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.