Madison predicts economic fundamentals outlook

ZAMBIA’S economic fundamentals are not likely to have significant changes in the second half of the year as witnessed in the previous period, Madison Finance Company Limited has predicted.
However, the company has recorded growth in interest income from about K35 million in the first half of last year to over K46 million in the same period this year despite adverse economic conditions in the first half of this year.
In its summary of unaudited results for six months ended June 30, 2016, the company attributes this to the anticipated continued low copper prices on the international market and power shortage.
“The current economic fundamentals are not expected to reverse in the second half of the year as copper prices are expected to remain relatively low and power deficit challenges equally not expected to improve significantly,” the report reads.
Other contributing factors include the tight liquidity conditions in the market which is not expected to reduce hence the cost of funds will remain high with exchange and inflation rates also expected to remain unfavourable.
Currently, the interest rates are between 40 and 45 percent while inflation rate is at 20.20 percent and exchange rate is between K9.70 and K9.90.
“In view of these [various challenges], the company’s performance in the second half of 2016 is not expected to significantly improve. However, the first-half performance is expected to be sustained with marginal improvements,” the report reads.
During the period under review, economic situation has impacted negatively on the business and resulted into various challenges such as increase in operation costs due to unfavourable exchange rates and high inflation that lead to lower than budget profit.
Other challenges are increased impairment provision on account of high default rates by micro, small and medium entrepreneurs’ clients due to the effect of power deficits and unfavourable exchange rate, among others.
“The overall financial performance of the company has generally improved when compared to that of the same period last year despite adverse economic conditions. Interest income has grown by 31 percent over the same period last year from K46,956,000 to K35,969,000,” the report states.

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