Zambia is large, landlocked, resource-rich country with sparsely populated land in the centre of Southern Africa. It shares its border with eight countries (Angola, Botswana, Democratic Republic of Congo, Malawi, Mozambique, Namibia, Tanzania, and Zimbabwe) that serve as an expanded market for its goods.
Zambia is experiencing a large demographic shift and is one of the world’s youngest countries by median age. Its population, much of it urban, is estimated at about 17.9 million and growing rapidly at 2.8% per year, partly because of high fertility, resulting in the population doubling close to every 25 years. This trend is expected to continue as the large youth population enters reproductive age, which will put even more pressure on the demand for jobs, health care and other social services.
An Economic Outlook of Zambia
After 15 years of significant socio-economic progress and achieving middle-income status in 2011, Zambia’s economic performance has stalled in recent years. Between 2000 and 2014, the annual real gross domestic product (GDP) growth rate averaged 6.8%. The GDP growth rate slowed to 3.1% per annum between 2015 and 2019, mainly attributed to falling copper prices and declines in agricultural output and hydro-electric power generation due to insufficient rains. In 2019, economic growth declined significantly, from 4% (2018) to 1.4%. The services sector remained the country’s key driver of growth, growing by 3.5% in 2019, but primary and secondary sectors decreased significantly.
The COVID-19 (coronavirus) pandemic has exacerbated Zambia’s macroeconomic vulnerabilities. The country is Africa’s second largest copper producer; depressed commodity markets have pushed copper prices down by about 14% through May 2020. The supply chain breakdown in major trading partners such as China and South Africa is negatively affecting domestic production and consumption. The Kwacha has depreciated by 30% since the beginning of the year, increasing external debt servicing costs and domestic inflationary pressures. Falling revenues and increased COVID-19-related spending will worsen the 2020 fiscal position, and falling exports and capital inflows will put additional pressure on foreign exchange reserves.
As a result, the economy is projected to contract by about 4.5% in 2020. Mining and services sectors will be impacted by the global commodities demand and price outlook and increased social distancing measures to contain the COVID-19 outbreak. The current account deficit is expected to worsen to 3.4% of GDP, while lower copper export earnings and capital inflows will put pressure on reserves and the Kwacha.
Domestically, increases in the number of COVID-19 cases and related social distancing measures could overwhelm the health system and result in massive business and job losses, especially in the urban informal sector.
Political Context
Zambia is considered a stable country with successful democratic elections held every five years. The current President is Edgar Chagwa Lungu of the Patriotic Front Party who was re-elected in August 2016, in a closely contested presidential race with his main rival, Hakainde Hichilema of the United Party for National Development (UPND).
The next elections will be held in August 2021.
Business opportunities in Zambia
1. World Bank Country Partnership Strategy for Zambia
The World Bank Zambia Country Partnership Framework (CPF) FY19-23 supports the government in achieving its development goals, and is closely aligned with the government’s National Development Plan and Vision 2030.
The CPF is underpinned by the Systematic Country Diagnostic (SCD), conducted in 2017 to augment the World Bank’s understanding of the mechanism needed for poverty reduction in Zambia.
The CPF focus areas are:
- Increase opportunities and jobs for the Rural Poor
- Increase public Services and Social Protection to build a healthy and skilful workforce
- Build Resilient Institutions
Zambia ranks among the countries with highest levels of poverty and inequality globally. More than 58% (2015) of Zambia’s 16.6 million people earn less than the international poverty line of $1.90 per day (compared to 41% across Sub-Saharan Africa) and three quarters of the poor live in rural areas.
Currently, the World Bank portfolio in Zambia has 14 projects with a total commitment of $1.2 billion. Agriculture accounts for 18% of the World Bank portfolio, infrastructure (roads, water and electricity), accounts for about 60% of the Bank’s portfolio, and the average life of a project is 3.8 years. The other sectors are currently as follows: environment (11%), agriculture (10%), finance and private sector development (8%), the public sector (8%), and human development (5%). Grants now account for about 18%of the current total net commitments while credits are at 82%.
2. The International Finance Corporation (IFC)
The IFC has a significant portfolio in Zambia, mostly in agribusiness and financial services as well as manufacturing. The current IFC portfolio in Zambia includes 13 projects, totalling $86.5 million, which is made up of an investment portfolio of $55.9 million and pipeline to the value of $155.8 million. Multilateral Investment Guarantee Agency (MIGA) are also providing support for Zambia’s development.
