The 2016 PwC Zambia Banking Industry Survey presents the findings on the state of the banking industry in Zambia.
Zambian businesses have faced numerous challenges over the last two years as the economy has struggled to make headway amid a climate of low copper prices, severe energy shortages,a weak Kwacha and rising inflation.
Falling copper prices have coincided with the country’s growing fiscal deficit, forcing Government to raise borrowing to meet spending commitments. In addition, the national energy crisis that became apparent in 2015 has resulted in lower productivity and increased fiscal pressure on Government due to the need for emergency power imports.
All of this prompted in 2015 a fast depreciating Kwacha and skyrocketing inflation. As a result, the Bank of Zambia (BoZ) had to significantly tighten monetary policy in order to safeguard price stability. This led to low market liquidity, higher interest rates and contributed to higher non-performing loans.
With such a scenario playing out, most businesses have had little choice but to focus on survival in the short-term. In particular, banks have been forced to implement various measures to mitigate the impact of the risks that have hindered the industry.
It is against this backdrop, the effects of which are still playing out, that PwC decided to conduct a survey to identify the key issues Zambia’s banks have had to contend with during this difficult time. The banking sector plays an important role in facilitating growth across the economy, and its health is vital in supporting economic and national development.
PwC invited 18 commercial banks based in Zambia to participate in the survey, which was conducted over a period of three months. A response rate of 72% (13 banks) was received. This included five of the countries’ six largest banks. There are a total of 19 banks in Zambia, with the top six accounting for over 70% of total industry assets and liabilities, highlighting how market share is concentrated among a few large players.
Broadly, the survey was divided into two parts. Firstly, a review of the current state of the industry was undertaken. This included looking at recent events and the actions taken by banks in response to the economic and business challenges faced. It also considered the actions required to improve the industry.
Next, the survey sought to identify emerging trends that business leaders are considering or will need to consider as they chart the way forward. The survey results and financial analysis were supplemented by interviews with managing directors of selected banks as well as an interview with the BoZ, an important industry stakeholder.
Finally, we complemented our survey findings by analysing selected industry key performance indicators based on the quarterly prudential returns that the commercial banks submit to the BoZ. This analysis can be found in the Appendix on page 16.