Our comprehensive assessment of Zambia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Zambia, as well as the latest industry developments that could impact Zambia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Zambia before your competitors.

Country Risk

Zambia Country Risk

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Core Views:

  • Zambian ruling party the Patriotic Front (PF) is set for a fractious succession process in the lead-up to an election that will be held within 90 days of President Michael Sata's death on October 28.

  • Domestic demand will be the engine of the Zambian economy in 2015 as low copper prices and policy uncertainty weigh on the external sector. The presidential bi-election in January 2015 will be a key determinant of policy until the next full election in 2016 and this presents risks - predominantly to the downside - for our 2015 r eal GDP growth forecast of 7.0% .

  • The kwacha will trade in a largely sideways fashion at around ZMW6.400/USD over both short and long term as declining oil prices offset the impact that lower copper prices will have on the external...

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Zambia Operational Risk Coverage (9)

Zambia Operational Risk

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BMI View:  Zambia is one of the more attractive locations for investment in Sub-Saharan Africa (SSA).The country has traditionally been one of the most peaceful and secure in the region, and the economically vital mining industry continues to be a focus for foreign direct investment (FDI) inflows. The manufacturing and tourism sectors are providing some economic diversification, and will attract increasing attention from foreign investors. In addition, a growing consumer market will help drive import demand. BMI notes that there remain significant risks to businesses in Zambia, particularly in the form of supply chain disruption and a labour force which is both poorly skilled and highly regulated. Nevertheless, these issues should not detract from the variety of opportunities for investment which are available.

Zambia's overall score in the...

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Zambia Crime & Security

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By regional standards, Zambia carries a low risk of interstate conflict and a low risk of terrorism. In a region that is beset by security challenges, this puts Zambia among the top places to do business given the low threat level facing international companies and foreign workers. There is also a low frequency of violent crime, however poverty drives crimes against the person and crimes against property, which necessitates caution among foreign nationals operating in the country. Zambia therefore performs well overall in the Sub-Saharan Africa (SSA) region in the BMI Crime and Security Risks Index, with a score of 56.2 out of 100 placing the country seventh out of 44 states. Nevertheless, we highlight that crime remains an issue, particularly in urban areas, and corruption seriously hinders the response of the security services.

Zambia's strategic international environment is among the most secure in the SSA region, thanks to increasing...

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Zambia Labour Market

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The workforce suffers from severe restrictions due to the lack of skills and formal work experience among the population, and the onerous burden of labour regulations. This limits the quality and options available for businesses looking to recruit Zambian labour, and imposes significant extra costs on employers. On the positive side, it is reasonably easy to bring in more highly skilled workers from abroad, which should reduce the need to recruit low-skilled Zambian labour. What's more, although we consider the quality and availability of education in Zambia to be poor by global standards, the country performs more moderately on a regional scale. Overall, Zambia scores lowly in the BMI Labour Market Risks Index, with 34.2 out of 100.

The lack of basic skills in the Zambian workforce is a primary labour market risk for investors in Zambia. Primary enrolment rates are rising, but dropout rates are high, which means the...

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Zambia Logistics

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BMI View:   As a landlocked state, Zambia requires an efficient supply chain to ensure doing business in the country is cost effective. This is not currently the case however, as shipping times and costs are very high, which erodes business margins and cuts profitability. Key threats include insufficient rail capacity, rising road congestion, high energy costs and poor availability. That said, the Zambian government is making progres s on infrastructure development, and long terms prospects should yield improvements.

The Zambian economy is closely tied to copper mining, which drives economic performance and shapes development of the international supply chain. Copper production underpins the value and growth rate of international exports and incentivises development of the transport network, which have a key bearing on logistics risk in Zambia. However, falling copper...

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Zambia Trade & Investment

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Rising inflows of foreign direct investment (FDI) are testament to the attractiveness of Zambia's business environment. Government policy is largely geared toward foreign participation, with low levels of trade protection, low tax rates, reduced levels of red tape, and equal rights for foreign and domestic investors. This degree of openness also has drawbacks, and capital outflows are undermining the country's balance of payments. Meanwhile, there is pressure on government finances and rising national debt, which places greater emphasis on foreign investment. Overall, Zambia performs well in the BMI Trade and Investment Market Risks Index, with a score of 49.4 out of 100 ranking the country eighth out of 44 states in Sub-Saharan Africa (SSA).

The absence of tariff and non-trade tariff barrier, a favourable tax regime, and low levels of government red tape, make Zambia an attractive place to invest and raise it...

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Zambia Industry Coverage (12)

Agribusiness

Zambia Agribusiness

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BMI View:   We expect food security in South West Africa to improve over the short term , as we expect higher corn production from Zambia in 2014/15 . Over the medium term, we see downside risks to corn production in the region owing to new reforms introduced in Zambia that aim to reduce farm subsidies. Even with reduced production incentives, we expect Zambia to easily remain the region's largest corn producer and exporter, while other countries in the region will struggle to maintain production surpluses. We see potential in the Angolan sugar sector due to rece nt investments coming on - stream   and...

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Autos

Zambia Autos

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Our sales forecasts in volume terms have been given a significant increase, based on a change to historic data showing that sales for 2012 and 2013 came in over 5,000 units. While we still expect strong growth over the five-year forecast period, the change in historical base now means that by the end of our forecast period in 2018, we expect sales of over 9,000 units, which is a big upgrade to our previous outlook. We believe the new car segment in Zambia, although still small, will be supported by growth in financing. This will enable new brands to access the market and widen the competitive landscape.

We expect private consumption to be a key driver of growth in 2014 and 2015, forecasting 6.5% growth in both years. This will be boosted by good harvests in the agricultural sector and with this being the case, we could see some of this income being re-invested in new commercial vehicles. In the private sector, another increase to wages in...

