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The annual inflation rate for September, 2021

Markets

Imports drop as Zambia posts another trade surplus

Zambia has yet again recorded a trade surplus of K3.9 billion in August 2021 compared to a surplus of K3.6 billion in July 2021 indicating an 8.3% increase. A drop of 9% in imports accounted for the largest part of the surplus. However, despite these consecutive statistical trade surpluses, the Kwacha continues to face pressure.

According to the Zambia Statistics Agency (ZamStats) Interim statistician general Mulenga Mupesa, exports mainly comprising domestically produced goods, fell by 5.3 percent to K17.5 billion in August 2021 from K18.5 billion in July 2021.

Speaking during the ZamStats monthly bulletin in Lusaka, Mupesa said this was mainly on account of about 32%, 27% and 20% decrease in export earnings of Consumer goods, Raw materials and Capital goods, respectively.

He said imports decreased by about 9% to K13.6 billion in August 2021 from K14.9 billion in July 2021. “This was mainly as a result of a 31.2 and 12.0 percent decrease in import bills of Consumer goods and Capital goods, respectively,” Mupesa said.

Meanwhile, Traditional Exports (TE’s) earnings increased by 0.7 percent to K13.5 billion in August 2021 from K13.4 billion in July 2021.

Mupesa said in terms of share in total exports, TEs or copper related exports accounted for 77.1 percent of export earnings in August 2021. He said Non Traditional Exports (NTE) earnings decreased by 20.9 percent to K4.0 billion in August 2021 from K5.1billion in July 2021.

Mupesa said in terms of share in total exports, NTEs accounted for 22.9 percent of total export earnings in August 2021.

“Export earnings from refined copper in August 2021 increased by 0.3 percent to K13.5 billion from K13.4 billion in July 2021.

“The increase is attributed to the 17.7 percent increase in export volumes from 62.9 thousand tonne in July 2021 to 74.0 thousand tonnes in August 2021. Copper prices on LME market for the corresponding months decreased by 0.8 percent to US$9,357.2 per tonne in August 2021 from US$9,433.6 per tonne in July 2021,” he said.

Mupesa said the volume of refined copper exported for the period January to August 2021 was 584.0 thousand tonne while that of 2020 for the same period was 591.0 thousand tonne representing a 1.2 percent decrease

Agricultural products accounted for a share of 25.3 percent of Zambia’s (NTEs) in August 2021 compared to 37.2 percent in July 2021.

Export earnings from agricultural products decreased by 46.1 percent to K1.0 billion in August 2021 from K1.9 billion in July 2021.

The major export commodities were Tobacco, partly or wholly stemmed/stripped accounting for 12.3 percent, other raw cane sugar (9.3 percent) and Cotton, not carded or combed (8.1 percent).

Non-agricultural products accounted for a share of 74.7 percent of Zambia’s NTEs in August 2021 compared to 62.8 percent in July 2021.

On the other hand, export earnings from non-agricultural products recorded a decrease of 6.1 percent to K3.0 billion in August 2021 from K3.2 billion in July 2021.

The major export commodities were Electrical energy accounting for 7.0 percent, Ferro-siliconemanganese (6.5 percent) and Portland cement (excl. white) (6.4 percent).

And Zambia’s major export products in August, 2021 were from the intermediate goods category mainly comprising copper anodes for electrolytic refining and Copper blister and accounting for 85.8 percent.

Exports from the consumer goods, raw materials and capital goods categories, collectively accounted for 14.2 percent of total exports in August, 2021.

October 1, 2021

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Zambia has yet again recorded a trade

Lifestyle

Nakonde border stretch porous – encouraging smuggling

Zambia’s border with Tanzania in Muchinga Province has been described as very porous with limited to no barriers or security arrangements leading to rampant smuggling activities and loss of revenue by authorities such as Zambia Revenue Authority – ZRA.

Speaking in an exclusive interview with the Zambian Business Times – ZBT, Cross Border Traders Association Nakonde branch members have disclosed that smuggling is rampant because of the porousness of the border.

CBTA Nakonde branch vice chairperson Michael Kanyanya said the stretch from Nakonde border to the next border which is Kasesha border near Mbala in Northern Province was too long and was not guarded, hence the increase in smuggling.

