Assessing the Impact of the African Continental Free Trade Area (AfCFTA) on Foreign Direct Investment Flows and Industrial Development in Zambia: A Case Study of the Manufacturing Industry in Lusaka City

Abstract

The African Continental Free Trade Area (AfCFTA) represents a transformative initiative aimed at creating a single continental market for goods and services across 54 African Union Member States. For Zambia, particularly in the manufacturing sector of Lusaka, AfCFTA presents significant opportunities for foreign direct investment (FDI) and industrial growth. However, the extent to which AfCFTA is influencing Zambia's manufacturing industry, especially in terms of competitiveness and FDI inflows, remains underexplored. This study adopts a qualitative approach to assess the impact of AfCFTA on Zambia’s industrial development and FDI flows, with a focus on Lusaka’s manufacturing sector. Specifically, it aims to analyze trends in FDI before and after AfCFTA, assess the competitiveness of local industries in Lusaka under the agreement, and evaluate the alignment of Zambia’s policy frameworks with AfCFTA’s goals. The research design is based on semi-structured interviews with key stakeholders, complemented by the review of secondary data from policy documents and trade reports. The qualitative approach provides a nuanced understanding of the experiences and perspectives of stakeholders, capturing the complexities of Zambia’s manufacturing landscape. Data were analyzed thematically to identify key patterns and insights related to FDI trends, industrial competitiveness, and policy alignment. The findings reveal that AfCFTA has positively influenced FDI inflows into Zambia’s manufacturing sector, reversing prior declining trends. Lusaka’s local industries, particularly in agro-processing and textiles, have demonstrated resilience and adaptability in the face of increased regional competition. However, infrastructure deficiencies, high energy costs, and non-tariff barriers continue to challenge Zambia's ability to fully capitalize on AfCFTA’s benefits. The study concludes that while AfCFTA offers immense potential for Zambia’s industrial development, further efforts are needed to address infrastructure bottlenecks and reduce trade barriers. Key recommendations include investing in energy and transport infrastructure, supporting small and medium-sized enterprises (SMEs), and enhancing policy coherence to fully harness the opportunities presented by AfCFTA. By adopting a qualitative approach, this study provides a detailed exploration of the critical dynamics shaping Zambia’s manufacturing sector under AfCFTA.