PRIVATE SECTOR CONDITIONS SHOW GLIMPSES OF RESILIENCE

As Stanbic remains optimistic that the worst of the downturn maybe behind us.

LUSAKA, ZAMBIA – COVID-19 has had a telling impact on business conditions in the local private sector since the outbreak started in Zambia earlier this year.

According to Stanbic Bank’s Purchasing Managers’ Index (PMI) for July 2020, the private sector has seen further reductions in output, new orders, and employment for the sixth successive month while input costs rose for first time in four months. A weak demand environment led companies to scale back employment and purchasing activity again.

However, the sector did show signs of recovery despite the persistent contraction to record the highest PMI reading since the start of the outbreak in March.

"Despite the business conditions continuing to deteriorate, there are signs that the worst of the downturn may have passed with the PMI reading posting its highest reading since March 2020," notes Stanbic Bank Head of Global Markets, Victor Chileshe.

Mr Chileshe explained that “at 44.6, the headline PMI for July recorded a marginal improvement on June’s 42.3. However, the figure still represented an overall marked decline in business conditions across the Zambian private sector.

“What we saw in July was that the rates of decline in output and new orders eased further from what we had in May despite business conditions continuing to deteriorate during the month. Operating conditions have now contracted for 17 successive months.”

Anecdotal evidence suggests COVID-19 remains the main factor affecting business conditions even in July. Restrictions placed on the economy to stop the virus’ spread have negatively affected several businesses over the last few months.

Since the partial lockdown was implemented, there has been a marked fall in demand while some businesses remain closed. As a result, new orders decreased sharply, albeit at the slowest pace in four months.

IHS Markit Public Relations Manager Katherine Smith added: “Due to the conditions created by the virus, we saw a similar trend in business activity which decreased at a noticeable yet softer pace.

“Further, difficulties in securing new orders meant a lack of pressure on operating capacity. Companies were therefore able to work through backlogs of work again and scaled back employment for the sixth month running.

“Moreover, the rate of job cuts quickened from that seen in June. Purchasing activity and inventories were also reduced amid a reluctance to hold excess stocks at a time of weak demand and pressure on cash flow.”

She noted that COVID-19 continued to impact suppliers' delivery times, with delays on the delivery of inputs from abroad due to border closures widely reported by firms adding that total input costs ticked up in July for the first time in four months.

“The overall increase was centred on higher purchase prices, which rose due to currency weakness,” she said.

In contrast, staff costs continued to fall amid reductions in employment and wage cuts. Companies in Zambia lowered their output prices for the fourth month running in a bid to attract customers.

Meanwhile Mr Chileshe stated that the marginal reduction was the slowest in the current sequence of decline hinting at newfound resilience by the sector.

“July saw a slight improvement in confidence regarding the 12-month outlook for business activity, though concerns around the impact of COVID-19 meant that sentiment remained well below the series average,” he said.

“Despite receiving a battering from a weak currency and harsh conditions created by the pandemic, Zambia’s private sector has demonstrated remarkable resilience to record marginal growth in July.

“Whether we can build on this growth remains to be seen but the positive psychological impact it is likely to have on the local private is cause for optimism.”

The headline figure derived from the survey is the Purchasing Managers’ Index™ (PMI™). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

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About Stanbic Bank Zambia

Stanbic Bank Zambia is part of the Standard Bank Group, Africa’s largest bank by assets.

Standard Bank Group reported total assets R2.3 trillion (about USD163 billion) at 31 December 2019, while its market capitalisation was R277 billion (USD20 billion).

The group has direct, on-the-ground representation in 20 African countries and in 5 global financial centres. Standard Bank Group has more than 1 100 branches and 9 000 ATMs in Africa, making it one of the largest banking networks on the continent. It provides global connections backed by deep insights into the countries where it operates.

Stanbic Bank Zambia is the largest bank in Zambia by balance sheet and provides the full spectrum of financial services. Its Corporate and Investment Banking (CIB) division serves a wide range of requirements for banking, finance, trading, investment, risk management and advisory services. Corporate and Investment Banking delivers this comprehensive range of products and services relating to: investment banking; global markets; and global transactional products and services.

Standard Bank’s corporate and investment banking expertise is focused on industry sectors that are most relevant to emerging markets. It has strong offerings in mining and metals; oil, gas and renewables; power and infrastructure; agribusiness; telecommunications and media; and financial institutions.

Stanbic Bank Zambia’s Personal and Business Banking unit (PBB) offers banking and other financial services to individuals and small-to-medium enterprises. PBB serves the increasing need among Africa’s small business and individual customers for banking products that can meet their shifting expectations and growing wealth.

For further information, go to http://www.stanbicbank.co.zm/

Gillian Langmead at Langmead & Baker Ltd;

+260 979 060705;

[email protected]