International Development CommitteeWritten evidence submitted by the Department for International Development (DFID)

A. Introduction

1. This memorandum focuses on DFID’s bilateral aid programme in Zambia, specifically outlining the following areas:

(a)Introduction.

(b)The historical and developmental context in Zambia.

(c)An overview of DFID’s key priorities and spending profile in Zambia.

(d)The pillars of DFID Zambia’s programme, including detail on particular projects.

(e)Efforts made to ensure that the programme offers value for money.

B. Context

2. After 30 years of economic mismanagement and decline, Zambia has made significant progress since 2000. Twelve successive years of growth have trebled per capita income to $1,070 and seen Zambia regain lower middle income status. This growth has been built on sound macro-economic management and increasing foreign investment, mostly in mining. This helped urban poverty to fall by a third from 1996–2006.

3. However, as mining employs only 50,000 people and until recently has contributed limited tax1 it has meant little for the rural areas where 61% of Zambians live. Zambia remains one of the least-developed countries in the world, ranking 164 out of 187 countries in the UN Human Development Index with a third unable to meet even basic food needs. Zambia is seriously off track on the poverty Millennium Development Goal (MDG 1, as Table 1 below shows) and inequality remains very high. Gender disparities are high in virtually all spheres of social, political and economic life in Zambia.

Table 1

MILLENNIUM DEVELOPMENT GOALS INDICATORS
CURRENT ASSESSMENT¹

1.	Proportion of population below $1.25 a day	Red
2.	Net enrolment in primary education	Green
3.	Ratio of girls to boys in primary education	Green
4.	Under 5 mortality ratio	Amber
5.	Maternal mortality ratio	Red
6.	HIV prevalence rate	Green
7.	Access to improved water source	Amber

4. The economy is being driven by booming mining, services and construction sectors. Most Zambians, however, rely on rain-fed agriculture as their primary source of income and hence have livelihoods that are poorly linked to the growth sectors of the economy. As a result, three quarters of the rural population live in extreme poverty and remain vulnerable to weather and food price shocks.

5. Zambia has long been relatively urbanised, though the collapse of the copper industry in the 1990s led to migration to rural areas. It is only in the last few years, with rapid population growth of 2.8% per year, that Zambians have started moving back to towns. With a total population of only 13 million spread over an area three times that of the UK, delivering services and joining up markets in rural areas is challenging and expensive.

6. As the economy has grown, dependence on traditional development aid (ODA) has fallen to 7% of the Government’s budget (from 37% in 2002). Non-ODA sources of development finance are becoming increasingly important, especially from China. Government and donors are engaging on how Zambia can sustainably graduate from aid. This will include continuing to invest in strong institutions to ensure that they can spend the budget well (whether financed by local or foreign taxpayers) and hold government to account.

7. In the medium term Zambia will need to use its own resources to achieve the MDGs, sustain private-sector led growth in sectors other than copper and increase regional trade and integration. To make real progress in poverty reduction, Zambia will need to maximise domestic taxes (especially from mining) and spend its growing wealth more effectively to support better service delivery and more inclusive growth especially in rural areas and for women and girls.

C. Overview of DFID Programme

8. Zambia has an opportunity for change for the first time in a generation as economic growth, fiscal restraint and debt relief have made available the resources to invest in a better society. With the right support and policy choices, Zambia can deliver real poverty reduction and achieve its vision to become a “prosperous middle-income country by 2030”. Zambian leaders also have an incentive to change driven by higher demands of Government from a young, more educated population, an active civil society and a growing private sector, set against a background of increasingly competitive multi-party politics.

9. In response DFID is supporting Government to improve its systems; skills and decision making, enabling Zambia to increase its tax take and use its resources to deliver better services.² This includes continuing to tackle corruption and waste and increasing Government’s transparency and accountability to its citizens. DFID will work to directly address the most off-track MDGs, and remove the barriers to wealth creation and investment. DFID will work with Government and other donors to empower women and girls in order to make growth more inclusive and tackle inequality.

