New Currency Regulations to Impact Skyline Industries’ Clients: Zambian Kwacha Mandated for Domestic Transactions

The Bank of Zambia has drafted new currency regulations that may significantly impact Skyline Industries’ customers in the building and building materials sector. The regulations aim to strengthen the Zambian Kwacha by making it the sole legal tender for domestic transactions. This commentary provides an overview of the key provisions and implications for businesses operating in Zambia’s construction industry.

• The Kwacha as Sole Legal Tender: The new regulations, once enacted, will mandate that all domestic transactions, including those related to building and building materials, be conducted in Zambian This means that businesses like those served by Skyline Industries will no longer be able to quote, pay, or receive payments in foreign currencies like US dollars for transactions within Zambia.
• Transition Period for Existing Contracts: The regulations stipulate a one-year transition period for existing contracts denominated in foreign Skyline Industries will advise its customers with such contracts to initiate the process of converting these agreements into Zambian Kwacha to ensure compliance within the stipulated timeframe.
• Exemptions for Specific Transactions: While the regulations emphasize Kwacha usage, some exemptions Transactions related to paying foreign currency liabilities to financial institutions, taxes paid to the government in foreign currency, and certain activities within the mining and tourism sectors are exempt. However, it’s essential to note that purchasing building materials is not listed as an exempted activity.
• Penalties for Non-Compliance: The regulations outline severe penalties for non-compliance, including hefty fines and potential imprisonment for individuals involved in transactions that violate the Kwacha-only rule. Therefore, it is crucial for Skyline Industries to emphasize to our customers the importance of adhering to these new regulations to avoid penalties.

Impact on the Building and Building Materials Sector:

• Pricing and Payment Negotiations: Skyline Industries will guide our customers to adjust to pricing and invoicing in Negotiations with suppliers and contractors should clearly reflect this shift.
• Foreign Currency Risk Management: The regulations aim to reduce the reliance on foreign currencies. Skyline Industries will work with our customers to develop strategies to mitigate foreign exchange risks, especially for imported building materials.
• Contractual Clarity: All future contracts should explicitly state that payments will be made in Zambian Kwacha.

Skyline Industries, as a trusted supplier, is well-positioned to advise its clients on navigating these new regulations. By providing timely information and practical guidance, Skyline Industries will support our customers in remaining compliant while ensuring minimal disruption to their business operations.