Profit eludes BAT despite revenues going up by 50%

The British American Tobacco (Zambia) Plc – BAT has recorded an increase in turnover of 48.8 percent (approximately 50%) to K343.2 million in the year ended December 31 2020 compared to the K230.6 million recorded during the same period in 2019.

This increase in revenue has largely been attributed to price increase of the company’s key brands and products. Despite the 50% increase in revenue, the Kwacha depreciation wiped out the company’s profits through financing costs.

According to the BAT audited financial results for the full year ended December 31, 2020 made available to the Zambian Business Times – ZBT, the total operating cost increased by 36.5 percent to K288.9 million reflecting the impact of the increased general cost of production.

Company secretary Zoe Chiliboyi said the increase in operating costs was mainly driven by the cost of tobacco leaf and wrapping material imports.

“The Company continued to grow its operating profit despite the impact of the COVID-19 pandemic. Operating margin increased by 92.2% percent from 8.2% in 2019 to 15.8% in 2020. The increase was mainly as a result of an increase in price for our key brands,” she said.

Chiliboyi disclosed that the Company’s contribution to the treasury in various taxes for the period to 31 December 2020 was K207.2 million compared to K149.3 million in 2019 representing an increase of 38.8 % year on year.

“The Company continues to be a key and compliant contributor to the treasury through the payment of various taxes key among them; Excise, Corporate Tax, VAT, PAYE and Withholding Taxes,” she said.

Chiliboyi said during the same period, the Company made a loss before tax of K36.9 million compared to a loss before taxation in 2019 of K25.1 million.

This is largely attributed to higher finance costs in 2020 due to the Company’s borrowing facility being denominated in US$, and the Zambian Kwacha depreciation during the year.

Chiliboyi said the Company demonstrated resilient performance despite the economic and social effects of the Coronavirus (COVID-19) pandemic which strained economic growth in an already challenging operating environment.

She said the performance of the cigarette industry continues to be affected by the prevalence of the illicit cigarette market.

Chiliboyi said in 2020, country lockdowns and supply chain disruptions contributed to distortions in the flow of illicit activities wherein there was a noted increase in the prevalence of Zambian manufactured cigarettes being sold openly in the informal market in various Southern African countries resulting in substantial loss of forex earnings for the Revenue Authority.

She said locally, the legitimate cigarette industry continues to grapple with the open sale of duty not paid cigarettes that do not comply with legal requirements pertaining to utilization of the appropriate health warning messages and/or the affixation of ZRA tax stamps as required by Zambian Law.

The COVID-19 pandemic has been characterized by severe restrictions and lockdowns that prompted the Company to implement Business Continuity Plans, which include increasing stock holding durations for raw materials, imported finished goods and spares.

Chiliboyi said this resulted in tying up approximately K10 million additional working capital in stock.

“Additionally, the Company faced substantial business and operational disruptions, which have included reduced time in trade, as well as unbudgeted costs related to the purchase of COVID-19 personal protective equipment as per the Ministry of Health guidelines.

“Nevertheless, the Company remains optimistic that it will continue to invest in its brands and people as it navigates the challenges posed by this pandemic,” she said.

Chiliboyi said, “In 2020, the industry received significant support from government in form of enacted legislation and enforcement of laws aimed at deterring illicit trade in cigarettes. We welcome measures to create a level playing field in the cigarette industry and fully support the scaling up of enforcement activities to curb illicit trade.”

Analysts say the failure to manage the Kwacha and defend its value by the current monetary and fiscal management teams at Bank of Zambia and Ministry of Finance is perhaps the biggest economic disruptor that is making it difficult for most companies to operate profitably.

The British American Tobacco (Zambia) Plc -

Cooking oil, meat price escalations drive up inflation

Zambia’s annual inflation rate for March, 2021 increased to 22.8%, up from 22.2% recorded in February, 2021 mainly due to increases in consumer goods prices. A deeper review shows that meat, cooking oil and sugar price increases are among the key contributors.

Zambia Statistics Agency interim statistician General Mulenga Musepa stated during the monthly bulleting presentation on Thursday 25 March 2021 attended by the Zambian Business Times – ZBT that the annual food inflation rate for March, 2021 was recorded at 22.8 percent compared to 22.3 percent recorded in February 2021, representing an increase of 0.5 percentage points.

Among the most essential foodstuffs, Cooking oil recorded the second highest year on year inflation rate of 61.67 percent after millet surprisingly hit a record high year on year inflation rate of 69.81 percent.

Meat products such as T-bone, mixed cut, rump steak, fillet, chicken live and brisket year on year inflation was recorded at 50.32, 50.09,43.65,39.06, 37.12 and 45.93 percent respectively.

On the other hand, Year on year increase in prices for eggs was recorded at 47.83 percent while sugar recorded a 35 percent year on year price increase. Dried kapenta Mpulungu and dried kapenta Siavonga’s inflation rate was paged at 30.54 percent and 32.54 percent respectively.

