By KENNEDY MUPESENI –
A ZAMBIAN business consultant based in America has observed that Zambian companies can help mitigate the depreciating Kwacha if they stop importing raw materials.
Raja Bobbili said the move would help to manage risks associated with Kwacha depreciation.
Mr Bobbili said to reduce risks associated with the devaluation of the local currency, companies needed to substitute some of the imports for Zambian-made materials.
“Consider denominating your sales and your purchases in a common currency such as the dollar, or substitute some of the South African imports for Zambian-made materials,” Mr Bobbili said.
He observed that some of the most successful global manufacturers have adapted to buy-where-you-sell and build-where-you-sell strategies with great success in time of high currency risks.
Mr Bobbili, a graduate of Harvard Law and Business School said this in a presentation dubbed Understanding and Managing Risks in Africa.
He said entrepreneurs should also restructure businesses to match the currency of its revenue with the currency of your costs.
Mr Bobbili said that for many Zambian businesses, managing currency risks prudently was critical to their success.
Firms should consider purchasing financial hedges to enable them buy and sell forward contracts to lock in a pre-determined exchange rate.
Mr Bobbili also warned companies to beware that hedging was a zero-sum game and that as perception of future risk increases, financial hedges become exorbitantly expensive.
China’s quick pace of growth over the last few decades created an insatiable need for commodities such as copper, steel, aluminum, lead, zinc and others.
Mr Bobbili said many of the commodities were supplied by countries like Zambia which he said fueled the country’s economy in the process especially that copper makes up around 60 per cent  of the country’s exports.