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Depreciation of Kwacha hindrance to private sector development – PSDA

“The private sectors need to protect their businesses. But if the rate of the Kwacha continues to fluctuate, private companies are forced to hedge against inflation,” says Private Sector Development Association (PSDA) chairperson Yusuf Dodia. THE Private Sector Development Association (PSDA) says the continuous instability and depreciation of the Kwacha against major world currencies threatens the growth and development of the private sector.

Speaking in an interview with the Lusaka Star, PSDA chairperson Yusuf Dodia said the private sector business environment in the country will continue to worsen if nothing is done to save the free falling kwacha, adding that foreign currency was the life line of the Zambian economy.

Mr. Dodia explained that the Kwacha’s inconsistency negatively affected business activities in the country stating, “There is need for a predictable exchange rate to protect private sector business.”

He added, “The private sector need to protect their businesses. But if the rate of the Kwacha continues to fluctuate, private companies are forced to hedge against inflation.”

Mr. Dodia further added that the private sector needed to re-evaluate the pricing of their goods in order to reflect the current value of the United States Dollar.

The PSDA Chairperson noted that the continued economic problems being faced in the country have led to the closure of some companies, with other institutions constantly laying off workers in a bid to save their businesses.

“The Private sector also faces sales problems because when the Kwacha depreciates and prices go up, their products sit in their stores for six months for example … which would have been sold in one month and this leads to a reduction in productivity.

“These problems have seen some companies being operational yet not producing anything, meaning the country will see even less foreign currency thereby contributing to the Kwacha getting weaker,” he explained.

Mr. Dodia was however quick to mention that despite the current economic problems being faced in the country, investors have continued to show interest in bringing more investment into Zambia.

He has since called for national reforms that will boost investor confidence in the country’s private sector.
“Investor confidence in the country is still good and strong even with the current problems we are facing. Investor confidence is however affected when government begins to take away businesses,” he said.

Meanwhile, University of Zambia (UNZA) development studies lecturer Francis Chigunta said the current instability of the local currency calls for concerted efforts from all major stakeholders.

Dr. Chigunta said the increase in the value of the Dollar was negatively impacting the country’s business community.

“The performance of the Kwacha is extremely worrying in that it is depreciating at a very fast rate, hence causing uncertainty in terms of business planning,” he noted.

Dr. Chigunta, who is also a Cambridge University Alumni explained that most African currencies have continued to suffer external economic shocks.

He however noted that the situation was worse in Zambia than any other country due to the fact that the country was not economically independent, adding that the continued power deficits being faced posed even greater challenges.

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