Africa-Press – Zambia. According to Isaac Matshego, Nedbank chief economist, the firmer kwacha is a double-edged sword for SA firms operating in Zambia, including Pick n Pay, Shoprite, Sanlam and finance institutions Standard Bank, Absa and Nedbank, among others.
South African firms operating in Zambia will record currency losses as they repatriate their earnings from kwacha to the rand, said Matshego. “…the stronger local currency helps ease the inflationary pressures emanating from offshore … Goods sourced from South Africa are cheaper in Zambian kwacha terms,” Matshego told Fin24 by email.
Dallas Langman, managing director for Africa at Pick n Pay, says his business direct exposure to a stronger kwacha is limited because most of its trading stock is sourced locally, while all service-level agreements and most store leases are paid for in local currency. Pick n Pay has reported strong Zambian sales in the past quarter thanks in part to increasing customer transactions.
While the kwacha recently reached parity and surpassed the rand (K1=R1.09), the inflation differential between South Africa and Zambia favours the rand, says Irmgard Erasmus, senior financial economist at Oxford Economics Africa. Erasmus expects Zambian inflation to average 10.7% in 2023 from 14.7% in 2022, which is much higher than the forecasts for South Africa at 4.6% in 2023 from 5.9% in 2022.
Higher inflation erodes the value of an exchange unit, and a higher medium-term inflation forecast for Zambia suggests that the kwacha will depreciate at a faster pace than the rand, he explained.
“The implications for South African companies are that the kwacha appreciation has some further room to run, but the greater diversification of the South African merchandise trade and current account base, coupled with the hawkish SA Reserve Bank should see the rand gaining ground against the kwacha later this year,” said Erasmus.
Currency fluctuations in markets outside South Africa have been problematic for SA companies. For example, Massmart reported last quarter foreign exchange losses from its regional operations, including Zambia stood at R381.1 million for the first quarter of 2022.
MY CONCLUSION: It will always be about SA Companies making huge profits to send back to SA. They come first and their Zambian customers second. Tusalapuke.
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