High lending rates are a reflection of the economy – BAZ

High lending rates are a reflection of the economy – BAZ

The Bankers Association of Zambia – BAZ has revealed that the current [high] levels of lending rates are a mirror reflection of where the economy is in relation to the key macro economic indicators. 

Zambian businesses and retail clients have had to contend with market lending rates that are currently above 20% for banks and above 60% from micro-finance institutions. This has led to a high cost of doing business, a high cost of living and slow down of economic growth.

Single digit market lending rates remain a pipe dream and successive governments continue to blindly drive the job creation agenda but are shy to aim for the needed below 10% lending rate that could actually spur the much needed local investments that could deliver overall national economic development.

Responding to the Zambian Business Times – ZBT on why interest rates have remained high and as to whether the general public should expect a reduction following the recently announced restructure of $6.3 billion out of the about $18.6 billion external debt, the association disclosed that lending rates are set considering various parameters.

BAZ President Leonard Mwanza told ZBT that some of the benchmarks that Banks use for price loans include interest rates on treasury bills, interest rates on government bonds as well as the overall inflation rate which determines the cost of doing business.

A check by ZBT revealed that indeed, treasury bills and bonds discount rates, considered as risk free lending to government, remain relatively high and expecting banks that are lending to local business and individuals to lower rates may be illogical and counter intuitive.

Mwanza further stated that now that the debt restructure bridge has been crossed which had been a major bottleneck in unlocking the economy and passing on the benefits to consumers, there is renewed hope of some economic recalibration around some of the key economic indicators. 

The BAZ President stated that once government starts accessing the funding from the international market, and the benefit that will be acrude from the debt restructuring, it is expected that the government willingness to source funding from the local markets might scale down. 

“If the government does not have a lot of demand to borrow on the local market through Treasury Bills and Government bonds, the natural expectation is that the market interest (or lending) rate will start coming down. Obviously you cannot determine that this will happen tomorrow, it is a process”. 

“So once we start seeing those benchmark interest rates which were around 15% for treasury bills, and above 20% for government bonds depending on the tenure, we expect that the [effective market lending rates] will start going lower than the current 15%”, said Mwanza .

He explained that this would mean that the new base on which pricing would be referenced will be much lower than the current base, hence the accrued benefits will begin to show.

Mwanza hopes that the inflation trajectory will start going to the country’s medium term target which is between 6 to 8% as this will mean that another variable used to price from the base will start coming down. He added that once the savings on the foreign exchange come in through the debt restructuring, there might be more liquidity coming in on the local foreign exchange market that can eventually support and stabilize the Kwacha. 

The BAZ President also noted that resolving the issues surrounding Mopani and KCM will result in an increase in Mineral royalties remittance [through Bank of Zambia] due to more copper production and exports, thereby more foreign currency which can be further used to support the Market.

Mwanza said that the Kwacha has a big say on how inflation is computed, hence a stable and downward trending Kwacha (relative to US dollar) will answer to questions of the high cost of doing business. BAZ is confident that once the bases begin coming down, there will no question of whether interest rates should be reduced or not as it will be an automatic adjustment. 

High lending rates are a reflection of

Local Fertilizer production at UCF fails to cut prices by 40%

It has emerged that the savings from buying fertilizer produced locally by Government may not be that much as the final price agreed falls short of the huge savings that had been earlier anticipated.

Government through the Ministry of Agriculture has disclosed that the two contracted companies will supply D-Compound Fertilizer under the Farmer Input Support Programme – FISP for 2023/2024 farming season at USD 880 per ton.

In September 2021, UCF had told the Zambian Business Times that “the Wonderful group would build a large fertilizer plant that will cut the importation of fertilizer for Zambia by about 60% and reduce the cost of fertilizer by about 40% due to use of local raw materials and economies of scale”. See link… https://zambianbusinesstimes.com/new-300m-fertilizer-plant-to-cut-prices-by-40/

Two firms, United Capital Fertilizer – UCF & Nitrogen Chemicals of Zambia – NCZ are to supply D compound Fertilizer at the price of $880 per ton.

The Ministry of Agriculture has disclosed that UCF and NCZ have been contracted through direct bidding for the supply, delivery, warehousing and distribution of 120,380.25 metric tons of compound D fertilizer for the 2023/2024 farming season.

Speaking in an exclusive interview with ZBT – Ministry of Agriculture Permanent Secretary (PS) Green Mbozi, when asked if it is now cheaper to locally source the compound D fertiliser compared to a time when it was being imported, the PS said, “it is very difficult to tell because we don’t just look at the price on a one on one basis, we look at other factors. When you are producing locally you also create jobs and other businesses benefit as suppliers, so those are the things we look at, the one to one price comparison is just one of the issues.

“The periods and conditions are different and the time we were landing fertilizer a bit cheaper and what has happened is that prices now have come down in dollar terms but because of other fundamentals such as the inflation exchange rate, the prices in Kwacha terms have not come down but all in all we can say it is beneficial to have our fertilizer produced locally because of the jobs that are created.” He said. 

When further told that ZBT had received concerns that the contract was in US dollars which would defeat the benefits of local sourcing and forex saving, Mboozi said, “I think normally that is an issue you can discuss with treasury, I think the suppliers want to protect themselves against fluctuations exchange rates. The payments will be made in Kwacha, it’s just that we have pegged the contract pricing in dollar but the payment will be in kwacha at the exchange rate that will be prevailing at the time of payment.”

