QUESTION 1.

Introduction

This part of the assignment provides complete information about the important
elements/components of business environment in Zambia. The information will help us have a
clear understanding of the Zambian business environment. Understanding the working of the
economy would help everyone of us but especially managers or any other decision makers to
make informed decisions as regards to any changes that may happen in the business environment
of Zambia. Also this information will provide as highlights to those interested in doing business
in Zambia. It does not cover the subject exhaustively but is intended to answer the important
questions “ what are the important elements of business environment in Zambia”.
Zambia - Key statistics

Zambia is a landlocked country in the Southern Africa sub-region. It is bordered by Tanzania in

the North East, Malawi in the East, Mozambique in the South-East, Zimbabwe in the South,
Botswana and Namibia in the South-West, Angola in the West and the Democratic Republic of
Congo in the North.

Population (millions): 16.6 million

Land mass: 752,614 sq. km

Primary exports: Copper & Cobalt

Currency: Kwacha

Inflation rate per annuam (2016) -17.9%

Zambia’s economy has experienced strong growth in recent years, with real GDP growth of
more than 6% per year for the past five years. (deloitte –zambia, 2013),

The Zambian Government took advantage of the current low level of inflation and relatively
stable economy to rebase the Zambian currency by dividing every denomination by 1,000,
effective 1 January 2013.The Zambian economy has historically been based on the copper
mining industry. Privatization of government-owned copper mines in the late 1990s relieved the
Government from sustaining mammoth losses generated by the industry and greatly increased
copper mining output and profitability to spur economic growth. However, the Zambian
Government is undertaking economic diversification to reduce the economy’s reliance on the
copper mining industry and exploit other components of Zambia’s rich resource base by
promoting agriculture, tourism, gemstone mining, and hydro-power. According to the research
done by (deloitte –zambia, 2013), the Zambian’s economic performance over the past decade
has been impressive, driven by: Improved macro-economic management. This has resulted in
general economic stability in contrast to pre 2000 years of significant foreign exchange rate
volatility, high inflation, rapid currency depreciation and high interest rates.

Zambia has the potential for further economic diversification and growth, with economic policies
aimed at encouraging sustainable economic growth and creating a vibrant private sector and
enabling environment for domestic as well as international investors(mcti.gov). The rebuilding
of the country’s social and physical infrastructure is also key, both for economic development as
well as Government’s poverty reduction strategy. The country’s economy experienced growth
and increased stability with the resumption of support from the IMF following the approval of a
three-year Poverty Reduction Growth Facility (PRGF), which ended in the year 2007. Since
then Zambia has put across a lot of initiatives to enable its economical growth. For instance, the
Private Sector Development Reform Programme (PSDRP) a framework of the Government of
the Republic of Zambia aimed at reducing the cost of doing business in the country and
encouraging competitiveness in the private sector was launched in 2005 with the purpose of
promoting investment in the private business sector. The cost of doing business in Zambia was
too high, effecting foreign and domestic investment. This brought in the collaboration between
PSD, the Zambian government and the private sector, to promote quality of service and private
investment by addressing numerous issues involving finances, infrastructure, and bureaucracy.
Some of the PSD initiatives recent successes include reducing the amount of time it takes to
register a company, speeding up the border clearance time, and a large reduction in the number
of licenses required to start and operate a business in Zambia.

In the past years , the Zambian government has partnered or signed a Memorandum of
Understanding with a lot of organizations that have agreed to partner so that they can give a hand
to developing economies to overcome challenges that Zambia faces in accessing world markets.
e .g UNIDO the JITAP and the WTO and many other partnerships were established to develop
the system to enable connectivity to the global market and integration into the multilateral
trading system . Through projects in the Zambian Ministry of Commerce, Trade and Industry
(MCTI)the government is being assisted by; 1. reviewing the overall organizational framework
relating to metrology, standards, accreditation, inspection, testing and certification, i.e. the
National Quality Infrastructure (NQI), including the related legislation.  2. the upgrading of
facilities of the National Quality Infrastructure (NQI) institutions such as, but not necessarily
limited to, the Zambia Bureau of Standards (ZABS) and the Zambia Weights and Measures
Agency (ZWMA) under MCTI and the Food and Drug Control Laboratory under the Ministry of
Health (MoH) to improve especially the food sector’s ability to prove conformity and hence
facilitate exports.  3. the project endeavors to strengthen the ability of selected sector enterprises
to comply with international quality requirements creating a demand pull factor for the upgraded
TBT and SPS compliance infrastructure.(mcti.gov)

In 2016 following another year of low copper prices and crippling electricity supply deficits
affecting economic activity, Zambia faced economic challenges. Immediately the new
government took office in September 2016 , it started implementing its economic reform
programme that aspires to expand growth and restore budget credibility while reducing the fiscal
deficit.(AEO, 2017)

Job creation guided by an Industrialisation Strategy is a key priority of the government as

Zambia still retains a low formal employment base of just 11% of total employment.The
government launched its Jobs and Industrialisation Strategy in 2013 as an important initiative to
diversify the economy and reduce vulnerability to mining. It is noteworthy that foreign direct
investment in manufacturing surpassed mining for the first time in the past decade in 2015. This
could be an indication that non-mining investors are looking to Zambia that offers, by regional
standards, a stable investor environment.(AEO,2017)
poverty remains a significant problem in Zambia with approximately 60% of the population
below the poverty line, despite a stronger economy. However, the medium-term economic
outlook appears favourable, with inflation projected to remain in single digits. The current
inflation rate is estimated at 6%.
Past trends in economic performance

Since 2004, Zambia has undergone improved macro-economic stability in contrast to previous
years of significant foreign exchange rate volatility, high inflation, rapid currency depreciation,
and high interest rates.

