Zambia’s private sector pulse on steady recovery, strongest in 20months

October business pulse in Africa’s copper hotspot, Zambia, rallied to a 20 month high with a headline reading of 48.9 from 46.6 levels in September. Readings above 50 signal expansion while those below 50 reflect contraction. According to Market economics release, Zambia’s private sector neared stabilization during October as business conditions across the country showed signs of improvement following the worst of the coronavirus disease pandemic earlier in the year.

The red metal producer has been in the doldrums (<50) for 21 straight months given persistent themes namely power bottlenecks, high fuel prices and currency depreciation which elevated manufacturing costs. Disease pandemic earlier in the year exacerbated factory activity sending the Purchasing Managing Index – PMI to the lowest since the index started being tracked at 34.3 (May) as COVID pandemic weighed. Zambia is set to record a V shaped recovery of 1.8% in 2021 after a projected 4.2% recession this year.

With currency depreciation of 41% year to date, the steepest of all Africa currencies, input prices remain under pressure and significantly weighed October PMI readings. The month observed pressure on wages which was as a result of the need to incentivise workers and signs of improved demand. Business confidence edged higher though below series average in the labyrinth of uncertainty.

PEER COMPARISON

Kenya’s operating conditions were at the highest since index tracking in 2014 when its PMI rallied to 59.1 from 56.3 in September as the economy re-opens while South Africa’s business pulse crossed into positive territory as its PMI rose to 51.0 from 49.4 previous month. Nigeria’s increase in demand drove its factory activity to 53.5 in October from 52.5 previous month while Ghana’s output hit a 29 month high with PMI at 53.1 from 51.4 in September. Egypt’s non oil private sector activity grew at the strongest rate since 2014.

The Kwacha Arbitrageur