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Saturday, 31 May 2008

Quote of the week (Hakainde Hichilema)

"I was very alarmed to hear President Mwanawasa say that his government will not increase allowances that our students are requesting. This is total irresponsibility of the highest standard. We have been calling for proper funding to our two universities and unless this is done, students' unrest will not be stopped. Right now President Mwanawasa is spending more money for his trip to Japan than what is requested by the students. Why can't he prioritise education in the country?"

Hakainde Hichilema (The Post)

UPND president Hakainde Hichilema reacting to the shooting of two University of Zambia students over the meal allowance protest, in the process questioning the value for money of Presidential foreign trips relative to other expenditure. I tend to agree with him that some of the Presidential activities have benefit cost ratios below 1. Unfortunately it all bit late now given than Presidential trips expenditure are part of the overall national budget. A 2008 Budget approved byMPs, including Mr Hichilema's own MPs. I don't ever recall this being raised when the Budget was being debated. The President appears to have been given a pot of money and he is simply spending it accordingly.

Friday, 30 May 2008

Counting the cost of RSA's xenophobia.....the Nigerian way

Nigeria is seeking compensation for its citizens caught up in RSA's xenophobia violence. In the words of Foreign Minister Ojo Maduekwe:

"It is reassuring that no Nigerian was killed in the wave of attacks ... (but) many of them lost their properties and their shops were looted....The mission has already compiled the list of Nigerians ... with the purpose of seeking compensation from the South African government"
Would be interesting to know who else might follow suit. I have problems with the idea of compensation, because it strikes me that people go abroad in search of better prospects, and with that they accept the risk that they may not be welcomed. That aside, it appears the Nigerian government is charging the South African government with general neglect - the failure to protect the people under its care (usually applied to extreme cases such as failing to prevent a terrorist act which results in massive lost of life). That is the only logical explanation on why compensation is not being sought from the criminals but the South African government.

Update (1st June 2008) :

The same Nigerian Minister has been busy again suggesting that the
xenophobia is due to South Africans' poor understanding of history (see Gershom's blog for similar assessment) :
“What has been happening on the streets of Durban and Johannesburg is the absence of history that has led to hysteria.....When you have embarked on great acts of solidarity like that, and you don’t teach your children what you did, and how you worked together, they will come out on the streets some day killing foreigners from the very countries that levied money to fight for their freedom....Xenophobia is a sign that the kinds of conversations that ought to be taking place have not been taking place.”

The Smoking Ban

The Government has introduced new legislation banning smoking in public places which could see offenders face up to two years in jail, with immediate effect. In the words of the Local Government Minister, Silvia Masebo:

"I have been compelled to issue the above Statutory Instrument due to the continued smoking in public places by persons that have no regard for the comfort of others.....Whoever will contravene this regulation will commit an offence upon conviction to a fine or to an imprisonment for a term not exceeding two years or both....the government had decided to introduce such stiff penalties for smokers because of the hazardous nature to non-smokers who were forced to be passive smokers"
Apparently, a few designated smoking areas will be introduced to allow smokers to indulge during lunch time. The only problem of course is that there are currently no designated smoking areas in most public places such as offices, shopping malls and public transport. Presumably Ms Masebo has not considered the possibility that people will just smoke more at home? Doesn't this measure simply divert policing, court and jail resources from serious crimes ? It takes many months, sometimes years, before individuals see the light of day in court. Do we really need petty crimes like this one to add further pressure on our paralysed legal system? Why did she not fully consult on this proposal? In countries that have imposed similar bans, these things are subject to public discussion for many months before it is applied. I guess this is all academic since the legislation will almost certainly be difficult to enforce, not even in Ms Masebo's own constituency.

Gender Inclusion and Growth

A new report on Rwanda argues that the inclusion of women in national legislatures has positive policy outcomes for children. Relevant to the discussion here.

Lumwana & The New Mining Tax, revist'd.....

The National Post appears to agree with the position discussed here that Equinox believes that the Lumwana DA, which contains a copper price participation clause, also protects it from the new windfall tax.

Update: Reuters reporting that RBC Capital Markets regard the new regime as "very negative" for mining companies. Noting that First Quantum (owners of Kansanshi) and Equinox still believe their DAs should take precedence.

Thursday, 29 May 2008

Whats in a name?

When this blog was started it was called "Zambian Economist". For whatever reason, I decided to call it "New Zambia". Well may be its because I thought there were many Zambian economists already in the blogsphere and may be calling it "Zambian Economist" would monopolise the "Zambian" title too much. After now blogging for over a year, and being the only dedicated blog to Zambian economic related issues, and having received a number of emails on the matter, I have decided to revert to the original name that correctly matches the blogspot url. I hope this return to normality will not confuse regular readers. This will be last change....really.

Easterly on the Growth Report

William Easterly has now responded to the World Bank Growth Commission report in the Financial Times.

Trust the development experts – all 7bn
By William Easterly
Financial Times (28th May 2008)

The report of the World Bank Growth Commission, led by Nobel laureate Michael Spence, was published last week. After two years of work by the commission of 21 world leaders and experts, an 11- member working group, 300 academic experts, 12 workshops, 13 consultations, and a budget of $4m, the experts’ answer to the question of how to attain high growth was roughly: we do not know, but trust experts to figure it out.

This conclusion is fleshed out with statements such as: “It is hard to know how the economy will respond to a policy, and the right answer in the present moment may not apply in the future.” Growth should be directed by markets, except when it should be directed by governments.

My students at New York University would have been happy to supply statements like these to the World Bank for a lot less than $4m.

Why should we care about the debacle of a World Bank report? Because this report represents the final collapse of the “development expert” paradigm that has governed the west’s approach to poor countries since the second world war. All this time, we have hoped a small group of elite thinkers can figure out how to raise the growth rate of a whole economy. If there was something for “development experts” to say about attaining high growth, this talented group would have said it.

What went wrong? Experts help as long as there are useful general principles, such as could be established by comparing low-growth and high-growth countries. The Growth Commission correctly pointed out that such an attempt to find secrets to growth has failed. The Growth Commission concluded that “answers” had to be country specific and even period specific. But if each moment in each country is unique, then experts cannot learn from any other experience – so on what basis do they become an “expert”?

The logical next step at this point would have been to give up on experts. But the commission insists that ex­perts, who will communicate their ad­vice to technocratic leaders, are still the answer. Partly this reflects how wedded the World Bank is to the “leaders and experts” vision of how growth happens, since such a world-view does create a big role for World Bank experts.

