Zambia Q1 2016 Wrap

​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. 

​The first quarter of 2016 has blown by very quickly with some positive and negative trends emerging while certain things remain the same. Here is a quick review of Q1 2016:
 
Macro  Indicators
 
Currency
 
After a 70% decline in 2015, the Kwacha has been very stable versus the US dollar and showed signs of strength toward the end of the quarter:

The effects of Central Bank policy tightening have been a significant contributor to this stability.
 
Copper
 
Copper was up 3.3% in the first quarter of this year:

​Prices breached the $5,000 per MT mark for 5 days in March before dipping back below.
 
Inflation
 
Inflation slowed down and declined for the first time 6 months to 22.2%:

​The flow-through effects of last year's currency decline look to have bottomed-out.
 
Interest Rates
 
Bank of Zambia (BoZ) kept the policy rate unchanged at 15.5% at the February committee meeting:

​The economy is currently operating in a high interest environment.
 
Trade
 
Exports are up 48% year-on-year over the first two months of 2016 (March data unavailable) at K11.5 billion – led by a 55% rise in metal exports:

​Imports are up 34% year-on-year over the same time period to KK12.4 billion – led by a 142% rise in consumer goods imports. The trade balance was at an 11-month low in January.
 
Capital Markets
​
 The Lusaka Stock Exchange (LuSE) All-share index close the quarter at K5,534.39, down 3.5%. Here' s table of the performance of individual equities on the exchange:

​
​Financial Services
 
Commercial Banks Plan to Raise Interest Rates to Between 30 & 40%
 
Collateral Registry Bill Set for Parliament
 
 
ICT
 
Zambia to get Solar Powered Wifi Network
 
Vodafone Appoints CEO for New Zambia Operation
 
MTN Zambia Partners-up with JUMO for Mobile Lending Platform
 
Airtel-Zambia Picks Ericsson for Network Transformation
 
ZICTA Makes Progress on Construction of PC Assembly Plant

​Government Finances/Politics
 
Fitch Ratings Revises Zambia's Outlook to Negative, Affirms at B
 
Key Areas that could be on the Table in a Zambia/IMF Program
 
Cabinet Approves $154 million in Concessional Loans for Various Projects
 
Governments Cuts Local Debt Auction Sizes as Yields Rise
 
Government Cancels Gunvor's Oil Supply Contract
 
AFDB set to lend $125 million to Zambia
 
Zambian Constitution Changes Set Rules for August 2016 Elections
 
2016 Elections to Cost K940 million
 
Former President Rupiah Banda Immunity Restored

Mining
 
Zambian Miners Pay More for Power but get Tax System Re-design in Return
 
Gemfields Rakes in GBP23.3 million at Q1 Emerald Auction
 
Glencore Set to Invest $1.1 billion in Zambia Operations
 
Zambia 2015 Copper Output Rises Marginally Despite Challenges
 
 
Infrastructure
 
$287 million Mongu-Kalabo Road Completed
 
Freca Mining to Construct Mwinilunga-Jimbe Road
 
Zambia Secures $243 million Loan for Rehab of Chinsali-Nakonde Road

Trade
 
Zambia and Angola Sign Trade Deal

Energy
 
Zambia Plans to Revisit Power Tariffs after Reversal
 
Parliament Approves K2 billion for Emergency Power Imports
 
Sweden Invests 20 million Euros into Clean Energy in Zambia's
 
Turkish Power Ship Docks at Nacala to Generate 100MW for Zambia's
 
Kariba Dam Water Levels Set to Improve
 
Zambia Bans Incandescent Bulbs and Energy Inefficient Lighting Devices
 
120MW Itezhi-Tezhi Hydro Commences Power Generation (at 25% capacity)

Mergers & Acquisitions
 
Tradehold Targets Majority Stake in REIZ
 
KHI sells 100% Stake in Intercontinental Hotel Lusaka for $36 million
 
Prudential Plc Acquires Professional Life Assurance
 
Exercise of the Put Options granted to RCL FOODS in respect of Zam Chick and Zamhatch
 

Things to Watch
 
1. Real Estate:
 
- A number of tenants at some major shopping malls in Lusaka are either being evicted or closing their stores. The stores are exposed to currency risk through dollar-denominated leases and due to the fact that most import their products for re-sale.
 
-  Vacancies in residential as well commercial properties are on the rise in Lusaka (plenty of 'For Sale/Rent' signs outside premises of properties which don't normally advertise in that manner!).
 
2. Politics:
 
- Parliament is set to be dissolved in May 2016 which will see a kick off a flurry of endorsements, alliances, campaign spending etc. prior to the August 11 elections.
 
3. Energy:
 
- The uptick in rainfall towards the period at which the rainy season traditionally comes to an end should help prop up water levels in major dams over the next few months.
 
- The Maamba themal project (300MW) should be fully online by June 2016 which will also help cut down power outages.
 
4. Maize:
 
- Even though (according to the Agriculture Minister) Zambia will produce enough maize for itself (and a bit more), a regional deficit of the staple crop will put pressure on domestic pricing. This will not only affect the price of 'mealie-meal' but also flow-through to animal feed.
 
- The Food Reserve Agency (FRA) will have to pay significantly more than the K75 per 50Kg bag they paid last year for strategic reserves – putting further pressure on Government finances.
 
5. Non-performing Loans:
 
- The Banking sector could see a spike in non-performing loans as a consequence of pressure on businesses from higher interest rates, effects of load-shedding, effects of currency depreciation and a generally tougher environment for the consumer.

6.IMF Program

- The Government held talks with the IMF about centered on an economic recovery program. Nothing concrete was announced but some news could come out in mid-April during  the IMF/World Bank Spring Meetings.