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Mining

Chinese cement giant Huanxin Cement has acquired majority stake and taken over the troubled French local unit, Lafarge Zambia. According to a stock market note availed to the Zambian Business Times – ZBT, the Chinese firm has acquired 75% of all of Lafarge group interest in the Zambian cement manufacturer.

The other remaining 25% is publicly held by individual and institutional shareholders vis its listing on the Lusaka Securities Exchange – LuSE. Huanxin has also picked up the Lafarge Malawi unit at the same time, signaling a bigger group level transaction for Lafarges Southern Africa units.

Lafarge Zambia troubles began together with two other cement firms in Zambia when they were fined and asked to slash down their prices after Zambia’s anti-trust regulator – Competition and Consumer Protection Commission – CCPC found the company guilty for participating in a price cartel – see earlier article by ZBT on Cement firms defy CCPC.

And Lafarge Zambia company secretary Chibuye Mbesuma-Ngulube has confirmed the take over of Lafarge Zambia by Huanxin Limited of China. Ngulube stated that an agreement for the sale of 75% of the company was executed by majority shareholders in Lafarge Zambia i.e. Finaciere Lafarge and Pan African Cement to Huanxin for an enterprise value of USD150 million.

The Lafarge Zambia company secretary however indicated that this is a related party transaction as LafargeHolchim group holds about 42% shares in Huanxin group. Lafarge Zambia has two cement plants in Zambia, one in Lusaka Chilanga area and the other in Ndola’s Masaiti area. The combined production of the two plants is 1.5 million tons per annum with the aggregate plant producing about 600k tons.

A source within Lafarge has told ZBT that the transaction or acquisition of Lafarge Zambia has come as a suprise for the local staff. The source stated that anxienty has gripped most members of staff on the new owners and the conditions of service they would implement stating that most chinese firms level of staff compensation is lower compared to western owned multinationals.

Most senior managers and directors are expected to be exited as new owners usually want to come in with their own managers to introduce their new systems and drive a new organisation culture. This announcement has come as a shock stated the source.

According to the note released by Huanxin seen by ZBT, this transaction is subject to regulatory approvals, in Zambias case, CCPC, LuSE and the ministry of mines have been listed as the regulators that will need to give the transaction the blessings before its can be completed.

It is however not clear if this transaction if approved, will render the order by CCPC to Lafarge and two other cement firms to cut prices null and void. The other two firms athat were also fined and ordered to cut prices were Dangote and Sinoma Cement. All the three firms have not cut prices as the decision is now being awaited from the appeals tribunal.

see also more articles from ZBT on cement Kwacha depreciation blamed for escalating cement prices

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Chinese cement giant Huanxin Cement has

Sport

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Win K55 Million on Euro 2020 with

Agribusiness

A random survey conducted by the Zambian Business Times – ZBT have revealed that the prices of cooking oil have started coming down in retail outlets by about 10 to 20%. Even those companies that import crude edible oils seem to have also reduced their retail prices in anticipation of the landing of imported cooking oil to protect themselves from losing market share.

And the National Traders of Edible Oils Association says government’s decision to allow the importation of cooking oil is because the local producers admitted that they have no immediate solutions or plans to reduce the high prices of cooking oil on the market.

Association National President Sylvester Kaluwa said the Ministry of Agriculture, the Crushers and Edible Oil Refiners Association (CEDORA) and the Zambia National Farmers Union (ZNFU) among other stakeholders held discussions and agreed on allowing the importation of an initial quota of 9,000 metric tonnes of cooking oil.

Kaluwa said the local processors are unable to buy all the locally available soya beans grown in the country due to their limited crushing capacity. So, the issue here is locally installed crushing capacity which is low. People should understand that the increase in the price of the crude palm that is imported and used in the manufacturing of cooking oil which is currently being retailed is what has led to increased prices. The crude palm oil is imported, and as you know, the Kwacha has depreciated by about 60% within a period of one year.

