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Friday, 30 March 2007

IMF showers Zambia with praise

The IMF this week made a positive assessment of Zambia's progress. A news report below:

IMF showers Zambia with praise

Lusaka - The International Monetary Fund (IMF) on Friday described Zambia's economic performance as remarkable, praising the southern African country's strengthened macroeconomic policies in a statement.

A team from the international institution, led by Francesco Caramazza that spent about two weeks in the country earlier this month, said it was impressed with fiscal regime changes in the mining sector and Zambia's overall economic performance.

The IMF in the statement issued in Lusaka said: "The mission reviewed economic and financial developments and held productive discussions with Zambian authorities on economic performance in 2006 and on policies and prospects for 2007."

The IMF acknowledged the renaissance of the copper mining sector and that extensive debt relief had markedly strengthened the country's economic prospects.

Caramazza said Zambia's stance on fiscal policy remained prudent in 2006 as evidenced by the decline in the budget deficit when grants were excluded.

In a related development, inflation marginally increased by 0.1 percent this month to 12.7, according to acting director of Central Statistical Office director Efrida Chulu.

She said despite the external forces and factors, Zambia's economic performance was remarkable, recording a significant trade surplus in February.

Zambia's exports include refined copper and crude materials with major destinations as Switzerland, South Africa, Democratic Republic of Congo and the United Kingdom.

The country has maintained single digit inflation for ten months in 2006 but slipped into the double in January this year as economic analysts keenly watch the economic pendulum. - Sapa-dpa

Tuesday, 27 March 2007

Public Sector Reform

LPM's statement in Namibia that "the HIPC savings were periodical and that 65 per cent of Government revenue went to paying civil servant salaries", may only reiterate what we already knew, but does deserve some attention from all who wish to see Zambia develop.

The share of Government revenue being spent on public sector pay is too large. In theory only 35% or the HIPC savings are being spent on infrastructure, the rest of Government revenue is on wages and other unproductive activities.

Unfortunately a quick scan of all the major political parties' manifestos shows a lack of long term view on: a) what they plan to do reduce the public sector pay burden to something manageable; and more importantly b) what is being proposed to ensure that the little that we have that can be spent on non-wage activities is being utilised properly.

The problem is that politicians have very little incentive in addressing (a) because it could cost them votes come election time. The bigger the size of the public sector relative to population, the more unlikely it is that any party will want to discuss the issue. However it is important that people see the bigger picture. Clearly spending 65% on wages is not sustainable in the long term, and crucially leads to greater inflationary pressures. To control inflation in the long term Government needs to ensure that negotiations of wages does not return to the FTJ days of 20% plus wage increases. I am glad that Government has at least shown some intent to slow down wage increases, but unfortunately as a nation we are not placing sufficient importance on the question of whether the current size of the public service sector is 'optimal'.

If the lack of success in addressing point (a) is due to weak incentives on the side of politicians, the incentives for addressing point (b) are certainly plenty. With revenues constrained by public sector pay, we must look at public sector reform - the exam question for our politicians therefore is what are they proposing to ensure that our public sector uses the little resources we have to deliver effective public services?

I would suggest that in answering this question, as a nation we reflect on at least three strands. First, more devolved responsibility along the lines suggested in my Participatory Budgeting blog - failed accountability is at the root of public sector dysfunction. A strong bond of accountability between citizens and the public sector would lead to continuous improvement in public sector service delivery. Participatory budgeting is an excellent way to do this at the local level. Secondly, Government needs to create stronger incentives for avoiding corruption. Both detection mechanism at the local level and stiffer penalties for corruption should be encouraged. And finally greater information - wide dissemination of information allows citizens to monitor public service deliver and gives them a platform for challenging how it is being delivered to them. An improvement in this area will ensure that the little we have is being spent wisely.

Until we begin to have a debate around the pay burden imposed by the public sector, and how to ensure that the little we have is used efficiently, our development will be sluggish and often involve wasted resources. We must all work together to push political parties and Government to put this issue at the top of the agenda.

Monday, 26 March 2007

Child Slavery / Street Children

Just finished watching Rageh Omar's incredible documentary on Child Slavery, as I watched couldn't help but wonder how many of our Zambian children are probably in a similar position.

