There are reasons for my optimism

Tue, 27 Jun 2017 14:03:05 +0000

Two weeks ago, I went to a networking event, it had an electric inviting atmosphere and the usual snacks plus drinks to vacillate the stress of the day. The conversations were everywhere, the crowd was joyous and that buoyance signaled to me a sense of confidence re-emerging in Zambia. It was a confirmation that the liquidity outcry that had been a topic of 2016 had simmered.

On my way out, as I was saying my goodbyes to our hosts for this event, I met a lively lady with the hosts, who was also bidding her farewell. In the process of introductions, I mentioned this column, ‘the Industry Corner’, and I saw her face light up and she said, “You know we were discussing you with my colleagues and the optimism in your articles about the state of the economy made us wonder whether you were living in the same country as us. I admitted that I am factually optimistic and that when I look at the statistics they confirm my optimism. We laughed about it and said our goodbyes and we were on our separate ways.

On my way home, I reflected on the conversation and an article I wrote on 6 June 2017, wherein I noted as follows; “the recent past has brought forth a multitude of good news largely ignored. For instance, reports suggest the energy generation capacity in Zambia has improved to almost 1,600MW, notwithstanding that the electricity tariffs have increased. However, the focus of the social news outlets was of the immediate burden, rarely about the optimism that can now be associated with the energy sector.”

And so I became motivated to rewrite that article and perhaps from another angle, to expand on the reasons for my optimism. I hold the view that if we Zambians work hard, reimagine the future we want and infuse that with an idealistic optimism, the world will be our oyster because the events that need to support Zambia’s economic growth are emerging.

In January 2017, Bill Gates wrote that Africa was one of his favorite places to go for a fresh perspective on how the world was improving.  That although 2016 was a tough year for many African economies, almost every trend on the continent has been moving in the right direction over the last decade. “Per capita income, foreign investment, agricultural productivity, mobile banking, entrepreneurship, immunization rates, and school enrollment are all heading upwards.”

That was Bill Gates and so I was happy to share his optimism for Africa and in my case for Zambia. Afterwards, I read a speech that President Akinwumi A. Adesina of the African Development Bank gave on 28 March 2017 to the International Conference on the Emergence of Africa in Abidjan, Ivory Coast. He said and I have underlined it. “That we must be very careful of the purveyors of doom and gloom for Africa, despite a tough global economic environment, African countries posted resilient growth”. He pointed to the African Development Bank’s estimates which showed that African economies grew by 2.2% in 2016, and that 12 African countries grew by over 5% in 2016 and 20 African countries grew between 3-5% despite a global environment dragged down by recession.

But it is what he said next that caught my attention. That there was no doubt in his mind that the future belonged to Africa based on the fact that by 2050, Africa will have the same population as China and India combined today, with rising consumer demand from a growing middle class. That the cities will be booming, as the number of urban areas with populations of millions of people increase. That if we harness these potentials, Africa will be unstoppable. He pointed to the need for accelerated implementation of what he termed the “High 5s”: 1) Light up and power Africa, 2) Feed Africa, 3) Industrialize Africa, 4) Integrate Africa, and 5) Improve the quality of life for the people of Africa, and stressed that at the top of the list is electricity.

He advised that Africa cannot grow in the dark and that we must move faster. “Just imagine an Africa with lights everywhere. Businesses will boom. Factories will chunk out products. Africa’s cost of doing business will drop and the continent will be competitive. This will spark innovation. Jobs will be created everywhere, especially for the youths. An electrified Africa will be an unstoppable Africa. Then, Africa will truly be free economically to join the league of industrialized nations.”

That is the lens with which I see this country. Every macro-economic indicator is telling me a view. Every right project pursued confirms that view.  Some of the positive areas that support this view are;

1. a) Information availability

One of the biggest challenges in the past was the lack of publicly available current information to guide potential investors. But just last week, STANBIC launched a private sector index known as purchasing manager’s index to provide a comprehensive suite of economic indicators in the country that will enable policy makers and businesses to make well informed decisions. Its implementation suggests that STANBIC as a group has an optimistic long-term outlook about this country. Equally, we have seen an improvement in the availability of statistics and research from the Bank of Zambia website as well as other organisation. This will bode well for Zambia in the long run.

1. b) E-government initiative

In the past, it was difficult to expect with confidence that the various Government ministries were complementing each other’s efforts. Now that the government has embarked on extensive computerization including the establishment of an e-procurement system, implementing an Integrated Financial Management Information System Project, Payroll Management and building of Local Area Networks to establish an E-Government system, which will likely increase efficiencies and a more coordinated government.

1. c) Development

initiatives

On 26 July 2017, the Luapula Province administration will be hosting a first investment initiative working with all Members of Parliament from Luapula to woo over 300 local and foreign investors who might be interested to invest in Luapula province. The expo is expected to showcase the natural endowments in Luapula Province in a bid to encourage investors to invest in the region. We do not yet know how successful this event will be, but it is encouraging that there is a shift, a mindset shift that our elected officials are looking beyond the government coffers when seeking development.

1. d) Strides in the Energy Sector

In the energy sector, there are various active projects that are being pursued and which have been enabled with the increase in electricity tariffs. Some of the key ones are;

1. On 22nd March 2017 the government launched a US$4 billion 2,400mw Batoka Gorge Hydro-Electric Scheme implementation process and held an international investor conference in Livingstone on 30th March, 2017, aimed at mobilising resources for the Batoka Hydro-Electric Scheme, which is a joint venture with neighbouring Zimbabwe. This project has attracted a lot of interest based on public reports from this international investor conference in Livingstone. There is reason to hope.
2. On 22 June 2017, the Minister of Finance noted that the Government has embarked on a programme to diversify the energy sector by establishing the first-ever 400 megawatt gas-powered plant in Chinsali district, Muchinga Province, at a cost of US$900 million, with capacity for expansion. This project has yet to be financed, but there is no reason to believe that this project would not attract private sector financing if properly structured given the available Zambian and Tanzanian market.

Further in March 2017, we learnt from the Minister of Mines that consultants engaged to conduct oil and gases exploration in Luapula and Northern Provinces had indicated presence of hydro carbons in the two blocks, which bodes well for finding of oil deposits.

There are many more ideas and projects that are actively being pursued, too numerous to mention here, that it is reasonable to conclude that If they are all funded and implemented, the multiplier impact on the economy will be more than we have seen in our lifetime. It is also worth noting the political will that has been made apparent in the last few weeks to develop the energy sector and certainly the energy sector’s outlook in 2017 looks much different than it did in 2016.

1. e) Concurrent African Indices

These recent news events above, the current macro-economic stability and the revised GDP growth projection by the World Bank to 4% in 2017 point to this country being a very attractive investment destination and the Africa indices support that view.

The Africa Investment Index (AII) developed by the Quantum Global Research Lab, which aims at providing an investment guide to investors in Africa, about which countries are most attractive for investments, covering all 54 countries in Africa ranked Zambia as the fifth ranking African country in terms of its attractiveness for investments.

Similarly, the EY Africa Attractiveness Index (EY AAI) which measures the Foreign Direct Investment (FDI) attractiveness of 46 African countries ranked Zambia 15th in terms of its attractiveness for foreign direct investments, an improvement from the previous ranking of 16th in 2016.

All of the above factors suggest business unusual, a Zambia that is ready to emerge and perhaps you will agree that my optimism is not without a basis.

About the Author

Kelvin Chungu is an Associate Director in the Assurance, Advisory and Business Development Service lines of EY Zambia and he can be contacted on 0976-377484.