Pop: 10.2m

GDP: $4.3bn

Econ rank: 121

President: Lecy Mwanawasa

Dept relief from G8 countries is helping Zambia, but farmers still face economic disaster as a result of their trade policies, writes Michael Shaw

Oden Chisuta likes the United States. He lives in a tiny village of grass-roofed mud huts with no water or electricity and was delighted when he began a correspondence course in business management last year with a US college. The farmer proudly shows off his airmail letters. Unfortunately, the 35-year-old Zambian has had to cancel the course, along with his plans to buy the village a water pump and chickens. The reason is not the drought that has shrivelled Chilenje village’s maize crops, nor the foot-and-mouth outbreak that has crippled local animals. It is because the main crop on Oden’s 10-hectare farm is cotton and the price he gets paid has been cut this year from 21p per kilo to 16p.

Although Oden earns more than most of his neighbours, it has been difficult for him to suffer the sharp cut in income: he has two wives and an extended family of 16, including his orphaned nieces and nephews. The three grass-covered mounds that look like speed bumps at the entrance to the village are the graves of his brother, an Aids victim, and his two sisters.

Ask organisations such as Oxfam why cotton prices have dropped they have one answer: the vast subsidies the US gives to its own farmers that enable them to undercut the Zambians. The World Trade Organisation (WTO) has accused the US of acting illegally, arguing that $3.2 billion of the money it spends on annual cotton subsidies and $1.6bn of its expenditure on export credits break international trade rules. It is estimated that US cotton subsidies alone cost Zambia more than $8m.

Zambia had the potential to become one of the world’s richest countries when it gained independence from Britain in 1964, but mismanagement, debt and disease have left it one of the poorest. It was badly hit 30 years ago by the collapse in the market for copper, its chief export. Its mining industry is now starting to recover because of new demand from China and India.

However, it is by improving farming that the country hopes to rebuild its shattered economy. Zambia’s trade minister, Dipak Patel, says: “The issue of subsidies is hurting us very badly as we should have a natural competitive advantage for agriculture - we have the land, the weather, the water resources, and the labour for it.”

Drive half an hour from Chilenje and you reach Mazabuka, the heart of Zambia’s sugar cane industry. The town is a model that Lusaka would like others to copy. Zambia Sugar (despite its name, a South African company) employs 6,000 people in its fields and processing plant here. It also funds three schools and four medical clinics - crucial facilities in an area where malaria and HIV are highly prevalent.

However, its most significant contribution is supporting a project running since the mid 1980s: farmers are given their own patches of sugar cane. The 161 Kaleya smallholders each have plots of about six hectares and employ family and casual workers from a nearby shanty town to help.

Frederick Chinyama, a smallholder, earns pound;2,500 ($4,300) a year - the average annual income is pound;460 - and has built a house with electricity.

“The money I get goes so my children can go to school and on taking care of my relatives,” he says. “They are starving in the villages, so I help them buy food. With less money for sugar, I could not help them all.”

The positive experiences at Kaleya, and the wide areas suitable for sugar production raise an obvious question: why don’t more Zambian farmers grow sugar cane? The answer again is subsidies: those given to European farmers, as well as restrictive EU quotas that limit the amount Zambia can sell to the lucrative European markets. Changing such trade practices - which have also been criticised by the WTO - would create more than 4,000 jobs in Zambia, according to Oxfam.

An even greater problem for Zambia is the country’s huge external debt. G8 leaders have taken laudable steps in writing off the billions that they were owed. With the exception of Russia which is demanding its $124m back.

Through the Heavily Indebted Poor Countries initiative, in which creditors reward countries taking prudent economic action and reducing poverty, Zambia’s external debt of $6bn is being reduced to $2.1bn, most of it owed to the International Monetary Fund and World Bank. It will still spend at least $120m servicing debts next year, more than it plans to spend on health.

Poor governance and corruption remain a concern, even though things have improved under President Levy Mwanawasa, who was elected three years ago on an anti-corruption platform. One of his first acts was to remove immunity from his predecessor, Frederick Chiluba, and have him arrested for embezzlement.

The Department for International Development (DfID) in London has been helping Lusaka tackle mismanagement. It includes measures in all its projects with Zambia to ensure that budgets are transparent. Its work supporting education and health is likely to have more long-term impact.

The UK has put pound;20 million into an innovative project to improve reading. It copies many aspects from England’s primary teaching strategies, including a daily literacy hour. Instead of expecting pupils to speak English from their first day at school, teachers now hold classes in one of the seven official Zambian languages. In the second year, when the pupils have mastered the basics of reading and writing, teachers switch to English.

The scheme has transformed literacy levels at Chingwele basic school in Lusaka, where it was piloted five years ago. Grade one pupils talk in their native language, Cinyanga, about manzi (water), while grade two pupils take turns to pronounce English words starting with “h”, such as hen, hut and hat. Teachers report that the proportion of older pupils who can read and write has risen from one in six to two-thirds.

Grace Sitali, a teacher, says parents are overjoyed, although they were initially suspicious because they believed pupils who spoke Cinyanga at school would be considered inferior.

“One parent attacked me in a long letter, saying ‘What type of teacher are you teaching in Zambian language? What school did you go to?’ ”