export earnings. The mines
employed -- in one capacity or another -- almost half the workforce. At
the same time, there were no large-scale textile producers in the
country.

Using the state as the economy's engine, the "humanist" government of
Kenneth Kaunda, then Zambia's president, nationalized the mines,
expanded the economy's manufacturing and agricultural sectors and walled
them off from foreign competition with import tariffs. To improve the
productivity and skill level of its workforce, the government provided
free health care and primary education.

Literacy levels rose. The economy grew. Within six years of Zambia's
independence, nearly 85 textile manufacturers employed more than 10,000
workers.

Then the bottom fell out. Copper prices plummeted just as world oil
prices climbed, and Kaunda turned to the donor community in 1973.

"We had refused to borrow, but now we had no choice," Kaunda said in an
interview. "I approached both the IMF and the World Bank and said: Look,
we are in this precarious situation. Can we borrow? Their reply was,
well, we think that copper prices will soon rise again, so please feel
free to borrow."

He did, but copper prices continued to plunge.

Weary of the skyrocketing inflation and chronic food and fuel shortages
caused largely by Kaunda's big-government approach, voters in 1991
replaced him with Frederick Chiluba, a union leader whose Movement for
Multiparty Democracy promised political and macroeconomic reform. What
followed was the continent's -- perhaps the world's -- most dramatic and
speedy transition from a command economy to the free market. Virtually
overnight, the Chiluba government eliminated subsidies to farmers,
slashed tariffs on imports, loosened the state's grip on monetary policy
and began to charge "user fees" for public schools and clinics.

By 2000, Zambia had sold more than 300 state-owned enterprises to
private investors, including virtually all of the state-owned mines. The
restructuring reduced inflation, stabilized spending and increased cash
reserves. But illiteracy and school dropout rates increased. Zambia's
debt has reached $6.6 billion, and the annual payment on the debt is
three times what the government spends on primary education.

Zambia's factories have shed roughly 325,000 of 800,000 manufacturing
jobs since 1990, according to government figures. Chiluba inherited an
economy that included more than 140 textile manufacturing firms when he
took office in 1991. When he left office in January after his second
term, the industry had been whittled to fewer than eight. About 30,000
of the industry's 34,000 jobs disappeared, according to the Zambia
Association of Manufacturers.

"The pay was not much," said Millie Mansa, Edward's mother. A
56-year-old widow, she worked at several textile factories in Ndola and
Lusaka until she lost her job five years ago. "But even after my husband
died, I could put food on the table. We were not rich, but we did not
suffer."

Now, she said, "it pains me to see my son go to work every morning
selling these secondhand clothes for sometimes [a few pennies] a day.
Zambia has given up so much to globalization."

Used clothing began to arrive here almost immediately after the
government repealed import taxes in 1992. With no duties charged for
used clothes -- customs officials listed their value at zero --
wholesalers realized they could create a new market without paying much
more than freight costs.

"We started buying secondhand clothes by the truckloads from America and
Canada and Europe," said Jim Ebrahim, managing director of Central
African Traders Ltd. Working with a Canadian cousin, he ships a
truckload of secondhand apparel into Zambia, Congo and Tanzania at least
once a week.

"We pay $35,000 for each container," he said. "When we first started six
years ago, we would clear about $6,000 profit for each shipment. But now
there is so much competition that we only clear about $2,000 profit on
each container."

Zambia's textile producers simply could not compete with the influx of
Western clothes. Even used, most of the clothes were made with superior
machinery and cheap cotton subsidized by Western governments.

"It was stylish. It was cheap. It was better-made," said Mark O'Donnel,
chairman of the Zambia Association of Manufacturers. "Our industry
didn't have a chance. We would have preferred for the changes to be
phased in to allow our textile industry a chance to catch up to the rest
of the world and really compete."

"It's not just clothing," said Ramesh Patel, director of SWAPP Ltd.
Clothing in Ndola, the heart of Zambia's struggling Copperbelt region.
"We used to have factories everywhere, but Ndola is a ghost town now. We
are one of the lucky ones who have managed to survive, but there's no
comparison. We used to supply retailers with 3.5 thousand tons of
clothing annually; we're down to less than 500 tons now. We had 250
employees eight years ago; we're down to 25 now."

Millie Mansa was one of the workers to lose her job at SWAPP. Unable to
support herself, she moved in with her son and his young family.

Like eight of every 10 Zambians, the family survives on less than $1 a
day. Roughly once every six weeks, Edward Mansa and his business
partner, John Sakala, buy a bale of used clothing for $180. With a good
bale, they earn about $240, splitting the profits evenly and reinvesting
the remainder in another bale.

"The key is to get a good bale," Mansa said. "Some wholesalers will let
you inspect the bale first; others won't. We have found that inspecting
beforehand to make sure that you have quality clothes is the most
important aspect in this business."

Millie Mansa has no romantic illusions about Zambia's socialist past,
but the distinction she makes between the past and present is one
repeated across the continent by those old enough to remember.

"Back in the Kaunda era, there was nothing on the shelves but everybody
had a little money in their pocket," she said as she sat cross-legged in
the family's darkened hut on the outskirts of Lusaka. "Now the shelves
are always full and we have things that we never before had in Zambia.
But no one has any money to buy anything."

Many liberal economists and development experts point to the shrinkage
of Zambia's textile industry as evidence of the failure of the
"Washington Consensus," the U.S.-driven policy to spur economic growth
in the developing world through exports. Development leads to expanded
trade, not the other way around, they say.

"Zambia probably has the most liberalized economy in the world," said
Lebogang Motlana, the U.N. Development Project's deputy representative
here. "But 30 years into our liberation, we don't have the variety of
industries to penetrate other markets, and we were ill-equipped for such
a competitive mode. Maybe the government should have done more to care
for the people and develop industries other than mining, rather than
devoting so much of its resources and energy to free trade."

President Levy Mwanawasa, Chiluba's successor, has pledged to adjust
Zambia's one-size-fits-all macroeconomic approach. His party -- the same
Movement for Multiparty Democracy that turned to free trade a decade ago
-- has introduced legislation to eliminate user fees, lower costs for
government medical care, restore agricultural subsidies and nourish
industries that have the potential for growth.

Mwanawasa has named his administration's economic program "The New
Deal."

                                                               © 2002
The Washington Post Company