10. We will improve the accountability of government by strengthening citizens’ and civil society’s voice, building on the relative freedom of the media and civil society.

11. DFID Ministers have agreed the following headline results2 that we will deliver in Zambia by 2015:

Governance—Increase the number of people who vote in elections from 1.79 million in 2008 to 3.3 million in 2011.

Governance—Maintain all Public Expenditure and Financial Accountability indicator scores and improve the scores of at least six indicators by 2014.

Social Protection—Provide direct cash transfers to 99,000 recipients.

Nutrition—Reduce micro-nutrient deficiencies in at least 800,000 children under five.

Wealth Creation—Provide 100,000 additional small-scale farmers with access to improved agricultural inputs and advice.

Family Planning—200,000 more couples using modern methods of contraception.

Malaria—45,000 more pregnant women and 209,000 more under five’s sleeping under an insecticide-treated bed-net.

Water and Sanitation—three million more people with sustainable access to improved sanitation facilities.

12. Table 2 below shows the broad outline of programme spending by sector for the last few years and up to the end of the Operational Plan period (2015). The figures include General Budget Support (GBS), which has been apportioned to the sectors according to the sector spending shares in the Zambian budget. Our GBS peaked at £36 million in 2009–10 and in 2011 Ministers decided to reduce it to allow us to focus resources more directly on poverty reduction interventions. However, GBS remains an important tool to improve Government service delivery systems and to overcome policy constraints in agriculture and infrastructure.

Table 2

SECTOR SPENDING PROFILE

Sector	2009–10 £m	2010–11 £m	2011–12* £m	2012–13* £m	2013–14* £m	2014–15* £m
(a) Governance	13.6	13.5	8.0	10.5	10.0	9.5
(b) Poverty & Vulnerability	1.7	4.0	5.8	9.5	11.5	11.5
(c) Wealth Creation	12.0	11.5	5.3	11.5	12.5	13.0
(d) Health	9.1	14.4	19.9	13.0	16.0	18.0
(e) Water & Sanitation	0.8	1.4	2.5	4.0	6.0	6.0
(f) Education	10.0	9.5	3.3	6.5	6.0	5.0
(g) Climate Change	0.4	0.5	0.2	—	—	—
Total	47.6	54.7	345.1	55.0	62.0	63.0

* indicates forecasts

D. (a) Governance

Overview

13. Zambia has long been relatively stable and peaceful. Since 1991, elections have been free and mostly credible. However, as in many other parts of Africa, political authority remains unhelpfully centralised with significant discretionary power retained by the Presidency. Despite this challenge, governance in Zambia has improved overall in recent years with the state broadly more capable, accountable and responsive. This is reflected in improving indicators of good governance,³ which are above the average for sub-Saharan African countries.

14. The new Patriotic Front (PF) government (elected in September 2011) has implemented a number of institutional changes, particularly around corruption, that are likely to strengthen governance. Nonetheless, our 2012 Fiduciary Risk Assessment indicates that for now the risk of the misuse of Government funds remains significant. High-level, as well as mid and lower level corruption remains a persistent challenge. State institutions of accountability are still developing and civil society organisations (CSOs) are active but are often unfocused in their attempts to hold Government to account.

Democracy and Accountability

15. The Deepening Democracy programme supported the Electoral Commission of Zambia to deliver credible elections in 2011 while also strengthening civil society to oversee the process. It spent £5.2 million over 2010–11 to 2011–12 and contributed to the peaceful transfer of power.

16. The Democratic Representation programme will work with civil society over 2012–13 to 2016–17 to get citizens engaged in monitoring the delivery of services in their area. At a national level civil society will be supported to engage with the government on new policies and legislation, improving accountability and ensuring citizens get a say in what government does.

Anti-Corruption

17. The Anti-Corruption programme supports the Zambian Anti-Corruption Commission to prevent corruption by educating the public on the issue and investigating and prosecuting cases. It also works with parliamentarians in their work to hold other branches of government to account, spending £5.6 million over 2010–11 to 2014–15. Over the last decade, DFID’s support has resulted in a number of high level corruption convictions and we are currently supporting the prosecution of senior figures accused of stealing public funds.

