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-DECEMBER-

The LuSE stock market index closed the year at 181.43 points, up 12.4% in Kwacha terms and 2.7% in dollar terms. The devaluation of the Kwacha in December has significantly eroded the dollar gains the market had been carrying right up to the year end. Still, after 1998's dismal performance, we're glad to see the situation stabilising. We're hoping Zambia's New Year's resolution is to complete its mining privatisation deals so that all of us can start the Millennium with a good year. Happy holidays to all of you and your families. As always, Pangaea thanks you for your interest and patronage.

24th December 1999

Chibuluma Mines Plc (CHIBM) Quoted on the LuSE

Chibuluma Mines Plc is now quoted on the LuSE market, effective 16^th December 1999, following registration of its shares with the Securities and Exchange Commission. This means that Chibuluma Mines Plc now trades its shares on the quoted section of the LuSE, effective 22^nd December 1999.

10th December 1999

Farmers House Announces Interim Dividends and Results

Farmers House Plc held its Board Meeting on 28^th October 1999 at which interim results for the six month period ended 30^th September 1998 were presented and approved. An interim dividend of Kw 10 per share was approved and will be payable to shareholders registered in the company's books at the close of business on 3^rd January 2000.

TZI Announces Year End Results

For the year ended 30 September 1999, TZI has announced the following results: Turnover Z$2,576.6 million, Operating Profit Z$317.7 million, Total Operations: attributable profit for the year Z$164.8 million, Earnings Per Share Z$71.2.

Zambia Sugar Announces Yearend Results

Zambia Sugar Plc has published its final results for the financial year ended 30 September 1999. The company has changed its financial year end from March to September to align its reporting with that of Zambia Sugar's majority shareholder, Tate & Lyle. The results are summarized below.

Profit/Loss Statement - Year Ended 30 September 1999

Kw Millions	1999	% Change	Annualized 1998*
Net Turnover	158,008	22.12	129,391
Operating Income	30,364	18.96	25,525
Interest	9,486	129.96	4,125
PBT	20,878	(2.44)	21,400
Tax provision	2,276	(11.09)	2,560
PAT	18,602	(1.26)	18,840
Dividends
Interim	1,845	(57.50)	4,341
Final	3,582	(48.84)	7,001
Total	5,427	(52.15)	11,342
Transfer to Reserves	13,175	75.71	7,498
EPS	3.43	(1.15)	3.47
DPS
Interim	0.34	(57.50)	0.80
Final	0.66	(48.84)	1.29
Total	1.00	(52.15)	2.09

*Yearend change

Largely due to buoyant local sales, ZSUG recorded a 22% increase in net turnover from Kw 129.4 billion in FY1998 to Kw 158.0 billion in FY1999 notwithstanding weakness in world sugar prices. Unit sales increased by some 20% over the year (a result of smaller packaging to fit consumer budgets), despite a drop in consumer disposable incomes. The increase in local sales was due to several factors. During the year, the company adopted a new marketing and sales strategy that included an improved depot network able to cater for the remotest of areas of the country. Also, given the difficult economic conditions and the attendant decline in consumer purchasing power, the company began to offer its product in smaller packets, greatly boosting sales at the retail end of the market. Finally, working closely with government, illegal imports of sugar were virtually eliminated.

Unfortunately, sales into the company's primary export market, the DRC, suffered a dramatic decline largely due to the continuing civil unrest in that country. Historically, the DRC has contributed a significant percentage of ZSUG's export earnings. Although new markets were developed father afield, these yielded lower margins. In addition to that, current low world sugar prices increased competition and reduced margins in traditional export markets.

While the operating profit margin remained virtually unchanged from the previous year at just over 19%, profit after tax declined by 1.26%. This was almost entirely due to a 130% increase in the company's interest expense burden, going from Kw 4.1 billion in 1998 to Kw 9.5 billion in 1999. Some of the company's interest expense typically arises from overdraft facilities from local banks used to finance working capital requirements. (ZSUG has high cash requirements when it is buying and stock piling sugar cane for processing, and becomes a net borrower of funds during these periods. As the finished products are sold, however, this exposure is significantly reduced.) However, in this instance, the main change is due to ZSUG's servicing a hard currency loan secured from Tate & Lyle in early 1998. With its hard currency revenues falling in FY 1999 due to reduced exports, ZSUG had some exchange rate exposure resulting in a Kw 3.6 billion Foreign Exchange loss.

As can be seen above, Zambia Sugar's performance has suffered over the past two years, largely due to conditions outside the company's ability to control. The worldwide glut in the sugar market, which has depressed prices dramatically, and the rapid deterioration in ZSUG's export earnings due to the hostilities in the DRC are both factors that the company is unable to influence in any way. Given this scenario, management's performance over factors it can control must be seen as credible. The programmes it has implemented to cut costs and boost domestic sales rather significantly in a declining local economy have been successful. And, when world sugar prices increase (something that is now just beginning to happen) and export markets re-open, the company is extremely well positioned to expand its sales and profitability accordingly. Nonetheless, investors can see that this company is in a mature business with growth prospects tied to macroeconomic factors - leaving the company unable able to determine its "profit destiny".

Given the company's high debt level and the high prevailing interest rates, the Board of ZSUG reduced the dividend payout from its historic rate of 60% to 29% for the just completed financial year. Combined with the interim dividend of Kw 0.34 per share paid at mid-year, the final dividend of Kw 0.66 will result in a total dividend for the year of Kw 1.00 per share, a 52% decline from the Kw 2.09 per share paid the previous year.

At the current market price of Kw 10, the company's shares are trading at a price/earnings multiple of 3, which is considerably lower than other sugar producers in the region. We are confident that Zambia Sugar has strong fundamentals and a very efficient cost structure. Notwithstanding the cyclical, mature market in which it operates, once ZSUG retires its outstanding external loan (which we are told, is being syndicated by a group of local banks), the Zambian economy improves, and export markets return (especially the DRC), it is very likely that incremental increases in revenue will make significant contributions to bottom line earnings. The immediate key to the company's revival and the economy's as a whole, is the sale of the remaining mining assets. Should that deal be successfully completed in early 2000, it will lead to increased investment, an improved economy and a stable Kwacha. (We believe the Kwacha will slide marginally in the short term as local firms increase imports in expectation of an upturn in the economy. Thereafter, it is expected that the Kwacha will then stabalise and in fact start appreciating slowly, as the economy gets back on its feet and as foreign investors begin making investments to improve the mines and other related industries.) With ZSUG management's expectations of improved yields from cane and in turn, a lower cost of production as well as the possibility of an upturn on the revenues side, we recommend Zambia Sugar as a SPECULATIVE BUY at its current market price of Kw 10.

Update on ZCCM

ZCCM has a Board meeting scheduled for Tuesday, 14^th December and we are told that during that meeting, the agreement to sell the Nchanga and Konkola mines to Anglo American will finally be approved. Anglo executives had informed us some time ago that they would be ready from their side to sign the agreement by mid-December, and we are told that, in fact, there will be a formal signing ceremony on 15^th December, the day following the ZCCM Board meeting. Upon signing, the two mines will officially change hands and we should, at long last, begin to see the conclusion of deals on the sale of all the remaining ZCCM assets. With the sale of Nchanga and Konkola, which will pave the way for Anglo to begin work on the new Konkola Deep Mining project as well, we could see an acceleration in the process by which the remaining assets are sold; Nkana being the next likely candidate. In an earlier article we reported on the symbiotic nature of the Nchanga and Nkana mines; Nchanga needs the smelter at Nkana to process its ore; Nkana needs the ore from Nchanga. With Nchanga in the hands of Anglo, there should be increased confidence among the parties interested in Nkana and, assuming goodwill and a desire to complete the sales programme on the part of the government, we could see this one sold in short order. In addition to the purchase of Nchanga and Konkola, Anglo will also be given a contract to manage the Nkana and Nampundwe mines while discussions with other interested parties on the sale of these two mines continue. As we earlier reported, both First Quantum of Canada and Metorex of South Africa have expressed strong interest in these assets.

We all look forward somewhat breathlessly to next week's events. Should the above transpire, it would be without a doubt the best yearend gift the ailing Zambian economy and its business community could possibly be given and we could all begin to look forward to 2000 with some degree of renewed optimism.

3rd December 1999

Farmers House Announces Interim Dividends and Results

Farmers House Plc held its Board Meeting on 28^th October 1999 at which interim results for the six month period ended 30^th September 1998 were presented and approved. An interim dividend of Kw 10 per share was approved and will be payable to shareholders registered in the company's books at the close of business on 3^rd January 2000.

Chilanga Cement - Cautionary Notice

Chilanga Cement has been invited to enter into discussions with regard to a possible investment. Accordingly, investors are advised to exercise caution when trading in the Company's shares and should seek the professional advice of a broker or investment advisor for guidance. Shareholders and the market will be kept fully informed of any subsequent developments in these discussions.

Update on Sale of Remaining ZCCM Assets

Earlier we reported that the Government, ZCCM and Anglo had signed a "Heads of Agreement" for the Nchanga and Nampundwe mines and the Konkola Deep project. Anglo is working all out to conclude the transaction and informs us that they will have documents ready for signing by mid-December; well in advance of the end-January target date for completion (or the March date mentioned by IFC and reported last week). While Anglo had offered to manage the Nkana mine, but were not prepared to make the capital commitment that would have been required for its rehabilitation, it now appears that other bidders have come forward. First Quantum Minerals, the Canadian company that acquired and turned around the Bwana Mkubwa operation into a profitable entity, has confirmed its interest. Similarly, Metorex of South Africa, the purchaser of the Chibuluma mine has just completed its own due diligence on the Nkana mine. Metorex has managed to reduce costs at the Chibuluma mine from over US$ 1.00 per pound when it took over to US$ .54 per pound at present. There is a highly symbiotic relationship between the Nchanga and Nkana mines; Nchanga needs the smelter at Nkana to process its ore; Nkana needs Nchanga's ore to keep its smelter going. With Anglo owning Nchanga, and guaranteeing ore for processing at the smelter, Nkana suddenly becomes a much more attractive asset and thus the reason for the recent spate of interest from First Quantum and Metorex. Certainly, Anglo would feel much more confident were the mine to be sold to a private owner/operator.

-NOVEMBER-

Work Continues on ZCCM Deal

Reliable sources at IFC confirmed to Pangaea that they are vigorously working to get final approval for and completion of the ZCCM/Anglo deal. They are confident that both Government and Anglo are serious about the deal. Estimated closing date is late March. IFC also believes the Codelco deal fell apart mainly because of domestic Chilean pressures, not Zambian or Anglo issues.

19th November 1999

Zambia Sugar Dividend Correction

The proposed final dividend for the year ended 30^th September 1999 is Kw 0.66 per share and not Kw 1.71 per share as earlier reported by the Lusaka Stock Exchange (LuSE).

National Breweries Plc Final Results

For the year ended 30^th September 1999, National Breweries Plc reports net turnover of Kw 21,551 million, profit before tax of Kw 78 million and after tax adjustments a porfit for the year of Kw 803 million. Earnings per share is Kw 12.74 and proposed final dividend is Kw 8.89 per share.

Zambia Sugar (ZSUG) Board Meeting

The Board meeting which was scheduled for 11^th November, 1999 has been postponed to 24^th November to allow overseas directors to attend the meeting. A committee of the Board will meet on 15^th November, 1999 to specifically approve the accounts for year ended 26^th September, 1999. Results for the year will be published thereafter.

New PTA Bank Debt Issue

The Eastern and Southern Africa Trade and Development Bank (PTA Bank) has announced that it plans to raise up to US$ 20 million through a Note Insurance Programme (NIP) in Zambia. The US$ 20 million will be raised in a series of tranches over a period of time that is yet to be determined. But, presumably, the funds will be raised as a function of conditions in the market. The Bank is planning to apply for a listing of the Notes on the Lusaka Stock Exchange which will make them the first privately placed debt stock to be listed. Once listed, the notes may then be traded in the secondary market much the same as Government Bonds. The funds raised in the programme will remain in Zambia and be used by the Bank to provide financing to export-oriented businesses.

Under the programme, the Bank will issue Notes denominated in, and/or linked to, United States Dollars (US$). The Notes will have varying tenors and, as indicated above, will be issued in tranches, until the targeted US$ 20 million has been raised. The Notes will be priced at a margin over the US treasury bill rates of similar maturities and, as such, the pricing of each tranche may fluctuate according to movements in the US treasury bill rates. We believe the first batch of notes will have a coupon rate in the region of 8%.

The programme will provide an umbrella structure for various types of issues over time and will be governed by an Offering Circular. Each tranche will be supported by a pricing supplement that will outline the nature of that particular tranche. This will permit the bank to adapt to changing market conditions and investor demands.

