LUSAKA, ZAMBIA – The capital market in Zambia has the potential to excel above average, despite the current economic challenges, observes Philip Chitalu, Chief Executive Officer of the Securities and Exchange Commission (SEC).
Speaking in a recent Anakazi Banking Online Conversation, Chitalu was confident that the country’s capital market could grow if the exchange rate and inflation were closely monitored.
“We really have to watch our inflation (currently at 15.9%); we watch the performance of the money markets in terms of returns on bond, and of course, we have to watch the exchange rate; it has to be stable to encourage people to invest for the long term,” he said.
Chitalu underscored the importance of a stable currency to the performance of the capital market.
“The stability of the exchange rate is very, very key to the performance of capital markets, because if I bring $1 million into the economy, how much do I take out in 12 months? If the exchange rate has moved against me, and if I did not hedge, then I would have lost out,” he noted.
The SEC boss stressed that high inflation could negatively impact the capital market as it would discourage long-term investment.
“With your inflation going up, investing long-term becomes of concern to most people because then you’ll have your capital eroded within a short period of time,” Chitalu observed.
And Regional Debt Capital Markets at Stanbic Bank Zambia Mwila Pascal Mwenya called for introduction of a capital market index that will measure economic performance in Zambia.
“In Zambia, we’ve seen the growth of Stanbic’s PMI as an economic indicator that stands out, and we have the dollar-kwacha indicator, but what’s missing is the LuSE index, which should be there, and looked at as the first line indicator of whether the economy is heading this way or that way,” he observed.
Mwila explained that: “If you have a healthy and functioning capital market, it becomes another barometer for the economy, which can be used to quote whether the economy is performing well or performing badly. And so, it’s very, very important that we have a capital market that is robust enough for the index to be used as a barometer for the economy”.