A Socialist Wreck On The Mend...Faces A Deadly Enemy: Aids

When Malcolm F. McPherson of the Harvard Institute for International Development arrived at Zambia's Finance Ministry in 1992, he knew the economy was in trouble. How badly, he couldn't tell: Central-bank accounts hadn't been audited since 1988, and when asked how much Zambia owed international lenders, officials simply said "a lot."

It took months to learn the terms of the $6.2 billion foreign debt, which puts Zambia among the world's most indebted nations, per capita. It took months, as well, to get solid numbers on the $3.5 billion gross domestic product, little changed for 20 years despite 65% population growth. Now, McPherson has up-to-date numbers daily. What they show is an African reclamation project in the works.

The landlocked country of 9 million managed a peaceful end to one-party rule in 1991, when Kenneth Kaunda, who had been President ever since independence in 1964, allowed his 27 years of authoritarian socialism to end at the ballot box. However, deficit-funded social subsidies and tumbling prices for copper left a bankrupt nation.

The new President, Frederick Chiluba, undertook the only course open--a radical shift to a free market. The International Monetary Fund created a "rights accumulation program" that will allow Zambia to start paying its debts and resume low-interest borrowing if it holds the new course through 1995.

Zambia now has arguably the freest economy in Africa, with no restrictions on currency exchange or capital transactions. In 1993-94 it kept to a balanced budget, bringing down 12%-a-month inflation to 35% for all of 1994. Food-price controls are gone, and informal entrepreneurship is everywhere. John Tanga, 40, and his wife, Janet, sell live chickens from a plank-and-wire stall at Lusaka's fast-expanding new Soweto street market. "If you sold on the street before," he says, "they would shoot you."

Among the state companies that have been privatized are Chilanga Cement and Zambia Breweries, the latter acquired by South African giant Anglo-American Corp. Zambia is looking at Anglo-American as a new owner for Zambia Consolidated Copper Mines, source of 95% of foreign currency earnings and a huge employer. Anglo, the former owner, has held a 27.3% share since the mines were nationalized in 1969. Chiluba knows his handling of ZCCM will be a measure of his commitment to reform regardless of the political heat.

And there is plenty of that. Zambians nostalgic for cheap maize meal and subsidized health care are creating pressure that could tempt politicians to jettison reform as 1996 elections approach. Reforms are off track already after retroactive civil-service wage hikes and a bank bailout.

"TOTAL DISASTER." Fanning the discontent with his trademark white handkerchief is Kaunda, a hail 71-year-old running for his old job as President. Kaunda acknowledges he erred somewhat but pronounces the new free-market tack "a total disaster" that has cost 200,000 jobs.

Answers Chiluba, whose reception rooms are guarded by an enormous stuffed lion atop a red carpet: "I know that some of our people are complaining, but surely along the way they are also seeing the changes are positive, and so they have a sense of aptimism."

But a force beyond IMF control threatens recovery. An estimated 25% of sexually active adults are HIV-positive in some cities. As is true across Africa, AIDS is a heterosexual epidemic striking productive citizens in their prime. Barclays Bank of Zambia Ltd. loses around 40 employees--out of a staff of 1,800--annually to AIDS. Many more are absent because of prolonged AIDS-related illnesses or repeated bereavement leaves. Managing Director Michael M. McNie oversees an AIDS-inflated "death budget" covering mourners' transport and funeral costs, which Zambian companies customarily pay.

At the Finance Ministry, McPherson says AIDS is thwarting efforts to teach Zambians to run a market economy. Of the 70 people the Harvard team has trained during the past three years, eight have died, undermining Zambia's bid to pull its economy out of Africa's downward spiral and send its foreign monitors home.

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