“The smuggling at Nakonde border is rampant because the border is porous, the stretch which is not guarded is too long. It’s the stretch from Nakonde up to Mbala connecting to the other border Kasesha. The stretch from Nakonde on the right is very porous,” he said.

Kanyanya said there was need to intensify sensitization of the traders on the need and importance of trading formally . He said stakeholders such as the Zambia Army, Zambia Revenue Authority (ZRA) and the Immigration department should come together to fight this scurge.

Kanyanya noted that smuggling was not good for both the country and the traders as it leads to loss of revenue and promotes criminal activities. He said there is urgent need to curb smuggling as it deprives the traders of free competition with those who has paid taxes.

“There is need for stakeholders like ZRA, the immigration and us the association to come together and try to find ways of curbing this, we need to intensify sensitisation on this matter.

“As we may all be aware, a country achieves better economic growth by developing its own industrial base. Smuggling under-cuts prices of the locally manufactured goods thus destroying the market for local products and robs the nation of her revenue, hence affects provision of social services to entire community,” Kanyanya explained.

He said, “Traders should know that when you use formalized routes, you are sure of what you are doing, then theft is minimized, because when you use illegal routes you meet people that can steal or get all of your capital but when you use legal routes you are guided on how best you can trade and intimidation is minimized.

Kanyanya further appealed to Goernment to help the association with grants or loans to boost their business of lending out money to small scale cross border traders.

“We have 800 members , those that have renewed their membership are 137. Our members need good capital to facilitate their businesses, the little capital that they have can not facilitate them to grow faster.

“We would like to urge government to provide grants or loans to help the traders to grow. What we are doing as an association is that out of the small business that we do, we buy maize resell maize to FRA then use the money to give small loans to our members. For example, three months ago we were giving K600 to our small scale traders as an association then they pay back K650. So if we are given a grant as an association we can boom it from there and be able to empower our traders,” Kanyanya said.

He said the Covid-19 pandemic has slowed down business for most traders as there are usually restrictions for crossing the border.

“The business is very slow because of the closure of the borders, there was lockdown, people could not trade as normally as they used to. A few weeks ago there were restrictions that people can not cross. What we are doing as an association we are sensitizing our people to follow the five golden rules then we are also encouraging them to vaccinate. When they do these they are allowed to cross but of course with a lot of intimidation within ourselves. A lot of money has been lost. Almost half of people’s capital,” Kanyanya said.

October 1, 2021

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Zambia’s border with Tanzania in Muchinga Province

Markets

Kwacha vulnerable – crosses K17 per US dollar threshold

Zambia’s currency, the Kwacha has continued to be vulnerable to the US dollar as it opened trading session on Monday at between K16.7960 and K16.4720 per US dollar, and has today Tuesday 28 September 2021 crossed back over the K17 per US dollar threshold at some bureaus in Lusaka.

According to the Zanaco’s weekly financial markets updates made available to the Zambian Business Times – ZBT, troubles for the Kwacha continued leaving it trading on the back foot for the 4th week in a row amidst ongoing excess demand conditions in the FX market.

The depreciation of the local unit accelerated to 1.1% (compared to the prior week’s 0.9%) after closing at K 16.58/16.63 per US dollar on Friday afternoon on the interbank from Monday morning’s open rate of K16.40/16.45.

Zanaco Bank indicates that in addition to tight FX liquidity, the Kwacha has also been reeling from a strong dollar which has been on a bullish run since the start of September.

Cognizant of the challenges commercial banks are facing to meet their clients’ FX needs, BoZ continued to help with injections of US$34 million in the supply support over the course of the week.

“Going into this week, we still see the Kwacha remaining on a weaker path due to excess demand conditions amid loose local currency liquidity (as government and private firms pay salaries and other month-end obligations) which is likely enhance FX demand.

As such, supply support from the central bank is set to continue this week to limit the pace of depreciation,” the Market update further states.

And a check by ZBT on the daily indicative rates at Absa Bank Zambia revealed that the kwacha was selling and buying between K16.79 and K16.47 respectively on Monday against the United States Dollar.

