




































 

134 

 

Finance, Accounting and Business Analysis 
Volume 7 Issue 2, 2025 

http://faba.bg/       
ISSN  2603-5324 

DOI: https://doi.org/10.37075/FABA.2025.2.01 

 

Who really controls Zambia’s mining wealth? Stakeholder influence 

on inward Foreign Direct Investment 

 

Oscar Kaonga1* , Lubinda Haabazoka2 , Bwalya Chilolo3  

  
Graduate School of Business, University of Zambia, Lusaka, Zambia1 

Graduate School of Business, University of Zambia, Lusaka, Zambia2 

Graduate School of Business, University of Zambia, Lusaka, Zambia3 

* Corresponding author 

 

Info Articles   Abstract 
 

History Article: 

Submitted 29 March2025 

Revised 15 June 2025 

Accepted 4 July 2025 
 

 Purpose: This study examines the influence of key stakeholders including the 
Zambian government, local communities, multinational enterprises (MNEs), 

and foreign investors on inward Foreign Direct Investment (FDI) in Zambia's 
mining sector. It seeks to understand how stakeholder dynamics shape 

investment decisions and sustainability outcomes in this resource-dependent 

economy. 

Design/Methodology/Approach: A mixed-methods approach with a 

convergent parallel design is employed, integrating quantitative and qualitative 

data. An Autoregressive Distributed Lag (ARDL) model assesses long-term and 
short-term relationships between Stakeholders’ influence and FDI trends, while 

historical data, policy shifts, corporate social responsibility (CSR) practices, 
investor perceptions and local economic linkages provide contextual insights.  

Findings: The findings reveal that Stakeholders’ influence exert significant 

influence on FDI through measures such as CSR expectations and policy shifts 
and yet disparities in benefit-sharing persist. Foreign investors, especially from 

China, drive capital inflows but often with limited local economic spill overs. 
Moreover, policy stability, particularly in taxation and regulatory frameworks, is 

critical for attracting FDI, with recent reforms showing positive effects. 
However, Zambia's heavy reliance on mining FDI perpetuates vulnerability to 

commodity price fluctuations. 

Practical Implications: The study recommends policy measures to enhance 
regulatory consistency, promote value addition in mining, and diversify into 

agriculture and renewable energy. Strengthening local content policies and 
fostering multi-stakeholder dialogue are essential to ensure FDI contributes to 

inclusive growth. MNEs should align CSR strategies with community 

development needs to secure social license to operate. 

Originality/Value: This study contributes to the literature by providing a 

comprehensive stakeholder analysis of FDI in Zambia's mining sector, bridging 

gaps between policy, corporate practice, and community impacts. Unlike 
previous studies focusing solely on macroeconomic factors, this research 

highlights the interplay between governance, investor behaviour and local 
development, offering nuanced insights for policymakers and investors in 

resource dependent economies. 

Paper Type:  Research Paper 

 

Keywords:  

Foreign Direct Investment, 

Mining Sector, Stakeholder 

Influence, Corporate Social 

Responsibility, Resource 

Dependence  
 

 

JEL: E62, H5, O16  

* Address Correspondence:   

E-mail: oscarkaonga@gmail.com1 

  lhabazoka@yahoo.com2 

  bwalyachilolo@yahoo.com3 

 

 
  

http://faba.bg/
https://doi.org/10.37075/FABA.2025.2.01
mailto:bwalyachilolo@yahoo.com3
https://orcid.org/0009-0006-8194-0054
https://orcid.org/0000-0003-4055-2531
https://orcid.org/0009-0006-4515-9316


O. Kaonga, L. Haabazoka, B. Chilolo / Finance, Accounting and Business Analysis, Volume 7, Issue 2, 2025 

135 

 

INTRODUCTION 
 

Foreign direct investment (FDI) in Zambia’s mining sector has long been a cornerstone of economic 

growth, yet the distribution of its benefits remains contested. While multinational corporations (MNCs) 

dominate extraction, the extent to which local stakeholders including the government, traditional leaders, 

and civil society shape FDI inflows and their outcomes is poorly understood. Studies suggest that Zambia’s 

heavy reliance on copper exports has entrenched external control over mineral wealth, often sidelining 

domestic interests (Fraser and Lungu 2007). However, emerging research highlights the role of stakeholder 

bargaining power in negotiating investment terms, from tax incentives to corporate social responsibility 

commitments (Hansen et al. 2020). This study examines the dynamics of influence among key actors; foreign 

investors, state institutions, and local communities to determine who ultimately dictates the allocation of 

mining resources. By analysing policy frameworks, corporate disclosures, and community engagement 

practices, the study challenges the narrative of passive local participation and explores how stakeholder 

interactions either reinforce or disrupt foreign dominance in Zambia’s mineral economy. 

 

OVERVIEW OF STAKEHOLDER INFLUENCE IN ZAMBIA'S MINING SECTOR 

 
Zambia's mining sector, as the cornerstone of the country's economy, attracts diverse stakeholders 

with competing and sometimes overlapping interests. The sector contributes 72% of export earnings, 44% of 

government revenues, and 9% of GDP, making it a critical arena for economic and political influence (World 

Bank 2022). Foreign investors, particularly from China, Australia, and Canada, dominate the sector, drawn 

by Zambia's abundant copper reserves and cobalt deposits (Mining for Zambia 2023). These multinational 

corporations prioritise profit maximisation and stable fiscal policies, often lobbying against frequent tax 

regime changes that have characterised Zambia's mining landscape with ten tax policy revisions in sixteen 

years (Zambia Extractive Industries Transparency Initiative [ZEITI] 2021). The government, as both 

regulator and beneficiary through tax revenues, seeks to balance attracting foreign direct investment (FDI) 

with maximising national benefits, creating inherent tensions in policy formulation (Lombe and Cheelo 

2023). 

Local communities near mining operations have distinct interests centered on employment 

opportunities, environmental protection, and social infrastructure development. While mining accounts for 

only 2.4% of formal employment (International Labour Organization [ILO], 2021), it remains a crucial 

source of livelihoods in mining regions. Civil society organizations, empowered by initiatives like the 

Extractive Industries Transparency Initiative (EITI), push for greater transparency in revenue flows and 

contract terms, challenging both government and corporate opacity (EITI 2020). The Zambia EITI's work 

has revealed gaps in licensing procedures and enabled civil society to advocate for legal reforms on 

subnational revenue distribution (ZEITI 2022). Traditional leaders also wield influence as custodians of land 

under customary tenure, though all land ultimately remains vested in the presidency (Zambia Land Alliance, 

2020), creating complex dynamics in mining land acquisitions. 

