The Malawi Motor Traders Association (MMTA) has said car dealers are losing money on vehicle sales due to the appreciation of the kwacha.
Ironically, when the local currency was depreciating a few months ago, the car dealers also faced difficulties in making sales due to soaring costs of vehicles and spare parts.
Speaking in an interview with Business News on Tuesday, MMTA president, Jolly Nkhonjera, said motor traders are losing money as the kwacha continues to gain value, which he feared would force them to reduce selling prices leading to losses.
MMTA is a group of companies which include Mike Appel and Gatto, HTD Limited, Automotive Products Limited, Tata Zambia, City Motors, Toyota Malawi and Cfao.
In some authorised dealer banks, the kwacha seems to have gained considerable strength against the dollar from K769 at the beginning of the month to K689.93 last Saturday.
“Motor traders lost money in exchange losses as the kwacha was losing value every day. The situation is different in March as the local currency has started appreciating against the major trading currencies.
“This, however, is not really good news as we will continue losing money for all those vehicles that were purchased at high exchange rates as they will be sold at a strengthened kwacha. What this means is that the selling prices will be dropped, which will lead to losses,” said Nkhonjera.
Nkhonjera bemoaned the volatile exchange rate regime which he said is not good as it makes planning difficult.
“Speculators, including banks, take advantage of this situation to make huge profits on foreign exchange sales. The problem is that the country is not producing enough foreign exchange through exports, as a result demand is always higher than supply,” he said.
Economist Professor Ben Kalua, however, said the appreciation of the kwacha may only be temporary as it would start shooting again after the lean period.
In his winding-up speech of the Mid-Year Budget Review statement in Parliament earlier this month, Minister of Finance, Economic Planning and Development, Goodall Gondwe, expressed optimism that the kwacha would stabilise and warned speculators who were perpetuating the depreciation to take note.