Zambia’s economy is inextricably connected to the world copper price – and this needs to change. A FocusEconomics panel report found that the Covid-19 pandemic had put the economy into a severe recession in the first half of 2020.This comes on the back of economic activity grinding to a “near halt” at the end of 2019 due to depressed global copper prices and a resulting shortage of hard currency.FocusEconomics panellists project a 3.3% GDP contraction in 2020.
For 2021, the panel sees GDP growth recovering to 1.6%.All this could change. As we write elsewhere in this special report, there is growing physical demand for copper thanks to the rollout of electric vehicles and green energy.
There are also longstanding plans to diversify the economy.The first National Development Plan (1966-1970) identified the potential in other sectors such as agriculture and manufacturing.The seventh and latest National Development Plan (NDP) (2017-2021) lists agriculture, tourism, other types of mining, manufacturing and energy as diversification opportunities. Support for manufacturing investment is in the form of multi-facility economic zones and industrial parks.
Around US$3.3 billion has been invested in these facilities, creating over 15 000 jobs, according to a study published by Policy Monitoring and Research at the start of 2020.In a bid to promote local content, the government’s National Local Content Strategy aims to see at least 35% of inputs into industrial processes being locally sourced.
Moves to put more freight on local trucks and trains through legislation can be seen in this light – the government has realised that unemployment is the main threat to its voters, and therefore the jobs of ruling party politicians.Zambia is due to hold elections in 2021.The government recognises the importance of logistics.
Under Strategy 4: “Improve logistics management” the RDP states: “The government, in partnership with the private sector, will facilitate provision and improvement of logistical infrastructure and services to support both domestic and international trade, such as warehousing, storage, laboratory facilities and testing equipment, as well as ICT infrastructure at points of entry.”
“Logistics” features prominently throughout the document.Sophisticated and functional as it is, Zambia’s logistics ecosystem is seen as a risk to investors.FitchSolutions puts it this way: “Businesses face the highest degree of operational risk from Zambia's logistics capabilities, which are hindered by the nation's status as a landlocked country, the high trading costs that arise from a lack of coastline, and reliance on overburdened regional ports.
“Other key threats include insufficient rail capacity, rising road congestion, high energy costs, erratic power outages and the limited availability of essential utilities.”These risks are not enough to deter investors. According to Unctad’s 2020 World Investment Report, FDI f lows in Zambia increased from US$408 million in 2018 to US$753 million in 2019. Total foreign investment in Zambia is estimated at US$19 billion.Efficient logistics chains will see that grow