Zambian Government Debases Kwacha

The Zambian government has knocked off 3 zeros from the Kwacha,a move aimed at strengthening the local currency against major convertible currencies.Analyst Chibamba Kanyama highlighted the core issues like strong production,exports and fiscal discipline so that the zeros do not resurface.
Finance minister Alexander Chikwanda says Debasing will reduce transaction costs associated for businesses and the general public.
However it must be noticed that people with "mattress money" will have to bring it into circulation and this will lead to temporary inflationary pressures.

Inflationary data for the second quarter seems to support this move since monthly inflation seems to have  been falling gradually over the second quarter of 2011.
Read or download Inflation data

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Challenges facing Zambia Agricultural Commodities Exchange

Food Security  research  project
Download Food and research project
A few phrases from the report
"While the institutional structures for addressing issues of contract compliance and shirking
are in place at ZAMACE, they are under-utilized, inefficient, and fail to address some of the
pressing needs of Zambian agricultural markets. Understanding how and why limited contract
enforcement and underdeveloped settlement guarantee can limit participation and trade
volumes on an exchange case is critical for assessing the feasibility of developing sustainable
commodity exchanges in the region"
 The limited use of ZAMACE by commercial farmers and medium-scale wholesalers must be
understood as the outcome of the risk mitigation strategies they deploy to protect against
contract default and payment failure in the highly volatile market conditions that prevail in
Zambia.
 The development of futures options, particularly for wheat and soy, may provide an
opportunity to encourage greater trade volumes on ZAMACE, enroll more speculators onto
the exchange, and thus bring the exchange much needed liquidity. However, the frequency
with which the government intervenes in the regulation of food imports and exports raises
the basis risk— the risk associated with differences between spot market and future market
prices—to levels that may be intolerable to many hedgers, speculators, and other financial
institutions. Furthermore, the weak legal framework for enforcing contracts, as well as the
certification and regulation of secure storage undermine the potential for a futures market to
develop.
 Commodity exchanges like ZAMACE are physical exchanges built primarily around trade in
cereal crops. As a result, the feasibility of developing the exchange is tied to the availability
of high quality storage facilities capable of continuously supplying grains to the market.
While few respondents interviewed for this report cited a lack of appropriate storage facilities
as a factor limiting their use of ZAMACE, many suggested that there are a number of
disincentives in the market that limit their willingness to store grain.
 A settlement guarantee facility, coupled with effective and timely arbitration, can serve to
transform Zambia’s agricultural marketing structure. The importance of cultivating
interpersonal relationship between buyers and sellers in Zambia is, in part, a response to weak
and costly contract enforcement.
 Commercial farmers and traders regularly use the ZAMACE reference price when
negotiating sales of their commodities, yet very few use ZAMACE as a sales platform. While
much of their reluctance to use the exchange results from the potentially high transaction
costs associated with contract shirking on the exchange, at least part of their limited use of
the exchange may be attributable to their lack of knowledge of the exchange.
Despite these potential advantages, the participation of commercial farmers and
medium-scale wholesalers on ZAMACE has thus far been limited by the perception of high
transaction costs and risks of using the exchange compared to traditional trading systems.
It is particularly revealing that according to the report fully 68% of all trades recorded by ZAMACE are still "registered" trades conducted off the floor between brokers and traders on a single-bidder basis without open competition.
ZAMACE charges a fee of 2% for such registered trades, while assessing both buyers and sellers each 1.5% (total cost of 3% once a trade is complete) for trades conducted on the exchange floor. This is a clear disincentive to enter into an open bidding situation if agreement can be reached between two parties off the floor.ZAMACE charges a monthly membership fee (recently raised by 25% due to low trading volumes and resulting shortfalls in collection of the per trade fees alluded to above), which is unrelated to the amount of trading the member conducts either on the floor or through "registered" contracts.

I think the restructuring of the incentive structure would help greatly.Also use of commodity derivatives would allow for commodity price hedging and create a platform for food security while carefully not exploiting farmers. It will also allow for greater diversity.

