03 SEPT - 17 SEPT

Just when the markets were expecting support from increased kwacha demand to pay mining taxes, tax authorities ( ZRA) just paid out refunds in VAT in excess of K385million against the odds. This then meant that the usual dollar conversions to kwacha were replaced by kwacha VAT refunds that were used to absorb tax obligations. This gave little support to the local unit which would have ideally helped reverse some losses to cushion pressure from the risk off environment. However, weakness in the kwacha against the dollar doesn’t make its exchange rate to the rand any better as the dollar and appreciated after the South African government dropped the land appropriation law which saw the SA local unit gain to levels of ZAR13.89/USD from last week’s highs of ZAR14.28/USD. The rand can never be trusted because it had then pushed back to ZAR14.39/USD levels. This makes import inflation risk high for Zambia whose trade basket (33%) comprises SA goods. We cannot rule out price volatility that could further slow private sector pulse as measured by Purchasing Managers Index – PMI for August.

Mutisunge Zulu is an Economist and Finance Expert and currently National Secretary for the Economics Association of Zambia. PAGE 6