Strong kwacha alone is not enough-Manufacturers
ZAM president Mohammed Umar
By Carol Sichone
The recent appreciation of the Zambian kwacha, while broadly welcomed, is not sufficient on its own to guarantee long-term sustainability in the manufacturing sector, the Zambian Association of Manufacturers (ZAM) has said, calling instead for currency stability and predictability.
Speaking to Zambian Business Times- ZBT, in an interview, ZAM president Mohammed Umar said manufacturers welcome the strengthening of the local currency, particularly as it helps reduce the cost of importing raw materials, but cautioned that short-term gains must not be mistaken for structural solutions.
”A strong kwacha alone is not enough,” Umar said. “What matters is sustainability,”Umar said.
“what the sector is really calling for is stability. Stability is key for planning, especially in manufacturing where decisions are medium to long term.”
Umar attributed the recent movement in the exchange rate to a combination of market forces, including new Bank of Zambia currency regulations introduced late last year, treasury bill auctions, and provisional corporate tax payments due in early January. He noted that these factors may have temporarily supported the kwacha, while renewed demand for foreign currency was already beginning to exert pressure on the local unit.
“These are all market forces,” he said, adding that currency movements remain fluid and subject to shifts in demand and supply.
While a stronger kwacha lowers the cost of imported inputs, Umar explained that manufacturers continue to face high fixed local costs, including borrowing costs, taxes, logistics and other operational expenses, which limit the extent to which exchange rate gains translate into broad-based relief for the sector.
Umar further stressed that manufacturers place greater value on exchange rate stability than strength, noting that volatility complicates budgeting, investment planning and procurement decisions.
“With a stable exchange rate, it becomes much easier to plan,” Umar said. “Predictability allows businesses to make informed decisions and invest with confidence.
On the impact of the stronger kwacha on the competitiveness of Zambian manufactured exports, Umar said it was still too early to draw firm conclusions, as most factories were only reopening following the industrial break and market conditions were still adjusting.
Umar reiterated that while currency appreciation is positive, it must be supported by sound and consistent economic policies to ensure sustainability and long-term growth of Zambia’s manufacturing base. – Zambia Business Times.
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