Thursday, August 21, 2008

Is Zambia the next China?

In the article, The Rise of Africa’s “Frontier” Markets, the IMF reports that several African countries are set to become the newest generation of emerging markets. So move over 1980’s-style emerging China, India, and Taiwan, and make room for 2000’s-style emerging Botswana, Ghana, Kenya, Mozambique, Nigeria, Tanzania, Uganda, and Zambia. Investors are interested.

What is an emerging market? Well, in 1980, the International Finance Corporation defined it as:

“developing countries with stock markets that were beginning to demonstrate the features of the mature stock markets in industrial countries. Emerging markets—which afford the opportunity to participate in economies through financial investments—have been identified in all regions of the world. In Africa, only South Africa so far has been seen as an emerging market.”

According to the article, the wider use of the term refers to an economy that has attracted investor interest based on a set of macroeconomic and financial fundamentals. Some sub-Saharan economies may soon be called “emerging” since they have experienced a surge in economic growth, where growth is led by the private sector. Public policy has recognized and accommodated the growth. Further, there must be a financial system where investors can put their money.

Zambia, a sub-Saharan country that shares a border with Angola, Democratic Republic of the Congo, Malawi, Mozambique, Namibia, Tanzania, and Zimbabwe, is a country that may be one of these new-age emerging countries in Africa. First, it shares similar economic statistics as the ASEAN (Association of Southeast Asian Nations) countries did in the 1980’s, when they were classified as emerging markets. Second, the central bank of Zambia, the Bank of Zambia (BoZ), recognizes the need for financial stability and has incorporated this need into its central bank mandate.
Zambia has experienced a surge in growth, which is necessary for emerging market status. The table illustrates that Zambia’s economic statistics in 2007 are similar to those emerging markets in 1980. Zambia is already growing at a 5.3% rate annually, and with an inflow of funds from foreign investors, growth could really takeoff.

Zambia has a financial system in place that encourages public trading of stocks, valued at $4.5b in 2007, and the central bank incorporates financial stability into its policy making process; both factors add to Zambia’s potential for emerging market status.

The BoZ’s official mandate is the following: Formulate and implement monetary and supervisory policies that achieve and maintain price stability and promote financial system stability in the Republic of Zambia. This is in contrast to the US Fed mission, which is to promote price stability and maximum sustainable growth, but necessary for its economic status.

Dr. Denny H. Kalyalya, the Deputy Governor Operations of the Bank of Zambia (Zambia’s central bank), indicated that public policy is recognizing and accommodating the growth. First, the Government of the republic of Zambia launched a 5-year Financial Sector Development Plan (FSDP) in 2004. Second, and in support of the FCDP, the BoZ initiated its Strategic Plan for 2008-2011 that strengthens the bank’s role in promoting Zambia’s financial system.

Could Zambia be the next China? It certainly doesn’t seem so now, and only time will tell. In 2007, per-capita GDP (income per person) in Zambia was $1,300. If Zambia continues to grow at the rate of 5.3% for the next 28 years, then per-capita GDP will rise to $5,520. China’s 2007 GDP per-capita was $5,300; something to think about.

Please leave comments. Best, Nontruths


  1. Heard just a couple days ago that the Chinese are heavily investing in African commodities like metals which will be in short supply in the near future. Are they a substantial part of this emerging market or is the beginning growth across all sectors?

  2. Very interesting -- especially if Zambia's per-capita GDP even halfs China's. These nations have had it so hard it's encouraging to hear them promoting financial stability. How are these African nations making their money? Despite the cliche diamond and chocolate industry, what is the current state of their industry? Obviously China is known for being extremely industrious, I'm interested to find out how these African nations will increase their revenue or exports to compete with the rest of the world.

  3. Hi you all, thanks for the comments!

    Some statistics about Zambia from the Bank of Zambia website:

    Major Tourist Attractions: Victoria Falls (one of the 7 natural wonders of the world); Kariba Dam (one of the largest man- made lake); Kalambo Falls (one of the deepest falls in the word); 19 National Parks and 34 game management areas as well as 23 million hectares devoted to the conservation of an amazing variety of wild animals and bird species. The country also holds a number of traditional ceremonies including the Kuomboka, Ncwala, Likumbi Lyamize, Shimunenga, Mutomboko.

    Some statistics from the CIA Factbook

    Exports – commodities (highest valued export products): copper/cobalt 64%, cobalt, electricity; tobacco, flowers, cotton
    Exports – major partners: Switzerland 34.1%, South Africa 20.4%, China 8.4%, Tanzania 6%, Italy 5.6%, Thailand 4.7% (2006).

    Thanks for reading!

  4. Again Rebecca, superficial analysis. 1 big problem for Zambia - landlocked w/o a coastline.

    The real story for Africa is going to be Angola.

  5. "1 big problem for Zambia - landlocked w/o a coastline."

    Agreed, but with talk of reform, it's certainly not destined to be Zimbabwe. There is absolutely no reason that Zambia would not benefit from strength in Angola, or commodity exports to the rest of the world. It all starts with reform.


  6. The title of your article reads - Is Zambia the next China?

    To which I responded - NO. The next 'China' in Africa - if defined by economic growth, w/b Angola - based on the fundamentals.

    Whether Zambia benefits from this or not is a wild assed guess on your part.....