Sata to Sign Law to Support ‘Abnormal’ Kwacha, Sampa Says

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BoZ-Gondwe

BoZ figure head Michael Gondwe

Zambian President Michael Sata will within the next few days sign a law requiring exporters in Africa’s biggest copper producer to deposit foreign-currency earnings in local banks, Deputy Finance Minister Miles Sampa said.

The Bank of Zambia amendment act will allow the kwacha, which is currently at an “abnormal level,” to strengthen to below 5 per dollar, he said in an interview in Lusaka, the capital, today. The currency has weakened 3.9 percent this year and traded 0.5 percent lower at 5.4 per dollar by 1:30 p.m., according to data compiled by Bloomberg.

In a country where 61 percent of the population live below the poverty line, according to the World Bank, Zambia faces an inflationary spiral if the kwacha continues to weaken, Finance Minister Alexander Chikwanda said on Feb. 5. The slumping currency also makes it harder for the southern African nation to repay international debt, he said.

There is no time requirement that exporters will have to keep foreign-currency earnings deposits in Zambian banks under the amended law, Bwalya Ng’andu, deputy governor of the Bank of Zambia, told reporters.

“We are not introducing exchange controls,” he said. “These measures are well-meaning, we are just trying to increase our capacity to manage things a little more effectively.”

Zambia’s copper exports have been increasing faster than imports, meaning the kwacha should strengthen or remain stable, Sampa said. The government has accused mining companies of falsely declaring their exports and robbing the country of foreign currency that can support the kwacha.

Accounts Abroad

“The financing doesn’t come, it stays abroad in accounts in Switzerland, in accounts in Hong Kong, in accounts in England,” Sampa said.

Sampa told central bank Governor Michael Gondwe the currency is “heavily depreciated” at a meeting earlier today. “The levels do not depict fundamentals on the ground.”

Chikwanda accused banks of operating as a “cartel” and profiting from manipulating the kwacha on Feb. 26. The Bankers Association of Zambia said demand for the kwacha and its pricing were subject to market factors beyond the control of its members.

Bloomberg News

 

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112 Responses to Sata to Sign Law to Support ‘Abnormal’ Kwacha, Sampa Says

  1. I don’t think that will solve this problem for ABNORMAL KWACHA.

    I think the PROBLEM is THAT there are too many Policies Pronounced so far since SATA came into power and BANKS now are confused. Funny policies such as criminalizing doing business in Dollar and many other funny policies which were issued is the beginning of this kwacha falling against dollar.

    Now kwacha is depreciating twice in a day ! Last week on Thursday i bought dollar from Zanaco in the morning at KR 5.410 and in the afternoon thought of getting some more I was surprised to find that it actually went as high as KR 5.485, barely in a day. This is scaring and an indication of bad signs of the economy for poor Zambians.

    Now another policy will be signed concerning the most sensitive sector which are the mines. Any disturbances here will send us into ZIMBABWE situation and no doubt about it.

    I think the PF gov. must begin to appreciate why MMD systems worked well and WHY they were in place unlike the way the PF dismissed them and removed key people from strategic positions for alleged corruption for which commissions of inquiries were formed and still we haven’t heard OF the results of their findings. Learn from MMD please, before you distroy Zambia – Things ARE just hanging all over the place – ZAMBIA with PF KAYA !!!!!

    Too Many Policies - March 23, 2013
    13:28

  2. This will make the country pay the Euro-bond through its nose. Sata will prevail over Zambia as the worst chief executive the country has ever had. KK was even better because there were very few economists to tell him where he was going wrong to kill the private sector.

    Great Hunter - March 22, 2013
    13:52

  3. Let the government bring the Dollar and other currencies to the levels Mwanawasa’s government left them……US 3,300, ZAR 320, BWP 380 etc. It would be good to ask brilliant Magande how they did it with Levy to make the kwacha stronger then.

    Southern watchman - March 22, 2013
    06:47

    • Yup – then drive exporters out of business. Think fool!!

      Fougarcon - March 22, 2013
      10:01

  4. The exporters must complete an export declaration form which must be stamped by ZRA copy to BOZ copy at export exit,buyers must pay via LC DA or similar.

    Puungwa - March 21, 2013
    21:28

  5. good move …well it depends on the move govt is goin to take,if positive good for zambians.

    EUSTY .M - March 21, 2013
    20:37

  6. this must be supported because it will benefit many zambians.its time we benetited from our natural resources

    joe - March 21, 2013
    18:16

    • Supported yes but with caution. Let the government tell us what happens to those whom don’t adhere to the law? What they should have intially done is to consult with the stakeholders, the mining companies, and here their views than rushing to implement what could be misinterpreted. As of now one would see it as the government trying to bring back the “nationalisation” of the mines through the back door as once the mining companies look to leave govt is given the first right of refusal to buying off the mines. Lets try and be sincere with what we are doing in this country as national government leaders and politicians. What we need is more “Foreign Direct Investments” (FDI’s) in the various sectors of the economy to attract foreign exchange and create job opportunties, not to “harass” the few existing investors.

