Where do you see the key areas of growth or opportunity for businesses?
The opportunities and areas of growth are often driven by a country’s needs. In Zambia these are energy, food and agriculture, industrialisation and manufacturing.
National access to electricity in the country averages 31%, with 67% in urban areas and 4% in rural areas. The government set a goal for universal electricity access for all by 2030. A balanced energy mix is essential to achieve this. Currently 85% of Zambia’s power is hydro; therefore, in the last few years there has been a huge drive to encourage solar and wind power. Legislative changes and cost reflective tariffs are being implemented to ensure this is an attractive sector for investment.
Historically, Zambia has been dependent on copper exports, with its agricultural potential not fully tapped into. Of the 75 million hectares of land, the vast majority is highly fertile and arable, with an abundance of freshwater rivers and lakes. Organised and mechanised agriculture has been highlighted as a priority sector that has benefitted from investment incentives and concessions in the national budget.
Which sectors have been most affected by COVID-19 and what have businesses in those sectors done to cope with these changes or potentially benefit from new opportunities?
The sectors most affected have undoubtedly been tourism and hospitality and leisure, healthcare, financial services and aviation. In all these sectors, there has been an interesting reinvention to ensure continuity and survival.
In the tourism sector and its related businesses, we have seen a resurgence of local tourism and efforts to encourage Zambians who would ordinarily have gone aboard to spend their holidays in Zambia. This has meant exclusive resorts and related services have had to drastically reduce their prices to make resorts accessible and affordable to ordinary Zambians.
In the healthcare sector, local hospitals (both state-run and private) have been stretched to their limits. The immediate result has been the development and opening of modern and state-of-the-art hospitals. The previous norm was for the wealthy and government officials to travel to South Africa or Europe for medical treatment.
The lack of access to normal banking services has opened up a rapidly expanding market for fintech. As of 2018, with 41% of the population financially excluded and 5 million adults (60% of the population) not accessing financial services, COVID-19 transformed the landscape with the number of financial services products and payment platforms on offer.
The education sector was also severely affected and with the lack of easy and cheap internet access for the majority of the population, e-learning was only fully available to a small percentage of people. Digitalisation both for education and innovative banking and financial services to reach the vast urban and rural population remains an attractive investment opportunity.
What is the current investment appetite in the region?
The current investment appetite can best be described as “rising optimism” in the region, mainly due to the disruption on the Southern African economies caused by the COVID-19 pandemic.
Southern Africa has been the hardest hit region in Africa, with a GDP contraction of 7% in 2020. The sectors that this region is mainly dependent on (tourism, oil and gas, metals and minerals) were all severely affected. Oil exporting countries such as Angola contracted by -4.7% in 2020; resource-intensive countries also contracted significantly, Botswana -8.9%, South Africa -8.2% and Zambia -4.9% with the drop in metal and mineral prices and lower demand.
With metal and minerals, oil and gas and tourism markets going back to normal, and increased demand coupled with the ease of travel restrictions, opening up of borders, free movement of people, goods and services, there is light at the end of the COVID-19 tunnel with projected regional growth by 3.2% in 2021 and 2.4% in 2022.
In which sectors do you expect to see increased investment and /or financial movement in the next 18 months?
Tourism, hospitality and leisure, aviation, energy, metals and mining, manufacturing and portfolio investment are expected to attract increased investment.
These sectors had been experiencing exponential growth before the disruptive effects of the pandemic on the global economy and supply chains. For instance with tourism, Africa had the second-fastest growing tourism sector before the pandemic. It grew 5.6% between 2017 and 2018 and only lagged behind Asia-Pacific. It accounted for 8.5% of Africa’s GDP and employed over 24 million people. Despite the negative consequences businesses dependent on tourism will have encountered, the sector is expected to rebound quite strongly once travel restrictions ease.
The same can be said for hospitality and leisure and aviation. According to the International Air Transport Association (IATA), Africa will be one of the fastest growing regions for aviation in the next 20 years with annual expansion of 5%. Driving this growth is the increasing demand for interconnectivity between countries in Africa and the growing middle classes. The demand for more routes and flight frequencies has never been greater. In the past decade certain non-African airlines have tripled their offering to African cities, and other African carriers are expanding their fleets, rushing to raise capital to fund their expansion and offering to buy stakes in other airlines on the continent.
With global manufacturing attention on clean energy, clean technology and electric vehicles, demand for base metals and minerals such as copper and cobalt has seen increased demand and record prices. Base metals will therefore also be a sector that sees increased investment attention and significant financial movements.
What is the most relevant regional or pan-African economic trend that you expect to see in the next 18 months?
There will be an emphasis on more interregional trade and cooperation through trading blocs such as the South African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA). And on a pan-African level more coordinated efforts through the African Continental Free Trade Area Agreement and the African Union. The exclusion from markets and countries outside Africa has led to a realisation that African countries have to be more self-reliant and introduce structural reforms that ensure that economies are more resilient and “future crisis proof.”
What do you expect the general business mood to be in your country in the next 18 months?
Zambia has just gone through its ninth democratically held election and the peaceful election of its seventh president. The political maturity of the country’s democracy cannot be praised enough; namely that the country has had seven presidents who have all taken office peacefully, left office peacefully, have died peacefully or are living in the country peacefully.
The mood and goodwill the country has enjoyed since the elections has seen the Zambian Kwacha appreciate 70% in the month following the vote. There is an expectant mood from the youth and general population for jobs, greater opportunity, deregulation, zero tolerance to corruption and a conducive environment for investment from a focussed pro-business government. The business mood is that Zambia is once again open for business.