Moody’s affirms Zambia rating at B1, downgrades outlook to negative
Moody's Investors Service ("Moody's") has today affirmed Zambia's B1 government bond rating and changed the outlook to negative. The key drivers for the negative outlook are:
- Deteriorating debt metrics, as evidenced by a rapidly rising debt burden and increasing debt servicing costs;
- A trend of missed fiscal targets that points to high execution risks in current deficit reduction plan to arrest the upward debt trajectory, particularly amid spending pressures in the lead up to next year's presidential election;
- The shift of the current account into deficit, removing a key credit support that has historically suppressed external vulnerability. (Read more)
Two of the big 3 rating agencies have now revised their outlooks to negative. This is important because it plays a major role in dictating what interest rates Zambia can borrow at on the international markets. There has been talk of a third Eurobond being issued this year to finance the gaping hole which has been left by the failure of the 2015 mineral royalty changes. Any bond issued without major fiscal reforms first could see Zambia paying a coupon beyond 10%!
The fiscal situation is not pretty right now – a quick and dirty way of telling that is by looking out for treasury information briefs from the Ministry of Finance. If they haven’t been released then you can safely bet that the numbers are ugly. Fiscal information is (unfortunately) usually only released when satisfactory/very good. Though yields on Treasury bill are more straightforward indicators.
Let’s see what fiscal changes will be talked about in parliament – which is now in session.
Government set to cut underground mining mineral royalty rate to 6%
Zambia's government will cut mineral royalties for underground mines to 6 percent, lower than the 9 percent expected to take effect on July 1, the presidency said on Friday. It marks a second retreat from higher rates since Africa's second-largest copper producer decided in January to raise royalties. That decision rankled mining companies and unions and forced the government to review its plan. (Read more)
This debacle should be used as a case study at all Zambian universities to highlight the importance of consultation, timing and execution by Governments. The ideas behind it (i.e. collecting more revenue from aggressive tax planning miners) was good but everything that came after leaves a lot to be desired.
Nationa Breweries records 40% drop in fy 2014 net profit
National Breweries Plc (LUSE: NATBREW) reported a 40% year-on-year decrease in net profit to K28 million in financial year (FY) 2014. Earnings per Share (EPS) came in at K0.44 (K0.74 in 2013): (Read more)
Zambian Breweries records 25% drop in fy 2014 net profit
Zambian Breweries Plc (LUSE: ZAMBREW) reported a 25% year-on-year decrease in net profit to K132 million in financial year (FY) 2014. Earnings per Share (EPS) came in at K0.24 (K0.32 in 2013): (Read more)
Old mutual in talks to acquire stake in CEC’s $220 M hydro project
Zambia’s Copperbelt Energy Corp. is in talks with Old Mutual Plc, Africa’s largest insurer, to sell it a stake in a $220 million hydropower project in the country’s northwest. “We are speaking to them and they seem to be very interested,” Hanson Sindowe, chairman of the power supplier, said in an interview on Tuesday in Lusaka, the capital of Africa’s second-largest copper producer. “They are carrying out their own due diligence.” (Read more)
Cargill Holdings completes Zamanita Acquisition
Further to the announcement of 3 February 2015, Zambeef (AIM:ZAM), the fully integrated agri-business with operations in Zambia, Nigeria and Ghana, is pleased to announce completion of the transaction regarding the disposal of its wholly owned subsidiary, Zamanita Limited (“Zamanita”) to Cargill Holdings BV (“Cargill”). (Read more)
Monsanto quietly working with Syngenta to iron out regulatory hurdles to proposed takeover
Monsanto Co., the world’s largest seed company, is quietly working with Syngenta AG to iron out regulatory concerns that could stymie its proposed takeover of its Swiss rival, people with knowledge of the situation said. Antitrust lawyers for the two companies are discussing how to address regulatory hurdles that would arise from the combination, said the people, who asked not to be identified because the talks are private. The efforts don’t guarantee that Monsanto will raise its offer or that an agreement will be reached, the people said. (Read more)
This news is relevant to Zambia because Syngenta recently acquired MRI Seed and MRI Agro Ltd. This deal could have implications for both the entities.
Finance Bank Chairman resigns from position
Finance Bank Board Chairman Dr Rajan Mahtani has resigned from his position following his arrest earlier today. Board member William Nyirenda has since been appointed to act as Board Chairman. In a brief statement, Finance Bank confirmed that Dr Mahtani graciously stepped down from his role with immediate effect. (Read more)
At first glance, it may look like the Finance Bank Initial Public Offering (IPO) may be off but the fact that the chairman resigned could be saying otherwise i.e. he saves the bank from the potential reputational damage which his arrest/court case will do. This is something to keep an eye one.
Zambia Railways CEO fired
The Zambia Railways Limited (ZRL) board has terminated the contract for its Chief Executive Officer Muyenga Atanga. Transport and Communication minister Yamfwa Mukanga confirmed this development.Mr Mukanga said the board terminated Atanga’s contract in a letter dated May 29,2015. He however said he could not comment on the matter and has wished Prof Atanga the best in all his future endeavors. (Read more)
Does this open a gap for Clive Chirwa to make a comeback? He has the expertise and the vision to take Zambia Railways to the next level.
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. * * *