Structural characteristics of Zambias agricultural sector and the role for agricultural policy : insights from SAM based modelling

Mulanda, Stephen Mulanda (2020-03)

Thesis (MCom)--Stellenbosch University, 2020.

Thesis

ENGLISH SUMMARY : Structural development economists believe that for an economy to develop, it must structurally transform. It is therefore understood that developing countries must transform their economies for them to see development. This study used sectoral contributions to employment and total output in the economy from the 1980s to 2017, to understand the structure of the Zambian economy. Social accounting matrix (SAM) multiplier analysis and analysis using a computable general equilibrium (CGE) model were combined to shed more light on this topic. This study finds that the transformation of the Zambian economy does not follow standard literature. Although we find that agriculture’s share in the total output declined between 1983-2017, the decline corresponds to an increase in the share of services and not manufacturing. In 2017 the service sector contributed 56.33% to gross domestic product (GDP). The economy seems to transform from agriculture to services. In addition, it was found that the agricultural sector is the right sector to kick-start transformation in the Zambian economy. Our results indicate that in general primary agriculture has the largest output multipliers compared to the industry and service sectors. The livestock commodity, for instance, was found to have the largest output multiplier of 3.60. Within the industry, agricultural processing commodities had larger multipliers as they had more backward linkages in the economy. Further, the literature on structural transformation has concentrated on the role played by capital in the process of structural transformation. There is limited literature on the role played by transaction costs on structural transformation. Therefore, this study further sought to establish the relevance of transaction costs in structural transformation by drawing from a CGE model insights. The study also sought to find out the impact of increasing capital in Zambian agriculture. Using a static CGE model calibrated to the Zambia SAM for 2007, it is found that transaction costs played a significant role in aiding structural transformation. Reducing transaction costs in Zambian agriculture by 30% increased value-added for all the agricultural processing activities in the economy. The “sugar refining” activity, for example, had its quantity of value-added increase by 2.00%. Increasing agricultural capital by 30% also increased the value-added of all agricultural processing activities. , The “meats, fish and dairy” activity had its quantity of value-added increase by 3.94%. Economists have highlighted the importance of complementing production policies with market policies to achieve optimal development results. To assess this synergy, transaction costs in Zambia’s primary agriculture were reduced simultaneously with an increase in agriculture capital. It is found that the impact on the quantity of value-added per agriculture processing activity was higher than the sum of two individual scenarios, indicating the presence of multiplier effects. It was also found that in the combined simulation, in general, labour moved out of agriculture to industry. Within the industry, the quantity of labour employed increased more for the agricultural processing subsector. The quantity of labour employed in tobacco curing and processing, sugar refining and “meat, fish and dairy” activities increased by 20.80%, 17.06% and 13.01% respectively.

AFRIKAANSE OPSOMMING : Ekonome van struktuurontwikkeling glo dat ‘n ekonomie struktureel moet transformeer om te ontwikkel. Dit word dus verstaan dat ontwikkelende lande hul ekonomieë moet transformeer sodat hulle kan ontwikkel. Ekonome het bewyse gevind dat die Zambiese ekonomie nie struktureel verander nie. In hierdie studie is sektorale bydraes tot indiensneming en totale produksie in die ekonomie vanaf die tagtigerjare tot 2017 gebruik om die struktuur van die Zambiese ekonomie te verstaan. Sosiale rekeninge matriks (SAM) vermenigvuldigeranalise sowel as analise met ‘n berekenbare ewewigsmodel (CGE) is gebruik om meer lig te werp op die onderwerp. Hierdie studie bevind dat die transformasie van die Zambiese ekonomie nie die standaardliteratuur volg nie. Alhoewel ons vind dat die landbou se aandeel in die totale produksie tussen 1983-2017 gedaal het, stem die daling ooreen met 'n toename in die aandeel van dienste en nie vervaardiging nie. In 2017 het die dienstesektor 56.33% tot die bruto binnelandse produk (BBP) bygedra. Dit lyk asof die ekonomie van landbou na dienste verander. Verder is gevind dat die landbousektor die regte sektor is om transformasie in die Zambiese ekonomie te stimuleer. Ons resultate dui daarop dat die primêre landbou in die algemeen die grootste uitsetvermenigvuldigers het in vergelyking met die industrie- en dienstesektor. Daar is byvoorbeeld gevind dat vee die grootste uitsetvermenigvuldiger van 3.60 het. Binne die industrie het verwekte landbou-kommoditeite groter vermenigvuldigers gehad, aangesien dit meer rugwaartse skakeling in die ekonomie gehad het. Voorts het die literatuur oor strukturele transformasie gekonsentreer op die rol wat kapitaal speel in die proses van strukturele transformasie. Daar is weinig literatuur oor die rol wat transaksiekoste in strukturele transformasie speel. Dus poog die studie om die relevantheid van transaksiekoste in strukturele transformasie te vestig deur insig te verky met algemene ewewigsmodelle. Daarbenewens het die studie gepoog om uit te vind wat die impak van die verhoging van landboukapitaal in die Zambiese landbou is. Met die hulp van 'n statiese berekenbare algemene ewewigsmodel wat met die 2007 Zambia SAM gekalibreer is, word gevind dat transaksiekoste 'n belangrike rol gespeel het in die ondersteuning van strukturele transformasie. Die vermindering van transaksiekoste in die Zambiese landbou met 30% het toegevoegde waarde verhoog vir al die landbouverwekringsaktiwiteite in die ekonomie. Die aktiwiteit “suikerraffinering” het byvoorbeeld toegeneem met 'n toename in toegevoegde waarde met 2.00%. Die verhoging van landboukapitaal met 30% het ook die toegevoegde waarde van alle landbouverwerkingsaktiwiteite verhoog. Die aktiwiteit “vleis, vis en suiwel” het byvoorbeeld 'n toename in toegevoegde waarde van 3.94% getoon. Ekonome het die belangrikheid daarvan benadruk om produksiebeleid met markbeleid aan te vul om optimale ontwikkelingsresultate te behaal. Om hierdie sinergie te beoordeel, is transaksiekoste in die primêre landbou van Zambië terselfdertyd verminder met 'n toename in landboukapitaal. Daar is gevind dat die impak op die hoeveelheid toegevoegde waarde per landbouverwerkingsaktiwiteit groter was as die som van twee individuele scenario's, wat 'n aanduiding is van die vermenigvuldigingseffekte. Daar is ook gevind dat arbeid in die gesamentlike simulasie oor die algemeen uit die landbou na die industrie beweeg het. Binne die industrie het die hoeveelheid arbeid wat in diens geneem is meer toegeneem vir die subsektor van landbouprosessering. Die hoeveelheid arbeid wat gebruik word vir die verwerking van tabak, suikerraffinering en “vleis, vis en suiwel” -aktiwiteite het byvoorbeeld onderskeidelik met 20.80%, 17.06% en 13.01% gestyg.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/107983
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