The first notes to be issued will be Currency Linked Notes (CLNs). These Notes will be subscribed for in Zambian Kwacha. At the time of subscription, however, the amounts placed will be "notionally" converted to US$ at the prevailing US$/Kwacha exchange rate. Interest and principal repayment is calculated at the future prevailing exchange rate at the time of payment. At the time of interest and/or principal payments, the US$ will be converted back into Kwacha at the then prevailing rate. This is an attractive feature, as the Notes will hedge investors against future devaluations of the Kwacha.

The programme is a welcomed development in that it provides benefits to the development of the capital market in general, to investors in the Notes and to export-oriented businesses in need of financing.

The market as a whole will benefit in several ways. Firstly, in a capital market that has a limited number of investment opportunities, the Notes represent a new and innovative instrument that will add diversity to the LuSE. The Notes will be the only instrument linked to a hard currency that generate a US$-based return. The Notes will not impact on Zambia's foreign currency reserves, because they will be transacted in Kwacha. And, the proceeds of the programme will provide a new source of capital to Zambian businesses in need of export financing and other forms of project/bridge financing.

The Note Insurance Programme is also of benefit to investors, as it will provide a hedge against any future devaluation of the Kwacha. While 1999 has been a good year in terms of currency stability, one only has to go back to 1998 to see the potential benefit of an investment in the NIP. Treasury bill rates continued to rise throughout most of 1998, closing the year in the 32% range. During that year, however, the Kwacha dropped by over 60% in value against the US Dollar. Investments in Treasury bills, therefore, generated negative real returns. Further, the notes offer attractive, US Dollar based returns at very low levels of risk in view of the strength of the issuer, the PTA Bank. Finally, the Notes will assist investors in their financial planning as they will provide a fixed annuity income stream that can be used to meet future financial commitments and requirements. Lastly, the programme will also be of benefit to borrowers, especially exporters who will see incremental financing made available at US$ interest rates.

Pangaea/EMI has been appointed as the sponsoring broker for this US$20 million issue. We support the efforts of PTA Bank and welcome their proposed Note Issuance Programme as a significant contribution to the development of Zambia's young capital market.

5th November 1999

Zambezi Ranching and Cropping Plc (ARC) Quoted on the LuSE

Zambezi Ranching and Cropping Plc is now quoted on the LuSE market with effect from Wednesday, 3^rd November 1999, following registration of its shares within the Securities and Exchange Commission.

National Breweries Plc Board of Directors Meeting

National Breweries Plc will held a Board of Directors meeting on 3^rd November 1999 at which meeting the Directors 1) recommended the final dividend for the year ended 30 September 1999 and 2) approved the publication of the results for the year then ended.

-OCTOBER-

29 October 1999

ZCCM, Government and Anglo Strike Deal--Again

The Government of the Republic of Zambia (GRZ), Zambia Consolidated Copper Mines (ZCCM) and the Anglo American Corporation PLC through its subsidiary Zambia Copper Investments (ZCI) have announced that they have reached an agreement on the acquisition of selected of the remaining mining assets of ZCCM by ZCI and partners. The acquisition will be facilitated via a new company that will own 80% of the Konkola Division, the Nchanga Division and the Nampundwe pyrite mine. The Heads of Agreement has in it a detailed timetable that aims to conclude the transaction by 31 January 2000.

ZCCM will receive a cash consideration of US$30 million at the close of the deal and an additional US$60 million in the form of deferred payments. ZCCM will also participate in copper and cobalt pricing schemes with a ceiling benefit of US$125 million over the life of the company. ZCCM will have a 5% free carried interest and a 15% repayable carried interest in the new company.

The new company, again an Anglo subsidiary, has committed to a capital expenditure of US$731 during the first 3 years. This will include investment in the Konkola Deep Mining Project (KDMP) hailed to be the gemstone of the Zambian copper industry.

In addition to the above-mentioned transactions, the new company will have the option to purchase the Nkana smelter and refinery. Anglo American is to manage the smelter during the option period. ZCCM is to sell the Nkana division, which includes the cobalt plant, as a separate package. Anglo American Plc is to manage the Nkana package until a sale is finalized.

Both ZCI and ZCCM will be informing their members of these developments and will address the financing of the initial investment in the new company.

This new deal differs from the previous proposed transaction, when Codelco was expected to participate in the acquisition. The assets to be acquired and the numbers involved are much smaller, which in turn has enhanced the projected returns from the transaction. Anglo American has based the success of this project on the basis, among other assumptions, that copper prices will be at US$0.90/lb. This appears to be a relatively conservative assumption given that most copper consuming economies are on the path to recovery.  

The new deal is a welcomed one by all players in Zambia, but the story of, 'the boy who cried wolf' comes to mind.

Standard Chartered Bank Reports Record Q3 Earnings

Standard Chartered Bank Zambia PLC (SCZ) 3^rd quarter 1999 results have been released and as we had anticipated in early August, the bank has performed well.

Profit and Loss Account 1999

K' Million	2nd quarter	Yr. to date	1998
Net interest income	12,377	31,536	23,245
Provision for loan losses	(38)	(515)	(2,988)
Net income after loan losses provision	12,339	31,021	20,257
Non interest income	5,984	20,740	23,348
Non interest expenses	(8,560)	(22,835)	(26,537)
Income before taxation	9,763	28,926	17,959
Taxation	(2,929)	(8,678)	(5,286)
Net income after taxation	6,834	20,248	12,673
EPS	1.66	4.93	3.09

You will recall that during the first six months of its financial year, the bank had already exceeded its 1998 earnings. At that point in time we had already anticipated a record year for the Bank. The 3^rd quarter results have solidified our expectations. The Bank has reported an after tax profit of Kw 6,834 million. This translates to a year-to-date after tax profit of Kw 20,248 million, a near 60% increase from all of 1998 earnings.

The bank has historically never paid an interim dividend. Assuming the bank ends the year at Kw 25,000 million PAT and continues its policy of paying out 80% of its earnings as dividends, an SCZ investment would achieve a dividend yield of 18%. The dividend coupled with the capital gains could easily make Standard Chartered the top performer on the LuSE, yielding a combined return of over 60% for investors who bought when Pangaea/EMI began to issue its BUY recommendation at the end of 1998; this recommendation was upgraded to a STRONG BUY at mid-year. During a time when the Zambian Kwacha has remained quite stable and if anything will depreciate only marginally by year-end, that is certainly a healthy real return.

The bank, just last week launched its VISA product. Now an agent of VISA International, the bank's ATM machines now allow consumers to withdraw cash on their VISA cards. This is a new feature in Zambia and could very well turn out to be a big hit, given the increasing international traffic flowing through Zambia. The bank has placed the machines strategically across Lusaka and plans to install more ATMs in the Copperbelt and Livingstone. With the new Sun International project in Livingstone and the recent ZCCM sale announcement, it appears that the bank will realize attractive returns from its investment in the VISA product.

Standard Chartered is also planning to reopen a branch in Livingstone. In an area that is on the verge of exploding into a major tourist site, we believe the bank will certainly do well. The recent development of the ZCCM - Anglo transaction over the mines has restored some confidence in the local economy. If local businesses do decide to proceed with expansion plans, the banking industry will surely see various viable financing opportunities come its way.

We are confident that the bank will perform well through yearend and continue with our STRONG BUY recommendation.

22nd October 1999

Lusaka Stock Exchange Performance Update

While the first half of the year saw the LuSE index increase by 16.3% in real terms, we do not believe that the second half will be as impressive. Share prices have started to slip, largely a result of the poor performance by the LuSE's blue chip stocks. Their weak performance, in turn, is attributable to the economy's softness that has resulted from low copper prices and the government's abysmal handling of ZCCM's privatisation.

Chilanga Cement PLC's price reached an all time high of K300 in mid-June, a price that at the time was a more realistic value for the company's shares. Since then, the company announced an interim loss of K3.5 billion, a direct reflection of the dire economic conditions in Zambia. The market has responded to the company's results and since the announcement, the Chilanga price has continued to drop and is currently at K224.50. The company's management expects a better second half although it may not be positive enough to place the company into profitability by year-end.

Zambian Breweries similarly declared disappointing interim results. PAT dropped by 46% compared to H1 of the previous financial year. Zambian Breweries, whose share price near doubled in May 1999, recently concluded a Rights Issue, the proceeds of which went to liquidate the loan for the acquisition of Northern Breweries. The Rights Issue was priced at K450 per share, an almost 10% discount to the market price at the time. Zambian Breweries' shares are currently trading in the K450 range; a decrease in value since midyear. Similar to Chilanga, Zambian Breweries' performance has been affected by the heavy burden of the Northern Breweries acquisition coupled by the feeble economic environment. With the festive season round the corner, the company anticipates having a relatively profitable second half.

Zambia Sugar continues to trade thinly at extremely low prices. The company, a casualty of an expensive rehabilitation programme last year and an over supply of sugar in the global markets, has seen its profitability decline dramatically over the past 18 months. At this stage, there is no indication that the company will reproduce its excellent FY97 performance, but with world sugar prices inching their way back up, the company is likely to benefit marginally.

Rothmans of Pall Mall also turned in a not so exciting performance. While the company's profitability only fell marginally, a large portion of the company's income is a result of treasury management. In an industry that is very dependable on consumer incomes, the company has over the past few years cashed in on the lucrative money market in Zambia, which is currently yielding returns in the region of 35%. The company's share price has also dropped by K15 since midyear and is currently trading in the K70 range.

One of the main successes so far this year is Standard Chartered Bank. The bank turned in an outstanding performance for the first half of the year. PAT for the first six months exceeded the entire PAT for FY98. Even if the bank was to perform only half as well in the second half, it would translate to an annual yield (capital gains and dividends) of over 40%.

There are other bright spots on the LuSE, such as Farmers House Plc, the country's only listed property development company. Farmers House is currently engaged in a massive expansion plan that will hopefully, by year-end, double the company's capital base.

Despite the poor performances displayed by some of the listed companies, most of them have used this difficult economic period to squeeze costs. Thus, when the economy does turn around, these leaner and meaner companies will begin to realize attractive earnings growth. The obvious question, of course, is 'when will the economy turn around?'. We all hope it's sooner rather than later.

15th October 1999

Market News

It has been a relatively quiet week in Zambia. We understand that the Government is still reviewing Anglo American's revised proposal on the Mines. Local Anglo executives have indicated that a decision by the government is to be expected by the end of the month. Similarly, we have been informed that while the Sun International deal has been signed, details on the transaction cannot be released until the Sun Executives have met with President Chiluba. A meeting has been scheduled for 18 October, in Lusaka, but sources close to the action believe that this date may be pushed further back by the President. The delay is in no way suggestive of any problems between the two parties and is merely a timing issue.

ZCCM Announces AGM Class Meetings and EGM

ZCCM has advised shareholders by circular letter of an Annual General Meeting on 9^th November 1999 at 11:00 hours, followed by a separate Class Meeting of holders of the "B" Ordinary shares, followed by a n Extraordinary General Meeting (EGM). The EGM will consider an adoption of an article in the Company's Constitution to restrict borrowings to a specified limit.

TZI Unbundles ZRC

A circular notice has now been issued to TZI holders advising them of the procedure and details of the unbundling of its subsidiary Zambezi Ranching and Crop Ltd. (ZRC). ZRC is therefore expected to register as a Public Company and enter the LuSE market second tier to trade as a quoted/unlisted stock. The target date is Wednesday 3^rd November 1999. Pangaea/EMI is handling the process for TZI/ZRC in Zambia.

 1st October 1999

Sun International Finally Concludes Deal with Government

While the details have not yet been disclosed, this week government announced that they had signed the sales agreement with Sun International Hotels for the Mosi-o-Tunya Hotel and Rainbow Lodge in Livingstone, both of which are on the banks of the Zambezi River. In the ongoing gloom surrounding the continuing ZCCM saga, this is the first real positive news coming out of the privatization programme for some time.

This will be the single largest investment in the tourism industry that the country has ever seen and will certainly re-vitalize the city of Livingstone and the economy in that part of Zambia. Sun will soon be awarding construction and other contracts that could easily amount to US$ 50 million+. Both directly and indirectly, the new investment is expected to generate on the order of 6,000 new jobs over time. Among current LuSE listings, Chilanga Cement will most directly benefit though all those workers working in the hot sun will probably want a beer on occasion!

