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Monday, 13 October 2008

Agenda for the next government? (Guest Blog - HK)

Let me present an AGENDA of the national priorities which potential leaders need to espouse in order to deserve the precious votes of Zambians. I compiled the AGENDA hoping to secure enough financial and material resources to contest the forthcoming presidential by-election.

Priority 1: Existing Projects and Programs

The new leaders would need to adopt and implement all the national projects and programs that were started or planned by previous governments in Central Province, Copperbelt Province, Eastern Province, Luapula Province, Lusaka Province, Northern Province, North-Western Province, Southern Province, and Western Province.

They would also need to honor all bilateral and multilateral agreements, conventions and protocols that have been consented to by the current and previous Zambian governments with countries and institutions within the African Union and beyond.

Priority 2: A Smaller National Government

There is a need to perform existing and planned government functions with fewer Cabinet Ministers, and to abolish the positions of Deputy Minister, Provincial Minister, Provincial Permanent Secretary, and District Commissioner. There is also a need to initiate restrictions on leaders’ trips to foreign countries. And, among many other cost-cutting measures, we need to reduce the number of Zambia’s foreign embassies by having clusters of countries to be served by single embassies.

Besides, we should not entertain any calls for the creation of the position of Prime Minister.

The savings to be realised from the cost-cutting measures should be invested in improving education and training, healthcare services, infrastructure, crime-fighting, and agricultural production and food security.

We also need to apply the savings to be realised from getting rid of meaningless top-level positions in the national government on employing more teachers and healthcare personnel, and on improving their conditions of service.

Besides, we need to ensure that retirees and retrenchees from the civil service and privatised state companies are promptly paid their overdue terminal benefits. It is high time we made it possible for them to enjoy the fruits of their labor!

We need to create a smaller and more efficient government that will not overburden taxpayers or resort to heavy borrowing of funds to finance the provision of public services. In other words, we need to rescue our country from its current addiction to loans. We can, therefore, not wait to embark on the process of creating a government that will live within its means!

Priority 3: Decentralisation of Power

We should decentralise economic and decision-making power to provinces by ensuring that dis-tricts and provinces are administered by elected district mayors, provincial governors, provincial police commanding officers, and provincial prisons commanding officers. We need to make it possible for citizens nationwide to assume and exercise greater authority over the socio-economic affairs of their communities.

There is a need for citizens to elect leaders in their respective districts and provinces rather than have leaders like District Commissioners, Provincial Ministers and Provincial Permanent Secretaries imposed on them by the central government!

Besides, such decentralisation of power would make it possible for districts and provinces to function as nurseries for national leaders.

Priority 4: Free Life-Saving Healthcare

We should provide free life-saving healthcare to all Zambians that would be respectful, that would recognise personal dignity, and that would adequately provide for personal privacy. Besides, healthcare facilities and personnel are in serious need of a government that would really address their needs and expectations with respect to medical supplies and equipment, housing, transportation, salaries and allowances, and retirement benefits.

In all, there is a pressing need for leaders who are committed to waging a vicious and relentless war against HIV/AIDS, malaria, cholera, diarrhea, cancer, tuberculosis, whooping cough, and other deadly diseases.

Priority 5: Free Formal Education

It is essential for government leaders to abolish examination fees on inauguration day as an initial step in the provision of accessible education for all Zambians. Besides, there is a need to abolish Grade 7 and Grade 9 elimination examinations within 1 year of assuming office, and to provide for free education through Grade 12 at least.

In March 2007, the National Assembly recognised the need for such a policy by supporting calls to phase out Grade 7 and Grade 9 final examinations. But given the current bloated national government, free education from Grade 1 to Grade 12 will remain a pipe dream until the people elect leaders who are committed to the creation of a smaller and more efficient government.

To promote scholarship and academic excellence in education and training, high-school graduates who would obtain a Division 1 would need to be automatically awarded scholarships upon being accepted at any Zambian college or university.

All other high-school graduates and working Zambian men and women wishing to pursue further studies should be granted with low-interest loans upon being accepted into classroom-based or correspondence-based study programmes offered within Zambia. Loan recipients who would graduate with "Distinction" should be excused of 75% of their debt obligations, while those who would graduate with "Merit" should be absolved of 50% of their debt obligations.

And all citizens who would graduate from Zambian colleges or universities with "Distinction" should be automatically awarded scholarships to pursue higher education or training programmes within Zambia or in foreign countries — that is, upon advising the government that they are accepted by accredited educational or training institutions to pursue further studies.

Besides, we should provide for the establishment of computer laboratories at educational and training institutions nationwide, and for eventual connection of computers to the Internet. We need to equip the youth with the computer skills they need in order to compete successfully in the modern socio-economic system.

And we should establish an accreditation board to monitor, regulate and boost the standard and quality of formal education and training nationwide.

Fellow Zambians, we need to make a sustained effort to cater for the basic needs of the educational system. Some of the basic needs are as follows:

(a) Schools and classrooms that are adequately equipped for both teaching and learning;

(b) Qualified, self-motivated and well-paid teachers or lecturers in every classroom; and

(c) Competent school administrators on competitive conditions of service, and adequate office supplies and fixtures.

The youth are our beloved country’s most important treasures — they are the jewels of our Motherland! It is, therefore, surprising that we have continued to pay lip-service to the educational and other basic needs of our country’s youth.

The issue of Grade 12 students in private schools not being able to sit for examinations due to the lack of examination centres also needs to be tended to with the urgency it deserves. In this regard, government leaders need to work closely with the Private Schools and Colleges Association to have examination centers at private schools at public expense.

We need to be seriously concerned about the education of all citizens, irrespective of whether they are in government-funded or privately operated schools.

Priority 6: Agriculture and Food Security

We should boost agricultural production through government-financed irrigation dams and canals, cattle re-stocking and disease control, a fertilizer subsidy, and zero value-added tax on agricultural inputs and raw food. We should also promote food canning, efficient marketing of agricultural produce, and agribusiness.