      "Silent Majority" - March 21, 2013
      20:13

  7. awe dollar yalipena!!! i miss levy too. My business was at the highest peak during his term then reduced to 80% during RB this time I cant mention, its just going down the sewer line of Pabwato.

    honset - March 21, 2013
    15:59

  8. ITS JUST SIMPLE LOGIC. MONIES MADE IN ZAMBIA SHOULD NOT BE BANKED IN SWITZERLAND, MAURITIUS HONG KONG ETC & LATER LOANED BACK TO ZAMBIA AT HIGH INTEREST FEES. IF THEY CHOOSE TO DO SO, IT SHOULD ATTRACT SERIOUS CHARGES/TAXES ETC. I HAVE N NUMEROUS OCCASIONS MADE THIS STATEMENT ON THIS WEBSITE & OTHER ONLINE TABLOIDS, BUT NO ONE READ/CARED. BRAVO DR.GONDWE ON THIS ONE.

    MALOZA - March 21, 2013
    14:12

    • The way you simplify it.but you also ought to know that money broght in zambia has to generate and taken back where it came from.so down with those cosmetic piece of legislations they wont help.

      pastor pole - March 21, 2013
      20:38

  9. How did you survive with a bold head Mr man. I am sure sata is watching you

    village chicken - March 21, 2013
    13:53

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    Arthur Johnson - March 21, 2013
    13:24

  11. With that receding hair line, I am sure its half price at the barber shop. Hope Sata wont be an easy with the balding governor

    Lusaka Fire - March 21, 2013
    13:17

    • yaaaaaaaaaaaaaaaaaa!!!!!!!!!!!!!!

      honset - March 21, 2013
      14:30

  12. I don’t support this pathetic government, but I support this move. This is a good decision if implemented properly. The catch 22 here is to ensure the money just doesn’t sit there idle, it should be made to work by the banks. They should invest the money and lend it out to Zambians. This would reduce the cost of borrowing money from the banks, i.e. the banks may not have to rely on borrowing offshore or overseas.

    The other catch 22 is to ensure the economy is good enough to allow so much money floating around the markets. Can Zambian banks offload this money by lending it out on the international markets? More importantly can Zambian banks afford to pay interest on this huge sums of money, without risking making a loss? How will the circulation of the money be implemented. I just hope they have planned and considered other factors as well.

    This is an engineer’s version… very limited economic understanding so I’m happy to be corrected.

    Maverick - March 21, 2013
    13:17

    • May I also add that in a truly free market society, the governments merely create favourable conditions that would encourage investors to bank locally, rather than putting in statutory and punitive controls as is the case here. Investors must have an incentive to bank locally, such as good interest rates from the local banks or the government can deliberately tax those who bank locally at a lower rate; etc. Legislative controls would just encourage these investors to revolt and find a way to work around the system such as bribing enforcers, etc. Again my take which seem to contradict my support above… but I’m still for this move – I believe this is good if things I highlighted above could be addressed.

      Maverick - March 21, 2013
      13:30

      • Could always from the level of your intellect in the comments you submit that you just had to be an Engineer. Off the topic, when are we bringing sanity and pride to our Engineering Institution of Zambia?

        Taking Over - March 21, 2013
        15:10

        • * Could always tell…. my bad

          Taking Over - March 21, 2013
          15:14

      • Free market economy? Where does it exists on earth? Keep on dreaming, my brother!

        VIbestar - March 21, 2013
        15:47

  13. Good move

    Mwansa - March 21, 2013
    12:33

  14. Government seem to be full of dunder heads

    Ituri forest - March 21, 2013
    12:24

    • Ichipuba niwe na wiso

      borat - March 21, 2013
      12:59

      • Muleke alifye bwino nokoh ichinyoh

        pastor pole - March 21, 2013
        20:41

  15. I am not PF but this is a good move

    Sam - March 21, 2013
    12:23

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    Arthur Green - March 21, 2013
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  18. pf seems not to know why the kwacha is depreciating since they took over.they introduced statutory instrument banning quatation of prices in forex and boasted that the kwacha was going to appreciate and the result is minus zero.ex boz governor gave pf free advise to use the eurobond and contracts to local firms so that the market would utilise the forex and reduce demand and strengthen the dollar.is eurbond cash still in boz accounts miles?

    chakumunzi - March 21, 2013
    12:10

  19. The Minister blames banks and his deputy blames mining companies?
    which is which? Anyway from the BoZ amendment Act awaiting Presidential assent, we can say that the culprits are the mining companies since the new law will require the mining companies to deposit their earnings in the local banks, so the local banks are innocent after all, right?

    foloko - March 21, 2013
    12:09

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