The annual non-food inflation rate for March 2021 was recorded at 17.0 percent from 16.2 percent in February 2021. The increase in non-food inflation rate was mainly attributed to price increases garments, rentals, charcoal, gas, washing soap, domestic services.

The monthly food inflation rate for March, 2021 was recorded at 1.6 percent, a decrease of 1.1 percentage points from 2.7 percent recorded in February, 2021.

This development was mainly attributed to the decrease in the inflation of food items such as cereals, fish, pineapples, avocados and tomatoes.

Non-Food inflation rate for March, 2021 was recorded at 1.9 percent, indicating a decrease of 0.4 percentage points from the 2.3 percent recorded in February, 2021. This development was mainly attributed to price movements of Non-food items such as Household Textiles.

The annual inflation rate by province shows that the annual inflation rate for March, 2021 decreased for Northern, North-Western and Western province while it increased for the rest of the provinces.

Provincial changes in annual inflation rate show that between March, 2020 and March 2021, Northern Province had the highest annual inflation rate at 35.8 percent, followed by Central Province at 28.8 percent.

Zambia’s annual inflation rate for March, 2021

Financial literacy key for young people to achieve their goals – BoZ

The Bank of Zambia (BoZ) has said children and youths have a role to play in achieving the national vision for Zambia to become a prosperous middle-income nation.

Speaking during the launch of the #FinancialLiteracyWeek2021 attended by the Zambian Business Times – ZBT , BoZ deputy governor for operations Dr. Francis Chipimo said the provision of a wide range of financial services and financial literacy is intended to empower citizens with necessary skills to manage risks, plan for the future, and achieve their goals.

Dr. Chipimo said equally, these skills will enable business enterprises to access affordable financing as well as facilitation of innovation, growth and employment creation, and ultimately contribute to realizing Vision of making Zambia a middle income country.

“It is important for children and youths to know that financial sector strategies aim to broaden the types of financial services in the banking, capital markets, microfinance, and insurance and pensions sectors”.

“These strategies also aim to promote financial inclusion by making all citizens, including children and youths, have access to, and usage of a broad range of affordable financial products and services in the form of savings, credit, payment, insurance, investment and mobile banking services,” Dr. Chipimo said.

He said children and youths have an opportunity to learn about household and business finances, earning a living, savings, budgeting, prioritizing expenses between needs and wants among others through the primary and secondary education curriculum subjects of Social Studies, Expressive Arts, Business Studies, Civic Education and Physical Education.

“This will provide a good foundation for them to understand how the economy functions, the allocation of money and development of productive assets and financial decision making”.

And by developing the habit of saving and financial planning, and the use of appropriate financial services, children and youths can acquire financial and social security, as well as accumulate capital to meet their current and future development needs, thus leading to prosperity in their individual lives,” he said.

“I therefore wish to encourage them to prioritize education. I also want to reiterate the importance for children and youths to understand that achievement of Vision 2030 is a collective responsibility for everyone. Together, we can make Zambia a prosperous nation,” he said.

The BoZ deputy governor further stated that the central bank was working around continuing with the outreach programmes and finding innovative ways of increasing financial product uptake. BoZ is currently pushing financial service providers to develop products that are suited for people who do not have a lot of money to save.

The Bank of Zambia (BoZ) has said

Micro lenders struggle to access K10b stimulus package

Only a few micro finance institutions have succeeded in accessing funds from the Bank of Zambia (BoZ) K10 billion-stimulus package. Of the K4.1 billion disbursed, only K1.9billion have been accessed by micro lenders

This failure by micro lenders to access the stimulus package has been largely attributed to some of the conditions set by technocrats at BOZ which have seen micro lenders shun pursuing the fund despite the fact that local companies and SMEs who are their key customers are facing liquidity constraints.

Micro lenders in Zambia are the key financiers of local businesses and SMEs as the commercial banking sector has more share of the large corporates and multinational companies. The failure to access the stimulus package in effect means limited flow of the stimulus package to local businesses and the informal sector whose main

Association of Microfinance Institutions in Zambia (AMIZ) executive director Webster Mate in an exclusive interview with Zambian Business Times – ZBT, stated that only about four micro lenders or institutions had so far accessed the fund and applications for about two micro finance institutions are currently being processed.

The Zambian Government las year through the central bank – BoZ announced a K10 billion targeted medium term refinancing facility aimed at cushioning the adverse effects of Covid-19 on enterprises and individuals, with the funds expected to be disbursed for onward lending through commercial banks and non-bank financial institutions.

Mate told ZBT that the reason why only a few of their members had accessed the funds was because some have some internal processes and requirement that need attention to satisfy [the BOZ requirements] while some institutions did not see the immediate need to apply for the funds.

“Applying for such funds is a decision which is made at individual institution level internally. The other pertains to the requirements by the central bank – BOZ that the board of directors of that particular company/institution must approve the application first, that is when they start doing due diligence which if satisfied, BoZ then notifies the applicant of the decision,” he said.

