By Dr. Joseph Phiri and Margret Mbewe
13th May 2025
In the recent past, Zambia has demonstrated notable resilience against the odds. The IMF has reaffirmed this, indicating that the economy is likely to achieve its 2025 growth projection of 6.6%. Whilst facing a looming debt crisis, which was only recently resolved, and a severe drought, the macroeconomic environment was turbulent. In defiance, the economy rebounded particularly in 2023 and 2024 recording annual GDP at 5.3 percent and preliminary 3.9% respectively, with quarterly growth rates highlighting this resurgence. Notably, in the fourth quarter of 2024, preliminary GDP grew by 8.6%, marking a significant recovery from the previous quarter at 3% and an improvement from 7.8% in the fourth quarter of 2023.
Likewise, Moody’s recent upgrade of Zambia’s economic outlook from “stable” to “positive” adds to a growing sense of international confidence in Zambia’s macroeconomic trajectory. While the growth outturn for 2024 was fair, the outlook for 2025 is better, and the credit rating is positive, caution is warranted as the underlying sources of this growth remain unsustainable. This is because of its dependency on the extractive sector and vulnerability to shocks, including global commodity prices and climate change. Therefore, beneath the economic optimism lies a stark reality: Zambia’s structural transformation has lagged, stifling growth, as revealed by ZIPAR’s Country Economic Transformation Outlook (CETO) study.
The CETO reveals that, Zambia, a country which once upon a time was among Africa’s most industrialised nations pre-millennium, lags on Zambia’s structural transformation, with an African Transformation Index (ATI) score of only 18.4% on the 2022, a five percentage points decrease from its performance at the start of the millennium. The ATI, developed by the African Centre for Economic Transformation (ACET), measures a country’s level of complete transformation. Thus, the CETO underscores the elusiveness of Zambia’s economic transformation if persistent structural weaknesses are not addressed with expediency and coherence.
Guided by the DEPTH framework, emphasizing diversification, export competitiveness, productivity increases, technological upgrading and improved human wellbeing, the Zambia CETO highlights key challenges and opportunities for Zambia. The challenges identified include outdated trade systems, low industrial complexity, and chronic underperformance in value addition. Further, inadequate quality standards, skills mismatches, weak rural participation—especially among women—and limited technological integration continue to undermine the country’s competitiveness. To rise in the ATI rankings and achieve sustainable development, Zambia must confront these challenges head-on.
Firstly, revamping Zambia’s industrial policy is imperative to enhance value addition. ZIPAR highlighted the country’s weak value chain development and lack of supply chain integration. A modern industrial strategy that efficiently targets strategic sectors, particularly mining, agriculture, agro-processing, energy, and ICT, where Zambia has latent potential. Further, industrial policy should be linked to provincial comparative advantages—for instance, cassava in the Northern Province, copper in the Copperbelt, and sugarcane in the Southern Province—to operationalize a “One Province, One Product” model. This decentralisation aligns with localised growth that feeds into national transformation.
Secondly, ZIPAR identifies inefficient trade systems as a major bottleneck. Streamlining Zambia Revenue Authority (ZRA) should adopt procedures for reducing customs delays, lowering transaction costs and increase competitiveness within regional markets, particularly under the African Continental Free Trade Area (AfCFTA). Simplified trade protocols, especially for SMEs, would help unlock the export potential of Zambia’s emerging industries. While Zambia has established several simplified trade regimes and facilitation tools, including the COMESA-Simplified Trade Region and the Authorized Economic Operators programs, the primary bottleneck remains the effective implementation of these systems. Strengthening inter-agency coordination, investing in necessary infrastructure and technology, and building capacity among stakeholders are crucial steps to fully realize the benefits of these trade facilitation measures.
Thirdly, ZIPAR underscores Zambia’s vulnerability to climate shocks and calls for green growth strategies. Integrating climate-resilient farming practices, promoting rainwater harvesting, and scaling up biofuel production from local crops such as cassava and corn are immediate entry points. The report identifies opportunities for adopting sustainable energy models—such as biogas and briquettes—based on successful case studies from Brazil and Indonesia, which could enhance on the implementation of the country’s National Green Growth Strategy.
Further, digital inclusion and human capital development are prominent features of the study. The country must accelerate investment in rural ICT infrastructure and further enhancement of the education curricula to align with industry needs. This includes vocational training tailored to priority sectors and digital literacy programs that bring women and youth into the formal economy. Formalizing informal work through digital platforms could significantly raise productivity.
The CETO study underscores the need for strategic foreign direct investment (FDI) and technology partnerships with an emphasis on high value sectors. To this end, Zambia should proactively engage investors in high-impact sectors. The partnership between Rwanda and Volkswagen to establish a car assembly plant offers a useful case study. In Zambia’s context, given Toyota’s growing interest in the country’s energy sector, key lessons can be learned to enable similar public-private collaborations that could catalyze industrial diversification in areas such as the transportation sector.
Furthermore, the study points to untapped mineral potential, particularly tantalum and manganese among others, which Zambia can leverage to penetrate global high-tech value chains. With targeted investment, Zambia could become a supplier of key inputs for electronics, surgical tools, and electric vehicles to global markets like the EU, China, and the USA. This would mark a shift from exporting raw materials to exporting value-added goods and furthering Zambia’s diversification agenda.
Lastly, ZIPAR stresses the need for inclusive transformation. Women in rural settlements and informal sectors face systemic barriers to economic participation. Therefore, addressing these barriers through dedicated access to finance, value chain inclusion, removal of barriers to entry, and skills development must become a cornerstone of national policy. Gender inclusion is not just socially imperative but economically transformative.
In conclusion, Zambia’s economic rebound provides a unique opportunity to reset its long-term development agenda. The insights from the CETO study offer a candid diagnosis of the nation’s challenges and point to actionable solutions. Notwithstanding, political will, institutional coherence, and citizen participation are imperative to fully realize these solutions. By embracing smart reforms and inclusive strategies, Zambia can finally unlock the structural transformation it has long aspired to and chart a sustainable path from promise to prosperity