International financial institutions like the IMF and World Bank exert indirect influence through 

structural adjustment programs and debt relief conditions. Zambia's 2021 $1.4 billion IMF Extended Credit 

Facility came with macroeconomic reform prescriptions that impacted mining sector governance 

(International Monetary Fund [IMF] 2021). The Hichilema administration's 2022 mineral royalty tax 

deductibility reform, intended to attract investment while maintaining revenues, reflects this delicate 

balancing act between competing stakeholder demands (Mining Review Africa 2022). Labor unions 

represent another critical constituency, advocating for worker protections amidst industry volatility as seen 

when a 1.5% royalty increase in 2019 prompted threats of 20,000 job cuts (Zambia Federation of Employers 

[ZFE] 2020). 

The interplay of these stakeholder interests creates a complex governance environment. While FDI 

in mining has shown positive long-term GDP impacts (United Nations Conference on Trade and 

Development [UNCTAD] 2021), Zambia's heavy reliance on the sector makes it vulnerable to commodity 

price shocks and external investor decisions (African Development Bank [AfDB] 2022). Recent moves 

toward financial modelling transparency and beneficial ownership disclosure suggest growing recognition 

of the need to align stakeholder interests more equitably (Fraser Institute 2023). As Zambia positions critical 

minerals as strategic for national development (Ministry of Mines and Minerals Development [MMMD] 

2023), understanding these competing stakeholder dynamics becomes essential for designing policies that 

ensure mining wealth benefits both investors and Zambian citizens equitably. The tension between short-

term investor priorities and long-term national development goals remains unresolved, with the 

government's recent proactive steps in financial data requests from companies signaling a shift toward more 

assertive resource nationalism. 

 



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INWARD FOREIGN DIRECT INVESTMENT IN ZAMBIA'S MINING SECTOR 

 
Zambia's mining sector has long been the cornerstone of its economy, attracting significant inward 

foreign direct investment (FDI) due to its abundant mineral resources, particularly copper, cobalt, and 

emeralds. The country's liberalised economic policies since the 1990s have positioned it as a prime 

destination for multinational mining corporations, with over 80% of total FDI inflows channeled into the 

extractive industries (World Bank 2022). This heavy reliance on mining FDI has created a complex interplay 

between economic growth, environmental sustainability, and social equity, raising critical questions about 

who truly benefits from Zambia's mineral wealth. The sector's development trajectory reveals both the 

promises and pitfalls of resource-dependent growth models in developing economies. 

The historical context of mining FDI in Zambia demonstrates a shift from diversified investment 

patterns pre-2000 to concentrated mining sector dominance in subsequent years (Fessehaie and Morris 

2023). This transition coincided with global commodity price surges that made Zambia's copper reserves 

particularly attractive to foreign investors. Studies indicate that while FDI contributed to mining sector 

recapitalisation and increased output, it failed to generate the anticipated dynamic economic growth or 

diversification effects (Saad-Filho and Weeks 2023). Instead, the mining sector's overwhelming share of FDI 

has reinforced Zambia's dependence on primary commodity exports, leaving the economy vulnerable to 

price volatility in international markets (Simutanyi 1996). Copper prices and external demand remain the 

primary drivers of mining FDI, overshadowing other economic factors that could promote more balanced 

development (Lombe and Cheelo 2023). 

The regulatory framework governing mining FDI reveals significant tensions between investment 

promotion and environmental and social protections. Zambia has established various policies and laws, 

including the Mineral Resources Development Policy, National Policy on Environment, Environmental 

Management Act, and Mines and Mineral Development Act, to guide mining activities (Zambia Ministry 

of Mines 2021). However, research suggests these instruments lack adequate mechanisms to effectively curb 

environmentally degrading practices or ensure equitable distribution of mining benefits (Wambwa et al. 

2023). Regulatory institutions like the Zambia Environmental Management Agency and Mines Safety 

Department often face capacity constraints, insufficient funding, and political interference, limiting their 

enforcement capabilities (Wambwa et al. 2023). This regulatory gap has allowed some mining companies 

to operate with relative impunity, prioritising profit over environmental stewardship and community welfare 

(Haglund 2023). 

Environmental concerns associated with mining FDI present one of the most pressing challenges for 

Zambia's sustainable development. The extractive nature of mining operations inevitably leads to ecological 

degradation, affecting local communities' rights to a clean and healthy environment (Sikamo et al. 2016). 

While international environmental standards exist, their non-binding nature limits their effectiveness in 

Zambia's context (Nyambe and Mwitwa 2023). Case studies reveal that environmental damage from mining 

activities often disproportionately affects vulnerable populations living near extraction sites, creating social 

tensions and undermining the potential benefits of FDI (Kragelund 2022). The concentration of Chinese 

investment in Zambia's mining sector has drawn particular scrutiny regarding environmental practices, with 

some studies suggesting a correlation between relaxed regulatory vigilance and increased FDI inflows (Lee 

2023). 

The socioeconomic impact of mining FDI presents a mixed picture. On one hand, foreign investment 

has brought capital infusion, technology transfer, and employment opportunities to Zambia's mining 

regions. Studies of major operations like Konkola Copper Mines demonstrate positive contributions to 

government revenue, export earnings, and GDP growth (Zambia Extractive Industries Transparency 

Initiative 2023). The sector's multiplier effects have created ancillary economic activities and infrastructure 

development in mining communities (Fraser and Lungu 2022). However, critics argue that these benefits 

often fail to translate into broad-based improvements in living standards or economic diversification. The 

enclave nature of many mining operations limits their integration with the local economy, while profit 

repatriation and tax avoidance practices reduce the net gains for Zambia (Larmer et al. 2023). 

The governance of mining FDI involves multiple stakeholders with competing interests, including the 

Zambian government, foreign investors, local communities, and civil society organisations. The government 

faces the difficult task of balancing the need for investment with the imperative to protect national interests 

and ensure sustainable development. Recent reforms, such as the 2024 Mineral Regulation Commission 

Act, represent attempts to strengthen oversight and modernise Zambia's regulatory framework (Zambia 

Ministry of Justice 2024). These measures aim to combat illegal mining activities, promote transparency, 

and encourage responsible sourcing practices among mining companies and mineral traders (Mining Watch 

Zambia 2023). However, the effectiveness of these institutional innovations remains to be seen, particularly 

in addressing power asymmetries between the state and multinational corporations (Caramento et al. 2023). 



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Civil society organisations have emerged as important actors in holding both government and mining 

companies accountable for their actions. Environmental and human rights groups have increasingly turned 

to legal avenues to challenge harmful mining practices, though court decisions have often favoured corporate 

respondents (Chibbabbuka et al. 2021). This judicial trend reflects the broader challenges of enforcing 

accountability in a sector where economic imperatives frequently overshadow environmental and social 

concerns. The growing activism around mining issues suggests that stakeholder conflicts over Zambia's 

mineral wealth will likely intensify unless more inclusive governance mechanisms are developed (Garbarino 

2023). 

