Zambia

Economic Overview

The Republic of Zambia is a resource-rich, landlocked country in Southern Africa that is currently undergoing a significant economic reset. After becoming the first African nation to default during the COVID-19 pandemic, Zambia has embarked on a comprehensive, IMF-backed reform and debt restructuring program that is being closely watched by international markets. The economy is traditionally dominated by copper mining, making it highly sensitive to global commodity price cycles. The 2025-2026 outlook is one of cautious optimism, contingent on the successful implementation of reforms, a stable copper price, and renewed investment confidence following the resolution of its debt crisis.

GDP Size & Growth Trajectory

Zambia's economic growth has been volatile, impacted by fluctuating copper prices and macroeconomic instability. Following the debt default, growth slowed. However, the reform program is expected to restore stability and unlock new growth. The IMF projects real GDP growth to strengthen to 4.7% in 2025, up from previous years. This recovery is predicated on improved macroeconomic management, a rebound in mining output, and growth in agriculture and services.

Sector Composition

• Industry: This sector is the primary driver of GDP, contributing around 36%, almost entirely dominated by copper mining. Zambia is one of Africa's largest copper producers, and the sector is the main source of foreign exchange earnings. This heavy reliance makes the economy vulnerable to price shocks.
• Agriculture: This sector contributes about 9% to GDP but is the primary source of livelihood for the majority of the population. There is significant untapped potential for commercial farming, with fertile land and abundant water resources. Key crops include maize, soybeans, and tobacco.
• Services: The services sector accounts for over 50% of GDP and includes wholesale and retail trade, financial services, transport, and tourism.

Inflation Trends

High inflation has been a major challenge, driven by currency depreciation and high food and fuel prices. The Bank of Zambia (BoZ) has adopted an aggressive monetary tightening stance to combat these pressures. With the stabilization of the currency (the Kwacha) and fiscal consolidation measures taking hold, inflation is expected to moderate and gradually return to the central bank's target range of 6-8%.

Fiscal & Monetary Policy Stance

• Monetary Policy: The BoZ is committed to a tight monetary policy to bring inflation under control and ensure financial stability.
• Fiscal Policy: The government is implementing a strong fiscal consolidation program as part of its IMF agreement. This involves increasing domestic revenue, rationalizing expenditure, and removing inefficient subsidies (such as on fuel and electricity). The goal is to restore debt sustainability.

Debt Sustainability Indicators

Zambia's recent default highlighted its unsustainable debt burden. The country has since made significant progress on debt restructuring under the G20 Common Framework, reaching agreements with its official bilateral creditors (including China) and, more recently, with its private commercial creditors (Eurobond holders). This comprehensive debt treatment is a landmark case for other debt-distressed nations and is crucial for restoring Zambia's access to international capital markets and ensuring long-term fiscal health.

Table 1: Key Macroeconomic Indicators (2023-2026F)

Market Size & Demand Potential

Zambia's market is characterized by a young, fast-growing population, with significant long-term potential for consumer demand.

Population Size and Demographics

With a population of over 20 million, Zambia has a youthful demographic profile, with a median age under 18. This provides a large and growing labor force.

Urbanization and Consumer Hubs

The country is one of the most urbanized in Sub-Saharan Africa, with over 45% of the population living in cities. Lusaka, the capital, is the primary commercial and administrative center. The Copperbelt Province, with cities like Ndola and Kitwe, is the traditional industrial heartland.

Consumer Spending & Market Access

Consumer spending has been constrained by high inflation, but the formal retail sector is relatively well-developed in urban centers, dominated by South African chains. The growing adoption of mobile money is expanding access to financial services and digital commerce.

Business Environment

The new government has made improving the business environment and attracting private investment a top priority.

Ease of Doing Business & Regulatory Reforms

The government is actively working to reduce red tape and create a more transparent and predictable environment for investors. The Zambia Development Agency (ZDA) is the national body for investment and trade promotion, providing facilitation services.

Company Registration Process

The Patents and Companies Registration Agency (PACRA) manages business registration. The process has been increasingly digitized to improve efficiency, but it can still be a multi-step process requiring registration for tax and social security.

Tax Regime

• Corporate Income Tax (CIT): The standard rate is 30%. A variable profit tax applies to mining companies based on copper prices.
• Value Added Tax (VAT): The standard VAT rate is 16%.

The government offers fiscal incentives for investment in priority sectors, particularly through the establishment of Multi-Facility Economic Zones (MFEZs).

Political Stability & Governance

Zambia is widely regarded as one of Africa's most stable and peaceful multi-party democracies.

Political Environment

The country has a history of regular, competitive elections and peaceful transfers of power. The 2021 election, which saw a peaceful transition to the opposition party, was a major affirmation of the country's democratic maturity and was widely praised. This political stability is a key asset for investors.

Rule of Law & Investor Protection

Zambia's legal system is based on English Common Law. The judiciary is independent, and the country has a legal framework for protecting private property and foreign investments. Corruption remains a challenge, but the current administration has made fighting graft a central policy plank.

Infrastructure Readiness

As a landlocked country, Zambia's infrastructure is critical for its connectivity to regional and international markets.

Transport and Logistics

Zambia serves as a key transit country in Southern Africa. It relies on transport corridors through its eight neighbors to access seaports, primarily the Port of Dar es Salaam (Tanzania), Beira (Mozambique), and Durban (South Africa). The road and rail networks are in need of significant investment and upgrading to reduce logistics costs.

Energy Sector

The energy sector is dominated by hydropower, which provides the vast majority of the country's electricity. This makes the power supply clean, but also vulnerable to droughts. To mitigate this, Zambia is actively seeking investment in diversifying its energy mix, particularly into solar power, for which it has excellent potential.

Sector-Specific Opportunities

1. Mining (Copper and other minerals)

Copper remains the core of the economy. The government is keen to attract new investment to increase production and extend the life of existing mines. There are also significant opportunities in mining other minerals like cobalt, manganese, and gemstones (emeralds). A key focus is on value addition, moving from exporting raw copper to producing semi-finished and finished copper products.

2. Agriculture

This sector has immense, largely untapped potential. With abundant land and water, there are opportunities for large-scale commercial farming of crops like maize, soybeans, wheat, and tobacco. The government is promoting the development of farm blocks and agricultural value chains.

3. Tourism

Zambia is home to one of the world's natural wonders, the Victoria Falls (Mosi-oa-Tunya), which it shares with Zimbabwe. The country also boasts vast national parks with incredible wildlife, such as South Luangwa and Kafue. The sector offers significant opportunities for investment in hotels, lodges, and tour operations.

4. Energy

With its reliance on hydropower, there is a major push to develop alternative energy sources. Solar energy presents the largest opportunity for independent power producers (IPPs). There are also opportunities in developing off-grid solutions to increase energy access in rural areas.