Economic growth slowed down to 3.7% in 2015 primarily due to the negative effects of prolonged load-shedding in the second half of the year as well as a significant decline in the currency.
2015 started off with a bang – a tightly contested and peaceful presidential by-election coupled with the economic stimulus of a reduction in fuel pump prices. One can be forgiven for thinking things could only get better from there. Unfortunately, that was not the case.
Here is a recap of some of the factors that shocked the Zambian economy and their subsequent effects:
Copper, the country’s main foreign exchange earner (accounts for 70% of earnings), saw its price drop by 25% to end the year at about $4,701 per MT as a result of a slowdown in Chinese demand:
August Inflation Quickens to 7.3% as Trade Deficit Contracts
August inflation ticked up to 7.3% from 7.1% the previous month. The upward move was led by an increase in the prices of non-food items such as fuel and transport fares and fees. The Government raised the pump price of fuel by an average of 13% in July whereas road user fees (road tax, license renewals etc.) were also raised by 50%.
The trade balance came in at a deficit of K958 million in July, down 20% from the previous month. This was the first contraction in the trade deficit this year.
Atlas Mara in talks to buy Finance Bank Zambia
Atlas Mara Ltd., the company co-founded by Bob Diamond to invest in African financial businesses, is in talks to buy Finance Bank Zambia Plc, according to three people with knowledge of the matter. Negotiations began as early as March, two of the people said, asking not to be identified because they’re not authorized to comment on the talks. (Read more)
Zambia set to tap international bond market to fund projected K10 bn budget gap
Zambia’s plan to plug a gaping budget deficit by more than doubling foreign bond issuance is sending dollar-borrowing costs to 14-month highs.It could get worse, according to Oliver Saasa, a consultant who was briefed about the plan to raise as much as $2 billion in Eurobonds by a Finance Ministry official. The southern African nation may have to pay as much as 10 percent for the new debt, about 2 percentage points higher than yields on existing securities, he said. (Read more)
More than 1,000 SMEs enter Nyamuka Zambia business competition
MORE than 1,000 Small Medium Enterprises (SMEs) have registered their business ideas in the Nyamuka-Zambia business plan competition. The ZANACO-sponsored Nyamuka Zambia is one of four components under the Private Enterprise Programme Zambia (PEPZ), funded by the United Kingdom's Department for International Development (DFID). (Read more)
Changes to mining tax set to be approved by cabinet on April 20
Zambia will return to a 30 percent corporate-income tax for mining companies and amend a royalty system that operators said would lead them to close pits, an official said. The cabinet of Africa’s second-biggest copper producer agreed to royalties of 9 percent for both underground and open-pit operations, said the official, who asked not to be identified because the matter is private. Parliament will review the amendments when it resumes in June. (Read more)
Inflation falls to 7.4% as trade deficit widens
Data released by the Central Statistics Office (CSO) showed that inflation fell to by 0.3% from the previous month to 7.4% in February 2015. The decrease was driven by a drop in non-food inflation. This is the third consecutive drop in the inflation rate since it hit a high of 8.1% in November 2014.
VAT rule 18 amended
Effective February 23 2014, VAT ‘rule 18’ is set to be amended to include import documents from a transit country as sufficient proof of export as well as scrapping the provision requiring export proceeds to be deposited in Zambian accounts (proof of payment by an intermediary should suffice). For transactions prior to February 23, exporters will be required to fulfil the old rules. [KPMG Zambia release on 20.02.2015]
Zambia’s newly elected President Edgar Lungu, who has promised lower interest rates, replaced the central bank governor a day after he held borrowing costs at a record high. Lungu named Denny Kalyalya, previously deputy governor, to take over from Michael Gondwe, who had been in the post since 2011, according to an e-mailed statement on Friday. Read more....
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. * * *