Business confidence in economy continues to shrink, reveals ZACCI Survey

9th November 2020

Business

Zambia Chamber of Commerce and Industry (ZACCI) president Chabuka Kawesha speaks to journalists at Parliament Building shortly after Finance Minister Dr Bwalya Ng’andu presented the 2021 national budget on September 25, 2020 – Picture by Tenson Mkhala

Business

Zambia Chamber of Commerce and Industry (ZACCI) president Chabuka Kawesha speaks to journalists at Parliament Building shortly after Finance Minister Dr Bwalya Ng’andu presented the 2021 national budget on September 25, 2020 – Picture by Tenson Mkhala

LOCAL businesses in Zambia have continued to express low confidence in the economy as a result of persistent negative sentiments caused by load shedding and the COVID-19 outbreak, according to a ZACCI Survey.

Announcing the Survey in Lusaka, Friday, ZACCI president Dr Chabuka Kawesha disclosed that business confidence in the local economy had shrunk to a new low this year during the period ending June 30, 2020, on the back of negative sentiments attributed to the COVID-19 outbreak and load shedding.

This was measured in ZACCI’s latest Business Confidence Index (BCI) for the second quarter of 2020, which saw business confidence dwindle to 38 points from 60.3 points recorded in the first quarter.

“The BCI for Q2 of 2020 was recorded at 38 points, a decline from 60.3 points recorded in Q1 of 2020, according to the ZACCI Business Confidence Survey conducted on 114 members of ZACCI. The 38 points recorded implies that the business executives expressed negative sentiments about the business environment. The main reasons that led to negative sentiments on the business environment were load shedding and the outbreak of COVID-19 leading to closures of borders. The Survey reveals that the performance of business has worsened in Q2 of 2020 compared to Q1 of 2020 due to the aforementioned reasons,” Dr Kawesha said.

“All the eight study sectors (mining and quarrying, manufacturing, wholesale/retail, financial, tourism, transport and communication, social and community and construction) recorded negative sentiments on the business environment. All the three study provinces (Copperbelt and Lusaka and North-Western) recorded negative sentiments on the business environment. The Survey reveals that the performance of business has worsened in Q2 of 2020 compared to Q1 of 2020 due to the aforementioned reasons. Further, the Survey reveals that most businesses reduced their staff in Q2 2020. Furthermore, businesses experienced reduced demand for their products in the same period.”

The continued decline in business confidence carried on from the first quarter of this year, which was characterised by gassing incidences, the kwacha’s depreciation and scarce liquidity in the local economy.

“The BCI for Q1 of 2020 was recorded at 60.3 points, according to the ZACCI. Business Confidence Survey conducted on 114 members of ZACCI. Though an improvement from the 13.2 recorded in Q4 of 2019, the 60.3 points implies that the business executives expressed negative sentiments about the business environment. The main reasons that led to negative sentiments on the business environment were depreciation of the kwacha, load shedding and poor liquidity in the economy affecting demand for goods and services. Other factors that contributed to negative sentiments were lost contracts to supply the mines, particularly in the Copperbelt and the gassing incidences that the country experienced,” read part of the survey.

“All the eight study sectors (mining and quarrying, manufacturing, wholesale/retail, financial, tourism, transport and communication, social and community and construction) recorded negative sentiments on the business environment. All the three study provinces (Copperbelt and Lusaka and North-Western) recorded negative sentiments on the business environment. The Survey reveals that the performance of business has worsened in Q1 of 2020 compared to Q4 of 2019 due to the aforementioned reasons. Further, the Survey reveals that most businesses maintained their staff in Q1 2020. Furthermore, businesses experienced reduced demand for their products in the same period. Additionally, the survey reveals that the general cost of doing business increased in Q1 of 2020.”

And he recommended that government should fund the stimulus package relief designed by Zesco for targeted customer categories, cut VAT, Turnover Tax, PAYE, among others, and encourage investments in alternative sources of energy.

“Government should fund the stimulus package relief designed by Zesco for targeted customer categories. The stimulus package requires government funding to cover 50 per cent of the cost of electricity for the commercial and residential customers falling within R1 and C1 consumption categories, respectively, prior to implementation by Zesco. This would help especially SMEs to survive amidst and post-COVID-19. Government should encourage investments in alternative sources of energy by offering special incentives,” said Dr Kawesha.

“Investors should take advantage of the Electricity Act of 2019, which opens up the energy sector and gives equal access to the electricity infrastructure in terms of transmission and distribution. Government should cut VAT, Turnover Tax, PAYE and Corporate Income Tax Rates. VAT should be reduced from 16 per cent to 10 per cent for all transactions. This will allow businesses to channel the savings back into staff retention and manufacturers for increased production.”

The BCI is the ZACCI proprietary tool that measures the level of confidence of business executives in the business environment and predicts short-term business trends.

It simply expresses perceptions on the state of the business climate in one figure (index) with 100 points as the median, meaning that, a BCI higher than 100 points signifies positive sentiments about the business climate, and one lower than 100 points signifies negative sentiments about the business climate.

Further, the tool is calculated out of the current business moods and expectations for the future.