In 2005, Zambia qualified for significant debt relief under the World Bank’s Highly Indebted
Poor Countries debt relief initiative. The Highly Indebted Poor Countries relief has provided
Zambia with a major impetus for sustained economic growth. GDP now stands at US$20 billion,
nearly double what it was in the mid 2000s.Despite the recent adverse global economic
conditions, Zambia has continued to experience strong output performance. In 2011, GDP grew
by 6.8%. GDP growth has continued to remain resilient with a growth of 7% forecast for 2012.

Inflation has declined significantly from c.18% in the mid-2000’s to c.6% in 2012.

Further, Zambia’s exchange rate has remained relatively stable over recent years, with the
currency depreciating by less than c.7% between 2008 and 2012.

This low level of inflation and relatively stable exchange rate provided the country’s Central
Bank, BOZ, an opportune time to rebase the Zambian currency by dividing every denomination
by 1,000, effective 1 January 2013.
In September 2012, Zambia had a successful maiden entry into the international bond market
through the US$750 million bond issuance with a coupon of 5.375%, one of the lowest prices
ever for an inaugural issue by a Sub-Sahara African country.
Zambia’s economic outlook appears bright, on the back of increasing investments in various core
sectors of the economy

According to the EIU, Zambia’s economic growth trajectory is expected to continue at a robust
annual rate c.7% over the period 2013 to 2016. The growth will be led by increasing investments
in mining, agriculture, power and construction:

Growth in mining is expected to accelerate in 2014-15 as investments at the Kansanshi,

Lumwana and Konkola mines, as well as First Quantum’s new Trident mine, approach
completion.

Agricultural production, especially of the country’s staple food, maize, looks set to be strong in
2012-13 supported by Government’s continued efforts to assist the sector yield results
Based on current planned projects, Zambia’s power generation capacity may increase to c. 4,700
MW over the next 5 years, from the current c.1,800MW.
Road infrastructure is projected to improve significantly as a five-year US$5.6 billion project to
upgrade approximately 8,000km of road network (20% of the country’s road network) is
implemented, under the Link Zambia 8,000 Programme.
Construction growth will be driven mainly by planned investments in mining, power and the
road network

The Kwacha’s value is expected to be supported by robust growth in copper production levels
over the period to 2016, significant Foreign Direct Investment (“FDI”) and public borrowing
(e.g. the successful bond issue of US$750 million in September 2012).
Inflation which averaged 8.3% in 2011, is forecast to decline further, averaging c.6.4% over the
period 2013 to 2016
As part of the newly formulated National Strategy for Industrialisation and Job Creation, the
Government has identified four priority areas of focus for growth and job creation; namely,
Agriculture, Tourism, Infrastructure and Manufacturing. Under this initiative, the Government
aims to create approximately one million new jobs over the next five years.

Zambia has a vast endowment of metals, gemstones, industrial minerals and potential energy
resources including coal, hydrocarbons, and more recently, uranium. Zambia is one of the
world’s largest producers of copper and cobalt. It also has considerable reserves of selenium and
silver, in addition to minor quantities of gold.The outlook for mining looks bright, with sector
growth expected to accelerate over the next three to four years. Based on current pipeline of
major investments, Zambia’s copper output could almost double by 2016. On the pricing side,
although copper prices weakened somewhat in 2012, most forecasts indicate that copper prices
will remain robust over the medium term, driven by demand. However, there are a number of
significant projects currently underway, which are expected to transform the copper mining
landscape in Zambia
According to (ZDA)Zambia’s agricultural sector accounts for 21% of GDP, with the balance
coming from industry (35%) and services (44%). It is estimated that the agricultural sector
employs about 70% of the population and the sector has immense potential to drive economic
growth, given the country’s vast expanses of arable land and free flowing easily accessible water
supplies: in this regard government has embarked on a number of initiatives to improve yields,
including:
 Investment in training of small scale famers;

 Investment in research and development; and

 Promotion of local production of key inputs such as fertilisers and seeds.

 Promoting agriculture is one of the Governments key strategies to diversify the economy
from over reliance on mining. Agriculture related incentives include:
 Agricultural activities currently enjoy concessionary corporation tax rates of 10%
compared to the standard rates of 30% – 35%;

Zambia has abundant hydroelectric resources and has historically met most of its electricity
needs from its own hydroelectric stations, which are operated by the state-owned ZESCO
Limited (“ZESCO”).

