JOHANNESBURG - After years of steady and rapid growth, Zambia's economy has, like many other mineral export-based economies, entered a challenging period.
It’s a dynamic seen across emerging and frontier markets today. It’s also one that Zambia is well poised to make it out of intact.
Depressed prices for copper, Zambia's main export; a drought in the country's growing areas; a budget deficit; and a high debt burden have tempered some investor optimism for Zambia. And understandably so.
But with the country now launching an aggressive effort to mitigate those risk factors, Zambia is proving its resilience and reminding investors that their faith has not been misplaced.
Under the new leadership of Minister Bwalya Ng’andu, the country’s Finance Ministry is moving full steam ahead to address the budgetary and debt issues that have created uncertainty around Zambia's economy.
A respected technocrat with a reputation for staying above politics, Ng’andu’s track record in commercial banking speaks for itself - and markets reacted in kind to his appointment. Under his tutelage, Zambia is undertaking the unglamorous work of fiscal consolidation, with an eye on bolstering the country's medium to long-term attractiveness for investment.
Through scaling back discretionary spending, broadening the tax base, and making revenue-collection more efficient, Zambia is on track to reduce its budget deficit to 6.5percent of its gross domestic product (GDP) this year - from 7.5percent last year.
While still admittedly high, this will put Zambia on the path towards bringing the deficit under 4percent of GDP in the medium term, in line with countries like Uruguay, UK, and Chile.
It has put a freeze on the issuance of new arrears, and is postponing and cancelling some contracted but as-of-yet not disbursed loans, as we turn our focus to servicing existing debt. While some peers may be content to become market pariahs, Zambia is not.
Our country always has and will continue to value its reputation in the eyes of investors and creditors. We understand that tackling our debt-load will be neither easy nor politically expedient at home. But we also understand we cannot spurn the international partners on whom we so rely. Zambia has never defaulted. All hands are on deck to keep it that way.
The work Zambia is undertaking has not gone unnoticed by investors who continue to give the country their trust, as new projects are announced.
And those investments are going beyond traditional sectors such as mining - which is itself poised for a future boom as the global shift to a high-tech economy augurs ballooning demand for Zambian cobalt and copper.
Investors are increasingly seeing Zambia as a bastion of opportunity in sectors as varied as e-commerce, renewable energy, tourism, and agriculture. Firms like General Electric, IBM, Cargill, Radisson and Microsoft have given Zambia their vote of confidence by setting up shop for the long haul.
They are integral to our country’s plan for economic diversification, and Zambia is sparing no effort to ensure our relationships remain mutually beneficial.
Years of pro-business reforms have made our country one of the more attractive places on the continent to do business. Still, we have room to improve, and doing so - and quickly - has become the government's first priority. We don’t believe in the fool’s errand of pursuing autarky in the globalised world of today.
Zambia is open for business, and we intend to provide more proof.
So as Zambia weathers this storm, let our international partners know we are prepared to come out stronger than we went in.
Dr Lubinda Haabazoka is president of the Economics Association of Zambia.
BUSINESS REPORT