The Case for Zero Rated Inputs in Zambian Agriculture

Zero rating implies that goods are taxable but at a 0% rate. What would be the point of this? The significance of zero rating is that it allows businesses claim back their input taxes in acquiring these goods from suppliers for sale. In light of the financial reforms preventing use of foreign currency in Zambian trade, this may be a necessary measure to prevent the agricultural sector from suffocating from the effects of high production costs. 

High costs of production are partly attributable to the high cost of inputs, 90% of which are imported. The instability of the Zambian Kwacha has meant that to minimise price fluctuation in the consumer market, agro-suppliers have in the past conducted trade with exporters in more stable foreign currencies. Anti-dollarisation has implied a need to buffer consumer prices by higher percentages to minimise losses attributable to inflation. This has seen food prices rise astronomically and the trend is set to continue if mitigating measures are not put in place.

A proposed mitigating measure might be a zero rating tax policy for agro-suppliers. The proportion of the market price that is buffered to account for currency valuation fluctuations would be significantly reduced by the ability of the suppliers to reclaim taxes paid on importing the goods in the first place. The buyer, who in this case is the farmer, also wins because such an instrument implies that they too pay no value added tax on 

these goods. These lower prices then trickle down to the rest of us in the form of lower food prices.

A caveat exists in that zero rating reduces revenue for the government so it has to be used in conjunction with alternative revenue sources. The policy has been tried in South Africa's agricultural sector and has so far proved to improve the welfare of the poorest in society without impacting negatively on other households. It has also lent itself to a transformation of a retrogressive Value Added Tax on other goods to the creation of a more progressive structure.

Granted, the economic structure of South Africa is greater advanced than that of Zambia but there is no harm in mapping and modifying best practice to suit our own economic climate. Now this in my opinion would do a better job of putting 'more money in our pockets' without robbing others blind.

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Opinion Piece- Wage Wars in Zambia

A minimum wage sets the lower limit of what employees earn from their labours. The problem with the ongoing debate on the use of this economic tool in Zambia is that the debate does not seem to adequately reflect progression to a living wage.

The living wage is two-fold, it must be met by both the employee and their employer. The necessary considerations as to whether raising the minimum wage by over a hundred percent makes economic sense ought to put into perspective the basic principles of undergraduate economics of supply and demand. In as much as demand for the proposed increments in minimum wage continues to be resounded, Zambia's financial and economic leaders are characteristically mute about what or who is going to supply this demand. While the real wages of salaried employees continue to diminish because of inflation instability owing to yet another 'dragon' of a measure in the guise of anti-dollarisation (which deserves an article to itself), they have to contemplate forgoing even more of the diminished income by meting out wage increments beyond the scope of what I think is rational thinking.

The dismissal of the linkage between the minimum  wage and living wage simply reverses the current status quo by pushing those in lower income jobs to a level of affordable living whilst pushing their employers out of the realm of affordable living by virtue of having to pay unrealistic and unsustainable wage bills, in the context of the Zambian economy. The current government's political ammunition has been the promise of 'more money in your pockets'. The little disclaimer they forgot to attach to that is this money seems to be merely shifting from the pockets of approximately 750,000 to meet the hundred percent plus minimum wage increments of at least 2,386,000 people. This basically means that the 'average' salaried employer needs to meet the wage demands of at least 3 employees (targeted in this instance are house helpers, gardeners and security guards).

Without trying to come off as an unpatriotic citizen, I am compelled to ask the question- what then is the role of the government in increasing the welfare of ALL Zambians and not just of those that they believe put them in power? Is it to merely manipulate the legislative system and play 'Robin Hood' by redistributing wealth from those just getting by to those employed by them? My naivety in using a purely academic approach to this issue may be redressed by insightful comments from those that may have a better understanding of the issue than I do- it is on this note that I invite you all to contribute to this forum with questions and comments on a matter that affects us all. All opinions and shared knowledge  are respected.

