13 December 2012

Zambia: 2011 Foreign Direct Investment Slumps

ZAMBIA recorded US$1.1 billion in Foreign Direct Investment (FDI) inflows in 2011, which is about 36 per cent lower than the $1.7 billion recorded the previous year.

The stock of FDI grew by 9.8 per cent to $10.9 billion in the same period.

Bank of Zambia (BoZ) Governor Michael Gondwe has said the 35.9 per cent fall in the investment inflows in 2011 were as a result of the uncertainty associated with last year's general elections, particularly for new investors.

The primary data, however, shows that the foreign private investment inflows recovered in the second quarter of 2012, reflecting renewed optimism by investors in the Zambian economy.

According to a survey conducted by BoZ in conjunction with the Central Statistical Office and Zambia Development Agency on private investment and investor perception in Zambia - 2012, foreign private capital inflows to Zambia in 2012 declined to $1,280.5 million from $2,116.5 million in 2010.

Officiating during a dissemination workshop for the findings, Dr Gondwe said investors had retained a high level of confidence in the Zambian economy.

"The retained earnings component of FDI, however, grew by 10.2 per cent in 2011, reflecting continued confidence of existing foreign investors in the Zambian economy," he said.

He said Zambia had continued to maintain a policy environment aimed at fostering private sector-led growth which was conducive for FDI inflows noting that now investors maintained high levels of confidence in the economy.

"They are particularly impressed with the sustained robust economic growth, favourable political environment, and financial system stability.

"The prospects for foreign private capital flows to Zambia are, therefore, bright, given Government's commitment to policy consistency, maintaining macroeconomic stability and addressing the cost of doing business through, among other things, infrastructure development," Dr Gondwe said.

He said FDI inflows were critical to facilitate economic growth and job creation, and that FDI was likely to contribute positively to the exchange rate stability, and tax revenues and technology transfer.

He commended the Government for efforts aimed at reducing the cost of doing business in Zambia.

Presenting the quantitative survey findings of foreign private investment in Zambia, BoZ director-economics Mulenga Pamu said following the positive trends in the second and third quarters of 2012, FDI made prospects in the medium term bright.

Zambia was likely to continue attracting FDI inflows in the mining, manufacturing, energy, construction and tourism sectors.

Dr Pamu said FDI inflows in the mining, tourism and manufacturing sectors were likely to be dominant given the Government's strategy to attract and facilitate investment through infrastructure development and establishment of Multi Facility Economic Zones.

During the year under review, the capital inflows were dominated by FDI, amounting to $1,108.5 million and accounting for 86.6 per cent of total inflows, followed by other investments at $267.0 million.

That was followed by foreign portfolio equity investment, which recovered to $24.6 million from $1.6 recorded in 2010.

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