DEPUTY Minister of Commerce, Trade and Industry Miles Sampa
DEPUTY Minister of Commerce, Trade and Industry Miles Sampa

The recent Kwacha appreciation against the US dollar and other major currencies is in my view, not sustainable. This is because it is not backed by any significant improvements in economic fundamentals . Exchange rates appreciate or depreciate based on an increase or decrease in the value of exports or imports.

For the last year or so, Government has told us that the huge Kwacha slump was due to reduced global demand and reduced world market price of our main export commodity, Copper. The question is; has the price and demand of copper now improved significantly on the global market? I think the answer is No. As at end of 2015, London Metal Exchange (LME) Copper price $4800 per tonne and now fetching around $4600 per tonne representing a 5 percent copper price reduction in the 3 months period.

If Copper volumes and prices are still not favorable and if anything getting worse, the question is whether there is any other commodity that Zambia has suddenly exported worth influencing the Kwacha parity? The answer is No. Is there something Zambia was importing in huge volumes and now stopped doing so? The answer is no as we are still importing fuel and other retail consumption goods.

My take is that the appreciation of the Kwacha is simply due to interventions from the Bank of Zambia (BOZ) who are selling Dollars from our Foreign exchange Reserves. While the recent Kwacha appreciation may be deemed as good for the Country; it’s the means to the end that are neither ideal nor sustainable.

It’s like pushing a sponge downwards in a bucket full of water. Once the human hand is withdrawn, the sponge will spring back up with massive force within no time.
To put it differently, It’s like a poultry farmer slaughtering pullets to please children or guests. Sooner than later, the farmer will have no chickens or eggs for sustained existence of the homestead and in this case, our economy.

I challenge the Government to deny that they have not used Foreign exchange reserves to temporarily support the Kwacha. In doing so, can they state what our Reserves were at the beginning of the year ( around $3.4 billion) and what they are now. When those figures are availed, you will find that about $1billion may have been pumped into the market directly or indirectly. One wonders what will happen to the rate when they run out of reserves to spend.

The other reason for the sudden gain of the local currency is that Government has opted to siphon Kwacha liquidity out of the banking system and financial market to support the exchange rate. As a result, the Kwacha lending rate has surged to over 20 percent and instantly put some companies and SMEs out of business.

When companies have no access to affordable Kwacha loans, the next thing they do is scale down operations and lay off workers. Simplified, any current gain in the value of Kwacha using the ‘liquidity squeezing’ method, has equivalent huge job losses due ‘cash squeeze’ inside balance sheets of SMEs and various companies.

Government’s approach of solely focusing on exhibiting a strong Kwacha for political expedience is therefore not worth the troubles it is causing in the economy. In business and corporate world, it said that ‘cash is king’ and if squeezed dry, no one survives.

Their approach is a panacea meant to provide relief but not solutions to our monetary problems. It’s like taking panadol to cure malaria. One feels better for a few hours but the potentially fatal disease is still there.

I could not help but laugh when I saw Kambwili on TV stating that the current appreciation of the Kwacha, is due to massive confidence in the Edgar Lungu administration . I guess conversely he is also agreeing that the massive depreciation (60 percent) in the last one year was due to a massive lack of confidence in the same administration. By implication , Kambwili is also telling us that any consequent depreciation between now and election time, will be a sign of lack of confidence in the PF government .

In a nutshell , this appreciation is not genuine and will backfire sooner rather than later as it is not backed by an actual improvement in the country’s terms of trade. It is simply a charade process by authorities that is not sustainable and cannot be relied upon for the well being of the national economy. The current Kwacha appreciation of approximately 12 percent is more of a political gimmick than an economic gain in overall gross domestic product (GDP) of the Country. Mixing political and economic variables into the financial markets normally tends to backfire in no time. I stand to be proven wrong in the next 4 months.

