As an investment destination for Western economies, Zambia’s emerging economies have many business opportunities, including providing services to the growing middle class in the urban population centre. In general, most industries are dominated by a few large companies, leaving room for new entrants in the market.
In Zambia, there are market opportunities in key areas such as manufacturing, infrastructure, energy, mining, information and communication technology (ICT), tourism, and agriculture.
Manufacturing has the greatest opportunity for growth. This sector contributes more than 8% of GDP and is relatively small compared to other African countries. However, the introduction of the government's multi-agency special economic zone (MFEZ) complements the abundant land, abundant raw materials, cheap labour, and cheap labour, which is another important factor available in this sector. The government has also introduced significant investment incentives. There is zero corporate tax for the first five years from the first year of profit, and zero tax on imports of raw materials, capital goods and machinery for the first five years of operation in the territory.
South African Development Community (SADC) and South East African Common Market (COMESA) compare well with other countries. The burgeoning mining sector adds significant capital to local investments, driving demand for manufacturing locally. The new mining tax law being debated complements the relatively strong banking sector by keeping more money in the country.
From 2009 to 2012, domestic consumption of manufactured products, including fertilizers and building materials, surged with an average annual increase in Zambian pockets of 14% (per GDP per capita). There are no signs that these demands will slow down. In particular, the International Monetary Fund (IMF) predicts that Zambia will grow the ninth fastest in the world between 2011 and 2015.
Building and construction is the largest industrial sector. Zambia has a national housing deficit of 1.5 million housing units. Opportunities in the sector are led by demand in the mining industry, infrastructure development, residential buildings, and offices. There are opportunities in the manufacturing sector, especially in agribusiness and food processing.
Zambia’s mining sector is currently one of the fastest growing industries, with investment from international companies such as Vedanta Resources plc. Opportunities for contractors and service providers include construction of new mines, expansion and modernization of existing mines, and development of infrastructure at mines around the country.
Zambia is the second largest copper producer in Africa and seventh largest in the world. Foreign direct investment (FDI), since privatization of the sector in 1996, totals more than $8 billion. Opportunities exist in exploration, mining services, water management, engineering, construction, and environmental services. Zambia is also home to other precious metals such as gold, silver, gemstones (amethyst, aquamarine, emerald, and tourmaline), coal, and industrial minerals. Immense potential exists for both extraction and value-added industries. The country's potential for mining remains substantial, despite the effects of the global commodity downturn. There is demand for minerals such as gold, copper, cobalt, nickel, and zinc. Current production levels are less than half of what might be possible with new investment.
With an estimated 370 million ounces (10%) of gold reserves and 19 million tons (14%) of copper reserves Zambia can support an estimated 30 000 jobs in the mining sector each year for many years to come.
Demand for electricity has grown at an annual rate of about three percent, and generation development is starting to grow. Investment opportunities exist in electricity generation, especially in the off-grid market, upstream and downstream petroleum, and renewable energies. Demand for renewable energy options has grown significantly. The government is considering policies that will incentivize a willing-buyer/willing-seller model for power purchase agreements (PPA).
However, the financially distressed electricity parastatal ZESCO remains the main off taker of large PPAs, and ZESCO has run up substantial arrears to existing PPAs. This will likely limit large-scale development in the short term. The mining sector is also a key driver of the Zambian economy and employment. Zambia has several large-scale hydropower opportunities with significant international interest in its hydropower potential.
The government has embarked on reforms in and liberalization of the ICT sector. Opportunities include provision of retail fibre optic, mobile, internet service providers, software development and sales, and ICT business parks. The Zambian information communications technology (ICT) sector has seen rapid growth over recent years. Approximately 60% of businesses operating in Zambia have websites that were created by local web designers or programmers.
Zambia shares the world-famous Victoria Falls with Zimbabwe; one of the Seven Natural Wonders of the World and the sector makes up seven percent of GDP. Zambia boasts 20 national parks and 34 game management areas. There are opportunities to build hotels to address Zambia’s general lack of room capacity in tourism and mining regions, in addition to hospitality services, infrastructure development, and tourism site operations.
Zambia's location makes it a major trade and transport hub in Southern Africa. The country’s economic infrastructure is modern, including several ports: the Mpulungu port in Katete District on Lake Tanganyika, Chilanga Port on the border with Angola, and Livingstone Port at Victoria Falls. The country has eight airports and two international airlines. Zambia has foreign trade zones (FTZ) in the capital, Lusaka; Ndola, the second largest city; and Ndola-Kitwe Road (NKR) corridor near the Copperbelt mines.
The agricultural sector provides maximum opportunities for impact and development The sector makes about 21% of GDP and employs an estimated 67% of the nation's workforce (most of which are small farms). Arable land makes up 47% of the country, but only 15% is currently cultivated. As a member of SADC and COMESA, Zambia has easy access to a growing consumer market. It is also strategically located close to other fast-growing countries such as Tanzania, Angola and Mozambique.
Eliminating corn subsidies adds to the complexity of crop production. Requires commercial investment in cash and production as a major crop for the economy. The government has slowly moved to liberalize production, centred on major crops such as rice, millet and cassava. Policy discussions and increasing production inequality are creating enormous opportunities over the next five years.
For example, the country has zero corporate tax for the first five years on first-year profits earned in the agricultural sector. Tobacco, soybean, tea, and coffee agricultural processing is a high cash value state, and the processed and packaged final product meets the financial resources needed to obtain in developed markets more than ten times the price of the raw product sold locally. The water industry also has great potential, with 15 million hectares of water and rapidly growing domestic consumption.
Sources: Africa.com, Trade.Gov, World Bank