Government Systems

18. The Public Financial Management (PFM) and Public Service Management programmes will embed VfM in the management of public resources, reducing waste, and will support community monitoring of government services (£9.5 million, 2009–10 to 2014–15). PFM results to date include:

the roll-out of a new Integrated Financial Management System to half of all ministries;

bringing forward the annual budget cycle so that Parliament approves the budget before the year commences thus improving planning and preditability of funding;

cleaning the public payroll to remove “ghost workers” saving £13 million from the government’s annual wage bill;

cost savings of around £5 million a year in reduced bank charges through operating a new single-treasury account; and

on the revenue side the programmes also aim to increase non-mining tax revenue collection by 1% of GDP by 2013.

D. (b) Poverty, Hunger and Vulnerability

Overview

19. Zambia is on track to meet the education, under five mortality and HIV MDGs. Net enrolment in primary education is at around 97% in 2008, up from 70% in 1999. The incidence of malaria has fallen sharply and is now under 10% (from over 30% in 2000) while HIV prevalence has fallen to 14% (from 16% in 2000).

20. However, progress on income poverty is severely limited. The poverty headcount fell by just 10% points over the last 15 years.4 60% of Zambians live below the national poverty line and 42% below the extreme poverty line, unable to meet basic food needs.5 Inequality is increasing with poverty highest in rural areas (78% poverty and 58% extreme poverty).

Social Protection

21. Cash transfers are one of the most direct ways to tackle extreme poverty and hunger, empowering the poor to buy more and better food, to send their children to school and clinics and to make small investments.

22. DFID works with Government and other donors through the Social Protection Expansion programme to provide cash transfers to the most vulnerable in the poorest and most remote districts. By 2015, DFID will support over 135,000 people with transfers to 99,000 recipients, spending £24 million over 2011–12 to 2014–15. Over 80% of recipients will be women.

23. The cash transfer programme is demonstrating that well targeted and efficiently delivered social protection programmes can be implemented and have measurable impact. This will inform the National Social Protection Policy being developed this year.

Nutrition

24. Zambia has one of the highest rates of childhood under-nutrition in the world. 46% of under-five’s are stunted, meaning that they are chronically undernourished, and 53% have Vitamin A deficiency. Malnutrition is likely to be the most significant factor in child mortality and morbidity, underlying half of under-five deaths in Zambia. Children who are stunted by the age of two will never meet their full potential of physical and mental development.

25. Direct nutrition interventions have been proven to be effective but are not carried out to scale in Zambia because of weak health systems, knowledge gaps, poor coordination and lack of investment. In response, DFID Zambia is providing £17 million over four years (2011–12 to 2014–15) through the Tackling Maternal and Child Under-nutrition programme to:

expand coverage of direct nutrition interventions (Vitamin A, de-worming and therapeutic zinc) for children through the primary health care system;

pilot and, if successful, scale up two innovative approaches for delivering nutrition interventions; ColaLife (using Coca-cola’s distribution chain to distribute zinc and oral rehydration treatment) and Harvest Plus bio-fortification (enriching maize with vitamin A); and

build capacity in the National Food & Nutrition Commission and key line Ministries to deliver the new National Food & Nutrition Strategy.

26. The expected impact is a reduction in stunting of under fives from 46% in 2010 to 41% by 2015, meaning that 130,000 fewer children will be stunted.

Gender

27. Women are disproportionately affected by poverty in Zambia6 and there has been a lack of progress on female empowerment. Zambia ranks 124 out of 137 countries in the UN’s Gender Inequality Index. Violence against women persists (half of all Zambian women report having experienced physical violence since age 15) while women and girls’ participation in decision-making remains low. Representation of women is one of the lowest in the SADC region with only 11% of MPs being female. Women’s rights to access and control productive assets are limited and the impacts of poverty on women and girls remain poorly understood and poorly captured in official statistics.