The commission made the common mistake of anointing high growth rates as the measure of success, whereas high growth mysteriously comes and goes. Indeed, only two of the 13 high-growth episodes the commission studied were still going at the time of the study. Yesterday’s growth failures (for example India) are today’s successes and yesterday’s growth successes (for example Brazil) are today’s failures. Much of this volatility is inexplicable and unpredictable. To give credit to whatever leader happens to be in power during a burst of high growth is just circular reasoning (How do we know they were a great leader? Because there was high growth!).

The details of success are equally unpredictable. Where are the experts who guessed in advance that an obscure Indian company making edible oils would become a $10bn-plus company (Wipro) providing information technology services and call centres? Or that a lossmaking Brazilian state enterprise (Embraer) would go on to capture a lot of the world market for regional jets after being privatised? Or that South Korean entrepreneurs would create a carmaker (Hyundai) with greater market value than General Motors or Ford? Or that a schoolteacher named Dong Ying Hong, formerly earning $9 a month in Datang, China, would become a millionaire making socks?

What to do in a world of such unpredictability? There are some general principles and they do not require experts. Another Nobel laureate gave the crucial insight a long time ago – the answer is freedom for multitudinous individuals to figure out their own answers. Friedrich Hayek said: “Liberty is essential to leave room for the unforeseeable and unpredictable; we want it because we have learned to expect from it the opportunity of realising many of our aims. It is because every individual knows so little and ... because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it.”

The evidence for this vision is not found in those baffling fluctuations of growth rates, it is in the levels of development attained in the long run. Confirming Hayek, systems that give more liberty to individuals – featuring both more economic and political freedoms – are associated with much less poverty. The evidence for this comes from both history (for example old, despotic, poor Europe compared with modern, free, rich Europe) and cross-country comparisons (for example South Korea compared with North Korea, former West Germany compared with East, New Zealand compared with Zimbabwe). This alternative paradigm has a much smaller role for experts, because experts cannot direct or impose freedom from the top down (or else it would not be freedom).

The end of the “development expert” paradigm does not mean the end of hope for development. Development is al­ready gradually ending poverty (global poverty rates have fallen by more than half in the past three decades) – not be- cause of development experts such as those who wrote the World Bank Growth Commission report – but thanks to more freedom for more of the 6.7bn individual development experts alive today.

Wednesday, 28 May 2008

Fighting HIV....the Angolan proposal

Angola is proposing reforms to the Penal Code which would make HIV-positive people who intentionally infect others with the virus to be punished. The law calls for a sentence of between three and tens years in prison for those who knowingly pass on infectious diseases, including HIV. Proponents argue that the law will act as a strong deterrent against willful infection. NGOs disagree saying that criminalisation would increase the disincentive for people to admit their status.

Tuesday, 27 May 2008

Sharing the proceeds of mining, 2nd Edition

Nkana Member of Parliament Mwenya Musenge is calling for government to immediately establish a mining communities development fund to benefit residents of mining areas. Warning that should government fail to establish the fund, people living in mining communities would have no option but to start agitating for it.

.....Many countries in the world have a development fund that benefits communities that live in mine areas. If we do not establish this fund in Zambia, even the mine developments that we are talking about like in North Western Province and Southern Province will not amount to anything.....There’s so much excitement for North Western Province but many years down the line, once the investors have made their profits and when there is no more mining to talk about, we’ll just be lamenting like we are doing for the Copperbelt.....the government should retain at least 40 per cent of the profits from the mines to benefit mining communities and cities....This money could be shared between the local authority for that particular town and communities surrounding the mine....
A previous blog articulated the same concerns noting that in sharing the proceeds of mining expansion, for distributional reasons, we must first and foremost seek to deliver a favourable outcome to the Zambian miner and the local community. The remaining revenue can then be used by central government to fund strategic infrastructure. However, we also need to ensure that additional revenues are free from corrupt activities and are not mired in the web of bureaucracy. These two issues certainly looms large at both the central and government levels, and any new mechanism must deal successfully with both.

Monday, 26 May 2008

Could the end be nigh for ZAMTEL?

Daily Mail are reporting that Government is studying various options of unbundling Zamtel to operate efficiently and effectively. A previous post sets why I oppose ZAMTEL's current position.

Saturday, 24 May 2008

Quote of the week (Levy Mwanawasa)

I remember the last time I went to Chiengi, I mentioned that there is plenty of water here but you the people of Luapula Province are too lazy to exploit this water for irrigation. There is plenty of water, fish has been taken away; are you going to leave this water unattended to?

Levy Mwanawasa (The Post)

The President explaining to the people of Luapula Province why he thinks the province has remained poor. In return the Minister for Luapula, along with some local chiefs, promised to name the new Chembe bridge after him. Unfortunately, such comments only serves to perpetuate stereotypes and seek to hide the real reasons for Luapula's underdevelopment - poor infrastructure and a lack of a proper investment strategy for the province. To his credit, the President is doing something about the former.

Update: The Post Editorial on the issue of the poor and laziness.

Friday, 23 May 2008

What matters for growth?

The final report from the Independent Commission on Growth and Development, a global panel of eminent experts, report is out. It tries to answer that great question - what matters for growth? The Commission tries to provide important lessons from countries that have achieved high, long-term economic growth. If you can't be bothered to read the large report, here is a short presentation from Michael Spencer or you can simply watch this video. As well as the main report there are many working working papers from leading experts on nearly every area from institutions to agriculture to urbanisation.

There's nothing in the final report that we have not discussed on this blog. In some respect the report simply brings together existing research. A number of areas where the report comfirms our discussions here (good opportunity for new readers to read some old posts!):

Investment (see
here) :

Based on the experience of the sustained, high-growth cases, the Report suggests that overall (private and public sector) investment rates of 25 percent of GDP or above is needed. The Report urges that about a third of that figure should be public investment in physical infrastructure and “human capital” (education and training).
Girl Child Education (see here ) :
Investment in education and health and a focus on educational outputs, such as literacy and numeracy, are all viewed by the Commission as essential inputs to growth, concluding that currently educational spending in many countries is marred by waste and inefficiency. The education of girls provides one strong test of a government’s commitment to equality of opportunity. Educated women have fewer, healthier children…..Their children are then more successful in school. Educating girls is thus one way to break an intergenerational cycle of poverty.
Infrastructure (see here , here , here and here) :
Infrastructure investment is also viewed as particularly important to growth by the Report. The Report argues the need for clearly written and monitored private/public sector partnerships with commercial risks born by the private party. Governments must also resist the temptation to see infrastructure as a source of revenue through increased taxation, leading to overpriced services, out of reach to large parts of the population.
Urban - Rural Drift (see here and here)
With half of the world’s population now living in cities, the Report reminds us that no country has ever industrialized without also urbanizing. Rather than considering urbanization an unpleasant side-effect of growth, the Report calls for the better management of urbanization and its benefits. The Report calls for greater financing of urban infrastructure with clear guidelines and appropriate incentives, well regulated housing finance, sound planning principles, and a robust systems of property rights. The Report also looks at the role of agriculture and the importance of rural public services, so that it is productivity that motivates migration to cities, rather than access to better services.
Mineral Resources (see here)
The Report also recommends that the first claim on resource rents be adequately funding public sector investments. The Commission recommends that the remaining rents should flow into a fund, managed by experienced investment professionals operating with a well defined set of parameters with respect return, risk and diversification. The fund should pay out (much as endowment funds in non-profit entities do) a percentage of the total each year for the benefit of the citizens either directly in the form of income or indirectly in the form of reduced tax burdens.