-SEPTEMBER-

24th September 1999

New Anglo proposal for ZCCM

Despite recent press reports which have indicated that any deal between the Zambian government and Anglo American over the remaining ZCCM assets is dead, executives at Anglo American (Zambia) have confirmed that they have now submitted yet another proposal to the government. In this revised proposal, Anglo, on its own this time, has offered to buy the Konkola North, and Konkola Deep projects, the Nkana mine and Ndola Lime. The inclusion of Ndola Lime represents an addition to Anglo's historic proposals and, presumably, reflects their concern over the supply of lime which is so critical to the mining process. In previous weeklies we reported that Ndola Lime had been awarded to a Belgian-registered company called SUCOMA. To date, SUCOMA has not been successful in securing the necessary funding to acquire Ndola Lime.

Anglo has proposed to invest $250 mm in the above projects. Their new submission also includes a proposed contract under which they would manage Nchanga with an option to buy over a specified period of time. Anglo is of the understanding that this new proposal will be viewed favorably by the IFC and World Bank and that these organizations would be prepared to provide an additional $ 250 mm for Nchanga's required rehabilitation.

This revised proposal was only formally submitted to the government today (Friday, September 24, 1999), so it is highly unlikely that we will get any formal response from the government until late next week at the very earliest. The rather unexpected addition of Ndola Lime to this revised proposal adds new complexities to the transaction which the government must address. Once again, Anglo has demonstrated its keen understanding of the Zambian environment. The inclusion of Ndola Lime into the equation will require the government to make some difficult decisions if it wants to proceed along the lines proposed by Anglo.

17th September 1999

Chilanga Cement PLC mid-year results

Chilanga Cement PLC recently released its interim results for the six-month period ended 30 June 1999. The results are highlighted below:

 

K' Millions	6 months to 30.06.99	6 months to 30.06.98	Year to 31.12.98
Net turnover	24,294	25,704	62,530
Profit / (loss) before tax	(3,521)	5,990	14,897
Taxation	0	1,797	4,505
Profit / (loss) after tax attributable to shareholders	(3,521)	4,193	10,392
Dividend on ordinary shares
- Interim	Nil	1,980	1,980
- Final			1,440
Transfer to reserves	(3,521)	2,212	6,672
Earnings per ordinary share (K)	(17.60)	20.96	51.95
Dividends per ordinary share (K)
- Interim	Nil	9.90	9.90
- Final			7.20

Chilanga Cement PLC, like most companies in Zambia, is now experiencing the results of the depressed economic conditions. This year's interim results are a clear reflection of the adverse economic environment.

The Company registered a loss of K3.5 billion for the first six months of FY99. The company attributes the loss to depressed demand in the local market and stiff competition from neighboring Zimbabwe. Although Zimbabwe is currently experiencing a shortage of cement, Zimbabwean traders choose to sell their products in Zambia in hopes of realizing hard currency revenues. The company also encountered some competition from South African imports. Local traders, having seen that the Kwacha had stabilized and in fact appreciated marginally in early February, ventured into imported cement. The company has since taken measures to control the South African cement imports. In order to maintain their local market share, the Company has had to cut prices. Historically, local sales, with their healthy margins, have accounted for Chilanga's success.

The Company's export sales have also dropped, largely due to the continued civil unrest in the DRC. The Company had anticipated reduced sales to Burundi and Rwanda (these markets are now being serviced by Mbeya Cement, Tanzania, in which Chilanga has a shareholding interest), but was largely banking on increased volumes to the DRC. Despite the lagging export sales, the Company is starting to see increases in local sales.

Chilanga's senior management has indicated that they expect the second half to be positive. The Company is currently in negotiations with SUCUMO for the acquisition of Ndola Lime. You will recall from our previous weeklies that SUCUMO was the successful bidder at the time of the Ndola Lime sale, but since, had experienced difficulty in meeting the bid's financial obligations. If the negotiations are successful, Chilanga will have access to large deposits of lime, which, though not directly used in the manufacture of cement, will complement the Company's products used in Zambia's mining industry.

With the eventual privatization of the mines and the start up of the Lower Kafue Gorge project, the company believes that sales will return to normal. The construction of the Lower Kafue Gorge dam is expected to start in early 2001. In the meantime, the company does expect local sales to increase and margins to improve.

In the absence of any positive news regarding the mine sale, and taking into account the recent results, we downsize our Buy recommendation on Chilanga to a HOLD.

Zambian Breweries Plc Interim results

Zambian Breweries Plc also released their unaudited six-month results this week. The results are presented below:

K' Millions	6 months to 30.06.99	6 months to 30.06.98	% Chg.
Gross Turnover (including Excise)	53,437	42,919	24.5%
Net turnover	23,102	18,167	27.2%
Profit / (loss) before tax	1,284	2,135
Taxation	334	576
Profit / (loss) after tax attributable to shareholders	951	1,559	-39.0%
Number of shares in issue at 30 June	130,000,000	130,000,000
Earnings per share (K)	7.32	11.99	-39.0%
Number of shares in issue at dividend declaration	182,000,000	130,000,000
Interim dividend per share (K)	4.00	14.50	-72.4%
Net assets per share (K)	320	239	33.9%

Trading conditions for Zambian Breweries Plc were extremely difficult, once again a result of the poor economic conditions in Zambia. The company attributes the decline in sales to a product switch by consumers. Given the harsh economic conditions and its toll on consumers' pockets, the Company has seen a shift from clear beer to opaque beer. Opaque beer is a cheaper product and is brewed illegally by some players in the market. This has caused clear beer demand to fall by some 12-14% this year.

Zambian Breweries currently churns out 550,000 hectolitres per annum. The Company expects that once the economy picks up, consumption may rise to 700,000 hectolitres. The acquisition of Northern Breweries will add an additional 200,000 hectolitres, bringing the total capacity to just under 950,000 hectolitres. In addition to the increased capacity, the Northern Breweries acquisition will allow the Company to enjoy tax losses for the next two years.

Management at Zambian Breweries has indicated that the Company is likely to close the year at a marginal loss. They intend to expense a large part of the acquisition's costs to this year's accounts. They have indicated that the Company will be back in the positive by next financial year. At this point, the Company is battling with the government over the reduction of the excise tax. Approximately 56% of the sales price per beer is passed on to the government in the form of excise tax and VAT.

In these difficult times, Zambian Breweries continues to streamline its operations by downsizing staff, improving efficiencies and cost structures, and managing quality control. Thus, when the economy turns around, we will see an immediate improvement in bottom line figures.

As in the case of Chilanga Cement, we believe the company has sound fundamentals, excellent management and will be a true performer in the long-term. We recommend Zambian Breweries as a HOLD. Record date for the interim dividend of K4.00 per share is 30 September and dividends will be mailed the week of 8 October.

Mines Sale In A New Twist

The Guardian newspaper in South Africa reported that Anglo American PLC's chairman last week indicated that Anglo would be investing $240 million at its wholly owned zinc and copper operations in Canada. At a presentation in London, the Chairman downplayed Zambia's ZCCM assets in Anglo's drive to become the world's largest copper producer.

This was a strange development, given the importance of the Zambian mines to Anglo's regional strategy. If anything, Anglo is merely buying time on making a decision. Negotiations on financing the mines' acquisition are still on with Matsui and Mitsubishi of Japan, who have had dealings with ZCCM in the past, and who are trying to secure future streams of copper.

With the Government's back against the wall, one can only marvel at Anglo's strategy to acquire the mines for a song.

10th September 1999

Rothmans of Pall Mall Year End Results

Below are the audited FY1999 year end (30 June) results for Rothmans of Pall Mall (Zambia) Plc.

K '000	FY1999	% Chg.	FY1998
Turnover	39,106,309	9.6%	35,678,151
Profit before taxation	5,765,531	- 12.8%	6,617,936
Taxation	(2,665,088)	17.9%	(3,246,891)
Profit after taxation	3,100,443	-8.0%	3,371,045
Profit attributable to minority interest	(113,864)	68.7%	(364,199)
Profit attributable to shareholders	2,986,579	-0.67%	3,006,846
Dividend paid / proposed (gross)	(1,556,352)		(1,556,352)
Transfer of revaluation reserve	162,465	-50.6%	329,146
Retained profit for the year	1,592,692	-10.5%	1,779,640
Retained profit at 1 July 1998	11,620,717		9,841,077
Retained profit as at 30 June 1999	13,213,409		11,620,717

While the company's turnover went up by 9.6%, profit after tax attributable to shareholders fell by 0.67%. As anticipated by Pangaea, the company's sales volume once again declined, this year by 22%. The company only sold 789 million cigarettes as compared to 1,018 million cigarettes in the previous FY. The increased turnover thus came only through price adjustments. The fact that the company managed to virtually maintain the same level of profit is attributable to the continuing success of cost cutting measures and the fact that a significant level of income is generated from its treasury operations.

Overall, 60% of pre-tax profit was generated through a combination of the company's investments in high yielding money market instruments and through exchange gains. As at 30 June 1999, the company had over K14 billion in short term deposits, bank balances and cash. Thus at a price of K80 per share, each shareholder effectively owns K88 per share in cash and short term deposits.

With plant capacity utilization at an all-time low of 28%, the company could easily gear up rather quickly to meet any increase in demand. This being the case, shareholders must wonder why the company continues to build its cash balances instead of increasing the level of dividend payout.

More on Codelco, ZCCM Mines (see 3rd September 1999 for additional information)

With the withdrawal of Codelco from its proposed joint venture with Anglo American, the Anglo Board is now scheduled to meet in South Africa early next week, presumably to decide on its plan for Zambia and the mining assets it had under consideration. This meeting will be followed closely by a ZCCM Board meeting for later in the week to learn of the Anglo plans and make some decisions of its own. Watch this space for more on the continuing, sad saga.

3rd September 1999

CODELCO Withraws from ZCCM Mines Joint Venture

With CODELCO's withdrawal from the Zambian joint venture to acquire the remaining ZCCM mines, South Africa's Anglo American Coporation now has to decide as to how exactly they intend, if at all, to proceed with the purchase of the mines. While the Zambian mines are an integral piece in Anglo's regional strategy to become the largest metal mining operation in the Africa, the company is not willing at this stage to take on the entire responsibility of the ZCCM recovery.

A senior executive at Anglo American Zambia, commented that given the size of the mines' contribution to the Zambian economy, it would only make sense to diversify the control and management of the conglomerate. As we all now know, that would have made the Kafue Consortium the perfect partnership.

Anglo is meeting in Johannesburg this week to review their options on the mines. At this stage, it is obvious that Anglo will have to abandon the hopes of securing a technical partner. It is probably more important for the company to secure some form of non-recourse financing. All this, we are told, has to be finalised before the next Anglo Board meeting on September 14. Anglo will, at that meeting, finally conclude on the way forward in Zambia. They will table their plans at the next ZCCM board meeting, scheduled for September 16 in Lusaka. After 24 October (Zambian Independence Day) that may be the second most important day for Zambia.

-AUGUST-

27th August 1999

CODELCO Decides Against Zambian Copper Mines Venture

A morbid disappointment fell over Zambia this week when Chile's state-owned Codelco (Corporacion Nacional del cobre de Chile) announced that it was no longer interested in the joint acquisition of the largest ZCCM mines. The Chilean mining giant informed Zambia Copper Investments, the Anglo American owned unit that initiated the joint venture negotiations, that the deal did not comply with Codelco's investment criteria.

Anglo's agreement in January to purchase Zambia's dominant copper mines from the parastatal ZCCM, among other factors, was conditional upon attracting a major mining partner and securing a $200 million non-recourse loan. Codelco, the world's largest copper producer, and an ideal fit for the pre-condition, scuppered the partnership hopes by declaring that non-recourse financing was unlikely to be made available.

In the light of Codelco's withdrawal, ZCI is reevaluating its position and has indicated that it will hold further talks with ZCCM and Zambian government officials.

The Zambian government has confirmed in a statement that it now recognises the urgency to conclude the mines' privatisation and remains committed to sell the remaining ZCCM assets despite the Chilean decision. Similarly, local Anglo officials have also confirmed their intent to find a solution and, if possible, complete the protracted sale.

Zambia's once thriving copper industry has been a victim of mismanagement and lack of investment over the past three decades - output has, over the past 25 years, dropped from over 700,000 tonnes p.a. to some 250,000 tonnes last year. With copper prices at all time lows and the dilapidated state of the mines, the Zambian Conglomerate has experienced difficulty in obtaining attractive prices for the remaining assets, especially for the Konkola Deep mines project, which is hailed to be the main prize in the Zambian copper industry.

We await detailed reports from both Anglo and ZCCM executives as to their next approach for the mines. Hopefully somewhere in their strategy, there must be a 'Plan B', or in the case of the Zambian government, a 'Plan C'!