3. The Multilateral Investment Guarantee Agency
MIGA has about $106 million in commitments in Zambia and guarantees are helping agriculture, livestock and aquaculture development. A MIGA guarantee for Agrivision Africa (formerly Chayton Africa) is helping a large commercial farm in the Copperbelt Province to achieve efficient agricultural practices and expand capacity of a grain processing facility, thereby providing substantial demonstration effect to other farms.
MIGA has also supported the Silverlands Fund through a multi-country Master Reinsurance Contract with the Overseas Private Investment Corporation in Silverlands Ranching Limited which is helping improve and develop a large cattle farm in Zimba, Southern Province.
4. Regional Trade Facilitation
Zambia has committed to implementing policy reforms to enhance regional trade. Zambia is part of the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC) bodies that promote regional trade. Overall, Zambia has performed well in all dimensions of the regional integration index, ranking second in COMESA and fourth in the SADC region.
5. The Bank’s response to COVID-19 in Zambia
Zambia’s location in Southern Africa—surrounded by eight countries—increases the risk of imported diseases from neighboring countries and beyond. This is because Zambia is a major trucking route for goods, both for import and export, as well as a destination and transit point for labor migrants, asylum seekers, illegal migrants, and victims of human trafficking in the region increase the risk of COVID-19 community transmission and spill over into Zambia.
The Bank is providing $25 million to support Zambia’s response to the COVID-19 pandemic. Of this amount, $20 million will come from the crisis response window resources, while $5 million is grant from the Global Financing Facility. The funds will be channelled through the Zambia COVID-19 Emergency Response and Health System Preparedness Project.
Positive results so far
– Human Capital
The Health Services Improvement Project, which aims to improve neonatal, child health, and nutrition, has:
- Contributed to an increase in childbirth deliveries attended to by skilled health providers in project areas from a baseline of 27% in 2013 to 48.5% in March 2018 in project areas.
- Provided full immunization coverage for children below one year old, increasing from a baseline of 80% in 2013 to 89.5% in March 2018 in project areas.
The Girls’ Education and Women’s Empowerment and Livelihoods (GEWEL) Project, implemented by the government with funding from the World Bank, exceeded its targets, reaching 26,000 extremely poor girls and women. The project was expected to end this year, but was approved for $142 million in additional financing to scale-up the program through co-financing grants from the UK Department for International Development (DFID) and the Swedish International Development Association (SIDA), which are jointly funding the program under a Bank-administered multi-donor trust fund.
By 2020, the program had:
- Reached more than 34,000 women have so far been supported with livelihoods package (training, productive grant, savings groups and coaching).
- School fees are currently being covered for more than 16,000 girls from the poorest households through the government’s Social Cash Transfer (SCT). The targeting of these girls and women builds on well-tested, national poverty testing techniques used under the national SCT, as well as participatory community methods.
The Southern Africa Tuberculosis and Health System Support Project is a regional centre for occupational lung diseases established in Zambia’s copper belt to serve the Southern Africa Development Community (SADC) region. The centre is facilitating laboratories compliance with regionally harmonized standard operating procedures for surveillance of Multi-Drug Resistant Tuberculosis (MDR-TB) case notification.
– Energy
The World Bank is supporting the Zambian Government on electricity access initiatives and continues to invest heavily in access across Zambia.
- Between, 2009 and 2015, the Bank financed the connection of approximately 91,000 households – benefiting almost 500,000 people.
- More recently, through the Electricity Access Project, Bank is also supporting subsidizing the cost of connection to the grid for 22,000 low-income households and about 1,000 Small Enterprises in rural areas.
– Climate Resilience
The Strengthening Climate Resilience Project has supported improving canals in the floodplains.
- Thirty-four secondary and tertiary canals have been rehabilitated, providing additional land to more than 2,000 households
- In Mbeta Island of Sioma district, a natural lagoon is helping 66 vulnerable households (57 female-headed) to integrate fish farming, thus diversifying their sources of livelihood and promoting the use of a hitherto untapped resource.
- For sustainability, a National Standard Norms and Procedures Manual for the operation and maintenance of the canals has been developed.
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