2014 has been a bit of a rollercoaster year for Zambia. The country lost President Michael Chilufya Sata to illness a few days after celebrating its 50th year of existence. The consumer was under tremendous pressure as the effects of a weaker Kwacha took hold over the course of the year.
However, the economy maintained an upward growth trajectory. According to preliminary data from the Ministry of Finance, Gross Domestic Product (GDP) growth of 6% was achieved in 2014 – a slowdown from growth of 6.7% in 2013. Construction, led by the ‘Link 8,000’ project, was ramped up with 49% of the 2,630 Km of roads in phase one being tarred to date.
Here are the top 12 business and economic highlights which shaped 2014 in Zambia:
1. Kwacha depreciation
The Zambian Kwacha saw a sharp depreciation in the first half of the year – falling as much as 27% against the US dollar to trade at around K7.05 in May 2014. The fall was caused by low forex supplies on the domestic market driven mostly by:
2. Bank of Zambia monetary tightening
The central bank raised policy rate to as high as 12% in the first half of the year in a bid to curb the Kwacha’s depreciation. They also implanted a number of other policies which drained liquidity (and reduced short-selling) in the market. A key result was a rise in lending rates which could rise as high as 28% for commercial banks and over 40% for Microfinance lenders. This helped the Kwacha but hurt small businesses and other borrowers. Policy rate ended the year at 12.5%
3. Issuance of $1Bn Eurobond
The Government raised $1 billion on the international markets making it the second over the last two years. It was not as ‘cheap’ as the first one as it was issued at a yield of 8.625% (5.625% in 2012) over 10 years despite being oversubscribed by $4 billion ($11bn in 2012). Investors were slightly more apprehensive this time around (despite oversubscription) because of the fiscal issues of 2013 which saw Fitch assign a ratings downgrade.
4. Bond and Derivatives Exchange pulls off first live transaction
The Bond and Derivatives Exchange (BaDEx) executed its first live transaction which was a ‘June 2014 US Dollar/ZMW futures contract’. The transaction was between Banc ABC (who is a trading member) and a client. BaDEx is one of the few derivatives exchanges in Africa.
5. Price of fuel upped in April and cut in November/December
Weakness in the Kwacha caused an overall 8% upward revision of fuel pump prices in April as import costs of the commodity increased. The Pump prices held for the next 7 months until they were marginally cut in November/December because of a global decrease in oil prices which dropped by over 30% to trade under $60 per barrel.
6. Electricity tariffs upped for residential, commercial and miners
The Energy Regulation Board (ERB) approved upward electricity tariff adjustments for both mining (29%) and non-mining (up 24% for residential) sector in 2014 with the former starting in April and the latter kicking-in in July. 7 mining companies went to court against the ERB over the increment.
7. Maize and Wheat bumper harvests
The country achieved an increase in Maize and wheat production of 32% and 24% to 3.3 million MT and 338,000MT, respectively.
8. Madison K62M Initial Public Offering
Madison Financial Services raised K62 million as they listed 20 million shares (40%) on the Lusaka Stock Exchange (LuSE). This was the second initial public offering (IPO) on the LuSE over the last 2 years and made Madison the 23rd listed company.
9. Launch of LuSE-Alternative Market
The LuSE launched an alternative exchange for Small and Medium Enterprises (SMEs) to be able to list and raise capital for their businesses. The LuSE also signed a memorandum of understanding with the Zambia Agricultural Commodities Exchange (ZAMACE) paving way for the LuSE to acquire majority shares as well as a restructuring of ZAMACE.
10. Credit rating changes
Ratings agency Fitch revised Zambia’s outlook to positive and affirmed their rating at ‘B’ after a downgrade and negative outlook in 2014. There were no changes from Moody’s and S&P (reaffirmation). The domestic market also saw the launch of a first ever rating agency called ‘Credit Rating Agency (CRA)’
11. New mining tax regime
The major highlight of the 2015 National Budget speech was the replacement of the current two-tier system with changes below:
12. Bank of Zambia launches Islamic Finance guidelines
The central bank launched guidelines for implementation of Islamic Finance in Zambia. Could this be the much needed boost that could boost entrepreneurs in a market that continues to subject them to high interest rates?
2014 showed that the economy is still too narrowly-based and import-centric as highlighted by the negative effects of the Kwacha's depreciation. However, conferences like the Pangaea Zambia Investment conference (with keynote speakers like Sir. Richard Branson and Charlie Robinson) showed that there is an appetite to do more business here and expand various sectors of the economy.
There are many questions to be answered in 2015 - who will be the next president? Will we see cheaper oil?How will issues in mining sector be resolved? - to mention a few.
What were your top business and economic highlights in 2014?
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. * * *