Looking forward, Zambia's experience with mining FDI offers important lessons for resource-

dependent economies. The country's heavy reliance on extractive industry investment has yielded limited 

transformative development, while creating significant environmental liabilities and social tensions. 

Diversification strategies targeting non-mining sectors like agriculture, tourism, and manufacturing could 

help mitigate vulnerabilities to commodity price shocks (African Development Bank 2023). Infrastructure 

development, particularly in electricity supply and transportation networks, remains critical for attracting 

more balanced FDI flows (Zambia Development Agency 2023). Regional cooperation within the Southern 

African Development Community (SADC) could provide opportunities for adopting best practices in 

mining regulation and environmental protection (SADC Secretariat 2023). 

Ultimately, the question of who controls Zambia's mining wealth cannot be answered by examining 

FDI statistics alone. The distribution of benefits and costs associated with mining investment reveals 

complex power dynamics that extend beyond formal ownership structures. While foreign investors may 

control significant portions of Zambia's mineral production, the long-term sustainability of this arrangement 

depends on creating more equitable and environmentally responsible models of resource governance. There 

is need to explore innovative approaches to stakeholder engagement and benefit-sharing that can align 

private investment objectives with Zambia's broader development goals. 

 

STAKEHOLDER INFLUENCE AND INWARD FOREIGN DIRECT INVESTMENT IN ZAMBIA'S 

MINING SECTOR 

 
The mining sector in Zambia has long been a focal point for foreign direct investment (FDI), driven 

by the country’s abundant copper and cobalt reserves. However, the distribution of control and benefits from 

these investments remains contested among various stakeholders, including the government, multinational 

corporations (MNCs), local communities, and international financiers. The Zambian government has 

historically promoted FDI through liberal policies, aiming to spur economic growth and job creation (Fraser 

and Lungu 2007). Yet, critics argue that these policies often prioritise MNC interests over national welfare, 

leading to revenue losses through tax incentives and profit repatriation (Lombe and Kalinda 2019). MNCs, 

particularly those from China, Canada, and Australia, dominate Zambia’s mining sector, leveraging their 

financial and technological advantages to secure favorable extraction rights (Haglund 2016). Their influence 

is further reinforced by international financial institutions, which condition investment flows on regulatory 

concessions (Burdzik 2014). Meanwhile, local communities and civil society organisations have increasingly 

demanded greater equity and environmental accountability, challenging the dominance of foreign investors 

(Carmody and Hinfelaar 2017). These competing interests create a complex dynamic where FDI inflows are 

shaped not only by market potential but also by power struggles among stakeholders. While the government 

seeks to balance investor attraction with national development goals, the disproportionate influence of 

MNCs raises concerns about who truly controls Zambia’s mineral wealth. Understanding these stakeholder 

dynamics is critical for assessing whether FDI in Zambia’s mining sector delivers equitable and sustainable 

benefits. 

 

EMPIRICAL STUDIES ON STAKEHOLDER INFLUENCE IN AND INWARD FDI 

 

The literature on stakeholder influence on inward Foreign Direct Investment (FDI) in Zambia's 

mining sector reveals a complex interplay between government policies, corporate strategies, and local 

community engagement. Research by Yangailo and Chambani (2023) highlights the broader impact of 

industrialisation on Zambia's economic growth, emphasising the role of FDI as a key driver, though their 

study does not specifically dissect stakeholder dynamics in the mining sector. Meanwhile Phiri (2011) 

provides a more focused analysis, identifying copper prices, external demand, and infrastructure 

(particularly electricity supply) as critical determinants of mining FDI in Zambia. However, while this study 

acknowledges the role of government and urbanisation in shaping FDI, it underplays the influence of non-

state stakeholders such as local communities and civil society organisations.   

Corporate social responsibility (CSR) and stakeholder engagement are emerging themes in the 

literature, yet their direct linkage to FDI inflows remains underexplored. For instance, studies on Ghana’s 



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mining sector, such as the case of Newmont Ahafo mines, demonstrate how CSR initiatives can enhance 

corporate reputation and community relations, but they do not establish a clear causal relationship between 

stakeholder engagement and FDI attraction. In Zambia, while mining firms like those on the Copperbelt 

engage in CSR, there is limited empirical evidence on whether these practices significantly sway investor 

decisions or government policies on FDI.   

A significant gap in the literature pertains to the role of local communities and their capacity to 

influence mining FDI decisions. While studies such as Munalula and Matildah (2016) discuss the impacts 

of Chinese FDI on African communities, including employment and environmental concerns, they do not 

explicitly examine how these communities exert influence over investment inflows in Zambia. Similarly, 

Domela et al. (2023) explore determinants of Chinese FDI in South Africa's mining sector, including 

political stability and trade openness, but their findings are not directly transferable to Zambia’s context, 

where stakeholder dynamics may differ due to varying regulatory frameworks and socio-economic 

conditions. Another research gap lies in the comparative analysis of stakeholder influence across different 

mining jurisdictions in Africa. While UNCTAD (2022) notes the growing role of Chinese and other 

emerging investors in African mining, it does not delve into how stakeholder pressures such as regulatory 

demands from host governments or activism from local NGOs shape FDI strategies in Zambia relative to 

other resource-rich countries like Zimbabwe or South Africa. Furthermore, the literature lacks longitudinal 

studies tracking how shifts in stakeholder power (e.g., from state-centric to community-inclusive models) 

have historically influenced FDI trends in Zambia’s mining sector.   

In conclusion, while existing research provides insights into economic and policy drivers of mining 

FDI in Zambia, there is a notable absence of focused studies on stakeholder influence, particularly from non-

state actors. There is need to investigate how local communities, advocacy groups, and industry watchdogs 

shape FDI inflows, as well as the interplay between CSR practices and investment attractiveness. 

Additionally, comparative studies across African mining economies could yield valuable lessons for Zambia 

in optimising stakeholder engagement to sustain and diversify FDI in its mining sector.  

 

METHODS 

 

This research employs a mixed-methods strategy with a convergent parallel design, gathering and 

analysing both quantitative (QUAN) and qualitative (QUAL) data simultaneously, as outlined by (Edmonds 

and Kennedy 2017). In this concurrent triangulation approach, the two types of data are collected 

independently but concurrently, with findings later compared and synthesised into a unified framework. 

NVivo was used for qualitative analysis, while EViews and Stata facilitated the storage and examination of 

quantitative data, enabling parallel analysis. 