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President Michael Sata urges Investors in Zambia and ZAMTEL workers not to panic

President Michael Sata has urged investors in Zambia and ZAMTEL workers not to panic or be used by individuals who have axes to grind with the Government and are peddling all kinds of lies as a cover for their crimes.
The President has said that the PF Government’s primary duty was to be custodian of public interest and it therefore has a duty to correct falsehoods, distortions and misrepresentation of facts by elements that have unscrupulously plundered public resources.
“Despite the release of the Report of the committee investigating into the sale of ZAMTEL to LAP Green Networks to the public, members of the tainted MMD administration assisted by some imprudent media houses are still having a field day spreading falsehoods, alarm and despondency,” says President Sata.
President Sata underlined that LAP Green failed to meet three cardinal bench marks prescribed by the Zambia Development Agency (ZDA) in the sale process.
“And these are: (a) a minimum of five years of licensed operation in the telecommunications industry (b) have more than three million subscribers on fixed, mobile or fixed wireless networks; and (c) a minimum of US$250 million Shareholders’ equity for private entities or a minimum market capitalization of US$500 million for public listed entities,” President Sata said.
“LAP Green all the same had the sale consummated by a corrupt regime which disregarded its own legal requirements of effecting the tender process, the mandatory legal consent by the Attorney General and ensuring valuation within the provisions of our laws. Although, there is no documentary evidence of any valuation, R.P Capital were paid US$12.6 million which was shared with the corrupt collaborators with explicit assistance by the Government officers at various levels.”
Mr Sata said that Government is convinced that a deal of this nature shrouded in insidious corruption cannot be sustained by any court of law in the international community.
“Therefore, the scare mongering tactics by Dr. Situmbeko Musokotwane intended to cover up his crimes is essentially an exercise in futility. The PF Government’s unequivocal stance on zero tolerance for corruption has the fullest support of the international community which abhors resource misdirection through corruption, a big contributory factor to Africa’s retardation,” President Sata said.
“Since the advent of the PF administration all donor institutions and Governments have increased their aid outlays to Zambia and the challenge is in fact for Zambia to develop adequate capacity to use the external aid timely and effectively. ”, Mr Sata Said
On investment, President Sata said it was flowing into the country at a commendable pace because investors trust the PF policy consistency and predictability, the pillars of credibility.
“The type of investors that are idols of the likes of Dr. Musokotwane who come via the route or channel of corruption are a luxury Zambians can do without. Make no mistake about it, for we are determined to see transparency, accountability and good business moral codes in all spheres of Governance,” the President says.
“Investors who are here and those planning to invest in our country are assured Zambia is a reliable investment destination. Zambia has not only both peace and stability but is irrevocably committed to the rule of law. What is more, there are no restrictions let alone cumbersome procedures for externalist of dividends.”
The President said that suggestions of investors shunning Zambia is a misperception and pipe dream of Dr. Musokotwane.
“The former minister has as yet a lot of things to answer including the tax deferment concessions he gave in ways which Zambian law does not mandate. Sabre rattling as a defence, he will soon prove, is unsustainable and will not get him off the hook even with the lavish coverage he is getting from reckless media houses with a strange agenda,” President Sata said.
“This Government will not be stampeded into precipitate actions and if the Government is slow in bringing to book those who have committed crimes against Zambia, it is only because they want to follow the due process of the law. We urge ZAMTEL workers not to panic or be used by people who have axes to grind and who are peddling all kinds of lies as a cover for their misdeeds. If any accounts have been frozen it is to prevent the money from being taken out and it is basically in public interest.” , Mr Sata said
President Sata emphasized that when ZAMTEL has been sorted out the majority of the shares will be owned by Zambians.
“ZAMTEL is a viable proposition when things have been realigned and streamlined. The temporary setbacks of the workers will be attended to so that workers are not subjected to uncertainties any more. Government has both the will and capacity to meaningfully capitalize ZAMTEL,” President Sata said.
“As Head of State, I will never sideline my commitment to safeguard and superintend the interests of the Zambian people. Zambians with the passage of time will realize that they never misallocated their trust by entrusting me to preside over their fate and destiny.”

