Exploring The Influence of Kwacha Fluctuations on Medium Small and Micro Enterprises Mmsmes Profitability: A Case of Choma District Southern Zambia

Temwani Zulu
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Temwani Zulu: Ministry of Education, Zimba. Zambia

International Journal of Research and Innovation in Social Science, 2025, vol. 9, issue 11, 3427-3460

Abstract: This study investigated the impact of kwacha fluctuations on the financial performance of Micro, Small and Medium Enterprises (MSMEs) in Choma District, Zambia, specifically on how demographic characteristics, sectoral distribution, and managerial strategies influence enterprise resilience to currency volatility. Using both descriptive and correlation analyses, the study found that MSME operators are mmostly male (59.6%) and the majority aged between 36 and 45 years, with most possessing only primary or secondary education. This demographic structure significantly constrains financial literacy and the capacity to apply sophisticated risk management tools such as hedging. The findings revealed that 98% of MSMEs are import-driven, making them acutely vulnerable to kwacha depreciation, which inflates procurement costs and erodes profitability. Retail and manufacturing sectors exhibited the highest exposure, showing large fluctuations in net profit margins (NPM) and profit growth rates (PGR), while service-oriented sectors such as education and finance displayed relative stability. The study further established that most MSMEs depend on informal coping mechanisms primarily inventory management and reactive pricing adjustments rather than formal financial instruments, due to limited financial literacy, weak supplier networks, and restricted access to capital markets. Correlation analysis confirmed significant relationships between currency volatility, pricing strategies, import reliance, and profitability, as well as a positive association between education level, enterprise size, supplier relationships, and hedging adoption. The findings affirm theoretical perspectives from the Resource-Based View (RBV) and Purchasing Power Parity (PPP), emphasizing that internal capacity and market exposure determine enterprise resilience. The study concludes that MSMEs in Choma District face systemic vulnerabilities to exchange rate instability due to import dependence, weak financial management practices, and limited macroeconomic awareness. It recommends targeted financial literacy programmes, improved access to hedging instruments, promotion of local value chains, and macroeconomic stability as crucial pathways for enhancing MSME resilience and sustainable growth in Zambia's volatile economic environment.

Date: 2025
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