IMPACT OF DEBT AND COVID ON YOUNG ADULTS IN ZAMBIA
Chileshe G. Mange
As the COVID-19 pandemic enters it’s third year, the World Health Organization reports that by the end of February 2022 there were 433 million confirmed cases and over 5.9 million deaths globally. Between 2020 and 2021 global economic activity shrank by 4,7 percent and per capita incomes declined by 3.6%, tipping millions of people into extreme poverty. Emerging markets and developing economies shrank by almost 2.5 percent. These figures varied from country to country across the continent depending, in part, on the prevailing macroeconomic conditions at the onset of the pandemic.
This article explores the socio-economic impact of the COVID pandemic on the lives of young adults in Africa with a specific focus on Zambia which in November of 2020 became the first African nation to default on its debt in the post COVID era.
Overview of Zambia
Zambia has a population of approximately 18.38 million people and a Gross Domestic Product per capita of US$1270.86 which was last recorded in 2020. Much like the rest of Africa Zambia has a young population, with 65 percent of the population under the age of 25, and 52 percent under the age of 18. Although Zambia has a favourable youth policy environment, national policies and programs are poorly implemented. There is no superseding accountability mechanism holding the government accountable for fulfilling its commitments to youth investments. As a result of poor policy implementation and systemic weaknesses, young adults in Zambia face many challenges which act as barriers to the effective enhancement of their well-being, in addition to their potential contributions to the country’s economic activities and overall development (UNFPA 2019).
In terms of employment, 88.7 percent of the employed Zambian population work informally according to the International Labour Organisation (2020). Specifically, 87 percent are informal workers employed in the informal sector whilst 1.2 percent are informal workers employed in the formal sector, and 11.3 percent are formal workers employed in the formal sector. Informality rates are generally higher in rural areas, though they still exceed 50% for urban employees. Virtually all workers in the primary sector (defined as working in the farming, fishing and forestry industries) are informally employed. This in and of itself presents a rather grim picture in terms of opportunities for young people and social safety nets especially in the wake of the COVID-19 pandemic (ILO 2019).
It is important to note that prior to the pandemic the Zambian economy was already grappling with, amongst other issues, a high poverty rate, persistent levels of inequality, food insecurity, slow growth and most notably high debt and fiscal deficits. At the end of 2019, the debt to GDP ratio had reached 64.3 percent. By the end of October 2021, Zambia’s public debt accounted for more than 100 percent (CTPD 2020).
In the wake of government-imposed restrictions to curb the spread of COVID-19, the negative impact of the crisis was particularly severe in the mining, tourism and manufacturing. The lockdowns, social distancing and quarantine measures imposed to curb the spread of the virus resulted in partial and/or full closure of factories. About 40 percent of firms surveyed indicated that they temporarily closed during the outbreak of the pandemic and about 3 percent of firms reported having permanently closed since the pandemic was declared. About 44 percent of surveyed firms in Zambia reported decreasing the total number of temporary workers since the pandemic began (UNCTAD 2021). Youth unemployment reached approximately 23 percent at the end of 2021.
The pandemic affected capacity utilization through supply chain disruptions, which made it challenging to procure inputs needed for production. Furthermore, as an import-based economy, the supply chain disruption impacted the availability and cost of essential commodities, an aspect which along with restricted cross border trading, significantly impacted the informal sector and small businesses further impeding young entrepreneurs.
The negative impact was exacerbated by significant decreases in foreign exchange earnings which resulted in sharp depreciation of the local currency placed added pressure on the import-based economy. Inflation continued to soar and hover in the double digits. Some of the real consequences of these developments include an increased poverty rate from 58.6 percent in 2019 to 60.5 percent (World Bank 2020), a statistic which implies that an additional 706 900 Zambians fell into poverty by the end of the first year of the pandemic.
The more indirect effects of COVID-19, include a strained health care system, particularly in the rural areas. The impact on the education system may not be fully visible for many years, however it is likely that future human capital will be reduced due to disruptions in learning and prolonged school closures. Furthermore, most households were unable to migrate to internet or e-based learning platforms. Less than 56 percent of Zambians have internet access and only 0.8 percent access the internet through a PC (ZICTA 2020). This poor digital inclusion is a further hindrance to young people who are excluded from smart participation and accessing local and regional markets.
From the foregoing, it is not in question that the COVID-19 pandemic has disrupted Zambian lives, more so the lives of young adults who make up two-thirds of the population. Zambian society is characterized by deep inequalities which have been exacerbated by COVID-19. Unless there is a conscious effort to implement existing youth policies and strengthen institutional weaknesses in so far as they pertain to creating enabling environment for young people, these inequalities will likely continue to shape Zambian society.