Nchimunya Muvwende

02/04/2024

About Debt Restructuring

Just in case you wondering what debt Restructuring is and why it's important, just consider this pay slip.

Despite earning over K10,000 in gross income, this person can hardly do anything with his net pay. There are many people to be paid from his earning. 77% of his monthly income goes to service debt and compulsory obligation. 62% of his salary is for debt only.

Now imagine, how does he survive, invest in business or do anything worthwhile with this income? Almost impossible right?

Debt Restructuring to him would mean engaging these people and institutions he owes. He agrees with Izwe that instead of paying K2604 per month, he can only manage K500 but they can extend the period. Similarly, he tells Spectrum that they should deduct, K500 per month instead of the K1,923 they are currently getting. He agrees with all the lenders and they agree. So the debt has been restructured.

In short, he will still pay the money but in smaller amounts for a longer period. The salary of this person has not increased in a literal sense but because of these agreements, the net pay would increase from the current K2,414 to say K4,000. This person can now get this extra money and invest in something that will generate more money to be able to pay back stress free.

Just in case you are wondering what debt Restructuring really is, think about this person especially regarding their current situation and how it improves if the people he owes agree to reduce the amount payable per month. He has relief which he can use to better his life.

Now that you know, go and teach others about DEBT RESTRUCTURING FOR THE COUNTRY.

08/09/2023

Train up children to learn that Money is generated and not Begged. We shouldn't raise a generation of specialized beggers instead, we need innovative Minds.

01/09/2023

It's either you manage your Money or Money manages you. The former is the reason you always complain. Try the latter...

07/07/2023

LETS PLAN FOR THE FUTURE INSTEAD OF INVESTING IN REPEATED CONTENT ON DSTV

Hon saili mavegie phiri writes:

So for example Not watching DSTv makes one lose nothing. Imagine puting K720 into savings account which you pay for DSTV for the whole year. You save K8,640. Say you want kids to be watching cartoons. You get a Topstar Decoder and pay their premium.

Say from your budgeted K720 for DSTv you are paying about K240 and remain with K480. You save K480 in your kids account, at the end of 12 months you save K5,760 towards your kids future. DSTv has nothing educative to watch for kids or even entertainment. You can download a lot of educational materials on YouTube and save them on a hard drive. You can have it plugged to your TV and kids can chose from the hard drive what they want to watch see.

05/07/2023

Financial Tip.

Hold on to your money like a Tonga Man holds on to Cattle. No matter how hungry he gets, eating his invested cows is out of question.

23/06/2023

Debt restructuring Explained

Great news! Zambia's public sector creditors have agreed to reschedule $6.3 billion of debt, which includes $1.3 billion in arrears. Private sector creditors are also expected to follow suit with the $6.8 billion owed to them, according to a Reuters article. The agreement entails restructuring Zambia's debt over a period of more than 20 years, with a three-year grace period.

To put it simply, imagine you borrowed money from different people, each with their own repayment deadlines. However, due to unforeseen circumstances, such as a decline in business revenue and reduced financial support, you find it challenging to meet your credit obligations. So, you devise a plan to address your debt situation.

In this scenario, you group your lenders together, appoint leaders to represent them (China and France), and request a modification to the loan terms. Instead of repaying the borrowed amount within the original time-frame, you propose a longer repayment period. This allows you to reorganize your business, seek new investors, and increase your income to fulfill your repayment obligations. Essentially, you're assuring your lenders that you will pay them back, but you need more time to do so.

In short, debt restructuring is mostly about buying more time to deal with your debt situation. It could include increasing repayment period, reducing the interest rate or other things that reduces your repayment burden.

For Zambia, some of the $6.3 billion debt was initially due earlier. However, under the conditions, the debt will now be paid over a 20-year period, including a grace period of 3 years.

why not debt forgiveness like what happened in 2005 under HIPC?

Lets put it in this way, back in the day (before 2005), you used to borrow money mostly from your family members and close friends (bilateral and Multilateral lenders like, China, World Bank and IMF). But when you were faced with challenges, you asked them to forgive your debt. And because you are more like family to them, they decided to forgive about 80% of your credit. But after this debt relief, you decided to now borrow from other people such as neighbors, the shylock, the business man (Commercial lenders like Euro-bond etc), how easy is it to ask them to forgive their credit, they are not your relatives.

The fact is that you borrowed and still need to pay. However, while they need their money, they have agreed to give you time to reorganize yourself, pay in small installments over a long period of time. Lets flip the coin, you lend your money to someone, can you easily forgive them because they have asked? Remember, you also have use for the same money.

09/06/2023

Money rarely lands in your hands by accident. Plan your finances and work towards achieving your goal.