28. Improving the lives of women and girls is central to our poverty reduction⁴ strategy including: delivering a significant reduction in maternal deaths; increasing family planning choices; better social protection and choice through cash transfers and a big push on nutrition; improving women’s health and dignity through better sanitation; and empowerment through financial inclusion and women’s participation to girl’s leadership initiatives.

29. The Adolescent Girls Empowerment programme implemented through the Population Council, will empower 10,000 10–19 year old girls to build their health, social and economic assets (£8.5 million, 2011–12 to 2015–16). It will result in fewer early unintended pregnancies, reduced early marriage, lower rates of HIV and other sexually transmitted infections and fewer school drop outs.

30. Support to scaling up USAID’s A Safer Zambia programme will help tackle gender based violence (GBV). It will fund response centres where GBV victims can access integrated medical care, psychological and legal support as well a public awareness campaign to change attitudes and beliefs around GBV (£0.75 million, 2012–13 to 2014–15).

D. (c) Wealth Creation

31. Three quarters of rural Zambians live on less than $1 a day and nationally only 10% of the working population are formally employed, half in the public sector. The rural poor rely on agriculture, with their crops providing both food and income. Most farm relatively small pieces of land, using few inputs and inefficient methods. As a result, yields are extremely low and most do not have access to the inputs required to improve their productivity. Access to finance is limited with two-thirds of the rural population having no access to any financial services.

32. Poor rural Zambians cannot be expected to wait for growth to trickle down. Hence DFID will work to accelerate wealth creation in rural areas while improving the broader investment climate, working closely with the private sector and with large investment programmes where feasible (PIDG, ACTIS, IFC etc.). Wealth creation is a new priority area for Ministers and as a result we are developing the following three programmes.

33. The Access to Finance programme will facilitate the development of inclusive financial markets in Zambia, particularly in rural areas, through investing £7 million over 2012–13 to 2014–15. It will increase access to financial services for the poor and small rural businesses, providing 170,000 additional people with access to finance (119,000 in rural areas) by 2015.

34. The Rural Market Development programme will promote the development of sustainable rural markets in which poor people and small and medium enterprises can actively participate. It will seek to increase access to sustainable input, service and output markets for smallholder farmers through the private sector and work with government to improve agricultural policy (£9 million, 2012–13 to 2014–15).

35. The Zambia Economic Advocacy programme will seek to promote public understanding and debate on economic policy issues critical to growth and poverty reduction. It will strengthen Zambian think tanks with £3.25 million over two years from 2012–13 so as to increase both the supply of and demand for sound economic policy ideas.

D. (d) Health

Overview

36. Maternal and child mortality are high with over seven million healthy life years lost annually due to a high disease burden and a weak health system. Many of these deaths could be easily and cheaply prevented. Zambia’s HIV prevalence rate is 14%, the seventh highest in the world, and each year 82,000 newly infected people join the existing pool of one million people living with HIV. Zambians suffer four million cases of malaria each year and access to trained health workers and essential medicines is lacking.

HIV to AIDs

37. The Intensifying HIV Prevention programme will address existing prevention gaps by increasing demand for and access to effective, integrated prevention services. It will will support the scale up of couples counselling and testing and the uptake of male circumcision services with £13 million over 2012–13 to 2015–16, contributing to a halving of new infections.

Maternal and Reproductive Health

38. Ministers’ decision to proceed with the Strengthening Human Resources for Health & UK Health Workforce Alliance programmes will address Zambia’s acute shortage of trained health workers by piloting the training and deployment of a new cadre of Community Health Assistants and by increasing the training opportunities for nurses and other priority health workers (£5.7 million, 2010–11 to 2014–15).

39. The International Health Partnership programme is overcoming the barriers that prevent women accessing maternal and neo-natal health care services. Support includes creating demand for services using volunteer Safe Motherhood Action Groups, the provision of a social fund for emergency transport in labour, mentoring of staff and the provision of bicycle ambulances to health centres. It also addresses health system bottlenecks through the purchase of emergency obstetric care supplies and equipment (£10 million, 2010–11 to 2013–14).

