Population 13.921 million
GDP 20.682 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
7.6 |
6.6 |
7.3 |
8 |
|
Inflation (yearly average) (%)
|
8.5 |
8.7 |
7 |
6.7 |
|
Budget balance (% GDP)*
|
-4.9 |
-4.5 |
-7.5 |
-5.6 |
|
Current account balance (% GDP)
|
5.6 |
0.4 |
-2.4 |
-1.8 |
|
Public debt (% GDP)
|
26.6 |
27.7 |
29.5 |
28.4 |
| (e) Estimate (f) Forecast * High risk |
||||
STRENGTHS
- Mineral wealth (copper: No 1 country in Africa, 7th in the world, cobalt, uranium, gold and diamonds)
- Major hydroelectric potential
- Tourist attractions
- Democratic system
- Central position in southern Africa
WEAKNESSES
- Dependence on copper
- Isolation and dependence on neighbouring countries’ communication channels
- Limited electricity production and inadequate transport networks
- High youth unemployment in the urban centres
- Huge inequalities, deficiencies in health, education and administration
Risk assessment
Continued strong growth
Growth, steady in 2012, will remain vigorous in 2013. The big minimum wage increase in many sectors (67% on average) in mid-2012 will continue to impact positively on consumption. Mining, on which a major part of Zambia’s economy depends, will grow due to increased capacity at existing mines (Konkola) and the opening of new mines. Construction will gain from the development of mining installations, road and house building and the realisation of major projects (construction of a copper foundry of the Batoka hydro-electric power station). The services sector (telecommunications, trade and financial services) will still contribute nearly half of GDP.
Inflation, fuelled by high food and energy prices (therefore of petrol, increasing transport costs in this landlocked country) will slow in 2013 and will return to a level below the central bank’s target (7%).
Zambia has begun a process of de-dollarisation with the prohibition, since May 2012, of the use of foreign currency for commercial operations within the country, offenders being liable to punishment (fines or even imprisonment). Like Angola, the Congo, and Ghana for example, the country is trying, in this way, to improve the effectiveness of its monetary policy.
An accommodating economic policy
Overall spending has been higher that the estimated budget in 2012 (maize purchases via the Food Reserve Agency at fixed prices to guarantee adequate incomes, pensions and wages to the producers) and the revenues have improved sufficiently to prevent a deterioration of the fiscal balance. The government will maintain an expansionary policy in 2013, spending (26% of GDP) needing to be more targeted towards infrastructures health and education also still being priorities. The expected growth of revenues from the mining sector, broadening of the tax base (reduction of exemptions) and improved recovery are expected to result in a reduction of the announced deficit. The first sovereign bond issue for a sum of $750mn intended for infrastructure funding has been a success. Public debt remains low after the debt relief from which the country benefitted in 2006.
Slight current deficit maintained by high imports
The current account deficit, which appeared in 2012, is expected to be confirmed in 2013 without worsening. Exports, dominated by copper (over 80% of the total) will increase mainly due to the measures taken to improve mining companies’ accounting of the volumes exported. But imports of capital goods for the development of mining and manufacturing, as well as of oil products, will remain high. Purchases of services and the repatriation of dividends by foreign companies will contribute to the maintenance of a current account deficit, which will be funded by foreign investments and borrowing. The share of foreign aid has fallen as a result of Zambia having attained middle-income country status and now represents less than 2% of GDP. The external financial situation will remain no less satisfactory for this.
Successful political changeover but slow progress on governance
The October 2011 elections brought the new president, Michael Sata and the Patriotic Front (PF) to power replacing the Movement for Multiparty Democracy (MDD). Signs of a concentration of powers by the President, the appearance of disagreements within the government and tensions between the executive and the judiciary could worsen the social and political climate. However, the country’s stability is not expected to be threatened until the next elections (2016).
The new president seems to be adopting a pragmatic approach and to be more accommodating towards foreign investors (notably Chinese), an attitude one would not have predicted from his electoral campaign. Relations between China, the main investor in the country, and the PF are, however, more antagonistic than they were with the MDD. Tensions over labour conditions in the mines managed by Chinese companies are regularly the subject of complaints and sometimes result in riots, as was the case in the Collum coal mine in summer 2012.
Measures aimed at preventing and condemning corrupt practices are slow to produce results. Moreover, there are still deficiencies in the quality of regulation and property rights.
