Electricity cost of service study findings remain secret

The Energy Regulation Board-ERB says it is still waiting for further guidance from the Ministry of Energy concerning the way forward on the implementation of the Cost of Service study findings.

In response to a query from the Zambian Business Times-ZBT, ERB Public Relations Manager Namukolo Kasumpa said the Cost of Service Study was successfully concluded in December 2021.

Kasumpa said the report has since been submitted to the Ministry of Energy for studying and further guidance on the implementation of the findings.

However, efforts to get a comment from the Ministry of Energy concerning the findings of the cost of service study proved futile by press time.

The Cost of Service Study was initiated by ERB in 2019 with a contract awarded to Energy Market and Regulatory Consultant – EMRC, a UK based consultancy firm at a total cost of about US$600,000.

The study has been made possible with financing from the African Development Bank – AfDB which will establish the cost of generating, transmitting and distributing power in the most efficient manner and translating the costs into the unit cost of energy for each customer category.

It was sanctioned to provide a paper on which to base future electricity policies and plans to be formulated. Electricity Tariffs are among the factors that the study was expected to analyze and propose recommendations.

Energy experts have urged for technical and professional analysis of the energy sector to ensure quality decision making that would ensure Zambia’s long term interests are safeguarded. Energy remains a key and strategic sector vital for powering Zambia’s development journey.

The Energy Regulation Board-ERB says it is

Inflation adjusts upwards after hitting single digit last month

The annual inflation rate for July 2022 has increased to 9.9 percent from 9.7 percent recorded in June 2022, which means that on average, prices of goods and services increased by 9.9 percent between July 2021 and July 2022.

Zambia Statistics Agency-ZAMSTATS Interim Statistician General Mulenga Musepa said the increase in inflation was mainly due to price movements in non-food items.

Musepa explained that nonfood inflation for July 2022 was recorded at 7.2 percent from 6.9 percent in June 2022, an outturn mainly on account of price movements in items such as garments (men’s shirt imported, men’s trousers imported, ladies skirt imported, ladies dress imported), fuels and lubricants (diesel, petrol, engine oil), cooking oil and charcoal.

Speaking during a briefing monitored by the Zambian Business Times-ZBT, Musepa noted that food inflation for July 2022 was recorded at 12.0 percent from 11.9 percent in June 2022 mainly attributed to price movements in fish (buka buka, fresh kapenta, dried bream, dried kapenta), fruits (orange, lemon, banana, pawpaw) and cooking oil.

He said Copperbelt and Lusaka provinces contributed the highest at 2.5 percentage points to the overall annual inflation of 9.9 percent in July 2022. Southern province was second, contributing 1.2 percentage points while North Western, Eastern and Western provinces had the lowest contributions of 0.4 and 0.5 percentage points, respectively.

Musepa mentioned that total trade for the period January to June 2022 decreased by 2.5 percent, from K181.3 billion to K176.7 billion in 2021 for the same period adding that the country recorded a trade surplus of K2.2 billion in June 2022 compared to a surplus of K3.4 billion in May 2022 indicating a 36 percent decrease in the surplus.

He noted that the total value of exports for the period January to June 2022 was K102.3 billion, exports decreased by 6.3 percent to K16.2 billion in June 2022 from K17.3 billion in May 2022 mainly on account of a 9.0, 11.5 and 0.4 percent decrease in export earnings from intermediate goods, capital goods and consumer goods, respectively.

Musepa said imports increased to K14.1 billion in June 2022 from K13.9 billion in May 2022 mainly due to the 52.7 percent increases in import bills of capital goods.

 

 

 

 

 

 

The annual inflation rate for July 2022

Banks challenged to cut lending rates

A financial economist, Bright Chizonda says Zambia as a country has improved in terms of financial inclusion especially when you include the penetration of mobile money services but remains challenged when it comes to loans because the lending rates are too high.

Chizonde stated that there is need to interrogate how the interest rates are computed, come up with immediate actions that can led to the average lending rates dropping so that individuals and businesses can start to borrow for investment and growth.

Analyst say the Bank of Zambia should not just hide in technicalities, but roll their sleeves, engage banks and the treasury to come up with short, medium and long term actions to bring down the lending rates. As things stand, nothing will come out from any of the successive governments efforts if lending rates remain at rates beyond normal business or industry margins.

In an interview with the Zambian Business Times – ZBT,  the financial economist called banks to come up with lending products that are suitable for the bigger number of local businesses. “They should start giving more loans that are realistic to service because some current interest rates are too high for most industry margins and local company rates of returns.

Inflation has now been recorded as a single digit, below 10%,  so banks should be open about what other factors which government should work on so that we can also have single digit lending rates. Otherwise, we risk having more discussions and talk shows that will not held bring down lending rates.

When banks requirements are not realistic with what is available with the majority of the citizens, when the lending rates are too high, then micro finance institutions also have even higher rates. Informal lenders would then have even much higher rates than micro finance, so the vicious circle continues.

He further added that it is gratifying to note that the banking sector has made itself familiar with mobile money  and thus they have allowed transactions from and to their respect bank accounts. Chizonda stated that Banks should continue going that direction of encouraging closer collaboration between mobile accounts and Banks as it increases subscribers and continues to encourage financial inclusions. The next step now would b extending lending services to the larger mobile money account holders.

A financial economist, Bright Chizonda says Zambia

BOZ fails to raise the targeted K2billion in July treasury bill auction

The Bank of Zambia – BOZ, the country’s central banks has for the fifth (5th) time this year failed to raise the required K2 billion per auction as only K889 million was raised  during the latest auction results published on July 14, 2022.

The subscription rates are an economic barometer of the economy as an oversubscription is generally seen as a mark of economic confidence by investors while an undersubscription is seen as a score for low investor confidence.

According to the treasuring results seen by the Zambian Business Times – ZBT, BOZ which raises funds on behalf of the central government through issuing treasury bills, only managed to raise K889 million out of the targeted K2 billion, an undersubscription or low uptake of 44%.

A further check of the auction results for 2022 done so far, the central bank has so far recorded a total of five (5) out of fourteen (14) undersubscribed auctions, which translates into a success rate of 64%.

BOZ first recorded an undersubscription on April 21, 2022 when only K580 million was raised out of a target of K2 billion. The second undersubscription was then recorded on May 19, 2022 when K1.5 billion was raised out of a target of K2 billion.

The months of June and July 2022 have been the hardest when a total of three undersubscribed auctions have been recorded. One was on 2 June 2022 when K1.5 billion was raised and then the one on June 16, 2022 when K1.7 billion was raised and the latest one on 14 July, 2022 when only K889 million was raised, all below the target of K2 billion.

BOZ is further struggling with a market dogged by high lending rates which have slowed down investments and dampened consumer spending. Most banks in Zambia use the treasury bills discount or interest rate as a floor price for pricing loans. With the T-bill rates remaining relatively flat despite the single digit inflation rate, lending rates remain high.

Banks are currently charging high lending rates of about 22 to 24% per annum while micro lenders who service the massive number of informal sector employees and local businesses are facing lending rates of about 60% per annum, a situation which is unacceptable in most functional economies.

The Bank of Zambia - BOZ, the