At Access Bank Zambia the local currency was buying at K16.4720 and selling at K16.7960 against the dollar and at Atlas Mara Bank, the Kwacha has been spotted to be trading between K16.4835 and K16.8165.

In last week’s trading session, the kwacha was vulnerable to the US dollar as supply flows maintained at a bare minimum against sustained demand. According to Zanaco daily treasury newsletter, the currency opened trading at K16.2500/16.300 per dollar on Monday morning and moved in one direction to close Friday at K16.500/16.600 per dollar.

“As we get into this week trading, market will take cues from supply flows that will come through,” the letter said.

And at Zambia Industrial Commercial Bank (ZICB), the Kwacha continued to trade on the back foot against the U.S Dollar with supply of the hard currency continuing to be outweighed by demand on Friday. The ZICB Daily Treasury Newsletter indicates that the local unit which opened at K16.560/16.610 was mostly weighed down by sustained demand closing the week at K16.600/16.650.

Analysts have called on the new Minister of Finance Situmbeko Musokotwane to take strong corrective action before the local unit slides further. Experience has shown that its more difficult to claw back value than to defense the exchange pair at lower rates.

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Zambia’s currency, the Kwacha has continued to

Agribusiness

Did you know that Nakonde rice is imported from Tanzania?

Rice is one of the main foods that Zambians continue to adopt and consume with quantities or demand increasing year on year as urbanization takes root and the middle class expands.

Zambia being a vast country has areas and regions that are endowed and capable of growing enough rice that can meet local demand and even cater for the export market especially to nearby African countries.

So, we have various areas that grow rice which have even become part of the brand names for the locally grown rice. Some of the common local rice varieties are identified as Mongu rice, Chama rice and Nakonde rice right? Wrong…

When verified with local traders, it has been confirmed that only Mongu and Chama rice qualify to be marketed as locally grown rice brands. It has also been confirmed they there are no local people in Nakonde, Muchinga Province that grow rice at a large scale.

Speaking in an interview with the Zambian Business Times – ZBT, the Cross Boarder Traders Association – CBTA Nakonde branch vice chairperson Michael Kanyanya has clarified that the rice that is commonly referred to as Nakonde rice is actually grown in Tanzania and is imported into Zambia.

He confirmed that people in Nakonde do not grow rice in notable quantities as only very small-scale rice farmers are there. “There are only very small scale farmers in Nakonde. Nakonde rice actually comes and is imported from Tanzania. In fact, we should stop calling it Nakonde and call it Tunduma rice or Tanzanian rice,” Kanyanya said.

He explained that the rice is not grown in Nakonde but its bought from Tunduma and then sold to Zambian people as Nakonde rice.

Kanyanya further stated that “People in Nakonde don’t grow rice. That rice is imported from Tanzania and enters through Nakonde border.“There is no such thing as Nakonde rice. People in Nakonde do not grow rice. That rice is imported from Tanzania and enters through Nakonde border.

So, next time you want to buy locally grown rice, consider Chama and Mongu rice!

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Rice is one of the main foods

Tech

NORTEC faces work stoppages due to delayed salaries

The Northern Technical College (NORTEC) of Ndola on the Copperbelt is reported to be facing funding and cash flow challenges which has led its workers to threaten to strike due to delayed payment of salaries.

One of the workers representative who asked for their identity to be withheld told the Zambian Business Times – ZBT that all staff members were supposed to be paid their salaries on 21st of September 2021 but due to cash flow challenges being faced by the college, management says it will only be able to pay the salaries in the second week of October 2021.

NORTEC seems to be resorting to delaying payment of salaries, but the workers are getting adversely affected due to their commitments which the management seems not to be finding solutions to.

The workers are threatening to go on strike on Monday, which puts students in a difficult position as they are scheduled to have exams on the same day, Monday 4 October 2021.

The source said management has said that it is unable to pay salaries because it is being owed huge sums of money for bursaries by government dating back as far as 2017, adding that students have been learning but government has not been paying for the students who are on bursaries.

The source said because management has not been funded, they are not able to pay salaries on time stating that their bank accounts have been depleted. Efforts to get a comment from the Ministry of Education and the Loans and scholarships board by ZBT proved futile by press time.

