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Closing Zambia's Investment Gap for Sustainable Development

This article provides information on the Zambian economy, including recent economic developments, external sector improvements, the banking sector environment, capital market developments, and infrastructure needs. It highlights the potential for investment in various sectors and the incentives in place for establishing profitable businesses in Zambia.

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Closing Zambia's Investment Gap for Sustainable Development

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  1. Bank of Zambia THE EUROMONEY ZAMBIA INVESTMENT CONFERENCE “NARROWING ZAMBIA’S INVESTMENT GAP FOR SUSTAINABLE DEVELOPMENT” June 10, 2008 Taj Pamodzi Hotel – Lusaka Caleb M. Fundanga Governor - Bank of Zambia 1

  2. Information on Zambia Bank of Zambia ZAMBIA Area: 752,614 sq km Population Estimate: 12.1 mil 2007 Independence: 1964 GDP: US $11,363.4 mil: 2007 GDP per Capita: US $934.5 DR Congo Angola Tanzania ZAMBIA Malawi Mozambique Namibia Zimbabwe Botswana 2

  3. Information on Zambia Bank of Zambia • Economy performing well with positive growth and stable macroeconomic environment. • Reform programmes focussing on restructuring the economy to shift production to private sector • Abundant natural resources and human capital • Centrally located with access to the SADC and COMESA markets. • Suitable climate, peace and a stable political environment (multi-party political system). • Various incentives and property rights protection in place under the ZDA Act for establishment of a profitable business investment. 3

  4. Overview of the Zambian Economy Bank of Zambia Recent Economic Developments • Lower Inflation and interest rates plus stable exchange rate • Real Gross Domestic Product (GDP) averaged 5.1% per annum during 2001 - 2007. • Per Capita GDP rose to US$934.5 in 2007 from US$360.5 in 2001. • Stable financial sector with commercial banks average lending rates declined to 24.4% in 2007 from 54.6% in 2001 • Single digit inflation achieved: end-Dec 2007 8.9% from 18.7 in 2001 (see Table 1). 4

  5. Overview of the Zambian Economy (cont’d) Bank of Zambia Table 1: Selected Macroeconomic Indicators: 2001-2007 Source: Bank of Zambia *End - period BoZ mid-rate 5

  6. Overview of the Zambian Economy (cont’d) Bank of Zambia • External Sector Developments • Remarkable improvement leading to build up of international reserves to 3.6 months import cover in 2007 from 0.9 months in 2001 • Over the last couple of years, the exchange rate of the Kwacha against major currencies has been relatively stable. • Increased mining output and high copper prices as well as growth in the non-traditional exports sector have had a positive impact. 6

  7. Overview of the Zambian Economy (cont’d) Bank of Zambia • External Sector Developments (cont’d) • Trade balance rose to a surplus of US$983.1 mil in 2007 from a deficit of US$342.2 mil in 2001. • Contributing factor was high receipts from increased copper exports • In addition, non-traditional export earnings rose by 260% to US $920.7 mil in 2007 from US$255.7 mil in 2000. • Enhanced HIPC Initiative completion point attained in April 2005. • Debt cancellation resulted in Zambia’s external debt stock decreasing to US $2.1 billion at end 2007 from US $7.3 billion as at end-2001. 7

  8. Overview of the Zambian Economy (cont’d) Bank of Zambia Table 2: Trade Statistics 8

  9. Banking Sector Environment Bank of Zambia Financial System Stability • Overall financial condition of the banking sector has been satisfactory with banks maintaining adequate regulatory capital • Government through the Bank of Zambia continues to modernise the banking environment by endorsing various legislation that promote a safe, sound and efficient financial system. • There is increasing interest from outside banks with one new entrant licensed in 2008 bring the number of players in the banking sector to 14 banks. 9

  10. Capital Market Developments Bank of Zambia Notable developments in capital markets to date include: • LuSE market capitalisation increased by 45% in 2007 from 13.9% in 2006. • The LuSE all shares index rose by 92.9% in 2007 compared to 47.7% in 2006. • Government introduced long dated bonds of 7, 10, 15 years to maturity to help deepen financial markets. • Foreign investments in Government securities rose to K830.5 billion in 2007 from K539.8 billion at end 2005 10

  11. Infrastructure Development Bank of Zambia • In order to consolidate recent economic gains, infrastructure gap needs to be addressed • Weak infrastructure reduce ability to take advantage of Zambia’s good location • Poor infrastructure and inadequate access result in increased cost of doing business

  12. Infrastructure developments Transport and Communication: Government rehabilitating road network covering 35,168 kms. Investment opportunities in road rehabilitation, maintenance and consultancy Investment in highways connecting industrial towns to major seaports is vital to economic development Other Infrastructure needs include; rehabilitation of Railway system, airports to make Zambia a hub of the sub region Public Private Partnerships for effective Information and Communications Technology development are key Bank of Zambia 12

  13. Infrastructure developments Bank of Zambia Agriculture: • Zambia is endowed with: • Large arable, fertile, virgin land • Good weather conditions • Large water resource (40% of SADC fresh water resources) • Only 15% of arable land is under cultivation • Only 40,000 hectares are irrigated from a potential 500,000 hectares. • Recent surge in food prices presents an opportunity for Zambia to become the food basket of the region. • Infrastructure needs include; feeder roads, communication, power, and irrigation facilities 13

  14. Infrastructure Development Bank of Zambia Energy: • Vast water resources and coal reserves ideal for the generation of hydro and thermal electric power; • Huge demand for electricity in the region and locally • Huge potential to develop new power generation plants across the country • Opportunities in alternative sources of power such as gas energy for domestic cookers • Good climatic conditions suitable for solar power generation 14

  15. Infrastructure Development Bank of Zambia Mining • Abundant known mineral deposits. • Has about 6% of the world’s known copper reserves. • Other opportunities include exploitation of gold, zinc, coal, nickel and gemstones (e.g. emeralds, aquamarine, topaz, opal, and amethyst). • Diamond and Uranium reserves have also been identified. • Mines and Minerals Act provide exemption from import duty and VAT on all mining machinery and equipment 15

  16. Infrastructure Development Bank of Zambia Tourism: • More room for investors in the hotel industry • Untapped opportunities in game ranching, transport service, organised tours, outdoor sports facilities • 19 national parks, 34 game management areas totalling 65,000 km2 all not fully exploited 16

  17. Infrastructure Development Construction and Real Estate: Expansion of economy requires extensive construction Housing schemes introduced in the recent past Large deficit of housing still exist providing an opportunity for further investment in this sector Bank of Zambia 17

  18. Conclusion • Government continues to pursue market and structural reforms in partnerships with private sector • Enormous business Opportunities still lie unexploited in all sectors of the economy • Potential for infrastructure development through public private partnerships arrangements • Economic growth and macroeconomic stability expected to contribute to reducing the cost of doing business, employment creation and poverty reduction

  19. END Bank of Zambia • For more information on the Zambian economy, visit the Bank of Zambia Website on: www.boz.zm • Thank You 19

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