ABSA Zambia prognosis on HH and likely changes

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Following the successful elections this last weekend, please find below brief profile of the President and anticipated changes. We will continue to provide you updates.


* Born in 1962, the president elect, Mr. Hakainde Hichilema (popularly known as HH) is a seasoned business man, commercial farmer & politician and is leader of the United Party for National Development (UPND). He ascended to the helm of the UPND in 2006 following the death of Mr. Anderson Mazoka. HH has contested the presidency 5 times (over the last 15 years) and has finally ascended to the helm in August 2021 by winning the elections and beating the incumbent President Edgar Lungu of the Patriotic Front by over 1 million votes.
* Mr. Hichilema holds a BA Economics and Business Administration (University of Zambia) and MBA Finance and Business Strategy (University of Birmingham). His career spans across a wide range of activities including being Chief Executive and also Chairman for a number of companies and boards respectively. Noteworthy is HH having served as the board chairman for Barclays Bank Zambia Plc (30 March 2004 to 14 July 2006), having served on 24 other boards in various capacities including chairman and being a member of the Institute of Directors for Zambia.
* The UPND is targeting to achieve a GDP growth rate of 10% in order for the country to achieve the 2030 vision in the party’s manifesto. Three of the key programs to be undertaken by the new government are (i) Economic transformation (ii) entrepreneurship and (iii) digital revolution


* Incumbent Bank of Zambia Governor is expected to be replaced very soon. The same is expected with other presidential appointees (Security wings, Permanent secretaries, Secretary to the Treasury, Utility Company chief executives, NAPSA, ZRA etc.) This is a usual trend whenever there is a change of government.

* Significant structural and some policy changes are expected in the government agencies.
* Financial and budgetary reforms as we head into the budget season are also expected. It will be key to see the 2022 national budget to be presented in October this year.

* Removal of middlemen in the fuel and agriculture sector that added little value but increased government cost in Crude oil importation and FISP is expected.

* Reforms in the FX Market are expected to come – Mineral royalty taxes and other mining statutory obligations may be collected in ZMW once again allowing increased FX supply on the market which will support the Kwacha. Further, direct Central Bank intervention to force a Kwacha appreciation like we saw during run up to elections will stop.
* The Kwacha is expected to appreciate against the US Dollar in the short to medium term from the current 19.3 to 15.0 on the back of positive market sentiment/investor confidence. (New government is projecting a rate of 10.0 USD/ZMW)

* The offshore investors that sold USD and bought Zambian government bonds in the last 2 to 3 months at yields averaging 34% are expected to continue aggressively participating in the auctions. We have already noted offshore investors trying to sell dollars today and position to buy more bonds in the next auction, implying a rally in the bond market. The dollar flows will help support the kwacha appreciation and interest rates are expected to start going down (full shift of the yield curve which will filter to other market interest rates). We expect market rates to drop 400 – 500 basis points on average in the short term.
* The BOZ Bond Buy-Back program that had commenced last year is likely to be stopped despite it having been planned for the full year 2021. The continuation of this will depend on the objectives of the new Governor/Minister of Finance

* Public expenditure tightening and close monitoring and accountability is expected.
* IMF Programme implementation expected to resume with some measure of confidence in the governance system. A fully funded program is expected and the new government will utilize the $1.4 billion SDR which may most likely be used to boost FX reserves. There’s also an expectation that the IMF program will be concluded in the very short term and at a faster pace than was the case with the previous government.

* We anticipate rating agencies to improve the country rating (from Junk) and outlook in the medium term as the political risk is reduced and with a funded IMF program on board.
* A review of mining tax regime which has been poised to offer huge concessions to the mining corporates at the expense of personal income tax as the new government endeavors to empower the masses

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