Zambia: Investment Boom in Zambia

By Nawa Mutumweno – An enabling policy environment   and increased private sector investment underpinned Zambia’s incredible resilience to the recent global financial crisis.

It is a stark reality that the country emerged as one of the best performers in what was one of the worst recessions in recent times.

Against an initial projection of 4.4 percent, the Zambian economy grew by 6.4 percent in 2009, the highest recorded during the last decade. On top of this, inflation slumped to single digits, while international reserves grew to record levels of over five months of import cover.

Definitely as the five-year Fifth National Development Plan (FNDP) comes to a close this year,  it is evident that  the country has achieved some significant success worth writing home about,  what with increased growth, lowered inflation, impressive fiscal discipline and strengthened external position.

It is such kind of track record that Zambia continues to attract many a local and foreign investor as the days glide by.

According to the Zambia Development Agency (ZDA0 director general Andrew Chipwende, approved projects  currently stood at about $3 billion.

Positive investment scenarios are now opening up in Zambia as a result of economic stability, according to IMARA (the Pan African financial services group) Real GDP growth projected at 6.6 percent in 2010, boosted by a record maize harvest (1.8 million tonnes), a rebound in tourism and a continued increase in copper output and construction are some of the positive indicators.

The International Finance Corporation (IFC) of the World Bank Group has pledged to support Zambia’s long-term growth and diversification of the economy from mining. The World Bank has committed $115 million to be approved by its board in 2011 to strengthen the agricultural sector through irrigation. Specific sites where the irrigation sites will be developed are being identified in conjunction with the Ministry of Agriculture and Cooperatives.

Speaking at a press briefing in Lusaka in November, IFC vice president and chief executive officer Lars Thunnell  recognised Zambia for being one of the top ten most improved economies for the ease of doing business this year. IFC has been working closely with Zambia’s public and private sector, supporting their efforts to increase the ease of doing business, strengthening the private sector and diversifying the economy beyond mining.

The IFC has committed a total of $65.7 million to Zambia to increase its investment and advisory programmes with a focus on mining, agribusiness, tourism, finance, energy, among other key sectors.

The International Development Association of the World Bank has approved $15 million to go towards investment in road infrastructure and institutional reforms. In terms of roads, IDA has since 1998 supported the government’s Road Sector Investment Programme (ROADSIP), which has seen paved roads in good and fair condition rise from 27% to 80%. It has also approved an additional credit facility of $20 million for the Increased Access to Electricity Services (IAES) project.

Following reforms, government in 2009 registered 12 000 businesses from below 6 000 the previous year that graduated from informal to formalized businesses.

Government has since identified 12 areas that are poised to enhance further reforms such as dealing with construction permits, trade across borders, reduce minimum documentation and amendment to the Companies Act.  Programmes that support private sector growth as the engine to drive the economy to high levels of progress have been introduced.

To continuously attract investment, Government has put in place stringent measures that are user-friendly, for instance limiting the number of licences required in some sectors (e.g. tourism) before a business  could be up and running. The focus is now on the promotion of an enabling environment through better infrastructure and reforms aimed at reducing the cost of doing business so that investors could dwell on business operations as opposed to acquisition of licences.

The once-cinderella province, North Western, has in the recent past attracted enormous investments in the mining sector with First Quantum Minerals investing in Kansanshi mine and Equinox flexing their financial muscle in Lumwana mine.  Zhonghui  Mining Group of China plans to invest over $3 billion in mining activities on the Copperbelt and North Western Province. There are various other mining projects on the drawing board which are awaiting environmental impact assessment.

Konkola Copper Mines (KCM) has invested over $1 billion in various projects that is scheduled to increase its output of processed copper to 500 000 tonnes next year. These include the state of the art 250 000 tonnes smelter, a new concentrator and the Konkola Deep Mining Project (KDMP).

KCM has also announced plans to invest $170 million to build a copper plant with a capacity to process 12 million tonnes of refractory ore per annum. The new plant is to be located near its Nchanga mine in Chingola.

Brazilian mining giant, Vale Mining Limited is to spend more than $1 billion over the next five years to develop and construct the Konkola North copper mine on the Copperbelt  in a joint venture with South Africa-based Rainbow Minerals.

Another investment on the mining horizon is between $600 million to $800 million to be spent by First Quantum Minerals (FQM) as capital cost to develop its Sentinel deposit in North Western Zambia.

Some of the major investments include Chayton Capital, an equity fund institution from the United Kingdom, which is setting up a $50 million agribusiness and related infrastructure venture. Investing under the company name Agrivision Limited, Chayton Capital expects to develop up to 10 000 hectares of annual production cropped twice a year which equates to about 12 000 tonnes of crops. It intends to employ about 1 639 Zambians.

The operation will produce 60 000 tonnes of wheat and 15 000 tonnes of soya beans. It would cover five primary production farms of 18 000 hectares, silo and elevator business, milling operation, fertilizer blending, among others.

Varun Beverages has ploughed $40 million in the establishment of a Pepsi bottling plant that would also bring online fruit juices from home-grown raw materials.

Central Province whose economic fortunes had floundered in recent years with the collapse of mining, textile and rail firms is set to prosper with the $23 million  Maosheng Leaching and Mining Processing Plant in Mumbwa and the  $16  million Xing  Xing Mineral Resources Limited that is currently   exploring  for cobalt and copper in Mumbwa and Chibombo  districts.

A $11 million manufacturing plant – Steel Rolling and Mill Balls – is also being set up in Kitwe on the Copperbelt..

One of the projects lined up in Eastern Province is the $6 million Lundazi Tobacco Project and the setting up of two ginneries in the provincial capital, Chipata, to support the growth of the cotton industry.

Not to be left out Southern Province has the $420 million Kariba North Bank Extension Project and the proposed development of a 250 mega watts thermal power station at Maamba Collieries. The Zambia Sugar Expansion Project was completed recently. Western Province will soon have a beef processing factory.

The country’s fair investment climate was ushered in in 1991 through the transition from a one party state to multiparty democracy. Since then, Zambia has endeavoured to promote a liberal market economy through the privatization of state owned enterprises (SOEs), commercialization  and the removal of unnecessary controls.

Trade liberalization has been a pivotal component in Zambia’s macroeconomic dispensation, resulting in an open, competitive market economy. Barriers to trade have been substantially reduced, making the country one of the most rewarding destinations for investment on the continent.

To cap it all, the establishment of the Zambia Development Agency (ZDA) has facilitated a one-stop shop that has addressed the hitherto high cost of doing business in the country and simplified the processes of various business formalities, including licensing.