Chambeshi Metals Proceeds with Expansion Plans

On a much brighter note, Chambeshi Metals announced that they have just secured a $70 million project-financing loan from The Rand Merchant Bank of South Africa. Chambeshi Metals, which was bought by South Africa's Anglovaal Mining group (AVMIN), produces copper and cobalt from mining slag dumps. AVMIN had purchased the Chambeshi cobalt and acid plant and the Nkana slag dump at a price of $50 million last year.

The infrastructure to be built from the loan facility will enable the company to enhance its treatment of copper and cobalt. The new facility will create additional capacity to process over 4,500 tonnes of cobalt and over 20,000 tones of copper a year. The good news is that this expansion may trigger other projects in the dormant copperbelt region -either to support this specific expansion or to undertake other mining sector projects.

Industrial and economic watchers, because of the positive signals it creates, have welcomed the loan; one of the more substantive investment inputs into the mining sector in recent months. Clearly, not everyone in Zambia is waiting for the sale of the remaining mining assets in order to continue with their expansion plans.

20th August 1999

Standard Chartered Bank Continues to Perform

Standard Chartered Bank Zambia PLC (SCZ) 2^nd quarter 1999 results have been released and they show continued excellent performance in a difficult market.

Profit and Loss Account 1999

K' Million	2nd Quarter	Year to Date	1998
Net interest income	10,221	19,159	23,245
Provision for loan losses	(396)	(477)	(2,988)
Net income after loan losses provision	9,825	18,682	20,257
Non interest income	6,868	14,756	23,348
Non interest expenses	(7,779)	(14,275)	(26,537)
Income before taxation	8,914	19,163	17,959
Taxation	(2,674)	(5,749)	(5,286)
Net income after taxation	6,240	13,414	12,673
EPS	1.52	3.27	3.09

During the first six months of its financial year, the bank has already exceeded its 1998 earnings. At K 13,414 million, net income after tax is 6% above what the bank managed to achieve for all of 1998. Management has indicated that this is all core banking business and there are no exceptional items.

While the bank has not yet declared an interim dividend, historically Standard Chartered has always paid out 80% of its after tax earnings in dividends and we anticipate this will be the case for this year as well. While management has indicated that second half performance may not achieve the same level as the first half, even if the bank only manages 50% of first half results, this would mean after tax earnings of about K 20,000 million. At the present share price of K19.00, this results in a forward PE of 3.9 and a dividend yield of over 20%. At a time when the Kwacha is quite stable (having only devalued by about 3% for the first six months of 1999) this stock is a real bargain by any standard.

Chilanga Cement Issues Profit Cautionary

Chilanga Cement announced that its results for the six months ended 30 June 1999 are expected to reflect a net loss, attributable to the difficult economic conditions in Zambia and the Southern African region in general. These difficult conditions have resulted in significant reductions in the net selling price. The company has also made some provisions against selected debtors. Given these results, it is likely that there will be no interim dividend.

The second half of the year is always better than the first half and management is confident that the company will return to profitability over this period and will be in a position to declare a final dividend. It is likely to be lower, however, than the dividend paid out in 1998.

Zambia Sugar March 1999 Interim Results

Zambia Sugar has released its interim results for the six months ended 31 March 1999. Net turnover is Kw 62.465 million and net income was Kw 3,803 million. An interim dividend of Kw 0.34 per share has been declared for all holders recorded as of 18 June 1999.

13th August 1999

Zambian Breweries Rights Offer Closes

Today, 13 August 1999, was the final day for the Zambian Breweries Rights Offer. The market, both local and international, responded well to the issue and, as Zambia's first ever rights issue, it must be considered a huge success. Of the 52,000,000 million new shares being offered under the rights issue at Kw 450 per share (an approximate 10% discount to the market price), South African Breweries took up in full its 90% allotment of 46,800,000 new shares. There were a significant number of existing shareholders that participated in taking up the balance of 5.2 million shares; during the final week of the offer period, there was brisk trading of the rights over the LuSE. Of the 5.2 million remaining shares, retail and local institutional shareholders took up 1.8 million of the offered shares; 2.3 million were acquired by new investors (including selected offshore participants) through the purchase of rights (with the final traded price being at Kw 5.00 per right); while the balance of 1.1 million were picked up by the underwriter, Saturnia Regna, an Anglo American managed pension fund. The only disappointment was the rather limited participation by local institutional shareholders. We attribute this to liquidity constraints due to the continuing depressed economic conditions prevailing in Zambia at the present time.

Pangaea/EMI Securities served as financial advisor and sponsoring broker to the issue.

Bank of Zambian (BOZ) in Action

This week, the head of BOZ's public relations department confirmed that MICR (Magnetic Ink Character Recognition) cheques will finally be introduced in Zambia within the next two months. Should this occur, confidence in transacting with cheques will be greatly enhanced. The main historic concerns of fraud and error should be reduced dramatically. The programme monitoring teams from the Ministry of Finance and Economic Development and the BOZ have done the preparatory work which is to be reviewed by the IMF this month; in addition a subcommittee of the Bankers' Association of Zambia has already been constituted, aimed at ensuring that the cheques conform to required standards.

Commercial banks have had to adjust foreign exchange rates by about 2 - 3% due to the appreciation of the Kwacha in the last few weeks. Corporate entities have been releasing more forex into the economy in order to meet their local financial commitments. Government has also contributed by transferring all tax revenue from the commercial banks to the central bank. All this has lead to a surplus of forex and a shortage of Kwacha.

This week the situation reached a critical stage and the BOZ had to intervene by selling Kwacha into the market as secured loans for periods of up to five days at rates of interest of 53% per annum. The stability of the Kwacha is expected to continue well into next month.

6th August 1999

Zambian Breweries Rights Issue Update

The Zambian Breweries rights issue is now drawing to a close. The last day to trade the Letters of Allocation (the rights) is next week, Wednesday 11^th August. In the week ended 6^th August, some rights traded at Kw 10.

Trans Zambezi Industries (TZI) - Announcement

Trans Zambezi Industries Limited (TZI) has announced the appointment of Mr. David Edwards as a non-Executive Director. Mr. Edwards has been an executive with Hollandia Re, a subsidiary of Hannover Re, for twelve years. He is Chief Executive of Hollandia Reinsurance Company Limited, the group's principal operating company in Johannesburg. He has group responsibility for strategic planning and for its SAR 750 million investment portfolio. Mr. Edwards is a Director of Madison Insurance Company (Zambia) Limited, a subsidiary of TZI in which Hollandia Re have a strategic shareholding. Hollandia Re has an investment in some 19% of TZI. During the last two years, Mr. Edwards has provided TZI with help and advice on the provision of health services and on other insurance matters. In particular he has played a key role in introducing new products and technology to the TZI Health and Insurance Division.

-JULY-

Zambian Breweries PLC - Rights Issue

Zambia’s first ever ‘Rights Issue’ has been triggered off with approvals from the SEC and the LuSE. The new shares are being offered at a price of Kw 450, which is an approximate discount of 10% to market price. The Offer ratio is 2 for 5. The Offer commences on the 19 July 1999 and will close on the 13 August, with the last day for postal acceptances being 18 August. The Offer document will be mailed to existing shareholders on 19 July.

-JUNE-

National Breweries - Interim Report

National Breweries has put out unaudited results of the company’s operations for the six months ended 31st March 1999. The results are yet again disheartening. Below are the figures:

K’Million	6 Months to 31 March 1999	% Change	6 Months to 31 March 1999
Gross Turnover	17,096	(21.0)	21,712
VAT	2,916	(23.0)	3,766
Excise & Surtax	3,621	(21.0)	4,591
Net Turnover	10,532	(21.0)	13,355
Profit Before Tax	183	(59.0)	443
Taxation	55	(59.0)	133
Profit After Tax	128	(59.0)	310
EPS	2.03	(59.0)	4.92
DPS	-	-	-

Turnover, at Kw 17,096 million, experienced a 21% decline on the Kw 21,712 million achieved in the 6 months period to March 31st 1998. The ever increasing number of entrants in the lucrative opaque beer industry, which stood at 19 (with 13 of the facilities becoming operational in the last 12 months), continues to threaten National Breweries’ market share. This scenario is further compounded by the very high levels of taxation the opaque industry faces. Such taxation provides high incentives for tax avoidance and greatly limits the ability of tax compliant companies, such as NATBREW, to compete on price. The Zambia Revenue Authority has, however, moved to intensify tax collection in the industry; it is hoped this will eventually restore fair and equitable conditions.

After taking into account VAT and Excise & Surtax, Net Turnover amounted to Kw 10,532 million. This represented a 21% decline on the Kw 13,355 million in the 1998 interim period. Likewise, after charging operational costs, Profit After Taxation stood at Kw 183 million, a 59% reduction on the Kw 433 million recorded in the six months to March 31st 1998. Profit After Tax was down 59% at Kw 128 million in the 1999 interim, as compared to Kw 310 million attained in the half-year period last year. NATBREW’s margins have been under pressure from the ever rising costs of raw materials (due to inflation in the case of corn, and devaluation of the currency in the case of other imported inputs). The current rarnings level translates into EPS of Kw 2.03 as opposed to Kw 4.92 in the corresponding period last year.

Recently, South African Breweries International (Africa) BV took over Lonhro Africa’s 70% interest in National Breweries, and is now attempting to restructure and reposition the company. It aims to take advantage of the anticipated improvement of the economy after the sale of the mines, and also counter the rather adverse opaque beer trading conditions. As such, given the financial muscle and technical expertise SAB is endowed with, there is cause to be optimistic. We continue our HOLD recommendation.

11th June 1999

Chilanga Cement News

Due to low domestic sales, management at Chilanga Cement has undertaken to suspend production of clinker and cement at its Ndola Works. This move has been necessitated by the excess cement stock the company has accumulated as a result of depressed local sales. The surplus in inventory is in the range of 17,000 - 20,000 tonnes. The reduced domestic sales are largely attributable to the rampant illegal importation of cement from neighboring countries, which is sold at much cheaper prices than locally produced cement brands. The Ndola plant accounts for over 64% of Chilanga Cement’s total capacity.

Management believes that this temporary cessation of operations, will not negatively impact sales volumes, however, which are already projected to decline by 17% this year from the 350,000 tonnes achieved in 1998. In addition to smuggling, cements sales are also constrained by the economic recession Zambia is currently undergoing, which has adversely affected the construction industry.

In the meantime, Chilanga has lodged an official complaint with the relevant authorities on the illegal importation of cement. The Zambia Revenue Authority (ZRA) has been quick to react to similar complaints in the past by companies such as Zambia Sugar and their actions have yielded favorable results. The Chilanga case shouldn’t be an exception.

Anglo-American/ZCCM News

The following hardly sounds like a company likely to walk away from ZCCM: Anglo-American Ltd., the South African mining giant, which is due to take controlling interests in the privatisation of copper mines in Nchanga and Nkana, has urged the Tanzania Harbours Authority (THA) and Tazara to improve their services. The company urged a cut in the transhipment period of copper and its products via Dar es Salaam port.

Tanzania & Zambia to Commercialise Railways Authority

And speaking of Tazara, Tanzania and Zambia have reached an agreement to commercialise the Tanzania Zambia Railways Authority (Tazara) in order to improve its performance. Several possibilities are under consideration. One possibility involves a joint venture with China, which has already been involved in the completion of the railway in the mid-1970s as aid to the two countries.

4th June 1999

Farmers House - FY results

Farmers House has released results for the financial year-ended March 31st 1999. The property company has recorded some growth in nominal terms, although in real terms it has in fact experienced a reduction in income. Below are the figures:

K’000	1999	% CHG	1998
Income	1,498,039	22.7	1,220,583
Profit Before Exceptional Items	864,605	26.3	684,630
Exceptional Items	(234,960)	-	-
Profit Before Taxation	629,645	(8.0)	684,630
Taxation	(105,792)	(51.7)	(219,233)
Profit for the Year	523,853	12.6	465,397
Retained Profits at 1/4/99	994,622	41.0	705,616
Dividend Paid	(98,018)	66.7	(58,797)
Dividend Proposed (gross)	(117,594)	-	(117,594)
Retained Profits at 31/3/99	1,302,863	31.0	994,622

Income for the period ended March 31st 1999 stood at Kw 1,498 million, representing an upturn of 22.7% over the Kw 1,221 million registered in the same period last year. This, however, translates into a marginal decline of 8.9% in real terms. The slump in the Zambian real estate industry accounts for this slight downturn. In addition to that fact, a number of tenancy agreements were not renewed during the year (in advance of implementation of property re-development plans) resulting in lost rental income. In fact, the growth in nominal terms, largely reflects exchange gains on dollarized rentals. The company’s policy of maintaining bank balances in excess of working capital requirements in foreign currencies also helped in the same vein to deliver on the top line figures.

