‘We learnt the hard way’, says Zambia’s Central Bank Governor Denny Kalyalya

Zambia's central bank leadership has acknowledged critical policy missteps in recent years, signalling a potential recalibration of monetary governance at a pivotal moment for the nation's economic recovery. Meanwhile, diplomatic intervention in the Democratic Republic of Congo's protracted conflict underscores the persistent political instability threatening the region's investment climate. Together, these developments present a mixed picture for European investors navigating sub-Saharan Africa's most volatile markets.

Governor Denny Kalyalya's candid admission that Zambia "learnt the hard way" reflects the painful lessons of hyperinflation and currency depreciation that ravaged the economy in recent years. Zambia's kwacha lost over 80% of its value between 2020 and 2023, and inflation peaked above 300% before moderating. These catastrophic outcomes stemmed from loose monetary policy, foreign exchange mismanagement, and the cascading effects of sovereign debt distress. The country's 2023 debt restructuring agreement with creditors has created space for orthodox monetary policy, but implementation remains fragile.

For European investors, Kalyalya's acknowledgement suggests a genuine commitment to discipline—but also highlights institutional vulnerabilities. The central bank's previous failures weren't merely technical; they reflected weak institutional independence and political pressure to monetise fiscal deficits. While current reforms are welcome, European investors should remain cautious about the sustainability of policy consistency, particularly if political pressures intensify around 2026 elections.

The simultaneous crisis in the Democratic Republic of Congo presents an entirely different challenge. US diplomatic intervention, with the Biden administration summoning parties to address stalled peace negotiations, indicates international concern about renewed escalation. The M23 militia's resurgence, backed by Rwanda, has destabilised the eastern provinces—home to the world's largest cobalt reserves and significant coltan deposits critical for European green energy and technology sectors.

The Congo's conflict directly threatens European supply chains. Artisanal and small-scale mining in conflict zones increasingly supplies global markets despite sanctions and due diligence regulations. European companies dependent on these minerals face reputational and regulatory risks if they cannot guarantee conflict-free sourcing. Major European automotive and battery manufacturers have already implemented stringent traceability protocols, driving up operational costs and complicating procurement strategies.

The divergence between these two African crises is instructive. Zambia's challenges are fundamentally economic—policy mistakes compounded by external shocks—whereas the Congo's are structural political failures embedded in regional geopolitics. This distinction matters for investor strategy. Zambia presents a recovery narrative with improving fundamentals (inflation declining, currency stabilising, mining production recovering), albeit with lingering governance risks. The Congo, by contrast, requires investors to accept that resolution may take years and that supply chain risk mitigation is non-negotiable.

For European investors, these parallel developments demand differentiated approaches. Zambia presents selective opportunities in sectors benefiting from currency stability and recovery (banking, consumer goods, infrastructure), but only for investors with patient capital and strong political risk insurance. The Congo demands immediate attention to supply chain resilience and conflict minerals compliance, with limited direct investment opportunities until political settlement emerges. Investors should treat southern and central Africa not as monolithic markets but as distinctly different risk environments requiring tailored strategies.