09/06/2023

Following the Heads of state Summit, I wrote this article, urging that the focus should be on implementation of deals that have potential to accelerate regional economic development.

04/06/2023

Are you looking for an Investment Option? Do you want to understand how you can invest in Government Securities? Here is your chance. Register for a free virtual seminar by following the link: https://www.eventbrite.com/e/649081629627

Financial Education | Economic Discussions | Financial Advisory

03/06/2023

You can either choose to make Money or Excuses. Always choose the former, you can't do both simultaneously.

01/06/2023

Money built steadily is more sustainable than the one off get rich schemes. Understand your investment

17/05/2023

securities best investment options

The alarming rate at which individuals are falling prey to fake investment schemes in Zambia has become a source of great concern. Despite the risks, many people are still willing to invest their hard-earned income, but, unfortunately they lack knowledge when it comes to identifying legitimate investment opportunities.

How huge amounts of money are being lost to these fraudulent investment schemes is stunning. Millions of kwacha are being taken from unsuspecting investors.

While it may seem that lack of capital is a barrier to investing, this is evidently not the case. There are individuals who have funds to invest, but are simply in need of guidance and support in choosing the right investment options. With the recently signed law that allows people to withdraw 20 of their pension contributions National Pensions Scheme Authority (NAPSA), there some investment vehicles that are less risky. Among such safer investment options are Government securities.

Securities
These are investment options through which individual or a company lends money to the Government for a specific period of time in exchange for an interest. There are two types of Government Securities, Treasury bills and Government Bonds. With a minimum amount of K1, 000, one is able to invest in either of these government securities. In addition, there are no restrictions to invest in government securities but the requirements are that the investor should have a local commercial bank kwacha account. The investor should also register on the Central Securities Depository at the Bank of Zambia (BoZ).

There are two options for investing in Government securities. You can either directly submit a bid to the BoZ, or you can request a local commercial bank to place the bid on your behalf with the central bank. The easier option is to walk to your bank and inform them your intention to invest in Government securities and they will be able to help register and invest.

bills
They have maturities of 3 months, 6 months, 9 months and 12 months. This means that if the investment scheme is in Treasury bills, the money can be invested for a period between 3 to 12 months. As of 6th April, 2023, the interest rate (Weighted Average Discount Rate) from Treasury bills ranged from 9.8% for a 3 months investment scheme to 13.6% for the 12 months investment option.

Under a Treasury bill, the money invested is at a discount and the difference between invested money and the return is the interest received. Thus, Treasury bills are always bought at a price less than their face value, but at maturity, the holder is paid an amount equal to the face value. For example, if one intends to invest a K5, 000, which is called the face value, for a 6 month maturity period, the money they give is less than K5,000, say, K4, 500. But at the end of 6 months, they receive K5, 000. In this case, the interest earned is the K500.

The auction of treasury bills is done every two weeks on Thursdays and a person can invest in different securities so as to diversify when to receive returns.

bonds
They have tenors for 2, 3, 5,7,10 and 15 years and investments can be made over any of these periods. Under Government bonds, there are mainly two types of returns. Firstly, you receive a coupon payment every six months and, secondly, the yield earned at maturity. As of 31st March, 2023, the coupon rate ranged from 9% for the 2 year bond to 14% for a 15 year bond, while the yield rate ranged from 18% to 27.8% for the same time period. What this means is that, if you invest in the 2 year bond, every six months, you receive coupon payments at a rate of 9% and at the end of the 2 years, you receive the invested money with the yield rate of 18%.

of Government securities
The Government securities are considered one of the safest investments because they are backed up by the full faith and credit of the Government. It is highly unlikely that a Government can default on this type of debt. These securities are also highly liquid and this means that if you decide that you want cash, the security can be traded in the secondary market.

With the difficult faced in accessing credit from lending institutions, Government securities can be used and accepted as collateral when obtaining a loan. This makes access to credit easier amid requirement for collateral when accessing loans from financial institutions.

Another benefit is that Government securities have relatively higher interest rates as compared to putting money in a savings account. One needs to only put their money and wait for the returns without doing anything else. For those accessing partial pensions from NAPSA, it is important to consider investing some of the money in Government securities and watch it grow. Remember that you only need a minimum of K1, 000 to invest into these lucrative securities.

People are seeking to invest their money should not make themselves vulnerable to scammers who have been on rampage swindling people out of their hard-earned funds. There is, therefore, need for all stakeholders, including individuals and companies, to enhance financial literacy and provide investment advice to prospective investors who expose themselves to scammers.

By working together, we can help people make informed investment decisions and protect their money from scammers and fraudulent investment schemes. More information on investing in government securities is available on the
Bank of Zambia website.

Financial Education | Economic Discussions | Financial Advisory