By Kapya Kaoma
Bally is already Fixing It! 10-15% appreciation of the Kwacha in less than 2 weeks. Done! Free education from grade 1 to University. Next! COVID-19 Pandemic. Bring it on. Jobs for all graduates. Soon to follow. If only bitter PF cadres can step aside–our Bally will fix it.
We can’t change history, but we can avoid mistakes of the past. President HH and the UPND should not repeat the arrogance of the 1991 Chiluba victory over KK, and its ill-informed 1990s economic policies. The Chiluba administration was heralded by the World Bank and the IMF as a success story of a century–something I discuss in “Raised Hopes, Shattered Dreams: Democracy, the Oppressed, and the Church in Africa (The Case of Zambia).” But we, Zambians, were the biggest losers. I pray we won’t make the same mistakes again.
Bloomberg News August 19, 2021 article, “Zambia Election Euphoria Fuels Kwacha’s World-Beating Streak” noted that the “Kwacha extended its gains versus the dollar, making it the world’s best-performing currency” since May 2020, following HH’s victory. Specifically, the Kwacha appreciated by 7.8 % within a week against the US dollar. The appreciation has continued at a very fast rate. Yet the economic performances of the nation remain unchanged, while prices of commodities and salaries remain the same.
Bloomberg News assessment was based on the global platform for buying and selling of money. Yes. I mean selling and buying money as a product. The buyers are making dollars by betting on the Kwacha based on HH’s victory and his anticipated capitalist economic policies (even though he campaigned as a socialist) with the hope of reselling it in future.
These bets were driven by two factors–the “$1 billion Euro bonds due 2024” and $1.3 billion IMF relief package. This is where the deal is. These amounts were being negotiated by the Lungu administration. However, the Bretton Woods Institutions, and other funders were reluctant to release the funds due to the Lungu Administration’s lack of accountability. Now that they are certain the money is assured, why not get a share? Buy the Kwacha at its weakest.
Worse still, the Kwacha made some minimal appreciation based on high Copper prices on the international market. Since the transactions are all in dollars, it means that we need to exchange the dollar into Kwacha to pay workers and local contractors. Sadly the Mines are losing money by the same margins of the said appreciation to meet their payroll. The same with donor aid etc. If they used $100, today they will use $115 to meet the same payroll. If workers want a raise, this becomes impossible. The only solution is for prices of commodities to go down, which is not possible given the abrupt nature of the appreciation. In short, Zambians must be ready to tighten their belts.
Venture capitalists won’t hold unto the Kwacha forever–they will offload it at the time the Kwacha will be assumed strongest to the dollar. Those who bought it at K20 to $1, for example, would make a big profit by selling it at K12 to $1! As for those with excess Kwacha like President HH, it is now time to pile up US dollars–knowing too well that the dollar is the stable currency. They are winners either way.
I challenge President HH. If this appreciation is real, let him be patriotic enough and change his dollars into Kwacha. He won’t! Instead, he will be the first to buy dollars when the Kwacha is at its weakest–after all, he will be the first one to know. In the real world, this would be considered inside-dealing, illegal and unethical, but who cares in the nation where Presidents and politicians continue to run their own businesses while in power?
Moreover, not every Zambian small business owner has access to foreign currency accounts–most of us buy foreign currency from small businesses who are now afraid to part with their money. They don’t know when things would return to normal. But for team HH, the Bank of Zambia is open 24/7. We should expect artificial shortage of foreign currency in the nation since people will start withholding their Kwacha and dollars alike. This would lead to black market or parallel markets, which is not good for the economy.
Bretton Woods Institutions have never supported strong African currencies for a reason–they harm investors. In fact this is the reason for their original demand for devaluation of local currency as condition for Aid. The current Kwacha appreciation is solely based on financial speculation, betting and anticipated Western-interest driven capitalistic policies of the incoming HH administration. They know President HH, and where his heart is–making more and more money. But why subject the nation to Western vultures whose only interests is to rape our economy?Surely President HH knows that real appreciation of the local currency is highly dependent on many economic factors other than the president alone. The reason the venture capitalists are betting on Zambia is because they have seen a gold mine. They do not have any interest in Zambia at all, aside from profits and profits alone.
