Zambian Emeralds Must Benefit the People - Musukwa

Mila Kunis - the face of Gemfields
 - wearing a necklace of Zambian emeralds by Fabergé.
Photograph: Mario Sorrenti

The government has dismissed claims that Kagem Mine, the world’s largest emerald miner, would loose almost a fifth of its market value after the announcement that the country will not allow the sale of gemstones abroad.

Shares in Gemfields, a London-listed company which owns 75% of Kagem, plunged this week after the mining firm warned that Zambia's plans to clean up the gemstone trade would put its profitability at risk.

On Monday, Mines Minister Yamfwa Mukanga said the government planned to ban the sale of Zambian gemstones outside the country, a move which Gemfields claimed would knock its profits.

Gemfields, which recently signed up the Hollywood star Mila Kunis as the face of the company, said any "limitation on selling emeralds in other countries could have the potential to materially constrain Kagem's revenues".

The Kagem mine, which is 25% owned by the Zambian government, produced 21m carats of the precious stones last year. All of the mine's output, worth some $160 million since 2009, has been sold abroad in 11 auctions.

In response to Gemfields’ claims Deputy Minister of Mines and Natural Resources Richard Musukwa told a meeting of investors in London on Thursday that the recent policy change on the sale of Zambian emeralds was aimed at ensuring that the proceeds of the precious resource benefitted the local people.

Musukwa said it was wrong to suggest that the decision to compel Kagem Mine to include Zambia on the Auction Circuit, is meant to stiffle the company operations.

To the contrary, the minister explained, the Zambian wanted to create equity in the distribution of benefits from the precious stones sector.

“We are making Kagem more viable, we are growing the local gems market and increase Zambian participation in the auctions. Zambians must rise to this challenge. We want to re-establish the rapidaries and promote cutting and polishing of the gems locally,” he stated. “Obviously this may not sound good to those wishing to maintain the status quo (of auctioning Zambian emeralds gems abroad only). Our aim is to see value-addition on the Zambian gems. I urge international partners to support the Lusaka auctions in the same way they support Kagem’s international auctions.”

Musukwa explained that the inclusion of Zambia on the Auction Circuit would result in massive investments into host communities.

He added that the changes will also help government curb secondary and illegal dealers who were undermining both the industry and the government in terms of tax losses due to evasion.

This is according to a statement made available by Press Secretary at the Zambian Embassy in London, Amos Chanda.

Local Money Market Rates

ZANACO - The Kwacha traded relatively flat against the U.S. dollar on Tuesday as improved dollar inflows curtailed a fall of the local currency seen in the previous session.

At market open the domestic unit was trading at 5.405/5.425, marginally up by KR0.005 from its previous close. Trading was more balanced on the day as dollar supply picked from selling from some offshore and local interbank players.

On the other hand demand for the greenback from corporates in various sectors remained strong putting pressure on the Kwacha.

The Kwacha closed the day unchanged from its opening level as a result and is in the near term expected to range within KR5.350 and KR5.450
Tuesday saw market liquidity considerably dropping to touch KR838.5 million from the previous levels of KR1 013.7 million.

Funds traded by commercial banks decreased to KR206.5 million from KR244.5 million and the weighted average interbank lending rate remained unchanged at 9.25%.

Kwacha Update

Wednesday, 20 March 2013 : StanChart

BID OFFER

USD/ZMW 5.3550 5.4560
ZAR/ZMW 0.5797 0.5913
EUR/USD 1.2774 1.2976
GBP/USD 1.4983 1.5186
GBP/ZMW 8.0785 8.2309

LOCAL AND INTERNATIONAL NEWS
ZMW
 Yesterday ZMW exhibited a similar trend to Monday’s trading
against USD. The Inter-Bank closed at 5.390-5.410. Kwacha in
the short term seems to be bearish with some resistance at the
5.440 level.
International News

 Bloomberg- The euro weakened toward the lowest in almost
four months against the dollar after the Cypriot parliament
voted down a bank-deposit levy needed to secure a bailout,
risking renewed tumult in the currency bloc.
The euro fell 0.1 percent to $1.2873 as of 1:35 pm in Singapore
from $1.2882 in New York yesterday, when it touched $1.2844,
the weakest since Nov. 22.