Improvements in the financial services regulatory framework coupled with improved macro-
economic stability have had a positive impact on Zambia’s financial system over the recent past.
Among the group of seven foreign banks, three large banks (Barclays, Standard Chartered and
Stanbic Bank), play a dominant role in Zambia’s financial system.
Currently, there are 33 micro-financial institutions in Zambia excluding leasing, building
societies and bureau de change, which all fall under the non-bank financial institutions category.
(ZDA)
BIBLIOGRAPHY

 African Economic outlook (AEO) 2017

 Deloitte – Zambia 2013 – Doing business in Zambia a unique flavor
 ZDA – 2015 – Zambia Development Agency - Doing business in Zambia
 ZDA – 2013 - Zambia Development Agency – Cost of doing business in Zambia
 PACRA -  Patents and Companies Registration Agency
 mcti.gov.zm – Ministry of Commerce, Trade and Industry
 wwwfocus-economics. Com – Zambia Economic outlook
QUESTION 2.

INTRODUCTION.

Enterprises should do business in flexible and innovative manner. They should also strive for
constant improvement of their business. Above all they should have strategy to capture larger
share of the market in relation to their competitors. Competitive analysis of a single enterprise
business success is based on the analysis of the related business industry. In other words, a
marketing strategy development is based on the industrial strategy analysis results, which
provides insight into the possibilities of business venture success within the specific business
sphere. The insight into the aforementioned possibilities helps define the ways of creating
competitive advantage (Porter, 1980). In the early 1980s, Michael E. Porter developed the most
influential industrial structural analysis model, thus having significantly contributed to the
general theory of competitiveness and competitive advantage.

Porter’s model is used to analyze risks and opportunities of doing business in any industry by
considering competiveness of that particular industry (Baines et al 2008). These are, as follows:
Threat of new entrants, Bargaining power of buyers, Bargaining power of suppliers,
Threat of substitute products and Rivalry among existing firms. The mutual influence of the
five competitive forces determines both potential for profit and differences between industries in
relation to the amounts of profit. Therefore, the purpose of industrial analysis is to determine the
best marketing strategy for the specific enterprise. Or, in Porter’s view (1980), the competitive
strategy of enterprises should define the most lucrative market position for them.
 1. Threat of New Entrants.

This force examines how easy or difficult it is for competitors to join the marketplace in the
industry being examined. The easier it is for a competitor to join the marketplace, the greater the
risk of a business's market share being depleted. Barriers to entry include absolute cost
advantages, access to inputs, economies of scale and well-recognized brands.

For example an Enterprise can consider to increase capital costs to improve branding,
advertising and creating product demand, and hence limits the entry of newer players in the
market.

2. Bargaining power of buyers.

This force looks at the power of the consumer to affect pricing and quality. Buyers have the
power to demand lower price or higher product quality from industry producers when their
bargaining power is strong. Buying power is low when consumers purchase products in small
amounts and the seller's product is very different from any of its competitors Or The buyer
power is high if the buyer has many alternatives.

An example is the grocery sector since supermarkets tend to retain power over suppliers due to
volume and price of contracts. They dictate terms, set prices and can possibly end agreements at
any time.

3. Bargaining power of suppliers.

This force analyzes how much power a business's supplier has and how much control it has over
the potential to raise its prices, which in turn would lower a business's profitability. In addition, it
looks at the number of suppliers available: The fewer there are, the more power they have.
Businesses are in a better position when there are a multitude of suppliers. Some sectors have
monopolistic (one) or oligopolistic (few) suppliers, such as utility companies. Sometimes
customers have little choice. In the jewellery sector, diamond suppliers often hold the power and
can set prices, withhold supply and restrict sales.

4. Threat of substitute products

This force studies how easy it is for consumers to switch from a business's product or service to
that of a competitor. It looks at how many competitors there are, how their prices and quality
compare to the business being examined and how much of a profit those competitors are earning,
which would determine if they can lower their costs even more. The existence of products
outside of the realm of the common product boundaries increases the proneness of customers to
switch to alternatives. The threat of substitutes are informed by switching costs, both immediate
and long-term, as well as a buyer's inclination to change. Substitutes matter when customers are
attracted to the products of firms in other industries.

5. Competitive rivalry.

This force examines how intense the competition currently is in the marketplace, which is
determined by the number of existing competitors and what each is capable of doing. Rivalry
competition is high when there are just a few businesses equally selling a product or service,
when the industry is growing and when consumers can easily switch to a competitor's offering
for little cost. When rivalry competition is high, advertising and price wars can ensue, which can
hurt a business's bottom line.
References

Bennett, R. & Smith, C. (2002). Competitive conditions, competitive advantage and location of
SMEs. Journal of Small Business and Enterprise Development. Vol. 9. No. 1. pp 73-86.

Porter, M. (1980). Techniques for Analyzing Industries and Competitors. New York: The Free
Press.

Burke, I. & Jarratt, D. (2004). The influence of information and advice on competitive strategy
definition in small and medium sized enterprises. Qualitive Market Research: An International
Journal. Vol. 7. No. 2. pp 126-138