 

Quantitative Data Analysis 

To assess the influence of stakeholders on foreign direct investment (FDI) inflows, this study applied 

a quantitative research design, utilising an Autoregressive Distributed Lag (ARDL) model (Okeke and Kalu, 

2022; Assefa, 2020; Pesaran and Shin 1998). Stakeholder influence data was obtained from the World Bank’s 

World Governance Indicators (WGI), while inward FDI figures were sourced from the World Development 

Indicators (WDI), consistent with prior research. The timeframe from 1965 to 2023 was chosen to capture 

long-term FDI trends and stakeholder dynamics, as well as to incorporate the most recent reliable data. 

Additionally, this period spans the governance of all major political regimes in the country, including the 

United Independence Party (UNIP), the Movement for Multi-Party Democracy (MMD), the Patriotic Front 

(PF), and part of the United Party for National Development (UPND) era. This ensures that the findings 

remain generalisable across different administrations and policy environments. Table 1 summarises the data 

sources. 

 

Table 1.Variables in the study 

Variable Description Source 

IRQ Stakeholder influence (Institutional Regulatory Quality) World bank - WGI 

VAC Stakeholder influence (Voice and accountability estimate) World bank - WGI 

FDI Foreign Direct Investment net inflows (% of GDP) World bank - WDI 

Source: Authors 
 

This research used secondary time series data, which is particularly valuable for detecting trends and 

patterns over time. Time series analysis enables the examination of historical events and the projection of 

future developments. Recent methodological progress has also made it possible to conduct causal inference 



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139 

 

using time series data. Since this study aims to assess the influence of Stakeholders on inward FDI while 

investigating both short-run and long-run causal dynamics, time series data was deemed the most 

appropriate choice. 

For quantitative analysis, the Autoregressive Distributed Lag (ARDL) model was applied, a method 

well-suited for time series data, particularly when variables exhibit unit roots and cointegration (Shrestha 

and Bhatta 2018). This approach is effective in evaluating both long-term and short-term linkages between 

stakeholder influence and inward FDI. Hypothesis testing was performed by analysing the ARDL model 

results, which were further validated through diagnostic checks to ensure robustness. The statistical 

hypotheses tested in this study are outlined below: 

 

H10: Stakeholder influence has no short run relationship with inward FDI. 

H1a: Stakeholder influence has a short run relationship with inward FDI. 

H20: Stakeholder influence has no long run relationship with inward FDI. 

H2a: Stakeholder influence has a long run relationship with inward FDI. 

 

Qualitative data analysis 
This study primarily collected qualitative data through focus group discussions. Following established 

methodological guidelines, each focus group consisted of six to twelve participants with varied backgrounds 

and expertise to ensure diverse perspectives (Lazar et al. 2017; Wilson 2014). The data was analysed using 

thematic, content, and grounded analysis techniques within NVivo. Thematic analysis was employed to 

identify recurring patterns and themes (Braun and Clarke 2006; Lester et al. 2020; Morgan 2022) concerning 

stakeholder influence on inward FDI, building on existing frameworks (Saad 2014). Content analysis was 

used to assess the prevalence and distribution of key concepts (Bengtsson 2016; Elo et al. 2014; Erlingsson 

and Brysiewicz 2017), providing deeper insights into the mechanisms linking stakeholder dynamics to FDI 

inflows. Additionally, grounded analysis facilitated the development of new theoretical insights (Charmaz 

and Thornberg 2021; Edgington 1967; Timmermans and Tavory 2012). 

The convergent parallel mixed-methods design proved highly effective, allowing simultaneous 

collection and integration of qualitative and quantitative data (Tashakkori and Newman 2010). This 

approach enabled a comprehensive exploration of the complex interplay between stakeholder influence and 

FDI (Schoonenboom and Johnson 2017). 

 

Measurement of variables and justification 
Accurate variable measurement is essential for robust research. In this study, the independent variable 

(Stakeholder influence) was proxied by Regulatory quality and Voice and accountability indices, measured 

on a scale of -2.5 to 2.5, consistent with prior studies (Khan et al. 2023; Haven et al. 2022; Matsudaira 2015; 

Ali et al 2022; Mkonyi 2022). The dependent variable (FDI inflows) was operationalised as net FDI inflows 

as a percentage of GDP, aligning with existing literature on Foreign Direct investments (Mkonyi 2022; 

Mahmood and Chaudhary 2013; Kaulu and Haabazoka 2023). 

 

 Table 2. Measurement of variables 

 

Quantitative data analysis procedure 
The quantitative analysis followed a structured sequence of steps. First, descriptive statistics were 

computed to summarise the data characteristics. Subsequently, stationarity was assessed through unit root 

testing. Appropriate lag lengths were then determined using established information criteria. The analysis 

Type of 

variable 

Variables Proxy Code Unit of 

measurement 

Reference Source 

of data 

Dependant Foreign 

direct 

investment 

FDI net inflow 

(% of GDP) 

FDI Percentage Mahmood  and  

Chaudhary (2013); 

Kaulu  and  

Haabazoka (2023) 

World 

bank 

Independent Stakeholder 

influence 

Institutional 

Regulatory 

Quality 

IRQ Index of -2.5 

to 2.5 

Khan  et al. (2023); 

Haven et al. (2022); 

Matsudaira (2015) 

 

World 

bank 

Independent Stakeholder 

Influence 

Voice and 

accountability 

estimate 

VAC Index of -2.5 

to 2.5 

Ali et al. (2022); 

Mkonyi (2022) 

World 

bank 



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140 

 

proceeded with bounds testing to evaluate long-term relationships, followed by short-term dynamics 

examination via the Error Correction (EC) mechanism within the ARDL framework. Finally, diagnostic 

checks were conducted to verify model validity. 
 

Unit root testing and Optimal lag selection 
Stationarity properties were examined using both Augmented Dickey-Fuller (ADF) and Phillips-

Perron (PP) tests. Lag length optimisation differed between tests: AIC guided lag selection for ADF, while 

SIC was applied for PP. The tests operated under the null hypothesis of non-stationarity (presence of unit 

roots). The ARDL approach was specifically chosen for its ability to handle variables with differing 

integration orders - some I(1) (requiring differencing) and others I(0) (stationary in level form). 
 