On measures that his ministry has taken to ensure that no sub-standard fertilizer is distributed, Mboozi assured the nation that the fertilizer has good quality which has been approved by Mount Makulu, UNZA and other private institutions which have tested the fertilizer.

On the total fertilizer bill for the 2023/2024, the PS stated that they have not yet concluded the procurement for the top dressing Urea, so “once we do that by mid-July we should be able to tell”.

NCZ has been contracted to supply over 43,292 metric tonnes while United Capital Fertiliser is earmarked to supply over 77,087 metric tonnes of  ” D”  Compound  Fertiliser for the 2023/2024 farming season.

It has emerged that the savings from

Zambia loses over $330M in Q1

The total copper production direction for the first Quarter of 2023 has been droped to between 199, 982 from 239, 603 tonnes recorded within the same period in 2022.

At average international copper prices of over USD$8, 300, Zambia has lost about $330 million in copper exports.

Zambia’s copper production figures have continued to decline with the country recording around 15 percent drop for the first quarter of 2023 when compared to the same period last year.

Total copper production for the first quarter in 2023 was 199, 982 tonnes, a 15% decrease from Q1 2022.

According the ministry of Mines and Minerals Development MMMD, the country recorded a total production of 199, 982 tonnes of copper in the first quarter of 2023 down from 230, 603 produced last year during the same period under review, designating a crash of a total of 30, 621 tons of copper.

Experts who spoke to the Zambian Business Times – ZBT, have attributed this continued decline in copper production figures to a lack of turnaround at distressed asserts such as KCM and Mopani and delayed capital expenditure into the sector.

Zambia also recorded declined annual copper production in 2022 with figures dropping to a total of 760, 000 from 800,696 tons from the year the new dawn took over office with a target to 1.3 million tons of copper productions in 2022 alone and up to 3 million tonnes annually by 2031.

The total copper production direction for the

Zambia loses out on becoming Africa largest Manganese mine producer

Although Zambia is richly endowed with a vast amount of manganese reserves it has failed to capitalise on this and reach higher levels of economic growth. This is partly due to the reason that the sector is underdeveloped because of the many challenges it continues to face.
The Luongo Manganese Mine in Chipili District of Luapula Province Worth over USD$180 million which is earmarked to be one of the biggest Manganese Mines in Africa is still not fully operational even at a time when there is increasing demand for manganese globally.
Manganese is an essential component of the steel-making process, manganese has also played an increasing role in the battery market. The metal sulphate is an important stabilizing ingredient in the cathodes of batteries widely used in electric vehicles and electronics.
Western Province Luapula province Permanent Secretary Might Mumba has confirmed that the 40 million tons Manganese mine which was commissioned by the Head of States President Hakainde Hichilema in November 2022 is still operating on a small scale level.
“The principal came through last year, the President came through to lay a foundation that was done and by then there was a bit of mining going on and even this time around they are mining but only on a small scale. The mining company Musamu resources is yet to put in place the electricity as they are currently using the gen-set and also bring in other essentials.”
Speaking when he commissioned the mine, President Hichilema said the development of Luongo Manganese Mine is a milestone as it has shown that Zambians can set up and run mines in the country.
President Hichilema assured that government will support the mine and ensure that it creates more jobs to benefit the locals.
The Head of State also pledged that suppliers and contractors will benefit from the mine as it will be adding value to the manganese to produce chemical manganese for car batteries.
According to the Association of Zambian Mineral Exploration Companies – AZMEC – The Luongo Manganese Mine in Chipili District of Luapula Province has the capacity to generate about united states dollars USD$180 000 000 (180 Million) as the project is about 40 million tons of manganese.
The mine has been developed by Musamu Resources a Zambian owned company.
Meanwhile efforts to get a comment from Musamu Resources on when the company will commence full production, proved difficulty by press time.

Although Zambia is richly endowed with a

Stanchart Bank withdraw charges increased by 40%

Standard Chartered Bank Zambia Plc – SCBZ – customers are about to get high withdraw fees from the Automated Teller Machine – ATM as the bank has resolved to increase the charges by about 40 percent quoting high cost of doing business as an excuse.

The British multinational bank has increased the withdraw charges for Automated Teller Machine – ATM – by about 40% from the current K12 to K20 per transaction.
As if this is not enough, the Bank has increased Counter check charges from k20 to k50 while saving in business banking account management fee has been raised from k150 to k200.

According to the information made available to the Zambian Business Times – ZBT, by an impeccable source who asked for their names to be withheld, the bank has also increased the monthly management fee for the foreign currency account USD Dollar from $10 to $20 while over the counter withdraws within the ATM limit has been increased k200 from k100.
The bank has also introduced Priority annual membership fee of k500 on the priority customer, SMS notification charge of about K1, bill payments k10, Retirement Tax Services – RTS – of k55 and e tax to the Zambia Revenue Authority – ZRA – which was zero but now k25 has been introduced per transaction.
This has been attributed to the high cost of doing business. “Because we are also looking at the market conditions which have necessitated us to increase the charges.”
“The cost of doing business have actually increased so that is what has actually made us to revise some of our charges.” The source remarked.
Some customers however feel the increase is too much and the bank risks losing already existing potential customers who feel the charges are now too much to carry.

Standard Chartered Bank Zambia Plc – SCBZ