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Commercial Banking

Zambia Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Food & Drink

Zambia Food & Drink

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BMI View:   We maintain an optimistic outlook for the country's food and drink industry over our forecast period. With expectations for strong economic growth, a favourable demographic profile and a gradually emerging middle class, Zambia remains one of the most attractive investment destinations in the region. That said, short-term challenges remain, including continued pressures on an already ailing Zambian kwacha and the prospect of industrial unrest within the public sector workforce. With the World Bank expecting little, if any, improvement in the global commodities market during the last quarter of 2014 or through much of 2015, this will also continue to weigh on the Zambian economy.    

Key Forecasts

  • Total food consumption growth (local currency) in 2014: 9.0...

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Infrastructure

Zambia Infrastructure

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BMI View: The rating for Zambia's construction sector suffers this quarter due to a revision of historical data that has downgraded estimates but the long term macro trends and growth rate remains strong nonetheless. The country still has a healthy pipeline of new projects which continues to attract investment. Year on year (y-o-y) growth is forecast at 24 . 68 % in 2014.

The construction sector is being targeted under the broader reform agenda of the Patriotic Front government, and while substantial progress has been made, there is still much room for improvement. Change has been particularly evident in the construction sector, including management changes at Zesco, the road development agency, a freeze on construction to ensure...

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Insurance

Zambia Insurance

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BMI View:   Growth will remain steady, from a low base, at around 8-10% across the market over the next five years. Motor and property insurance will continue to dominate, accounting for over 65% of non-life premiums. Insurance density, at around USD20 per capita , is extremely low by regional standards.   Despite being well regulated, the industry is underdeveloped, remaining concentrated in the hands of a small number of key players and dominated by simple product lines , such as motor and property insurance. For the next five years, key trends in the market will be the evolution of microinsurance, a surge in bancassurance channels and the development of health and personal accident lines.

Gross insurance...

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Mining

Zambia Mining

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While Zambia's mining sector is set to continue on a positive trajectory over our forecast period to 2018, risks are mounting. The major copper producers have threatened to shelve expansion projects and delay capital expenditure due to a deteriorating regulatory environment in the country. Copper will remain the mainstay of Zambia's mining sector, while growing coal production will contribute to growth over the coming years.

The Future Is Copper
Zambia - Mining Industry Value & % GDP

Recent regulatory developments in Zambia have threatened to deter investment, as the government has shown itself capable and willing to...

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Pharmaceuticals & Healthcare

Zambia Pharmaceuticals & Healthcare

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BMI View:   The share of the government's 2015 budget allocated to health care is lower than in 2014, and this, combined with the political uncertainty following President Sata's death, raises concern as to whether the country will succeed in its missions to improve healthcare provision and reduce mortality from communicable diseases. Nevertheless, the government has pledged to provide 2,000 more health workers over the coming year, and this can only improve patients' access to healthcare.

Headline Expenditure Projections

  • Pharmaceuticals: ZMK1,393bn (USD227mn) in 2014 to ZMK1,595bn (USD251mn) in 2015; +14.5% in local currency terms and +10.9% in US dollar terms.

  • ...

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Power

Zambia Power

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BMI View:   The outlook for Zambia ' s power sector is generally positive. After decades of underinvestment by the Zambia Electricity Supply Corporation (ZESCO) the government has responded to the demands of the mining and manufacturing sectors to galvanize the development of new generating capacity. A number of coal-fired and hydropower stations are under development and close to completion, sufficient to cover Zambia ' s needs and allow for significant volumes of exports. In this context, power generation will increase by 4.9% year-on-year (y-o-y) in 2014 to 5.2TWh, and by 58.9% over the ten-year timeframe, reaching 20.3TWh in 2023. Meanwhile, power consumption will increase by 6.5% y-o-y in 2014 to 6.7TWh, rising to 10.0TWh by...

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Telecommunications

Zambia Telecommunications

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BMI View :  BMI's Q 4 14 Southern Africa report analyses the latest industry, regulatory and macroeconomic developments in the telecoms markets in Angola, Botswana, Mozambique, Mauritius and Namibia. It also contains analysis of the latest market data relating to the end of June 2014   a nd an update of   our five-year forecasts to 2018 for the mobile, fixed-...

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Zambia Telecommunications

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BMI View:  The mobile markets in Zambia and Zimbabwe will witness strong growth of mobile data services on the back of network development by the operators, improved international connectivity and the proliferation of low-cost smartphones. However, the growth in the wireline sectors of both countries will be tempered by underinvestment in network infrastructure development, partly due to a lack of competition, and continued fixed-to-mobile substitution. Our five-year growth forecast, through to 2018, for the telecoms markets in Zambia and Zimbabwe expects the broadband sector to record the fastest growth, driven by wireless access technologies. 

Key data

  • The mobile markets in Zambia and Zimbabwe contracted by 2.5% quarter-on-quarter (q-o-q) and 1.2% q-o-q in Q214, mainly due to the disconnection of inactive and unregistered SIMs

    ...

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Tourism

Zambia Tourism

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BMI View: Za mbia's tourism industry is coming to the attention of major international developers who are attracted by the steady increase in international arrivals and the stable political and economic investment environment. While still in the early stages of development, Zambia could grow to rival major established safari destinations in Sub Saharan Africa.

Home to the world famous UNESCO World Heritage site Victoria Falls, and seven other potential World Heritage sites, Zambia offers potential visitors a wide range of attractions. The country boasts several major national wildlife reserves and is well placed to develop itself as a hub for safari holidays - potentially rivalling more well established and expensive markets in the region such as South Africa. Zambia is also marketing itself as an adventure sports destination - tapping into the youth travel market.

...

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