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Investors still like Zambia - analysts

Harare - Zambia is still a destination of choice for foreign investors, despite woes over its kwacha currency, worsening drought conditions afflicting the entire region and an electricity supply situation that is threatening Lusaka’s lucrative mining industry, analysts say.

Despite big copper mining companies scaling back mining and smelting operations over erratic power supplies, First Quantum Mining this week said it had resumed full-scale operations in the country after electricity supplies improved, thanks to a deal inked to import electricity from South Africa’s Eskom.

Zambia's kwacha. File picture: Waldo Swiegers, Bloomberg. Credit: BLOOMBERG

Analysts at FocusEconomics say foreign investment interest in the southern African country is promising.

“Although headwinds will hamper growth prospects in Zambia, foreign investment interest is promising, which could translate into growth in a number of sectors across the economy,” the FocusEconomics report on the sub-Saharan Africa region’s economic performance, said.

Expectations are that Zambia, among Africa’s top copper producers, will grow by 3.9 percent this year and by about 5.1 percent next year.

Zambia suffered ratings downgrades last year as woes over its fiscal position and currency weakness weighed down sentiments over its growth potential.

Rising inflation

And with the El Niño dry weather phenomenon still wreaking havoc and stoking up inflation across southern Africa, FocusEconomics has projected inflationary pressures to persist.

“Inflation increased to a staggering 21.1 percent in December, up from 19.5 percent in November. Skyrocketing inflation is becoming apparent as the pass through from the recent currency deprecation impacts prices (and) panellists expect inflation to average 18 percent in 2016 and 9.7 percent in 2017,” the report says.

However, while Zambia will likely be propped up by strengthening foreign investor interest, Tanzania will benefit from economic diversification and rebound by as much as 6.8 percent this year.

Zambia and other countries in the region have also been urged to diversify their economies to better withstand shifting commodity consumption patterns.

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