After considering expenses, profit before exceptional items amounted to Kw 865 million, a 26.3% increase over that attained in FY1998. The charge for exceptional items (which included costs on restructuring, provision for terminal benefits and valuation fees) at Kw 235 million resulted in a PBT of Kw 630 million. This in fact represents a marginal reduction of 8% on the Kw 685 million achieved in the period ended March 31st 1998. However, due to a much lower effective tax rate - 16.8% in FY 1999 as compared to 32% in FY1998 - profit for the year came to Kw 524 million, a 12.6% upsurge over that attained in the same period last year. This translates into EPS of Kw 53.50 as opposed to Kw 47.50 in FY1999. Dividends proposed at Kw 118 million remained static, which in per share terms yields Kw 12.00.

At the current market price of Kw 270 per share, Farmers House is trading at 70% discount to its Book Value and a PE of just over 5.

-MAY-

28th May 1999

Zambia Sugar - Interim Results

Zambia Sugar has put out results for its half-year period, which now falls on March 31^st following the change of its financial year-end to September 30^th. The results for the period under review fall considerably below expectations. Below are the figures:

KW’Million	6 Mos. to 3/99	% Chg	6 Mos. to 3/98	6 Mos. to 9/98	12 Mos. to 3/98
Net Turnover	62,465	2.0	61,228	68,163	102,662
Operating Income	7,482	(22.9)	9,704	16,803	14,741
Interest	3,679	188.5	1,275	2,849	1,673
Profit Before Taxation	3,803	(54.9)	8,429	13,954	13,068
Taxation	685	(33.0)	1,022	1,564	1,718
Profit After Taxation	3,119	(57.9)	7,407	12,390	11,350
Dividends        -Interim	1,845	-	-	-	2,442
-Final	-	-	4,341	7,001	4,342
Retained Earnings	1,273	(58.5)	3,066	5,389	4,566
EPS	0.57	(58.0)	1.36	2.28	2.09
DPS                -Interim	0.34	-	-	-	0.45
-Final	-	-	0.80	1.29	0.80

Net turnover for the 6 months to March 1999 at Kw 62,465 million was a marginal 2% over that achieved in the corresponding period of 1998. The strain brought about by regional conflicts and the overall low world sugar prices in the export market have had an adverse impact on the company’s performance. While the local sugar market although has continued to show some improvement largely owing to the new marketing strategies adopted by the company, it has not been enough to offset losses on the export front.

Operating income amounted to Kw 7,482 million representing a 22.9% decrease over that recorded in the six months to March 1998. This came about due to the fact that dollar quoted inputs as a result of the depreciating currency (over 60% last year), became more expensive in the absence of offsetting gains from export sales as was the case in the corresponding period in 1998. In addition, performance in the 6 months to March last year was boosted by the 4,000 tonnes of Special Preferential Sugar (SPS) quota to the European Union at preferential prices. The increase in cost of dollarized inputs coupled with interest payable on dollar denominated loans resulted in Zambia Sugar incurring a huge exchange loss of Kw 1.255 million. Total interest charges were also higher at Kw 2.4 billion. As such profit before taxation for the half-year period ended March 31^st came to Kw 3,803 million representing a 54.9% reduction on that attained in the same period last year. After charging taxation, profit after tax was Kw 3,119 million, 57.9% lower than the six months to March 1998. This translates to EPS of Kw 0.57 as compared Kw 1.36 for the same period in 1998. Total dividends were Kw 1,845 million, which was Kw 0.34 in per share terms. Earnings retained were Kw 1,273 million as opposed to Kw 4,341 million in the same period last year.

Despite this rather dismal performance (which was predictable when the ZCCM privatisation did not occur last year), the company’s projections for the rest of this year are upbeat. Management forecasts a rebound in profits backed by strong domestic demand for sugar with anticipated macroeconomic stability after the complete disposal of the mines. We agree with their expectations though not necessarily in the short term. At the current price of Kw 13, which yields a P/E ratio of 22.8, the stock is now on the expensive side, compared to P/Es of other sugar companies. We continue our HOLD recommendation.

21st May 1999

Zambia Bata Shoe Company Plc - Financial year-end results

FY1998 was yet another challenging year for BATA. The company, however, managed to keep its head above water and turned in a fairly good performance. Below is the Profit and Loss Statement.

Kw ‘000	1998	% Change	1997
Turnover	9,875,894	45.6	6,785,139
Cost of Sales	(5,717,821)	38.7	(4,123,028)
Gross Profit	4,158,073	56.2	2,662,111
Administrative Expenses	(3,761,886)	38.0	(2,726,641)
Profit/(Loss) from Operating Activities	396,187	714.0	(64,530)
Rental Income	444,659	45.6	305,463
Interest Income	356	-	-
Exchange loss	(92,099)	966.2	(8,638)
Profit on Disposal of Fixed Assets	31,408	(93.4)	474,997
Profit/(Loss) from Non-operating Activities	384,324	(50.2)	771,822
Profit Before Taxation	780,511	10.4	707,292
Taxation	( 59,843)	(4.5)	(62,674)
Profit After Taxation	720,668	11.8	644,618
Dividends	(94,982)	62.5	(58,451)
Retained Profit	625,686	6.7	586,167
EPS	2.96	11.8	2.65
DPS	0.39	62.5	0.24

Turnover significantly increased at Kw 9,876 million, going up a stellar 45.6% over the Kw 6,785 million registered in FY1997. The upturn in turnover is even more impressive in view of the fact that it amounted to 15% in real terms. Turnover went up on the back of heightened sales volumes, which increased in spite of intense competition and overall poor economic conditions. Cost of sales amounted to Kw 5,718 million representing a 38.7% increase over FY1997. This translated into a gross profit of Kw 4,158 million, which went up by 56.2% as compared to Kw 2,727 million in the FY ended December 1997.

After charging administrative expenses of Kw 3,762 million, profit from operating activities came to Kw 396 million, a 714% increase over the prior year. Profit on non-operating profit at Kw 384 million, was 50.2% down largely on account of a 966.2% increase in exchange losses and a 93.4% downturn in profits on the sale of fixed assets.

As such, profit before taxation increased by 10.4% at Kw 780 million as compared to Kw 707 million in FY1997. Profit after taxation stood at Kw 721 million, 11.8% up and above the Kw 645 million achieved in the financial year ended 31st December 1997. This translates into EPS of Kw 2.96 as compared to Kw 2.65 achieved in the previous financial year.

Total dividends declared amounted to Kw 95 million as compared to Kw 58 million for FY1997. As a consequence, retained profit for the year was Kw 626 million as compared Kw 586 million in the prior year.

BATA management should be given a "pat on the shoulder" for its efforts to put the company on the right financial footing in the face of stiff competition, which often times is unfair (illegal trading practices by competitors include under-declaration of duty and VAT on imported goods) and the present poor economic conditions. As one of the moves to correct the company’s past tight financial position, management has embarked on an aggressive program to greatly expand its retail chain to enable the company to counter the competition from new retailers entering Zambia. An ambitious export plan to the SADC and COMESA regions has also been put in place. Given the above, it is safe to say that we might be looking at a major turn around in BATA, more so when the mines are finally completely privatized as Bata has traditionally been a major supplier or work shoes at the mines.

7th May 1999

Rothmans of Pall Mall (Zambia) Plc - Interim Report

Rothmans of Pall Mall (Z) Plc has released its financial results for the interim period ending December 31st 1998. Below are the figures:

K ‘000	6 Months to 31 Dec 98	% Chg.	6 Months to 31 Dec 97	Year to 30 Jun 98
Gross turnover	24,020,956	9.3	21,977,082	42,7202,056
Net turnover	20,070,187	9.2	18,368,620	35,678,151
Profit before tax	3,561,420	(0.4)	3,578,862	6,617,936
Taxation	(1,292,753)	(0.04)	(1,293,387)	(3,246,891)
Profit after tax	2,268,667	(0.7)	2,285,475	3,371,045
Profit attributable to minority interests	(338,916)	(0.4)	(573,562)	(364,199)
Profit attributable to Shareholders of RPM	1,929,751	12.7	1,711,913	3,006,846
Transfer from reserves	36,854	20.8	30,513	329,146
Proposed dividend	-	-	(524,160)	(1,556,352)
Retained profit	1,966,605	61.4	1,218,266	1,779,640
Earnings per share	11.97	12.8	10.61	18.64

Total turnover went up, albeit marginally, by 9.3% at Kw 24,021 million over the Kw 21,977 million attained in the 1997 half-year period; this signals, once again, that the company’s sales growth continues to be constrained by the persistent slump in the economy. Net turnover also followed suit, recording an upturn of 9.2% over the Kw 18,369 million registered during the period ending 31st December 1997.

RTHZ’s margins continued to be under pressure, largely emanating from imported inputs, which became more expensive in Kwacha terms as the currency devalued by almost 70% for the year. As such, profit before taxation experienced a downswing of 0.4% at Kw 3,561 million as compared to Kw 3,579 million in the previous year’s interim period. Consistent with this decrease in PBT, profit after tax (at Kw 2,269 million) also recorded a reduction of 0.7% down from that achieved in 1997’s corresponding period.

A lower charge of profits, attributable to minority interests, at Kw 339 million represents a 0.4% reduction. This caused profit attributable to shareholders to be higher by 12.7% at Kw 1,930 million in the period under review. This translated into a higher EPS at Kw 11.97 as opposed to Kw 10.61 in the half-year period ended December 31st 1997.

Transfer from reserves amounted to Kw 37 million, representing a 20.8% increase as compared to that made in the interim period of 1997. The company’s directors have not declared any dividend. As a result, retained profits went up by 61.4% at Kw 1,967 million in the period under review.

Given the extremely poor economic conditions that prevailed during the second half of 1998, Rothmans of Pall Mall Plc turned in an adequate performance. Management continues to pursue cost control measures to improve margins. The current price of Kw 85 yields a annualized forward P/E ratio of 3.6, which, relative to P/Es of regional cigarette companies, is quite low. We maintain our HOLD recommendation.

-APRIL-

30th April 1999

Standard Chartered Zambia Plc (SCZ) has turned in a splendid first quarter ended 31/03/99. A statement of income and expenses is presented below comparing the first quarter of 1999 to the year end results for 1998.

Statement of Income and Expenses - 31/03/99

K’ Million	1st Quarter to 31/03/99	% of full FY98	12 Months 12/31/98
Net interest income	8,938	38	23,245
Provision for loan losses	(81)	0.31	(2,988)
Net interest income after loan loss provision	8,857	49	20,257
Non interest income	7,888	32.5	24,239
Non interest expenses	(6,496)	24.5	(26,537)
Income before taxation	10,249	57	17,959
Provision for income taxes	(3,075)	58	(5,286)
Net income after taxation	7,174	56.6	12,673

Interest income for the quarter was Kw 12,334 million against interest expenses of Kw 3,396 million resulting in net interest income of Kw 8,983 million.

Provision for loan losses amounted to Kw 81million. Non interest income for quarter was Kw 7,886 million while non interest expenses were Kw 6,496 million. Income before taxation amounted to Kw 10,249 million. With the provision for taxation at Kw 3,075 million, net income for the quarter was a healthy Kw 7,174 billion. This amounted to 56.6% of net income for the whole of FY 1998.

Annualizing the first quarter, results in net after tax income of Kw 28,697 million, a forward EPS of 7.0. At today’s price of Kw 19, this results in an earnings yields of 37% and forward P/E of 2.71. Going by SCZ’s past record of declaring about 80% of earnings as dividends this could mean a dividend of Kw 5.60 per share, up 124% on 1998. We continue to recommend SCZ as a Buy.

23rd April 1999

ZCCM – Third Quarter Review

For the quarter ending 31 December 1998 ZCCM continued to record losses and the scenario remains bleak due to the declining output and persistently low copper and cobalt prices.

Copper production for the period was 66,164 tonnes compared to 67,913 tonnes in the corresponding quarter in 1997. Cobalt production was up at 2,981 tonnes against 884 tonnes in the same quarter of the previous year. Due to increasing cobalt sales, which were up by 274% over the same period in the prior year, total revenue was Kw 296,626 million versus Kw 271,019 million. Significant additional gains however were curtailed by a corresponding drop in the price of cobalt, from US$ 20.77/lb at the beginning of the quarter to US$11.75/ lb by the end of the period. The copper price also fell from US$0.74/lb to US$0.64 during the same period.

The cost of sales continued to increase and was Kw 408,507 million during the third quarter compared to Kw 367,118 for the same period in 1997. Not surprisingly, the Group recorded an operating loss of Kw 111,881 million for the period against Kw 96,099 million in 1997. The Net loss for the period was Kw 161,874 million compared to Kw 36,605 million for the same quarter in 1997.

