Proposed legislation forcing Zambian exporters to bank their earnings locally could drive up costs for companies in Africa’s biggest copper producer, Chamber of Mines General Manager Frederick Bantubonse said.
The government is drafting the statutory instrument to boost economic growth, the Times of Zambia said on July 14, citing Deputy Finance Minister Miles Sampa. Exporters will need to obtain letters of credit from the government before exporting goods, and deposit the proceeds with local banks, the state- owned newspaper reported.
Miners sell their products mainly in dollars, and “there will be the cost of converting the forex” into the local kwacha if the planned law, known as Statutory Instrument 34, requires companies to do so before depositing the cash in local banks, Bantubonse said by phone from Lusaka, the capital.
Glencore International Plc, London-based Vedanta Resources Plc (VED) and Canada’s First Quantum Minerals Ltd. (FM) have mines in the country.
Companies may need to keep export earnings in Zambian bank accounts for one or two months under the new legislation, Bantubonse said, adding that there was a lack of clarity as the government had not yet disclosed details.
The Finance Ministry has not consulted the Chamber of Mines over the planned legislation, he said.
“There is now a war between industry and the government” because the state has not adequately consulted business over legislative changes this year, Bantubonse said. The government on May 18 implemented a new law banning local transactions in foreign currencies, forcing companies to accumulate kwacha.
The legislation was the main cause of a 9 percent rally in the kwacha from the start of June until July 11, which made it the world’s best-performing currency in the period, Michael Keenan, a Johannesburg-based strategist at Absa Capital, a Barclays Plc (BARC) unit, said July 18.
“These fluctuations make it difficult for the economy,” said Bantubonse. Sampa did not respond to calls seeking comment.
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