40. The Scaling Up Family Planning programme implemented by ABTS Associates will build the capacity of the public and private sectors to deliver quality comprehensive family planning services as well as directly providing services in the most under-served districts. It will provide modern family planning methods to an additional 200,000 women and girls through spending £15 million over 2011–12 to 2014–15.

Communicable Diseases

41. The Malaria and Child Health programme will reduce child mortality from malaria and other illnesses in Zambia by providing malaria commodities and essential medicines while working to strengthen government emergency response systems (£22.1 million, 2011–12 to 2014–15).

D. (e) Water and Sanitation

42. Nearly 5 million Zambians lack access to safe water and 6.5 million lack access to adequate sanitation. This has major health implications, with 20% of under-five mortality in Zambia caused by diarrhoeal disease. Our Sanitation and Hygiene programme will work with local government, NGOs and the private sector to carry out sanitation and hygiene promotion and marketing to the community and to construct latrines at schools and health clinics. The programme will result in three million additional people using improved sanitation facilities, thereby reaching the MDG sanitation target (£19 million, 2011–12 to 2015–16).

D. (f) General and Sector Budget Support

43. Since 2005, General Budget Support has been a major part of DFID’s programme in Zambia, with £89.3 million of budget support over 2009–11 contributing to macroeconomic stability and increased government delivery of essential services. Over 2012–14, £58 million will be programmed as a Growth & Poverty Reduction Grant to further strengthen government systems and address policy constraints in areas such as agriculture and infrastructure.

44. We will also provide £15 million over 2012–14 as Sector Budget Support to improve the quality and consistency of basic services, initially focusing on education.

45. As the Zambian Government becomes increasingly able to mobilise resources through taxation and external sources, the share of budget support in the DFID-Zambia programme will fall from 45% in 2011–12 to 29% in 2014–15. This will allow more resources to be focused on direct poverty reduction interventions.

D. (g) Working with Others

46. DFID plays a lead role on aid effectiveness with the Zambian Government and other donors in Zambia as set out in the Joint Assistance Strategy.⁵ This, along with a strong Division of Labour (DoL) agreement among donors, coordinates aid to ensure its effectiveness and avoid duplication. Under the DoL, DFID is a “lead” donor in Governance, Health, Social Protection, Macroeconomics, Nutrition and Gender. As other donors start pulling out of Zambia (the Danes and Dutch both plan to leave in 2013), DFID’s relative status as a bilateral partner will increase.

47. DFID Zambia works closely with DFID Southern Africa on issues where the best option is a coordinated regional response. These include:

Regional trade and integration—The cost to export a container from Zambia is 37% above the sub-Saharan African average, limiting trade. DFID works with TradeMark Southern Africa to accelerate regional economic integration through support to the “Tripartite” of the Common Market for East and Southern Africa (COMESA), the East African Community (EAC) and the Southern Africa Development Community (SADC). This includes the establishment of a Tripartite Free Trade Area, support to upgrading the “North-South corridor” connecting East and South Africa, and reducing the legislative barriers and high transport costs that limit regional integration; and

Climate change—While supporting regional climate change interventions in agriculture, energy and water, we will also “proof” our existing programme to ensure that DFID Zambia is “climate smart” in its operations.

E. Evidence and Value for Money

48. Following clear direction from Ministers, we have prioritised the need to ensure the maximum impact and value for money (VfM) for all of DFID’s aid spending in Zambia. At the design stage, we ensure that new programmes are informed by and built on all available evidence through rigorous economic, political, social, institutional and environmental appraisals. During implementation, we ensure that programme monitoring focuses on impact, results and VFM. We also take evaluation seriously, ensuring that our programmes are designed and implemented with evaluation in mind, enabling us to confidently demonstrate results and learn and communicate lessons (eg 61% of 2011–12 spend is subject to independent evaluation).

49. By their nature, some programmes and sectors have better evidence on effectiveness and VfM than others. Below are some examples from our health programmes which are particularly well supported by evidence and show very good value for money:

Our Malaria & Child Health programme will avert the loss of 260,000 healthy life years (DALYs) from malaria at a cost of just £65 per DALY.

