Simunza Muyangana, Page 2 Author

The Zambia Institute for Policy Analysis and Research (ZIPAR) has recently released its report on the labour market in Zambia.

The impact of the recent Zambian economic slowdown on both businesses and the public is revealed for the first time in research commissioned by the Zambia Institute for Policy Analysis and Research (ZIPAR) as part of its flagship More and Better Jobs project.

A large survey of businesses and a nationally representative survey of the public were conducted and published last week on 23 June 2016 at the Radisson Blu Hotel. A key finding was that over the last year 9.3% of Zambians say they have lost a job and were unable to find a new one, while 2.8% report going from having no job to acquiring one. A third of businesses surveyed report laying off staff in the last year.

The research also highlights how the hardest hit have been the young. The survey reveals a clear generational effect. Of those who report having lost of a job and not found another in the last 12 months, 13.4% are under 25, compared to 6.4% aged 41-55.

More positively, there was evidence that the worst may be over. Some businesses appear to have made difficult decisions about their workforce in 2015 (laying off of workers and imposing recruitment freezes), and now feel better placed to withstand economic challenges. When we asked businesses when they felt ‘the impact of the economic challenges most severely’, well over half – 61% – stated the second half of 2015. Only 7% said the first quarter of 2016. There was also some optimism about the future with about a third of Zambians and businesses being upbeat about future job opportunities.

The report is available for download at http://tinyurl.com/z74ybes

In its first economic forecast since the EU referendum, the British Chambers of Commerce (BCC) has today (Monday) downgraded its UK GDP growth forecast, from 2.2% to 1.8% in 2016, from 2.3% to 1.0% in 2017, and from 2.4% to 1.8% in 2018.

Weaker consumer spending and a large fall in investment were the main reasons for the leading business group’s downgrading of its growth forecasts. The uncertainty surrounding the UK’s long-term political arrangements with the EU, as well as the timeline over which any actions will take place, are expected to dampen growth prospects towards the end of 2016 and over 2017.  Despite these issues, the UK is expected to skirt with, but avoid, recession. The post-referendum slide in sterling is expected to help improve the UK’s net trade position.

The downgrades to the BCC’s forecast for UK GDP growth imply that the UK economy will be £43.8 billion smaller at the end of the forecast period than previously predicted.  

Key points in the forecast: 

• UK GDP growth forecasts downgraded: to 1.8% for 2016, to 1.0% for 2017, and to 1.8% 2018.
• GDP growth is expected to slow sharply in the short-term – quarter-on-quarter growth in Q3 and Q4 2016 is forecast to slow down to 0.1%. 
• If the GDP growth forecast for 2017 is realised it would be the weakest rate of growth since 2009. 
• Weaker consumer spending and a large fall in investment is expected to be only partly offset by a stronger contribution from net trade. 

• Business investment is expected to fall by 2.2% in 2016 and by 3.4% in 2017. The slight pick-up in business investment in 2018 (+2.0%) reflects a ‘levelling-off’ from the declines recorded in 2016 and 2017. This compares to our previous forecast of a 4.5% increase in 2016 and rises of 7.4% in 2017 and 2018.  
• Export growth is expected to drop to 2.3% in 2016, from 4.8% in 2015, but grow slowly to 3% in 2017 and 4% in 2018.

• Services and consumer spending will remain the key growth drivers of the UK economy through the forecast period.
• Employment growth is expected to slow in 2017, as uncertainty weighs on recruitment intentions.
• A further cut in interest rates is expected by the end of the year.

Dr Adam Marshall, Acting Director General of the British Chambers of Commerce, said:

“Although individual businesses continue to report strong trading conditions, the overall picture suggests a sharp slowdown in UK growth lies ahead.

“Our forecast suggests that the UK is likely to avoid a recession, but with the health warning that businesses are still digesting the result of June’s EU referendum and the challenges and opportunities to come.

 “The value of sterling, the shape of future trade relationships, the status of EU nationals in the UK workforce and other factors will all influence business confidence over the coming quarters.

 “Stability, clarity and action must continue to be the watchwords for government. Aside from a clear timetable for negotiations with the EU, ministers must act to support business investment and confidence.

 “They should start with the long list of business-boosting infrastructure projects that have been put on hold for far too long – including a firm decision on a new airport runway, new nuclear investment, and road and rail schemes. 

