Kwacha appreciation good for business

THE Zambia Association of Manufacturing (ZAM) says the cost of doing business will reduce once the Kwacha continues gaining against major currencies as that would reduce the prices incurred by industries relying on local materials for their businesses.

On Thursday last week, the kwacha gained more than 11% to 12.38 per dollar by 12:00hrs, the biggest advance among more than 150 currencies tracked by Bloomberg since November 2008, after the Bank of Zambia (BoZ) sold $510 million of its foreign-exchange reserves to support the kwacha since January.

Speaking to the Daily Nation yesterday, association president Maybin Msupila told the Daily Nation that while the current appreciation of the Kwacha against the major currencies had immediate benefits for businesses which relied on local materials for their operations, major industries such as manufacturing will only benefit from the strength of the local currency in the long run.

Mr. Msupila explained that manufacturing industries depended much on foreign materials which had to be sourced in advance adding that the companies in the industry would not have immediate benefit from the current trends.

“We are only praying that the local currency continues to gain against major currencies because that is the only way the benefits of this gain will trickled down to our operations as businesses because that will reduce the cost of production.

“The immediate benefit of the appreciation of the Kwacha will be felt by the industries that depend on local materials for their business but for us, such benefits will only come in the long run because we usually buy our materials from other countries in advance and so, the adjustments in prices take long to have an effect on our expenditures,” Mr. Msupila said.

He said the appreciation of the Kwacha had provided hope to the industry that the economy would stabilise in the long run and present a conducive atmosphere for doing business.

“You see, almost 80% the raw materials we use is sourced from outside the country and as a result of the poor performance of the local currency which had persisted, the prices had almost tripled our previous expenditures and that had suffocated us very much.

“Worse still, as a result of the poor performance of our Kwacha, there was uncertainties in the industry because we didn’t know what would happen next and so, even the purchasing of raw materials had become a serious challenge to us.

The business had become risky and that is why we are hoping that the Kwacha can continue gaining for our economy to stabilise,” he said.

The Kwacha has dropped 48%t this year against the dollar as plunging metal prices, a power crisis and widening budget deficit weigh on the economy.

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