zambia weekly wrap - august 30 edition

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.

Inflation will remain under upward pressure for the rest of the year from the effects of both load shedding and the continued depreciation of the Kwacha. Businesses in various sector of the economy have had to adjust to power outages by using supplemental energy (from mostly generator sets) and altering work hours. The cost of running a generator set has been exacerbated by the recent rise in fuel pump prices. At some point those additional un-budgeted costs will be passed onto consumers (if not already).

The Kwacha is down 32% year-to-date against the US dollar and currently stands at a spot rate of K8.56/$. Of Zambia’s K27.1 billion in first half 2015 imports, 69% were consumer (30%) and capital goods (39%). Capital goods imports are not going to slow down anytime soon because of the extent of current and future infrastructure projects. But consumer goods, especially food, can be curtailed by sourcing more locally. This would reduce pressure on the Kwacha.

The Ministry of Agriculture must play a key role, at a granular level, to ensure that production of certain products like meat, vegetables, potatoes etc. (i.e. things that the country can sustainably produce at high quality) are increased. As things stand, local producers – because of a lack of adequate capacity and capital – are only getting a small piece of the multibillion Kwacha food industry.  Capacity needs to come first because capital will follow in abundance once there is consistent and high quality production.

High fuel pump prices

It is tragic that Zambian consumers will not get to see any relief from low fuel pump prices in light of the fact that global oil prices have declined to around $40 per barrel. Procurement of oil through the Ministry of Energy remains poor, inefficient and without any political impetus to reform. The Energy Regulation Board’s (ERB) ‘cost-plus pricing’ model also makes consumers pay for not only those inefficiencies but exchange losses (fuel is purchased using US$) resulting from a weaker Kwacha. This is one of the key areas where opposition parties should be pressuring the current regime to reform.

Zambia to Cut Deficit in 2016 Even as Growth Prospects Dim

Zambia plans to narrow its budget deficit to about 5 percent of economic output next year even after lowering its 2015 growth forecast for the second time since June. The shortfall will shrink from an expected 6.9 percent this year, Deputy Finance Minister Christopher Mvunga said in an interview at his office in Lusaka, the capital. That’s higher than an earlier government estimate of 4.6 percent. (Read more)


Zambia forecasts lower growth, larger deficit as copper earnings shrink

Zambia expects slower economic growth and a bigger fiscal deficit this year as weak global demand for copper hits exports, documents released by the Ministry of Finance on Sunday show. Global commodity prices have dropped sharply on concerns that China's economy is slowing after years of rapid development that has sucked in metal imports. (Read more)


Government to increase salaries of public service workers


GOVERNMENT says it will increase salaries for public service workers next year but will ensure that the overall size of the public sector pay as a share of gross domestic product (GDP) does not rise over the Medium Term Expenditure Framework (MTEF) period.

(Read more)

Warehouse Receipt System to Increase Access to Finance
The Zambia Agricultural Commodity Exchange (ZAMACE) held Seminars last week to familiarize the various stakeholders on the trading platform. In addition to enhancing trading of commodities.
(Read more)


Zambia assents to the Anti-Terrorism Amendment Act

ZAMBIA has assented to the Anti-Terrorism Amendment Act which seeks to establish the National Counter Terrorism Centre in the country. Home Affairs Minister, Mr. Davies Mwila has said that the Anti-Terrorism (Amendment) Act, No. 2 of 2015 which aims to facilitate for the establishment of the National Counter Terrorism Centre was assented to on 14th August, 2015. He has said that Government was now in the process of establishing the Centre. (Read more)


Monsanto Says It's No Longer Considering Bid for Syngenta

(Video)

CEC Releases H1 2015 Earnings

The Revenue for the Group has increased by 19% in Zambian Kwacha compared to the half year 2014 on account of improved billing efficiency, power tariff increase at the Abuja Electricity Distribution Company (AEDC) and depreciating Kwacha on the Zambian operation. (Read more)


Zambia Anticipates Foreign Investment Boom

The number of foreign firms active in the Zambian defense market is expected to grow this year with companies from China and Brazil setting up plants to manufacture troop carriers and ammunition to supply the Zambia Defense Force (ZDF), the Zambia Police Service and the regional market. (Read more)


First Quantum Minerals launches $2.1 bn Sentinel Project

Canada's First Quantum Minerals on Friday launched production at its $2.1-billion copper Sentinel mine which has been under construction since June 2012. The mine would produce 280 000 t/y to 300 000 t/y of copper at full production from one large low-grade ore body containing 0.51% copper, First Quantum said.
(Read more)


Congo Copper Output Seen Declining This Year on Power Shortages


Copper production in the Democratic Republic of Congo, Africa’s biggest producer, is expected to decline along with output of other metals this year because of unreliable power supplies in mineral-rich Katanga province, the main industry body said. (Read more)


Fly Africa to open new routes in East, West and Southern Africa

Southern Africa-focused low-cost airline Fly Africa will expand to fly new routes to destinations in East and West Africa, Gabon’s president said on Saturday. (Read more)


The Kwacha receives a facelift as BoZ launches new notes for the blind

The Bank of Zambia has issued new notes with a tactile feature to cater for the visually impaired.The special marks are in the form of slanting lines on the front of each denomination ranging from two slanting lines on the lowest banknote for K2 to seven slanting lines on the highest denomination of K100. (Read more)

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