Post default when Africa’s second largest copper producer skipped a $42.5million coupon payment on its bond 2024 dollar bond, BNP Paribus issued a statement to its clientele that it would be suspending custodial services to Zambia. This move was seen as one that would breed asset and currency sell-off pressure to weigh the Kwacha even further. Responding to a Q&A session at the AFMIndex 2020 launch in Lusaka, Director Market Supervision and Development at the Securities and Exchange Commission -SEC Mutomboi Mundia said perception in a crisis time as Zambia is in, is everything.
“We need a communication strategy across the financial sector that provides concise information on what is pertaining on the ground as this is what will allow both local and foreign investors to trust the market for investor confidence purposes,” Ms. Mundia said.
It is time for crisis managers to rise up and wear their thinking and planning hats with practical solutions, she said.
Zambia’s ranking on the access to foreign exchange pillar slid a point to 60 out of a 100 weighed by falling reserves as the red metal producer grapples with fiscal fragilities. Other pillars such as capacity of local investors and macroeconomic opportunity scored the Southern Africa below 50 out of 100 reflecting a suppressed capital market.
“For Zambia, the fundamentals currently don’t support growth of the capital markets or allow for them to play the role that they should,” the SEC Market Supervision and Development Head said. There exists a inverse proportional relationship between market development and the cost of capital benchmarked against government securities, she said.
The Zambian capital markets are currently undergoing repositioning to include green bond framework introduction and potential integration with the fintechs that will seen innovation at both product and technology level.
The Kwacha Arbitrageur