Speaking in an exclusive interview with the Zambian Business Times-ZBT, Kaluwa said the association’s estimated prices of sunflower cooking oil once brought into the country will range between K300-K400 for a 10 litres container, K270-K300 for a 5 litres container, K170-200 for a 2.5 litres container and K130-K150 for a 2 litres container.

He said these are fare prices considering sunflower cooking oil is expensive and will be imported adding that different types of cooking oil will be brought into the country and should be landed at a price lower than K200.

“Palm oil will also be imported and a 5 litres container will land between K180 and K200. We will bring in soya bean oil, palm olein, palm kernel, canola oil”, he said. He noted that these estimated prices are based on the information the association has concerning the prices of cooking oil in the countries they want to import from and the landing price will determine the price of the cooking oil when brought into the county.

He further said cooking oil that will be imported from countries within the SADC region is likely to be cheaper than the cooking oil that will be imported outside the SADC region. Kaluwa said the imported cooking oil will be cheaper than the locally produced oil but the plan is not to reduce the sales of the locally produced cooking oil adding that local producers were given incentives, which will see them reducing their prices, by about 20%.

Kaluwa said the importation of cooking oil will bring about competition, which will benefit the consumers, and the association will be able to cut costs by not involving agents and directly supplying to retail stores such as Shoprite who sell directly to consumers.

He mentioned that due to allowing the importation of cooking oil, government has allowed farmers to export atleast 40,000 metric tonnes of soya beans. He said imports have begun and the placing of orders has also begun and the oil will take one to two weeks to land in the country if imported from countries within the SADC region and 20-25 days if imported from Indonesia or other Asian countries.

He mentioned that the finished product cooking oil will be imported from Malaysia, Indonesia, South Africa, Tanzania, Zimbabwe, Malawi and Mozambique.

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A random survey conducted by the Zambian

Markets

The Zambia Forestry and Forest Industries Corporation (ZAFFICO) plc has made a profit after tax of K229 million in the financial year ended December 31, 2020, up 67% when compared to K137 million recorded in 2019.

The recognition of compensation of K134.35 million payable by the Government included in other income significantly contributed to the recorded profit uptick of 67%.

ZAFFICO Company secretary Chanza Sikazwe in a statement made available to the Zambian Business Times – ZBT said the compensation is due from the Government and represents the value of the felled trees from a section of the plantation on which the new international airport in Ndola has been constructed.

According to information made available to ZBT, Sikazwe said the Corporation reduced the annual harvest of Pine roundwood from 448,621m3 in 2019 to 299,219 m3 in 2020, representing a reduction of 33% as part of the it’s efforts towards the attainment of sustainable forestry management.

However, the forestry company has indicated that it intends to expand its plantations in Luapula, Northern, Muchinga and North-Western provinces to support its sustainable forestry products agenda. Historically, its main plantations have been on the copperbelt but a strategic decision was made to expand to all the provinces with suitable climatic and weather conditions.

Additionally, “despite the Company having issued additional shares via a combined initial public offering (IPO) and third-party sales of shares during the reporting period under review, the EPS is still expected to increase primarily due to the recognition of K134 million compensation payable by the Government,” he said.

Sikazwe said during the year, the Corporation continued executing its revenue diversification strategy which included the promotion of the use of Eucalyptus as an alternative to Pine and optimizing the operations of the Pole Treatment Plant.

He said total operating expenses, after the capitalization of qualifying expenditure to the Plantations in Formation (PIF), amounted to K92.73 million during the year under review compared to K 73.45 million in the prior year.

Sikazwe said the increase is largely driven by the general inflationary pressures as well as additional costs inspired by the Covid-19 pandemic.

“Total assets increased to K1, 228 million as at 31 December 2020 compared to K 880 million as at the close of 2019. The increase in assets is mainly attributed to the investment in the Plantations in Formation.

“The increase in shareholders’ funds to K1, 024 million as at 31 December 2020 from K 690 million in 2019, is attributed to the issuance of new shares at a premium and higher retained earnings,” he said.

Sikazwe said the generation of cash from operating activities remains very strong, having generated K162 million during the year under review.

