Transcript Investment Climate in Zambia

Bank of Zambia
THE EUROMONEY ZAMBIA INVESTMENT
CONFERENCE
“NARROWING ZAMBIA’S INVESTMENT GAP FOR
SUSTAINABLE DEVELOPMENT”
June 10, 2008
Taj Pamodzi Hotel – Lusaka
Caleb M. Fundanga
Governor - Bank of Zambia
1
Information on Zambia
Bank of Zambia
ZAMBIA
Area: 752,614 sq km
Population Estimate: 12.1 mil 2007
Independence: 1964
GDP: US $11,363.4 mil: 2007
GDP per Capita: US $934.5
Angola
ZAMBIA
DR Congo
Tanzania
Malawi
Mozambique
Namibia
Botswana
Zimbabwe
2
Information on Zambia
Bank of Zambia

Economy performing well with positive growth and stable
macroeconomic environment.

Reform programmes focussing on restructuring the
economy to shift production to private sector

Abundant natural resources and human capital

Centrally located with access to the SADC and COMESA
markets.

Suitable climate, peace and a stable political environment
(multi-party political system).

Various incentives and property rights protection in place
under the ZDA Act for establishment of a profitable business
investment.
3
Overview of the Zambian Economy
Bank of Zambia
Recent Economic Developments

Lower Inflation and interest rates plus stable exchange rate

Real Gross Domestic Product (GDP) averaged 5.1% per
annum during 2001 - 2007.

Per Capita GDP rose to US$934.5 in 2007 from US$360.5 in
2001.

Stable financial sector with commercial banks average
lending rates declined to 24.4% in 2007 from 54.6% in 2001

Single digit inflation achieved: end-Dec 2007 8.9% from 18.7
in 2001 (see Table 1).
4
Overview of the Zambian Economy (cont’d)
Bank of Zambia
Table 1: Selected Macroeconomic Indicators: 2001-2007
2001
2002
2003
2004
2005
2006
2007
4.9
3.3
5.1
5.4
5.0
5.8
5.7
360.5
362.7
402.7
490.6
635.5
922.7
934.5
18.7
26.7
17.2
17.5
15.9
8.2
8.9
3,819.1
4,334.4
4,645.5
4,771.3
3,508.9
4,406.67
3,844.81
Real GDP
(%)
GDP/Capita
(US$)
Inflation (%)
Exc. Rate*
(ZK/US$)
Source: Bank of Zambia
*End - period BoZ mid-rate
5
Overview of the Zambian Economy (cont’d)
Bank of Zambia
External Sector Developments
• Remarkable improvement leading to build up of
international reserves to 3.6 months import cover in 2007
from 0.9 months in 2001
•Over the last couple of years, the exchange rate of the
Kwacha against major currencies has been relatively
stable.
•Increased mining output and high copper prices as well
as growth in the non-traditional exports sector have had a
positive impact.
6
Overview of the Zambian Economy (cont’d)
Bank of Zambia
External Sector Developments (cont’d)
Trade balance rose to a surplus of US$983.1 mil in 2007
from a deficit of US$342.2 mil in 2001.
•Contributing factor was high receipts from increased
copper exports
•In addition, non-traditional export earnings rose by 260%
to US $920.7 mil in 2007 from US$255.7 mil in 2000.
•Enhanced HIPC Initiative completion point attained in
April 2005.
•Debt cancellation resulted in Zambia’s external debt stock
decreasing to US $2.1 billion at end 2007 from US $7.3
billion as at end-2001.
7
Overview of the Zambian Economy (cont’d)
Bank of Zambia
Table 2: Trade Statistics
2001
2002
2003
2004
2005
2006
2007
Total Exports
(US$’m)
914.1
979.7
1,209.9
1,843.7
2,209.8
3,826.7
4,324.7
Metal Exports
Copper
Cobalt
602.4
514.9
87.5
611.4
521.4
90.0
794.7
609.8
184.8
1,358.8
1,074.6
284.2
1,644.2
1,485.9
158.2
3,084.1
2,380.0
146.1
3,400.3
3,150.4
249.9
Non-Traditional
Exports (NTEs)
311.8
368.3
415.2
484.9
565.7
742.6
924.4
18.3
18.1
12.7
16.8
16.7
31.3
24.5%
NTEs Growth
year-on-year
(%)
Note: Data is presented as c.i.f
Source: Bank of Zambia
8
Banking Sector Environment
Bank of Zambia
Financial System Stability
•
Overall financial condition of the banking sector has been
satisfactory with banks maintaining adequate regulatory
capital
•
Government through the Bank of Zambia continues to
modernise the banking environment by endorsing various
legislation that promote a safe, sound and efficient financial
system.
•
There is increasing interest from outside banks with one
new entrant licensed in 2008 bring the number of players in
the banking sector to 14 banks.
9
Capital Market Developments
Bank of Zambia
Notable developments in capital markets to date include:

