Foreign investors are confident in Zambia’s future

0
256
Zambian President Edgar Lungu

AS the African continent’s second-largest copper producer, Zambia’s reputation in the global marketplace as a resource-endowed developing nation is well established. Indeed, over the course of these last several decades, the nation’s mineral wealth has been the leading destination for foreign investment, writes Christopher Mvunga*

 Though contrary to popular belief, the most valuable asset in Zambia, my country, is not what lies underneath its surface, rather, it’s who walks upon it.

I’m referring of course to Zambians themselves. Young and growing younger, the country’s population presents global investors with an exciting frontier market in the heart of Africa. Moreover, the increased purchasing power of Zambia’s emerging middle class has driven precipitous demand for consumer goods, housing, healthcare, infrastructure and electricity.

Fortunately, recent developments indicate that foreign investors are keen to respond to what they see as one of southern Africa’s most promising economies.

Key among them is a series of new deals in 2019 between Lusaka and private and state-backed investors from Europe, the Middle East and elsewhere. These investments, although they range in size and scope, target critical sectors of the Zambian economy. International projects in infrastructure, healthcare, information and communications technology, and power generation not only respond to new demand from the middle class, but also address some of the country’s obstinate barriers to growth and development.

The best example of this is in Zambia’s energy and electricity sector, where rising demand, inefficient tariffs, an overdependence on hydropower and other issues have contributed to unreliability, deterring international investors and ultimately handicapping the country’s economy. Unfortunately, this issue is made especially apparent in times of severe drought, when low water levels force power cuts at hydropower facilities, an increasingly frequent circumstance. But where some see crisis, others see opportunity.

Two major events in the last few months highlight this. In March, construction on Zambia’s first utility-scale solar farm was completed after little more than a year. This solar farm is the fruit of a joint effort between the Industrial Development Corporation (IDC), a Zambian development finance institution, and Neoen, a French solar developer. Outside of South Africa, the farm is the largest of its kind in sub-Saharan Africa. What’s more, the facility’s 54MW generation capacity is expected to power up to 30,000 Zambian households while reducing the power sector’s dependence on hydropower, giving hesitant investors plenty of reason for optimism.

But this is merely a first step. In April of this year, the Zambian government awarded a total of 120MW worth of solar power development projects to three pairs of developers – all of which are international. There’s no doubt that these projects will further diversify the nation’s energy mix away from hydropower, thus improving reliability for commercial and individual consumption. Over time, the improved distribution and reliability of electricity in Zambia will incentivize greater investment from domestic and international investors alike, particularly in electricity-intensive industries such as mining, infrastructure, and health. Whether it’s through an act of benevolence or purely a pursuit of profit, the role that global investors play in developing Zambia’s energy sector cannot be understated.

The same can be said of the government in Lusaka.

It’s important to remember each of these transactions would likely not have transpired without the dedicated, proactive participation of the Zambian government. After all, the 120MW worth of solar generation projects were awarded through a highly competitive international solar tender co-administered by Zambia’s Department of Energy and its partner, the German development bank KfW.

The Zambian government has long been aware of the same obstinate barriers to growth and development that international investors are now working to address. This understanding has guided Lusaka’s commitment to attracting foreign investors in a bid to accelerate Zambia’s emergence onto the global stage.

This campaign is not confined to the energy sector however. In fact, the government has initiated several public-private partnerships with international institutions in a variety of sectors.

For instance, a deal signed in January between the government of Zambia and Bluebird Finance & Projects will support the construction and installation of much-needed agricultural facilities in the northern part of the country. This multi-million dollar project includes plans to develop modern irrigation systems, as well as an advanced technical training center. This project will provide socioeconomic protections to Zambian farmers, who are simultaneously the nation’s largest and most vulnerable labor force demographic.

And an earlier project between Lusaka and AME International, an Austrian medical technology company, aims to renovate the country’s Cancer Centre, with financing from grants and zero-interest loans from the Austrian Credit and Export Bank. Should the project move forward, the improved health outcomes would yield tremendous economic benefits for patients, their families and communities.

These and other examples ought to be interpreted as reassuring signs of a mutual confidence in Zambia’s future.  Though this is to be expected. Available data shows that inbound foreign direct investment in Zambia increased by nearly 65% in 2017, and was one of the leading destinations for FDI from member and non-member countries of The Common Market for Eastern and Southern Africa.

And while it’s possible that this is a result of the relative ease of doing business in Zambia, the more likely explanation, however, is that global investors are sunny on Zambian potential, and recognize Lusaka’s efforts to support it.

* Christopher Mvunga serves as Deputy Secretary to Cabinet of the Government of Zambia

 

LEAVE A REPLY

Please enter your comment!
Please enter your name here