A Four-Year Comprehensive Analysis of ZAMEFA Financial Reports
Manufacturing, ZAMEFA Plc

Metal Fabricators of Zambia (ZAMEFA), a public limited liability company incorporated in the Republic of Zambia under the companies Act, first started its operations in 1968, just over 4 years after the independence of Zambia; it was later privatized in 1996 and in 2004 it was listed on the Lusaka Securities Exchange. The majority shareholders of ZAMEFA is Reunert International Investment of Mauritius which owns about 75% of shares and the rest is owned by a portfolio of investors and individuals who include employees of the company.



After its listing on the Lusaka securities exchange, ZAMEFA, Just like any other public liability company, is mandated by the Securities Act to make public its financial activities at the end of its financial year; it does so through its annual reports. Of interest to this article is the 2020 ZAMEFA  annual report; this article will analyze the afore-mentioned annual report while making reference to the 2017, 2018, and 2019 annual reports so as to give a comprehensive insight into the operations of ZAMEFA.


The past three financial years have not been kind to ZAMEFA. The company, even before Covid-19 came on the scene, was going through tough times as evidenced by its financials. Despite the profit margin and revenue gains of 17% and 9% respectively in 2017, mainly due to increase in copper prices on the international market, the board through its chairman lamented the difficulty with which the regional business environment, of that year, came with. “The region had challenges which included a six months downturn demand of copper in Kenya due to elections; policy changes in Tanzania and South Africa continued to register slow growth. These negatively impacted our production as well as sales volumes which in turn had adverse effect on revenue”, stated AE Dickson, Board chairman.


2017 to ZAMEFA was more like just an introduction to the difficulty times that were coming ahead. The two financial years that followed, in the words of the chairman, were disappointing. This time, the liquidity challenges the country was facing and the continued accumulation of VAT refunds exacerbated the already existing woes the company was facing. The building up of VAT refunds led to an increase in receivables as result the company became short on cash as a consequence, it was pushed to contract US$ debt. The depreciation of the Kwacha made even more difficulty for the company to service the debt; as the currency depreciated the cost of servicing the debt continued to go up and ZAMEFA ended up making losses in exchange rates.


In 2018, the company made losses amounting to K88.8M and the following year the losses stood at K88.6M, and in both financial years, these losses were before taxes could even be accounted for! To curb the rising costs; due to losses, increasing receivables and interest payments, the Board was left with no choice but to instruct management to restrict output. According to the chairman of the board, these actions were unavoidable in an effort to ensure that the group would be in a position to discharge its obligation as they fall due.


As is the case with many businesses, the year 2020 has been tough due to Covid-19. 2020 financial year has been the worst, among the years under study for ZAMEFA; the worst in terms of revenue generation since 2016. According to the recently published annual report showing financial results for the year ended, 30 September 2020, the company’s revenue fell to K99.5M from K1.3B of the prior year, K1.2B of 2018 and K1.18B of 2017. The VAT refund ZRA owes the company is said to be at an all time unsustainable high. As if that is not challenging enough, the conditions of operations were made even more difficulty due to the shortage of copper cathodes in Zambia, in the first half of the 2020 financial year, due to Covid-19 restrictions. In addition, the continued depreciation of the Kwacha, made even worse by Covid, led to foreign exchange losses as a result the company found it difficult to service its US$ debt. By the end of the financial year, the losses before taxes stood at a whooping K233M from K 68.8M recorded in the 2019 financial year, representing a more than 200% increase.


Due to continued foreign exchange losses, the company and group were facing, the board decided to enter into an agreement that allowed the long term loan to be reclassified as an equity loan with 0% interest rate. To quote the Board chairman’s words, “I am happy to report that at the end of July 2020, the Board approved an addendum to the long term agreement between the company and the majority shareholders which allows the loan to be classified as an equity loan and interest has been reduced to 0%”.


However, despite the challenges stated above, ZAMEFA’s management has expressed optimism in future prospects. The optimism expressed by the company’s management may have been motivated by the increased copper prices on the international market. During the 2020 financial year, of the company, copper prices averaged $6700/ton. “The export market is slowly opening up and so are the contractors and miners locally which are our major drivers of volume” said the managing director. Seeing that ZAMEFA activities are mostly determined by the activities in the mines, it is quite understandable why management appears excited about the signs of ‘life’ in the mines’ activities.

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