Mate explained that during due diligence, if BoZ discovers that the particular institution has a running loan with another institution, the institution is asked to provide proof that the other creditor is aware of the institution’s intention to borrow from BoZ and has no objections to it. He said some of their members have failed to access the funds because they have running loans with other institutions.

“This has to some extent been another reason as to why only a few institutions have accessed the funds from the central bank. I am aware of one institution where such has happened but also the other major factor is that not all institutions felt like they could apply for the facility because they did not see the immediate need for it,” he added.

Mate said the stimulus package has helped institutions that accessed the funds to have [adequate] capital, which is important for any business. A few micro financial institutions are among the 18 applications that were received from non banking institutions amounting to K1.9 billion that has been disbursed.

He further revealed that lending activities for micro finance institutions have reduced due to the economic downturn resulting from the adverse effects of the Covid-19 pandemic. Mate said demand for some of the services has not been as it should be because economic activity has been slow.

“We [micro Finance institutions] are still not doing well economically, which means that demand for some of the services is not as it should be when economic activity is slow. So naturally, the businesses will begin to experience a slowdown in turnover, this affects profitability, and if this happens, you slowdown in terms of what your ambitions are for the future.

“We are optimistic that things will change, now that there are vaccines, there is hope that we can get Covid -19 under control and go back to the way things used to be with heightened attention to personal health. Things are looking positive and we hope this continues to the next quarter and beyond,” he said.

See also an earlier article on how micro finance have struggled to access the K10billion stimulus fund Micro finance struggle in 2020

Only a few micro finance institutions have

ZSIC Life IPO postponed for the second time

ZSIC Life has for the second time postponed its highly anticipated initial public offer – IPO listing of its shares on the Lusaka Securities Exchange (LuSE) to next year 2022.

The Life insurer was expected to undertake a public offer of its shares in 2021 after the initial postponement of its listing that had earlier been planned for 2020. The listing of ZSIC life and ZAFFICO had earlier been announced in the October 2018 budget speech by then Finance Minister Margerate Mwanakatwe for listing in 2019.

Mwanakatwe had in the 2019 budget then stated that “ZSIC Life and ZAFFICO will be listed on LuSE in 2019”. ZAFFICO has since been successfully listed, while the listing of ZSIC Life has now been postponed for the second time.

However, the company has stated that they have made some progress such as the converting of the company from a private limited company to a public company. “ZSIC Life’s ordinary shares have now been registered with the Securities and Exchange Commission (“SEC”) in terms of the Securities Act with effect from September 3, 2020”.

Speaking in an exclusive interview with the Zambian Business Times – ZBT, ZSIC Life public relations manager Nabwalya Vlahakis said the company shares were now tradable and quoted on the second tier market.

Vlahakis said this means that the shares are not yet completely opened up to the public as the registration with SEC was part of the process to the full listing on LuSE.

“Our ordinary shares have been registered with the SEC, this means that the shares of ZSIC Life are now tradable on the second tier market, this entails that we have not yet opened up completely to the public, it is just part of the process”, Vlahakis stated.

“So this is the first step towards our eventual listing on LuSE, by upgrading from the quoted tier to the listed tier. We are in the process, by next year [2022], we will be officially listed on LuSE, and then we can open up [our shares] to the public,” she said.

The insurer stated that there are a couple of processes that are remaining to be followed and are quite lengthy but this is just means preparation on the part of company.

“As a company going out there to the public to sell shares, you have to be a company that is bringing something great to the market. Our different plans, product offering are in line with what we want the public to have, but it is just the regulatory processes we are concluding,” she said.

She also assured ZSIC Life clients and Zambian citizens in general that there is nothing to worry about because the listing is a great step towards improving profitability and attracting more investments.

“Usually there is concern on what will happen to the company after we list, the company is a wholly Zambian owned and our track record is that we are one of the oldest insurance firms, so the listing for us means enhancing our profitability.

“What happens is that every time a company is listed, it changes its profile, the company begins to have a good image because then, its shares are tradable on the stock exchange market and that means that the profile for the company goes up.

“So there is really no fear that should be out there as it is a good thing for the company to be more competitive. For us its just aligning and evolving as a company, and becoming more profitable as we keep on moving with the time,” Vlahakis said.

The net outcome of SEC registration under the Act is that the shares of ZSIC Life are now tradeable on the second tier market of LuSE). SEC registration gives automatic admission to the quoted tier segment of the LuSE market.

Therefore, the quotation of ZSIC Life is the first step towards its eventual listing by upgrading from the quoted tier to the mainboard or listed tier of the LuSE market. Going forward, following the quotation of ZSIC Life on the LuSE, the Board and management of ZSIC Life are working through the steps and actions required to attain a full listing on LuSE.

ZSIC Life is wholly owned by the Industrial Development Corporation (“IDC”). In 2015, ZSIC Holdings was placed under the IDC. In 2017, the IDC took direct equity control of ZSIC General and ZSIC Life to streamline the operating structure and improve the performance and profitability of the two companies.

See the first postponement ZSIC Listing first postponement

ZSIC Life has for the second time