Model formulation and dynamic Analysis 
The ARDL framework, recognised for its robustness with mixed-integration time series data 

(Shrestha and Bhatta 2018), served as the primary analytical tool. This approach remains valid when 

variables demonstrate I(0) or I(1) properties, though becomes inappropriate with I(2) or higher-order 

integration. Key advantages of this methodological approach include the fact that it accommodates variables 

with different stationarity properties and allows simultaneous estimation of short-term adjustments and long-

term equilibrium relationships. Besides, it allows for superior performance with limited sample sizes 

compared to alternative cointegration techniques. As such, this analysis framework ensures comprehensive 

examination of both immediate effects and enduring relationships between Stakeholder influence measures 

and foreign investment flows. The study's specific ARDL specification for examining Stakeholder influence 

(proxied by IRQ and VAC) on FDI inflows for the years 1965 to 2023 takes the following form:  

FDIt  = ƒ(𝐼𝑅𝑄𝑡 , 𝑉𝐴𝐶𝑡 )  (1) 

In equation 1, FDI refers to foreign direct investment inflows (measured as a percentage of GDP), 

IRQ is Stakeholder influence with proxy of Institutional regulatory quality measured in index of -2.5 to 2.5) 

while VAC is Stakeholder influence with proxy of  Voice and accountability estimate also measured in index 

of    -2.5 to 2.5 ). Equation 1 can also be written as follows: 

FDIt  = 𝜆0 + 𝜆1IRQt +𝜆2VACt + µt (2) 

The logs of each variable were taken in order to minimise the volatility and multi collinearity of the 

time series data. The following log linear model is therefore obtained by applying logs to equation 2: 

log FDIt  = 𝜆0 + 𝜆1𝑙𝑜𝑔IRQt  +  𝜆2𝑙𝑜𝑔𝑉𝐴𝐶t + µt (3) 

Analysis in the ARDL model can be done in two steps. Step one looks at long run associations in the 

model while step two looks at the short run. Equation 4 represents the ARDL model specification for this 

study. 

∆ log 𝐹𝐷𝐼𝑡 = 𝛼0 ∑ 𝛽1 𝑗
𝑝
𝑖=1 ∆ log 𝐹𝐷𝐼𝑡−𝑘 + ∑ 𝛽2 𝑗

𝑝
𝑖=1 ∆ log 𝐼𝑅𝑄𝑡−𝑘 + ∑ 𝛽3 𝑗

𝑝
𝑖=1 ∆ log 𝑉𝐴𝐶𝑡−𝑘+ 

           + 𝜆1 log𝐹𝐷𝐼𝑡−1 +  log𝐼𝑅𝑄𝑡−1 + 𝜆3 log𝑉𝐴𝐶𝑡−1 +  휀𝑡 
(4) 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

In this equation; 𝛼0 is the intercept, ∆ is the first difference operator, 𝑝 is the lag order and Ɛ𝑡 is the 

error term. The bounds test was used to check for long run equilibrium in the relationships amongst IRQ, 

VAC and FDI. In this test, the null hypothesis is Ho: 𝛿1 = 𝛿2 = 𝛿3 = 0 (that is, there is no cointegration) and 

the alternative is H1: 𝛿1 ≠ 𝛿2 ≠ 𝛿3  ≠0 (there is cointegration). If the calculated F statistic or absolute t-statistic 

is greater than the upper level bound or absolute upper level bound respectively, H0 is rejected (Pesaran and 

Shin 1998). The conclusion is that there is cointegration in the relationship amongst IRQ, VAC and FDI. If 

the statistics are below the lower bound, there is no cointegration. If the calculated statistics are between the 

upper and lower bounds, the result is inconclusive. 

 The JJ test (Johansen and Juselius 1990), "cumulative sum recursive residuals (CUSUM) and 

cumulative of square of recursive residuals (CUSUMSQ)" can be used to check the robustness of the 

cointegration (Brown et al. 1975; Chandio et al. 2020). 

The short run relationships between IRQ, VAC and FDI were assessed using the following ECM 

form of the ARDL model. 



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∆log 𝐹𝐷𝐼𝑡  = 𝛼0 ∑ 𝛽1 𝑗

𝑝

𝑖=1

∆𝐹𝐷𝐼𝑡−𝑘 + ∑ 𝛽2 𝑗

𝑝

𝑖=1

∆𝐼𝑅𝑄𝑡−𝑘 + ∑ 𝛽3 𝑗

𝑝

𝑖=1

∆𝑉𝐴𝐶𝑡−𝑘 +  𝛼𝐸𝐶𝑀𝑡−1 +  휀𝑡 (5) 

 

Diagnostics Tests 

Model fit was checked using the R2. This value ranges from 0 to 1. The higher the value, the better 

the fit with 1 implying perfect fit and 0 implying no fit at all. Breusch-Godfrey test was used to check serial 

correlation. Jarque-Bera test of normality, ARCH and white test of heteroscedasticity, RESET test of 

linearity and CUSUM of square tests of model stability were the other diagnostic tests carried out to check 

the respective characteristics. 

 

RESULTS AND DISCUSSION 

 

Results 

Qualitative findings of the study 
Qualitative findings of this study indicate that, the influence of stakeholders on foreign direct 

investment (FDI) inflows in Zambia’s mining sector presents a complex interplay of positive and negative 

effects, shaped by policy frameworks, corporate practices, and socio-economic dynamics. On the positive 

side, the Zambian government has implemented policy amendments aimed at enhancing the sector’s 

attractiveness to investors, such as revising tax regimes and improving regulatory clarity. These efforts have 

contributed to stabilising FDI inflows, particularly in copper mining, which remains the primary focus of 

foreign investors due to bullish global prices and Zambia’s rich mineral reserves. Interviewees stressed that 

Multinational corporations (MNCs), especially those from China and India, have brought capital, 

infrastructure, and employment opportunities, highlighting their role in boosting export earnings and 

contributing significantly to GDP during peak periods. Additionally, FDI has facilitated limited technology 

transfer and skills development, particularly in large-scale operations like Konkola Copper Mines (KCM), 

where on-the-job training and employment creation have been documented. 

However, stakeholder influence has also introduced significant challenges. Policy instability, 

including abrupt tax hikes and inconsistent enforcement, has deterred long-term investment, with instances 

like the 2012 tax reforms causing temporary disinvestment. Based on the data collected, this study found 

that the dominance of MNCs in extractive activities has reinforced Zambia’s economic dependency on 

copper, limiting diversification and exacerbating vulnerabilities to commodity price fluctuations. Critically, 

the concentration of FDI in mining has failed to translate into broad-based economic growth, with spill over 

effects into sectors like agriculture and manufacturing remaining weak. Local communities often perceive 

FDI as exploitative, citing environmental degradation, inadequate CSR initiatives, and preferential hiring 

of expatriates over locals. For example, CSR programs in mining regions have been criticised as superficial, 

failing to address systemic poverty or foster meaningful community engagement. During focus group 

discussions, representatives from civil society and environmental activists further highlighted their campaign 

against the ecological costs of mining, however, their advocacy is frequently undermined by weak regulatory 

enforcement and prioritisation of short-term revenue over sustainability. 

