Zambian foreign policy formation is highly centralized, empowering the country’s president to shape foreign relations, international partnerships and Zambia’s position within global geopolitical discourse (Box 1). In his first year in office, Hichilema – leader of the United Party for National Development (UPND) – and his administration pursued a foreign policy focused primarily on economic cooperation, trade and inward investment. In his inauguration speech on 24 August 2021, the president promised enhanced economic diplomacy and committed to ‘promoting open and cordial relations with our neighbours and countries on the continent and beyond’.
Zambia’s top exports are copper and other mined products. These are primarily exported to China, the commodity trading centres of Switzerland and Singapore – though the product mostly ends up in China – and regional economies, especially the Democratic Republic of the Congo (DRC), Namibia and South Africa. Foreign direct investment (FDI) is dominated by large mining investments from Canada, China, the Netherlands, Switzerland and the UK. For the past decade, investment in the industry has been predominantly driven by the extension of current projects, or reinvestment from existing investors. To attract a new cohort of investors, especially into sectors that could benefit from economic diversification, the government must adopt a new approach.
In recognition of this challenge, Hichilema – who often refers to himself as the country’s ‘chief marketing officer’ – has travelled extensively in the US, UK, EU and Africa to promote Zambia’s exports and attract investment. This marks a significant break from his predecessor as president, Edgar Lungu. To emphasize this transition, the administration refers to itself as the ‘new dawn’ government. Zambia’s recent Eighth National Development Plan 2022–2026 emphasizes the importance of a well-governed private sector as a driver of growth, and the significance of partnerships between the public and private sectors. Attracting international investment is key to achieving this goal.
Zambia’s recent Eighth National Development Plan 2022–2026 emphasizes the importance of a well-governed private sector as a driver of growth, and the significance of partnerships between the public and private sectors.
But marketing alone will not be enough. Despite positive economic fundamentals and relative stability, Zambia has lost the reputation it enjoyed in the late 2000s and early 2010s as one of the top investment destinations on the continent. Under the creeping authoritarianism of former president Lungu, debt spiralled, corruption skyrocketed and international investors became wary. Zambia’s economy is dominated by former state enterprises and dependent on copper exports, thus it is acutely vulnerable to price volatility on international markets. Mitigating these risks requires structural reform, economic diversification and support to broaden the participation of Zambia’s citizens in the economy.
But the administration has had difficulty communicating the long-term benefits of structural reforms and international partnerships to an impatient young population demanding change and improved socio-economic conditions. Promises of jobs and growth have been further undermined by worsening global economic headwinds, such as the COVID-19 pandemic, which restricted Zambia’s critical mineral exports and compounded high debt levels. This resulted in low growth and fewer resources for domestic development. Managing domestic resistance to necessary fiscal and regulatory reform is a critical political challenge for Hichilema’s government.
This challenge will be further complicated by the fact that the current administration’s foreign policy is being forged amid increasingly complex global power competition. Zambia’s traditional foreign policy ethos is rooted in its post-independence non-alignment and ‘positive neutrality’, which allows the country to proactively work with a diverse range of partners and avoid dependence on any single foreign power. While former president Lungu aligned the country much more closely with China, Hichilema’s government is signalling a return to the country’s traditional approach to foreign partners – with the presidency, Ministry of Commerce, Trade and Industry, Ministry of Finance, and Ministry of Foreign Affairs all taking prominent roles in engaging with international partners.
But the state of current global geopolitics is pressuring leaders across Africa to take sides. Balancing external partnerships and competing interests – especially those of China, other emerging powers, Western nations, and Zambia’s immediate region – is another critical task facing Hichilema.
He has already demonstrated his agility and political instincts in this regard. Hichilema has personal connections in the West, especially in the US and UK, and his first visit as president was to the US for the 76th Session of the United Nations General Assembly (UNGA). Many international observers saw his presidency as an opportunity for Western powers to push back against Chinese influence on the continent, a view supported by the early attention Hichilema gave to pursuing a deal with the IMF, positive engagement with Western creditors and a vote against the Russian invasion of Ukraine at the UN. Zambia’s vote for UN resolution ES-11/1 on 2 March 2022, which condemned Russia’s invasion of Ukraine, marked a commitment to principles of independence and sovereignty. This was acknowledged in a phone call between Ukrainian leader Volodymyr Zelenskyy and Hichilema in August 2022. Hichilema’s stance on the war has also demonstrated a willingness to break ranks with Zambia’s neighbours – Angola, Mozambique, South Africa and Zimbabwe all abstained from condemning the invasion in the March 2022 vote.
