Zambia - Market ChallengesZambia - Market Challenges
The Zambian economy is heavily dependent on copper mining and rain-fed agricultural production, which exposes the economy to external vulnerabilities such as changes in global copper prices and seasonal weather patterns. Zambia has a relatively small domestic market that is spread across a country a bit larger than Texas.
The Zambian government amassed huge debt loads from 2012 to the present. While official figures put the debt at 60 percent of GDP, many observers estimate it to be substantially higher if Zambia moves forward with many of its planned infrastructure projects, mainly financed by Chinese firms. The government’s outstanding arrears of several billion dollars to private contractors has constrained private sector growth for the last few years. The Zambian government’s talks with the International Monetary Fund for a $1.2 billion credit line are stalled until the government commits to placing a moratorium on the accrual of additional debt.
Other challenges include policy inconsistency, pervasive corruption, and high domestic lending rates.
Though the monetary policy has eased and there has been an increase in commercial bank liquidity, the private sector is crowed out by increased government borrowing at attractive rates to financing institutions.
Although hourly wages are low, actual labor costs are considered high for the region, driven up by low labor productivity, stringent labor laws, and a shortage of skilled labor.
Although improvements have been made at key border crossings, including the opening of integrated customs services at the Zambia-Zimbabwe border at Chirundu, the DRC-Zambia border at Kasumbalesa, and the Zambia-Tanzania border at Nakonde, the cross-border movement of goods remains slow. This, combined with high fuel prices and some poor highway segments, translates to steep transportation costs.
Government policies with respect to business and trade change often without prior consultation, such as agricultural crop export bans. Similarly, market-distorting subsidies in the agriculture sector inhibit greater involvement by and the growth of private enterprises in the sector.
Zambia Trade Development and Promotion