Additionally, respondents emphasised that international stakeholders, such as the IMF and World 

Bank, have indirectly shaped FDI trends by tying financial support to policy reforms, including transparency 

measures like the Extractive Industries Transparency Initiative (EITI). While these interventions aim to 

improve governance, their impact is often diluted by institutional weaknesses and corruption. The growing 

reliance on Chinese investment has also sparked debates about neo-colonialism, with concerns over labour 

abuses and limited value addition to the local economy. 

In conclusion, qualitative results of this study show that while stakeholders like the government and 

MNCs have driven FDI inflows through policy incentives and capital injection, their influence is marred by 

structural inefficiencies, socio-environmental trade-offs, and uneven distribution of benefits. The net effect 

is thus a mixed one: FDI has bolstered mining output and fiscal revenues but at the cost of reinforcing 

economic monoculture and marginalising local stakeholders. For Zambia to harness FDI more equitably, 

stronger institutional frameworks, diversified investment targets, and inclusive community participation are 

essential. 

 

Quantitative findings of the study 
This section presents the study’s findings based on quantitative data analysis particularly the ARDL 

model. It starts with descriptive statistics, followed by inferential statistical results. Next, the outcomes of 

stationarity tests are discussed. The findings related to the long-run hypothesis are then examined, followed 



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142 

 

by testing of the short-run hypothesis. Finally, a summary of the diagnostic test results is provided. 

 

 Descriptive statistics 

The summary statistics are presented in Table 3, which primarily include the measures of central 

tendency and dispersion for Foreign Direct Investment (FDI) and Stakeholder Influence (IRQ, VAC). The 

average Stakeholder influence (IRQ) is 0.358, with a maximum value of – 0.038 and a minimum of – 0.521. 

The standard deviation of 3.421 indicates that the FDI inflow values are relatively close to the mean. The 

positive skewness of 0.398 suggests that most of the data points are clustered near the lower end, with fewer 

outliers closer to the upper end. Similarly, the positive skewness of 0.130 in VAC implies that while most 

years displayed lower Stakeholder influence in terms of voice and accountability estimate, a few years had 

significantly higher influence. In contrast, the negative skewness of – 0.0049 in Stakeholders’ influence (IRQ) 

suggests that while most years showed relatively high Stakeholders’ influence in terms of institutional 

regulatory quality (with minimal leftward skew), a few years had notably lower levels in the same regard . 

Regarding Kurtosis, the FDI inflow was found to be approximately mesokurtic, indicating it has a 

tail behavior similar to a normal distribution. The value of 0.123 is close to 0, signifying that the FDI data 

is approximately normally distributed, with no significant outliers. This supports the reliability of the dataset 

for further statistical analysis or modeling (Kallner 2018; Kim 2013). Furthermore, the Jarque-Bera test 

statistic showed a p-value greater than 0.05, indicating that the FDI inflow follows a normal distribution. 

 

Table 3. Descriptive statistics 

Measure  FDI  inflows IRQ VAC 

Mean  3.176 - 0.358 0.320 

Median  2.451 - 0.297 0.248 

Maximum  7.914 - 0.038 0.571 

Minimum  - 0.879 - 0.521 - 0.166 

Std. Dev  3.421 0.217 0.321 

Skewness  0.398 - 0.0049 0.130 

Kurtosis  0.123 - 2.013 2.650 

Jarque-Bera  1.789 1.423 1.342 

Observations  27 18 18 

Source: Author computations 
 

Correlation between IRQ, VAC and FDI 

Table 4 below illustrates the correlations between IRQ, VAC, and FDI. The results indicate a 

significant positive correlation between Stakeholders in terms of voice and accountability estimate (VAC) 

and FDI, implying that as the number of Voice and accountability estimate in a country increases, FDI 

inflows also increase, and vice versa. Similarly, a strong positive correlation was found between Stakeholders 

influence in terms of Institutional regulatory quality (IRQ) and FDI, suggesting that higher institutional 

regulatory quality in a country is associated with higher FDI inflows, and vice versa. 

 

Table 4. Correlations among IRQ, VAC and FDI 

Source: Author computations 

 

Stationarity tests 
Prior to conducting time series analysis, it is necessary to perform stationarity tests. This is especially 

important for ARDL models, which require that none of the variables be integrated of order I(2). However, 

the variables can be I(0), I(1), or a combination of both. The ADF test was applied alongside the PP test for 

robustness. The results of the stationarity tests, presented in Table 5, show that the variables are all I(1) and 

I(0). This result allows for the use of the ARDL model. 

 

 

 

  Log FDI Inflow Log VAC Log IRQ 

Log FDI 1.0000 
  

Log VAC 0.7430 1.0000 
 

Log IRQ 0.6981 0.0542 1.0000 



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Table 5. Stationarity Tests  
With Constant 

t-Statistic 

Prob. With Constant 

and trend t-

Statistic 

Prob. Without 

Constant and 

trend t-Statistic 

Prob. 

Log FDI - 2.162 0.132 - 2.143 0.654 - 0.341 0.516 

Log VAC - 2.714** 0.072 - 2.891 0.175 - 0.721 0.399 

Log IRQ - 0.899 0.932 - 1.879 0.645 0.802 1.940 

∆Log FDI -7.015*** 0.000 - 4.011* 0.085 - 5.012*** 0.000 

∆Log VAC -7.994*** 0.000 - 8.012*** 0.000 - 7.043*** 0.000 

∆Log IRQ - 3.897** 0.042 - 3.987** 0.039 - 2.998*** 0.043 

Log FDI - 2.451 0.356 - 2.123 0.765 - 0.345 0.6231 

Log VAC - 3.487* 0.081 - 2.803 0.089 - 0.412 0.3895 

Log IRQ - 0.998 0.814 - 0.078 0.598 0.734 0.8723 

∆Log FDI - 6.0121*** 0.000 - 1.399*** 0.000 5.891** 0.0000 

∆Log VAC - 8.1240*** 0.000 - 3.004*** 0.000 9.012** 0.0000 

∆Log IRQ - 3.0134** 0.036 - 3.032** 0.069 - 4.023** 0.0021 

Note: Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests with 10% (*), 5% (**) and 1%(***) 

significant levels.  

Source: Author computations 

 

Optimal Lag selection 

To evaluate the long-term and short-term relationships between VAC, IRQ, and FDI inflow, the 

ARDL method is employed. This requires determining the optimal lag structure. According to all 

information criteria, the optimal lag length is found to be lag one, as indicated in Table 6. 

