(LUSAKATIMES, REUTERS) Zambia takes back Libya-owned Zamtel, knocks off three zeros from the kwacha

Zambia takes back Libya-owned Zamtel, knocks off three zeros from the kwacha
TIME PUBLISHED - Monday, January 23, 2012, 4:10 pm

Zambia will take back a 75 percent stake in local fixed-line operator Zamtel that is currently held by Lybia’s LAP Green Networks, Finance Minister Alexander Chikwanda said on Monday.

“We made a decision to restore Zamtel back to the people of Zambia,” Chikwanda said at a media briefing.

“The plight of the workers may be affected temporarily but we are trying to put up something permanent. If we find Zamtel is not adequately capitalised we will avail fresh capital.”

Zambia last week seized bank accounts belonging to Zamtel as part of a money-laundering investigation. The company has denied any wrongdoing.

Under its previous government, Zambia sold a majority stake in Zamtel to the Libyan operator for $257 million. A government inquiry in November ruled that 2010 transaction illegal.

Chikwanda also said Zambia would rebase the kwacha currency by lopping off three zeros, a move that should make it easier for foreign investors to participate in the economy,

“The rebasing had to be done when all the fundamentals like inflation and GDP growth were right and we think they are now right,” Chikwanda said.

Currency rebasing usually does not change the exchange value of the currency and is introduced to make commercial calculations easier.

The rebasing might be kwacha positive “to the extent that it is a continued commitment to low, and stable inflation”, said Razia Khan, head of Africa research at Standard Chartered.

The kwacha was last trading at 5,120 against the dollar from 5,123 at the end of last week.

Government would also raise commercial banks’ capital requirements to 104 billion kwacha, and 250 billion kwacha for foreign commercial banks from 12 billion kwacha to make them more resilient to economic shocks.

“The measure to raise the minimum capital is intended to mobilise additional resources to enable banks participate more effectively in growing the economy by increasing credit available to the private sector,” Chikwanda said.

[Reuters]