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The Zambia Forestry and Forest Industries Corporation

Agribusiness

The Dairy Association of Zambia (DAZ) has disclosed that the importation of milk concentrates which is being used for most prepacked milk products on the Zambian market suppresses the growth, development and maturity of the local dairy industry.

The concentrates are leading to most suppliers preferring to import than developing facilities to buy, process and package milk and diary products locally thereby suppressing local demand and development. The concentrates also affect the pricing and the profitability of locally produced milk , as some of the imported milk is cheaper because some of it is subsidized and some of it given away at a low price when there is excess production in their countries of origin.

Association Project Manager Victor Ng’andu said the importation of milk concentrates supports the dairy industries in countries where the concentrates are imported and kills the thriving of the local dairy industry. Zambias milk consumption continues to increase but the herd of diary animals is not commensurate. These import of concentrates are not only dampening growth of the local industry, but is also a drain on foreign exchange for a product that can be processed locally.

Ng’andu said Zambia mostly produces local fresh milk but some processors are reconstituting a certain percentage and such kind of milk and this type of milk is normally labelled, adding that this is the milk where powdered milk and water is mixed, reconstituting into fresh milk so it is up to consumers to choose the kind of milk they prefer.

He said the importation of milk concentrates does not only kill the local industry and deprive the country of forex but also discourages creating entrepreneurship opportunities in the country adding that the per capita consumption of milk is quite low. He said there is need to have people venture into locally processed milk in communities and if there is importation of powdered milk, people will be discouraged from venturing into such industries.

Speaking in an exclusive interview with the Zambian Business Times-ZBT, Ng’andu said the association is not in support of the importation of milk powder or milk concentrates for further processing but instead supports locally produced milk as that creates availability in terms of milk products on the market and creates employment.

He said the country cannot depend on imports of such products as they are not consistent noting that occurrences like the Covid-19 pandemic which caused a stoppage of movement of goods and people can easily destabilize the supply of such products.

“When you have that kind of milk brought into this country, it will suppress the local industry because you are competing with a product that is heavily subsidized or just dumped, that has just been let go of in it’s country of origin”, he said.

“If we grow our own industry here, it will be sustainable because we have our own cows, grass, we will support the industry, there will be job creation and income levels for the locally based farmers will increase which will reduce the poverty in the rural community”, he said.

Ng’andu said the association is engaging all stakeholders involved so they can also contribute towards the development of the local dairy industry by education or investing in the local farmers adding that stakeholders need to see the importance of promoting the local dairy industry and government should put a prime on locally produced foods.

He mentioned that the engagements have received positive response with government increasing tax on the importation of dairy products from five to fifteen percent which has made the concentrates arriving at quite a competitive price making it more expensive compared to locally produced milk which is giving an incentive to farmers to actually invest more and produce more.

Analysts have called for large Zambian based milk companies such as Varun Beverages Creambell, Lactalis (formerly Parmalat), Trade Kings Diary Gold and FINTA milk to invest in local facilities that can concentrate on growing the local production and processing of milk as opposed to importing milk concentrates and exporting the much needed jobs.

There is need for local brands of milk to come up so that they can compete with some of the re-constituted milk products. The labelling also needs to be clear with consumer education on how to ensure that they buy fresh milk and not confuse it with reconstituted ones.

Some consumers have complained of some milk brands that are almost water but being retailed as milk. Only the color seems to be milky but cream and milk concentration levels are too low – One consumer told ZBT.

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The Dairy Association of Zambia (DAZ) has

Markets

The recent announcement by the central bank (Bank of Zambia) on the adjustment to foreign exchange limits may have appeared insignificant, but when one looks at the details and expected impact on the ground, you will note that its effect will be far reaching and has potential to deliver increased forex inflows into the Zambian formal banking system if well implemented.

The Bank of Zambia (BoZ) has exclusively told the Zambian Business Times – ZBT that the recent increase in the over-the- counter transaction limits will go a long way in enhancing structured trade through licensed financial service providers at Kasumbalesa border and other active border facilities.

The Central Bank recently adjusted upwards the daily limit for over-the-counter cash transactions for customers from the current US$1,000 to US$5,000 to allow customers to sell or buy forex over the counter up to a maximum limit of US$5,000.