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The Northern Technical College (NORTEC) of Ndola

Lifestyle

Access Bank appoints Lishala Situmbeko as MD

Access Bank Zambia, a local unit of one of Nigeria’s top tier banks has announced the appointment of Lishala Situmbeko as the Country Managing Director – MD from November 2021. Situmbeko has over 25 years of experience as a renowned business leader in the private financial and public sectors.

According to information made available to the Zambian Business Times – ZBT, Situmbeko served Zanaco Bank Plc for over 10 years in various roles, with the most recent being Chief Commercial Officer and acting Managing Director before joining Access Bank Zambia.

At Zanaco, Situmbeko held an expanded role that spearheaded the bank’s key business in retail banking, treasury, corporate and investment banking, business banking, transactional banking and other support functions.

Situmbeko was seen to have been passed over for the Managing Director role at Zanaco following the departure of Henk Mulder in preference for an outside hire and the current Zanaco Managing Director Mukwandi Chibesakunda.

Before joining Zanaco, he held senior treasury roles at Barclays Bank now ABSA Bank Zambia, was a senior economist at the Ministry of Finance and an economic and financial markets specialist at Bank of Zambia – BoZ.

Situmbeko has a Bachelor’s Degree in Economics from the University of Zambia, a masters degree from the University of Nairobi and has completed the program for executive development from IMD Business School in Lausanne, Switzerland.

In addition, Situmbeko is a Hubert H. Humphrey Fellow in Banking and Finance from Boston University. He also has numerous accreditations and certifications in business and development including being an executive coach, speaker, mentor and trainer under the John Maxwell Team.

A statement from Access Bank made available to ZBT further stated that “with this wealth of knowledge and experience in the industry both professionally and personally, Situmbeko will be an incredible asset to Access Bank Zambia as we continue on our growth plan in Zambia and beyond to be the World’s most respected African Bank,” the board of directors said.

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Access Bank Zambia, a local unit of

Mining

Copper prices rebound to over $9, 300 per tonne

Zambia’s economic prospects continue to remain bright with Copper prices on the London Metal Exchange (LME) recording a rebound of about 0.6% to over US$9,300 ($9, 384.50) per tonne in the month of September 2021.

According to Reuters report, Copper prices rose on Monday 27 September 2021 on the back of falling stockpiles in exchange warehouses in top consumer China and the general shortage of scrap metal boosted demand for refined copper.

The three-month copper on the LME rose by 0.6% to $9,384.50 a tonne by 02:57 GMT, while the most-traded October copper contract on the Shanghai Futures Exchange advanced 0.8% to 69,580 yuan ($10,760.55) a tonne.

Tighter restrictions and supply disruptions also limited supplies of scrap copper, forcing some users to switch to copper cathode for consumption. In September last year, copper on the LME was trading around $6,500 per tonne.

Copper is Zambia’s number one foreign Exchange earner accounting for over 70% of total exports for the mineral rich country. The country produces about 850,000 tonnes of copper annually, which at current prices would mean revenues of about US$8 billion (850,000 tons *9,300).

According to the Zanaco weekly financial markets update, heightened possibility of a debt default by China’s second largest property developer, Evergrande, sparked a sell-off among copper investors early in the week leaving the price of the red metal lower.

On average, London copper was down 2.5% to a 5-week low of $ 9, 226.81/MT from $9, 461.05. However, and on a statement that Evergrande would honour its interest obligations on a local bond, fears eased and copper was seen partially erasing part of the earlier losses Wednesday through Friday but a hint that the US may start tapering its stimulus program limited this recuperation effort.

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Zambia’s economic prospects continue to remain bright

Markets

IMF loans are interest free & good for Zambia – Cheelo

An International Monetary Fund (IMF)-supported economic programme is inevitable for Zambia as it presents important opportunities for realism in setting the debt records straight, transparency and mutual accountability, and technical assistant towards establishing fiscal and debt discipline.

According to information made available to the Zambian Business Times-ZBT, a local research economist at Equilibria Consulting Limited Caesar Cheelo said through an IMF programme, Zambia would be able to replace expensive commercial loans bearing coupon rates in the region of 5.36-8.97% for cheaper zero interest rate moneys.