Until economic activities improve, confidence in the HH administration is established and accountability becomes a norm, any rapid appreciation controlled by Western capitalists will only harm our economy. There is a reason why governments protect their currencies from venture capitalists–the Chiluba-like economic policies will only make ordinary Zambians biggest losers. This is because the rich will continue to pile up dollars–knowing the appreciation is fake. The very people who raped us in the 1990s know HH is at the helm of power, so they are set to return and rape us again. Don’t be lied to–there is self-dealing at Wall Street–it is filthy. The Bretton Woods Institutions are not independent from the very people buying the Kwacha, but they are one and the same. Neither do they have Africa’s Interests at heart. They are buying the Kwacha because there is a catch for them.
We are not driving the appreciation of the Kwacha, but we are at the mercy of neocolonialist and capitalist imperialists whose only interest is to profit from Zambia. As Nobel winning Economist Amartya Kumar Sen has demonstrated, local people’s participation in the economy is key to economic development. Zambians must be empowered to participate in the economic activities that would lead to the true and sustainable appreciation of the Kwacha.
I want the Kwacha to appreciate–it is overdue. But real appreciation should follow real economic performances by all Zambians, and not speculation by Western criminals whose interest is to rob Africa of every cent possible. The Bank of Zambia must intervene to arrest this mess. America, Britain, and China are among the many countries that have protected their currencies from going rogue! They may call it currency manipulation, but the truth is the government must ensure that its currency is protected from foreign interests. It is a national security issue.
I fear another Chiluba administration.
Sent via the Samsung Galaxy Note8, an AT&T 5G Evolution capable smartphone
“I fear another Chiluba administration.”
In other words no change from a neoliberal government for the central banks, not the voters.
This is good analysis. As a layman, I find it difficult to believe that all of a sudden, goods and services are more expensive now. Fuel was less than a dollar but now it’s more and so are prices of other goods.
What an ill informed article, based on false information, and clearly published with a very negative political goal. I would like to stress that the UPND will only take over the reigns of government by tomorrow – and the president elect has not made any decision or instructions that would have any influence as yet. Not very good LT!
The following statement and assertion is wrong and the opposite is true, “Those who bought it at K20 to $1, for example, would make a big profit by selling it at K12 to $1”
WESTERN VULTURES KIKIKIKI
YET YOU PREFER THE EASTERN & CHINK VULTURES
REALLY A BIAS ARTICLE
Sir, you have thrown around big words – imperialist, capitalists, criminals, vultures and so forth with reference to western world – what would you like HH to do, he’s not in yet. The new govt policies will take time to establish and start bearing fruits. For now just be happy breaks have been applied on the wanton destruction of the economy, perpetrated by thugs in PF
It will take good govt policies, watchful citizenry, strong govt leadership able to implement technically sound solutions, strong statutory institutions for the economy to lift off. I believe this what is advocated by HH and western democracies – Not the opposite, as ur article seem to portray
Your fears are exactly mine, Rev. Kapya Kaoma. I wonder how HH will convince IMF that its financing should provide free education to Zambians from pre-school to university, provide free medical care to Zambians, provide employment or a social safety net to the so many unemployed Zambian youths, provide social cash transfer to many vulnerable Zambians, provide agro-subsidies to poor Zambian peasant farmers. We know that FISP has been abused by civil servants (PACOS and DACOS) managing it who have been selling farming inputs at open market prices, even to commercial farmers, to make money for themselves. Central province is one province where PACOS and DACOs politically aligned to the UPND were undermining the government FISP programme to enrich themselves. They were the same UPND aligned…
What a load of bull crap article! You want to compare the FTJ and HH administrations, really dude!? Ofcourse people will store up dollars and Vice versa depending on how the rates go. You think economic appreciation is something that happens over a fortnight? Get yourself straight!
…civil servants that also undermined the e-voucher programme. One just wonders how the UPND will deal with this corruption by civil servants aligned to itself. Whether it will now decide to have farming inputs sold on the open market and disadvantage peasant farmers some of whom cannot even afford to pay the K400 they are required to pay to cooperatives they are registered to under FISP to access farming inputs. Will the UPND under its IMF supported economic programmes leave the prices of farming inputs to be determined by market forces and risk the food security of the country? Zambia is in a catch-22. The economy is in a recession and requires outside funding to resuscitate it. But the IMF funding comes with conditionalities that do not only try to cure but sometimes ends up killing…
As an economist, I know that the appreciation of the Kwacha, as long as it is sustained will help us pay back our foreign debt.
