In his Harvard Business Review (HBR) classic, “The Competitive Advantage of Nations”, Michael Porter stated that “national prosperity is created, not inherited”. He explains his assertion that “it does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists”. He believes that a country’s competitiveness depends on the capacity of its industry to innovate and upgrade. We agree with him. That is why the focus of this piece is on two institutions that have worked tirelessly for Zambia and Zambians in order for us to achieve competitive advantage within the region.
The first institution is the IDC. A quick look at their website and the reader will be quick to notice their bold targets: to create 1 million in 5 years, focus on 12 sectors of the economy, and achieve 8% GDP growth per annum. Although the inserted image shows all the sectors they are involved in, they have prioritized 4 sectors: Agriculture, Tourism, Infrastructure and Manufacturing. They have also indicated the number of jobs they seek to create: Agriculture (555,000), Tourism (300,000), Infrastructure (85,000) and Manufacturing (89,000). It is clear that there is an imbalance in terms of the distribution of the jobs the institution seeks to create across sectors. On the one hand, we are alive to the fact that an assessment based on the timeline to create these industries does influence the reality of execution. For example, agriculture is straight forward as already statistics indicate this sector is the largest employer. Tourism remains largely untapped but considering the proximity to population, it makes a perfect case to create. However, on the other hand, Infrastructure and Manufacturing are highly capital intensive and requires a workforce with minimum education. Influencing growth in these sectors will partly depend on the cost of capital. IDC are aware of this hence why they are allowed to be modest in their projections.
On the subject of cost of capital, the second institution which has enjoyed capitalization by its main shareholder seeks to provide access to finance for various projects in different sectors of the economy. According to their Strategic Business Plan for 2016 to 2018, the Development Bank of Zambia (DBZ) states that in carrying out its business, it will endeavour to provide capital and other resources for investment in areas which are consistent with the objective of maintaining a reasonable diversification in its investments among all sectors of the economy. Their choice of industries clearly shows that they have considered portfolio management whilst still meeting the aspirations of a good return on investment.
Reviewing both DBZ and IDC’s sectors of choice, one cannot ignore the fact the two institutions are influx regarding their mandate in terms of bringing development to Zambia. Nationals seeking to take part in creation of value must take heed and aspire to be part of the nexus of contracts that are available. IDC for example is a keen player when it comes to equity deals. There is evidence of this in their recent 90% purchase of Zampalm from Zambeef. DBZ are also keen to purse positive net present value projects, therefore the aspiring nationals must ensure that they are well prepared to present proposals that are beneficial not only to the mandate of these institutions but also address their own personal aspirations of creating value.