Africa’s second largest copper producer Zambia grew 5.1% in the third quarter of 2023. This was according to the Zambia Statistics Agency in its December inflation review report. This compares to 5.7% and 4.4% in the second and first quarters respectively. Earlier in the third quarter the ministry of finance in its medium term expenditure framework had projected a 2.7% overall FY23 growth due to forecast headwinds namely a plummet in mining production set to hit a 14 year low this year and climate risk concerns poised to affect hydro power generation and agriculture output. This was then followed by an upgrade by the central bank announced in its last monetary policy committee communique that Zambia would expand 4.3% in 2023 supported by transport, mining and the financial services sectors.
Major drivers of this third quarter expansion in gross domestic product growth accounting for 85% of the number were information communication and technology sector that grew by 19.6%, education which expanded by 15.1% and construction sector 12.9% expansion.
The technology boom and education reform were fueled by a deliberate national digitization agenda across key sectors as an enabler, free education coupled with rising demand for tertiary education beyond what the public universities can provide. This continues to boost demand for private schools and universities and is giving education a positive cue in contribution.
Zambia’s construction sector is on the rebound especially post pandemic in part supported by demand for housing and other infrastructure initiatives ranging from roads to hotels and lodges. The market continues to see a resurgence in the sectors momentum after a period of depression. The arts and entertainment sectors leaped 64.9% while the financial services headlined 11.5% in expansion as hospitality grews by 10.9%.
The Southern African nation is on the downside exposed to environmental risks ins erratic precipitation manifesting in agriculture and power contractions of -7.9% and -1.1% respectively as manufacturing slowed to 0.3%.
After a shaky start in the year as operational hurdles impacted mining leading to consecutive contractions, the sector registered modest 1.8% growth in 3Q23, signaling recovery a potential sector resurgence. This is supported by empirical evidence of lowest declines in copper export and revenues in four quarters, due to continued investment which will support stronger positive growth in red metal exports by early 2024. Positive mining trends will support to the tax authorities propel mineral royalty collections by 10% in 2024 after a 30% decline this year.
Higher than forecast growth is expected to add a wave of pressure to power generation which could accelerate load management. This could threaten growth resilience. Continued investments in mining, digital transformation and private education remain critical in sustain the growth surge.
Zambia’s better than expected growth figures and sectoral dynamics do pave the way for a resilient economic outlook. However tight monetary policy in the wake of persistently notorious inflation as a consequence of a weakening currency will likely keep the cost of money elevated in the medium term. The Southern African nation.
Zambia is now in an inflationary growth cycle as opposed to stagflation which supports a broad asset rally observed year to date.
The Kwacha Arbitrageur
