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Tuesday, 22 April 2008

Optimistic or naive?

Carol White reckons there are opportunities galore for Zambia to grasp greatness. All that seems to stand in our way is lack of action on the part of ordinary Zambians. Depending on your point of view, she's either very optimistic or simply naive when she calls on you to "stop waiting for government policy to support and cushion economic growth - what are we doing about participating in the blossoming of Zambia? It’s not about money it’s about taking action . Let’s get cracking."

7 comments:

  1. First of all, what is her evidence that people are sitting around, waiting for the government to make things happen. With millions of people scraping a living as marketeers and subsistence farmers, 'get up and go' or 'pluck' or 'Get on your bike' (to use a few Thatcherite phrases) are not the issue.

    Then, there is this right wing notion that the government is not the people. The government is not some alien entity that exists in a vacuum. The government is made up of the people's representatives. Each and every member of the goverment has to be elected by the people. They are there to handle the people's money - taxes.

    So what can the people's representatives do, that people individually cannot?

    1) High interest rates on loans

    Even though inflation is now in single digits, interest rates are not even close to that, making borrowing prohibitive for most business models. The people can not individually change that, but the people's representatives can. But this goes way beyond managing inflation - to create more certainty for banks and other lenders, people should have fixed addresses, credit histories, there should be insurance for lenders, etc. There could also be business incubators, mentoring for business and engineering graduates, etc.

    2) Create a nationwide Free Enterprise Zone for Zambian businesses, specifically SMEs

    Instead of having all these breaks (taxes, imports, etc.) for foreign businesses, the government must extend such favourable treatment to Zambian owned SMEs. It should reshift the tax burdon to the mines, and give tax breaks to SMEs and employees.

    Having said all that, there are things that people can do right now, without much input. Every woman with time on her hands can grow half an acre of Crokus Sativa, which when harvested, would net her a few thousand dollars at least in saffron.

    So knowledge of the opportunities of agriculture is something that can be improved on. The internet is one option, but too few people have access to the internet to begin with.

    There are other crops, such as vanilla beans, which are labour intensive because they need to be pollinated by hand. Villages could grow teak trees, which would accumulate wealth over the long term.

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  2. She's naive.

    I laughted out loud when she described Zambia's GEOGRAPHY as an opportunity. I mean yeah Zambia is central, but usually hubs are about centralising and redistributing.

    But yeah, what is government policy for if it's not its job to cushion economic growth ? I mean, there are policy-level impediments.




    Even though inflation is now in single digits, interest rates are not even close to that, making borrowing prohibitive for most business models.

    High interest rate loans are one thing that may be hard to solve, given the inflationary pressures. But one thing the government can do is to borrow less from local banks which would make them need to lend to the private sector.

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  3. I think that she is a bit of both. One thing we have to understand about poverty, especially in Africa, is that it is both individualistic and structural. This is what I mean: Zambians have to do something in order to take advantage of the 'booming" economy and the opportunities that it offers because frankly, they do exist. That means people cannot just sit around and wait for goverment to give them a coupon for mealie meal handouts as it was in the UNIP era.
    However, goverment has an obligation to the people in that it must provide an enviroment that actually promotes and empowers the ordinary Zambian to confront poverty.
    Economic structures must be in place in oder to make this happen and this is where the government is failing to make significant progress.
    I was just in Zambia a few weeks ago and I did not come across anyone just wanting a hand out. People actually want to work and start businesses but with poor micro lending policies, many Zambians will continue to wallow in poverty

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  4. Hi Campbell Lumbila,

    I was just in Zambia a few weeks ago and I did not come across anyone just wanting a hand out. People actually want to work and start businesses but with poor micro lending policies, many Zambians will continue to wallow in poverty

    So you're saying that access to financing is a (the?) major obstacle. Perhaps development funds should be used to issue microloans?

    What is the infrastructure situation like - specifically the ability to move goods to markets?

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  5. Hi Mrk,
    Great suggestion about the development funds being used for micro financing. However, I think that interest rates must also be favorable for micro financing to actually work. Central bank will of course have to lead the charge but I think that banks would cry foul because they would lose a good chunk of their customer base. A favorable compromise will have to be reached.
    Right now you haves some of micro lending companies springing up but they usually service those who are in the civil service sector because they can use their salaries as collateral. Where does that leave the ambitious unemployed who want to be entrepreneurs?
    Lending to the poor is possible as demonstrated by Muhammad Yunus and the Grameen bank in Bangladesh.

    Infrastructure wise, there is need for work especially when it comes to the road network. Waht I found frustrating for example is that though a lot of trade is happening in the northwestern part of Zambia and road traffic has increased to dangerous levels, the government in its latest national development objectives has no plan to improve the road infrastructure in that part of the country. Now logic would dictate that if a certain part of the country has become the hub of the nation's economy, government should do everything to service it and, therefore, encourage trade. But not this government. It makes me wonder where all those mineral taxes are going!

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  6. Carol does have some good ideas with respect to investment areas but saying that "it is not about money" is being naive. IT IS ALWAYS ABOUT HAVING THE RESOURCES (MONEY being @ top of list) TO INVEST!!!
    For those in the bazungu lands and want to return home these would be some gr8 areas to invest in. Instead of looking at the Govt, Zambians abroad can invest and work in collaboration with others on the ground to create more opportunities for those locals with limited to no resources but with the willingness to be productive. Zambia is indeed blossoming and it is upto us to try our dammest to invest in our own nation instead of leaving it all to foreigners who are sure to take most of the proffits back to there motherlands.
    *Cho, love to read your blog, keep up the good work!!!!!

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  7. Interesting article
    on the impact even a little money can make.

    The government could lend money to MSMEs by sidestepping the issue of interest rates.

    For instance, in Islam it is illegal to charge interest at all (a bright 8th century idea to prevent Muslims from falling into slavery because of debt).

    Instead of paying back 100% of the principal plus interest, the borrower pays back (For instance) 150% of the principal.

    So if you lend $100, the borrower pays back $150. If they are good about paying back, they could (for instance) again borrow twice what they paid back - $300.

    No interest rates are involved.

    Campbell,

    Infrastructure wise, there is need for work especially when it comes to the road network. Waht I found frustrating for example is that though a lot of trade is happening in the northwestern part of Zambia and road traffic has increased to dangerous levels, the government in its latest national development objectives has no plan to improve the road infrastructure in that part of the country.

    Railway could take a lot of the freight that is currently traveling by road. Professor Clive Chirwa has mentioned this.

    Now logic would dictate that if a certain part of the country has become the hub of the nation's economy, government should do everything to service it and, therefore, encourage trade. But not this government. It makes me wonder where all those mineral taxes are going!

    Any government should prioritize agriculture, infrastructure and education to lay a foundation for sound future economic growth.

    Where are taxes going - Zambia has a huge bureaucracy, with at least 29 ministries and lots of duplication of functions. There is the issue of construction contracts that aren't being followed up on, but are paid for. Professor Henry Kyambalesa has written on the subject of the duplication of tasks by government and political positions.

    Hundreds of millions of (US) dollars could be made available from improving governance in these areas.

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