Zambia Weekly Wrap - September 20 Edition

$280m pledged for rehabilitation of Kariba Dam

$280 million has been pledged to rehabilitate Kariba dam by various entities in form of grants and loans broken down as follows:

The Zambezi River Authority will finance the remainder of the project bill. The dam has been in existence for over half a century and a potential collapse would adversely affect thousands of people who live within proximity of it. It is also a vital source of energy (over 1,600MW is generated from the dam) for both Zambia and Zimbabwe – any disruption would have far-reaching negative economic effects. The fact the funds will be made available is fantastic news but the work needs to start as quickly as possible otherwise this would have all been in vain.

Key takeaways from the President’s speech as he opened parliament

The president touched on many topics from health to education. Here are some key points we picked out:

·         Merger of the Public Private Partnership (PPP) unit to the Zambia Development Agency (ZDA) in order to free up fiscal space.
·       The  K108.5 million storage shed project with a total storage capacity of 117,000 MT set to be completed by year-end.
·         11,500/17,500 hectares has been brought under irrigation for small and medium scale farmers with the rest to be done by 2016.
·         In 2015, a local government equalization fund will be established to provide to shore up financial base of local governments as part of decentralization program. 
·         The Secretary to the Cabinet was directed to operationalize the Industrial Development Corporation and ensure that state-owned enterprises list on the stock exchange to improve their operations and capital base.
·         Non-traditional exports now account for 33 percent of total export earnings (20.9 percent in 2011).
·         Total electricity generation capacity has risen to 2,310 MW as of 2014 (1,669 MW in 2011). 

Pizza Hut set to enter Zambian market in 1H 2015

The company opened its first outlet in South Africa on Thursday after a 6 year absence and plans to open outlets in Zambia and Angola by the first half of 2015. Pizza Hut is owned by Yum Brands – the same entity that also owns KFC which opened its first Zambian outlet in March 2011.

Will that mean cheaper pizza for Zambian consumers? Pizza Hut will be competing against Debonairs and Pizza Inn for the delivery and takeaway segment. The real takeaway here is that companies are coming to Africa to tap into the spending power of a rising middle class. 

Company earnings: Puma Energy, REIZ and ZAMEFA

The takeaway here is that the depreciation of the Kwacha in the first half of the year had an adverse impact on the earnings on many companies, not just those that are publicly traded. High domestic interest rates result in many firms sourcing debt from abroad which leaves them heavily exposed to currency risk if not hedged. The Bond and Derivatives Exchange (BaDEx) is open for business – more companies should be using it to hedge their currency risk.

The Zambia Revenue Authority is currently withholding slightly over K4 billion (up from K3.6 billion in H1 2014) in VAT refunds from exporters who have not complied with the much talked about rule 18 as it stands.

Eric Schultz is the new US Ambassador to Zambia. His most recent post was as Deputy Chief of Mission at the US embassy in Ukraine and has had some Africa experience in Zimbabwe. He succeeds Mark Storella who held the post from 2010.

Data Check

Kwacha closed at K6.20 per USD, K10.11 per GBP, K7.96 per EUR and K0.56 per ZAR

T/bills: 91, 182, 273 and 364 days were at 9.5%, 17.4%, 16.5% and 19% at the latest auction

LME 3-month seller price closed week at $6,884 per MT

The LuSE all-share index closed the week at 6,216.56, unchanged from Thursday s close.