The central bank also adjusted upwards the daily limit for over-the-counter cash transactions for commercial bank account holders from US$5,000 to US$10,000 to allow customers to sell or buy forex over the counter up to maximum of US$10, 000.

Analysts say that those that are familiar with the Kasumbalesa border trade know that its a net gainer for forex for Zambia as its a trade route for exports to the Democratic republic of Congo. This means that most of the forex that has been in the informal market will now be channeled into the formal financial system, which will boost Zambia’s US dollar holdings or reserves.

BoZ has told ZBT that the central Bank expects that this increase and also encourage more financial service providers to set up operations at the border. “Kasumbalesa border is the busiest crossing point for travelers and cargo between Zambia and the Democratic of Congo and that thousands of Congolese traders cross into Zambia on a daily basis to buy huge quantities of merchandise for resale in the DRC.

“Given the limited access to financial services, it is difficult to pay for their purchases using electronic means such as bank transfers and debit cards, traders cross into Zambia with either Congolese Franc cash or US Dollars cash to purchase merchandise,” Mwanza noted.

She said going forward, the Bank will continue to engage relevant authorities responsible for improving the physical and security infrastructure at Kasumbalesa as this will also incentivize Financial Services Providers – FSPs to open up their branches.

The Central Bank also allowed non-commercial bank account holders to sell or buy forex in the commercial bank up to a maximum limit of US$5, 000 is consistent with the limit set for BDCs. In arriving at the decisions above, BoZ held extensive consultations with various stakeholders including the association of BDCs.

The bank also undertook a regional and international comparative analysis of presently obtaining over the counter forex limits in different and came to a conclusion that the proposed changes are long overdue and appropriate to ensure smooth operations of over the counter forex transactions.

These limits were last revised 20 years ago and business dynamics have changed. The central bank further revised downwards the daily maximum limit that Bureau De Changes -BDC’s can source from banks to US$20,000 from the US$100, 000.

The rationale behind this move is that BDCs should now be able to source forex from their customers in light of the upward revision to US$5, 000 on OTC limits for BDCs in addition to the US$20, 000 they can source from commercial banks. These decisions will ensure smooth and efficient operations and provide convenience to customers in sourcing and selling of forex, the Central Bank Governor Christopher Mvunga has stated.

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The recent announcement by the central bank

Agribusiness

Zambia Sugar Plc has disclosed that its operating profit has increased to K768 million compared to K235 million in the previous year for the half-year financial performance for the year 2021. However, the revenue and profit increase in Kwacha terms has largely bee attributed to exchange gains from export sales.

Zambia Sugar Country Managing Director Rebecca Katowa thanked the management team for executing the company strategy that was beginning to bear fruit and assured stakeholders that the company would continue to reduce debt levels in the business and pursue meaningful investment opportunities.

At a function held in Lusaka attended by the Zambian Business Times – ZBT, Katowa who was addressing shareholders, analysts and the media said that the company will continue to focus on attaining the right gearing for the business, which ensures that the company begins to look at further meaningful investment opportunities.

Katowa commended employees, management and government for the performance of the company inspite of the impact the COVID-19 pandemic had created on the environment.

Speaking at the same event, Company Finance Director, Raphael Chipoma commended the stakeholders and the employees for the 52% growth in revenue moving to K2.121 billion compared to the prior period.

Chipoma stressed that the growth in revenue was largely driven by a 28% growth in domestic sales volume and a higher realisation of export sales amounting to 51% (foreign exchange effect).

He also commended the hard working staff and management for the focus on cost containment initiatives introduced over the years, which was now yielding fruit. The Finance Director emphasized that part of the growth in operating profit was attributed to 230% increase in non-cash fair value of growing cane, which was because of good yields following good rain season and good supply of power from ZESCO.

He mentioned that although finance costs were at K102 million, this was a 37%  decrease compared to 2019 period, largely as a result of repayments of long term loans echoing the Country Managing Directors’ comments that the company would continue to de-gear the business which was now sitting at 32% compared to 40% in prior period.