Miles Bwalya Sampa,MP
DF President

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53 COMMENTS

  1. Miles Sampa makes sense here. Miles, generally you have got he knowledge. What you don’t seem to have is patience. Your chances of becoming President were nearer in PF than they are in any political party.

    Do you think Tongas can give you Presidency under any circumstance. Do you?

    Good article though.

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    • He thinks he has intermarried many tongas now which he failed to do when he was Southern Province Minister?

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    • @Tutu
      I don’t get how tribe get’s in that article, written by the DF president himself. He does not need to be in any other political party to have the presidency. Edgar Lungu stood for his party, PF, to be president.
      Now, coming to the article – yes very intelligent article with sober analysis – unlike Kashimba Chimbwi exhibiting his ignorance about economic fundamentals of the country.

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    • For sure Miles you should have just persevered until your time came, your advisers are wrong, you need to go back to the party your built with your uncle

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    • @Tutu I think Miles tried very hard to make it work in PF but it has been decided that he is going nowhere and he will be sidelined. People like Dora (MMD who hated Sata) are the ones who now lead PF. Miles was left no choice. Don’t avoid the truth

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  2. excellent article. logical. well written. fiscally on point. not politically motivated.

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    • Stop portraying you ignorance, what is excellent about this article?. what is logical when the writer has purposefully ignored the effects of the foreign sector. The English probably is well written. “fiscally on point” do you know what you talking about? the word fiscal has to do with Govt expenditure, could be policy,measures etc i cant relate this article to any fiscal policy or measures. and certainly is article is politically motivated. to malign the political opponents (PF Government) and gain political mileage. Sadly MBS is a failed project from the start, with his Fyaba yama mentality, you cant go very few with such hate. Watch this space!

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  3. myopic analysis ba Sampa, you have to look at the complete picture, both the external and internal shocks/factors to come up with an realistic and intelligent conclusion. i agree with you on the local front not much has been done to warrant the appropriation of the kwacha against major convertibles. However, the dollar has been depreciating significantly on the “Global” scale. this has translated into more dollars being cheaply offloaded on the local market. Demand ans supply has meant the kwacha gaining, coupled with the individuals/institutions who were holding the dollar offloading it on the market for fear of losing out. This has mainly driven the kwacha appreciation. there is no hand of humans (Politicians) in this appreciation.

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    • Miles an Agricultural Economist must learn from seasoned Economists who understand the financial markets. being a director at a bank owned by Mhattani did not make you an expert in financial markets. worse still you are and now talking mere politics, who are you to say this is appreciation is not sustainable. are you the one controlling the financial markets? From the trends in four months time the kwacha will be at K7 to a dollar. Mark my words.

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    • In addition, on the local front the Govt. has tried to implement contractionary monetary policy- intervening in the market when its absolutely necessary and the effects are sustainable. Equally so the tight fiscal policy that the Govt announced last year (Coupled with austerity Measures) has in the short term “stabilized” the economic fundamentals, which have in turn remained stable and resilient such that the currency exchange gains from the foreign sector translate into meaningful gains in the kwacha. Hence the PF govt. is morally justified to claim that the kwacha appreciation is due to its prudent economic management.

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  4. SAMPA is an under five in economics and I don’t waste reading his postings. He self exalted Harvard economist like his friend HH. These are poor economists who only qualify to be called Chartists or speculators. They are like CASINO players and when they in shares in some company making good business they jump ati am an economist-shame!!

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  5. Ba Sampa, economics is dynamic. Both internal & external factors keep on revolving & no permanent solution can be implemented in this world the way you are proposing. The cure for unemployment is the causer of inflation and vice-versa. They both keep on interchanging & are not fixed. What is crucial is to take action all the time once both internal & external factors move, unlike the way we have been complaining about the govt. If you are saying that UPND once moves in power you will not be acting, it may not be true. You have to keep on tuning until you find the best reception. Excellent statistics on prices of copper you have provided. Please, provide us with the exact statistics of withdrawn reserves since you Party which digs deeper but not assumptions which are dangerous.

