Assessing sectoral inter-linkages: The case of agro-processing subsectors in Zambia

Over the last 15 years, the Zambian economy has been growing at an average rate of more than 5 percent per annum, making this the longest sustained growth episode since independence in 1964. Sustained economic growth is expected to induce not only sectoral changes in the economy, but also significant structure shifts, particularly, output and labour composition as well as factor productivity. Indeed recent data suggests that the Zambian economy has undergone some noticeable structural change over the last two decades, with the services sector accounting for close to half of gross domestic product (GDP). From the available data, it is also evident that the agro-processing subsector (broadly, and particularly the food and beverage subsectors) as well as the construction cluster(particularly the real estate subsector, both residential and commercial property) have contributed significantly to this growth (CSO, 2014). In order to design policies that promote sustained economic growth and diversification in the economy, it is essential to have a deeper sense of how the different sectors and subsectors interact and contribute to the creation of the total output we are observing. One way of achieving this is through an inter-sectoral linkages analysis  which can shed more light on  the pull and push dynamics between and within sectors in the economy.   In the case of Zambia, there has been no systematic analysis of these inter-sectoral dynamics, to learn whether and the well-performing subsectors (such as agro-processing industry and subsectors) are linked to other sectors and subsectors, and from this analysis, identify how effective sectoral linkages can be created to promote broad-based economic structural transformation, sustained, inclusive growth and poverty reduction. Specifically, little is known about how the agro-processing industries are linked to the agricultural as well as the services sectors, and how these linkages can be strengthened  to promote economy-wide growth and structural transformation.

To contribute to a better understanding of how the different sectors interact in the economy, this study seeks to systematically examine the backward and forward linkages between the different sectors of the economy to identify strategic areas for promoting sustained and inclusive growth, and economic diversification. While the conventional approach to inter-sectoral linkages analysis often takes an aggregative approach, looking at the broader sectoral interrelations, such approaches provide limited insights into the specific  inter- and intra- sectoral dynamics. To capture the specific inter- and intra-sectoral dynamics, this study will focus on one of the fastest growing sectors in the Zambian economy: agro-processing subsectors. The main interest in conducting this study is to understand whether this rapidly growing sector is linked to other sectors and subsectors, and how the growth momentum generated in this sector can stimulate growth in the other sectors, deepen the inter-sectoral linkages, and support growth and economic diversification.

For a country like Zambia, whose industrial base is largely agro-based, the agro-processing subsector offers great potential to learn about the existing linkages between the various sectors and subsectors and also the channels through which the pull and push interrelations operate. The study also offers an opportunity to identify not just the weaknesses in the linkages between the sectors, but also the potential for the well-performing sector to stimulate growth in other sectors through appropriate policy interventions.  For example, a well-linked and rapidly growing agro-processing subsector can stimulate growth in the agricultural sector via the backward linkages in terms of demand for agricultural products such as sugar, cotton, coffee, cereal, livestock products, etc. In a forward linkage direction, the agro-processing subsector can stimulate productivity growth in the services sector by generating effective demand for financial, transportation, storage, marketing and packaging services, which are intermediate inputs in the agro-processing production process.

Outputs

  • Research in progress.

    Project last updated on: 3 Oct 2016.