Besides, we should promote agricultural schemes by municipalities, the civil police, the prison service, the defence forces, and by educational and training institutions in order to enhance Zambia’s food security and self-sufficiency.

We should also revitalise Farmer Field Schools nationwide to teach integrated plant nutrition in order to enhance soil productivity through the application of both mineral fertilizers and organic sources of plant nutrients.

We should strive to make food readily available and affordable in order to make "good milile" or "kulya bulotwe" the norm in each and every Zambian household within the shortest possible time!

Priority 7: Sustainable Rural Development

We should foster development in rural areas through attractive incentives for investors in such areas. And we should provide adequate public services and facilities in such areas — including police protection, an inter-modal road network, postal services, fire protection, low-cost housing, electricity, and access to clean water.

We also need to provide for educational, vocational, recreational, telecommunications, and healthcare facilities in rural communities.

Priority in providing for these essential public services and facilities should be given to resettlement schemes nationwide.

There is also a need to streamline the process of issuing title deeds and make it possible for the deeds to be issued in the shortest possible time.

Priority 8: Economic Growth and Job Creation

We should bolster job creation through heightened promotion of both private-sector investments and small business ownership. Moreover, we should reduce interest rates by at least 2 percentage points per year over a period of 4 years. Also, we should reduce Pay-As-You-Earn (PAYE) and corporate taxes by 5 percentage points, and value-added tax (VAT) from 16% to 12.5%.

It is high time citizens had a government that would make it possible for them to keep more of their hard-earned incomes for investment, savings and consumption!

This is one of the practical ways in which leaders can stimulate the national economy and create more jobs. And it should be one of the practical ways in which the government can broaden the tax base by getting more citizens to work who are going to pay taxes.

Besides,

(a) We need to achieve at least 7% annual growth in our national economy’s output.

(b) We need to attain at least 3 percentage points annual reduction in unemployment.

(c) We need to attain at least 2% annual growth in per capita income.

(d) We need to attain a 5% annual growth in exports through an ambitious promotion of non-traditional exports and attractive incentives to local suppliers of products currently being imported.

(e) We should expect to attain a relatively high annual rate of inflation of around 20% owing to contemplated reductions in taxes and interest rates intended to stimulate both the supply of goods and services and the demand for goods and services in order to bolster job creation and economic growth. We need to reverse the current emphasis on stabilising inflation at the expense of job creation and economic growth. By the way, the attainment of single-digit inflation is a target that is appropriate for countries that have already achieved a high level of job creation and socio-economic development. Zambia is clearly not one of such countries!

In matters relating to the economy and job creation, we should earnestly seek the active involvement of the Zambia Association of Manufacturers, the Zambia Association of Chambers of Commerce and Industry, the Economic Association of Zambia, the Civil Society for Poverty Reduction, the Zambia Federation of Employers, and the labor movement in the provision of decision inputs.

Priority 9: Affordable Water and Electricity

We should provide for strict and direct governmental superintendence over the supply of water and electricity to facilitate the charging of lower reconnection fees and lower rates and tariffs by utility companies. Besides, we need to provide for rapid rural electrification and accessibility to clean drinking water nationwide.

In this endeavour, we should initiate cost-cutting measures to be adopted by suppliers of water and electricity as follows:

(a) We should work with executives of water supply and sewerage companies in devising a standard and lean organisation structure to be adopted by the companies, except private providers that exclusively serve their employees;

(b) We should provide for a forum at which utility companies would be afforded an opportunity to suggest viable ways and means by which the government could facilitate the process of making public utilities less costly to consumers; and

(c) We should require all public utility companies to find ways and means of reducing marketing, public relations and administrative costs, and to seek low-cost suppliers of machinery, equipment, office fixtures and supplies, sub-contracted services, and so forth.

We cannot talk about electricity without considering other important sources of energy. Among other things, we should provide for attractive incentives to the private sector to engage in the exploration and/or supply of other forms of renewable and environmentally friendly sources of energy — including natural gas, solar energy, wind-generated electricity, methanol, ethanol, and propane.

Moreover, we should re-structure the Energy Regulation Board in order to enhance its efficiency and effectiveness.

Besides, government leaders need to work with the Zambia Association of Manufacturers, Zambia Association of Chambers of Commerce and Industry and oil marketing companies in designing a mechanism for pricing diesel, petrol, jet fuel, kerosene, bitumen, and related products that should take into account the needs of the transportation, manufacturing and agricultural sectors, among others.

And there is a need to seriously consider the prospect of either reducing or completely phasing out the Strategic Reserve Fee and value-added tax on sources of energy.

Priority 10: State-Financed Housing Schemes

We should seek to convert the National Housing Authority into an autonomous, self-sustaining and revenue-generating entity, which should incorporate all existing national public housing programmes. Its mandate should include the following functions:

(a) Implementation of home ownership schemes for all civil servants;

(b) Provision of low-cost housing units for low-income families nationwide; and

(c) Management of a home-ownership scheme for low-income families to be financed through low interest mortgages.

In this endeavor, we should also prohibit forced relocation of squatter compounds nationwide until:

(a) Low-cost public housing units are made available by the National Housing Authority; and

(b) Site and service areas designated by local authorities for resettlement are furnished with running water, electricity, public transportation routes and portals, and other essential public services and facilities.

To bolster the availability of low-cost building materials nationwide, we should provide attractive incentives designed to induce investments in the production of cement, timber, window panes and frames, paint, bricks, roofing materials, doors and door frames, and construction equipment.

Priority 11: Caring for Disadvantaged Citizens

We should make an earnest effort to care for adults and children who are economically and/or physically disadvantaged through such institutions as the Zambia Agency for Persons with Disabilities, Children In Need, the Zambia National Federation of the Blind, the Zambia Heroes and Freedom Trust, the Salvation Army, the Zambia Red Cross Society, the Twalumba Senior Citizens Organisation, the Senior Citizens Welfare Foundation, the Zambia Interfaith Networking Group on HIV/AIDS, independent operators of orphanages nationwide, and many other non-governmental organisations and agencies of foreign governments.