However, the new administration has stopped short of a full ‘pendulum swing’ to the West – Hichilema has maintained Zambia’s relationship with China. A phone call with President Xi Jinping in May 2022 was instrumental in unlocking China’s positive engagement in an ongoing multilateral debt negotiation, as well as in positioning Zambia at the forefront of Beijing’s own ‘new development paradigm’, which aims to support small and medium-sized enterprises (SMEs), human capital investments, green development, and emphasize FDI flows rather than loan financing.
Hichilema has also made a concerted effort to reinforce Zambia’s regional relationships. He has made multiple regional visits – including to Angola, Botswana, the DRC, Egypt, Eswatini, Ethiopia, Kenya, Lesotho, Malawi, Senegal, South Africa, Tanzania, Namibia and Rwanda – which far outnumber his engagements outside Africa. This demonstrates Hichilema’s recognition of Zambia’s position at the heart of regional trading and transport networks, and the vital importance of cross-border cooperation to Zambia’s future prosperity, explored later in this paper.
Hichilema has also prioritized the Commonwealth, taking part in the Kigali summit in June 2022. Soon after, he facilitated an honour for the Commonwealth secretary-general, Baroness Patricia Scotland, who became head woman of the Lundwe people of Bweengwa area in Monze on 7 August 2022. The secretary-general played a key role in the negotiations leading up to Hichilema’s release from prison when he was in opposition. She also attended his inauguration. But while Hichilema has been well received internationally, domestic press scrutiny of these foreign visits highlights the pressure on the president and his team to demonstrate the benefits of international engagement for Zambia, which have been inconsistently and sometimes poorly communicated.
Beyond managing Zambia’s delicate external relations, Hichilema has been able to contribute to international debates, notably around green energy and climate issues. He took a very lean delegation to Glasgow’s COP26 climate conference in October and November 2021, and gained respect from international partners for his assiduous bridge-building. He has also highlighted green energy in successive election campaigns and created a Ministry of Green Economy and Environment. The ministry is in the process of developing a green growth strategy. But this again will demand careful balancing between pressing for international climate commitments and protecting domestic development. A Zambian official, Ephraim Mwepya Shitima, held the position of chair of the African Group of Negotiators at COP27 in Sharm El-Sheikh, in November 2022, placing Zambia’s government at the centre of continental discussions ahead of the summit. Furthermore, the World Wildlife Fund has mooted that a ‘debt for nature’ swap could be included as part of Zambia’s debt negotiations.
Hichilema’s role and leadership has been broadly welcomed by external actors, and even praised at the European Parliament, with President Roberta Metsola noting that Zambia stands as an example of a mature democracy for the whole of the African continent. But for the current administration, the most important audience is domestic. The biggest risk to Hichilema’s new approach is domestic political turmoil driven by economic hardship. Hichilema and his party know that their 2021 election victory was due to a disenchanted population facing a worsening economic environment. Structural reforms are critical to remedying this, but they will take time, and while tighter fiscal discipline and the cancelling of debt-accruing infrastructure projects may balance the national books, such measures also result in reduced spending in vulnerable rural areas. New initiatives such as the Constituency Development Fund, as well as the protection of social spending within terms agreed with international financial institutions (IFIs), can ameliorate this impact. Domestic reform and institution-building is vital for long-term recovery and growth, not only to encourage investment through the protection of property rights, the rule of law and investor agreements, but also to enhance opportunities for Zambia’s population by ensuring a level playing field and an environment in which human rights are respected and upheld.
A conducive business environment is only the first step. This needs to be followed by investment, which takes time to translate into material benefit for the population, especially if it is via the mining industry. In the short and mid-term, the pressures of populism and demands for quick wins will continue to present a challenge, especially ahead of the next electoral cycle. A deal with the IMF will be important to smooth this transition, as will donor support. The World Bank are also pressing forward with concessional development policy financing worth $275 million to support the restoration of fiscal sustainability and private sector led growth. Ensuring that such initiatives actually produce sustainable results will depend on the successful management of Hichilema’s most pressing policy issue: Zambia’s debt burden.