Thursday, 22 May 2008

Insights from Chiefs (Chief Kapalaula)

Senior Chief Kapalaula II is not happy with where Zambia is heading. He has a particular quibble against the "foreign-engineered" Mung'omba Draft Constitution. Although some of his points are questionable, I do agree with him on the fundamental point that the Mung'omba Draft Constitution has a certain worldview which it tries to advance, without due regard to the local cultural and religious context to which the constitution would be applied. But the Senior Chief touches on another substantial issue that is often overlooked - that is advancement of unelected technocrats or political failures as he calls them:

The purchasers of our sovereignty have not been pouring money in Zambia for nothing. They have been sowing for the past 15 years and are now expecting a harvest through the Mung’omba Draft Constitution, which is a rope on which we are to hang ourselves. The stratagem of the fake draft constitution is to create a welfare state for the mice with cats in charge........The commissioners recommended a cabinet and that public affairs would be supervised by service commissions. There would be 22 cabinet posts, 18 deputy ministers, 9 cabinet ministers in charge of provinces and 18 commissions each having 10 members i.e. 180 members. There would be 230 unelected political failures running the government without consulting the people. One wonders what criteria would be used to pick such people from the streets. This arrangement would empower the capitalist-exploiter with the necessary power to check and easily control the ambivalent movements by which the government would function.....

Wednesday, 21 May 2008

FRA woes...

On the Securing our food..., I noted that more needed to be done in reforming existing institutions such as the Food Reserve Agency (FRA), epecially in relation to how it deals with small scale farmers. It appears the government has now began to recognise that FRA is currently not fit for purpose. Unfortunately, the President's speech did not outline concrete proposals aside from calling for FRA to expand their operations. It strikes me that if the problem is FRA inefficiency then expanding their operations would simply compound their problems. I am not entirely surprised. In Zambia we love calling for inefficient suppliers to expand operations. The list is endless...ZESCO, ZAMTEL, NACL etc. Our answer has always been more expansion of operations as a solution to their intrinsic inefficiency. In real life of course, you can never ask a junior staff who is underperfoming to have more responsibility.

South Africa's Poor Vs Zimbabwe Immigrants

Tuesday, 20 May 2008

Zambia Economic Outlook 2008

OECD's assessment of Zambia's economic outlook for 2008 was released this week. Quite useful in terms of bringing together most of the facts, figures and issues we have discussed on this blog in 2008.

Monday, 19 May 2008

Saturday, 17 May 2008

Quote of the week (Mike Mulongoti)

"Zimbabwe should quickly resolve its problems by holding free and fair elections before talking about the sanctions that have been imposed....The Zimbabweans need to exercise humility and show decency because they cannot insult President Mwanawasa and at the same time ask him to help them because as SADC chair he has done what he can...It is surprising that Mr Chinamasa, the man who lost an election is very vocal and bitter"

Mike Mulongoti [Zimbabwe Independent]

Chief Government Spokesman Mike Mulongoti responding to Zimbabwe's recent criticisms of Preseident Mwanawa's role as the chairman of the Southern African Development Community (SADC). These are the sorts of "insults" he has in mind.

An even stronger Kwacha? 2nd Edition

This Bloomberg article appears to settle the question of whether government plans to intervene in an event of a predicted strengthening of the Kwacha. Excerpt:

Zambian Finance Minister Ng'andu Magande said the kwacha, which has gained 13 percent against the dollar in the past six months, will continue to strengthen as copper production increases and metal prices gain.

Exporters should learn to adapt to the stronger currency as the government has no plans to ``interfere in the market'' to curb the kwacha's advance, Magande said in an interview in Maputo, Mozambique today during the annual meeting of the
African Development Bank.

Zambia, Africa's biggest copper producer, will probably mine 700,000 metric tons of the metal this year, a 40 percent increase from last year, Magande said. Export revenue has also been boosted by the copper price, which gained 19 percent in the past six months and reaching a record $8,880 a ton in London on April 17.

``I have warned Zambians that the currency will continue to appreciate,'' Magande said. ``In 2010, we're going to produce 1 million tons of copper and with the price around $6,000, then you're talking about $6 billion from just copper. By that time, we'll be producing nickel, uranium and other metals as well.''

Friday, 16 May 2008

An even stronger Kwacha?

A new Standard Chartered bank assessment on Zambia released yesterday is now pointing to an even stronger Kwacha very soon, largely due to the windfall tax. Excerpt:

Now the mining sector faces a higher royalty rate (from 0.6% to 3%), higher corporate taxes (from 25% to 30%, although losses may still be carried forward according to a predetermined 75:50:25 formula), and – most significantly - will see a windfall tax imposed on copper earnings of up to 75% .... Moreover, it is probable that these payments will be made in ZMK, significantly increasing the demand for ZMK relative to the FX inflows to which the market is accustomed. There is some possibility that payments might be made in USD to the Zambia Revenue Authority, which will then convert the proceeds at an average interbank USD-ZMK rate in an off-market transaction with the Bank of Zambia, thus preventing the inflows from impacting the market severely. However, at the time of writing, our information suggests that tax payments will be due - and made – in ZMK. A sizeable currency appreciation appears imminent.

What will the impact of all of this be? Official attitudes to currency appreciation are still ambiguous. While Zambia, as a net oil importer, will benefit in the near term from a stronger currency, other factors are likely to dominate government thinking. Although Zambia plans to reduce its traditional reliance on donor financing, for the moment, the contribution of donors to Zambia's budget is large enough for the authorities to be wary of seeing dramatic and sustained currency strength. (The proceeds of the windfall tax have not been included in the 2008 budget. With domestic revenue collection set to surge, Zambia will be able to make rapid progress in reducing its traditional donor reliance, should it wish to do so. But questions about revenue sustainability and the optimal means of development financing must still be considered).

