Zambia’s trade deficit with Egypt escalates to US$107 million

Minister of Trade Christopher Yaluma has urged the Zambian Business Community to step up in addressing the trade in-balance between Zambia and Egypt which in December 2018 showed that export to Egypt stood at a meager US$1.3 million while imports were over US$108 million.

Speaking at the singing in ceremony of a Memorandum of understanding (MoU) between the Zambia Chamber of Commerce Trade and Industry (ZACCI) and the Federation of Egyptian Industries-FEI at Taj Pamodzi Hotel on Match 19th 2019 attended by the Zambian Business Times – ZBT, Yaluma said the private sector has a vital role to play in enhancing the economic relations between the two counties.

The minister said Government is delighted to note the growing interest from Egypt to Invest in Zambia as evidenced by the number of inward missions that are undertaken to explore opportunities for investing and trading with Zambia.

“Our desire therefore is that an improved investment and trade climate in both countries supported by the MoU that will be signed here today, we will see more investment moving in both directions and as well as increased trade in value added goods and services”. He said

He added that the current trade and investment between the two countries is not encouraging as at December last Year, 2018, Zambia’s export to Egypt stood at a meager US$1.3 million while imports were just over US$108 million hence this platform will yield sustainable investment and trade benefiting both the Zambia and Egyptian economies.

And ZACCI president Michael Nyirenda said the MoU between the two countries play a vital role in economic development since it provides employment and is an important source of foreign for imports of capital and intermediate goods. Nyirenda said the initiative creates a platform which will help in dissemination of information on investment opportunities and create linkages.

Speaking at the same event, FEI head of delegations Dr Sherif EL-Gabaly said the strategic objective of federation has always focused on creating and enabling business environment for national and international investors.

He said FEI is also looking forward to initiate contacts with esteemed organizations in Zambia to discuss opportunities for cooperation and sharing knowledge and experience between the two countries, exploring the investment climate in Zambia, exploring possibilities for integration offset through agreements and possible cooperation based on win-win foundation.

Meanwhile, the Egyptian Ambassador to Zambia Ahmed Mostafa said the agreement between the two countries will be able to push forward economic relations on all levels and increase investment between Zambia and Egypt.
The Ambassador said both countries are ready to complement each other in terms of trade and investment adding that level of corporation is evident in growing business between the two countries.

“I am not happy to have learned that the trade volume between the two sister countries Zambia and Egypt who enjoy excellent political relations is only US$ 1.3 million in exports for Zambia, hence I took it as a priority to look into ways of how to correct the situation, he said.

Yaluma has however encouraged Zambian counterparts and local businesses to take this “opportunity” to positively explore and ensure that a lasting business partnership to benefit the two people is created.

Minister of Trade Christopher Yaluma has urged

Trade volumes growth need to trickle down to local businesses – PSDA

Private Sector Development Association – PSDA president Yusuf Dodia has urged government to ensure that all bilateral agreements are tailored to promote local businesses and promote youth entrepreneurship in the country.

Dodia cited the recent increased bilateral trade between Zambia and China to be an opportunity that should be used to empower youth entrepreneurship together with local small and medium businesses in the country to realize the full benefits.

The PSDA President told the Zambia Business Times – ZBT in an exclusive interview that government’s bilateral arrangements should be targeted at opening opportunities for young people as the country constitutes over 60 percent of youths most of who are either unemployed or under employed.

He said engaging youths and local enterprises in trade development plans will enable them open business markets in neighboring countries and join in cross border trade adding that failure to create a favorable environment for small and medium scale business, any existing bilateral relations have less impact locally if the benefits do not trickle down to young people and local economy.

He adds that Zambia has significant opportunities to grow its exports portfolio by utilizing young entrepreneurs and small & medium businesses in the country. “The agreements that Zambia has with countries like Angola, China, Egypt, Japan and many others should be reviewed to ensure that they open up opportunities for young people to take part in trade and business in contribution to national development”, he said

He has however advised youths in the country to be proactive and engage themselves with institutions that promote trade at all levels such as COMESA, Cross Border Trade Association for more open opportunities and make the challenges they face known so that solutions can be found.

The Chinese ambassodor recently announced that trade between Zambia and China hit US$5 billion in 2018. This levels of trade volumes growth were welcomed by a cross section of economic players but questions have arisen on the trickle down effects of this trade volumes to locally owned small and medium size businesses and youths in Zambia.