With respect to the unemployed youth who are currently roaming the streets, we should fully and promptly revitalise the Zambia National Service (ZNS) production camps and make it possible for them to enroll in government-financed entrepreneurial and other skills-training programs to be offered in the camps on a voluntary basis.

The Chiwoko ZNS Camp in Katete, the Chishimba ZNS Camp in Kasama and the Kitwe ZNS Camp should periodically recruit unemployed youth to pursue vocational training programs — which should include courses in carpentry, auto-mechanics, agriculture, bricklaying, plastering, tailoring and designing, and shoe-making and repairing.

The vacated refugee camps dotted across the country should also be utilised for skills-training purposes.

Graduates from skills-training centres should be encouraged to form joint business ventures, and should be provided with start-up kits and financial resources through relevant government ministries, the Youth Empowerment Program, and the Resettlement Department under the Office of the Republican Vice President. And institutions like the King George Centre in Kabwe should be expanded to accommodate larger numbers of graduates.

Priority 12: The Fight against Corruption

We need to seriously fight corruption because it has subverted the political process in our beloved country; it has thwarted economic growth and stability; it has undermined honest enterprise; it has discouraged foreign direct investment; it has eroded the country’s moral fibre; and it has tarnished Zambia’s image.

But like any other problem confronting us today, corruption cannot be effectively fought without first understanding its causes. Since independence, the causes of corruption in Zambia have included the following: an unstable political setting; regular reshuffles of political appointees; a weak legislative system; a weak judicial system; excessive, cumbersome and/or rigid administrative routines and procedures; inadequate wages, salaries and fringe benefits; and delayed payment of wages and salaries for employees on government payroll.

We should, therefore, bring corruption under control through:

(a) Sustained political will and zero tolerance of the scourge;

(b) Streamlined administrative and bureaucratic procedures;

(c) Provision of adequate remuneration to civil servants and public officials;

(d) Compulsory ethics education in educational and training institutions;

(e) Passage of strict pieces of legislation designed to prevent conflicts of interest in institutional settings;

(f) Limitation of recourse to immunity by public officials and business leaders and their organisations;

(g) Fostering the development of a free press to facilitate the exposure of unscrupulous activities in institutional settings;

(h) Provision for an anti-graft hotline for individuals and organisations to report acts of corruption anonymously or otherwise;

(i) Strict enforcement of the code of conduct established by the Parliamentary and Ministerial Code of Conduct Act of 1994 for deputy ministers, Cabinet ministers and members of the National Assembly; and

(j) Active participation in bilateral and multilateral conventions, protocols and declarations designed to fight corruption, particularly in the areas of prevention, prosecution, asset recovery, and international cooperation in generating rules for extraditing alleged fugitive perpetrators of corrupt practices.

Priority 13: The Fight against Crime

We should combat crime and other social vices nationwide through localised police units by allocating more money to the police units to enhance their capabilities in terms of communications, transportation, crime-fighting gadgets and equipment, and security cameras for installation in town centres and on major roads and streets.

Moreover, we should provide for the electrification of houses for police officers nationwide. There are just too many law-enforcement officers who are having a hard time preparing meals and uniforms in readiness for work due to the lack of electricity in their houses.

Priority 14: Competent Government Leaders

Let me now talk to you about the issue of experience in politics and governance.

Clearly, socio-economic conditions in the domestic, regional and global environments are changing constantly. As such, yesterday’s approaches to the resolution of our country’s problems are not likely to do an effective job; after all, they have evidently and lamentably failed to do the job in the past!

We, therefore, need leaders who are willing to develop new attitudes, skills and strategies in order to wrestle successfully with the complex and volatile socio-economic conditions of our time.

As such, we should expect all government leaders to consider themselves as being on job-on-training regardless of the extent of their previous experience in politics and governance. And such leaders should be technocrats, and not clueless figureheads!

Accordingly, the citizens we should consider for top-level government positions should come from a diversity of institutional settings — including the Bank of Zambia, the World Bank, educational and research institutions within Zambia and in the Diaspora, professional associations, the civil service, the business sector, and existing political parties and alliances.

They should be among Zambia’s sons and daughters who are adjudged to possess the necessary knowledge and skills relating to the overall missions and objectives of the government ministries and agencies which they would be expected to administer. Accordingly, they should be expected to translate national policies into concrete benefits for all Zambians.

Besides, we need leaders who understand the need to make a quick transition from campaigning to governing upon being appointed or elected to positions of authority.

We also need leaders who recognise citizens’ right to vote for candidates of their choice with-out being threatened that their communities would be excluded from the development process if they do not vote for candidates fielded by the ruling political party. After all, every person and every place in our beloved country deserves a fair share of the national cake!

We should also make an earnest effort to promote the active participation of women in all spheres and facets of Zambian society through high-level presidential appointments at Cabinet and Permanent-Secretary levels. Also, each of Zambia’s 9 provinces should be well-represented at Ministerial and Permanent-Secretary levels.

Priority 15: Promotion of Zambian Culture

We should make an earnest effort to preserve our country’s national treasures, including national monuments, museums, and historical sites through the National Heritage Conservation Council and a new Ministry for Culture and Community Services. Besides, we should promote our cherished cultural and traditional values, as well as promote traditional music and culture-related crafts.

We should also provide for government subventions to support the local publication of biographies on notable citizens in any field of human endeavor. We have an obligation to catalogue the exemplary accomplishments of our fellow citizens for future generations.

In this regard, I am thinking about outstanding individuals in sport, politics, journalism, broadcasting, music, art, business, teaching, science and technology, trade unionism, the military, law enforcement, community service, civil rights, and traditional leadership, among many other facets and spheres of human endeavor.

The government subventions should also be made available to support the publication of books and booklets on traditional ceremonies nationwide. And we should require municipal councils to provide for the naming of some of the new streets, parks, playgrounds, residential sites, and public buildings in their areas of jurisdiction with names of traditional ceremonies or deceased prominent Zambians.

Priority 16: Garbage Collection and Disposal

Zambia’s towns and cities are currently experiencing serious problems at all stages of solid-waste management — that is, the collection, sorting, transportation, and disposal of garbage.

