What are constraints to inclusive growth in Zambia? Discussant’s comments J G Kydd

Careful discussion of recent CSO data given convincing overview Sympathise with conclusion ”core problem is negative coordination externalities” would have liked to see this point better explained and illustrated Coordination and externalities are loaded words: – What are the coordination problems? – Espec interest in coordination failures which prevent small farmers from accessing inputs and adequately stable and adequately rewarding output markets

Externalities draws our attention to possible government actions (what might these be, are they plausible given the political economy – the paper has considerable reference to corruption and to inefficient policies – viz. fertiliser subsidy – but does not really tackle drivers of policy and issues of government competence. What is the world view and project(s) of the political elite? Externalities also lets us think about how technological and private/collective action might erode these effects - what might these be in the Zambian context?

Conceptual framework like it and the way in which it has been adapted; appreciate that it must be parsimonious but question – Absence of ToT effects, so cannot incorporate important strongeffects of trends in e.g. copper prices, cotton prices, exchange rate movements (so real appreciation comes in the narrative as a major explanation but not in the model) – given remarks about importance of coordination, framework has government failure and coordination failure as separate determinants of returns to economic activity but interaction of these a fertile area for enquiry directed to answering question posed in paper

Comments on bits of the story: – copper production increases before prices? Response to investment and new management from long-delayed privatisation (also a major story hear about govts inability to capture a “reasonable” share of copper price boom – Absence of discussion of formal labour markets, a significant issue for investment in restructuring enterprises; – Cotton story – a very positive one – but not recognised as such – especially given adverse prices. Essentially coordination problems overcome in Zambia cotton more successfully than in Tanzania, Mozambique and Zimbabwe (Poulton et al). This story carries insights into nature of coordination problems and how these may be overcome

– Commercial agric story: horticulture; tobacco migration from Zimbabwe – evidence of more sustained success with latter than former – story here is alluded to but not analysed – For most rural households (despite cotton success which provides an income) issue is “maize poverty trap”: for most rural households maize is primarily a subsistence crop, small surpluses disposed on weakly integrated and volatile markets. Key point here is that households desire fertiliser but cannot finance it from maize sales – hence strong political pressure for fertiliser subsidy. In summary, we do nor have a viable business model for supporting staple food production in smallholder sector.

– So fertiliser subsidy story needs a more nuanced coverage – Surprised at conclusion that rural land tenure is not an obstacle tomusing land as collateral (doubt that bankers would agree for small and emergent farmers) – Discussion of micro-finance interesting – core problem that rural microfinance less viable the further borrowers are from cities – a difference with poor areas of South Asia where microfiance has worked well in urban areas and, e.g., India, urban rather than rural areas are key margings of expansion – Odd to say that being landlocked not a problem for infrastructure development (difficulties with railways to coasts, getting private investment into infrastructure as in Maputo- Jo’burg corridor)

Final comments: rightly, paper stresses exchange rate appreciation. If we are in a commodity super-cycle this may be a persistent feature so: – Maybe Zambia’s strategy of promoting non-traditional agric exports is challlenged – Look for growth in supply of local non-agric services, plus agriculture focussing on better feeding the national population (with some spillovers to neighbours – espec DRCongo) Need to look beyond WB literature.