Anyone who has seen the many street children that now roam the Zambian streets, is only too aware that these kids eventually end up in one form of slavery or another. Child slavery and the growing number of street children are invariably linked. As long as they are on the street, they remain vulnerable to such activities.

I commend Citizen's Forum for coming out and urging Government to do something on this scourge. Tackling the problem of street children requires Government to put in places stronger policies that supports the family unit to prevent more kids flooding on the street. For those kids who are already there, we must do all we can to protect them from potential slavery through stronger governance, combined with more emphasis on police departments to take the issuesm of child slavery seriously. Unless we address this issue we are robbing our nation our future, and all of our policies to address HIV and other problems will be ineffective.

Sunday, 25 March 2007

Oxfam on EPAs

Oxfam has raised new concerns that the EU may be using Economic Partnership Agreements (EPAs) between Europe and african nations as a back-door attempt by EU to win trade provisions they could not get through the World Trade Organisation (WTO). Article here. The EU has been holding talks with African Development Ministers on the future of trade, including Zambia.

Friday, 23 March 2007

Benefits of Foreign Education?

This month's IMF's Working Paper by Antonio Spilimbergo explores the linkages between foreign education and democracy. It concludes :

" foreign educated individuals promote democracy in their home country, but only if foreign education is acquired in democratic countries".

What is sadly missing is better understanding of how this comes about. Antonio speculates that this could come from greater motivation of introducing democratic ideas to keep up with the developed world, foreign educated individuals probably spread more new ideas, and possibly foreign educated people are so scarce at home that they have considerable bargaining power.

It is revealing that when one scans the Zambian political scene we see most people at the forefront like HH, Nawakwi et al were educated abroad and in democratic countries. Of course it is a matter of opinion how much these and other foreign educated politicians contribute to the vibrance of Zambia's democracy, but it is encouraging to see that perhaps there are long term dynamic benefits of foreign education, in terms of greater push for democratisation.

Africa's Povery Trap

William Easterly an expert in development economics, has some important reflections in today's Wall Street Journal:

There is a sad law I have noticed in my economics career: the poorer the country, the poorer the economic analysis applied to it. Sub-Saharan Africa, which this month marks the 50th anniversary of its first nation to gain independence, Ghana, bears this out.

There has been progress in many areas over the last 50 years -- ... yet the same poor economics on sale to Ghana in 1957 are still there today. Economists involved in Africa then and now undervalued free markets, instead coming up with one of the worst ideas ever: state direction by the states least able to direct.

African governments are not the only ones that are bad, but they have ranked low for decades on most international comparisons of corruption, state failure, red tape, lawlessness and dictatorship. Nor is recognizing such bad government "racist"... Instead, corrupt and mismanaged governments ... reflect the unhappy way in which colonizers artificially created most nations, often combining antagonistic ethnicities. Anyway, the results of statist economics by bad states was a near-zero rise in GDP per capita for Ghana, and the same for the average African nation, over the last 50 years.

Why was state intervention considered crucial in 1957? Africa was thought to be in a "poverty trap," since the poor could not save enough to finance investment necessary to growth. Free markets could not get you out of poverty. The response was state-led, aid-financed investment. Alas, these ideas had already failed the laugh test... The U.S. in 1776 was at the same level as Africa today, yet it escaped the poverty trap. The same was also true for the history of Western Europe, Australia, Japan, New Zealand and Latin America. All of these escapes from poverty happened without a state-led, aid-financed "Big Push."

In the ensuing 50 years, there have been plenty more examples of poor countries which grew rapidly without much aid -- China and India (who each receive around half a percent of income in foreign aid) being the most famous recent examples. Meanwhile, aid amounted to 14% of total income year in and year out in the average African country since independence.


Despite these reality checks, blockbuster reports over the last two years by the U.N. Millennium Project (led by Jeffrey Sachs), Mr. Sachs again in his book "The End of Poverty," the U.N. Development Program (UNDP), the Tony Blair Commission for Africa, and the U.N. Conference on Trade and Development (Unctad) have all reached what the UNDP called "a consensus on development": Today Africa needs another Big Push. Do they really think nobody is paying attention?

