Entrepreneurship Zone: 07 February 2024 :: Dealing with Zambia’s economic headwinds: American CEO shares experiences

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Entrepreneurship Zone: 07 February  2024 ::  Dealing with Zambia’s economic headwinds: American CEO shares experiences

 


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American-born Carl Jensen, co-founder and CEO of Zambia-based Good Nature Agro (GNA), cites macroeconomic issues, especially those pertaining to currency, as the primary challenges the company has encountered since its establishment in 2014.

GNA contracts over 20,000 small-scale farmers to grow legume seeds and commodities – such as cowpea, soya bean, and groundnuts – and then purchases these products from the farmers to sell at a profit.

Jensen says he has been surprised by how much the company’s direction has been impacted by forex-related matters. Over the past decade, the Zambian kwacha has lost over 300% of its value to the US dollar. Additionally, a scarcity of US dollars in neighbouring countries has also impacted GNA. A case in point is Malawi, where GNA was developing a strong customer base until a US dollar shortage in the country led to a significant decrease in imports.

Zambia’s heavy debt burden has been a pressing issue over the past few years. In November 2020, the country was the first in Africa to default on its debt repayments amidst the Covid-19 pandemic, as the nation’s external debt climbed from $4.8 billion in 2014 to $11.2 billion in 2019. Three years later, Zambia is still negotiating with its creditors. In November, Zambia experienced a significant blow when its official creditors, including China, turned down a renegotiated agreement to restructure $3 billion in Eurobonds (bonds denominated in a currency other than that of the issuer’s country). On Monday, the country’s finance minister said he is unable to provide a timeline for reaching a debt restructuring agreement with private creditors.

According to Jensen it has been a “rough ride” but he says he has confidence in the country’s current trajectory. “We’re still riding a depreciating kwacha but in large part it’s because some of the tough points are being addressed. The kind of out of control borrowing that took place years prior has left the country in a really rough spot … The government is working hard to restructure all of those and progress has been good. They’ve been cutting back on several programmes that were just kind of bleeding money … So even though it’s a little painful right now – with quite a bit of inflation, continued depreciation, higher costs where subsidies have been removed on things like fuel – I think it is all for the good.”



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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

 


 

 


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