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  6. Miles Sampa’s father is a tonga the man has just gone back to support his tribes mate. He grew up in Kalomo for those who dont know

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  7. Ba Miles I’m surprised that you are not aware that dollar has depreciated against all currencies in the last fortnight. This was after the Federal bank reduced interest rates

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  8. Whether or not he grew up in Kalom would Tongas accept him as leader if they could not accept Sakwiba their relative

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  9. Miles is right. The commercial lending rates have been hiked to about 30%, and Banks are taking months to disburse individual home loans to Civil Servants. What is really going?.
    I applied for a loan secured by my employer from one of the commercial banks and it is more than 4 weeks without crediting my account, when l was assured it would take 5 days. Where is the KWACHA?.

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    • Your complaint has nothing to do with kwacha appreciation, Zeb Patriot lodge the compliant with your commercial bank. otherwise you are not part of the topic. Miles is still wrong as depicted from the under 5 article.

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  10. Fine. The argument that the appreciation of the Kwacha is not sustainable is also a possible outcome. Every keen observer will certainly acknowledge that. The question is: what is the explanation going to look like when in fact it urns out that the appreciation was sustainable? In other words, the Kwacha can hold due a variety of factors. When the Kwacha holds, it will not be easy to stand up and change the statements. Negative and pessimistic speculation will not be sustainable in that eventuality.

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  11. certainly not deep enough for a banker and economist. any layman could predict that for an LDC or emerging economy. it happened once under M’wasa when the kwacha went below K4/dollar and everyone knew it wasn’t to stay. we should be talking more about stability than sustainability owing to the many factors not to mention so called fundamentals impacting these economies. he probably would have done better had the objective been separated from hunger for political miles

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  12. Sampa has explained simply that the appreciation of the kwacha is not supported by strong fundamentals, like selling more goods and generating forex in the process. The appreciation could possibly be attributed to the deliberate infusion of reserves in the economy. Knowing the cluelessness of this govt and its leader that’s probably what they did to dupe the gullible cadres that the economy is actually growing. The appreciation of the currency could also come about as a result of a positive spin about the future investments in copper as Glencore has done. This is what Sampa means by ‘not sustainable’ because next week or even tomorrow Lungu or some punk in govt, after drinking liquor might say or do something stup!d and drive the currency southwards again.

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    • @ cluelessness Wantanshi, Sampa said ”The current Kwacha appreciation of approximately 12 percent is more of a political gimmick than an economic gain” cluelessness Sampa (an agric economist) does not know that the gain in kwacha is due to the weakening dollar on the global scene. He thinks its govt. pumping or offloading forex on the local market, that in its self is not sustainable in the long term. But this factor driving the kwacha gain is not political gimmick. Mark my words by August 2016 the kwacha will be treading at K7 to a dollar!

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    • @The Observer
      By ‘political gimmick’ Sampa could be right again considering the fact PF hasn’t a shred of economic formula to propel Zambia forward. At least I have never heard Lungu articulating what fundamentals needs to be put in place in order to launch the nation on a trajectory of growth. Zambia hasn’t suddenly began exporting massive quantities of copper at higher prices or selling other commodities and bringing in the country foreign currency. It could be some temporary measure PF has made in the economy to halt the Kwacha’s slide into nothingness. That’s why Sampa hinted at perhaps the govt has tampered again with the reserves and challenged PF to deny they haven’t done so. This is appreciation is caused by something the govt has done that’s not quite right. Also it…

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    • @The Observer
      Cont’d
      Also it can’t be that the Kwacha has appreciated because the US dollar is weakening. The dollar has been gaining value against other major currencies since mid 2014. The stark reality we are trying to avoid meeting head on is that Zambia is broke or nearly so and the main source of money, copper, is performing poorly.