LuSE market capitalisation increased by 45% in 2007
from 13.9% in 2006.

The LuSE all shares index rose by 92.9% in 2007
compared to 47.7% in 2006.

Government introduced long dated bonds of 7, 10, 15
years to maturity to help deepen financial markets.

Foreign investments in Government securities rose to
K830.5 billion in 2007 from K539.8 billion at end 2005
10
Infrastructure Development
Bank of Zambia

In order to consolidate recent economic gains,
infrastructure gap needs to be addressed

Weak infrastructure reduce ability to take advantage of
Zambia’s good location

Poor infrastructure and inadequate access result in
increased cost of doing business
11
Infrastructure developments
Bank of Zambia

Transport and Communication:

Government rehabilitating road network covering
35,168 kms.

Investment opportunities in road rehabilitation,
maintenance and consultancy

Investment in highways connecting industrial towns
to major seaports is vital to economic development

Other Infrastructure needs include; rehabilitation of
Railway system, airports to make Zambia a hub of
the sub region

Public Private Partnerships for effective Information
and Communications Technology development are
key
12
Infrastructure developments
Bank of Zambia
Agriculture:

Zambia is endowed with:


Large arable, fertile, virgin land
Good weather conditions
Large water resource (40% of SADC fresh water resources)

Only 15% of arable land is under cultivation

Only 40,000 hectares are irrigated from a potential 500,000
hectares.

Recent surge in food prices presents an opportunity for
Zambia to become the food basket of the region.

Infrastructure needs include; feeder roads, communication,
power, and irrigation facilities

13
Infrastructure Development
Bank of Zambia
Energy:

Vast water resources and coal reserves ideal for the
generation of hydro and thermal electric power;

Huge demand for electricity in the region and locally

Huge potential to develop new power generation plants across
the country

Opportunities in alternative sources of power such as gas
energy for domestic cookers

Good climatic conditions suitable for solar power generation
14
Infrastructure Development
Bank of Zambia
Mining

Abundant known mineral deposits.

Has about 6% of the world’s known copper reserves.

Other opportunities include exploitation of gold, zinc, coal,
nickel and gemstones (e.g. emeralds, aquamarine, topaz, opal,
and amethyst).

Diamond and Uranium reserves have also been identified.

Mines and Minerals Act provide exemption from import duty
and VAT on all mining machinery and equipment
15
Infrastructure Development
Bank of Zambia
Tourism:
 More room for investors in the hotel industry

Untapped opportunities in game ranching, transport
service, organised tours, outdoor sports facilities

19 national parks, 34 game management areas
totalling 65,000 km2 all not fully exploited
16
Infrastructure Development
Bank of Zambia
Construction and Real Estate:

Expansion of economy requires extensive construction

Housing schemes introduced in the recent past

Large deficit of housing still exist providing an opportunity for
further investment in this sector
17
Conclusion




Government continues to pursue market and structural
reforms in partnerships with private sector
Enormous business Opportunities still lie unexploited
in all sectors of the economy
Potential for infrastructure development through public
private partnerships arrangements
Economic growth and macroeconomic stability
expected to contribute to reducing the cost of doing
business, employment creation and poverty reduction
18
END
Bank of Zambia

For more information on the Zambian
economy, visit the Bank of Zambia
Website on: www.boz.zm
 Thank
You
19