Globally, recessions due to COVID-19 have wreaked havoc and the impact on the Zambian economy is apparent.
Businesses have shut down, investment spending has been cut and people have lost jobs.
According to the Google COVID-19 Mobility Map, there has been a drop in visits to shopping hubs by an average of 18 percent, while workplace attendance is down 16 percent. This has had a direct negative impact on investment and consumption, which are key drivers of economic growth.
The reduction in consumption and investment has led to reduced tax collection, depleted foreign reserves, unsustainable debt levels and increased government spending.
Dr Bwalya Ng’andu, the Zambian Finance Minister, confirmed that the government defaulted on a US $42.5 million Eurobond coupon payment in November 2020 after lenders refused to grant a moratorium. This confirmed the crisis, which mainly affects the poor and vulnerable, who are also the main victims of the severe climate impacts the country faces.
As a response, Zambian President Edgar Lungu launched the Economic Recovery Programme (ERP) that focuses on restoring growth, safeguarding livelihoods through macro- economic stability, economic diversification and debt sustainability.
This economic crossroads presents a rare opportunity for Zambia to reset and rebuild its economy based on proper valuation of its natural capital base and green investment pathways.
Adopting this green economy approach in Zambia, as well as other developing countries, is not an option but an imperative. It provides an opportunity to deliver green growth and green jobs while securing the very ecosystems that support economic development activities.
Transition to Green Economy
With 80 percent of the population depending on the natural environment for survival, overlooking the rapid loss of nature will be more catastrophic to Zambia’s sustainable development agenda than COVID-19 has been.
Now more than ever, Zambia needs to start making the shift towards a green economy.
This means the ERP goals should be refocused to have a macroeconomic framework and deliberate structural policy that moves the country towards nature-based, green and just economic recovery that unlocks opportunities for the majority of Zambians, especially those in rural areas.
Natural capital stocks – well-conserved and managed – could be a massive economic pillar.
Karin Kemper, global director for environmental practice at the World Bank, says, “Some client countries were beginning to explore nature-based solutions as part of their COVID economic recovery programmes. The World Bank has committed US$160 billion for grants and financial support over the next fifteen months in response to the pandemic, with initial support going to address pressing health needs.
“A number of countries have asked us to focus on the recovery and look at more equitable and sustainable impacts on the country’s natural capital and how they can invest in a greener recovery — examples such as investments in landscape approaches and coastal recovery and forestry and afforestation projects.”
The Worldwide Fund for Nature (WWF) is a proponent of green and just economic recovery, and asserts that nature as an asset be placed at the forefront of all economic policies post-COVID 19. WWF has welcomed the landmark decision by UN member states to include the contributions of nature to GDP calculations.
Such decisions provide the Zambian economy with the supportive environment to take the steps needed to promote green energy, green agriculture and green infrastructure, the bases upon which all the SDGs rely.
A green economy is defined as low carbon, resource efficient and socially inclusive. In a green economy, growth in employment and income are driven by public and private investment into such economic activities, infrastructure and assets that allow reduced carbon emissions and pollution, enhanced energy and resource efficiency, and prevention of the loss of biodiversity and ecosystem services.
This economy can be enabled through reset government driven policies and incentives to encourage financial institutions to promote a green agenda and for Zambia to make itself a hub for green investments and in the region.
This is what will enable Zambia to reach the noble ERP goals and simultaneously deal directly with major environmental challenges such as deforestation, climate change and pollution, which have cost the economy billions and driven many people into poverty.
In the last decade, Zambia emitted 125 million tonnes of carbon. In addition, climate change has cost the economy US$4-7 billion dollars annually.
A recent survey by Climate Disclosure Platform shows that global businesses sourcing commodities such as soybeans, cattle or rubber stand to lose US$53 billion from deforestation unless they take action now.
Businesses in Zambia, in particular those in agriculture, have to confront and help stop the rapid loss of forest cover.
Greening the ERP
Under the pillar of attaining fiscal and debt sustainability, the key objective of Zambia’s ERP is to gradually reduce the deficit from double digits in 2020 to five percent of GDP by 2023.
In addition to the measures highlighted in ERP, Debt for Nature Swaps can also be used to reduce debt distress, channel investments in economic streams that can generate green growth and green jobs such natural water systems, forest reserves and national parks.
Nearly 30 countries have used them since the 1980s to unlock more than US$1 billion to protect the environment. Furthermore, Debt for Climate Swaps, a broader concept, can also be used to fund programmes that help with climate mitigation and adaptation.
Instead of continuing to make external payments on outstanding debt in hard currency, Zambia can make payments in local currency to finance fast climate and adaptation projects on renegotiated terms.
A favourable macroeconomic environment entails low and stable inflation, low interest rates and minimum volatility in the exchange rate. To achieve this objective, Zambia will need to attract capital flows into the country, expanding the export base thus building up gross international reserves.
With a deliberate policy to attract large-scale nature based investments, governments can provide direct employment for those affected by the economic downturn and help relaunch the economy. These projects must be in the public interest and be guaranteed to lead to direct emission reductions, health benefits and ecosystem restoration.
The WWF Zambia Country Office and its partners are driving sustainable private sector shifts towards green bankable investments in Zambia through the Dutch Fund for Climate and Development (DFCD).
The DFCD thematic areas include sustainable forestry, eco-tourism, carbon sequestration through forestry and agriculture, watershed management and Nature conservation and restoration. For projects to access funding they have to promise delivery of a triple bottom line measurable in terms of commercial, social and environmental returns.
To restore economic growth, Zambia’s ERP focuses on the provision of economic stimuli and promotion of economic diversification.
The Target Medium Term Refinancing Facility (Covid Bond) was issued with an initial amount of K10 billion to provide liquidity.
According to a Covid Bond Report issued on January 18, 2021 by the Bank of Zambia, tourism and agriculture accounted for just 3.5 percent of beneficiaries. A green bond can change the narrative.
A green bond for targeted investments that are fully aligned with the Paris Climate Agreement targets can be issued to support ERP growth and the jobs agenda. The green bond proceeds will then be used to promote economic diversification by investing in marginalised sectors such as climate resilient agriculture, eco-tourism and sustainable forestry.
There is also need to consider a punitive tax system for high carbon emitters and degraders of the natural ecosystem.
Go Green Now
The call to arms is to go green now.
It is an imperative for leadership at the highest level – in the public and private sectors – to secure sustainable futures and sustainable businesses by pivoting toward clear sustainability agendas.
A climate blind economic recovery will lead to another six percent reduction in the size of the economy. That means more companies closing and more livelihoods lost.
A green economic agenda will not only make Zambia economically, socially and environmentally resilient, and but will also make it less vulnerable to future crises.
Nachilala Nkombo is the Zambia Country Director for the Worldwide Fund for Nature (WWF)