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  13. @ wantashi thanks for putting it more aptly: ‘he has simply explained’. and how simple that is for what we (from a kaponya to a president) all know is a complex subject!

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  14. So Mr. Sampa what could you have done differently in this case? your whole purpose for this article is to destroy and ridicule ECL as it is evident that you have joined your friends that celebrate the suffering of Zambians for them to ascend to power. you should know that u are not ridiculing ECL but God who is fixing the economy. wake up and stop opposing God, its not too late.

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    • Typical PF mudslinging:

      Now he is Ha Sampa just like Ha Mwamba, Ha Lupando, Ha Mutale……..kkkkkkk

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    • @DM

      It’s actually PF govt that hates and celebrates Zambian suffering. You must be a PF cadre and therefore should remember clearly how you used to enjoy when Sata demonically entertained you at his rallies by mocking a dying man, Mwanawasa. The current leader masquerades as a humble man but is equally if not more malicious and vindictive than the dead thug. He would rather build a highway than put food on the table, he would rather charter an expensive flight to go overseas than pay civil servants and students. Add to the list and shock yourself to discover who really celebrates the suffering of others.

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  15. At least Miles has explained what can be done to solve the currency issue unlike bena HH who have no solutins only criticisms

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  16. The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. Thomas Sowell

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  17. Some of these politicians just hate our country and its citizens. The kwacha gains, and they get mad. We they people are happy. We do not care about PF, FDD, MMD or UPND. If Jesus could rule our country directly we would opt for that instead.

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  18. Zambians. Simple question to those criticising Sampa, did Kambwili come up with all these economic fundamentals you have belaboured to propound apart from saying the people have confidence in the PFs economic policies? Like it or not Lungu and his ministers have no clue about economics. They have let the people down. In this era of the global economic downturn the world is looking for leaders who can run their economies well. That’s how Cameron and Obama won their respective re elections. The elections were not based on how humble they were. The only leaders so far sounding knowledgeable about our economy are from the DF and UPND and not this fossil from UNIP days called Chikwanda.

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  19. Sampa is such a dull man. He doesnt realize that the Kwacha is appreciating because there has been increased supply of the US dollar on the market due to corporations converting their US dollars to get kwacha so that they meet their quarterly tax obligations. Besides, there has been reduced demand for the US dollar on the market because the of the tight monetary policy being pursued by BOZ. Instead of him politicizing the issue, he should be happy for Zambians that they will now be able to import goods and services cheaply.

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  20. I find this article and analysis very shallow to say the least. If these are the economists that we have today, then we need a new and serious crop who can analyse the environment from a deeper perspective.
    This self rated man called Sampa, just like HH and fat Albert, they are jokers. Why cant they reason also that even when the price of copper is $4800 per tonne, as long as the volumes being sold from Zambia are high and meeting the demand, there could be huge forex inflows in our country. Its also not always true that when the demand of a commodity is high then the price will also be high just like that, NO! It could just be that even at $4800 per tonne, Zambia is one of the few countries meeting the high demand of copper.
    My research tells me that Zambia is eighth on world leading…

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    • @The Messanger

      “Its also not always true that when the demand of a commodity is high then the price will also be high just like that, NO! It could just be that even at $4800 per tonne,”

      I almost laughed at the joke you have cracked with the above statement but I realized you were serious and this is no laughing matter. If you don’t take advantage of the increasing demand for your product and sell at a high price and make a killing in the process, man, you are absolutely going contrary to nature and need a shrink to examine your brain. Why do you think the price of meali meal is shooting through the roof? There’s a demand for it! That’s how the natural laws of supply and demand work. But if you choose to disobey these cast in concrete laws who am I to discourage you. You must be…

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    • @The Messanger
      Cont’d
      You must be the type of rebellious macho guys who think nothing of walking from the roof a high storey building to another in total disregard of the unforgiving laws of gravity.