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Poverty levels still high – JCTR

THE Jesuit Centre for Theological Reflection (JCTR) says the cost of living in Zambia is still high, despite the inflation rate being stable in 2011.
JCTR information officer Twaambo Kanene-Mwale says the Basic Needs Basket (BNB) analysis for 2011 shows that the cost of living remained consistently over K2.9 million for an average family of six.
Mrs Kanene-Mwale said this in a statement issued in Lusaka at the weekend.
“When the inflation rate is stable, it is expected that the purchasing power will also remain stable. However, while 2011 was a good year at a macro-economic level, at a micro level the cost of living remained high and this may be exacerbated by the debt crisis with the Kwacha weakening and a decline in purchasing,” Mrs Kanene-Mwale said.
She said Zambia has experienced profound improvements in macro-economic performance in the last decade, having recently attained middle-income status.
Mrs Kanene-Mwale said there has been consistent improvement in gross domestic product at six percent in 2011 and a drastic stability in the inflation rate from around 30 percent in 2000, to an average of 7.2 percent in 2011.
The minimum cost for an average family of six to meet basic needs was K2.9 million for the month of December and the JCTR December release projects the cost of food items at K818, 750 and the cost of essential non-food items at about K2 million for Lusaka residents.
She said Zambians should begin to realise the benefits of macroeconomic improvements, especially in relation to inflation, with a commensurate reduction in the price of commodities.
Mrs Kanene-Mwale said a stable inflation rate reduces the severity of the impact of economic recession, allowing the labour market to adjust to changes.
He said the Patriotic Front (PF) government should sustain the economic gains of the last decade and remain fully cognisant of the practical anxieties of global developments on the average Zambian.
Mrs Kanene-Mwale said the cost of living in Zambia continues to be high with an estimated poverty rate of 60 percent and in December, the price of mealie meal and bread reduced nominally.

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Zambia freezes Libyan phone firm's bank accounts

Zambia's government has seized bank accounts belonging to telecoms group Zamtel, majority-owned by Libya's LAP Green Networks, as part of a money-laundering investigation, the company said on Friday. It denied any wrongdoing.

"The authorities have no reasonable grounds whatsoever to believe that the moneys in the seized accounts and any other Zamtel accounts are from the proceeds of criminal activity," Zamtel said in an email response to Reuters questions.

A government inquiry in November into Zamtel's $257 million sale to the Libyan operator ruled the 2010 transaction illegal. Zambia's attorney-general was still deciding whether to reverse the deal or not, the justice minister said on Friday.

Since his election in September, President Michael Sata has thrown a spotlight on a number of deals executed under his predecessor Rupiah Banda, who was criticised for taking a lax line on graft.

Sata in October scrapped the $5.4 million sale of unlisted Finance Bank to South Africa's FirstRand.

Zamtel said it would challenge the seizure of its accounts in court, while LAP Green said last week it would fight any decision to reverse the sale. It added that it would invest $129 million in the company over the next two years.

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ZAMTEL Commission Report

The final report to President Michael Sata of the Commission of Inquiry into the sale of ZAMTEL. The Government has release this confidential report to foster transparency and encourage public debate on the future of ZAMTEL.
 <a title="View Zamtel Commission Report - Government of the Republic of Zambia on Scribd" href="http://www.scribd.com/doc/78559670" style="margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block; text-decoration: underline;">Zamtel Commission Report - Government of the Republic of Zambia</a><iframe class="scribd_iframe_embed" src="http://www.scribd.com/embeds/78559670/content?start_page=1&view_mode=list" data-auto-height="true" data-aspect-ratio="" scrolling="no" id="doc_7498" width="100%" height="600" frameborder="0"></iframe>

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