Debt
Zambia has repeatedly accumulated debt to cover fiscal deficits, fund social programmes and pay for food imports, particularly when copper prices are low and drought conditions result in poor agricultural output. Most of Zambia’s external debt was written off in the mid-2000s as part of the Heavily Indebted Poor Countries (HIPC) initiative, but in 2011 the country achieved sovereign debt ratings from international rating agencies and was able to quickly accumulate manageable levels of debt on the international markets.
Zambia has repeatedly accumulated debt to cover fiscal deficits, fund social programmes and pay for food imports, particularly when copper prices are low and drought conditions result in poor agricultural output.
Borrowing surged following an extremely close presidential by-election in 2015. The winning candidate, President Edgar Lungu, largely used Chinese sources of funding to accelerate infrastructure projects to shore up support ahead of the 2016 general election, which he went on to win. The Lungu administration began discussion with the IMF for financial assistance in 2017, but these efforts failed to translate into a support package due to the administration’s reluctance to impose difficult reform measures.
In an attempt to improve trust and transparency – following accusations that the Lungu government had concealed the country’s true level of debt – in October 2021, just months after it came into power, the Hichilema administration released figures that revealed total external debts of $14.67 billion at the end of June 2021, including government debt and government guaranteed debt, a higher and more credible figure than previous disclosures. The most recent figures, contained in the 2023 budget speech, delivered on 30 September 2022, put public external debt at $14.87 billion and domestic debt at Zambian Kwacha (ZMW) 44 billion (around $2.5 billion).
A major public concern has been uncertainty and a lack of clarity over guarantees for key loans to Zambia, with suspicions that parastatals – such as Zambia Electricity Supply Corporation Limited (ZESCO), Zambia Railways Limited and TAZARA – may have been put up as collateral. Successive finance ministers have denied that Zambian ownership of parastatals is in jeopardy. These accusations have fed into divisive international interpretations of the debt crisis, for instance with Republicans in the US suggesting that China was demanding copper mining assets as collateral for possible debt forgiveness, citing provisions in loan agreements as part of the Republican party’s own manoeuvring on wider debates on Chinese influence. Hidden loan crises in other countries in the region, such as Mozambique, have further stoked international donor and financier fears that Zambia may also have substantial secret debt.
Zambia gained some relief on bilateral debt repayments through the G20’s DSSI, including from China and Japan. China’s Export-Import Bank (EXIM Bank) had agreed to suspend interest and principal payments worth $110 million in 2020 in concert with the G20’s DSSI. Nonetheless, in 2020, Zambia became the first country in Africa to default on a debt during the COVID-19 pandemic. The country failed to pay a coupon on its eurobond, after the government’s request for a six-month extension on interest payments was rejected by bondholders, who reportedly cited the opacity of the country’s debt to China as a reason for turning down Zambia’s request.
An agreement reached in December 2021 between the IMF and Zambia for a three-year, $1.4 billion extended credit facility marked a significant step. The IMF board subsequently went on to approve the arrangement at the end of August 2022, once a creditor committee had been established for the purpose of multilateral negotiations on debt restructuring.
Unlocking the IMF credit facility took significant diplomatic and policy action from the Zambian government. The formation of the creditor committee was slowed by China’s preference for bilateral renegotiation, and the country’s subsequent push to chair the creditor committee. By June 2022, under the G20’s Common Framework, 16 countries with eligible claims on Zambian debt formed a creditor committee, co-chaired by China and France and vice-chaired by South Africa. A second meeting of the committee, in July 2022, committed to providing long-term debt relief that matched the Zambian authorities’ ambitious fiscal and structural reforms. The committee is pushing for greater participation from private creditors, who so far have remained outside of the process.
This process is a significant demonstration of a functional reconciliation between Chinese and Western interests in the country, and – most importantly – one that materialized because of assertive Zambian agency. Zambia is an important test case of the Common Framework, alongside Chad, Ethiopia and Ghana, the only other countries currently taking part in the programme. It is also an important moment for Beijing, which is keen for Zambia to not set a precedent of moving away from Chinese partnerships. China is currently reviewing the credit it has extended across the continent, perhaps due to an increasing awareness that it has become overexposed – in August 2022, China cancelled a total of 23 loans across the continent.
