The covid-19 pandemic has fully exposed the long-term problems of the Zambian economy, especially unsustainable indebtedness. As a result of the drop in copper prices, which make up about three quarters of the country’s total exports, the loss of income from tourism and especially the depreciation of the domestic currency (about 50% against the US dollar for 2020), Zambia in November 2020 became the first country in Africa since the outbreak of the epidemic it found itself insolvent, thereby also practically losing access to international financial markets.
They are trying to negotiate with international creditors to restructure the debt. It is also seeking an IMF loan program, but reaching an agreement with the IMF will likely be very difficult at least until the elections in August 2021, before which the government continues to spend instead of improving fiscal discipline.
However, the consolidation of public finances after the elections will be all the more difficult. Unlike most countries in the region, Zambia has not imposed strict measures limiting economic activity in response to the pandemic.
In the current situation, the government has limited scope for fiscal measures to support the economy. However, it allocated approximately USD 125 million for concessions to businesses in the area of taxes and customs and USD 400 million in particular for the payment of old-age pensions and state debts to suppliers of goods and services, preferably domestic ones (including companies building and repairing roads).
The central bank released USD 500 million to commercial banks for loans to businesses and households affected by covid-19. In total, this represents support of approximately 5.3% of Zambia’s GDP. By the end of 2020, however, the funds from the budget were only partially released, the banks provided approximately 40% of the intended amount of loans.
At the beginning of 2021, the government abolished VAT on fuel and suspended the collection of excise duty on them. At the same time, it bought (on debt) one of the largest copper mines in the country from a foreign investor.
The proclaimed reason is, among other things, the protection of jobs. However, these steps must be seen primarily in the light of the upcoming general elections in August 2021.
Post-covid-19 opportunities for foreign exporters
More than 80% of Zambia’s electricity generation comes from a few large hydroelectric plants. In recent years, however, due to climate change, precipitation totals have been falling, which (in addition to the age and failure rate of power plants) has resulted in reduced production, which is not enough to cover the growing consumption, and therefore regular power outages occur throughout the country.
As a result of economic difficulties highlighted by the covid-19 pandemic, Zambia became insolvent in late 2020 and is unable to borrow funds to import electricity from other countries in the region, which previously partially offset the deficit.
According to allcountrylist, the Government of Zambia therefore supports the development of renewable energy sources. Zambia has very favorable natural conditions for solar energy, and is also experimenting with geothermal and wind sources.
The first two larger PV plants in Zambia were commissioned in 2019 and more are under construction. Feasibility studies for the construction of small hydropower plants are being carried out. Major foreign companies are involved in these projects, which are often supported by international financial institutions (World Bank, European Investment Bank, German KfW, etc.).
For Czech companies, this means the possibility of application in the supply of equipment and technologies, especially for solar and small hydro, but also wind, or geothermal power plants. Due to ongoing power outages, there is a significant demand for backup sources such as diesel generators and, more recently, the increasingly popular inverters.
Entertainment and leisure
Although the covid-19 pandemic has fundamentally slowed down the dynamic development of tourism in Zambia in recent years, it still remains one of the three main priorities of the national development strategy. Zambia offers similar natural attractions to the surrounding countries, but the number of foreign tourists is still relatively low in comparison.
A significant part of the country’s nature reserves is still very little visited, so this sector continues to offer significant growth potential. The basic prerequisite for its use is the development of tourist infrastructure, both in terms of quantity and quality.
In addition to the construction of access infrastructure (roads, local airports and their equipment), it involves the construction of accommodation facilities, the development of the hotel industry, gastronomy and related services.
The development of agritourism is also supported by some important foreign donors with regard to the protection of forests and biodiversity, especially the EU, which has set “green” recovery after the covid-19 pandemic as a top priority for the period 2021-2027. Thus, the possibilities of using various programs in this area are offered.
Healthcare and pharmaceutical industry
The covid-19 pandemic has fully revealed the completely inadequate state of the Zambian healthcare system, which is faced with a fundamental lack of technical equipment, medicines and professional personnel. The state healthcare system has been significantly underfunded for a long time and does not offer standards approaching healthcare in developed countries, the situation is slightly better in private healthcare facilities.
However, the demand for better health care is growing with the growth of wealth and the expanding middle class among Zambians, another impetus was precisely the covid-19 pandemic, which significantly complicated trips abroad for medical care (traditionally most often to South Africa).
Czech manufacturers and distributors of medical technology and material have a chance to apply themselves in supplies for private clinics, several state hospitals financed from abroad are also in the stage of preparation or construction.
A good reference for Czech companies in this direction can be the first delivery of Czech medical technology to the largest Zambian hospital, implemented in 2021 with funds from the Czech Republic’s foreign development cooperation.
Agricultural and food industry
Zambia has vast areas of uncultivated agricultural land, significant groundwater resources and a favorable climate. However, the problem is the small diversification of agricultural production, the lack of mechanization, artificial irrigation and other techniques.
The downstream food industry is very underdeveloped. Zambia is therefore forced to import a significant part of domestic consumption, especially products with higher added value, most often from South Africa. However, the covid-19 pandemic has brought complications for supplies from abroad, on the one hand, and a drastic weakening of the Zambian currency, which makes imports disproportionately more expensive.
In Zambia, there is therefore a growing interest in domestic production on the part of consumers, agricultural associations and relevant state institutions. The governments of South Africa and Zambia have agreed to work towards increasing the representation of Zambian foods in the offer of large South African retailers who dominate the Zambian market.
In Zambia, for the above reasons, the demand for a wide range of agricultural machinery, both for large and small farms, irrigation systems, as well as fertilizers and other chemical products used in agriculture, is growing rapidly.
A wide range of technologies and equipment can be used in the food industry, such as packaging and filling machines, storage and transport equipment, cooling and freezing technology, etc. The import and production of alcoholic and non-alcoholic beverages is also booming, so there is potential for suppliers of equipment for these production operations, including brewing and distilling technologies.
Currently, several development cooperation projects are underway in Zambia with the help of the Czech Republic, which are aimed at strengthening the access of small and medium-sized farmers to the market, diversifying and improving the quality of their production and generally improving the situation of the population, especially in agriculture and in the countryside.