While you were sleeping…

Saturnia House along Long Angels Boulevard road in Lusaka the capital.

While you were sleeping our analysts gathered market events you need to know to start your day. These are:

Zambian Kwacha slides to 4month Low as Hopes of IMF Deal Fade

AFRICAs second largest copper hotspot, Zambia’s hope of an IMF bailout package are fading and this has sent the Kwacha to a 4 month low. The IMF on 04 December released the Regional Economic Outlook in a document themed Sub – Saharan Africa – Fiscal Adjustment and Economic Diversification which highlighted Zambia has one of the SSA countries with the highest debt and that its diversification is not very optimal compared to other commodity dependent nations like Botswana. The IMF also highlighted that until Zambia addresses its debt and structural issues, conclusion of a deal package will be delayed.

“I wouldn’t like to go into those details but the relationship between IMF and the Zambian authorities is almost a saga now. It’s important to keep the background very clear that surely the IMF has been engaging with the authorities over the last year and particularly after the elections. So we did allow for good work to be done by putting the details together but then both of us we realized that the ambitious borrowing policy of government was inconsistent, we think that they need to take that trajectory to a moderate level to basically pave way for the possible fiscal consolidation and on that note what is being done now is to ask the authorities to come back now with a revised plan. You need to reduce on borrowing because as it is now, the levels of debt are very high and that is actually scary and worrying for the Fund because there is a lot that this country has to pay back,” Dr. Alfredo Baldini – IMF Resident Representative for Zambia said. To read more….

Private Sector Growth Pace Highest in 33 months – Stanbic PMI (54.7)

AFRICAs second largest producer of copper Zambia recorded the highest private sector growth pace in 33 months. According to the November Markit Purchasing Managers Index – PMI Zambia recorded a survey high of 54.7 from 53.5 in October indicating signalling indicating marked improvement in business conditions. Readings that are above 50 represent expansionary growth while those below 50 signal a contractionary pace. The PMI is reflecting the benefits of monetary policy easing which the Bank of Zambia has embarked on in 2017.

The Central Bank has trimmed the benchmark rate by 525bps (5.25%) to 10.25% to allow private sector growth which had been penalized following December 2015 monetary policy tightening to curb currency slide. The statutory reserve ratio has in the same vein been relaxed 500bps (5%) allowing for excess liquidity in the system to fund lending. The mines have benefited from a rebound in copper pricing on the London Metal Exchange – LME trading for US$6,826 per metric ton coupled with improved power generation capacity as a result of good rains. Manufacturing has equally received an adrenaline boost following no power disruption and the current ongoing projects which has fueled appetite for cement and bitumen to mention but a few.

“What the November PMI number is showing is in perfect alignment with the Ministry of Finance’s growth expectations for 2017 at 4.2%,” ZBT Chief Market Analyst said in a research note. As was stated at the Regional Outlook Fiscal Adjustment and Economic Diversification Outlook by the International Monetary Fund on 04 December most Sub Saharan countries Zambia inclusive are on an economic recovery path but with subdued growth owing to sub optimal diversification. To read more…….

Sixty Dollar (USD60/bbl.) Crude and Weak Kwacha could Push Zambia’s Pump Prices Higher Soon

CRUDE OIL is one commodity that has seen a recent rise in price to levels were Oil producers are seemingly smiling. Crude is trading for USD63/bbl. (a barrel) attributed to actual and anticipated supply cuts. One Kingdom very instrumental in making this happen is Saudi Arabia the world’s largest producer of crude. Other contributors are OPEC member nations that will also contribute to supply cuts.  Goldman Sachs has raised the 2018 forecast for 2018. A stronger than anticipated OPEC-led commitment to extend production cuts will support prices through 2018, according to analysts at Goldman Sachs. Zambia being a net importer of crude relies on international pricing coupled with revaluation effect impact on the USDZMW average exchange rate every two months to determine the cost of importation. It is from this point that the Energy Regulation Board decides on up or downward adjustment of the pump price to end users when a review is done. From last time the Energy Regulation Board – ERB increased prices – barely a month ago – the crude price has risen 15.3% to over $63/bbl. and the Dollar- Kwacha exchange rate has weakened by 5.33% crossing the USDZMW10 psychological level.  This then puts pressure on pump prices to edge higher according to the methodology the ERB implores. If this trend persists our commodity analysts forecast an upward adjustment to pump prices which could exert pressure on cost push inflation which could threaten single digit inflation. To read more…….

Copper Slides to 10 week Low as China’s Manufacturing Pulse slows to 5month Low

COPPER the only metal with a PHD recorded its worst slide since July 2015. The red metal slide 4.2% to USD6,547 per metric ton -10 week low- as China’s manufacturing pulse slows to 5 month lows. Other factors driving the decline of the strategic asset were a 5.85% rise in warehouse inventories to 192,550 tons. China is key factor in determining demand for copper as it consumes over 43% of global production.

Last week a gauge of manufacturing activity in China, responsible for nearly half of global consumption of the metal, declined to the lowest in five months in November, but factory managers’ views of the outlook for the next 12 months fell to the lowest level in more than five years.

In a research report released on Tuesday 06 December, Capital Economics predicts copper prices will edge lower over the next (6) months as “optimism about China’s demand fades and both mine supply and refined production revive”: To read more….

Heineken to Set up USD100million Plant in Mozambique in 2019

HEINEKEN will open a $USD100 million brewery in Mozambique, its first production facility in the southern African nation, the brewer said. The world’s second-largest brewer plans to start production at the 0.8 million hectoliters capacity plant in the capital Maputo in the first half of 2019, it said in a statement. Heineken, which also brews Amstel and Sagres, opened a marketing office in Mozambique last year, importing products to compete in a market where AB Inbev’s 2M is entrenched.

AB Inbev last year took over SABMiller, gaining a brewery in Mozambique among a host of assets worldwide. “We are delighted to enter Mozambique, where we see promising long-term economic perspectives,” said Heineken’s managing director for East and West Africa Boudewijn Haarsma. To read more…..

Look out for our 7th publication of the Zambian Business Times Newspaper on 11 December.