In this week’s Monday opinion, we look at the role that trade and investments play in Zambia’s economy. Government has come under attack from some sectors of society over the trips made by the Head of State in the recent past, where President Hakainde Hichilema has visited a number of countries in and outside Africa, raising the flagas the country’s Chief Marketing Officer.

Trading and investing are very different activities, despite the fact that the terms are frequently used interchangeably: While investing entails purchasing and holding securities for a longer period of time, trading concentrates on short-term buying and selling.Benefits of trade and investment engagements with other countries speaks to our balance of payment as a country – about all our transactions with the rest of the world. The Governments’ thrust here should be addressing issues such as ‘what are we buying from other countries against what we sell to them’.

Global trade enables countries and consumers to access goods and services that aren’t offered in their own countries. On the global market, you can buy almost anything: food, clothing, cements, minerals, vehicle parts, oil, medical instruments, cars, stocks, money, and electricity. For many of the smallest and poorest developing nations, where local demand is insufficient to support rapid increases in production, employment, and incomes, expanding trade regionally and internationally is essential. The main forces behind economic growth and the eradication of poverty are trade and investment.

Investments can either be domestic or foreign. Domestic investment is where Zambians commit funds or capital to projects or businesses internally and the opposite is true. Businesses and individuals make investments abroad for a variety of reasons, including sourcing components and raw materials, locating production in areas with favorable costs or a skilled workforce, or expanding their customer base.

Foreign investment typically comes in two forms: Foreign Direct Investment (FDI) occurs when an investor establishes or acquires a business (or the majority of a business) in another nation, whereas Foreign Portfolio Investments (FPI)occur as part of a portfolio and include purchasing debt or stock in a foreign company without having any ownership stake in it.

A nation’s economic development depends heavily on FDI. Zambia has been able to improve its infrastructure, increase productivity, and increase employment thanks to the inflow of foreign currency. FDI can be used to acquire cutting-edge technology and access foreign exchange reserves. However, Net FDI inflows (% of GDP) of Zambia plummeted by 140.57 % from 2.4 % in 2019 to -1.0 % in 2020. Since the 35.35 % surge in 2017, net FDI inflows (% of GDP) sank by 122.28 % in 2020. The highest FDI to GDP ratio recorded over the last fifty years was 9.6 percent. There is justifiable need for the Government to regain glory in these statistics and realise the country’s full potential.

So where are the opportunities for Zambia and how can the Government leverage on trade and investments for sustainable economic growth?

With global food and energy crisis arising from the Russia/Ukraine conflict, opportunities are eminent for Zambia to realign its agricultural sector to tap into the Ukrainian customer base of Wheat and Sunflower. Furthermore, Zambia’s has an opportunity to reduce its energy sector pressure by actualizing intra African supply chain linkages with oil producing countries like Angola. In addition, Government needs to foster more bilateral trade and investment relations that aggressively strengthen the country’s presence in strategic value chains such as mining (especially in the advent of the energy transition), manufacturing (agro processing and Electric vehicles and batteries), information and communications technology, tourism, energy, and climate resilience.

Secondly, COVID-19 and with its subsequent supply chain disruptions, presents an opportunity for Zambia to produce more and supply quality food products to countries like China, with huge markets. There was an open offer by the Chinese President, Xi Jinping on this aspect during a recent meeting with President Hichilema.

Thirdly, Zambia has been sleep walking through opportunities in the Common Market for Eastern and Southern Africa (COMESA) and Southern African Development Community (SADC) markets. Without conscious structural realignments for local businesses, prospects in Africa Continental Free Trade Area (AfCFTA) will be wasted and will remain business as usual. Strengthen the weaknesses and close trade and investment opportunity gaps in SADC and COMESA. Government should incentivize local business and place them in the driving seat for trade and investments. This entails making intentional structural adjustments in business ownership in favour of the local private sector, including partnerships and joint ventures with foreigners.

Fourth, there is need to strengthen missions abroad and set them as strategic government agents in sustaining the trade and investment agenda for Zambia. The New Dawn Government should restore honor to missions abroad and defy the odds by ensuring quality in constituting teams for foreign service duties, as this will be key in realising the country’s trade and investment agenda. Zambia needs to regain its diplomatic confidence and open up markets that were existing but not functional both intra Africa trade and beyond.

Fifth, Government has a duty encourage investment in areas that support human rights, high labor and environmental standards, and sustainable development; this includes fostering Corporate Social Responsibility and ethical business conduct. These can be achieved through a screening framework for foreign direct investment.

Lastly, Government should promote the creation of a more open, effective, and predictable business environment for investors through investment facilitation. For instance, making available information on beneficial ownership, investment policies, and reducing delays in obtaining government permits and approvals are some examples of how to do this.
This is it for this weeks Monday opinion, be sure to join us here next week with another exciting topic.

About the Author

Mr. Boyd Muleya is Head of Research at the Centre for Trade Policy and Development. He is an Economist and Banker by training. His area of Research includes Monetary Economics, Financial Markets, Investment Analysis and Financial Inclusion.