Unfortunately, the accumulated garbage in our midst is a very serious health hazard. For instance, piles of uncollected solid-wastes facilitate the formation of pools of stagnant water and create breeding grounds for mosquitoes and, as such, dispose residents to the deadly malaria parasite.

Besides, outbreaks of cholera, meningitis and other contagious diseases in the country have been directly linked to the absence of effective solid-waste disposal systems, together with the lack of potable water in some communities and unhygienic street-vending of foodstuff.

National leaders should, therefore, provide for adequate financial grants and incentives to local municipal councils and private organisations in order to facilitate the regular collection and recycling of solid wastes, the production of biodegradable products which can naturally break down into elements that are less harmful upon being discarded, and the manufacturing of reusable products and parts of products.

Priority 17: Libraries and the Internet

Provincial governments should be expected to provide and run public libraries in their areas of jurisdiction. The national government should bolster the efforts of provincial governments in this endeavour through sustained financial and material support.

And we should strive to narrow the gap between Zambians who have access to the Internet and those who do not have access to such a facility by making the Internet available at centrally located public libraries nationwide.

Priority 18: The Fragile Natural Environment

We should provide adequately for the financial and material needs of the Environmental Council of Zambia, created under the Environmental Protection and Pollution Control Act of 1990 to protect the environment and control pollution so as to provide for the health and welfare of persons and the environment.

We need to make it possible for the Council to perform its mandate of coordinating environmental management efforts nationwide, fostering awareness about the need to protect the fragile natural environment, and enforcement of regulations pertaining to the control and prevention of air, water and solid-waste pollution.

Priority 19: Reformation of the Public Media

We need to seriously call upon the government to open up the Zambia Daily Mail, Times of Zambia, Zambia National Broadcasting Corporation (ZNBC), and the Zambia News and Information Services (ZANIS) in order to make it possible for all segments of Zambian society to articulate their needs, demands and aspirations through them. We should not allow the ruling party to continue to maintain a monopoly over the use of public media institutions. It is high time we demanded to gain fair access to such institutions!

There is also a need for the government to break up the public media through privatisation. The role of a free press in the creation of a system of governance in which accountability, transparency, rule of law, and public participation in governmental decision making cannot perhaps be overemphasised. We should not expect our multi-party democracy to function effectively without such a system of governance. The following is what each of these essential elements of good governance entails:

(a) Accountability: That is, availability of a mechanism for ensuring that leaders are directly and fully liable for the outcomes of their decisions and actions, and the appropriation of resources assigned to them;

(b) Transparency: That is, public access to information about the state, its decision-making mechanisms, and its current and contemplated projects and programmes — except for state se-crets and matters relating to public officials’ right to privacy;

(c) Rule of Law: That is, the existence of non-discriminatory laws, and law enforcement organs of the government that are efficient, impartial, independent, and legitimate; and

(d) Citizen Participation: That is, availability of channels and mechanisms through which the citizenry and non-governmental institutions can have an influence on the behavior and actions of public officials either directly or through representation.

There is also a need for the government to spearhead the creation of a "Public Broadcasting Corporation" designed to provide for the following:

(a) Coverage of parliamentary and judicial proceedings as shall be sanctioned by a board of directors to be constituted by Parliament or any other impartial organ of the government;

(b) Regular broadcasts of Zambian, African and world news;

(c) Non-partisan and non-sectarian educational, cultural and informational programs to be generated by ministries and government agencies;

(d) Coverage of sporting events and ceremonial activities; and

(e) Programming of government-censored movies and music which do not have the potential to promote moral decay in our country.

Finally, the effective checks and balances we seek to introduce into our system of government are not possible in a political setting where the government is a prominent player in the fourth estate — that is, the media. On the other hand, members of the private media need to be professional and responsible if they are to play an important role in exposing abuses of power and deficiencies in governance. They, for example, need to avoid statements or actions that are demeaning, inflammatory and/or harmful to others.

Fellow citizens, press freedom carries with it a great deal of responsibility on the part of jour-nalists. It is, therefore, important for journalists to remember that other members of society have constitutional rights which need to be safeguarded, too. In shorthand, a journalist’s freedom to report on any given issue ends where societal members’ rights also come into play — such as the right to privacy.

Priority 20: Sustained Peace and Stability

We should foster the evolvement of a society in which people’s rights and freedoms are fully recognised and respected by the government; and a society in which ethnic, cultural, racial, and religious diversity should be appreciated, tolerated and celebrated. Moreover, we should relentlessly pursue lasting peace and stability within Zambia and the African Union, as well as foster sound relations between our country and all peace-loving nations worldwide.

What I have outlined thus far are great priorities for our beloved country; they reflect the desires of many Zambians to give our beloved country a fresh start. And they are the kinds of priorities that will make it possible for us to make meaningful improvements in education and training, agriculture and food security, public health and sanitation, infrastructure and public services, commerce and industry, job creation and economic growth, crimefighting, and the overall well-being of all citizens.

But these priorities are meaningless without our individual and collective commitment to pursue them. We, therefore, need to give the mandate to a new cadre of development artists to jump-start the country’s socio-economic system so that it can adequately meet our basic needs and expectations, and the needs and expectations of future generations.

Together, we can realise the benefits of independence, democracy and economic liberalisation by means of simple, practical and commonsense solutions to the problems facing our beloved country.

Henry Kyambalesa (Guest Blogger)
Agenda for Change

29 comments:

  1. Mr Kyambalesa, I think you've left out something important; the abolition of 'sacred cows'.

    It is high time that govt minister, and yes, senior opposition leaders were compelled to use the same local health and educational facilities which they expect everyone else to use!

    I am also disappointed that you've relegated garbage collection and disposal to Priority 16. This, together with water sanitation, and sewage systems are or have broken down countrywide, especially in the capital.

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  2. Zedian,

    Apart from sinecures cited in Priority 2, which are these 'sacred cows'?

    By the way, the arrangement of the priorities do not, by and large, reflect their level of importance.