Recent press reports, confirmed by senior Anglo American executives, indicate that serious discussions are underway with Coldeco, a major Chilean mining company. If successfully concluded, Coldeco could be brought in as the major mining partner Anglo has been seeking to conclude the transaction with the government.

9th April 1999

Standard Chartered Bank – Year-end results

Standard Chartered Bank Zambia PLC (SCZ) final 1998 results have been released:

K’ Million	1998	% chg	1997
Net interest income	23,245	14.14	20,365
Provision for loan losses	(2,988)	-	4
Net income after loan losses provision	20,257	(0.5)	20,369
Non interest income	23,348	99.3	11,715
Non interest expenses	(26,537)	(93.3)	(13,730)
Income before taxation	17,959	(2.15)	18,354
Taxation	(5,286)	(24.8)	(7,029)
Net income after taxation	12,673	11.9	11,325
EPS	3.09	11.9	2.76

SCZ’s performance was boosted by a near doubling in non-interest income to Kw 23,348 million resulting primarily from foreign exchange gains. A more favourable tax rate was the result of its December 1, 1998 listing on the Lusaka Stock Exchange (LuSE). The bank’s taxation charge for FY 1998 amounted to Kw 5,286 million compared to Kw 7,029 million in 1997, a decrease of 24.8%. The listing on the LuSE reduced its marginal tax rate from 45% to 30%, the effective rate for listed companies. These positive developments were offset in part by a 93% increase in non-interest expenses, a significant percentage of which relates to achieving Y2K compliance.

In line with our analysis of Standard Chartered’s preliminary results, the final bottom line figures have indeed gone up on a Kwacha basis (only). Profit after taxation went up to Kw 12,673 million against the previous year’s Kw 11,325 million. Earnings per share for 1998 were Kw 3.09, up 11.9% on 1997.

The bank has declared a final dividend of Kw 2.50 per share. There was no interim dividend. At its present price of Kw 19 per share, the P/E is 6.15 and the dividend yield is just over 13%.

Standard Chartered Bank continues to maintain its position in the market as one of the leading and most reputable banks in Zambia. The listing on the LuSE, its enhanced trade financing capabilities and the introduction of new innovative features in its product line (such as Automated Teller Machines) should permit continued growth in 1999.

1st April 1999

Zambian Breweries General Meeting – Rights Issue Approved

The shareholders of Zambian Breweries approved a motion at a special General Meeting on 31 March 1999 to authorise the Board of Directors to increase the share capital of the company from Kw 200 million to Kw 400 million by the creation of an additional 200 million ordinary shares of Kw 1.00 each. The shareholders also approved the issue of these shares by way of a rights issue to existing shareholders.

The company is looking to raise in the region of US$ 8.5 million to liquidate some debt financing secured for the acquisition of Northern Breweries. The details of the rights issue have not yet been finalised or disclosed. This will be the first rights issue in Zambia and a useful test of the current sentiments of existing shareholders with respect to the operations and prospects of the company. It is also interesting to note that although the company is looking to raise US$ 8.5 million through the rights issue, the current shareholding of the company could mean that 90% of the rights issue will be taken up by SAB and AngloAmerican Corporation leaving a balance of only 10% or US$ 850,000 from the public. Pangaea/EMI Securities has been appointed Financial Advisors and Sponsoring Brokers for the issue.

The Chilanga Cement Annual General Meeting was a very lively affair with the small personal shareholders showing a lot of enthusiasm more than ever in the operations of the company. A number of key issues were covered with the much slower growth than was anticipated in the export market topping the list. The Managing Director, Mr. Patrick Gorman reiterated this sentiment that the 11.4% growth in exports, although significant, was far below expectations. According to him there were virtually no exports to Malawi, the company’s main export destination, in the 1^st and 2^nd quarter of FY1998 due to severe foreign exchange problems in that country. The issue was further compounded by the fact the cheaper cement from South Africa and Zimbabwe – due to lower transportation cost entering the country from Blantyre as opposed to doing so via Lusaka, was flooding the Malawi market making it difficult for Chilanga’s product to compete. In addition, the devaluation of the Zimbabwean dollar further constrained Chilanga’s export growth as imports were made more expensive. The artificially low cement prices also added to low exports to the Zimbabwean market fortunately however they have been moves to counter this. The Burundi and Rwanda market on the other hand experienced significant growth accounting for the larger part of the overall 11.4% growth.

When asked about the progress of sourcing of US$2.31 million financing for 14% acquisition of stake in Mbeya Cement Company of Tanzania, Chilanga’s Company Secretary and Finance Manager, Mr. Terry Mordue mentioned that the company managed to secure a loan from the Commonwealth Development Corporation (CDC). The Mbeya deal was closed on the 27^th November 1998. Regarding the Y2K, the AGM learnt that a committee has been sitting since early last year and the identification process is nearly complete. US$250,000 has been set aside to purchase Y2K compliant equipment.

It was also learnt that the use of concrete in road stabilization is in the offing in many countries in the region and it presents substantial growth opportunities for the company in the near future. The company is currently in discussions with Malawian authorities for a major road project running from the North - eastern part of country near the boarder with Tanzania to the south. The company hopes it gets involved in this project and there is a good chance they will.

-MARCH-

19th March 1999

Zambian Market Roundup

The Lusaka stock exchange (LuSE) trading activity continues to improve from the slow start of the year. Trading volumes have increased significantly, from 2.1million shares in January to 9.7 million in February. Turnover rose from K82.3 million to K180.6 million during the same period. Volumes and turnover for the month of March are set to be even higher. The improvement in the activity on the LuSE is a result of renewed confidence in the economy derived from the restoration of donor aid and the imminent sale of ZCCM’s remaining assets.

With most of the listed companies’ reporting credible results, activity is set to increase in most of the LuSE’s listed stocks. A selection of some of the LuSE’s most active and best performing stocks is analysed below.

Chilanga Cement Plc

Currently trading at a price of Kw 155 per share and a P/E of 3.0, Chilanga is a very attractive stock. At 11%, Chilanga has one of the highest dividend yields in the market. The results for the last financial year ended were outstanding recording nominal gains of 103% on earnings, while real gains amounted to 45%. Chilanga is well positioned for even better growth, given that if local demand is to rise, the company will be in a position to cater for the increase. It would achieve this by sacrificing sales to the export markets, where margins are lower anyways. We recommend Chilanga as an excellent Buy.

Zambian Breweris Plc

Zambian Breweries is another one of the most attractive stocks on the market. The sole producer of clear beer in Zambia and a member of the South African breweries group, the stock has great potential. Though growth earnings for the year was a mere 0.1%, this was more of a reflection of the poor economic performance experienced by the country in general than the potential of the company. The company is now considering a Rights Issue to finance its’ acquisition of Northern Breweries, making ZAMBREW a virtual monopoly in Zambia’s beer market. The company’s share price is however haunted by the fact that there is a mere 10% float in the market -- the rights issue will solve this. Zambian Breweries is currently trading at Kw 210 per share, a P/E 5.40 and a dividend yield of 12.98%, the highest in the market. We recommend Zambian Breweries as a speculative BUY.

Standard Chartered Bank Plc

Standard Chartered bank is undoubtedly one of the most reputable banks in Zambia. Preliminary results for the year ending 31 December 1998 are good. The bank listed on the LuSE on 1 December 1998, meaning that the Bank will now attract a low tax rate of 30% compared to its current rate of 45%. Earnings should go up.

Trading at Kw 19 with a P/E 6.87 and a dividend yield of 12%, the stock is attractive and we recommend Buy.

11th March 1999

Chilanga Cement Year End Results

Chilanga Cement plc has released its results for the year ending 31 December 1998. A summary of the profit and loss is given below:

K’ 000	Year ended 31.12.98	% Chg	Year ended 31.12.97
Sales	62,529,951	40	44,600,647
Operating costs	48,246,829	32	36,513,029
Operating profit	14,283,122	76.6	8,087,618
Interest received	98,237	-	22,047
Net exchange gains	733,286	-	182,128
Finance charges	(217,950)	68.5	(693,756)
Profit before taxation	14,896,695	96	7,598,037
Income tax expenses	4,504,973	81	2,486,420
Net profit	10,391,722	103	5,111,617
Dividend	3,420,682	97.6	1,730,345
Retained profit for the period	6,971,040	106	3,381,272
Earnings per share	51.95	103	25.55

Chilanga Cement has turned in an outstanding performance for the year ended 31 December 1998. The results are even more impressive given the poor economic environment that prevailed in the year under review.

Turnover for the year went up 40% to Kw 62,529 million. Domestic sales amounted to Kw 49,285 million while exports were Kw 32,711 million. The operating profit of Kw 14,283 million was up by 76% over the Kw 8,087 million in the year ended 1997. Finance charges dropped a significant 68% reflecting the company’s low borrowings. The company posted significant exchange gains resulting from its export earnings.

Profit before taxation was an impressive Kw 14,897 million, a 96% increase over the prior year’s Kw 7,598 million. Taxation for the year was Kw 4,505 million , giving a net profit of Kw 10,392 million. This is an increase in nominal terms by 103% and in real terms by 47% over the prior year. Chilanga Cement retained Kw 6,971 million of the profits.

Earnings per share went up similarly by 103% to Kw 51.95. Dividends for the year amounted to Kw 3,421 million, up 97.6% on the previous year. A final dividend of Kw 7.20 gross per share, together with the interim of Kw 9.90 per share, brings the total to Kw 17.10 per share.

Currently trading at Kw 155 per share, with a dividend yield of 11.03% and a P/E of 2.98, Chilanga is a very attractive stock. Although the company turned in a splendid performance for the year, most of the gains can be attributed to cost controls and price adjustments as opposed to growth in demand. In fact, volumes of cement sold declined in the export market, while the domestic market recorded only marginal growth. Another threat to the company was the emergence of cheap imports in the market. This, coupled with the stagnation in the economy resulting from the delayed privatisation of ZCCM, affected the company’s growth potential.

It is clear that Chilanga is well positioned to benefit from any up turn in the economy, its performance in a difficult year like 1998 being a testimony to this fact. We continue to recommend Chilanga as an excellent BUY. It may be the best equity listed on the LuSE.

5th March 1999

Zambian Breweries Year End Results

Zambian Breweries has released results for the year ending 31 December 1998. The results are tabulated below:

Profit and Loss Account for the year ended 31 December

Kw million	1998	% Chg	1997
Turnover	81,022	15.6	70,046
Excise duty	38,464	14.7	33,537
Net turnover	42,558	16.6	36,509
Operating profit	6,803	(0.7)	6,853
Net financing costs	148	(56.9)	343
Profit before taxation	6,655	2.2	6,510
Taxation	1,591	9.6	1,451
Profit for year	5,064	0.1	5,059
Dividends	3,543	0.0	3,542
Retained profit for year	1,521	0.3	1,517
Earnings per share (Kwacha)	38.95	0.07	38.92
Dividend per share (Kwacha)	27.25	0.0	27.25

In a rather difficult year for the Zambian economy in general, Zambian Breweries has managed to maintain profitability, matching earnings of the previous year, on a Kwacha basis (only).

Turnover for the year was Kw 81,022 million compared to last year’s Kw 70,046 million, an increase of 15.6%. Excise duty amounted to Kw 38,464 million, up 14.7% on 1997. This brought net turnover to Kw 42,558 million.

Operating profits went down marginally, 0.7%, to Kw 6,803 million. This is due to the increase in operating costs resulting from the devaluation of the Kwacha. The devaluation of the Kwacha put costs under pressure, especially the cost of major inputs such as malt and hops, plant equipment and spares which went up by 72%. In addition, exchange losses were incurred as a result of periodic shortages of foreign exchange during the year. Net financing costs were reduced significantly from Kw 343 million in 1997 to Kw 148 million in 1998. Profit before taxation was Kw 6,655 million, up 2.2% on the previous year. Taxation for the year was Kw 1,591 million, leaving profit for the year at Kw 5,064 million. Zambian Breweries retained Kw 1,521 million of the profits.

Earnings per share and dividend per share remained largely static at Kw 38.95 and Kw 27.25 respectively.

Zambian Breweries is currently trading at Kw 210 per share, a P/E of 5.40. The dividend yield at 12.98% remains the highest in the market. The stock has tremendous potential and the slow down in earnings growth in 1998 is a reflection of the poor performance of the economy. While its earnings did not keep pace in either real or USD terms, we consider the company to have turned in a decent performance given that economy contracted by 2% and disposable incomes remained under pressure.