It’s much easier for the government to buy the dollar when it is trading in single digits to the Kwacha than when it’s trading in double digits e.g K21 to $1. The government last year needed more Kwacha to payoff debts in dollars. They didn’t have the money and hence Zambia defaulted and this was after our ill informed grandma of a Vice President assured us that Zambia would not default on any debt.
As long as the appreciation of the Kwacha against foreign currencies is sustainable, it will benefit us as a nation. And I strongly believe that this appreciation can be sustained with good monetary and fiscal policies.
But everything hinges on HH’s…
… the patient. One only hopes there has been a movement away from the one-size-fits-all prescriptions that the IMF programmes have always been known for worlwide. Otherwise, Zambia is in for a rough ride should the UPND government try to follow the IMF programme religiously the way the MMD under Chiluba did.
But everything hinges on HH’s inauguration speech. If the markets sense anything fishy in his speech, trust me the Kwacha will tumble and if the same markets are happy with his speech you should expect the Kwacha to gain.
Gains of the Kwacha towards appreciation thus far is purely Psychological projecting confidence in the markets. The President elect and incoming administration are aware of this and are not making points out of it for the reason. In as much as this article is informative ,it more polarized to being “a scare monger”. Relax ,they haven’t even started to work yet!
The Kwacha is not a big enough currency for people to make profits in buying it. I think that the appreciation of the Kwacha has been misinterpreted. The biggest reason is the high copper prices and increased production as well as confidence of investors in mines that they will have a friend in government. The Kwacha also appreciated due to travel restrictions for Zambians who buy from China and sell in Zambia. None have travelled for nearly 2 years.
The Saint of the comments, yours is the only level headed one. I also add that price of goods will remain high because no trader would reduce the the price when he bought the commodity at a high cost. Buses increase fares when fuel price goes up but have never reduced fares when fuel price goes down.
Countries like Singapore and others in Asian do not produce anything, but are doing so much better. What do you have to say about that in relation to what you have said about Zambia and its current happenings.
The author seems not to be enlightened in economic matters. Even I a layman knows that major events like elections and budget speeches have very big influences on a country’s currency. We understand the strength of the Kwacha should be backed by productive economic activities but there that margin appreciation which comes about due to investor confidence.
Criticizing the in-coming government even before they start working has done nothing more than paint your article as anti-HH propaganda.
Let them start work first and give then a chance to perform.
Cut all your lousy words and calling the west whatever you like as long as the prices of essential such as cooking oil, sugar, all local and imported food stuffs, fertiliser hence mealimeal, cement, etc come down. Which In my opinion should start coming down as soon as by end of this week. Who cares if its because of the west. As long it benefits us local zambians who have suffered with runaway high prices with Pf bad policies. If the previous government was good friends with countries like India and china, what did it benefit us locals in terms of the economy? As we learnt some words from our friends in the last decade….you are just bitter and envious of the new administration.
Rev Kapya Kaoma is also metal. You see, the ELECT is not the only economist
We never learn, we continue to do the same things and expect different results. Don’t say we never warned you. HH is now our president whether we like it or not. The euphoria and the thought of one person will fix everything is dangerous. Already we are seeing criminals taking advantage of the tag line and taking things in their own hands. We did this with President Sata’s “More money in your pocket” We all want HH to be a success story but our duty now is to make sure he protects Zambia’s interests. Constructive criticism is good and in my view HH should watch out for yes men, they make presidents become big headed. Just look at PF, still in denial due to the same arrogance.
Wake up and smell the coffee, Zambians. I don’t usually support Kapya’s articles but here he has hit the nail on the head, dead centre!! Bloomberg have been raving about the upnd/hh victory and I asked last week, what’s their agenda??? Do they genuinely care about the common Zambian or about how much profit they will make off their relationship with hh?? Simaata Simaata equally warned about 1991 set up returning should upnd win as the same group that conned us to sell off our country is back. Did our youths fall victim to the same rhetoric we did????
Rev Kaoma has always been neutral and objective. His zeal to be objective and neutral is now working against him, this article is premature.
I understand he is trying to isolate himself from the masses and be a constructive critic but he needs to find a fact to attack, not his imagination.
Already labelling HH as being behind the currency fluctuation is akin to blaming/praising him for the increase in the two weeks before election day.
Sean Tembo’s comment on the appreciation being engineered by BOZ to appease the President-elect makes for an objective viewpoint.