 “We also need to see policies to encourage business investment, such as revisions to our outdated business rates system, which penalises companies for investment in plant and machinery, and hits firms before they have even turned over a penny.”

 

Suren Thiru, BCC Head of Economics, said:

 

“The downgrades to our growth forecast confirm that the UK economy is set to enter a turbulent period, with growth expected to weaken materially in the near term. 

 “Mounting uncertainty is likely to put a brake on investment, while rising inflation and moderately weaker labour market conditions are expected to stifle consumer spending. On the upside, the UK’s net trade position is expected to be boosted by the post-referendum slide in the value of sterling.

 “Despite the likely improvement in the UK’s trade position, the significant imbalances currently facing the UK economy are expected to persist through the forecast period, with a continued over-reliance on services and consumer spending as key determinants of UK economic growth.

 “While the longer-term outlook for the UK economy is highly uncertain the risks are on balance tilted to the downside, with the deep-rooted structural issues, such the size of the UK’s current account deficit, leaving the UK increasingly exposed to economic shocks.”

The UK has voted, by about 1.2m votes, to leave the EU in the referendum on 23 June. The precise implications of this are, as yet, uncertain – apart from a rapid depreciation of Sterling against most currencies, though whether this is just a knee jerk reaction by forex markets or a longer term position remains to be seen. For companies in Zambia trading with the UK, goods and services will, in the short term, be cheaper is USD terms in the short run but caution should be exercised until the political and financial dust has settled.

The reaction of the British Chambers of Commerce in the UK can be found in this press release – BCC reaction to Brexit

The British Chamber of Commerce, in association with and support from the Indaba Agriculture Policy Research Institute held an event on Economic Diversification in two of Zambia’s key sectors at the Taj Pamodzi hotel in April. This was attended by over 80 members and guests.

Presentations were made by:

• Hon. Given Lubinda, Minister of Agriculture
• Jacob Mwale, CEO of the Zambia Agricultural Commodity Exchange (ZAMACE)
• Felix Chaila, CEO of the Zambia Tourism Agency
• Edjan van der Heide, Chairman, Kafue Park Operators Association.

The Minister of Agriculture opened the event by informing the meeting that the intentions of the Government of Zambia in agriculture were enshrined in the National Agricultural Policy. Specifically, he mentioned that the goal was for Zambia to be a net exporter of food and to be the food basket of the COMESA region.

The strategies to be employed in realising this included:

• Use of improved crop varieties and certified seeds. He stated that the Government would not adopt GMO technology just yet.
• Emphasis on the agricultural farm block development to address the issue of having infrastructure that will attract agricultural investment.
• To put 7,500 hectares of land per year under irrigation.
• Increase the adoption of mechanisation across the country. He stressed that he was of the view that the hand hoe is an archaic technology that belongs to the museum. In this regard the government was going to set up mechanisation centres across the country.
• Diversification from maize was also stressed as a central strategy so that the country can exploit many other enterprises that are available with Zambia’s vast resources. The electronic voucher which was piloted last year and allowed farmers to choose enterprises that they deemed suitable was meant to encourage diversification. He added that even the traditional Farmer Input Support Program had now included more agricultural enterprises.

The Minister informed the meeting that the issue of agricultural subsidies in both input and output markets was difficult to address. He admitted that the fiscal space for the subsidies in Zambia that were mostly focused on maize and maize products was limited but stressed that many countries in the world including Europe still had subsidies. He reported that he was willing to listen to those that could suggest ways out of the subsidies for Zambia.

Here are the presentations made by the other speakers

•  Zambia Tourism Board Presentation 
• ZAMACE Economic_Diversification_through_Agriculture
• Growing the Eco Tourism Industry Zambia travel and leisure

The British Chamber of Commerce, in association with the Securities and Exchange Commission, is planning to hold an event on Alternative Finance. The key speaker will be Professor Raghavendra Rau, the current holder of the Sir Evelyn de Rothschild Professorship of Finance at the Judge Business School at the University of Cambridge. He also heads the Centre for Alternative Finance. This will be an outstanding opportunity for Zambian companies, whatever their size and stage of growth or development, to learn more about ways to finance their businesses. Other discussants will be announced later.

Planned date and Venue: Wednesday 22 June 2016 at Taj Pamodzi Hotel at 18:00 (please note this will be on a Wednesday rather than our usual fourth Thursday of the month)