Africa's poverty trap is well covered in the media, since it features such economists as Angelina Jolie, Madonna, Bono and Brad Pitt. But even Bill Gates ... expressed indifference to Africa's stagnant GDP, since "you can't eat GDP." Mr. Gates apparently missed the economics class that listed the components of GDP, such as food. The World Bank and the International Monetary Fund have good economists who have criticized state intervention. Under the pressure of anti-market activists, alas, they have soft-pedaled these views lately in favor of ... U.N.-led Millennium Development Goals...

The cowed IMF and the World Bank never mention the words "free market" in thousands of pages devoted to ending poverty. ... World Bank economists are so scared of offending anyone on Africa that they recite tautologies. The press release describing the findings of the 2006 World Bank report "Challenges of African Growth" announces: the "single most important reason" for Africa's "lagging position in eradicating poverty" ... is "Africa's slow and erratic growth." The next World Bank report may reveal that half a dozen beers has been identified as the single most important reason for a six-pack.

Today Unctad (in its 2006 "Big Push" report) still offers to make possible government "infant-industry policies" for "small, fragmented economies" by setting up a regional market, presumably so Burkina Faso and Niger can help absorb the potential output of the Togolese automobile industry. Unctad lacks everything but chutzpah: All aid to Africa, it said, should be moved into a new U.N. Development Fund for Africa, to which Unctad helpfully offered its "in-house experience"... Unctad will thus permit the economics of Africa to at last "escape from ideological biases," so we can finally understand "why economic activity should not be left entirely to market forces."

The free market is no overnight panacea; it is just the gradual engine that ends poverty. African entrepreneurs have shown what they are capable of. They have, for example, launched the world's fastest growing cell phone industry to replace the moribund state landlines. What a tragedy, therefore, that aid agencies have foisted the poorest economics in the world on the poorest people in the world for 50 years. The hopeful sign is that many independent Africans themselves are increasingly learning the economics of how to get rich, rather than of how to stay poor.

Having read William's book, there's indeed much to say for more tailored approach to aid. Solutions to Africa will not come from foreign planning, but from more locally produced solutions. A piece meal approach built around a market approach is what is needed to get people out of poverty, not "grand schemes".

Monday, 19 March 2007

Celebrating Searchers! (Getrude Akapelwa-Ehueni & Monica Einsenberg)

The much inticipated opening of Zambia's first private university for science and technology in July 2007, provides an ideal opporunity to celebrate Zambian searchers! People who are actively working to make a difference and are not sitting by to wait for the Government to do things for them.
Getrude Akapelwa-Ehueni, chief executive officer of Victoria Falls is a true seacher. She has recognised the need for private university in Zambia focused on technology and more importantly taken the initiative by doing something about it. An initial US$375,000 has been invested in the project, which is fully financed by private individuals, including Ehueni herself.
Last year, I read a story of Monica Einsenberg, A Zambia lady who studied in London but eschewed a high-flying career in Britain to found the Back to School Project in Lusaka last year. She said when she returned home from her time in the UK, she was absolutely shocked and sickened to see how many more children were living on the streets from even a few years ago. But with the help of volunteers, a teacher and a nurse, Eisenberg founded the Back to School Project, which currently cares for 27 teenagers, offering them education, food, counselling and alternatives to their aimless and sometimes violent lives on the streets. Right now they gather outside for study, but they're building a classroom and in a couple of years she hopes to have a full education centre built on 300 acres of land, where the students will live, study and even work on a farm.
It is nice to see people who are able to think outside the box and get up and become agents of change. These people are stepping out and making a difference, and as long as there are such people, there's still hope for Zambia.

Saturday, 17 March 2007

Looking beyond mwabanomics

Education has risen to prominence this week as MPs have been calling for much freer education, backed by the Zambian National Union of Teachers (ZNUT). ZNUT General Secretary Roy Mwaba is reported to have said....

"the move [extending free education to Grade 12] was encouraging in that it would propel the country to greater economic heights......it did not make sense to have children get free education up to Grade 9 and fail to get to Grade 10 as a result of economic constraints on the part of their parents".

