Zambia has large metals reserves and strong potential for growth in the mining industry in particular. Copper dominates, but the country boasts deposits of iron ore, coal, uranium and manganese. Economic policy has significantly improved over the last several years in Zambia, with key macroeconomic indicators such as inflation, real GDP growth and the current account balance strengthening substantially since 2003. Investment in key non-mining sectors, especially tourism, has contributed to the country’s high growth.

We keep our informed abreast of the latest market moves and political developments in Zambia, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 12 of Zambia’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you one step ahead, so you find business in Zambia is a breeze.

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 real 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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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. Furthermore, 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 41.5 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 Crime & Security

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Businesses and foreign workers in Zambia benefit from a safer environment than in most other Sub-Saharan African countries, with lower crime rates, a negligible threat from domestic or international terrorism, and a secure strategic environment. Zambia therefore performs well overall in the Sub-Saharan Africa (SSA) region in the BMI Crime & Security Risks Index, with a score of 56.1 out of 100 placing seventh out of 44 states. Nevertheless, we highlight that crime remains an issue, particularly in urban areas, and corruption seriously hinders the response of security services.

Increasing regional integration and a lack of disputes with its neighbours mean that, despite Zambia's potentially vulnerable geographic location, its strategic international environment is among the most secure in the SSA region. The country's reputation as an advocate of indigenous and anti-apartheid movements in neighbouring states gives...

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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 progress 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 recent investments coming on-stream and...

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Autos

Zambia Autos

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Industry sales data from Renault showed that new vehicle sales in November 2014 declined 1.5% year-on-year (y-o-y) to 453 units, bringing sales for the first 11 months of 2014 to 4,973 units, a decrease of 1.7% y-o-y. Our forecasts for 2014 proved too optimistic in light of the poor sales in the past few months and as such we have downgraded our full-year sales estimate to 5,464 units, a contraction of 1.0%.

We believe auto sales in 2014 were affected by the depreciation in the Zambian kwacha in H114, which resulted in an increase in car prices for consumers given that the bulk of the cars sold in the local market are imported. However, we expect a recovery in the auto market in 2015 as economic growth accelerates.

We expect private consumption to be a key driver of growth in 2015 and 2016, forecasting 6.5% growth in both years. This will be boosted by good harvests in the agricultural sector and...

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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 healthcare 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 Q115 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 September 2014 and an update of our five-year forecasts to 2018 for the mobile, fixed-line and internet sectors.

Key Data

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Zambia Telecommunications

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BMI View: As operators' top line financial performance comes under intense downward pressure from regulatory and competitive factors, cost-cutting and efficiency improvement solutions will gain prominence in the mobile markets of Zambia and Zimbabwe. Zambia's two biggest mobile operators have outsourced the management of their tower assets to a third-party company, while we expect Zimbabwe's operators to give serious consideration to the telecoms regulator's call for infrastructure sharing based on an open access model.

Key data

  • The mobile market in Zambia grew by 2.5% quarter-on-quarter (q-o-q) in Q314 following three consecutive quarters of contraction, while the market in Zimbabwe contracted by 0.9% q-o-q in the same period.

  • By the end of September 2014, Zambia had a mobile penetration rate of 62%...

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Tourism

Zambia Tourism

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BMI View: Zambia'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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