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Apple Inc Stock Analysis Complied By Kampamba Shula

Company Description
Apple Inc. and its wholly-owned subsidiaries (collectively "Apple" or the "Company") designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company's products and services include iPhone®, iPad ®, Mac®, iPod®, Apple TV ®, a portfolio of consumer and professional software applications, the iOS and Mac OS ® X operating systems, iCloud®, and a variety of accessory, service and support offerings. The Company also sells and delivers digital content and applications through the iTunes Store ®, App StoreSM, iBookstoreSM, and Mac App Store. The Company sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers.


Pundit  Analysis
Throughout the extraordinary surge in Apple Inc. (AAPL)’s share price, a persistent question has lingered: Why is the stock still so cheap?
Many theories have been floated for why such a rapidly expanding company with such loyal customers would trade for so little. Perhaps investors believe Apple will cling to its $97.6 billion hoard of cash and marketable securities, rather than pay a fat dividend. Others have suggested a lack of confidence about the future given the death of Steve Jobs. It’s a consumer-electronics company, after all, and competition is brutal(Bloomberg).


There is a very strong sentiment among Apple (AAPL) investors that the stock is undervalued because the P/E ratio is lower than that of other companies in the tech industry, which is understandable. In a negotiated transaction of Apple shares, a very strong case can be made that the P/E multiple should be 23, the average P/E of the S&P 500, which would value Apple at $810 per share. If the price continues to rise at the current pace of 70% in 12 months, it will be $990 by March 2013. Using trailing earnings, the P/E ratio would be about 28, which would still be reasonable given its current growth and strong balance sheet.
The problem with using P/Es for valuation purposes is that there has to be an appropriate benchmark to compare the ratio against. There is currently no company with the same performance and operational metrics as Apple to compare it against. But if we take the P/Es of other technology companies like Dell (DELL): 9, Hewlet Packard (HPQ): 9 and Microsoft (MSFT): 12, then Apple already appears to be priced at a premium (M.Makoni).

Data provided by Capital IQ, except where noted.

Valuation Measures

Market Cap (intraday)5: 583.58B Enterprise Value (Aug 7, 2012)3: 555.93B Trailing P/E (ttm, intraday): 14.63 Forward P/E (fye Sep 24, 2013)1: 11.85 PEG Ratio (5 yr expected)1: 0.63 Price/Sales (ttm): 3.92 Price/Book (mrq): 5.22 Enterprise Value/Revenue (ttm)3: 3.74 Enterprise Value/EBITDA (ttm)6: 9.96

Financial Highlights

Fiscal Year Fiscal Year Ends: Sep 23 Most Recent Quarter (mrq): Jun 30, 2012

Profitability Profit Margin (ttm): 26.97% Operating Margin (ttm): 35.62%

Management Effectiveness Return on Assets (ttm): 24.57% Return on Equity (ttm): 44.32%

Income Statement Revenue (ttm): 148.81B Revenue Per Share (ttm): 159.61 Qtrly Revenue Growth (yoy): 22.60% Gross Profit (ttm): 43.82B EBITDA (ttm)6: 55.82B Net Income Avl to Common (ttm): 40.13B Diluted EPS (ttm): 42.55 Qtrly Earnings Growth (yoy): 20.70%

Balance Sheet Total Cash (mrq): 27.65B Total Cash Per Share (mrq): 29.50 Total Debt (mrq): 0.00 Total Debt/Equity (mrq): N/A Current Ratio (mrq): 1.57 Book Value Per Share (mrq): 119.22

Cash Flow Statement Operating Cash Flow (ttm): 52.15B Levered Free Cash Flow (ttm): 27.50B

