First quarter 2014 infrastructure spending and public debt figures released
K1bn was released for investments and special projects and allocated as follows:
Inflation increased by 0.1% from last month to reach 7.8% for the month of April 2014. The increase was driven by price hikes in various non-food items ranging from cement to charcoal. According to the CSO director, Western province had the highest rate of inflation at 9.3 % followed by North-Western province at 9.2% with Central province having the lowest rate of inflation at 6.2%.
Energy Regulation Board increases the price of petroleum products
The prices of petrol, diesel and kerosene were increased by 7.2%, 8.5% and 9.45%, respectively. This means that effective April 18 2014, the new pump prices of petrol, diesel and kerosene are now K10.63, K10.01 and K7.48 per litre, respectively. The ERB cited Kwacha weakness as the main driver of the decision to increase prices. Last year's increase was due to the removal of fuel subsidies.
Zambia imports finished petroleum products through a costly and inefficient supply chain - it also does not help that Indeni Oil refinery has obsolete equipment! The ERB sets pump prices so that they cover the cost of importation - so if the cost goes up (because of Kwacha depreciation), then pump prices have to go up to compensate otherwise the ERB would lose millions of Kwacha each time petroleum products are imported.
This is a logical move but will be very unwelcome by consumers because it will force retailers to raise prices of various goods i.e. inflation will pick up - maybe above 8% over the next few months?
So will this decision be reversed should the Kwacha start regaining its strength? Zambians already pay some of the highest gas prices in southern Africa. In the meantime, perhaps it would be prudent for the ERB to hedge this currency risk on say, the Bond and Derivatives Exchange before they come up with a final solution on Zambia's fuel problem?
The Bond and Derivatives Exchange (BaDEx) went live and executed its maiden live transaction yesterday at 14:49pm – a June 2014 US Dollar/ZM Kwacha futures contract. The transaction was between Banc ABC (who is a trading member) and their client. This was an historic transaction for one of a handful of Bond and Derivative Exchanges in Africa. BaDEx was incorporated in 2009 and became a licensed exchange in 2011. It is regulated by the Securities and Exchange Commission (SEC) of Zambia.
Zambia issues $1bn dollar bond
The government issued a second successful offering albeit at steeper conditions than the debut bond. The funds have been pledged to the transport and energy sector but with no specifics as of yet. What is most important now is the execution - this money needs to be put to work efficiently, more efficiently than the pace at which the $750m was utilized. The quicker the projects are done the quicker the pay-back period will be...
Batoka Energy Holdings (Ireland) Ltd is set to make a mandatory offer of K526.2m (K0.6746 per share) to Copperbelt Energy Corp. minority shareholders after acquiring 40% of Zambia Energy Corp. (ZECL) as part of a reorganization of ZECL announced in a cautionary note in Q4 2013. The 40% was previously held by institutional and retail investors. Here’s a chart showing the owner-subsidiary relationships before this change:
Two weeks before the $1bn bond offering, there were investor roadshows in Los Angeles, San Francisco, Boston, New York and London (the same destinations as before the 2012 offering). The final allocations by industry were as follows:
When the Minister of Finance was presenting the K42.7bn 2014 national budget in October last year, he highlighted that 25% of it would be financed by a combination of domestic (K3.5bn) and foreign debt (K7bn). It’s no secret that there was a Zambian delegation which included the Bank of Zambia governor on a USA coast-to-coast roadshow which was wrapped up at the tail-end of last week in London. Yesterday Reuters reported that Zambia had launched a 10 year, $1bn Eurobond at a final yield of 8.625%. This is the second Eurobond launched in the space of 2 years.
The company announced the following in a press release:
At the Extraordinary General Meeting (EGM) held on Monday 24 February 2014 at the Southern Sun Hotel in Lusaka, the members of ZCCM Investment Holdings Plc resolved to appoint a Non-Executive Director to represent the Minority Shareholders. Following this resolution, ZCCM-IH Plc is pleased to announce the appointment of Mr Philippe Taussac as a Non-Executive Director to represent the minority shareholders on the ZCCM-IH Board. Mr. Taussac brings to the Board many years of Business Management experience. ZCCM-IH is confident that he will add value to the Company.
Trying to decipher this puzzle that is Zambia by using a variety of publicly available data (structured and unstructured) in conjunction with my own skill/experience. * * *