Blame HH on matters he has control over, otherwise, hold your horses.
whatever happens . we are still in zed and are going to pass through so many things . as the current situation what can you do because every thing is on halt waiting for the elect to be sworn in and form government , these speculation where there and it shall come to pass . its true , we are happy today because we have voted but are we sure that we voted by our own right thinking or we were put in a situation so that we can do this math that things are not ok with this person while forgetting that those with big guns where the ones who squeezed the dolla, fuel price and other commodities to go high knowing that we will reach at a breakpoint then predicted that we will do this. lets wake up zambians and depend on our own . we build zambia with our own resources and strength by supporting…
HH is an economist & business mogul. He understands currency in a practical way & his knowledge is deeper than your theoretical knowledge, which you learned from the same Western text books you are now castigating.
You don’t get to be Zambia’s richest man by being stupid. The guy has an excellent brain,so don’t judge him yet, he still isn’t the President…
I do agree with this article everything pointed out is correct, no outside institution loves Zambia however they are only interested in looting at any glance of an opportunity , the in coming administration must be worried about about the immediate gain in Zambian currency.
As already said the dynamics that that drives economic growth must be seen on the ground rather than fictitious abnormal appreciation of the kwacha while nothing is happening on the ground. The in coming president must quickly see the danger and stop it as soon as possible, this trend won’t be sustained for long it is only a trap to loot Zambia as it happened in 1991 government.
Cadres will be fuming but they cannot change the narrative.
So this chap is calling Forex traders..Vulture Capitalists? Some people just want to post irrelevant articles every minute
Wako# 11 We don’t import cement. We export cement.
Article well articulated. What has hh done for Kwacha to appreciate like this. Belt tightening government
Rev Kapya Kaoma, you have thrown many accusations without backing them up. A little bit of education and capital markets. Capital markets incorporate news (good or bad) into security prices very quickly. This is known as the efficient market hypothesis in economics. Going into the 2021 elections, markets expected the PF administration to stay in power, given the unfair playing field in the election. Because of the economic mismanagement of the PF regime, their continued stay in power was priced negatively leading to drastic downward valuation of the kwacha. Fast forward to the election results. The market is surprised with good news: PF has lost and has agreed to hand over power peacefully! The markets have to unwind the positions they took before the election. Hence the appreciation of…
Rev Kapya Kaoma, you have thrown many accusations without backing them up. A little bit of education about capital markets. Capital markets incorporate news (good or bad) into security prices very quickly. This is known as the efficient market hypothesis in economics. Going into the 2021 elections, markets expected the PF administration to stay in power, given the unfair playing field in the election. Because of the economic mismanagement of the PF regime, their continued stay in power was priced negatively leading to drastic downward valuation of the kwacha. Fast forward to the election results. The market is surprised with good news: PF has lost and has agreed to hand over power peacefully! The markets have to unwind the positions they took before the election. Hence the appreciation…
Story is not correct.
The raise of the kwacha started mid July already in combination with price of copper.
HH had no influence on that. His policies will decide if it stays like that
Ba Kapya, well penned. I have no counterargument.
I was beginning to like your article until I saw that it was biased against the incoming president. Instead of presenting yourself as a well-informed and balanced economic and financial markets analyst, you just come off as a political Hitman. Sad. Missed opportunity.
Comment: rev kapya should behave like a true christian & a true follower of christ! this is time to work & not a time to foolishly critise & contradict aimlessly based on greedy & selfish ambitions through little/small education!.. “faith are things hoped for”, like a christian, please have faith ba reverand…
I see comments where basically some people are saying HH should not take any blame over current analysis of the USD – kwacha exchange rate. Does that mean until HH is sown into office, Lungu takes credit for the good performance of the kwacha over the last 1 week? In that case, let’s agree to look at the performance of the kwacha from tomorrow sometime and that’s the gain we will attribute to HH. Otherwise, don’t cherry pick.
There’s merit in what Kapya Kaoma is saying. His writing is usually objective. Let’s not be blinded by our support for one person and ignore any red flags. It’s those red flags we ignore that always lead us on a wrong path. I would rather start by giving HH 0% and raise the points as we go along, based on his performance, than give him 100% points and start deducting. That kind of optimism will leave very disappointed. HH is not supper human, don’t expect him to solve the world’s hunger.
