Saturday, February 24, 2024

Kwacha Depreciation Negatively Impacting Local Small and Medium Businesses in Zambia

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The continuous depreciation of Zambia’s currency, the Kwacha, against major convertibles is causing serious problems for small and medium businesses in the country. The depreciation has resulted in higher operational costs, making it expensive to run a local business. This negative trend is impacting businesses at all levels, but it is particularly affecting small and medium-sized enterprises (SMEs) that employ a large chunk of workers (90%+) outside the formal sector.

Silavwe Jackson, President of Global Progressive Zambia (GPZ), stated that “The situation is quickly turning into a serious business nightmare. Local small and medium businesses are experiencing high operational costs owing to the upward swing of the Kwacha. If not arrested, it is only a matter of time local small and medium businesses start to close, unleashing more unemployed people to the already existing 8 million job seekers on the market.”

The issue is compounded by the fact that Zambia’s economy is import-based and consumer-based, which means that the country relies heavily on imports, and consumer spending drives economic growth. The depreciation of the Kwacha has made it more difficult for local businesses to import goods and materials, leading to a rise in prices and operational costs.

To address the issue, the GPZ has called on President Hakainde Hichilema and his administration to provide tax, levies, and statutory incentives to SMEs to reduce the cost of doing business and encourage production. “We call on President Hakainde Hichilema and his administration to provide tax, levies, and statutory incentives to small and medium businesses so as to reduce the cost of doing business and scale up production,” Silavwe Jackson stated.

Other measures proposed by the GPZ include capping the prices of fuel and electricity, government taking over gold and sugilite mining through ZNS to generate more dollars, and creating a new venture fund to support startups in agriculture, mining, manufacturing, technology, and creative arts.

Meanwhile, there are concerns about what would happen to the Kwacha if the country’s debt restructuring efforts fail. According to Dr. Situmbeko Musokotwane, Zambia’s Minister of Finance, the delayed debt restructuring is one of the main reasons behind the Kwacha’s depreciation. “If he were right, then what would happen to the Kwacha if this debt restructuring totally failed?” asked Fred M’membe, the leader of the Socialist Party in Zambia.

“Zambia’s debt is not new, it hasn’t just arisen. The Kwacha was, for some time, appreciating on the back of this national debt burden. It even went as low as K15.89 to the US Dollar under this government. But it is reaching K20.70 to the US Dollar under the same government,” he added.

14 COMMENTS

  1. At the current exchange rate is now K21 to the USD. The west and the IMF do not want to help us, China is out only chance. The west are bailing out banks to the tune of over $300 billion and Zambia with a small debt of $17 billion us left to suffer a slow economic death. Everyday we hear of investment but everyday the Kwacha depreciates, it’s like a joke and no one is attending to this matter, what is wrong with the people at BOZ? Do they know how they have affected pensioners and retirees who put away their money into govt bonds and fixed deposit savers accounts? We need to stop using the USD and start using the Yuan Renibi most of the the trade we do these days is even with China, why are we using the USD for imports?

  2. Ctn…
    I’m convinced that there must be some sort of insider trading going on at BOZ, no way the currency can devalue at this rate on a daily basis.
    Practical steps to arrest this are
    1. ACC must begin to Investigate officials at BOZ
    2. Let us stop quoting goods and services in USD
    3. Further increase the monetary policy rate so as to buffer the cost of a high exchange rate for those that have banked their money in bonds and fixed deposit accounts. This will also encorouge the demand for ZMW
    4. Promote the use of local goods and services that are normally imported by creating tax breaks for firms that provide them
    5. Encourage the exportation of all goods and services.

    Anyways no one is even listening I’m just talking to myself but you will listen when 2026 comes

  3. Ctn…
    I’m convinced that there must be some sort of insider trading going on at BOZ, no way the currency can devalue at this rate on a daily basis.
    Practical steps to arrest this are
    1. ACC must begin to Investigate officials at BOZ
    2. Let us stop quoting goods and services in USD
    3. Further increase the monetary policy rate so as to buffer the cost of a high exchange rate for those that have banked their money in bonds and fixed deposit accounts. This will also encorouge the demand for ZMW
    4. Promote the use of local goods and services that are normally imported by creating tax breaks for firms that provide them
    5. Encourage the exportation of all goods and services.
    Anyways no one is even listening I’m just talking to myself but you will listen when 2026 comes

    • Bauze
      Whenever a Zedian property seller knows I live abroad they change their property price to dollars. Most of the time they outprice themselves comparing to US property prices. One is likely going to end up buying in New York rather than Lusaka
      Let us stop quoting goods and services in USD

  4. Congratulations HH! It is now 14hrs and the kwacha has graduated into adulthood by celebrating its 21st birthday this week. At this rate the kwacha will soon reach middle age by mid year and retirement age by end of year!

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  5. Ati vote for me and by 14:00the kwacha will improve against dollar. 14:00 came, all we hard was pwee pwee pweeeee pweee. Fuseke! Hahaha bl00dy failures

  6. It is not true that the Kwacha is depreciating when we have an economist at the helm. This can only happen when there is a Chakolwa (with No Plan) at State House.
    These stories must be peddled by the Pee_eff who are bent on plunging mother Zambia into turmoil.

    By next week, though, the FX rate will exceed the K23 heralded mark. Shame to the Neo-Dawn.
    Don’t say: ‘it is global’. We want solutions and not impractical theories to our economic and social malise.

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  7. There is a reason as to why Lungu sucked Danny Kalyalya. The man is a failure. You went to BBC to brag about the choice of BOZ. Only to bring back a d!mwit in the name of Kalyalya.The man should go to UNZA as a lecturer in theoretical economics.There are better economists who can do a better job than this failed project.Chakolwa Mvunga was far much better than Kalyalya.

  8. So who is responsible for the continuous depreciation of Zambia’s currency, the Kwacha, against major convertibles causing serious problems for small and medium businesses in the country??

  9. Wen the xchange rate was appreciating some pipo were complaining that its not good for business. One such person was mrs guy scot. She came out strongly in public that the strengthened kwacha was a threat to business. Let her cme out again now and cheer the downfall of the kwacha bcoz thats wat she wantd.

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    • Its not good for business depending on where you are. If you own offshore investment you enjoy the weakening Kwacha. If you depend on local products you have to work twice as hard. If you’re the minister of finance you have to look for a middle ground but more importantly stabilize it

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