Chipoma further said the company observed that COVID-19 pandemic would continue to have an adverse effect on the business in the input side including the area of employee productivity and especially that major inputs such as fertilizers, pesticides, process chemicals and factory spares continue to be imported and border restrictions continue in neighbouring countries.

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Zambia Sugar Plc has disclosed that its

Agribusiness

Government through the Food Reserve Agency (FRA) has increased the buying price of a 50Kg bag of white maize from K110 in the 2020 crop-marketing season to K150 in the 2021 crop-marketing season, effectively acknowledging a 36% increase in mealie meal prices on the Zambian market.

FRA Board Chairperson Kelvin Hambwezya said the agency will purchase three commodities this year, which are white maize, with a quantity between 500, 000 to 1 million metric tonnes, a minimum of 50,000 metric tonnes of soya beans and at least 10,000 metric tonnes of paddy rice.

Hambwezya said the agency has fixed its buying price of soya beans at K500 per 50Kg bag and K200 per 40Kg bag of paddy rice, adding that the agency will operate 1,200 satellite depots in 105 districts to mop up its volumes for strategic food storage.

Hambwezya has implored management to pay farmers within 48 hours of them delivering the product adding that the farmers would be paid through designated banks upon presentation of appropriate documentation with the funds made available on first come first serve basis.

Speaking during a press briefing in Lusaka, Hambwezya said the agency will this year replenish the strategic grain reserves that will cushion the effects of threats emanating from climate change, pest infestation, fall armyworm attacks and locust invasion and ensure that the stock losses by the agency are below 1% which has always been the case.

He said during the 2021 crop-marketing season, the agency will actively participate and make an early entry into the market to ensure that national strategic food reserve requirements are met and farmers are protected from uncompetitive prices.

He added that the local farmers who are mostly the small and medium scale farmers have contributed 93% of the 2020/2021 crop production will get a fair share of the market and improve their incomes at household level by being offered good prices.

He noted that these are not floor prices but FRA prices and the private sector can offer their own prices. The FRA board chairperson that as of 5 May 2021, the combined maize carry over stock is 840, 000 metric tonnes which demonstrates that the country is food secure and will continue to be adding that the agency will make sure farmers get a competitive price.

President Lungu has further confirmed that government will continue with the quarterly allowance of maize exports to neighboring countries such as Democratic Republic of Congo. The Govt will allow the quota system to continue for both maize and mealie meal so that both farmers and millers benefit from better export prices.

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Government through the Food Reserve Agency (FRA)

Agribusiness

Zambia’s Agro production is aggressively expanding with stakeholders calling for sustaining of these growth rates which will see the country becoming a notable agro production giant in the region.

The Tobacco Board of Zambia-TBZ has confirmed that Tobacco production in Zambia has increased by about 50% from 30 million kilograms (Kgs) last year 2019/2020 agricultural season to 45 million kgs this year’s 2020/2021 season.

With sustained cumulative annual growth rates of over 30% year on year and value addition to improve export prices, this crop can deliver over US$1 billion in forex earnings for the country and become a notable success story of Zambia’s economic diversification.

TBZ Chief Executive Officer-CEO James Kasongo said there was a lot of private sector investment in tobacco last year adding that the industry has new entrants who all invested heavily in terms of promoting out-grower tobacco production at community level as they have increased the number of tobacco growers in response to the demand.

Kasongo said the conducive environment and weather has also made it possible for farmers to increase production and the new Act that the Ministry of Agriculture is working on will only compliment and help realise the country’s vision of improving the tobacco industry.

TBZ has attributed the increase in tobacco production to the high demand on the international market. Kasongo told ZBT that this increase in production will earn the the much needed country foreign exchange and contribute as the tobacco produced in Zambia is mostly destined for the export market.

Speaking in an exclusive interview with the Zambian Business Times-ZBT, Kasongo said 90% of the tobacco produced in Zambia is exported, which means that export prices will be able to support local farmers to get better prices. He added that the quality of tobacco produced this year is also very good, meaning that farmers will get better prices after its graded.

