Zambia Weekly Wrap - September 13 Edition

Zamtel signs $18.3m deal with NEC Corp. to boost mobile coverage and capacity

The deal includes the supply, delivery, installation, testing and commissioning of Japan-based NEC’s microwave transmission network equipment. The investment will improve Zamtel’s network infrastructure by modernising its digital microwave transmission backbone – which will help support Long Term Evolution (LTE) roll out. The project will be completed within 12
months.

State-owned Zamtel remains number 3 in mobile subscribers in Zambia –  dead last by a country mile behind MTN and Airtel Zambia who each have almost 4 times the number of subscribers it has. In the first half of this year, MTN  (4.26m subscribers) overtook Airtel (4.04m subscribers) as market leader in  terms of subscribers for the first time despite having pricier voice and data packages. Why? Because MTN had a more reliable service in terms of up-time. Connectivity has become more critical than ever before and mobile technology has played a significant role.

 If Zamtel, the only domestic mobile service provider, can improve their network to equal or exceed that of the other two, they could gain a significant number of subscribers because they also offer very affordable packages. Affordable but unreliable is not a recipe for success so marketing alone cannot result in subscriber growth. Time is running out for them to truly establish themselves because as things stand, there will be a fourth mobile service provider after digital migration is implemented next year.

Zambia Revenue Authority delays implementation of VAT rule 18 amendment

A week after the controversial clause 1(b) of VAT rule 18 was waived, after the Minister of Finance wrote to the President calling it impractical, the Zambia Revenue Authority (ZRA) delayed implementation “pending further consultations”. The amendment was supposed to have taken effect on September 8 2014. Enforcement of the clause (which only started in 2013 despite the law being around for over a decade) has led to an accumulation of over K3.6 billion ($600) million worth of refundable VAT owed primarily to mining sector players. So far, 762.7 million has been refunded to exporters who complied with the law as it is.

Something has to give here – the more this situation remains unresolved the more uncertainty there will be for businesses currently involved in exports and those that are looking to venture into it moving forward. Copper exports rake in over
80 percent of export earnings so this is a pretty big deal. The ZRA needs to get their ducks in a row because this kind of vacillation does not reflect well on Zambia’s business environment. If they needed more time then they should have asked for it before announcing the amendment of the VAT rule 18!

Mizinga Melu appointed as CEO of Barclays Africa Regional Management

The appointment is effective October 1 2014. She was previously Managing Director of Standard Chartered Zambia before she moved to the ABSA groups National Bank of Commerce in Tanzania as MD and CEO. All the Barclays Country Directors outside of South Africa will be reporting to Mizinga Melu.

 Always good to see a fellow Zambian doing well – especially a woman making huge strides in our male dominated society. Last year she was awarded Business Woman of the year at the All Africa Business Leaders Awards (AABLA). 
 
Meanwhile, Zambia Sugar (LUSE: ZSUG) Managing Director Dr. Aubrey Chibumba resigned on Tuesday. No reason was given as to why he resigned. He spent just under two years at Zambia Sugar. What’s going on there?

Spar workers protest for 100% wage rise and ousting of CEO

Workers at supermarket chain Spar downed tool on Thursday which led to various outlets being closed for the entire business day. The workers were asking for wages to be increased from K840 ($134) per month to K1,640 as well as the ousting of their CEO for alleged nepotism practices. Their management was said to be in discussions with the National Union of Commercial and Industrial Workers of Zambia about the workers concerns.

 Spar was open for business yesterday. Spar management need to nip this in this in the bud otherwise they could end up sending customers to Shoprite, Pick n Pay and other stores which is bad for business. Not too long ago, Shoprite workers also protested for similar reasons which led to costly disruptions – especially at their Manda Hill store which has been said to be
  the busiest store in Africa. The workers will probably get some sort of wage increment somewhere between what they have and what they are looking for.

Data check

- Kwacha closed at K6.15 per USD, K9.98 per GBP, K7.95 per EUR and K0.56 per ZAR

-  T/bills: 91, 182, 273 and 364 days were at 9.5%, 17.5%, 16.9% and 20.5%  at the last auction

-  LME 3-month seller price closed week at $6,803 per MT

 - The LuSE all-share index closed the week at 6,224.54, down 20 points