Zambia’s credit rating is currently CCC, and deemed negative by Standard & Poor’s. However, Moody’s has given Zambia a stable outlook with a Ca rating, while Fitch reported Zambia at CC. These international ratings agencies are important insofar as they relate to foreign investor sentiment for the country. A negative rating effectively means that Zambia has been deemed a credit risk, and this impacts the country’s ability to attract FDI (Foreign Direct Investment), and loans at favourable interest rates. Updated ratings are expected in coming months, since the last credit rating by Fitch on 16 April, 2020.
Zambia’s gross domestic product (GDP) has plunged spectacularly since 2017 when it was measured at $25.87 billion. It increased to $27.01 billion in 2018, before declining to $23.06 billion in 2019. The fluctuating performance of the Zambian economy is typical for many developing countries, under current market conditions. When developed nations across Europe, the Americas, and Australasia are prospering, capital flows tend to be shared among these countries, with overflow moving to developing countries. However, a global downturn in 2020, precipitated by the pandemic has effectively shuttered economic activity for many developing countries, Zambia included. Indeed, in May 2020, Zambia sought International Monetary Fund (IMF) assistance for additional lines of credit. The countries already steeped in public debt, and the shutdown which ensued has placed additional burdens on the country.
A Country in Flux – Growing Internet Adoption Despite an Economic Slowdown
The country has been marked by increasing population use of the Internet, in recent years. Sharp growth has been reported since two 2010, when an estimated 10% of individuals across the country use the Internet. This increased to over 25% by 2017. The Internet penetration rate in Zambia is a major driver of economic growth and opportunity, facilitating increased communication, connectivity, and engagement across rural and urban areas of the country, and internationally too.
With a population of just 15 million people +, Zambia is well-positioned to provide Internet access to the entire country, although the majority of people in the country are rural. Increasing Internet adoption is evident in a growing number of casino games online for money at top-tier providers abroad. The infrastructure of the country is equally troubling, much like South Africa’s ailing electricity parastatal, Eskom. The International Monetary Fund anticipates a 3.5% contraction this year, from a modest growth rate of 1.5% in 2019. According to the African Development Bank (ADB), the health sector is bearing the burden of the current predicament, with thousands of cases to contend with. Zambia’s economy may well contract by an estimated 4% – 6.5% this year, but is expected to recover in the region of 4.8% in 2021.
Key Drivers of Economic Growth
The key drivers of economic prosperity in the country are tourism, mining, construction, and manufacturing. Another sector showing promise in Zambia is the tech entrepreneurship ecosystem. While underdeveloped, there is tremendous potential for growth in academia, business, information exchange, et al. Current studies reflected the Zambian network density is around 0.373/1, with 1 being the maximum Internet connectivity. Therefore, investment in this area will drive growth and fuel development of Zambian tech entrepreneurship.
Prior to the slowdown in 2020, Zambia’s economy has shown remarkable robustness. Growth rates of 5.5% of the past decade were recorded. With a young and impressionable populace, adoption of new technology is much easier in Zambia, given that 35% of the population ranges in age between 15 – 35. An entrepreneurial flair, and an affinity for all things technically oriented, there is no doubt that Zambia will power ahead into the future.