Business trends by Grandy Ntumbo

FOR decades, Zambia has been pursuing an ambitious economic development agenda through industrialisation.
Industrialisation is said to be a perquisite for developing nations like Zambia to help it reduce high poverty levels that have ravaged the economy for many years.
Therefore, industrialisation entails an enormous use of natural resources.
Think of the gold, copper, cobalt and manganese mining operations that are currently being undertaken on the North-Western, Copperbelt, Central and Eastern Provinces of the country.
These undertakings are a necessary evil that inevitably result in environmental degradation and adverse climate change effects.
During the period 2015/16 and 2018/19 farming seasons the country experienced one of the most severe droughts the country has ever faced which culminated into unprecedented prolonged electricity power load-shedding of up to 12 hours a day.
Indeed, this is only part of the undesirable side effects of use of natural resources for economic development.
Think of it, according to then Zambia Atomic Agency (ZAMATOM) director general late Rowland Msiska, revealed that the Zambian treasury spent over US$39 million on emergency power imports in the 2015/2016. This severely affected the country’s fiscal performance for 2015/2016.
In the recent past, I was privileged to interact with key players of the country’s capital markets including the World Wide Fund for Nature (WWF) country director Nachilala Nkombo.
On June 9, 2021, I was privileged to be invited to witness a signing ceremony between the WWF and the Capital Markets Association of Zambia (CMAZ).
I was enchanted with Ms Nkombo’s courage to suggest to the participants a sustainable solution for the country’s public debt crisis.
Ms Nkombo indicated that she would be failing in her duties if she does not provide solutions on how WWF Zambia could help implement programmes that can reduce the debt service stress that the Zambian Government is currently facing.
She further proposed to discuss a potential debt for the nature swaps with the Ministry of Finance in conjunction with the CAMZ.
Additionally, WWF through the Dutch Fund for Climate and Development expressed willingness to foster private sector-led bankable nature solutions.
Essentially, Bankable Nature Solutions (BNS) are financially viable economic activity projects that support the development of more resilient, sustainable environments and economic activity.
The term bankability refers to the ability for a project to be scaled up and replicated to realise large-scale positive impact for nature and people.
Ms Nkombo is confident that the capital market is an ideal platform to develop bankable nature solutions.
She further notes that the WWF Zambia has set an investment target of US$150m for 2021 to 2026 to promote low carbon and high impact green investment projects with a minimum ticket size of US$ 3 million.
The purpose of this Memorandum of Understanding (MoU) is to build collaborative partnerships between the two key stakeholders and build a common understanding of the available green instruments on Zambia’s capital markets as well as opportunities that can support the transition from the traditional green and ‘nature-sensitive’ economy.
This event culminated into a two-day workshop on Dutch Fund for Climate and Development (DCF) under the theme creating Climate resilient economic growth in developing countries.
“WWF believes that a transition to a green and low carbon global economy is an imperative”. “We believe this shift is key to any country that utilises its natural wealth to secure current resources and opportunities for present and future generations,” Ms Nkombo say.
To achieve this transition, she says the capital markets have both a challenge and an opportunity to develop products that respond to the green revolution.
That is, foster economic activities without fully degrading and depleting the ecosystem upon which these economic activities are entirely dependent on.
The WWF further notes that one of the fundamental aspirations of the African Union’s (AU) Agenda 2063 is to achieve a prosperous Africa based on Inclusive growth and sustainable development.
The AU has identified the following critical priority areas, sustainable natural resource management and biodiversity conservation, sustainable natural resource consumption and production patterns and water security.
Other priority areas include climate resilience and natural disasters preparedness and prevention, renewable energy and resilient African capital markets.
This means Zambia can increasingly take an economic path that simultaneously conserves ecosystems while supporting sustainable economic activities such as sustainable agriculture, fisheries and manufacturing.
Remarkably, capital markets play a central role in allocating capital and crucially in pricing the risk involved in an economic specific context activity.
This green financial instrument refers to instruments that are raised from the bond issues that are used to finance or refinance projects and assets that deliver win-win outcomes between the environment and respective economic activities.
Therefore, WWF works with private and public financial institutions and regulators to help them address nature loss and wider sustainability challenges and take advantage of related opportunities.
This work is grouped into three categories namely, assisting the financial sector and its regulators to understand and manage risks it faces from nature loss and the impacts it has on the natural world.
It encourages disclosure of nature-related risk and impacts and promoting the reallocation of capital to nature positive economic activity.
Look out for yet another exciting article on how the WWF and capital markets are stepping up to foster Zambia’s economic development.
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The author is the Managing Consultant at G. N Grant Business Consultant, a Chartered Certified Accountant (ACCA), a Master of Business Administration (MBA) holder, with a Specialism in Strategic Planning, and a candidate for the Herriot Watt University (Scotland) Doctor of Business Administration (DBA)