Kwacha has appreciated and how much of that has translated into lower inflation? Reduction in prices of essential commodities? Kwacha appreciation has benefited bond holders and currency traders who are typically foreign investors. HH’s economics is for the wealthy and not the poor.
Investors, both foreign and local, have confidence in the incoming govt. They are therefore willing to invest and this has an effect
Whether he’s right or not, the author of this article has definately struck a nerve and got people thinking. We may not all be economists but certain things are simple logic and easy to understand: For an economy which is already in bad shape, a strong currency is always a good thing but it also can become a problem in the long run if it’s appreciation is not aligned with the standard of living. A fall in domestic demand is the result: exports will be less competitive and imports become cheaper.
So the author is perfectly right – a strong economy is much better than a strong currency because the strong economy is able to sustain a weak currency but not vice-versa. A good example is Russia where the economy is stable and always able to sustain their relatively weak currency.
i would rather not say lets wait and see but would say who ever will be in my path as i want to do business or aquar this and that for me to go forward and make a difference to our great nation, tries to bring me down , i will tell them off and blame them that put them in that office or place. because i voted for them and they employed him or her tobe in that office. meaning .. if we zambians regardless of which party you maybe have been employed to work in sectors where you have a chance to better someone in a normal way weather giving guidance of how to do it .. please do because kwacha appreciation starts with us… look at this article how it has come out and the way everyone is responding. it completely shows that we know things much better but we only talk the walk but not walk…
Save Our Gold.
An ordinary Zambian disregarded our call to hold hh aside for the fact that he is a businessman.
I can see Kapya being fixed as Zambia gets fixed. Hold up, he has not started yet.
Pray that your suspicions are not true. You see alot of fake economists praising this ordeal. Sheer lack of experience in exhibition.
Indeed our GOLD is at stake. Indeed the vulture have raised their eyebrows.
How do you begin to celebrate such a mess. Today we mark day one of the hh administration and on day one, we have everyone needing favors. Get to work!
Save Our Gold.
An ordinary Zambian disregarded our call to hold hh aside for the fact that he is a businessman.
I can see Kapya being fixed as Zambia gets fixed. Hold up, he has not started yet.
Pray that your suspicions are not true. You see alot of fake economists praising this ordeal. Sheer lack of experience in exhibition.
Indeed our GOLD is at stake. Indeed the vultures have raised their eyebrows.
How do you begin to celebrate such a mess. Today we mark day one of the hh administration and on day one, we have everyone needing favors. Get to work!
Ooooooooh! Kapya! This is so sweeeeet.
Already you’re talking about vultures in the IMF and World bank and the 90s? While people are already in the hangover of the celebration and you’re bring in the memories of the 90s and the chap is just to be sworn in.
Give us a huge break.
Nice overview though.
We have an inexperienced individual in to occupy state house in hachilema.
Yes Zambians, guard your Gold. I smell a rotten fish too.
My analytical on this article is simple lets just beware of some of the foreign investors, they are smelling our resources we can’t afford to let loose our natural resources. It would be an ideal, if they want something lets have a say first based on our conditions not theirs. Otherwise big brothers are watching. Ppl won’t be fooled anymore.
Yes every currency appreciate based on speculation by Forex traders, which is a good thing. It simply shows trust in the currency & this translates into cheaper goods which are mostly imported for ordinary Zambians.
The value of money is based on peoples trust in that currency to be backed by the Govt & that’s what HH brings. Would you exchange your Kwacha & hold Zim Dollars? So investors & Forex traders exchanging their US Dollars & holding Kwacha it’s a good thing because they’re anticipating gains in the future going forward with what corrupt free HH is yet to offer interns of good governance & most importantly Govt Investments.
This was not the case in the ECL lead corrupt Govt full of bootlickers & consumers without investments. Read the Auditor General Report Sir.
This post is a pile of rubbish, first BoZ governor is a PF appointed lacky who will be on the street by next week, why would he help HH rig the kwacha, Also the kwacha started going up weeks ago because of supply and demand from the price of copper. the market has just corrected its self.
May i remind you the kwacha is a blocked pegged currency set by the BOZ. it doesn’t trade on the world stage like the pound, euro, and other major currencies , you can’t even buy or sell the kwacha to banks overseas. As for not seeing prices coming down that will take months as who will sell the goods they imported at 22 to 1 below cost.
Thoughtful analysis Proff. Thank you. At least I hear you