2. US Shale oil and OPEC supply policy will keep oil prices low in medium term
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Oil US$/barrel
Oil US$/barrel
Source: Bank of Zambia,
LME
• Global economic recovery remains
fragile and uneven, with important
implications for the domestic
economy through developments in
commodity price trends and global
trade and financial flows.
• Growth in U.S, lower unemployment
at around 5.5% will bolster the global
economy
• The US Federal reserve has
reiterated its ability to be patient or
lack thereof in raising interest rates.
Current expectation anticipate a rate
hike in June or September
• US shale Oil production has changed
the fundamental structure of the Oil
market shifting supply control away
from Saudi Arabia to US.
• Oil is projected to stay low in the
medium term due to increased supply
and OPEC policy.
• The potential of a possible deal with
Iran will increase oil supply and keep
oil prices lower in the medium term
3. Lower Copper Prices due to lower global demand & a strong dollar
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
450.00
500.00
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
Copper US cents/Lb
Copper US cents/Lb
Source: Bank of Zambia, LME
• Copper has continued to decline on the global market due to lower global demand and a strong dollar
• China’s economy which accounts for most of global copper demand has waned in recent years cooling off with
policy makers focusing more on boosting domestic demand
•
4. 7.7
7.4
7.2
7.4
7.6
7.2
8.0
7.3
7.1
6.6
6.8
7.0
7.2
7.4
7.6
7.8
8.0
8.2
Jan-15 Feb-15 Mar-15
Inflation%
Inflation Q1 2015
Total Inflation
Food Inflation
Non Food Inflation
• The Inflation rate has dropped consecutively
in the last three months from 7.7 to 7.2%
• Non food inflation has been a key driver of
lower inflation in Q1 through lower oil prices
on the international market
Source: Central Statistics Office
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
Inflation%
Inflation Year to Date
Total Inflation
Food Inflation
Non Food Inflation
• The Inflation rate averaged 7.8% over the year
2014
• In the second half of the year Non food inflation
drove overall inflation higher due to a depreciating
Kwacha which increased oil import costs.
Inflation drops for 3 consecutive months driven by lower oil prices
6. Province Target(MT) Purchases(MT) % beyond target Crop value(ZMW)
Central 50,600 149,488 195 209,283,760
Copperbelt I5,000 36,945 147 51,778,510
Eastern 89,100 251,123 182 351,852,340
Luapula 60,450 76,402 27 107,523,220
Lusaka 13,600 35,035 15 49,048,370
Muchinga 65,900 110,397 69 154,555,710
Northern 99,550 154,010 55 215,614,560
North Western 35,000 58,240 66 41,536,070
Southern 63,850 140,132 120 196,185,010
Western 6,950 18,891 172 26,447,050
National Total 500,000 1,031,303 106 1,443,324,620
The Food reserve agency continues to buy maize above the budgeted target
• FRA purchasing of maize above target combined with the introduction of maize subsidies will stretch the budget
deficit
• Due to poor rains, Zambia is not projected to record a bumper harvest with some regions expected to record food
deficits.
Source: Ministry of Agriculture
7. Loan advances to agriculture dropped, manufacturing and whole sale rose
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
ZMW
Commercial Bank Loan and Advances Other sectors
Agriculture,
forestry,Fishing
and hunting
Mining and
quarying
Manufacturing
Wholesale and
retail trade
• Commercial loans to Agriculture sector declined in first quarter mainly attributed to seasonal trends for rainfall.
• Loans to Manufacturing and wholesale sectors showed strength in the first quarter
Source: Bank of Zambia
8. 10.3
6.3
6.7 6.7
6.0
0
2
4
6
8
10
12
2010 2011 2012 2013 2014
Gross Domestic Product
Growth rate(%)
• Preliminary figures regarding overall GDP
growth suggest that non-mining output grew
strongly at close to 7.0%. However, output
in the mining and quarrying sector
contracted by around 1.4%, pulling down
the overall GDP growth to 6.0% in 2014
compared with 6.7% in 2013.
• Growth in non-mining output was largely
driven by the following sectors: transport,
storage and communications; construction;
financial institutions and insurance;
agriculture, forestry and fishing; wholesale
and retail trade; and community, social and
personal services.
• Preliminary estimates of Zambia’s GDP
growth in the first quarter 2015 are around
1.25%
• This lower than a seasonal 1.5% pulled
down by a 0.25% contraction in mining
We estimate the Zambian economy grew by 1.25% in Q1 2015
Source: Bank of Zambia
9. 9
0
1
2
3
4
5
6
7
8
9
10
2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014
Mining tax (%Revenues)
Mining tax (%Revenues)
Source: Central Statistics Office
Mining Tax regime is to be reverted back to a two tier system
• Mining tax a s a percentage of revenues have been low but increased since 2010
• In the 2015 Budget announce last year, Minister of Finance Alexander Chikwanda proposed a one tier tax system
based on increased mineral royalties.
• Some mining houses threated to cut jobs and stall investment in reaction to this development.