The ‘China versus the West’ narrative has been a central theme of news coverage of Zambia’s default. Debts owed to China and Chinese entities stand at more than $3 billion, with $2.6 billion owed to China’s EXIM Bank, and at least 18 entities responsible for credit lines to Zambia. There has been no top-down coordination or strategic oversight of these debts, due to the fragmented nature of the Chinese state. But while accusations of China seeking to accrue political influence by deliberately building Zambia’s debt are exaggerated, they should not be disregarded.
Debts owed to China and Chinese entities stand at more than $3 billion, with $2.6 billion owed to China’s EXIM Bank, and at least 18 entities responsible for credit lines to Zambia.
Some loans are paid directly by Chinese lenders to Chinese contractors operating in Zambia, without ever reaching Zambian government accounts. While such financing and loans are eventually included in the Zambian government’s official debt figures, loans yet to be disbursed are not added to the debt stock. Conversely, there has also been the potential emergence of a ‘principal-agent problem’, with allegations that representatives of Chinese organizations in Zambia have pushed for contracts that may enrich themselves personally without considering if the organization can meet its commitments – in these instances the risk remains with the head offices back in China, or the Chinese state itself.
In most cases, the commercial nature of Chinese lending behaviour does not match the narrative of China as a calculating predator pursing ‘debt trap diplomacy’, but the country is able to strategically leverage its position to get preferential treatment on debt repayments or even disrupt multilateral initiatives. The creditor committee has brought partners together to agree in principle to restructuring. However, decisions on the ‘haircut’ each creditor must take have proved more difficult. China is able to legitimately point to significant write-offs under the DSSI, as well as bilateral cancellation of loans outside these multilateral processes, which it can use to argue its case for taking less of a cut through the restructuring. Furthermore, there are technical differences in the way that China has historically managed debtors – often repeatedly delaying interest or principal payback horizons, effectively writing off the debt without directly cancelling it.
Hichilema has so far proved determined to proactively tackle the debt crisis, and he has demonstrated the potential power of Zambian ‘positive neutrality’ to bridge between seemingly irreconcilable external actors. But much of Zambia’s debt burden remains opaque, linked to vested interests and shrouded in allegations of corruption. The economic pain of debt management will undoubtedly fuel domestic resistance to necessary economic reforms, especially if Hichilema cannot point to improvements in socio-economic conditions.
Zambia’s strategic regional role: from ‘landlocked’ to ‘land-linked’
The approach of accumulating debt to deliver populist ‘quick wins’ has a long history in Zambia, but it is not a realistic option for Hichilema. It is for this reason that he has repeatedly emphasized Zambia’s geographical advantages, describing the country as ‘land-linked’ rather than ‘landlocked’, with its lack of sea access framed as an advantage. Zambia is a member of multiple regional economic blocs – including the Southern African Development Community and the Common Market for Eastern and Southern Africa (COMESA) – and is located at the centre of a web of infrastructure corridors (see Map 1). This gives the country access to ports on both the Atlantic and the Indian oceans. It also offers importers and exporters options, a diversity that strengthens resilience. For example, when South Africa closed its borders during the COVID-19 pandemic, Zambia was able to divert shipments from Durban to Walvis Bay in Namibia, Dar es Salaam in Tanzania, and even Mombasa in Kenya.
Regional trade is a priority for Hichilema’s administration, especially that which supports economic diversification, and the government has made efforts to strengthen intra-African trade. This will require significant additional investment in infrastructure, addressing non-tariff barriers such as border-post inefficiency, and – domestically – convincing the Zambian people of the benefits and opportunities that regional partnerships offer fledgling businesses.
The president has engaged the Ministry of Commerce, Trade and Industry, and the Ministry of Small and Medium Enterprise Development in efforts to strengthen and boost African trade and investment. The government has made it clear that going forward most infrastructure projects will be financed by the private sector using the public–private partnership model. The existing legislation governing the public–private partnership model is likely to be repealed and replaced in the current sitting of parliament. Publicly available proposal documents demonstrate that the government’s strategic goal is to develop trade-enabling infrastructure. So far, most projects are for roads leading to borders and for upgrades to border infrastructure.