In recent years, Zambia has also tried to boost its 'non-traditional' sectors, especially agriculture and tourism. While we believe that demand for high-end tourism may be relatively inelastic with respect to the exchange rate, and that a stronger ZMK may actually help with the cost of imported inputs for agriculture, such as fertiliser, (to say nothing of the cost of much-needed infrastructure development), the authorities - under the influence of various lobby groups - may not be receptive to this view. There is therefore a risk that sharp ZMK appreciation might be met with an official effort to reverse or slow the currency's gains. We have incorporated this into our currency forecasts, with a mid-09 USD-ZMK rate of 3500, compared with a rate of 3120 by the end of this year. But it is not just the currency impact of kwacha strength on the economy that should be considered. The impact on future mining sector developments is equally important.

Thursday, 15 May 2008

Growth Diagnostics for South Africa

The South African National Treasury has just put on its web site all the papers that were completed during a two-year project that Dani Rodrik and other prominent economists were involved in (along with a long list of other economists and social scientists). The papers run from straightforward research exercises to detailed policy recommendations. If you want a summary of the main results and recommendations, read this piece by Ricardo Hausmann. Of course Zambia does not need experts, we have the IMF / World Bank to do the growth diagnostics for us!

Wednesday, 14 May 2008

Securing our food...

This fascinating article on the Food Security Pack Programme provides a good case for government to expand the agriculture sector and move Zambia to a position that would guarantee food security. Although Zambia's food production has increased in recent years following those dark periods of the IMF's SAP, Zambia's agricultural industry is now facing renewed threats in addition to existing structural weaknesses (e.g. higher transport costs given its landlocked position). These new threats include significant power shortages, the strengthening of the Kwacha with a potential knock on rural agriculture and of course rising costs of fuel which are adding significant to transport costs. To make matters worse, the government's agricultural policy seems to have lost some bearings of late, culminating in a disastrous decision in the recent budget to reduce spending on agriculture. At this critical point in time, when food prices are escalating Zambia has actually reduced spending on agriculture!

Most of these problems (aside from rising oil prices) are within our power to control and more should be done to address them. But I think there also other areas we need to look at as we move forward. As good as the Food Security Pack Programme is, we cannot afford it to be our last stand. I have two additional suggestions where attention also needs to turn.

First, the potential benefits of more mechanised farming should now be explored. With the impending crisis world over, should we not now be asking ourselves seriously whether we are doing enough in Zambia to expand our food basket? I think now is the time to look to the Brazilians and ask ourselves how they have been able to develop large farms. We have the land just as they do, why can't we put together the same programme in place? I would propose that to partly offset the strengthening of the Kwacha, we must now use the new revenues from mining taxes and pour them into mechanised farming. It must surely be the long term hope for feeding the many hungry mouths in our urban areas. I am confident that the Food Security Pack Programme will deliver what we need in the long term for our rural areas, but I am less confident it will deliver the sort of urgent demand for food that is needed in our urban areas.

Secondly, better investment in education and research. We need to create better educational institution that supports farmers. Statistics show that only 3% of graduates in the higher sectors study agriculture. This is both unsustainable and unacceptable.
Further investment is needed to encourage more research and development.

Finally, there is a case for reforming existing institutions such as the Food Reserve Agency (FRA), epecially in relation to how it deals with small scale farmers. The National Association and Small Scale Farmers of Zambia Associate have previously complained that the FRA sets the price too low and thereby discourages small scale farmers from going into maize farming. To make it worse, the FRA apparently rarely pays the farmers on time. The FRA has actually become a negative distortion in its own right, failing to provide the level of certainty in revenue streams that farmers desperately need to invest in more maize and other products. Is it any surprise that small farmers often have bad credit?

ZCGA on the prospect of "dutch disease"

I recently noted the worrying implications of an ever stronger Kwacha. The ZCGA's Nigel Seabrook naturally agrees :

“This will have very serious implications on the country’s rural economy and could eliminate any opportunity that the country has to achieve its Millennium Development Goals in respect of the rural population.....The cotton industry plays a vital role in Zambia’s agricultural development and rural poverty alleviation. Currently, about 200,000 smallholder farmers directly depend on cotton, making it by far their most important cash crop.....This industry needs genuine investors who wish to expand cotton growing and not just exploit the existing, indeed currently shrinking, farmer base.....It is apparent that in the last two seasons, due to a number of reasons, those ginners who have pre-financed, have had poor input recoveries. If those ginners were to reduce their future pre-financing as a result of this, it would have a disastrous effect on national cotton plantings and could destroy the, already struggling, industry.”
The ZCGA position is hardly surprising, but I think the comments illustrate a critical dimension often ignored with regards to the probable effects of the "dutch disease". That is the immediate distributional impact from even minor appreaciation in the Kwacha may be significant. Simply put, for many rural Zambians relying on the agriculture sector, its bad news indeed. The urbanites of course aren't too bothered. Higher copper revenues means higher urban wages, and cheaper imports for urbanites. A stronger Kwacha might therefore widen the inequality between rural and urban dwellers even much further.

Tuesday, 13 May 2008

Basic Needs Basket (April 2008)

The JCTR Basic Needs Basket for Lusaka (April 2008) can be found here and the associated Press Release here. The cost of basic food items for a family of six in Lusaka stood at K742,700 in April, representing an increase of K59,000 from the March cost of K683,700. The total cost of non-food essentials (charcoal, bath soap, etc) remained relatively stable at K1,197,100 in comparison to the cost of K1,196,600 for the month of March. JCTR have also released food baskets for several copperbelt towns, Kasama (crucial for rural comparisons) and Livingstone ( a tourist town).

Monday, 12 May 2008

A Marshall plan for DRC?

The Democratic Republic of Congo has unveiled details of a controversial $9.25bn agreement that pledges millions of tonnes of copper and cobalt to China in exchange for roads, railways and other infrastructure. Excerpt:

Congo's Infrastructure Minister Pierre Lumbi, in a speech to MP's publicly unveiling the details the agreement for the first time, called it a "vast Marshall Plan for the reconstruction of our country's basic infrastructure."

Under the terms of the deal, some aspects of which had previously been announced by various Congolese government officials, China promised $3.25 billion to revitalise the country's potentially lucrative mining sector. Another $6 billion will go towards building more than 6,500 km (4,000 miles) of paved roads and railways, two hydro-electric dams, and the rehabilitation of two airports.

The opposition criticised large tax breaks for Chinese companies as well as risks the massive loan could further indebt the cash-strapped former Belgian colony. Congo is seeking to qualify for debt relief as a Highly Indebted Poor Country (HIPC) under World Bank and International Monetary Fund initiatives (IMF). The IMF last year warned Congo of the possible macroeconomic effects of the loan.

MP's also denounced the decision to cede to Chinese companies mining rights to over 10 million tonnes of copper reserves and around 600,000 tonnes of cobalt, which they say makes the deal heavily lopsided in favour of China. "The result of simple arithmetic makes the Congolese contribution at least $87 billion," Mbusa said.

Zambia Corruption Statistics

A useful statistical datasheet by the Anti Corruption Commission on Zambia corruption.