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  3. I think you have very correctly captured and highlighted some of the issues that we need to look at.
    1. It is imparative that existing programs are implemented. We do, however, have an unwritten rule to the effect that the wheel is re-invented and a whole new path chartered for it. This has led us to be in a constant state of stagnation as we want a new spoon for each bowl of porridge. My advice to whoever will take over is to try and maintain this and not terminate contracts for BOZ governor, get rid of minister of finance etc without an assessment of how Zambia can be considered to be doing well this time round. Additionally, I believe even the developments taking place in provinces mentioned has been because of a particular climate that has been created politically.



    2. A smaller governent is a defineite must. I was listening on radio a couple of weeks ago and one advocate of such a government, Mr. M. C. Sata failed to articulate himself and justify how he opted to be a minister without portfolio in a governemt that was similar in size to the current one. It is highly unlikely that given that background and the fact that his party appears heavy with regards to some positions, he will have a smaller government. Additionally he has shown propensity to appoint at will and I doubt this is a quality to be lost on election day. It is also simalrly unlikely tha Rupiah will have a small government given the people surrounding him and their expectation of reward. the problem we have in Africa is as has been highlighted by the Zedian. We have so many people to appease and maitain s sacrificial lambs. This adds to your cabinet size as you end up trying to squeeze everyone in cracks that don't exist thereby creating them. Rupiah himself is a product of appeasement and I think it will not be possible to expect otherwise from him. HH can swing either way. He as opposed to the other two main contenders is a professional and there is a 50% chance that he may apply himself in such a manner that will be fitting and pleasing to Zambians. Clearly Godfrey Miyanda is a man of principles and would be able to have a lean government. However, maybe the image builders being used for Rupiah are more needed here.


    3. Decentralisation is a brilliant idea that will bring development and foster growth in communities. I cannot make a decision for someone in Shangombo for example. However, this is only bound to happen if we make our leaders more accountable in so far as management of public resources is concerned. This not only about finances but also time, fuel, vehicles etc. The problem we currently have is that overtime (and this manifested itself even in the KK days but moreso during FTJ) politics is now considered a livelihood or another job. I have no objection to this, but if this is the case then we need to have people who are qualified for their jobs and also accountable by way of some appraisal system; which in our case is elections. Obviously this is an unworkable solution because it would mean quite a bit of voter education. Currently voters are chosen on the basis of age. Once one is 16 years old that makes him eligible. While I would hate to discrimate, I feel it is not fair to trust my life with some man smoking pot in the corner. Proponents of Oligarchys will argue that this may be a reflection of economic interests of a nation. I look at our campaigns in Zambia and realise that this is a problem deeply manifested in the country. Maybe voting criteria should be a little more than just 16 years of age. Once such a structure is in place, we are bound to see more rational leadership and more effective decentralisation.

    4. Your 4th priority goes without say. We need to critically look at our hospitals and create an enabling and accomodating ambiance about them (with medicines of course). the gesture shown to the PF president is actually availble to all Zambians. I remember a year ago my sister in law was flown to South Africa for treatment of an aneurysim. I suppose this is an FTJ mechanism. One can actually appeal to the Ministry of Health to have a relative flown out if the nature of illness is too complex to be handled here. However, this is not a solution. The governemnt will obviously not be able to meet all diseases that will be brought to its attention. Additionally, considering we are educating our own doctors, why not equip them for this kind of thing by ensuring hospitals in Zambia have the basic equipment for illness. In ZCCm time, due to the cost of medical equipment, this was distributed in such a manner that Konkola had the dialysis machine, Nchanga had the best dental, Nkana had the CT scanner etc. If a patient was in Chililabombwe and needed a scan, an ambulance would transport that individual to Kitwe where the machine was availble. This is managing availbe resources. This can be done in all provincvial head quarters for example and will reduce the cost of foriegn travel. Additionally, it will boost our meagre forex reserves if we are not using them at every turn.

    5. Free formal education is a definte must. I think a lot of important figures in this country made it because of the education system KK had in place and that is free education. This provides an important backbone for the development of communities and also poverty reduction. However, I disagree with abolishing exams. This may affect the standards of education. The exams serve to offer some level of education and maturity at each stage. An example would be the special papers written in grade seven. Those may not educate in the sense of education alone but also develop young minds on how to grapple with different problems life sets on us. Reasoning may need to be developed at such an age and abolishing the opportunity to do so may serve as a deterent to mature individuals being produced. I am sure this can be argued from the angle that some of these exams may not exist in other countrys but I am sure that other systems are in place to monitor growth of individuals...................


    I end here for now with the rest of my comments comming through tomorrow.....

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  4. Dear professor Kyambalesa,

    It seems to me that your project is a manifesto in search of a party. :) Why wouldn't the UPND, PF and Agenda For Change (and the Citizens Democratic Party) get together and create a super party, which can get into power and create a real alternative to the MMD?

    I have a few questions.

    1) Provinces

    With the an increase in the power of the provinces, what would the saveguards be against

    a) discrimination against non-members of the majority community and
    b) secession

    Kenneth Kaunda used 'tribal balancing' in his national government to prevent any semblance of tribalism and favoritism. I think his great fear was the pre-independence bloodshed of the Lumpa Church rebellion.

    With a greater emphasis on provinces and their obvious tribal allegiances, how would the state protect itself and it's citizens from that?

    Priority 2:
    A Smaller National Government

    There is a need to perform existing and planned government functions with fewer Cabinet Ministers, and to abolish the positions of Deputy Minister, Provincial Minister, Provincial Permanent Secretary, and District Commissioner. There is also a need to initiate restrictions on leaders’ trips to foreign countries. And, among many other cost-cutting measures, we need to reduce the number of Zambia’s foreign embassies by having clusters of countries to be served by single embassies.

    Besides, we should not entertain any calls for the creation of the position of Prime Minister.

    The savings to be realised from the cost-cutting measures should be invested in improving education and training, healthcare services, infrastructure, crime-fighting, and agricultural production and food security.

    We also need to apply the savings to be realised from getting rid of meaningless top-level positions in the national government on employing more teachers and healthcare personnel, and on improving their conditions of service.