The future of the Zambian economy looks promising given the pending completion of the sale of ZCCM and the restoration of donor support. Zambian Breweries is well positioned to take advantage of any upturn in the economy as is evidenced by the acquisition of Northern Breweries, the only other producer of clear beer in Zambia situated on the Copperbelt. We recommend Zambian Breweries as a BUY.

-FEBRUARY-

19th February 1999

Zambia Bata Shoe -- Interim Report

The unaudited results of the company’s operation for the year ended 31 December 1998 are as follows:

Kwacha ‘000	12 Months Ended 31 Dec. 1997	% Chg	12 Months Ended 31 Dec. 1998
Turnover             --Local--	6,272,290	40.5	8,813,667
--Export--	512,849	107.1	1,062,227
--Total--	6,785,139	45.6	9,875,894
Cost of Manufacturing	4,123,028	38.6	5,715,821
Profit Before Tax	707,292	10.4	780,511
Taxation	78,443	42.6	111,866
Net Profit	628,849	6.3	668,645
Earning per Share-Kwacha	2.58	6.3	2.75
Share Capital-authorised	500,000	-	500,000
Issued and fully paid Ordinary Shares of Kw 2.00 each	243,544	-	243,544

Sales for the year ended 31 December 1998 were Kw 9,876 million, up 45.6% on the previous year. Local sales amounted to Kw 8,814 million against last year’s Kw 6,272 million. Export sales for the year under review went up to Kw 1,062.2 million from Kw 512.8 million in the prior year. Profit before taxation was Kw 780 million, a 38.6% increase over the 1997 results. After charging tax amounting to Kw 112 million, the company registered an after tax profit of Kw 668 million. This translates to EPS of Kw 2.75, up 6.3% on the prior year.

Bata has been adversely affected by the poor performance of the Zambian economy and the cheap imports flooding the market from Europe. To counter this the company has embarked on an ambitious export program to the SADC and COMESA regions. Management is confident of achieving growth in the new financial year.

In an exclusive meeting with Pangaea/EMI Securities several months ago, Mr. Glen Manley, Chief Financial Officer of Bata Zambia, had indicated that the company was taking a more pro-active approach in Africa. He indicated that over the past 10-15 years, Bata had downsized its operations in Africa and that the Company was now looking at making a re-entry. Bata is also concentrating on quality, fashion and pricing. Mr. Manley explained how the company is in the process of changing its product mix, to cater for demand in the region. He believes that the key to the Company’s success will be in the company’s ability to generate foreign currency sales via exports to regional countries. Mr. Manley also revealed the Company’s plans to generate economies of scale through vertical integration. Along those lines, Bata now operates its own tannery and is purchasing high quality hides from local cattle ranchers. By doing so, the company is able to control the quality of the hides and in turn its products.

Bata’s performance continues to improve and the Company’s efforts to improve bottom line earnings are now coming though. We believe that Bata is positioned to increase earnings in the coming year. We however continue a HOLD recommendation for Bata in the short-term.

12th February 1999

Standard Chartered Bank – Preliminary year-end results

Standard Chartered Bank Zambia (SCZ) has released its financial year-end (FYE) December 1998 results. In the face of 1998's difficulties they are not bad. In reviewing these results, please note they do not reflect SCZ’s new, lower tax rate (see below).

K’ Million	1998	% chg	1997
Net interest income	23,616	15.96	20,365
Provision for loan losses	(2,988)	-	4
Net income after loan losses provision	20,628	1.2	20,369
Non interest income	23,348	99.3	11,715
Non interest expenses	(26,285)	91.44	(13,730)
Income before taxation	17,691	(3.6)	18,354
Provision for income taxation	(7,961)	13.26	(7,029)
Net income after taxation	9,730	(14.08)	11,325
EPS	2.38	(14.08)	2.76

Net interest income for the year was Kw 23,616 million, up 15.96% on the previous year. Provision for loan losses was Kw 2,988 million. This is in contrast to 1997 when they had a positive Kw 4 million in provisions having recovered more than anticipated. Net income after charging loan loss provisions amounted to Kw 20,628 million, a 1.2% rise over the previous year.

Non interest income comprising commissions/fees, dealing and exchange gains was Kw 23,348 million, increasing by almost a 100% on the prior year. Operating expenses amounted to Kw 26,285 million, going up by 91.44% on 1997. The increase in operating costs can be attributed to the costs associated with the growing client base. Income before taxation fell by 3.6% to Kw 17,691 million in the year under review.

Standard Chartered’s provision for tax in FYE 98 was Kw 7,961. This was based on a tax rate of 45%, the effective rate for banking profits in excess of one billion Kwacha. SCZ, however, was formally listed on the Lusaka Stock Exchange (LuSE) on 1 December 1998; listed companies attract a 30% tax rate. We expect the final audited results to reflect this position. At a tax rate of 45% profit after taxation for the year is Kw 9,730 million, down 14.08% on 1997. BUT, at a 30% tax rate, profit after tax amount will be Kw 12,383.7 million, up 9.34% on the year before. We anticipate EPS of about Kw 3.02 per share for the final results.

Standard Chartered Bank continues to maintain its position in the market as one of the leading and most reputable banks in Zambia. The listing on the LuSE and introduction of new innovative features in its product line (such as Automated Teller Machines) is set to ensure growth in 1999 and beyond.

Currently trading at Kw 19 and a P.E of 6.87 with a dividend yield in the range of 12%, SCZ is an attractive stock. We recommend BUY.

The 1999 Budget

MACRO-ECONOMIC OBJECTIVES

The Minister of Finance, Edith Nawakwi, presented the government’s 1999 budget to Parliament on the 29^th of January 1999. The Minister of Finance outlined a nine-part program for the year which focuses on: i) monetary and credit policy, ii) the Public Service Reform Programme (PSRP), iii) the Privatization Program, iv) the Presidential Housing Initiative (PHI), v) export and investment promotion, vi) poverty reduction, vii) health, viii) education, and ix) water supply and sanitation.

Unquestionably, the budget’s main objective is to reverse the severe and unprecedented economic decline, which characterized 1998, and put the economy firmly on the path to recovery and growth. In the social service sectors, the priorities are to make a considerable reduction in poverty levels, upgrade health sector services, improve the quality of education and training, and encourage private participation in the provision of water supply and sanitation services.

Government has set the following key macro-economic targets for 1999:

• Economic growth rate of 4%
• Reduce inflation rate to 15% by the end of the year
• Strengthen reserves by adding US$120 million to existing foreign exchange reserves

To this end government intends to:

• Maintain tight monetary policies; and
• Limit the overall fiscal deficit to 1.8% of GDP

More specifically, monetary policy in 1999 will be focused on stabilizing the currency by cutting inflation, maintaining a sound financial system and mobilizing much needed domestic savings, in part by maintaining positive interest rates throughout the year. Further, money supply and credit will be strictly regulated to achieve the yearend inflation target. To improve effectiveness of this vigorous anti-inflationary policy, the Bank of Zambia will reduce its reliance on the cash and liquidity reserve requirements as tools for credit control. It will instead intensify the utilization of market based monetary instruments.

In order to boost public confidence in the banking system, which is key in credit expansion and savings mobilization and investment, government plans to introduce amendments to the Banking and Financial Services Act of 1994. The amendments will focus on reinforcing prudential supervision by the Bank of Zambia and extending its supervisory function to non-bank financial institutions. In addition, the Bank will introduce a depositors protection scheme.

The government proposes to spend Kw 2,227.7 billion in 1999. In line with its economic recovery and growth program, Kw 818.24 billion, approximately 37% of the total, will go into capital expenditure. Of this amount, Kw 648.24 billion (79%) is expected to come from foreign sources. Domestically financed capital spending has been increased from the Kw 113.4 billion that was spent in 1998 to Kw 170 billion this year. This has been done to further prop up economic growth objectives via needed investments in infrastructure and other projects which will contribute to expanded production. In addition to the government’s allocations, multilateral and bilateral donor support to core infrastructure requirements including roads, energy, education, etc. is expected to expand significantly.

Just over Kw 400 billion (18% of the total) will go to personal emoluments. Included in this amount is Kw 75 billion to cover the 35% 1999 civil service pay increase. In addition, Kw 80 billion has also been set aside to meet the cost of retrenching 7000 civil servants under the Public Sector Reform Program (PSRP).

Recurrent departmental charges take up Kw 381.4 billion (17% of the total). Included in this figure is a Kw 170 billion contingency reserve to enable the government to cope with unprecedented outlays and revenue shortfalls. It also includes Kw 23 billion to cover payment arrears not made in 1998. The remaining Kw 147 billion, 10% of anticipated domestic revenue, gives a quarterly contingency reserve of about Kw 37 billion.

Constitutional and statutory expenditures will require Kw 367.0 billion. Consistent with the government’s objective of keeping the overall fiscal deficit below 2% of GDP, the 1999 budget provides for Kw 107 billion, or 1.3% of GDP, for the reduction of government indebtedness. This measure is expected to contribute to both the lowering of interest rates and the replenishment of foreign exchange reserves. It is also meant to enhance private investment and hence stimulate economic recovery and growth, all of which is expected to contribute to the stabilization of the Kwacha.

The balance of Kw 261.0 billion will go for grants and other payments, including Kw 52.0 billion for the Zambia Revenue Authority (ZRA), Kw 40.0 billion for hospital boards, Kw 26.0 billion for district health boards, and Kw 19.0 billion for pensions and gratuities.

On the revenue side, Kw 1,460 billion or 65.5% (which has been the norm over the past several years) will be sourced internally while the remainder will be covered by external sources. Of the Kw 767.72 in foreign financing, Kw 648.24 (84%) will be targeted to project financing with only Kw 119.48 billion for budget support.

The Kw 1,460 billion to be raised domestically will come from direct taxes (Kw 480.0 billion—22% of the total Kw 2,227.72 to be raised), trade taxes including import VAT and tariffs (Kw 387.74 billion—17% of the total), domestic VAT (Kw 270.0 billion—12%), and excise taxes (Kw 262.26 billion—12%), with the balance of Kw 60.0 billion (3%) coming from non-tax revenue such as the privatization program, user fees and charges, and motor vehicle licenses and fees.

Government has continued with the tax reform program, initiated in 1992, which involves increasing the revenue to GDP ratio over the medium term by 0.5%. The reforms also incorporate further restructuring by shifting the incidence of taxation from production towards consumption. For 1999, however, the government is focusing on modernizing the tax regime and laying the foundation for broadening the tax base by increasing compliance.

Some of the more notable revenue measures proposed in this year’s budget include the introduction of withholding tax of 15% income paid as commission to residents and non-residents not employed by the paying company. This measure is projected to raise Kw 0.8 billion. Other measures include changing the manner in which mineral royalty tax is calculated: it will be deducted from net sales after certain expenses instead of being levied on gross sales. The approximate revenue gain from this measure is Kw 1 billion. To discourage evasion, the government has proposed that the maximum tax rate on interest income earned be reduced to 25% from the present 30% and that it be collected at source as a final tax. All of the above measures will take effect on 1^st April 1999.

In addition, the agriculture sector has received further incentives, which include the suspension of duty on agriculture machinery and equipment. This is expected to result in a revenue injection into the sector of about Kw 6 billion. Horticulture, which accounts for a significant percentage of non-traditional exports (NTEs) also got a shot in the arm. The proposed reduction in tariff rates from 5% to 0% on consumable inputs for the sector will include roses bushes and other live plants.

The manufacturing sector, long left in the cold in past budgets, also got a boost with a reduction in customs duty rates on selected items used in the manufacturing process. Unfortunately, the items to benefit from this measure and the level of the reduction was not specified.

Coming off a disastrous 1998, the government’s 1999 budget targets, especially those related to its macro-economic objectives, must be viewed as somewhat aggressive. The targeted 4% economic growth rate and 15% inflation rate by yearend are bold when one considers that the actual figures for 1998 were –2% and 30.6%. The heavy capital expenditure allocation, much of it to be invested in physical infrastructure required to encourage increasing levels of private investment, and the incentives provided to agriculture and manufacturing are most welcome and send positive signals to local businesses and the foreign donor and private investor communities. Encouraging signs that the objectives may be achieved include the fact that a detailed Memorandum of Understanding has finally been signed with Anglo American for the sale of several remaining key ZCCM mine assets. This achievement resulted in the commitment by the IMF and World Bank to release balance of payments and employee retrenchment support, some of which has already been disbursed. This decision is expected to generate further disbursements by the bilateral donors. The successful conclusion of the ZCCM privatization saga and renewed donor support, combined with government follow through on its budget program, could result in a dramatic turnaround for the Zambian economy in 1999.