Saturday, 10 May 2008

Retracing Lenshina's followers..

Mwala Kaluluka has written a fascinating piece on Alice Lenshina followers, which serves as our quotable for the week :

Retracing Lenshina's followers, Mwala Kalaluka, The Post, Report :

Historians did a good job for posterity through their chronicles on the past that happen to form the foundation of today’s world; it is by them that the past and the contemporary lifestyles have been interlinked for the benefit of this generation.

But given the fact that at times historical presentations have been influenced by personal opinion, should the narratives of our forebearers remain cast in stone without them ever being questioned or revisited for the sake of balance?

The story of one, Alice Lenshina, a woman who founded the banned Lumpa Church in Chinsali in Northern Province in 1957, only to be dogged by controversy for the remaining part of her life, is one that still begs so many answers four decades down the line.

The Lumpa Church was started by Alice Lenshina Mulenga Lubusha, who was born in 1924 at Chimba’s village in Chinsali district. Those close to her say she was an ordinary girl who grew up in Kasomo village in chief Nkula’s area. Lenshina was married twice; to Gibson Nkwale with whom she had her first child. After her husband died, she got married to Petros Chintankwa, a cousin of her first husband, who adopted her.

On October 24, 1953, Lenshina, who was aged 29 then, fell sick and passed away at midnight. According to her disciples, Lenshina died and resurrected twice and that during these phases, she was taken to a very beautiful lake where she had an interaction with Godly beings. She was sent back to earth with instructions that she must preach the word of God to the people. Lenshina started working with the missionaries at Lubwa but her followers say she decided to build her own church at Kasomo village, which she called Uluse Kamutola, after she fell out with the missionaries and thus was born the Lumpa Church of Alice Lenshina.

The Lumpa (Super) Church was registered under the Societies Ordinance of 1957 and a year later, more church branches were registered in Chinsali, Kasama, Mpika, Lundazi, Isoka and Kawambwa districts and all together they numbered 150.

Today, however, for various political, social and religious reasons, the Lumpa church no longer decorates any page of the societies register and those members that fled to various places within and outside Zambia after the church was banned by the UNIP government on August 3, 1964 have all along held their silence.

But 44 years later, a few of those that saw it all and crossed the border to the Democratic Republic of Congo (DRC), then Zaire, are back in Zambia and operating under different names, they have managed to keep the spirit of the ‘Lumpa Church’ in their own respective ways in several parts of the country. They commemorate holidays that aim to revere the greatness of Alice Lenshina. Some of these have decided to open up and break their four-decade silence on what they knew about the activities of the Lumpa Church; which they claim is a church as any other.

One such group that was formed from the leadership wrangles that followed Lenshina’s death on December 7, 1978 is the Uluse Kamutola church, whose headquarters are in Kapiri Mposhi and its membership ranges from 3,000 to 4,000 and is headed by one of Lenshina’s former personal assistants, Maggie Kasungami Mfula (the overseer). Mfula has shepherded her group from as far back as the early 70s when they had been in exile in the DRC.

In an interview with the Sunday Lifestyle last week at her residence, Mfula, who asked the government to lift the ban on the Lumpa Church and restate the name, said through the church’s general secretary Peter Mulenga that theirs has been a life of persecutions and turbulences. However, the group of church leaders present during the visit- none of whom was below the age of 40 - said they have kept up to Lenshina’s vision because they want to be saved.

During the interview, the Sunday Lifestyle team was ushered into Mfula’s house where the leaders of the church, who were clad in assorted cloaks and surplices, similar to the ones worn by the hierarchy and membership of Lenshina’s Lumpa Church at its peak. Prayers followed the introductions and it was learnt that almost all the church superintendents, deputies, senior cardinal and personal assistants to the overseer had at one time or another been imprisoned on grounds of their association with the Lumpa Church.

It was further noted that all the Uluse Kamutola church leaders present had been to the DRC following the banning of the Lumpa Church in Zambia; and even there, they continued to follow Lenshina’s example. “We have never had an opportunity to explain ourselves out of this tarnished image that has been associated with our organisation (Lumpa Church),” Mfula said. “It is hard for us to start from somewhere because our image has been tarnished badly. We have tried to talk to those in leadership but they also just answered us badly. Our sources of wealth were grabbed from us and all the riches we had have been taken.”

Mfula said the story of Lenshina has always been told in a parochial manner and despite the turbulences they have experienced, her followers have chosen to lead a low profile life. Mfula said it was time to put the record straight in order to dispel the past assertions that the Lumpa Church members thrived on drinking urine and smearing themselves with faecal matter so as to protect themselves from bullets. “The Lumpa Church has thus survived both its 1964 tribulations and exodus of many of its followers afterwards although the church had lost many of its members, as well as properties worth millions of Kwacha in the process,” she said. “As a result of this, the church had been hampered in its growth, both economical and social development.”

According to Mfula, the allegations leveled against Lenshina and her growing cadre of followers was just a ploy to water down her popularity. “The success achieved by Lenshina in such a short time of her ministry’s existence was a thorn in the flesh of both Ilondola and Lubwa missionaries. Others launched a vicious campaign to discredit her and persuade defectors to return to their former respective missions,” she said. “By this time bishops and priests had long awakened to the fact that Lenshina’s church posed a major threat to the Catholic church and other churches had decided to halt this advance at all costs.”

Mfula narrated that this spirit of hatred paved the way for UNIP members to start provoking fights against Lumpa members. “This provocation did not only come from UNIP members alone, traditional chiefs also played a significant role in this fight against Lenshina’s rapid church growth.” Mfula, who became Lenshina’s convert at a very young age, said traditional chiefs felt overshadowed by Lenshina for their power and authority had been undermined by the fact that everyone was paying homage and surrendering witchcraft apparatus to her. “Lenshina was accused of being a witch whom they said had evil spirits. They insulted her day in and day out. Accusations were that she used charms, was it surely possible for her to deceive those people throughout the country and beyond, for years without tricks being discovered by those who had the most powerful charms?” she asked. “Lenshina used to tell her followers to be firm and not listen to these false allegations as this did not start at that time but even at the time Jesus Christ was on earth.”

Mfula remembers very well the rules on which Lenshina based her preaching on and these were as follows:-
Lumpa Church is a church in which God and his son Jesus Christ are to be praised. It is not a political organisation;

In the congregation there should be no citizen or foreigner, black or white, man or woman, but we are all of the same family and therefore we must love each other;

A Christian must not take part in backbiting, insults, lying, pride, boasting, hatred, anger, cruelty, false accusation, spite, disobedience, deceit and theft.