 

Table 6. VAR Optimal Lag Selection 

Lag LogL LR FPE AIC SC HQ 

0 - 26.0215 NA 0.00002 1.98718 3.0431 2.1340 

1 43.9816 108.4306* 1.45320* - 2.3214 - 1.2134* - 1.8956* 

2 58.5231 17.01327 0.00000 - 2.0765 - 0.3254 - 1.3679 

Note: Lag chosen by criteria  

Source: Author computations 

 

Bounds test 

The results of the bounds test are presented in Table 7. For FDI, VAC and IRQ as outcome variables, 

the F statistics are 5.9671, 5.8915, and 4.7988, respectively. Two of these statistics exceed the upper bound 

critical value at the 5% significance level, indicating the presence of two cointegration vectors. 

 

Table 7. Bounds Test Results 

Variable LOG FDI LOG VAC LOG IRQ 

F-Statistic 5.9671* 5.8915* 4.7988 

Optimal lags (1,0,1,0) (1,0,1,0) (1,1,1,1) 

Best trend specifications Constant & trend Constant & trend Constant & trend 

Critical values 10% 5% 1% 

Lower Bound (0) 3.39 4.04 4.98 

Upper Bound (1) 3.99 5.04 6.02 

Diagnostics: 
   

R2 0.895 0.423 0.892 

Adj. R2 0.610 0.430 0.945 

Note 1: Note: 5% (*) significant level 

Source: Author computations 

 

For robustness, the Johansen cointegration test was also run and the results are in Table 8. These 

indicate the presence of at least one cointegration equation. This suggests that long run association exists 

between FDI inflow and Stakeholder influence. 



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Table 8. Johansen cointegration test 

Cointegration equations Eigenvalue Statistic Critical value at 5% Prob. 

Trace statistic 

None 0.89562 54.01432 50.0023 0.0398 

At most 1 0.39876 18.16740 27.9875 0.7894 

At most 2 0.34897 5.14379 15.2345 0.7412 

At most 3 0.24136 0.91269 3.9876 0.3991 

Maximum Eigenvalue 

None 0.94315 33.4132 27.0123 0.0098 

At most 1 0.42136 12.9786 22.9465 0.4897 

At most 2 0.23760 3.9985 12.8960 0.9956 

At most 3 0.24681 0.8976 3.9874 0.7567 

Source: Author computations 
 

The Long-run model results 
The results of the long and short run estimates are shown in Table 9. The findings show that in the 

long run, Stakeholder influence has a positive relationship with FDI at the 5% level (β= 0.1984, p=0.002) 

and (β= 0.1790, p=0.004) for proxies of voice and accountability and institutional regulatory quality 

respectively.  
 

Short Run Dynamics 
The short run results are also shown in panel two of Table 9. Similar to the long run results, 

Stakeholder influence in terms of Voice and accountability estimate was found to have positive short run 

relationship with FDI inflow at the 5% level. The estimated coefficient for voice and accountability estimate 

was 0.1973 while that of Institutional regulatory quality was 0.2437). The cointegration coefficient was 

found to be – 0.7138 (p=0.0002). This means that in the short run, when there is a shock in the model, there 

is a 71.38% speed of adjustment to equilibrium. Overall, this model is able to explain76.54% (R2) of changes 

in FDI inflow. 

 

Table 9. ARDL (1, 0, 1, 0) Regressing determinants on FDI using AIC 

Variable Coefficient SE T-statistic P-value 

Panel 1: Long run estimates 

Log VAC 0.1984 0.0508 2.9801 0.0023 

Log IRQ 0.1790 0.0876 2.4319 0.0041 

Panel 2: Short run estimates 

∆Log VAC 0.1973 0.04332 4.1348 0.0008 

∆Log IRQ 0.2437 0.04761 2.8768 0.0275 

ECM (-1) - 0.7138 0.34216 - 4.9981 0.0002 
 

Diagnostic tests (p-value in brackets) 

Durbin-Whiteson statistic 1.8023 
   

Adjusted R2 0.7654 

 

   

R2 0.7531 

 

   

X2 SERIAL Breusch-Godfrey LM 

test 

1.2349 (0.21341) 
   

X2 White 23 (0.40123) 
  

  

X2 NORMAL 3.054789 (0.32178) 
  

  

X2 ARCH 2.045321(0.1795) 
  

  

X2 RESET 4.231567(0.051234) 
  

  

F-statistic 11.98570 (0.0001)       

Source: Author computations 
 

Results of Hypothesis Testing 
Table 10 summarises the results of hypothesis testing. Both hypotheses were supported. These are; 

Stakeholder influence has a short run relationship with inward FDI and Stakeholder influence has a long 

run relationship with inward FDI. 



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Table 10: Results of hypothesis tests 

Hypotheses Outcome 

H1a: Stakeholder influence has a short run relationship with inward FDI. Supported 

H2a: Stakeholder influence has a long run relationship with inward FDI. Supported 

 

Diagnostic Tests 

Diagnostic tests are presented in panel three of Table 9. The model successfully passed several 

diagnostic checks, including the Breusch-Godfrey test for serial correlation, the Jarque-Bera test for 

normality, the ARCH and White tests for heteroscedasticity, the RESET test for linearity, and the CUSUM 

and CUSUM of squares tests for model stability. Regarding model stability, the results from the CUSUM 

and CUSUM of squares tests showed that all plots remained within the 5% critical boundaries, confirming 

the stability of the estimated model parameters throughout the estimation period. 

 

Discussion  
The findings of this study demonstrate both positive and negative stakeholder impacts on inward FDI, 

with particular emphasis on the role of policy stability, regulatory frameworks, labour relations, and 

corporate social responsibility initiatives. It has been found that stakeholders including the Zambian 

government, local communities, multinational enterprises (MNEs), and international investors play a 

critical role in shaping inward foreign direct investment (FDI) in Zambia’s mining sector. The government’s 

policies, particularly tax reforms and regulatory stability, emerged as significant determinants of FDI 

inflows. For instance, the Hichilema administration’s introduction of mineral royalty tax deductibility from 

corporate income tax in 2021 was instrumental in reviving investor confidence after years of policy 

unpredictability under previous regimes. This aligns with previous research by Phiri (2011), which 

emphasised that inconsistent fiscal policies, especially in mining taxation, deterred long-term FDI 

commitments, reinforcing the vulnerability of Zambia’s economy to commodity price shocks. Similarly, 

Ndaba (2015) found that FDI concentration in mining post-2000 led to limited spillover effects on broader 

economic growth due to policy instability, corroborating the present study’s observation that regulatory 

coherence is pivotal for sustainable investment. 

