Zambia Weekly Wrap - July 12 Edition

Kwacha falls to record low against US dollar

The Zambian Kwacha (ZMW) fell 3.5% this week and hit a record low of K7.87 before settling at K7.85 to the US dollar:

The decline was largely driven by a huge sell-off in Chinese equity markets (accounts for 50% of Copper demand) and uncertainty over Greece (Europe accounts for around 13% of Copper demand) which sparked a commodity sell-off. Copper dropped to around $5,200 before recovering to trade around $5,600 per MT. The economic events of this week had a negative effect on the Kwacha (where copper exports account for over 70% of forex earnings) and a positive effect on the US dollar (currently a safe haven for investors funds).

This is makes 3 ‘Kwacha-negative ‘events over the last 2 weeks – 560 MW energy deficit, S&P credit rating downgrade and further depression in global copper prices (sparked primarily by China). There could be some reprieve after the issuance of the (up to) $2 billion Eurobond later this month which will increase international reserves to around $4.6 billion. But the real appreciation will come with higher global copper prices, decreased capital imports (up 22% as of May), increased exports (traditional and non-traditional down 22% and 11%, respectively as of May) and shoring up of the fiscal deficit.

The only things which are more or less certain is the inflow of US dollar from the Eurobond issuance (99% chance of happening) and shoring up of the fiscal deficit (65% chance of happening). There are too many variables in play for any positive change in the other factors mentioned. The best thing the Government can do right now is to make it easy for domestic entrepreneurs to flourish and the private sector to do business.

T/bill yields retreat as Government starts to scale back on domestic borrowing

Yesterday’s Treasury bill (T/bill) auction attracted only K311 million in bids of which K160 million were allocated:

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Goldman Sachs says too much money is snaring commodities markets in a negative loop

It’s going to take a prolonged slump in commodities to break a cycle of too much money and excess production, according to Goldman Sachs Group Inc. The market is caught in a “negative feedback loop,” where lower raw-material prices are strengthening the dollar and lowering production costs for countries with weaker currencies, Goldman analysts wrote in a report. That boosts the prospects of higher U.S. interest rates and a reduction in emerging-economy debt, according to the bank. Demand for commodities will subsequently decline, capping prices and further reinforcing the greenback, it said.(Read more)


Lusaka Stock Exchange sees Sluggish H1 2015 as K1.7 bn of Market Cap is Wiped Off

The Lusaka Stock Exchange (LuSE) has had a very sluggish first half of the year. The index declined by 5.2% to close at 5,842.08 as at June 30 2015:

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Zambia aims to cut power to the mines by 30%

Zambia, Africa's No.2 copper producer, plans to cut power supplies to mines by up to 30 percent as early as next week, after water levels at its hydro-electric projects dropped due to drought, industry sources said on Tuesday.(Read more)


Zambia and Zimbabwe set to complete feasibility study for 2,400 MW power plant

Zambia and Zimbabwe will conclude a study on a planned 2,400 megawatts (MW) hydro-electric scheme between them by the end of this year, the chief executive of the company in charge of the project said on Friday. Munyaradzi Munodawafa said Zambezi River Authority (ZRA) was updating the engineering feasibility studies and undertaking those on environmental and social impact.(Read more)


Water supply threatens the flow of SABMiller’s Zambian expansion

As SABMiller looks to ramp up its business in Africa, Zambia stands out as a prime candidate for expansion. The brewer has a long history in the southern African nation. Zambia has enjoyed some of the continent’s fastest economic growth rates over the past decade and Zambians enjoy a beer. Over the past eight years, SABMiller’s beer volume growth in the country has been 7.1 per cent — more than double its Africa total.(Read more)


National Breweries set to expand production


National Breweries Plc is set to expand in coming months after the commission last year of its new state-of-the-art production plant in Lusaka, Zambia. The company is notable for prouducing Chikubu ; a popular traditional beer.
The company has recently increased operational and capital focus on improving efficiencies and product quality, as well as capability enhancements.  This has been achieved through the construction of a K200 million state-of-the-art brewery and packaging line in Lusaka.(Read more)


Airtel money users in Niger will be able to transfer funds to users in Zambia, DRC and Rwanda

NEW DELHI: Telecom giant Bharti AirtelBSE -3.11 % today launched a cross-border money transfer service for its mobile wallet customers in Niger -- a first in the country by a telecom company. Niger will join three other African countries - the Democratic Republic of Congo (DRC), Zambia and Rwanda - where the company is already offering the service through Airtel Money. Through this, customers can transfer money, facilitate remittances, the company said in a statement. (Read more)


Zambian wins Cain Prize award on African writing

The story "The Sack" by Zambian writer Namwali Serpell was selected as the winner of this year's Caine Prize, the top accolade for African short story writers. South African author and chair of the panel of judges Zoë Wicomb praised the story, calling it "formally innovative, stylistically stunning, haunting and enigmatic in its effects." RFI spoke to winner Serpell about why she decided to split her prize money with fellow shortlistees.(Read more)

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