The future of Zambia’s economy hangs in the balance as a degradation in the business environment and the impacts of COVID-19 come to a head.
In a recent conversation with Trevor Simumba, Senior International Development Economist, and Oliver Saasa, Professor of International Economic Relations and Managing Consultant / CEO of Premier Consult Limited, Marlow Strategy Managing Director Simon Wolfe discussed what’s on the horizon for Zambia’s economy amid current uncertainties.
While highlighting Zambia’s vast economic potential, Mr Simumba and Prof Saasa were wary about recent government actions and a weakening of the rule of law, which could deter foreign investors and discourage Zambian companies from growth.
Mr Simumba said:
“Zambia is still a very lucrative investment destination. The problem we have is in the public finances, so, an investor coming to Zambia who wants to come and do, for example, a private sector project, maybe wants to invest in agriculture, mining, manufacturing, 100% I would back them up. However, if they are coming to do a government program, for example a public-private partnership or anything that relates to government, either lending money to the government or the government having to be involved, I would tread cautiously.”
The panellists cited the example of Copperbelt Energy Corporation (CEC), a Zambian energy company, which has proven to be an upstanding corporate citizen and a driver of employment and development. Rather than facilitate the growth of this Zambian success story, the government has enabled an assault against the company, simultaneously refusing to help resolve a massive debt owed to the company by a government-controlled mining company, while stalling talks on renewing CEC’s bulk supply agreement with the state-owned energy company, and even issuing a statutory instrument that essentially expropriates CEC’s assets.
Meanwhile, CEC has continued to engage professionally, extending olive branches to the government and requesting that they honour their commitment to help broker an agreement between all sides involved in the dispute.
Mr Simumba explained:
“I don’t understand why the government is unable to bring all these parties to the table. Let’s put the facts very clearly. Number one, the government of Zambia owns 24% of CEC. Actually, the government holds more shares than the founders of CEC…The three parties in this dispute all have a relationship with the government of Zambia. Not just the fact that they are companies here in Zambia, but actually government has a financial incentive in all of these three companies. So, the question that comes to mind is that, okay, if that is the case, why is it so difficult for the government to sit these parties together and come up with a solution?”
This example and that of Mopani Copper Mines, which has faced similar actions damaging its ability to operate, could scare off investors at the very moment the country needs them most.
As Prof Saasa highlighted,
“Most investors at the moment, even though they are already inside the country, are very apprehensive about how hospitable the investment environment in Zambia is, and whether they can actually expand their business. Now, with COVID-19, and the challenges that it has brought about, cost escalation, almost everybody is just now on hold, ‘wait and see.’”
Listen to the full panel discussion below.