    Besides, we need to ensure that retirees and retrenchees from the civil service and privatised state companies are promptly paid their overdue terminal benefits. It is high time we made it possible for them to enjoy the fruits of their labor!

    We need to create a smaller and more efficient government that will not overburden taxpayers or resort to heavy borrowing of funds to finance the provision of public services. In other words, we need to rescue our country from its current addiction to loans. We can, therefore, not wait to embark on the process of creating a government that will live within its means!


    I think this is the strongest idea. If we reduce the size of central government, we could put an emphasis on service delivery - teachers, nurses and doctors, police officers, etc. instead of 29 or so ministries, a huge cabinet and all the political positions that are mentioned here.

    Priority 3:
    Decentralisation of Power

    We should decentralise economic and decision-making power to provinces by ensuring that dis-tricts and provinces are administered by elected district mayors, provincial governors, provincial police commanding officers, and provincial prisons commanding officers. We need to make it possible for citizens nationwide to assume and exercise greater authority over the socio-economic affairs of their communities.

    There is a need for citizens to elect leaders in their respective districts and provinces rather than have leaders like District Commissioners, Provincial Ministers and Provincial Permanent Secretaries imposed on them by the central government!

    Besides, such decentralisation of power would make it possible for districts and provinces to function as nurseries for national leaders.


    I completely agree. Democracy is a bottom up affair, not a top down affair.

    " Priority 6:
    Agriculture and Food Security

    Priority 7:
    Sustainable Rural Development "


    How about the creation of Royal Development Companies or similar vehicles that can create development by developing agricultural complexes and services for starting commercial organic farmers - and do it in a way that allows the creation of lots of employment in rural areas while keeping the chiefs in the loop?

    We have discussed the outlines of the concept here.

    I think this is a very modular concept that can grow organically because it can be added on to.

    Please also check out:

    Citizens Democratic Party - Putting People First

    We could get together with all our manifestos and create a super party, which will put people first instead of corporations, when it comes to

    Zambia needs at least one demand side economics party to give people an alternative to all the supply side neoliberal parties.

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  5. MrK:

    Thanks for the observations.

    I wrote to some opposition political parties several months ago about the prospect of joining hands to prevent the splitting of the opposition vote by creating a National Alliance for Democracy and Development (NADD). Thus far, the response has been lukewarm at best. I, however, could not write to the Citizens Democratic Party (CDP) as it was not yet registered by then.

    To circumvent the potential for secession, and discrimination against non-members of the majority community, I have suggested the following:

    1) National laws and regulations and the provisions of the Republican constitution would uniformly be applied in all the provinces without exception. However, they would continue to generate and enforce ordinances that would not depart from the provisions of national laws and the Republican constitution. This would prevent the confusion being experienced by countries like the USA, where some states have passed their own laws relating to such critical matters as marriage and capital punishment.

    2) Each and every government ministry would directly perform mandated functions in all parts of the country, and would directly coordinate their respective services and operations with those of local governments and private institutions.

    3) Each of the nine provinces would have the authority to generate, as well as appropriate, their own revenues in line with the need to attract investors and skilled labor. In general, local authorities would collect their own revenues from businesses and residents, and would retain the revenues for local service delivery and development projects and programs. Suggestively, the potential sources of such revenues would include the following: water rates, municipal housing rent, investments in commercial undertakings, provincial lottery, property taxes, traffic violation charges, motor vehicle registration fees, personal levy, business licence fees, birth certificate fees, sale of unclaimed impounded property, and grants from the national government.

    Provincial governments would, however, be prohibited from minting money, and from demanding payments for commodities produced in their areas of jurisdiction and sold in other provinces in a currency other than the national currency. However, they would have the freedom to borrow capital from both local and foreign financial institutions on terms that would not subject public property in their areas of jurisdiction to the risk of seizure in the event of a delinquent loan. In the case of foreign borrowing, ratification would need to be sought from the Minister of Finance and Revenue prior to the consummation of arrangements for such borrowing.

    4) Potential revenue sources for the national government, on the other hand, would include the following: personal and business income taxes, value-added tax, postal revenues, nominal rentals of National Housing Authority residential units, commercial undertakings, customs duties, passport fees, fire-arm registration fees, excise taxes, hunting licence fees, work permit fees, citizenship and naturalization fees, NRC replacement fees, and 25% of any budget surpluses of provincial governments.

    The selling and/or buying of government bonds (by the Bank of Zambia) through LuSE and regional stock markets on behalf of the government (by means of "open market operations") would also be an important source of revenue for the central government.

    5) Provincial governments would not regulate inter-province trade or investment, or charge duties on commodities sold across provincial borders.

    6) Provincial governments would not regulate, or place any restrictions on, the movement of people wishing to seek jobs and/or residence across provincial borders.

    7) Provincial governments would be prohibited from entering into treaties, alliances or confederations of any kind.

    8) Parliament or the Cabinet would devise standardized organization / administrative structures for districts and provinces, and such structures would need to include the following positions:

    (a) District Level: Mayor, District Secretary, District Treasurer, and District Police Chief; and

    (b) Provincial Level: Provincial Governor, Provincial Secretary, Provincial Treasurer, Provincial Police Chief, and Provincial Prisons Superintendent.

    A Provincial Council, or any semblance thereof, would also need to be established by each province for the purpose of enabling incumbents of the foregoing positions to strategize on matters relating to local projects and programs and appropriation of revenues. Besides, the Republican constitution would need to be amended to include a clause that would provide for elected Provincial Governors to become ex-officio members of the National Assembly, subject to the disciplinary rules and regulations of the House.

    9) Superintendence over the civil police, prisons and the rehabilitation of prisoners and ex-convicts would also need to be devolved to provincial administrations, while the training of police and prisons officers would be conducted centrally by the central government. Provincial governments would, however, be prohibited from creating military establishments; the defence and security of the nation would be the preponderance of the Zambia Defence Forces.