No one doubts the desirability of extending free education up to Grade 12 ; the real question is whether it would necessarily lead to greater enrolment and retention of secondary school students, and of course whether it will lead to the greater economic heights Mr Mwaba hopes for. That question of course being part of a larger issue on the extent to which financial costs of schooling is the dominant factor that prevents children in our rural areas accessing secondary school education. Mr Mwaba clearly believes that the answer is 'yes'. Financial costs clearly do play a role, but there are other things that make it difficult for secondary school pupils in our rural areas accessing education, and until these are addressed by MPs, Mr Mwaba's aspirations will remain too aspirational.

One of those barriers is transport. Bad roads and inadequate or expensive transport plays a significant role in preventing pupils in rural areas from attending primary or secondary school regularly. One thing that struck me when I was in Luapula over Xmas was the isolated nature of our villages. Students literally have to walk great distances to attend secondary schools. This coupled with poor road infrastructure leads to poor school attendance, which forces kids to eventually leave secondary school even if the financial cost of education is very little. This problem is especially magnified for secondary school girls, who are so crucial for our development as previously argued in "more than a woman". No matter how free education is, it is pointless unless you can access it.

Its not just secondary school pupils who are affected, teachers also face the same constraints. Teachers are often reluctant to take up positions in more remote village secondary schools because poor transport options will isolate them from regular interaction with colleagues and other people of similar social status. Such villages may be without adequate teachers for long periods; teachers posted to these locations may take regular unofficial absences. There are a number of villages in Zambia where teachers are just unwilling to go there because it is too isolated.

Investment in transport is not cheap, therefore what is needed are Government supported “imaginative solutions” to address the link between poor attendance and transport access. This might be two fold: First, promoting wider availability of bicycles (as the recent Shova Kalula National Bicycle Programme has done in South Africa by providing subsidised bicycles), bicycle repair courses for girls and boys in school, girls-only buses, or distance learning. Secondly, using public sector transport to achieve educational goals, including running mobile libraries with information and communication technologies, travel allowances for teachers, organising school transport and so on.

We need our educational policy to be more creative and much broader than just calling for free education. Its pointless to offer something for free, if people won't be able to access it!

Wednesday, 14 March 2007

please Your Excellency, it's broader than that!!

It is interesting and most welcome that His Excellency called on BP yesterday to do more to invest in energy infrastructure. Today's Post newspaper notes the President's words:

"The infrastructure requires renovation and sometimes replacement. This will require the effort of the private sector because, you see, without fuel the economy collapses"

Its goes on to say…

"President Mwanawasa also said BP plays a very pivotal role in the social sector. 'You have assisted the nation in sport plus other good causes you have supported,' he said"

The private sector does indeed have a role to play in such ventures, but this role should not be restricted just to the sector they operate in. We need to find creative ways in which new investment in the country can be tied to broader local investment in other sectors especially transport and housing. The model that is needed is similar to the framework that the UK has adopted under Section 106 of the Town and Planning Country Act (1995). This UK legislation basically makes it a condition that any new investment in any local area of the UK should be conditional on providing some minimum level of investment in schools, transport and other things, if the local authority deems necessary.

If we have a similar and more robust act in Zambia, it would mean that when BP or another investor come calling we can ensure not only do they invest in their relevant activity but they also tie that new investment to providing schools, adequate transport schemes and so forth. The advantage of such a system is that it relieves pressure on local resources and helps tackle local poverty by linking the investment to the local needs. From an economic stand point, it also helps raise the costs of reneging by the new investor by making it that much costly for him/her to cut and run, like others have done in the past! So while I commended His Excellency for calling for investment in the energy sector, I do sincerely believe that we need a much broader framework along the lines I propose. It's not just the energy sector, but a much broader way of addressing local infrastructural provision!

Tuesday, 6 March 2007

Insights from Chiefs (Chief Puta)

Chief Puta's recent criticism of the House of Chiefs, for not respecting the decisions of council of chiefs is damning indictment of our system of governance. Puta's statement that "…such things were reducing the council of chiefs to mere white elephants because their decisions were not taken seriously..." cannot be ignored in our quest to develop as a nation. It calls for a critical assessment of whether as a nation we are wasting money in having a House of Chiefs, and if the answer is yes, how we should approach reform to ensure that the House of Chiefs contributes towards development.