The other rules were that Christians must avoid covetousness, witchcraft, stealing, adultery, witch finding, sorcery, discrimination, drunkenness, immoral songs, dancing and other pagan things, among others. Mfula said it was this moral code of the Lumpa church that angered traditional leaders, especially the then chief Nkula, who happened to be Lenshina’s relative. She said the rift was deepened after Lenshina started singing songs that ‘belittled’ chief Nkula. “He felt offended by this song and ordered his counsellors, messengers and other men of the palace to get ready for a fight against Lenshina and her followers, for he could not stand the insults from his own daughter,” Mfula narrated further. “They arrived at dawn and surrounded the village and set ablaze some huts. Hence the fight started. The chief and his warriors were defeated and took to their heels. At this fight none was killed, but many were injured on both sides.”

Mfula said similar incidents followed, especially that the rise of the Lumpa Church coincided with the struggle for Zambia’s independence. Mfula said Lenshina had her visions from God in 1953, at the same time that the Federation of Rhodesia and Nyasaland was established. “The political party that had massive support was the African National Congress (ANC) led by Harry Mwanga Nkumbula. Nearly everyone in the area identified themselves with ANC and its leadership in order to free the country from foreigners. Those who did not belong to ANC were considered to be enemies of the revolution,” she said. “However, when a new militant party which broke out away from ANC was formed and whose name was Zambia African National Congress (ZANC), the forerunner of UNIP, was formed, things started to change.”

Mfula said initially there was harmony between UNIP and the Lumpa Church but that the scenario changed as the fight for independence got close to its fruition, because of the party’s violent nature. “After the Cha Cha Cha, some church members who had defected to UNIP with a view to being considered for jobs as soon as independence was achieved started spreading malicious rumours against Lenshina and the church, which led to mounting fear and suspicion between the two parties,” she said. “Previously, political meetings were held on Saturdays, however, this was changed to Sundays and to make matters worse, an announcement was made by UNIP that all church activities would take second priority to UNIP activities; meaning UNIP meetings would take place first before church services. This ungodly announcement brought trouble between Lumpa Church and UNIP members.”

She recalled that Lumpa Church members that opted to go to church before attending UNIP meetings on Sunday were beaten and UNIP went further by burning the church’s structures. “It was at this juncture that Lumpa Church members decided to burn UNIP cards. This action annoyed UNIP militants who launched a vigorous card checking campaign from village-to-village to find out which Lumpa members had burnt or surrendered their cards,” Mfula said. “Whoever, was not found in possession of a UNIP card had instant justice administered on them. Lumpa members were beaten wherever they were found. Their houses were burnt, their crops destroyed. Hence Lumpa members started organising themselves in self defence.”

Mfula said in view of the situation, Lumpa members started moving in groups so that if they were attacked they could retaliate. “Surprisingly, each time the two parties clashed and the UNIP members were beaten, the latter rushed to report to the local chief or police. Policemen or messengers were sent to arrest Lenshina followers,” she said. “Convinced that they were hated for their belief in God, they decided to leave the villages they shared with UNIP members and set up their own villages in the bush away from UNIP-dominated villages.”

Mfula said chiefs were informed about this development but that while some were agreeable, others paid little attention and others were even hostile. This exodus did not however pacify the situation between UNIP and Lumpa members. “Most fights occurred when UNIP members waylaid Lenshina followers who had gone back to their old villages to get what they had left behind at the time of shifting or harvest their produce from their fields,” Mfula said. “UNIP members would ambush them and set on them and if they were women, raped them.”

Mfula said the violence spread from Chinsali to Chama and Lundazi and she said efforts by the government to quell the violent exchanges between Lumpa church and UNIP proved futile. “Yet, Lenshina now and again told them that she ran a church, not a political party to oppose them. She took no sides in their struggle for power and that what she wanted was to be left alone, so that she could accomplish the work given to her by God,” Mfula said. “At this juncture, Dr Kenneth Kaunda, who had become prime minister in the new black government, had approached both parties to try and find a solution.”

She narrated that Dr Kaunda sent his minister of agriculture, Simon Mwansa Kapwepwe, to listen to the two factions. “Kapwepwe however rebuked both sides and called for peace and harmony. Peace prevailed temporarily after the meeting with Kapwepwe,” Mfula said. “UNIP started trouble again by accusing Lumpa Church members of drinking urine, trying to fly and that they killed a mentally disturbed person by the name of Ntalasha and ate his heart.”

Mfula said the problem intensified to such an extent that in October, 1963 a combined team of UNIP and government forces attacked Chitambo Village where many lives and properties were lost. “In addition the following Lumpa villages were attacked; Bulanda, Lulumbi, Kameko, Chapaula, Shacepa, Chilanga, Sione HQ, Chasosa, Chipoma, Ishuko, Itonta, Chakosa and Isumba Village,” Mfula said. “In these villages, thousands of people died and their bodies were buried in mass graves.” She said these are some of the things that led to the banning of the Lumpa Church by the government on August 3, 1964. “Before Lumpa Church (Sione) headquarters was attacked by the government forces (in 1963), Lenshina had already escaped the place for Chilungululu Mountains in Kasama district where she hid in a dense thicket on an anthill,” Mfula said. “The government troops came in large numbers, armed with sophisticated weapons and opened fire on innocent and harmless people. They threw grenades into the church building killing women and children who had taken refuge. The church building (Kamutola) was partially damaged.” Mfula said the security forces used graders to clear the area, which was littered with bodies and one mass grave was dug at Chinsali. “This grave was filled to capacity and some bodies remained uncollected in the bush,” she said. “There could be more mass graves in Northern Province than people know of because bodies of Lumpa members were usually buried away from operational areas.”

Dani Rodrik on the "Great Question"....

Linking Zambia (Ministry of Education)

Two new links worth checking out - The new Ministry of Education website and Lebson's Weblog.

Friday, 9 May 2008

Lumwana & The New Mining Tax

The latest Equinox presentation on Lumwana was released this week. You can access it here. As always very visual, with interesting facts and figures e.g. Lumwana will add 35% to Zambia's copper mining tonnage in 2009 - equivalent to $1.4bn of additional copper revenues. The most eye catching section is on page 36, on "Zambia Tax Issues" which suggests the Equinox DA is still in force:

History of Tax Concessions:

  • Implemented in mid-1990s – early-2000s
  • Copper prices < $0.60/lb meant mines losing money – privatization process

But since Copper prices jumped in 2003:

  • Operating mines have made massive profits
  • This created the political imperative for “a better return to the Zambian people”

Tax Package introduced April 2008:

  • 30% Corporate Tax – 3%
  • Royalty Variable Profits Tax – Windfall Profits Tax (Cu prices >$2.50/lb)
  • Reduced capital write down – 25% per year

However, Equinox has a Development Agreement (“DA”):