Our measles vaccination programme will cost just 94 pence per child immunised, or £9.19 per measles case prevented, or £184 per death averted.

For HIV prevention, the average cost per male circumcision, thus reducing the likelihood of infection, is around £22 in Zambia, significantly less than the current cost of treating a HIV patient for a month.

50. We tightly monitor all of our programmes to ensure VFM. For programmes that are innovative and previously untried the existing evidence base is often less strong (eg sanitation and hygiene, gender and economic advocacy). In such cases we will conduct rigorous evaluations to build the evidence base. Programmes with significant evaluations include:

Social Protection Expansion Programme—a “gold-standard”, randomised control trial impact evaluation, rigorously looking at the impact of cash transfers on the lives of the poorest Zambians. This will allow a full cost-benefit analysis of the programme, assessing the economic impacts on recipients and the wider communities in which they live.

Adolescent Girls Empowerment Programme—an impact evaluation, looking at the economic, social and health impacts of this innovative programme.

Community Health Assistants Programme—an economic evaluation assessing the cost effectiveness of investing in a new cadre of health workers. This evidence on cost effectiveness will complement previous evaluation work from other countries and will enable comparisons to be made between investing in new community health assistants and investing in existing cadres.

These evaluations will generate robust results, allowing us to identify the mechanisms through which our programmes have impact. They will make major contributions to the evidence bases in their respective fields, driving forward changes to development investments in Zambia and beyond Zambia.

51. In response to Ministerial priorities, we have also re-designed our budget support to increase its focus on results and VFM. Dialogue with government and performance assessments are structured around tangible results and our funding is tied to specific performance targets.

Annex 1

Mining in Zambia

1. Privatisation and foreign investment have transformed Zambia’s mining industry from near collapse into the most important sector of the formal economy, with copper production of 875,000 tonnes and exports worth $8.5 billion in 2011. Most Zambian copper is exported as copper cathode following smelting which adds significant value to the raw copper ore.

2. Four large mines generate 80% of production, the largest being Konkola Copper Mines (majority owned by the London listed Vedanta Resources Plc.) and Kansanshi (owned by Canadian company First Quantum Minerals), both with annual output of over 200,000 tonnes. Output from the Lumwana mine (owned by Equinox Minerals, which has recently been acquired by Barrick Gold of Canada) opened in 2009, is set to reach 200,000 tonnes by 2012. Since privatisation it is estimated that over $2 billion has been invested in upgrading and expanding operations (especially open pit mines), reducing the unit costs of production and making output less sensitive to world prices.

3. Given the capital intensity of modern mining operations, employment in the industry is low (only 50,000 formal jobs) and the linkages to the wider economy outside of the Copperbelt are limited. Hence the main way for most Zambians to benefit from the booming copper industry is through mining tax-funded services. However, tax receipts have been limited over the last decade, due to generous tax agreements negotiated with the mines at privatisation when copper prices were low. The tax regime has been reformed over the last few years and now appears internationally competitive (6% royalty, 30% income tax and 15% variable income tax when gross margins exceed 8%). Revenues are now set to rise to 4% of GDP in 2012, whereas in 2000, propping up the sector cost 4% of GDP. It remains to be seen whether the Zambia Revenue Authority (ZRA) will be able to effectively enforce the new rules.

4. DFID helped to establish the ZRA in 1994 and provided support on tax issues up until 2006. Since then, Norway has taken on the role and has focused on mining tax, an area in which it has particularly strong experience and expertise. DFID is now re-engaging with ZRA to strengthen their tax administration capability as part of a broader public financial management programme.

References:

¹ UNDP, Zambia MDG Progress Report 2011.

² DFID, Zambia Operational Plan 2011–15.

³ World Bank Worldwide Governance Indicators, published online at: http://info.worldbank.org to governance to wgi to sc_country.asp

⁴ DFID, Zambia Gender Strategy Paper 2011.

⁵ “Joint Assistance Strategy For Zambia II”, November 2011.

March 2012