1998 Year End Report

THE ECONOMY

Unlike 1997, a year which saw falling inflation and interest rates, relatively stable exchange rates and a growing economy, 1998 can only be described as an economic disaster in Zambia. With falling copper and cobalt prices, continued protracted delays in the sale of the remaining ZCCM assets (in particular the Nkana and Nchanga mines) and the resulting (at least temporary) termination of donor support, the economy went into a tailspin. The significant gains achieved in 1997 on the inflation, interest rate and exchange rate fronts were all lost in 1998.

As we enter 1999, there is renewed, though greatly subdued optimism (compared to the beginning of 1998), that the mine sale saga will finally come to a merciful close. In mid-January, the government and Anglo American jointly announced the signing of a detailed Memorandum of Understanding which, if all pre-conditions are met, will result in the sale of the remaining key mining assets to Anglo by the end of the first quarter. If history is to be any guide, however, investors must proceed with caution until such time as a sales agreement has been signed and ownership transferred.

INFLATION

Inflation, which closed 1997 at 18.6% after declining consistently during that year, showed a dramatic reversal in 1998, ending the year at 30.6%. The declining economy which contracted by an estimated 2%+ during the year, combined with the need to import maize for the second year in a row pushed the inflation rate up, reversing the gains made in 1997 and eliminating any possibility of achieving the Bank of Zambia’s targeted 8% inflation rate for the year. The rate targeted for 1999 is 15%.

Interest Rates: Consistent with increasing inflation rates, interest rates climbed throughout the year; from a low of 12.3% for 28-day T-bills in January to 34.8% in December. If the 15% inflation target for 1999 is achieved, it should result in declining interest rates over the course of the year.

EXCHANGE RATE

The exchange rate dropped by 64% in 1998, going from Kw 1,427.50 to the US Dollar at the close of 1997 to Kw 2,342.50 to the US Dollar by the end of 1998. While non-traditional exports provided about US$ 315 million in foreign exchange (similar to the 1997 results), its percentage of foreign exchange receipts increased due to the decline in copper prices and production, and the non-receipt of US$ 235 million in balance of payments support that had been pledged by the donors at the Paris Club meetings. Had it not been for the contracting economy and the resulting decrease in demand, the Kwacha could have easily fallen further.

The government projects economic growth for 1999 in the 4% range. Coming after the disastrous 1998 results, this achievement would be nothing short of miraculous. It is highly dependent on several critical factors. First, there must be a turnaround in the mining industry driven by Anglo American’s takeover of the Nkana and Nchanga mines and related assets, and its re-investment in the same. Obviously, an improvement in the international prices of copper and cobalt would provide greatly needed assistance in this regard. Second, the manufacturing and construction industries, which have been in the doldrums for the past two years, must be revived, largely on the back of the mining industry. And, finally, tourism and agriculture, which have shown so much promise for several years, could begin to make an important contribution to the economy in 1999 supported by investments from major regional and international groups.

LuSE MARKET REVIEW

In line with the overall economy, performance on the LuSE in 1998 declined dramatically after the market’s record 90%+ real growth in 1997. The LuSE index opened the year at 210.7 and closed at 161.48, a 23% decline in nominal terms, but a 53% drop in U.S Dollar terms due to the dramatic fall in the value of the Kwacha during the course of the year.

While the number of trades increased marginally, going from 3,741 in 1997 to 3,772 in 1998, this was primarily due to small, Zambian investors selling off shares to meet short-term cash requirements. By all other indicators, the market showed declining performance. The volume of shares traded declined by 41.5%, from 269.6 million in 1997 to 157.9 million in 1998, while turnover dropped by over 59% in real terms going from US$ 8.77 million in 1997 to US$ 3.56 million in 1998. This is reflected in the lower participation by foreign investors in the market. While net foreign investor inflows to Zambia registered US$ 818.8 million during the year, this represented a 43% drop from the US$ 1.43 billion net inflow experienced in 1997.

There were two new listings during the year. First, National Breweries, in which the government offered its 30% shareholding interest, came on the market in early 1998. The offer was only 91% subscribed. This was largely due to concerns investors had over the offer price which many felt was on the high side, and the announcement by Zambian Breweries that it would be making an investment in the opaque beer industry and providing direct competition to National Breweries, the major brewer of opaque beer in the country. Second, in November, Pangaea/EMI was the sponsoring broker for the listing of Standard Chartered Bank, the first bank stock to be listed on the exchange.

STOCK PERFORMANCE

With the exception of Standard Chartered Bank, whose share price increased by 36% in nominal terms following its listing on the Exchange, all of the other major stocks registered price declines during 1998. During the year, trading was most active in Zambia Sugar, Standard Chartered, Chilanga Cement and Zambian Breweries shares.

Rothmans

Starting the year at Kw 95 per share and closing at Kw 80, Rothmans suffered a 16% nominal decline in price and 48.6% in U.S. Dollar terms during the course of the year.

Rothman's unit sales grew by 29% over 1997 due to the largely successful campaign to introduce low cost brands and win back the segment of the market that had been lost to raw leaf smokers. Nevertheless, the company’s performance continues to be adversely affected by the declining economy as disposable incomes remain under severe pressure and increasing input costs as a result of the depreciating Kwacha.

Prospects for the future are contingent on increasing disposable incomes, which are directly tied to improvements in the economy; once again, the mining industry issue.

We have a HOLD on Rothmans, pending the conclusion of the sale of the remaining ZCCM mining assets. Should this proceed with Anglo American as planned, the future prospects for the company should improve.

Chilanga Cement

One of the star performers of the market in 1997, Chilanga suffered much the same fate as other stocks during 1998. Its price dropped from Kw 155 at the beginning of the year to Kw 140 by the end of the year. While this represented only a 10% drop in nominal terms, in U.S. Dollar terms, the stock lost 45% of its value in 1998.

The performance of the construction industry in general, and Chilanga in particular, is directly tied to the performance of the economy as a whole. With the precipitous decline in the Zambian economy, 1998 saw Chilanga aggressively penetrating export markets, in particular the re-opening of Burundi, Malawi, the DRC and, to a lesser extent, Zimbabwe. In addition, in conjunction with its majority shareholder, the Commonwealth Development Corporation (CDC), the company made a successful bid for the acquisition of Mbeya Cement in Tanzania. This was a strategic move to prevent a competitor from taking its markets in East Africa. While a good, defensive move in the longer term for the company, in the short term it will negatively impact the company’s performance as markets in East Africa historically served by Chilanga will now be addressed by Mbeya.

We recommend Chilanga as a BUY ON PRICE DIPS in the short term. Should the sale agreement with Anglo be concluded, the immediate prospects for the company would improve dramatically and our recommendation would immediately shift to strong buy.

Zambia Sugar

Zambia Sugar continues to be the market’s most liquid and actively traded stock. The country’s sole producer of sugar, its price opened the year at Kw 28 per share and traded during most of the year around Kw 22. It recorded a high of Kw 32 per share in mid-year, but closed the year at Kw 14, representing a decline in real terms of 69.4%.

The price was adversely affected by two key factors. First, the declining Kwacha pushed up production costs. This, combined with the smuggling of sugar early in the year that required the company to reduce prices to compete, had an adverse impact on performance during the first half of the year. Second, given the difficult economic conditions, employees who had participated in the "Employee Stock Ownership Plan" (ESOP) and who had fully repaid loans extended by the company for them to purchase shares in the initial public offering, decided to sell their shares almost at any price. This seriously depressed the share price.

Cost control measures instituted in late 1997 and the shutting down of non-core businesses began to have a positive impact during the year, and the yearend results (a shortened 6-month year due to the change in the company’s fiscal yearend from March to September) were extremely encouraging.

At the depressed price, we recommend the stock as a BUY.

Zambian Breweries

Opening the year at a price of Kw 215 per share, Zambian Breweries stock attained a year high of Kw 260 in March before dropping to close the year at a low of Kw 200. In U.S. Dollar terms, this represented a decline in value of 43.3%.

In spite of this performance, which was driven by the poor economic conditions prevailing in the market during the course of the year, Zambian Breweries remains the dominant (and will soon be the sole) brewer of clear beer in Zambia. It is a highly profitable company and has the most attractive dividend payout record of any company in the market. The company is managed by South African Breweries which also owns 45% of the shares of the company.

It recently made an offer to acquire a controlling interest in Northern Breweries, the only other brewer of clear beer in the country. The offer was accepted and the purchase has been provisionally approved by the Zambia Competition Commission. Once final approval is given (and this is anticipated), Zambian Breweries will effectively have a 100% share of the clear beer market in Zambia.

While 1998 was a difficult year for the company and the high excise duties continue to adversely affect results, with the anticipated turnaround in the economy and the virtual monopoly position the company will enjoy in the clear beer market, we judge this stock to be a STRONG BUY. Unfortunately, only a small portion of the company's shares are publicly held and large blocks are almost impossible to obtain hence the recommendation is STRONG BUY FOR RETAIL CLIENTS.

Standard Chartered Bank

Standard Chartered was undoubtedly the market’s best performing stock of 1998. Opening the year at Kw 14 per share, it remained close to this level throughout much of the year. In November, just prior to its listing, it was still at this price level. Following the listing, however, investors responded and the price jumped to Kw 19 during the month following the listing, representing a 36% increase in nominal terms and a 25% increase in real terms. The listing will reduce the Bank’s income tax rate from the marginal 45% rate applicable to banks, to a rate of 30% for quoted companies. We estimate that this will save the Bank over Kw 1.5 billion in taxes for 1998 alone.

Since the completion of the Bank’s re-structuring which resulted in the closure or sale of seven branches throughout the country and the re-focusing on its core businesses of corporate banking, trade finance and treasury operations, the Bank’s performance has consistently improved and we expect this to continue into the future. We rate Standard Chartered a STRONG BUY.

MARKET OUTLOOK

We anticipate that activity on the LuSE will increase in the coming year. With the successful conclusion of the ZCCM saga, there will be more interest not only by investors, but also by companies seeking to raise capital, something that the Exchange has not yet been utilised for to date. We also anticipate that there will be more recently privatized companies listing on the Exchange, in stark contrast to the dearth of companies during 1998. Should the mining industry turn around and economic growth resume the upward trend which began in 1997 and which stalled in 1998, the coming year could be an attractive one for the market.

Farmers House – Interim Results

Farmers House has put out interim results for the six months ended 30^th September 1998. Given the economic turmoil of the past year, the company’s performance was far better than most to say the least. Below are the figures:

Kw Million	6 months to 30.09.1998	% Change	6 months to 30.09.1997
Turnover	839	77.4	473
Profit before tax	474	74.3	272
Taxation	(145)	74.7	(83)
Profit after tax	329	74.1	189
EPS	33.59	74.4	19.26
DPS	10	66.7	6

In nominal terms, turnover for the 6 months prior went up by 77.4% over the Kw 473 million achieved in the 6 months to 30^th September 1997 period. Profit before taxation likewise increased by 74.3% at Kw 474 million. The tax provision stood at Kw 145 million as compared to only Kw 83 million in the mid year period. The effective tax rate, however, remained more or less the same at about 30%. This resulted in bottom line earnings of Kw 329 million, representing a nominal 74.1% upturn over that achieved in the half year ended September 1997. Farmers House owes this strong showing to dollar denominated rentals on its properties in the face of the significant devaluation of the Kwacha against the US dollar.

In real terms, however, a different picture emerges, with profitability increasing under 5%. This results from the fact that the company did not renew the leases of many of its existing tenants in anticipation of major site redevelopment and a corporate restructuring program which is getting underway. The company plans to become the premier diversified property investment holding company in Zambia and the only one of its kind on the Lusaka Stock Exchange. Discussions are currently underway with a prospective third party investor that will presumably provide the incremental capital required for the planned restructuring program. The program envisions a property portfolio in the commercial/retail, tourism and healthcare sectors.

Its current prices of Kw 269.90 yields a forward PE of 4 and a Price to NAV of 0.35. In the long term, for investors interested in the property market, we believe that Farmers House is an excellent stock. It remains, however, one of the most illiquid stocks on the market and it has been impossible to secure any blocks of shares for trading. Given the company’s expansion plans and discussions currently underway, interested property investors may wish to consider an approach to the company regarding a possible participation.

ZCCM – The Saga Continues...

The much anticipated announcement from Anglo American regarding the conclusion and signing of an agreement with the government on the Nkana and Nchanga mines was not forthcoming this week, and economic conditions continue to deteriorate. During the week, ZCCM released about Kw 4 billion intended for payments to its suppliers. The payments never reached the suppliers, however, as the Zambia Revenue Authority (ZRA) managed to intervene, "grab" the funds and is now deducting VAT and other tax payments directly. Further, it is also deducting tax payments owed by these same ZCCM suppliers. The situation seems to be going from bad to worse, and the entire business community is suffering severe cash flow problems.

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