  • Legally binding DA signed in Dec 2005 (already high Copper prices)
  • Lumwana is ‘greenfields’ development – unlike other mines that acquired existing operations and infrastructure
  • Equinox has not been making ‘windfall profits’ – it has been investing $800m
  • Zambian Government recognises that Lumwana is different

The terms of the Equinox DA have been applied to date and the Government continues to do so

Hidden in the Mealie Meal

We have been discussing the lack of "legal enforcement" as an hindrance to reducing informality. Now here is another area identified by the Human Rights Watch as critical. As always, poor enforcement like corruption, always beats people when they are down. Excerpt :

Zambian women do not enjoy effective legal protection of their property rights and as a result practices like property grabbing (the unlawful appropriation of marital property upon the death of a spouse by in-laws) and the unequal distribution of marital property according to customary law for women who divorce are widespread. Women who are subjected to these practices often suffer abject poverty and are unable to afford transportation to clinics or even afford food to take along with HIV treatment. They therefore experience increased vulnerability to HIV and a reduction of their capacity to respond to the pandemic. Fear of divorce in a context of discriminatory customary laws and where women are economically dependent on men leads some women to remain in abusive marriages, which in turn can impede treatment. This discrimination is sanctioned by Article 23 of Zambia’s current constitution—currently undergoing review—which gives primacy to customary law in marriage-related matters. Although Zambia has a law that regulates distribution of inheritance where the deceased did not leave a will (the Intestate Succession Act of 1989, amended 1996), which should help counter property grabbing, this law is ill-enforced.

A new Government bank for farmers? revisit'd....

BOZ Governor Caleb Fundanga has now officially dismissed the idea of a new government bank proposed by Agriculture Minister Ben Kapita last year. Moral hazard appears to be his main worry. The government, with the help of IFAD, last year adopted a NABARD style programme. This is probably the future of rural and agriculture finance.

Thursday, 8 May 2008

A credit management database for farmers...

A fantastic development suggested not too long ago by MrK on this blog :

....Cotton Association of Zambia, with the assistance of the Zambia National Farmers Union (ZNFU), the government and USAID has launched Credit Management Database, whereby the industry would build up a history and type of credit reference bureau to identify not only the farmers with excellent loan repayments, but also those farmers with poor loan repayment histories....

Parastatal Madness, 2nd Edition

The blog Parastatal Madness noted that part of the reason why many parastatals are under performing and simultaneously remain in government hands can be found in the huge debts owed to them by government agencies. Two new articles on this - Government Agencies owe Zesco a staggering K55bn and ZSIC owed over K100bn.

Wasting away ?

A serious sanitation problem which has attracted little attention from the media and policymakers. Excerpt:

In Zambian cities, most of the unplanned settlement areas have pit latrines, where human waste mixes with floodwaters. Febby Mbewe is a resident of Kanyama, a Lusaka township where buildings are straw shacks and latrines are pits. She says, “There is too much water [in township] toilets. Roads have submerged in the floodwaters. Every time it rains the water level rises. Now it has gone up over knee-level. Because of that the houses, toilets [pit-latrine] and roads are all flooded.”.......The Water and Sanitation Council of Zambia acknowledges the problem. Osward Chanda is a coordinator of the council, “We need a policy change in the sanitation sector because people are building structures anywhere without proper sanitation facilities. So who’s responsible for where they are disposing the human waste? We need to police the sector properly; by this I mean having someone responsible to oversee the sector development. “

Wednesday, 7 May 2008

CSO on Income Inequality

The latest CSO April Edition has a fascinating article on income inequalities remain high in Zambia. Article replicated below :

Inequality in income distribution is one of the factors that determine inequality in the levels of household expenditure and access to goods and services. In measuring inequality the Lorenz Curve (a graphical representation of income distribution of a population) and Gini Coefficient (the use of an index of inequality to measure income distribution) are used.

In terms of distribution of income, the survey results revealed that the bottom 80 percent of the population in terms of earnings were reported to have acquired only 31.3 percent of the total income, while the top 20 percent of the population claimed 68.67 percent of the total income. This shows that income is very unevenly distributed in Zambia. The gini coefficient for Zambia in 2006 was 0.60, a decline from 0.61 percent in 1996. It was 0.54 in the rural households and 0.66 in the urban households. This reveals that the income inequalities in 2006 were more pronounced in the urban areas than in the rural areas.

Trend analysis of the income distribution from 1996 to 2006 shows that there has been no major change in inequality regarding the distribution of income. In 1996, the bottom 50 percent of the population claimed a mere 11 percent of the total income. This slightly reduced to 9.1 percent in 1998, and then increased to 21 percent in 2004 and then reduced further to 8 percent in 2006.

Should we be bothered? Absolutely! Socially, as bad as poverty is, its much worse when you see others are better off than you are, and the gap appears to be unchanging. Economically, the conventional thinking is that economic growth could be unsustainable in the long term without policies that reduces the divide between members of society or at the very least prevents a widening of the existing divide. It is therefore necessary to ensure that pro-growth policies go hand in hand with social and income equality goals.

The policy linkage is important because inequality has important implications for social cohesion (i.e. whether we as a society feel more as one nation with common interests). Social cohesion is important because a more united nation would be able to have internal peace and its citizens would lead happier lives. This is why responsible Governments generally pursue policies that encourage civic engagement through initiatives such as devolved decision making and greater voter participation. Unless we as society are more cohesive, the problems of crime and disorder would not be easily eliminated.

No one has described the the linkage between greater inequality and a less cohesive society better than James K. Galbraith. In his book Created Unequal : The Crisis in American Pay (1998), Galbraith argues that when citizens have diverging access to services (due to income and social inequality) the result can be social and political fracturing. Inequality may endanger society’s ability to think of itself as a single entity or nation. In his words :

“With high inequality, it becomes easy to know whether one is likely in the long run to be a net gainer, or a net loser, from public programs of family assistance, pension security, and health care. High inequality therefore weakness the willingness to share at the same time that it concentrates resources in the hands least inclined to be willing. In this way inequality threatens the ability of society to provide for the weak, the ill, and the old”.

Zambia Statistics - April 2008

The CSO April Edition can be found here. Single digit inflation is no more. Inflation was recorded at 10.1 percent as at April 2008. This rate is 0.3 of a percentage point higher than the March rate of 9.8 percent. Compared with the same period last year, the annual rate of inflation declined by 2.3 percentage points, from 12.4 percent in April 2007 to 10.1 percent in April 2008.

Tuesday, 6 May 2008

For Zambian Aviation enthusiasts!

An interesting piece on the resurgent Zambian airways, with good information on the history, their current market position and fleet composition. Would be nice to see something similar on other local airlines.

Monday, 5 May 2008

Affirmative action...for Zambian women?