With the diminished to stunted growth in formal jobs, there is a call for trade and business activities in Zambia to have a sizeable share reserved for local businesses for economic benefits to flow and trickle down to local citizens and youths.

In the construction sector for instance, there has been a policy of 20% sub-Contracting to local businesses but this move is not yielded the needed local empowerment due to lack of supporting legislation.

Private Sector Development Association - PSDA president

Attend to the cost of borrowing urgently!

Editorial

Private sector lending and household credit growth is a good measure of how an economy is doing and how it’s citizens and privately held businesses see the future economic prospects. One can involved in all sorts of marketing and public relations stunts to influence economic sentiment but it all comes down to what the hard numbers are saying.

The Zambian economy runs under a multiparty system that at every one time will have a ruling party and the opposition. These two sides of the same coin are ideally meant to provide the necessary checks and balances in the ultimate aim of getting balanced policies and implementation timelines.

The economic policy implementors are the civil service that are expected to supersede any political regime that comes to power for its limited term, to provide the stability in known policy pitfalls, to help guide political office holders at any particular time on the known exciting political promises but end up as pitfalls and guide the politicians in terms of the long term interests and drive for the country.

Following the monetary policy committee meeting and subsequent presentation of the fourth quarter results, we saw that private sector lending shrinked, household lending also slowed down. This is a telling statistic that the economy needs urgent administering of medicine and some strong medicine for that matter.

The government itself which is considered risk free has its treasury bills and bonds yield rates in double digits, treasury bill rates which are deemed risk free had yields of 23.5% in the latest auction. This simple fact is that market rates for similar tenor of upto 12 months would require rates of above 23.5% for lenders to be compensated and earn an extra margin for additional risk, otherwise its better to invest the funds with the government T-Bills.

To add salt to injury, Standard and Poors, a global credit rating agency though maintaining the sovereign credit grade at B-, they downgraded the outlook from stable to negative, a clear indictment on the economic prospect by what the external investors would deem an independent assessment.

The impact of these downgrades is not only on the government and its agencies, but percolates into the entire economy. The sovereign rating acts as the starting point for individual companies and consumers credit rating as seen from the global credit market.

As if this is not enough, the government statistics bureau, central statistic office – CSO and BOZ produces current and capital accounts net balances which are at times in avoidable deficits. All these increase the risk profile of the country and need tight management by state and government authorities.

The basic tenet of sound economic management is the tight management of the key macro economic targets and results. These then render confidence to the rest of the sectors across the economy.

The monetary policy rate which is ideally supposed to be the key benchmark rate for both domestic and business Kwacha borrowing has now been applied only to the inter-bank overnight lending.

This rate is needed to reflect the cost of funds to the households and business community and the applicable margins are what should be subject to regulatory and market debate. Alas, there seems to be no clear actions that are shared to stem the cost.

Entrepreneurship need financing and cost of borrowing is key to enable businesses to thrive. Manufacturing and exporting of local produce needs lower cost of borrowing to remain competitive. Households quality of life, access to asset and mortgage financing all need affordable and competitive cost of borrowing.

Even the government itself could do with low cost of borrowing to finance the annual budget as well as long term infrastructure needs. The investment return on budget lines spending and infrastructure may not be high enough to support future repayment at higher cost of borrowing.

So there is a clear need, but the question is of weather we have the clear capability and motivation to drive the cost of borrowing down. The complications that we see in an economy is that whichever state of economy is obtaining, there are beneficiaries that would prefer to keep the status quo.

Zambia has the requisite professionals, economic managers and economists educated at the best institutions in the world, with experience working at some of the best managed institutions of the world at both the Bank of Zambia and Ministry of Finance that can be empowered to weigh in and administer the needed cocktail of medicine.

When our analysts speak to the two institutions responsible for monetary and fiscal policy, we sense a tendency of resorting to a blame  game. The Bank of Zambia will say its the fiscal policy side that is failing the country and the spending agencies will counter accuse the central bank of failure to put in place astute and shrewd monetary interventions.

Our take is that this problem needs collective efforts even by ourselves as media to highlight and provide alternative solutions. All citizens who have Kwacha assets, resident Zambians and investors all need to highlight these distortions so that we can have some level of borrowing rates that can make doing business and lifestyle much more enabled.

Chart below MPR linked more to banks overnight lending rate than cost of borrowing for consumers and SMEs

Editorial Private sector lending and household credit growth