Cheelo said the debt service savings would create significant fiscal space.

He said an IMF programme would unlock new money saying Zambia is eligible to a quota of approximately US$1.3 billion in new concessional loan money.

“IMF loan terms and conditions of IMF loans are generally much more favourable than on any commercial debt, including any debt rearrangements (such as Bond refinancing). The IMF uses the following three concessional lending facilities to provide support to low-income countries (LICs) like Zambia.

“The Extended Credit Facility (ECF), Standby Credit Facility (SCF) and the Rapid Credit Facility (RCF) which are all concessional. While they have different maturities and grace periods, they are all currently interest free,” Cheelo said.

He explained that the ECF, which Zambia is seeking is a sustained medium- to long-term engagement in case of protracted balance of payments problems while the SCF is financing for LICs with actual or potential short-term balance of payments and adjustment needs caused by domestic or external shocks, or policy slippages and can also be used on a precautionary basis during times of increased risk and uncertainty.

Cheelo said the RCF is the rapid financial support, as a single up-front payout for low-income countries facing urgent balance of payments needs and possible repeated disbursements over a (limited) period in case of recurring or ongoing balance of payments needs.

He said financing under the ECF and SCF carries a zero interest rate at least through June 2021, with a grace period of 5½ years and 4 years, respectively, and a final maturity of 10 years and 8 years, respectively.

He said any commercial debt rearrangement for example, refinancing of the US$750 million Eurobonds falling due in 2022 would not introduce any new money but would simply rearrange the existing stock.

Cheelo said this would not offer much extra Balance of Payment (BOP) support or fiscal space, especially compared to financing under an IMF programme.

He observed that IMF provides a very strong signal to the international community, unlocking pockets of finance and international goodwill.

“The following examples emphasize this simple but powerful point: The G20 Common Framework of Official Creditors succeeded in establishing a moratorium, which covered part of Zambia’s official debt for a period.

This moratorium was possible because the IMF and World Bank weighed in and guided the establishment and implementation of the Common Framework.

“Despite Zambia having hired financial advisors Lazard Frères and legal advisor White & Case, refinancing talks with Eurobond holder stalled in 2020, with the Bondholder citing, among other things, the agreement of a Fund deal between Zambian and the IMF as a pre-condition for negotiating with creditors,” Cheelo said.

He said in other words, the Eurobond creditors suspended negotiations on debt restructuring until Zambia secures an IMF deal.

Cheelo said, “In addition, when Zambia defaulted on its Eurobond debt service payments in late 2020, it is a widely held secret that the IMF stepped in to keep the creditors at bay, convincing them to holt the international arbitration process of recalling the principal amounts all three Eurobonds totaling US$3 billion.

He also said the multilateral and bilateral partners are on record that their future development finance to Zambian will depend on both good standing with them individually and on good standing with the IMF.

Cheelo said this is especially important for securing budget support from various development partners, something that will not be granted without an IMF deal.

“IMF is a highly competent technical assistant and strategic accountability partner: the expertise of the IMF in economic management, governance, fiscal and debt rebalancing, macroeconomic stabilization, etc. will offer crucial support to Zambia going forward, given the recent history of significant economic mismanagement and weakening of economic institutions.

“For instance, on debt data integrity and reliability, it is well documents that the World Bank-IMF and Zambian authorities had serious disparities on debt numbers and therefore, on the understanding of the prospects for putting Zambia on a path of debt sustainability,” he said.

Cheelo said ultimately, an IMF program is not meant as a panacea for Zambia’s economic problem; however, it is a necessary element, among many others, for economic recovery.

He said economic recovery is not about finding sets of mutually exclusive policy options; it is about formulating and implementing a sequence of coherent complementary home-grown & external policies & programs.

“Of course, Zambia should not go to the IMF negotiating table with eyes closed or with a weak and poorly thought-out negotiating position.

“The country has experienced a lot, has learned a lot, including about its own self-destructive tendencies, and now has every opportunity to establish a strong strategic negotiating position and secure a reasonable deal, also riding on the domestic and international goodwill and strong political will,” Cheelo added.