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  6. The 'sacred cows' am referring to are those politicians who by some unwritten rule have found themselves entitled to medical services abroad, as well as foreign education for their children at the expense of the ordinary tax payer. Examples abound, including late Levy himself, and the evacuation of one Michael Sata, pictures of which he'd rather were completely erased from people's memory.

    How could these politicians possibly improve local health and educations services if they don't have to use them? We're talking about 100s of thousands of dollars that could be saved if these politicians were made to take the 'medicines they prescribe' to the public. It would also be the moral thing to do!

    Your Priority 2 doesn't address that.

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  7. Zedian,

    Doesn't "Anonymous" address your point with respect to the "sacred cows"?

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  8. Cho, absolutely! I actually totally missed the comments from 'anonymous', but we're very much in sync there.

    Not long ago KK critised late Levy for shuttling to and from the UK for medical check-ups when he could have had the same service locally. KK himself had a Presidential suite at UTH, the cost of which is obviously dwarfed by someone travelling the UK with an entire contingent of officials. I was quite disappointed that KK was all alone in voicing his concerns over the issue.

    And that brings me to another important issue 'anonymous' has raised here when he/she said, "Obviously this is an unworkable solution because it would mean quite a bit of voter education," when referring to having a more accountable system.

    I beg to differ with that suggestion as I think that if we're going to have a democratic system, voter education, including political awareness, would have to be raised quite significantly. I'm of the opinion that this is even more important that raising the minimum voter age limit from 16.

    Accountability to the people is heavily hinged on those people being able to question or influence decisions that affect them and people can only do that if they have an awareness of what is good or bad for them, and I don't mean simple right or wrong issues, but very complex situations.

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  9. Anonymous, MrK and Zedian:

    I greatly appreciate your observations.

    I wish to comment on the potential of the abolition of Grades 7 and 9 elimination examinations to affect the standards of education.

    The abolition of such examinations would contribute to efforts aimed at reducing the rampant juvenile delinquency apparently occasioned by dislodging youngsters from the educational system at a time when they are not yet mature enough to face the social, economic, and other facets and challenges of modern society. We just have too many youngsters being cast to the streets every year!

    It would also reduce the number of girls who are likely to fail Grade 7 or Grade 9 elimination examinations from getting into early marriages.

    There is a need for us to provide compulsory education from Grade 1 through Grade 12. In the information age of our time, all Zambian children need to be afforded the opportunity to be in school for at least 12 years in order for them to expand their knowledge base and/or gain the necessary vocational skills to at least make it possible for them to venture successfully into the real world.

    To ensure that pupils are afforded high-quality education at every level, end-of-term tests and end-of-year examinations would continue to be administered to gauge each and every pupil's intellectual development. Moreover, parents and guardians should be furnished with end-of-term and end-of-year transcripts detailing pupils’ performance in order to afford families the opportunity to bolster school authorities’ efforts to counsel and motivate pupils.

    To accommodate primary school leavers in secondary schools, as well as continuing Grade 9 students, we need to take the following measures:

    (a) Provide for immediate expansion of facilities at secondary schools which do not currently have extra space for Grades 8 and 10 classes;

    (b) Allow interested secondary school teachers destined for retirement to delay their retirements, as well as hire more of the trained teachers who are currently unemployed; and

    (c) Step up enrolments in training programs for secondary school teachers by at least 5%.

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  10. Zedian,

    My arguement on voting is based on the premise that age alone does not give one the ability to make informed decisions. lets look at the people vying for presidential office in Zambia, for example. Clearly the oldest two are the immature sounding of the lot. They seem to actually have less to offer than the youngest! With all the supposed experience and wisdom they have gotten over the years (quite a number of years i might add), one would have thought they would make some meaningful contribution to Zambia. My view is that age alone should not be used as a determinant. Democracy in itself is the best way to run the country. however, with an illiterate or should it be ignorant polpulation it becomes difficult to use the system for governance as can be observed from previous years elections. RB, Sata (and Chiluba in the past) have realised that if they target they're campaigns in areas such as these, they have a gold mine just waiting to be tapped. This has produced the voting pattern that we have e.g. 2006 that may not make sense. It is difficult for some man that has a very basic level of education to realise that some of the election campaign promises are simply words. you and me on the other hand will be able to pull out a fib and tear it to shreds. So my view is maybe until a time when literacy levels have gone up, we need to have some structured voters roll.

    Ba Kyambalesa

    I still maintain my arguement for not abolishing grade sevena nd nine exams. In its place, why not revise the education policy and ensure a firm foundation before grade seven. I have observed (though I am not an educationist) that children with a strong foundation have a better chance of survival in school as they get to understand the value of education. Remember that not all parents look at the progress their children are making and that in itself makes the children ill prepared for grade seven exams. I remember my parents physically carrying away our small tv just to make me study. In other households, though, there was laxity in this regard and in most cases the children from those houses have turned out a certain way. So my arguement is that maybe we strengthen the curriculum before grade seven as this will equip children better for exams. Lets view exams as a developmenal activity and not for weeding out people. Also we need to realise that parental involvement in the education of children is important in ensuring their growth. Homework is one way of compelling parents to get involved in the education of children. With regards to the problem of juvenile delinquency; again parental involvement. When we grew up, we had very strict curfews. This has over time disappeared and I must add that HIV/AIDs has created so many orphans that it has become normal to see delinquency at every turn.

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  11. Anonymous,

    I totally agree that "Homework is one way of compelling parents to get involved in the education of children." Let us add this to measures designed to improve the quality of education in Zambia.

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  12. Henry Kyambalesa offers many benefits which we would all like to have. And it is comforting just to focus on these. But how about costs? On this aspect he, like other politicians, is silent. Far from estimating costs, he even promises to reduce PAYE, VAT and company tax, yet without estimating the effects on revenue.

    Government-bestowed benefits are commonly regarded like Christmas presents. But they have to be paid for from the pockets of taxpayers. And in return for our money we normally receive services which are worth much less than what we could buy with the money we lose. How can government be made more transparent and more efficient, so as to provide value for money? Here again there is silence.

