Zambia: US Foreign Direct Investment (FDI) in Zambia increases

By Nawa Mutumweno – The United States’ foreign direct investment (FDI) flows into Zambia over the past ten years totalled $3.1 billion.

The investment configurations covers mining, agriculture and services with over 4 000 jobs generated for the locals.

And speaking at the AGOA stakeholders’ preparatory meeting in Lusaka recently, Zambia Development Agency (ZDA) export and marketing promotion director Glyne Michelo said Zambia’s exports to the US under AGOA amounted to $116 million since its inception in 2000.

Exports to the US have grown from $7.9 million in 2001 to over $25 million in 2008, declining to $5.3 million on the wake of the global economic crunch.

Imports from the US during the period under review amounted to $386 million.

“From the foregoing statistics and scenario, it is clear that there is a growing trade imbalance between our two countries. Therefore, hosting the AGOA forum presents an opportunity for Zambia to correct these imbalances in our trade relations with the US,” he pointed out.

AGOA is a legislation that provides eligible sub-Saharan countries with duty free access to the US market for any country which the US does not have a free trade agreement with.

About 7 000 products from 38 AGOA eligible countries including Zambia can enter the US duty free.

Zambia’s main exports to the US include base metals, coffee, tea, wood and wood articles, live fish and raw hides and animal skins/leather. Other products exported to the lucrative market encompass precious stones, paprika and spices, seeds, handicrafts, apparel and textiles, burley tobacco, particle boards, fruits and vegetables.

Although most products are eligible to enter the US market under AGOA, Africa’s exports to the US under this facility have mainly been textiles and garments, agricultural products, oil and handicrafts.

While market opportunities are important prerequisites for ensuring growth, the potential cannot be unleashed in the absence of investment.

“Despite improved market access, Zambia’s exports to the US have remained minimal compared to other countries. Zambia has great potential to exploit one of the world’s biggest and most lucrative markets,” Mr. Michelo said.

In penetrating the US market, Zambia faces challenges such as the long distance which exposes exporting countries to high transaction costs, especially that the country is landlocked.

Inadequate transport infrastructure, high freight costs, limited access to capital and unreliable and high cost of energy are some of the challenges affecting exporters.

Additionally, the US market has lengthy pest risk assessments that tend to frustrate exporters of fresh agro produce.