The impact of the soon to be introduced Sales Tax in Zambia that takes effect this April is not known, according to Victor Chileshe Head of Global Markets Stanbic Zambia in a response to a question from Financial Insight at an event hosted at Radisson Blu hotel in Lusaka.
Stanbic Bank Zambia held their annual Economy 360 degree event whose focus was discuss the state of the Zambia economy, impact of debt and the Purchasing Managers index which their Global Markets division publishes on the 5th of every calendar month. The purpose of the PMI is to provide information about current business conditions to company decision makers, analysts and purchasing managers. The purchasing manager’s index for February 2018 rose for the first time in 7 months showing signs of recovery, according to Stanbic Bank Zambia’s PMI statement released on the 6th of February 2019.
Due to lack of information on the rates of sales tax to be used come April, it was difficult to forecast whether or not the new regime would have an adverse impact on PMI. However, when asked whether interdependencies between the South African and Zambian economies would impact the Zambia PMI owing to the amount of raw materials that came out of South Africa, the Global Markets’ position was that purchasing managers would certainly feel the effects of fluctuations between Kwacha and Rand currencies.
Emphasis on “reigning in” fiscal conditions that posed risk following the identification of clear signals that show strain caused by rising domestic and international debt, a cooling off period was proposed that could help realign economic fundamentals. Drawing a comparison of other countries such as Ghana and Nigeria, among others, that have also been in analogous economic conditions, the appetite for aggressive infrastructure development could be slowed down in order for the ripple benefits of brand new infrastructure to kick in, according to Phumelele Mbiyo, Head of Research Africa, Standard Bank during a Q&A at the event. Furthermore, this could have an inadvertent effect of slowing down the rapidly reduction national reserves that have seen their sharpest continued decline to now stand at barely under 2 month cover.