“Before, it was very difficult for you to trace tobacco from a farmer up to the market and that way Zambia was sometimes losing tobacco to neighboring countries through vending and site selling, but now we have put in place an electronic system that can trace a farmer from production to marketing. The booking system is also electronic meaning, whatever crop of tobacco is produced in Zambia is not pilfered out to other countries”, he said

He said the good quality crop has also contributed to the high prices with the average price being US$2.40 per kg for flue cured Virginia tobacco and the highest being US$5. Air cured barley tobacco going at US$1.68 per kg. So, there is need for stakeholders to provide solutions to improving tobacco curing for local farmers.

He noted that TBZ worked together with various companies and intensified training for local farmers on how to grade tobacco, which can help them increase on the quality and therefore revenue earned from tobacco sales as well as the attentiveness on the curing of tobacco.

Kasongo told ZBT that the board together with its stakeholders has been working on the use of improved technology in terms of curing tobacco, which does not require the use of timber but instead uses coal and electricity and has adopted efficient curing facilities called rocket barns from neighboring Zimbabwe, which has contributed to improved quality of curing and reducing on environmental degradation.

He added that there is need to ensure that stakeholders together with government come up with suitable and modern legislation, which should be very competitive compared to Malawi, Zimbabwe and other countries in order to attract more investments so that the country can increase the forex generated from exports of this crop.

“If we have a very competitive legislation it means that we are going to have a lot of investors such as large scale buyers and global traders who are going to come in in terms of funding outgrower schemes, purchasing of tobacco, in terms of processing and that’s going to pull up production”, he said.

Kasongo said there is need to encourage local farmers to enter into irrigated tobacco growing which will help them escape the effects of adverse weather in case there is a drought as well as increase productivity.

When asked about which regions and areas recorded the highest production of tobacco, Kasongo stated that Eastern Province was number one (1), followed by Western, Central, Southern, Lusaka, Muchinga, North-Western with Copperbelt being the last. Luapula and Northern provinces are currently not active producers.

See article on 2019 tobacco production in Zambia

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Zambia's Agro production is aggressively expanding with

Markets

Zambeef has posted supernormal earnings and is expecting to record higher earnings per share – EPS of 3,290% in kwacha (2,167% in US dollars) compared to the half year period ended 31 March 2020. The company half year revenues have hit K2.2billion (about US$103 million).

According to information obtained by the Zambian Business Times-ZBT, the increase in earnings per share are predominantly due to the strong start that the company had to the financial year, delivering results of pre-pandemic levels.

However, analysts have challenged the company’s pricing decisions and wondered whether zambeef has been too aggressive as meat and poultry prices have been sighted as one of the national food basket items which consumers have been complaining about. The recent Zamstats report sighted beef and meat products as being the highest drivers of inflation in Zambia.

Zambeef company secretary Mwansa Mutimushi said the results are expected to report revenue of about K2.2 billion and a reported Profit After Tax for the period of about K54 million. Mutimushi said the cost containment embarked on by management also continues to yield significant savings and contributed positively to the earnings.

She said improvements in the load shedding situation, following the good rains, resulted in reduced generator fuel expenditure and improved production efficiencies.

“The board of directors of Zambeef advises the Shareholders of the Group that the Earnings per Share (EPS) for the half-year period ended 31 March 2021 is expected to be 3,290% higher in Kwacha (2,167% higher in USD) than that for the half year period ended 31 March 2020.

The increase in earnings is predominantly due to the strong start that the Company had to the financial year, delivering results of pre-pandemic levels,” Mutimushi said.

She also said the half year period continued to present challenges in the operating environment, resulting from the Covid-19 pandemic and the previous 2020 economic uncertainties, despite greater stability compared to the second half of the 2020 financial year.

The Zambeef company secretary said the rising inflation put pressure on consumer disposable incomes and reduced the share of wallet going towards food spend. She said supply constraints on some of Zambeef’s product lines further put pressure on cost of inputs.

Mutimushi said despite the challenges, demand for products, particular poultry products, remained strong allowing the Company to remain in line with revenue expectations.

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Zambeef has posted supernormal earnings and is