Currently Apple's book value per share is about $110, which gives us a price to book ratio a little over 5. This is higher than Microsoft's (MSFT) 3.5, Research In Motion's (RIMM) 0.35, Nokia's (NOK) 0.75 and Google's (GOOG) 3.1. 
 Apple enjoys impressively high margins and just as great return on investment rates. Over the last 3 years, Apple's return on investment exceeds 100% and the company's annual gross margins pass 40%. At the end of the day, a company's return on investment and margins tell a story about how well a company is using its current assets and resources to generate income, and Apple is doing a wonderful job at that. The price to book value metric doesn't really take future growth into account. It assumes that the company's assets will be the same for years to come. Investing is future oriented and when we are dealing with strong growth companies like Apple, we need a metric that can actually take its future growth into account, such as forward P/E ratio. For this particular metric, Apple is doing impressively well with a forward P/E ratio well below 10 when the company's cash is added into the equation (why apples book value ratio is irrelevant).

Below is graph of Apples performance in the past 3 years.

Economeka View by Kampamba Shula

Apple is a stock I wouldn't short.Simply put Even though apple's book value may deter investing its PE ratio still looks pretty good.Given its market cap there is no way it can fail to pay its debt of which it has none significant enough to change an investment decision.
Its share price has grown by 300% since 2009.

The reason I feel Investors and the market undervalue Apple is simply because of the nature of its business.Unlike other software companies Apple concentrates on providing high end niche sort of products not like Microsoft and Dell which produce more generic software electronics.

The other main deterrent is the price.Apple trades at about $600 a share.Not many middle income people would spend that much on a stock they are not very sure about.

In conclusion I do agree that Apple has shown immense growth potential and is undoubtedly a Good Investment at least up to 2015 when the market valuation should have stabilized.

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Bernanke to Economists: More Philosophy, Please

By Brendan Greeley 

“Textbooks describe economics as the study of the allocation of scarce resources,” said Ben Bernanke on Monday morning. “That definition may be the ‘what,’ but it certainly is not the ‘why.’” He was speaking to the International Association for Research in Income and Wealth, and “why” is not a question that Federal Reserve chairmen tend to ask in front of any audience. The Fed is charged with two precise, measurable tasks: Keep unemployment low and prices stable. These are indexes, numbers on a scale, and if a Fed chairman can keep them where they should be, he can be satisfied that he has done his job. In that sense, Bernanke is playing the world’s most complex video game.

But in Monday’s speech, Bernanke wandered outside the game. He asked why he should keep prices stable and unemployment down. Those numbers mean things to humans. They mean satisfaction, the ability to live within means. They mean happiness. These kinds of words make economists uncomfortable. Happiness resists measurement. When things cannot be measured, they cannot be modeled, and if economists aren’t using models, then they aren’t scientists.

On Monday, Ben Bernanke wasn’t talking like a scientist. He was talking like a philosopher. “The ultimate purpose of economics, of course, is to understand and promote the enhancement of well-being,” he said. To a roomful of economists, he suggested that the measurements they were using, like gross domestic product and personal consumption expenditures, were inadequate to that understanding. “Aggregate statistics can sometimes mask important information,” he said. Translation: People are unhappy, and we don’t know exactly why. “We should see better and more direct measurements of economic well being,” he said, “the ultimate objective of our policy decision.” Translation: I know it’s hard to measure happiness. Start doing it, anyway.

Economeka by Kampamba Shula

If I haven't indicated on this site before I am a Big fan of Ben Bernanke.He exudes an aura of insight that is unparalleled in economics.

After reading this Bloomberg article I couldn't help but agree with the overall sentiment implied by Bernanke.

Economics is meant to improve the lives of people but the metrics used such as GDP don't fully represent the interests of society.This is the reason many people complain that the benefits of higher GDP don't trickle down to the ordinary Jim and Jack.

In short I must agree that we need better and more accurate measurements of economic well being.This calls for a revolution of economics from its academics to its application.

To do this Economics has to shift from the "what" is allocated from scarce resources but more importantly to the "why" it is allocated.This requires a paradigm shift of perception.

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