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  21. contd
    My basic research tells me that Zambia is eighth on world leading copper producers and right now the other top ones may be having economic challenges too hence their productions affected.
    And these are the people who cheat themselves that the can be our presidents, NEVER! Its ECL only whose policies are yielding tangible results to the detriment of his enemies.
    ECL Nafuti nafuti. I tend to believe what Kabimba has said in the recent past that if Zambians make a mistake to vote for HH, they will be worse of because they dont have serious alternative to offer Zambia other than being envious and bitter and only the Satan they worship knows.

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  22. The dollar is down by a few points simply because markets are speculating that Janet Yallen will slightly reduce interest rates as the next meeting is near to be held.If you want to trend the dollar against emerging currencies just trend gold price and dollar.Whenever there is this federal meetings,the gold price always reacts and it is a good indicator of how your small currencies will perfom.Dollar vs gold price correlation is always inverse

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  23. According to politics of Zambian opposition when the kwacha went down you blamed Lungu and PF. Now that it has gone up why are you failing to praise Lungu and PF?

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  24. My take:
    1. Didn’t the opposition claim that all reserves have been depleted by PF government? So which reserves is Sampa talking about if government has been pumping them into the market to support Mr Kwacha? I wonder whether these opposition alliances ever consult.
    2. What is wrong with the PF taking intervention measures through BoZ? Doesn’t Sampa know and his friends so called economists know that the American government took similar monetarist measures to stimulate their economy? It is these measures that Janet Yellen the Fed Reserve Chair is now expected to loosen now that the American economy has picked up. What Yellen is trying to do is to take appropriate monetary actions at the appropriate time without rocking the economic balance. In short there is nothing wrong with taking…

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  25. In short there is nothing wrong with taking monetary or other actions to steer your economy in the desired direction.These tin pot economists aspiring for State House seem to think that we are all dunderheads, atase!
    3. All economic or monetary measures do have side effects, what is important is your objectives at a given time. For now the objective is to stabilize the economy by stabilising Mr Kwacha.
    4. The opposition seem to think that that there is only one economic solution to all Zambia’s problems. If they are not gonga economists, they should know that not all economists can agree on one thing, and I mean good economists.
    Look guys, let BoZ do its job, they have the knowledge, they are by far more intelligent economists in comparison to Millimeter Sampa and Fake “State…

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  26. Look guys, let BoZ do its job, they have the knowledge, they are by far more intelligent economists in comparison to Millimeter Sampa and Fake “State House” Hichilema. Seleniko ba bombeko Abanenu.
    Someone tell HH that his economics is better applied if he joined BoZ, not as a His Excellency, that is for leaders.

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  27. The appreciation of the Kwacha as mentioned by Sampa, is simply a political gimmick to win the election. Anyone who has studied basic economics understands that a currency appreciates when the demand for that particular currency increases. That happens with an increase in exports or with as put by Sampa manipulation by a central bank (BOZ) which is not independent and is influent by the executive. Economics 101.

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  28. ‘The recent Kwacha appreciation against the US dollar and other major currencies is in my view, not sustainable’ that’s his personal opinion…

    I am also saying that the recent Kwacha appreciation against the US dollar and other major currencies is in my view, SUSTAINABLE…

    So ba LT this does not qualify to be news but an opinion…NEXT ITEM PLZ

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  29. I agree with the you #the observer…..Sampa has definately politicized this article by ignoring international factors in his analysis of the Kwacha’s recent appreciation and placing the blame of the Kwacha’s poor performance solely on the PF regime and its policies, both monetary and fiscal. Its true the PF has done a fantastic job at weakening our currency, and done very little to decrease our vulnerability to international factors, but fact still remains, Zambia is an IMPORT – ORIENTATED country and so we continue to be largely affected by external factors. In short, in addition to the reasons dilligently outlined by Mr Sampa, the recent appreciation of the Kwacha had more to do with foreign investors diverting some of their funds in Zambia (as evidenced by over subscription of the…

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