September 26, 2021

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An International Monetary Fund (IMF)-supported economic programme

Companies

Cut T-bill rates to reduce cost of borrowing – BOZ challenged

By ZBT staff analyst

The only way to reduce market interest rates on loan facilities in the near to medium term is for the Treasury Bill rate [offered by the Bank of Zambia – BOZ] to decline, a scenario that will eventually culminate in reducing the cost of funds across the market, the Bankers’ Association of Zambia (BAZ) has disclosed.

According to the Bank of Zambia (BoZ), commercial banks’ nominal average interest rates on loan facilities marginally declined to 25.6 per cent in June, 2021, from 26 per cent in March, representing a decline of a meagre 0.4 percentage points. This is on the back of a Monetary Policy Rate (MPR) maintained at 8.50 per cent for three successive times.

Commenting the lethargic interest rate reduction, BAZ chief executive officer Leonard Mwanza said that cost of funds on the local financial market remained high, exacerbated by the Treasury Bill rates that government borrows at, signalling a sustained heavy government intervention on the local financial market.

“So, if you’re asking a question as to why we do not see a significant reduction on lending rates, what I’d say is it’s always a question of which one is the real benchmark rate that lenders are using. And you bring in the aspect of the cost of funds on the market; what drives the cost of funds is the interest–free rate, which government borrows when they issue securities – TBs (Treasury Bills) and also government bonds”.

You look at the short-term rate as a guide, which is the 364-day, the one-year Treasury Bill. If you concentrate where the TB rates are, you will find they are somewhere around 24 per cent. So, that’s the benchmark rate and it’s an alternative banks can use to lend because it’s risk-free. And when you look at what the lending rate is 25.6 per cent, that’s the average interest rates you’ll find in commercial banks,” Mwanza told the Zambian Business Times – ZBT in an interview.

“If you look at inflation at 24.4 per cent, the one-year TB rates are also around that range. So, you find that interest rates, inflation, the risk-free rates are within that margin. So, the key to dropping the lending rates is on the Treasury Bill rate because if they drive downwards, then, definitely, we can see interest rates start coming down. If inflation starts dropping below those levels, definitely, we’ll start to see interest rates dropping. So, we must also look at it from the angle of what the cost of funds are in the market. They are driven by the rate at which government is willing to pay for their Treasury Bills.”

Asked if the TBill rates could start to decline in tandem with the falling annual rate of inflation, Mwanza said this was dependent on government’s fiscal policy, which ultimately influences lending rates on loan facilities.

“Maybe not directly responding to the easing of inflation. It is more of a structural issue; it is a fiscal management issue. So, it starts from there; once we manage those structural, fiscal management issues, you’ll automatically start seeing interest rates coming downwards. For instance, the good market sentiments in the last auctions pushed the interest rates downwards because of the expectation that we will have a better focus, we’re expecting a better management of the economy, and out of that, the interest rates came down. And then the promise to consolidate fiscal management issues are actualised, going forward, yes, we could see interest rates following suit, they’ll start coming down,”he replied.

“And in any case, that’s what we always hope for; banks lend more when the interest rates are favourable to the market. When interest rates are high, you tend to have fewer borrowers, a lot of defaulters and risks increasing. I know already there is quite some lending to the private sector, but I am sure more can be done once it becomes more favourable to that small-medium enterprise, individual and to that corporate to borrow.”

And Mwanza, a former Natsave managing director, expressed optimism that the Non-Performing Loan (NPL) ratio, which still remained above the industry acceptable threshold of 10 per cent, would subside.

“The latest information we got for the first quarter of 2021 from the central bank was that Non-Performing Loans were around 11.6 per cent, which was above the industry threshold and it was mainly because of the subdued economy and the effect of the COVID-19 on businesses. I am sure there should be an improvement considering that there is an increase in lending to the private sector,” Mwanza told ZBT.

Lending to the private sector picked up by 16.3 per cent, year-on-year in June, 2021, compared to 0.5 per cent in March, this year, largely supported by increased disbursements from the BoZ’s K10 billion Targeted Medium-Term Refinancing Facility. However, the expansion in domestic credit to government slowed down further to 48.3 per cent from 69.6 per cent as commercial banks scaled down the accumulation of government securities, BoZ data shows

September 22, 2021