From Chief Puta's statements it is clear the second chamber is not functioning as it should, and in fact continues to drain resources from the national coffers that could be used for the fight against poverty. Most of the members are illiterate, and to make it worse they lack the powers they need to be motivated into taking the House matters seriously. The only alternative is reform, and this reform must embody two elements.

First, we must recognise that the notion of development and culture are interlinked. Our quest for development must not come at the expense of weakening our cultural institutions but rather development should come through a greater affirmation of our traditions and bringing them to the centre. If this logical premise is accepted then, Chiefs who are the very heart of our traditions must be recognised as having a primary role to play in our quest for development, and in defining that development.

Secondly, we must work to reinforce these traditions within a constitutional framework. We should seek to ensure that chiefs play a more significant role in local Government, have access to basic level of education supported by Government and then ensure that we have a strong second chamber with real powers to challenge Parliament. It is unfortunate that as a nation we continue the legacy of our colonial masters by sideling traditional systems of governance that served us so well before colonialism.

The natural response to a much stronger House of Chiefs is that it is undesirable because it would be undemocratic. This position is erroneous for two reasons. First, it is built on a presupposition that democracy is an end not a means to an end. Our concern should be development and not democracy. If we can have a less democratic second chamber that is more in tune with the local people, true to our traditional values, and provides perpetual checks on the activities of Parliament, isn't that a move toward development? And that development would be more worthwhile because it would be truly Zambian, built on ideals consistent with our culture. It neatly fuses modern principles of Governance while holding onto the beauty of our heritage. In the end really we will never achieve political or economic independence until we develop a distinctly Zambian idea to solving our economic problems. We are best when we do things in a Zambian way!

Secondly, an unelected person in position of making or approving laws is not always bad. Unelected chiefs are less likely to be swayed by wrong popular sentiments, and would be more sensitive to our traditions. It would be difficult to bribe chiefs compared to MPs.

Until we take this reform forward, Chief Puta and the others will continue to be a wasted resource and the ultimate victim will be the poorest of our society, who will never be reached with a non-Zambian centred idea of development.

Sunday, 4 March 2007

Hichilenomics, 1st Edition

The sooner the ugly head of corruption raised to the surface again, with the firing of Nyirongo, the sooner politicians and civil society jumped with possible solutions to this menace - just how do we sort this problem out? Hakainde Hichilema has been quick off the mark and has been quoted by the Post newspaper [Sunday 4th March 2007]as saying:

"... there was need to remunerate public service workers so that they did not feel the need to supplement their income through corrupt means...

..... it is important for public service workers to be paid decently so that this corruption should not be an additional source of income.."

The idea that additional wages and extra funding would reduce corruption on their own is a myth. Economists have known this for some time. Svenson (2005) was the last chap to look at this in his classic paper "Eight Questions on Corruption", decisively concluding that the "systematic evidence on the relationship between pay and corruption is ambigous". Before that we knew from Besley & McLaren paper in 1993 "Taxes and Bribery : The role of wage incentives", that paying higher wages reduces corruption, if and only if, the monitoring apparatus is effective. In other words, wage incentives might reduce bribery and corruption but only under a well functioning enforcement apparatus. This apparatus is essentially good effective institutions. Lets get the ACC and DEC be more accountable to Parliament and divorced from the Ministry of Home Affairs. This is what HH should focus on, and then we can look at higher wages if necessary.

Friday, 2 March 2007

Firms' access to capital in Zambia not getting better...

Zambia still has much to do in terms of being a good place place for new businesses to raise funds, according to the Milken Institute, a Californian think-tank.

The institute's Capital Access Index is a summary measure of the range, flexibility and sturdiness of financial markets in 122 countries. Each country is assessed according to 56 quantitative and qualitative indicators, ranging from the regulation of securities exchanges to bank soundness and credit-market ratings. The 2006 rankings show Zambia is still below the likes of Botswana and Namibia in terms of rankings. Zambia's position is 98 out, a 1 position improvement from last year, but its average score has actually been worsening since 2004. The score was 2.92 out of 10 last year, down by 0.15 from 2005, and down 0.22 from 2004 .

The highest ranked African country in 2006 is South Africa at position 32. Hong Kong regains the spot as the best place to be for new businesses in the world.