Interesting comments from Marian Munyinda (NGOCC Chairperson) on the need for the new constitution to have some element of affirmative action for women vis-a-vis electoral participation before the 2011 elections. Excerpt :

"We would like a situation where political parties can enshrine certain provisions aimed at advancing the development of women such as ensuring that 30 per cent of women adopted are women and also the Electoral Commission of Zambia adopting and implementing an affirmative action….For example, in Uganda there are certain areas where only women candidates compete against each other because of course there are fears that if men are put with women they may lose because the reality is that women are still disadvantaged in a lot of areas."
It was only a matter of time before someone suggested this. We have seen recent parliamentary bills reserve positions for women e.g. the new mining bill calls for a “deputy chair [of the mining watchdog] to be a woman if the chair happens happens to be a man”. Similar provisions are found in the pending ICT bill. Whilst I am not opposed to affirmative action in principle, I am amazed how the drive to set mandatory minimum female participation in certain areas has proceeded without debate.

What is not always clear to my mind is whether proponents like Marian see “minimum female participation" as Zambia development in action (end in itself) or as a crucial step towards economic growth. I think in so far as equality between sexes is a noble aspiration, any drive to improve it must be viewed as necessarily development. However, the question of unintended consquences must also be considered. Clearly having a minimum quota of MPs reserved for women may not be efficient for society as a whole if it delivers uneducated female MPs incapable of serving their constituents properly. There are clearly difficult trade-offs to be made and that is why a debate is necessary.

Of course may be Marian really believes that affirmative action is the way to achieve sustainable growth! For example she might believe that in the long term economic prosperity lies in reducing gender inequality. Either through preventing further social fracturing or by more positively breaking down barriers that prevent effective competition for top jobs. The argument here again needs to be better debated to see whether that is indeed the case.

Obstacles to growth

A useful IMF summary paper on the Zambia electric power market and potential obstacles to growth.

Chinese Investment in Zambia (A Special BBC Report)

BBC Newsnight Programme reports on China's influence in Zambia - A special two part report :

Part 1

Part 2

Sunday, 4 May 2008

Election Special - To run or not to run? (Reuters)

A reuters report on the current stand off. The MDC appear stuck on the next move - run and risk brutality from Mugabe's henchmen, while legitimising his hold to power in the process. Refuse and risk handing it to Bob on a plate, since the international community appear powerless :

Saturday, 3 May 2008

Quote of the week (Oscar Kalumiana)

“There are some symptoms of problems at Zesco but this is not because it is too big….Zesco only generates 1,700 mega watts of power and I don’t think tha would be considered a huge responsibility compared to other power utilities such as Eskom in South Africa which generates 45,000 mega watts of power. This is a huge difference but the South African government has maintained the company in public hands.”

Oscar Kalumiana (The Post 30/04/2008)

Oscar Kalumiana (Acting Energy Permanent Secretary) objecting to calls for ZESCO to be separated into three separate companies generation, distribution and transmission in order to make the power market more competitive and encourage investment in the market. Although ZESCO is not a statutory monopoly, it handles virtually all generation, transmission, and distribution of electricity in Zambia. ZESCO is a company on the ropes, beset by inefficiencies and high costs. According to the Cost of Service Study, ZESCO experienced five straight year of losses from 2002–06 and in the last few months has overseen significant power shortages in the country including the Black Weekend. Mr Kalumiana's response to all this is that size is irrelevant, although he perhaps could have said size has advantages. In any case citing Eskom is simply sakism. The wrong thought process among Zambian politicians that just because others are doing it, we should also do the same thing. Other people's actions [in this case RSA] are the best reasons for your own actions.

Friday, 2 May 2008

Mining Watch (Guinea)

Guinea has joined the quest to earn bigger share from profits of foreign mining companies. Careful readers of the article will also note that Mineweb believes "Zambia expects to earn US$650 million in additional revenue this year" from its new regime. This figure is higher than the $415m previously quoted. If $650m is the new "additional" estimate, then overall copper revenues might well be around $750m on 600k tonnes in 2008. But without knowing precise the methodology used to assess the $650m its difficult to believe any of these figures. There's also the additional complexity of other measures (e.g the 15% export tax on copper concentrates).

Parastatal Madness

Secretary to the Treasury, Evans Chibiliti disclosed earlier this week that a number of companies (Zamtel, Zesco etc) owe the Zambia Revenue Authority (ZRA) billions of Kwacha in unremitted taxes. Apparently ZRA has sufficient legal tools to compel defaulting clients to pay,but the situation is tricky because of " the strategic importance of the erring firms and institutions".The truth of course is that this is not entirely true. One only needs to peruse through the PAC report to see that most of the parastatals are actually owed a lot of money by the government, this is why they never pay taxes! Many of us have previously called for these parastatals to become independent, but reality is that incentives for government to act are very weak. Parastatals help governments to shift debt around! Mr Chibiliti calls this implementation of "various debt swap and cancellation initiatives".

Its not that the government has a poor command of economics or that it believes its own argument that "parastatals are crucial for national security", its just that it has weak incentives to make parastatals more independent. The government knows the right approach is to fully commercialise the firms and ultimate privatisation (with adequate regulation where necessary), but they fear that doing so would make them pay the debts back! In particular, fully commercialise / privatised parastals makes its very difficult for the sitting government to use them as engines for direct / indirect campaign during election time. For example, they can no longer get a Zamtel phone connected for free or get ZESCO to provide power for free etc! There are other disincentives of course, most notably incurring the wrath of laid off employees (see the ZAMTEL post), possibly culminating in an electoral defeat. Indeed in some cases the pressure from employees represents the greatest stumbling block for reform because they fear job losses! Although in the long run as the company expands it will be able to take on more employees and with better prospects.

Thursday, 1 May 2008

ZAMTEL on the verge of collapse?

Staggering news that Zamtel is operating a K150 billion deficit, and plans to retrench more than 800 workers this year to save the firm from total collapse. It appears the truth has finally hit home, that ZAMTEL is truly inefficient and very costly to the Zambian tax payer. According to Acting ZAMTEL MD, Mukela Muyunda :

"The current situation should be brought under control without any delay. We are spending more than 70 per cent on staff costs. I want to assure all our employees that those who are going to lose their jobs, both unionised workers and senior managers, are going to be taken care of. This is a surgery which is expected to be conducted to save the company. The company has been operating on losses. We have to start by making a profit of at least K20 billion this year alone in order to make the company viable again".

The quest to become SADC's transport hub...

Mozambique is in a hurry to develop, and central to the strategy is significant investment in its port capacity through issuing international tenders for concessions. The latest plan is a $900 million upgrade of the Nacala and Beira ports and associated surface access infrastructure. It has its eyes on landlocked neighbours Zimbabwe, Malawi and Zambia as key customers.