Hakainde Hichilema hopes to stabilise the economy with an IMF bailout and encourage foreign investment.
The victory of Zambia’s opposition leader Hakainde Hichilema in the country’s presidential election last week provides the businessman with the opportunity to stabilise the economy of Africa’s second-largest copper producer and encourage foreign direct investment (FDI).
On August 16, the country’s electoral commission declared Mr Hichilema the victor with more than 2.8 million votes, compared to then incumbent Edgar Lungu’s 1.8 million votes. In a televised address, Mr Lungu said he would “comply with the constitutional provisions for a peaceful transfer of power”, easing concerns that he would challenge the result.
The Zambian kwacha jumped in value against the US dollar following the announcement.
The election was fought against the backdrop of the country’s worst economic crisis in decades, including a default on billions of dollars of debts. One of Mr Hichilema’s priorities will be to conclude talks for an International Monetary Fund bailout and make deals with creditors to resolve more than $12bn of external debts that are destabilising the country’s economic recovery.
The difficult economic backdrop and the impact of the Covid-19 pandemic led to a 58% year-on-year drop in financial services FDI capital expenditure in 2020, according to FT-owned greenfield data monitor fDi Markets.
Sri Lanka-based conglomerate LOLC Group, which is mainly focused on the financial sector, was the only foreign investor in the sector in 2020. The group invested $28.5m on three projects; it created 66 jobs opening three branches in different parts of the country. Its subsidiary, LOLC Finance Zambia, will offer home loans, motor vehicle finance, and business and consumer loans to the domestic market.
In 2019, financial services FDI into Zambia was behind four projects, creating 158 jobs with a total capital expenditure of $67.3m. The investments included UK bank Standard Chartered’s Zambian subsidiary opening a new head office in Lusaka; the Zambian subsidiary of Nigeria’s Access Bank opening a branch in Solwezi; and Atlas Mara Bank Zambia opening a branch in the Zambezi district located in North-Western Province.
Trends identified using fDi Markets, a comprehensive online database of cross-border greenfield investments, covering all countries and sectors worldwide. Contact us.