 The Cypriot parliament strongly rejected the bill (36-0 with 19
abstentions) creating further uncertainty in the troubled Euro
zone. EU countries had warned of withholding the EUR 10b aid
if the vote did not go through.

 Brent could not hold on to its Monday gains and made a new
low. We see 106.25 as the next support.

Previous % 5.48 11.24 11.74 12.74 10.98 13.50 16.50 16.60
Current % 5.50 12.24 11.74 12.49 11.99 14.79 16.98 16.60

Zambia Needs Much More Than MIC Status

By Mutale Kapekele

The Zambian government says the country’s upgrade to a lower middle-income status is not enough success for the country, as it would like to see prosperous citizens.

Speaking when he addressed the From Low To Middle Income Status: Preparing Zambia to Create The Future Conference, organised by Oxfam, Ministry of Finance Deputy Director Crane Muleya, said there was still need for economic growth to translate into success for citizens.

“Much as we have achieved the lower middle income status, we also want to be prosperous, which means a lot of things,” Muleya said. “Currently, we are working towards achieving the aspirations of the Sixth National Development Plan (SNDP 2011 - 2016). This is been done through annual budgets. We want to see growth that cuts across sectors. For instance the agricultural sector has not been doing well until three years ago.”

Zambia graduated from a low income to a lower middle-income country in 2011 but statistics show a high levels of poverty which is estimated at 60 percent or 7.9 million of the close to 14 million population.
Muleya, in his presentation titled ‘Government of Zambia strategy for poverty reduction and inclusive growth,’ named poverty determinants as low agriculture productivity, lack of social security schemes, high illiteracy levels, large family sizes in rural areas, inadequate labour capacities and natural disasters.

He also said other contributing included poor access to education after the seventh grade and the inability to contract finance.

He said the Government was working towards removing structural barriers and reducing domestic borrowing to less than one percent to “leave the finances for the private sector.”

According to Muleya, Zambia desired to create an investor friendly destination by insuring political stability and a good business environment.

He said the low taxes that the government is collecting from the mines, the backbone of the Zambian economy, was an historical issue.

“The mines were on their knees at some point forcing some of them to close down,” he said. “This forced the government to negotiate the current development agreements, specifically the tax regime. Personally,

I don’t believe that tax incentives should be used to attract investment.
What is important is creating a conducive business environment and the government can work out particular legal requirements to get tax from the mines.”

In November 2012, the Zambian Government announced that the country was losing US$ 2 billion in tax avoidance with the mines winning the spot of the biggest culprit.

Learn From China Economic Growth - ZACCI

By Mutale Kapekele

Zambia Chamber of Commerce and Industry (ZACCI) says Zambia should learn from China’s example of growing its economy to the point of pushing its people from chronic poverty to the middle class.

In the last few decades China’s has splinted from a poor country to a rapid growing emerging market with an average economic growth of 12% per annum.

China’s economic growth has driven most of its poor into the middle class, an example that ZACCI says Zambia could emulate.

In an interview after the just ended ‘From Low To Middle Income Status: Preparing Zambia to Create The Future,’ ZACCI Vice President for International Relations Andrew Sinyangwe said China had planned ahead to get its economy to where it is.

He said Zambia benefited from the Chinese economic growth through mineral exports and urged the country to learn from China’s planning system.

Last year, Zambia recorded copper exports worth US$ 6.9 billion, most of which was bought by China.
“China has planned ahead. That is why they are buying so much copper for stockpiling,” Sinyangwe said. “What Zambia can do is to maximise the use of copper proceeds by developing the agriculture sector service provisions and grow the gemstone mining. We have diamonds, rutile, tin and gold just lying under the surface. We should use that wealth as a country to bridge the poverty gap.”

He said there was need for the private sector and the citizens to come up with innovative ideas of cooperation to make easier for Zambia to reduce the gap between the haves and have-nots.