Zambia’s Private Sector Growth out of the Woods – March Markit PMI

Copper cathode processing at a Zambian mine on the Copperbelt Province.

ZAMBIA’s private sector growth for the month of march is out of the woods as it recorded a Purchasing Managers Index – PMI of 50.7 from 47.1 in February when the copper producing nation grappled with the effects of a cholera disease epidemic it suffered in January 2018. Data collected between March 12-23 revealed an improvement in business climate for Zambia evidenced by the quantum of new business and output from factory and manufacturing entities. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

“The bounce back in the March PMI is a clear indication that the economy has weathered the Cholera Outbreak and it will be business as usual going forward. We however remain concerned with the prices of inputs, particularly after March year- on-year inflation backed up 100bps to 7.1%. Exchange rates, particularly ZAR – ZMK currency pair, continue to remain unfavorable,” Stanbic Bank Zambia Head Global Market Victor Chileshe said.

“This pulse level for march is a mere correction of the autopsy effects of the disease epidemic in the first quarter of 2018. Zambia started the year on the back foot when cholera caused business disruption that slowed private sector activity. However the effects could have been graver than recorded had it not been for the increased copper productivity in light of a healthy LME price little affected by disease that gave a positive stimuli to business activity on the Copperbelt of Zambia giving drive to actual mining and support related businesses.  Leadership transition in South Africa fueling a rise in business confidence in Africa’s most industrialized economy strengthened the Rand (ZAR) which then adds import inflationary pressure on Zambia. Thirty three percent (33%) of Zambia’s import bill is made up of SA imports and a strong Rand makes the bill swell. Zambia’s inflation rose 100-bps to 7.1% a 14 – month high fueled in part from a widened import bill and cost push pressure from the February fuel price hike that saw rise in cost of transportation and that of food stuffs. We did predict in out February PMI commentary that the economy would soon flush out the disease business disruption effects of the January epidemic.  Private sector growth is clearly out of the woods for March.

The Business Times carried in a note to clients on the morning of 05 April.

Our analysts forecast an upward trajectory in business pulse in the coming quarter as the mines try to increase copper production levels especially that the electric car era has given copper demand. The ministry of mines did revise the 2018 forecast to 1-million metric tons however the tax disputes may weigh the morale of the mines to keep the momentum going as such allegations at times cause investors to withhold investment. The Zambia Revenue Authority – ZRA will commence tax audits for all mines to assess compliance levels for red metal producers.

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