Zambia comes up tops in trade risk survey

Zambia currently poses the
lowest trade risk of the four
emerging African economies
that have been identified
by credit insurer Coface –
including Kenya, Tanzania
and Ethiopia.
“This is due to its strong
gross domestic product
(GDP) growth in recent
years as well as its growing
infrastructure thanks
to heavy investment by
countries such as China,”
lead analyst at Coface, Raijil
Singh, told FTW.
He noted that the
effects of massive foreign
investment had spread
throughout the country
and on the economic front
investment was expected to
continue to spur economic
growth, particularly in the
construction and mining
sectors. “However, while
massive capital inflows are
likely to push up the exchange
rate, these will also give rise
to a growing dependence on
Zambia’s largest investor –
China – especially for trade,”
said Singh.
Another potential risk is
the country’s dependence
on copper which makes it
vulnerable to depressed
commodity prices, but
record high copper prices
and a bumper maize crop
helped Zambia rebound
quickly in 2010 from a world
economic slowdown that
began in 2008. In 2011,
Zambia made the World
Bank’s list of top ten most
improved economies in ease
of doing business, and was
also ranked in the best five
performing countries in
southern Africa.
Singh said the Zambian
government was aggressively
tackling the challenge
of reducing the cost of
doing business in the
country by improving
infrastructure such as roads,
telecommunications, energy
and water. “The government,
through the central bank,
has also created a favourable
macroeconomic environment
that has led to improved
access to long-term finance at
lower interest rates,” he said.