Local communities and labour stakeholders also influence FDI through corporate social 

responsibility (CSR) expectations and social license to operate. The study highlights that mining MNEs in 

Zambia face increasing pressure to address socio-economic disparities, a legacy of colonial and post-

independence mining practices (Cronjé et al. 2017). Communities on the Copperbelt region, for example, 

reported divergent experiences with CSR across different operational eras colonial, nationalised, and 

privatised with the latter era often criticised for prioritising shareholder returns over local development 

(Blowfield and Murray, 2014). This contrasts with findings from Zimbabwe, where mining FDI was found 

to have a more pronounced positive impact on GDP growth due to stronger linkages between MNEs and 

local enterprises (UNCTAD 2017). The Zambian case thus underscores the need for MNEs to align CSR 

strategies with host-country development goals to mitigate resistance and foster stakeholder collaboration. 

International investors, particularly from China, Canada, and the EU, have been identified in this 

study as key actors driving FDI trends. The study notes that Chinese investments in Zambia’s mining sector 

have surged, mirroring broader African trends where China dominates critical mineral supply chains (Zhang 

& Liang 2023). However, unlike OECD countries where mining FDI is often coupled with stringent 

environmental regulations and economic diversification (Sun and Hasi 2024), Zambia’s reliance on 

extractive-sector FDI has perpetuated resource dependency. This echoes concerns raised by the World Bank 

(2015) and UNCTAD (2017) about the "resource curse" in low-income economies, where FDI inflows fail 

to catalyse structural transformation. The present study adds nuance by revealing that while FDI has 

recapitalised Zambia’s mining sector, its benefits such as employment and technology transfer remain 

unevenly distributed, exacerbating inequalities. 

Comparatively, the study’s findings diverge from optimistic assessments of mining FDI in other 

contexts. For example, research on Zimbabwe’s mining sector demonstrated robust GDP linkages from 

FDI, attributed to better integration of domestic suppliers into MNE value chains (UNCTAD 2017). In 

contrast, Zambia’s experience reflects weaker local participation, partly due to an underdeveloped enabling 

environment for downstream industries like mineral processing (Phiri 2011). This gap underscores the 

importance of policies that incentivise value addition, as seen in OECD countries where economic 

complexity and environmental regulations reduce mineral dependency (Sun and Hasi 2024). The study thus 

reinforces calls for Zambia to diversify its FDI base beyond mining, leveraging sectors like agriculture and 

renewable energy to mitigate external shocks. 

 

 

 



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CONCLUSION 

 

This study underscores the significant influence of stakeholders including the Zambian government, 

local communities, multinational enterprises (MNEs), and international investors on inward foreign direct 

investment (FDI) in Zambia’s mining sector. The findings highlight that policy stability, particularly in 

taxation and regulatory frameworks, plays a crucial role in attracting and sustaining FDI. The government’s 

recent reforms, such as the mineral royalty tax deductibility policy, have contributed to renewed investor 

confidence, aligning with previous research that emphasises the detrimental effects of policy unpredictability 

on long-term investment (Phiri 2011; U.S. Department of State 2023). However, despite these 

improvements, Zambia’s heavy reliance on mining FDI continues to expose the economy to commodity 

price volatility, reinforcing the need for diversification. 

Local communities and labour stakeholders also shape FDI outcomes through their expectations of 

corporate social responsibility (CSR) and equitable benefit-sharing. The study reveals that while some MNEs 

have made efforts to engage with communities, disparities persist, particularly in regions with a long history 

of mining activities. This suggests that stronger regulatory enforcement of CSR commitments and greater 

inclusion of local stakeholders in decision-making could enhance the sector’s social sustainability. 

Furthermore, the influx of Chinese and other foreign investments has brought capital and technology but 

has also raised concerns about uneven economic spill overs and environmental impacts. Comparative 

insights from other resource-dependent economies, such as Zimbabwe, indicate that Zambia could improve 

FDI benefits by fostering stronger linkages between mining operations and local industries. 

Despite its contributions, this study has some limitations. Firstly, the study focuses primarily on large-

scale mining, leaving artisanal and small-scale mining (ASM) largely unexplored, even though ASM plays 

a significant role in Zambia’s informal economy. Secondly, external factors such as global commodity price 

fluctuations and geopolitical influences were not deeply analysed but remain critical in shaping FDI trends. 

To maximise the positive impact of FDI, policymakers should prioritise regulatory consistency, 

incentivise value addition in the mining sector, and promote economic diversification into agriculture and 

renewable energy. Strengthening local content policies to enhance skills transfer and domestic procurement 

could also ensure broader economic benefits. Additionally, fostering transparent dialogue between MNEs, 

government agencies, and communities will be essential in mitigating conflicts and ensuring sustainable 

development.  

In light of the complex dynamics between foreign direct investment (FDI) and domestic stakeholder 

interests in Zambia, it is imperative that a nuanced policy framework be instituted to harness the benefits of 

foreign capital while mitigating its potential adverse effects. One critical area of intervention lies in the 

correction of market failures such as negative externalities arising from industrial activities often associated 

with FDI-led projects especially in the mining sector. The government should consider the implementation 

of targeted environmental taxation regimes, such as carbon taxes, which would serve not only to internalize 

the social costs of environmental degradation but also to incentivize cleaner production technologies among 

foreign investors. This fiscal instrument could further contribute to expanding the state’s revenue base, 

enabling increased investment in the provision of merit goods such as public healthcare, education, and 

environmental conservation sectors that are often underfunded yet critical for equitable development and 

long-term welfare maximization. 

Moreover, Zambia’s heavy reliance on the agricultural sector particularly in the context of an FDI 

landscape skewed towards extractive industries and mono cultural agricultural exports, exposes the 

economy to significant structural vulnerabilities. These include susceptibility to international commodity 

price shocks due to the low price elasticity and inherent volatility of primary products. To counteract these 

risks, the government must formulate and enforce industrial policies that promote diversification of the 

economic base, including the development of value-addition chains in agro-processing and the 

incentivization of investment in knowledge-intensive sectors. Strategic stakeholder engagement, including 

with local communities, civil society organizations, and domestic investors, should be institutionalized to 

ensure that FDI projects align with national development goals and sustainability imperatives. In this vein, 

the establishment of clear performance benchmarks for foreign investors particularly in areas such as 

employment creation, technology transfer, and environmental stewardship could enhance accountability 

and maximize developmental returns. These policy recommendations underscore the importance of 

adopting a proactive and context-sensitive regulatory approach to FDI in all sectors besides mining, one that 

balances the imperatives of economic growth, environmental integrity, and social equity in Zambia’s 

development trajectory. By addressing these challenges, Zambia can harness FDI not only as a driver of 

growth in mining and other sectors but also as a catalyst for inclusive and resilient economic transformation. 

 

 

 



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