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Zambia Business Forecast Executive Summary
(In The Zambia Business Forecast Report, by the Business Monitor International (BMI))

(Please credit all references when using this paper in your research, etc)

Investment The Key Issue

The effects of massive foreign investment have spread throughout Zambia. On the economic front, investment should continue to spur economic growth, especially in the construction and mining sectors. Furthermore, massive capital inflows are likely to push up the exchange rate but also give rise to a growing dependence on China, especially for trade.

On the political front there is a more mixed outlook. The two governments have solidified a beneficial partnership, but at the same time the perception of Chinese exploitation of Zambian labour has fostered an anti-China backlash among the general populace, which shows little sign of receding. This is despite China's efforts to aid the development of the country via infrastructure investment. This investment should help Zambia's business environment, with major pushes from both China and Zambia's governments to overhaul the faltering power and transportation networks, although work in other areas is also needed.


In February 2007, China and Zambia jointly announced the creation of a special economic zone in the Zambian copper belt, marking a commitment by the two countries to work closely for many years to come. However, a popular growing perception that China is exploiting Zambia by taking its resources while stifling the value-added sector, paying low wages, and ignoring safety laws has given rise to a backlash against the Asian investor, which shows no signs of abating in the years to come. Nonetheless, we see little scope for major policy change, as national elections are not scheduled until 2011, and the current government believes Chinese investment is in the best long-term interest of the country.

We have a positive macroeconomic outlook for Zambia on the back of improved macroeconomic policy, high commodity prices and foreign investment, which should keep real GDP growth strong, boost government revenue and expenditure, and help strengthen the currency. Zambia has worked to diversify its economy away from copper with some success, such that the country should be able to achieve growth above 4%, even amid a sustained fall in copper prices, which is not our core scenario. We are more cautious about the equity market's growth prospects, despite its strong performance in 2007, because the index remains small and potentially overbought.

The business environment is set to see many changes in the next year. The government seems prepared to raise mining taxes in April as promised, despite the objections of mining firms. The Citizens' Empowerment Act could see changes in the country's regulatory framework in the years ahead, with a shift towards preferential treatment of domestic firms and citizens. Finally, over the long run, major investments in the country's physical infrastructure continue to move ahead, potentially easing the transportation and power problems over the next several years.



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[Zambia Socio-Economic Snapshot] [Dead Aid, Dambisa Moyo] [Zambia Economy Case Study] [Leaders' Economic Burden] [Zambia Investment Climate] [Economic Growth Sectors] [Zambia Business Forecast] [Zambia Marketing Management] [Zambia Business Books (& Economics)] [Back to Zambia Homepages]


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