Zambia Continues Posting Positive Inflows

By Maimbolwa Mulikelela
 
OVER the last two years, Zambia’s economy has undergone significant transformation in terms of business and investment in all major productive sectors including mining, agriculture, manufacturing, tourism and energy recording impressive growth.
In line with the current economic reforms Zambia has continued to encourage private investment in all the productive sectors that are aimed at accelerating economic growth.
In order to attract more Foreign Direct Investments (FDI), the Government introduced economic policy measures, liberalised the market and relaxed investment conditions that strengthen the sectors in the light of greater competitiveness and integration of the world economy.
These initiatives have contributed towards providing a more conducive investment environment for both foreign and domestic investors including Micro Small and Medium Enterprises (MSMEs). Sectors such as mining and manufacturing have continued to contribute to output growth, exports and employment creation despite the recent global economic recession.
During the period under review, Zambia’s economy emerged as one of the best performers in what was regarded as one of the worst economic recessions. This achievement was as a result of Government’s prudent management of the economic resources and attractive investment packages.
The performance of the global FDI inflows diminished at the height of the global economic and financial crisis and this had raised concerns about the inclination and capability of transnational corporation to continue investing and expanding abroad.
During this period, FDI inflows to Africa declined from a peak of US$72 billion in 2008 to $59 billion in 2009. However, it is interesting to observe that in the latter half of 2009, recovery in global FDI inflows gathered some momentum which picked up in 2010.
According to the United Nations Conference on Trade and Development (UNCTAD), it is projected that the global FDI inflows are expected to increase to over US$1.2 trillion in 2010 and further rise to between $1.3 and $1.5 trillion in 2011, then head towards $1.6 to $ 2 trillion by 2012.
Locally, the investment inflows increased from $72 million in 2001 to register $1.3 billion in 2007. Last year the country recorded in excess of $1.8 billion worth of investments with the manufacturing sector hitting high with investments amounting to more than $580 million.
Commenting on this year’s performance, Commerce, Trade and Industry Minister Felix Mutati said as a result of overwhelming response from the investors, Zambia has posted $3.4 billion worth of investment inflows between January and October this year.
This resulted in the creation of 25,704 jobs in sectors such as agriculture, construction, education, energy, health, Information Communication Technology (ICT), manufacturing, mining, real estate, service and tourism.
Mr Mutati noted that manufacturing recorded $1.2 billion worth of investment which has translated into 13,786 jobs created during the same period.
 “We saw investment inflows to the value of $950 million with more than 3,459 jobs being generated in the mining industry followed by the energy sector which attracted investment totaling $565 million and 199 employment opportunities created,” he said.
Other sectors such as tourism registered $118 million, real estate $138 million, agriculture $68 million and construction $53 million respectively.
Mr Mutati said the Government also attracted investment worth $353 million from local investors between January and October representing 2,424 jobs created.
Those in the education, manufacturing, real eastes, service and tourism sectors were among the local investors that invested in the economy.
“This Government of President Rupiah Bwezani Banda will continue to provide a favourable investment environment by continuing to reduce the cost of doing business to attract additional domestic and foreign investment for wealth and job creation,” Mr Mutati said.
In order to sustain growth and development achieved over the past decade, Government is expected to launch the Sixth National Development Plan (SNDP) whose main thrust will be to facilitate the up-scaling of the manufacturing sector towards higher value addition and upgrade capacity in provision of related services.
Emphasis will be placed on transforming industrial business and complementary services particularly MSMEs into stronger value creating entities.
Mr Mutati said strategic focus of the SNDP would be to strengthen and widen the national manufacturing base with emphasis on backward and forward linkages given the country’s wide resource base.
“This will require intensifying the development of the resource based industries, with the aim to optimise and add value to the country’s natural resources,” he said.
Due to Zambia’s favourable investment climate a number of manufacturing firms have expanded their production capacities with some establishing base.
For example, Zambia Sugar PLC injected $185 million to increase its production by almost 100 per cent. The additional investment created additional employment of 1,742 jobs while Zamanita Limited also invested a further $22 million to increase the production of edible oils and creating employment opportunities of up to 280 jobs.
Other projects in the pipe line worth mentioning include the $400 million cement plant to be built by Dangote industries of Zambia.
The establishment of the Multi Facility Economic Zones and Industrial Parks and Gemstone exchange industrial park as well as the construction of shopping malls in Lusaka and Copperbelt respectively has also come up.
In addition, the National Pension’s Scheme Authority (NAPSA) has also invested huge sums of money in developing the Levy Junction mall which is projected to boost investment inflows.
As for the financial intermediaries, economic growth has an important impact on the banking sector as this growth means the banks will have more flows to intermediate.
According to Bankers Association of Zambia (BAZ) chairperson Saviour Chibiya, “when the economy is growing it means incomes are raising which results in companies and individuals being able to keep their money in banks resulting in higher deposits.”
Commercial Banks’ deposits from the public have increased by 20 per cent this year to K9 trillion and the challenge for the banks is to efficiently lend this money to productive areas of the economy so as to stimulate more economic growth and job creation.
 “However, we caution that increased lending should be done using prudent risk management to ensure that the levels of non-performing loans reduce over time as the incidence of these delinquent loans has remained high at 15 per cent which is over K1 trillion,” Mr Chibiya observed.
Implementation of the Government plans to tackle the structural impediments which have resulted in a large informal sector is also critical as growth of the formal sector will ensure that more transactions are carried out using the banking sector.
Higher volumes in the banking system will not only result in a growth in savings and increased capacity for banks to lend, but the increase in transactions through the banks will build economies of scale that would  assist in driving down other bank charges for the benefit of the customers.
The International Monetary Fund (IMF) noted major improvements in the way Government has handled the economic policies so far in 2010. The fiscal performance in 2010 had been broadly in line with expectations, though there has been the need to finance the purchase of the maize surplus.
The Bank of Zambia (BOZ) has managed the monetary policy well with a view to reducing inflation, while at the same time maintaining conditions to facilitate economic growth.
As a result, of the economic growth posted, international reserves have been strengthened and now stand at $1.9 billion. Interestingly, the informal trade has also registered positive growth as evidenced by the increased businesses being established in some townships.
A number of businesses have mushroomed such as carpentry, block making, stone crushers, salons and car wash dealers, among others.
A block maker, Rueben Kabwe of Twikatane area was impressed with the level of development being undertaken especially in real estates.
He said the market for his commodities was booming saying a lot of people were building hence they needed the blocks to construct their structures.
“As you know inadequate infrastructure has long been seen as an impediment to growth in productive sectors but for us, we see this as an opportunity to grow our informal business. I have since employed more than 10 people who make blocks,” Mr Kabwe said.
The Government through the Private Sector Development Reform Programme is streamlining a number of regulations that are intended to make the business environment more efficient and facilitate enterprise development as well as reduce the cost of doing business.
As Mr Kabwe said, it is important that the Government under the Ministry of Local Government and Housing was focusing on scrapping off some of the licenses that hinder growth of most businesses in the informal sector.
The ministry of Local Government and Housing was targeting at removing stone crushers, block makers, saloon licences among others in an effort to reform the licences.
Mr Kabwe, however, said business registration procedures should be done in local languages so that more businesses could be registered while issues of access to credit must also be dealt with if more growth is to be realised.
It is clear that the transformation of the industrial sector and sustaining its competitiveness remains among the major factors in determining the rate of economic activity in Zambia.
Looking ahead, Government should focus on a broader spectrum of reforms that will help enhance the prosperity of Zambians by encouraging more productive enterprises, industries and more jobs.