• President Edgar Lungu recently decreed to revert back to the two tier tax system which should come to effect on 8
April 2015.
10. One in four youths in Zambia are unemployed
0
5
10
15
20
25
30
35
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Percentage
Unemployment in Zambia
Unemployment, total (%)
Unemployment, youth total (%)
Source: World Bank
• Wage growth remained weak while labour force participation increased due to recent University graduates
• The natural rate of unemployment in Zambia still remains unofficially targeted
11. -150.00
-100.00
-50.00
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15
Trade balance
Trade balance
Source: Central Statistics Office
• Zambia faced a narrowing trade surplus broadly over 2014 even recording a trade deficit in December 2014
• In the first quarter 2015 Zambia has broadly recorded a trade deficit, widening over January to February
• *March results come out in May 2015
Zambia recorded trade deficits for 3 months consecutively
12. 0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2009 2010 2011 2012 2013 2014
Export Earnings (US$ millions)
Export Earnings
Non-Traditional Export Earnings
Source: Central Statistics Office
• External sector performance continued to deteriorate during the quarter under review with preliminary data
indicating that the overall balance of payments deficit widening to US $152.9 million from US $125.0 million
recorded during the third quarter of 2014.This situation continued in the first quarter 2015.
• The widening in the deficit was mainly driven by unfavorable performance in both the current and financial accounts.
External sector performance deteriorated in Q1 2015
13. -500
0
500
1000
1500
2009 2010 2011 2012 2013 2014
Current Account(US Millions)
Current Account
Source: Bank of Zambia
• The current account deficit widened on account of a trade deficit in Q1 as well as a widening of
the services and primary income deficits
• According to preliminary data expenses incurred with regard to fuel import purchases have
stretched the budget deficit and have put the Government under serious strain.
• The fiscal issues are further compounded with subsidies on maize, pension and road
construction as highlighted by the IMF in their recent consultation report.
Budget deficit estimated to have widened in Q1 2015
14. 14
0
5
10
15
20
25
2015 2016 2017
Personal Emoluments Amount
Source: Ministry of Finance
42
44
46
48
50
52
54
2015 2017
Personal Emoluments % GDP
Source: Ministry of Finance
• Government’s objective on personal emoluments is to contain the public service wage bill within sustainable levels
in order to create more fiscal space for developmental and service delivery expenditures
Wage Freeze on Public service projected to be upheld until Q3 2015
15. Conclusion
• Global economic recovery remains fragile and uneven, with important implications for the domestic economy
through developments in commodity price trends and global trade and financial flows.
• In the fourth quarter of 2014, commodity prices continued to decline sharply underpinned by lower growth rates in
emerging markets, especially China
• In addition to the decline in commodity prices, there has been an overall strengthening in the US dollar, reflecting a
flight to safety by investors as well as the brighter prospects for economic growth in the United States of America.
• Inflation dropped for 3 consecutive months driven by lower oil prices in non-food inflation
• The Zambian Kwacha depreciated in Q1 due to Strong dollar, low copper prices and domestic issues
• The Food reserve agency continues to buy maize above the budgeted target which combined with subsides will
stretch the budget
• Zambia recorded trade deficits for 3 months consecutively
• External sector performance deteriorated in Q1 2015
• Budget deficit estimated to have widened in Q1 2015
• Wage Freeze on Public service projected to be upheld until Q3 2015
• Mining Tax regime is to be reverted back to a two tier system
• Quka Consulting estimates Zambia’s GDP grew in the first quarter 2015 at 1.25%, lower than a seasonal 1.5%
pulled down by a 0.25% contraction in mining
16. About Us
• Quka Consulting is a data analytics research firm founded to provide timely data and accurate analysis that
provides an innovative insight which informs good decisions for our clients. We provide market analysis that
leverages absolute and comparative advantages for our clients in the business sector, putting global and local
macroeconomic variables in a business context that not only informs their business decisions but helps them drive
value and better services to their customers. We also provide policy analysis and macroeconomic forecasting for
various stakeholders including Governments and Non-governmental organizations.
• Our business philosophy is based on 3 core pillars namely; Ideas, Insight and Innovation underpinned by the values
of integrity, honesty and fair business practices.
Disclaimer
• While every effort has been made to verify the information contained in this document, Quka Consulting cannot
accept any responsibility for any errors that it may contain.
• This document has been prepared by Quka Consulting for information purposes only. This document contains
summaries of selected reports and macroeconomic data.
• Quka Consulting does not guarantee the accuracy or completeness of information which is contained in this
document. All such information has been obtained from or is based upon publicly available trade and statistical
services or other third party sources. All information, opinions and estimates are given as of the date hereof and are
subject to change.
17. Contact Us
For more information on the initiative “Zambia Economic
Analysis 2015: Q1", please contact:
Kampamba Shula
Economist – World Economic Forum Global Shaper
PO Box 50722, Ridgeway
Tel: +260973833383
Email: kampambashula@gmail.com
