ZAMBIA’S PRIVATE SECTOR SIGNALS HOPE FOR RECOVERY IN JUNE PMI

LUSAKA, ZAMBIA – Business conditions in the private sector in Zambia have signaled hope for improvement for the first time in 90 days, despite the negative impact of COVID-19 on local enterprises.

In June business experienced the softest deterioration in business conditions in the last three months, according to the latest Stanbic Bank Zambia IHS Markit Purchasing Managers’ Index.

The headline PMI rose to 42.3 in June from May's record low of 34.8, indicating a slight recovery from the worst constriction in five years caused by the respiratory disease.

“The coronavirus disease 2019 (COVID-19) pandemic continued to negatively impact the Zambian private sector in June, although there were signs that the worst of the downturn may have passed,” said Victor Chileshe, the Head of Global Markets at award-winning Stanbic Bank Zambia.

Headline PMI readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

Business conditions in Zambia have worsened in each month since March 2019.

“Output, new orders and employment all continued to decrease sharply, but at softer rates than in May. Meanwhile, input costs fell again, enabling firms to lower their selling prices to help stimulate demand,” Mr Chileshe explained.

He attributed low demand for products and services in the private sector to travel restrictions effected by various countries to prevent the spread of COVID-19.

“COVID-19 continued to harm demand, with customer closures and restrictions on international travel mentioned by respondents. As a result, new orders decreased sharply. The lack of new work, alongside COVID-19 restrictions, led to a further decrease in business activity,” Mr Chileshe observed.

The Head of Global Markets further observed that the drop in new orders allowed Zambian companies to focus on outstanding workload, although staffing levels reduced due to difficulties in paying salaries.

“Falling new orders led firms to work through outstanding business, while also lowering their staffing levels. Difficulties in paying staff were also behind reduced workforce numbers,” he explained.

And, Mr Chileshe disclosed that overall input costs in the private sector decreased for the third successive month, following reduction of purchase prices and staff costs in June.

“Purchase prices fell due to a lack of demand for inputs (purchasing activity declined sharply again), which outweighed the inflationary impact of currency weakness. Meanwhile, lower staff costs reportedly reflected a combination of wage cuts and reductions in staffing levels,” he said.

Mr Chileshe added that: “With input prices falling, companies again reduced their charges in an effort to secure new orders. Selling prices were down for the third month running, albeit only marginally”.

Meanwhile, uncertainty around how long the COVID-19 pandemic will persist led to a further drop in sentiment in June.

“Although improving from May, sentiment remained weaker than the series average. There was widespread uncertainty around the outlook. Companies held a broadly neutral outlook regarding business activity over the coming year,” the Stanbic Bank Zambia head of global markets noted.

Despite uncertainties surrounding COVID-19, Stanbic Bank will continue helping create a conducive business environment for SMEs in the country.

The award-winning bank recently announced a loan relief initiative for its clients and called on businesses to engage the bank when faced with financial problems as a result of COVID-19.

This was followed by a launch of Africa’s first ever China Africa trade corridor as part of Stanbic’s goal to connect local businesses to import and export opportunities in China and help ease the virus’ impact on trade as well as support businesses beyond the pandemic.

Stanbic has been named Zambia’s best bank in the Euromoney Excellence Awards 2020.

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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]