$400 million Was offloaded in First Quarter to prop up the Kwacha
Pressure on the local currency – Zambian Kwacha to depreciate further has escalated in the first quarter – Q1 (January to March of 2023) with the central bank – BOZ revealing that they had to offload more dollars to support and enable smooth flow of imports and in effect the economy.
BOZ sited the reduced forex inflows from mining taxes which have been low in the last nine months. Government had some time back designated mineral royalty taxes to be remitted in US dollars to shore up forex reserves held locally, but receipts have continued to plummet.
According to the monetary committee statement availed to the Zambian Business Times – ZBT, BOZ Governor Dr. Denny Kalyalya stated that “to support the market in [Q1] in meeting some critical imports, the Bank of Zambia injected about US$400 million”.
Mining taxes paid through the central bank have plummeted in the recent past, as per graph attached, mineral Royalty Tax receipts alone are down from over $210 million for Q3 (June to August) 2021 to only $72 million in Q1 2023.
This revelation by BOZ on reduced mining tax receipts perhaps exposes the Zambia Revenue Authority – ZRA that seem to be reporting that they are surpassing revenue collection targets for the mining industry.
Analysts say some of the fiscal policies that Finance Minister Dr. Situmbeko Musokotwane has initiated such as giving handsome mining tax incentive without securing written guarantees and timelines for actualizing of promised mining investments have now started to hurt an economy already besieged with delays in debt restructuring negotiations which may as well be down to his miss-calculation .
This is creating a precarious situation even for the central bank – BOZ to perform its functions of price stability or for its monetary interventions to attain the desired results in the medium term. Moreover, iconic mines such as Mopani, KCM and now Kasenseli remain in limbo with government losing more production time and money.
Ideally, government should have proceeded to source for bridge financing and continued to run these mines and sustain production even as negotiations are going on. This could guarantee continued tax revenues and sustained local economic activities for the five towns of Kitwe, Mufulira, Chingola, Chililabombwe and Mwinilunga that are directly impacted.
The problem now is that these complex and cut throat global mine operators are aware that if the mines remain unproductive, government, mine workers unions, local suppliers and other local stakeholders will get desperate and end up being arm twisted or simply bow down to corrupt offers that will in the end lead to Zambia again getting a raw deal.
The bottom line is that President Hichilema seems to be making genuine efforts and seems to have the desire to make a mark on the Zambian economy, but he may need to accept that the team that helped him ascend to the highest office may not be competent to now deliver and implement his vision.
History tells us that despite political mud that is thrown on each of Zambia’s successive leaders, each of the past President has been able to deliver tangible results that are there for all those with clear and un-politicized lenses to see.
As for President HH, it’s now clear even for the uninitiated to see that some of his ministers and top team members are struggling. This is clear even from talking to loyal UPND members and sympathizers. Even our random checks with experts and general members of the public reveals that some are actually doing more damage than good.
And before the entire first 5 years mandate finish, waiting on some of his ministers or top team members to up their game, it is perhaps time for HH to consider making some critical changes and replacements. But if the underperformance picture that members of the public are seeing is out of lack of information, then only time will tell.