    Admittedly, there is talk of reducing the size and expenses of government. That we can all applaud. But let us not overlook the fact that the civil servants to be laid off will be entitled to costly terminal packages. Simply transferring them to the newly created provincial governments, which already have many staff, is no simple solution.

    Would Henry Kyambalesa hope to solve these financial problems by printing money? That is suggested by his statement, “We need to reverse the current emphasis on stabilizing inflation at the expense of job creation and economic growth”. But the supposed link between inflation and employment creation is no longer credible. Instead we can expect ‘stagflation’, the economic situation where inflation and stagnation occur together. And how about the people whose savings and pensions would be destroyed, as happened in the Kaunda and Chiluba years? In 5 years 20% inflation reduces the value of money by two thirds. Moreover, interest rates, instead of rising with inflation, are to be lowered. How, and who would lend money at negative rates?

    Promises come easily from the lips of politicians. Ordinary people have to live with reality. I am sorry to sound negative, but we owe it to ourselves and to Zambia to be realistic. Henry Kyambalesa was unable to stand for the presidency for lack of funds. Would not the same limitation prevent him from achieving his manifesto?

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  13. Murray,

    It would help if you explained why you don't want the mining companies to pay taxes. Until then...

    Would Henry Kyambalesa hope to solve these financial problems by printing money?

    ... the origin of finances would be pretty obvious.

    I think the mining companies make at least $2.4 billion a year in profits, and they could easily be taxed over half of that, giving the state a renewed income of $1.2 billion. Right now as you know, they barely pay any taxes at all.

    At the same time, priorities can be shifted from ministries to service delivery personnel.

    For instance, the ministry for Vocational Training and Technology has a budget of $23 million per year. That amount would hire 3833 teachers at $6000 per year. And that's just one ministry.

    It is all a matter of priorities. And for the lat 17 years, the priority of the government has been with a tiny economic elite.

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  14. Murray,

    Thank you for the observations. I hope MrK's contributions have partly answered some of the questions you have raised.

    I will, however, comment on the issue relating to inflation and employment creation.

    In this regard, let me first state what we already know about the nature of inflation. Essentially, we can simplify economic theory relating to the causes of inflationary trends by designating inflation as being either demand-induced or supply-induced as follows:

    1) Demand-Induced Inflation (or Demand-Pull Inflation): This is caused by lavish government expenditure, a bloated government, high wages and salaries, very low taxes resulting in excessive purchasing power by consumers, and/or consumer credit at low interest rates which can make money readily available to buyers.

    2) Supply-Induced Inflation: This is caused by high costs of production due to costly inputs and/or inefficient suppliers (cost-push inflation), inadequate aggregate supply due to slack capacity utilization, and/or inadequate numbers of suppliers of essential commodities in a country’s economy.

    Since aggregate wages and salaries are generally low and interest rates and taxes are high in Zambia, inflationary trends can be said to be caused largely by excessive government expenditure, high costs of production, and inadequate aggregate supply.

    To control inflation, therefore, wage freezes, higher taxes, and high interest rates are not the appropriate instruments. As experience and common sense have taught us, such instruments can only stifle economic growth and job creation.

    Therefore, the appropriate instruments for lowering the aggregate price levels in Zambia are, and should be, the following:

    (a) Trimming the national government and strictly controlling government expenditure.

    (b) Finding viable ways and means of cutting the costs of energy, water, telecommunications, asset protection, and high insurance premiums (due to the high incidence of burglaries, robberies and vandalism).

    (c) Striving to induce investments in commodity production and research and development (R&D) to create a more competitive and innovative economic system where business entities can provide needed goods and services at lower costs and prices.

    Have we ever asked ourselves why industrialized countries have very low levels of inflation and yet they have extraordinarily high per capita incomes, very low interest rates, very low levels of unemployment, and no government-fostered wage and salary freezes?

    By the way, the issue relating to government expenditure reminds me of the observation you made in the Zambian Profit magazine of July 1993 that "high inflation and high taxes ... [emanate from] bloated and inefficient institutions which serve themselves instead of serving the public."

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  15. Kyambalesa,

    I thought your answer on inflation was well explained.

    A point I didn't quite get explicitly from your assessment.

    What is your position on the mining taxes? Are you with MrK for higher taxes? If so, how high, and how different from the new "now defunct" fiscal regime?

    More generally, what is your position on mining? What would you do different from what the government is doing, both with respect to new and old mines?

    I am also keen to hear your views on ZCCM-IH.

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  16. Priority 3: Decentralisation of Power

    We should decentralise economic and decision-making power to provinces by ensuring that dis-tricts and provinces are administered by elected district mayors, provincial governors, provincial police commanding officers, and provincial prisons commanding officers. We need to make it possible for citizens nationwide to assume and exercise greater authority over the socio-economic affairs of their communities.


    The Citizens Democratic Party (Robert Mwanza in Dallas, TX) has a very extensive page on decentralisation.

    http://www.thecitizensdemocraticparty.com/decentralization.html

    About the Citizens Democratic Party:

    CDP's strategy is to build an organization primarily centered on issues and not individuals. A common theme
    in Zambian politics is that political parties are personalized. However, individuals are corruptible and
    susceptible to err. Consider carefully the past and present political parties in Zambia. It is apparent that their
    vitality and subsequent ineffectiveness has been, and still is, a product of cults of personality. The Citizens
    Democratic Party is therefore, taking the lessons from the political history of our nation and using them to
    build a strong political organization whose foundation will be based on ideology and core values rather than
    personalities.

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  17. Kyambalesa,
    If I've got you right, it appears your ICT agenda is to make Zambians better ICT users/consumers by proving more training labs, which is ok, as it is one of two possible strategies.

    The other strategy, and one I would prefer, is to create policies that will turn Zambia into an ICT exporter. That's because there's a lot more to gain in that. And yes, it's possible. South Africa has already done it and they're exporting ICT to the rest of the world. There's a couple or so South African ICT companies which are now listed on major world stock markets and their revenue is in the billions of dollars. One of these companies is Dimension Data, having raked in $2bn in the first half of '08.

    So how did South Africa do it?

    Well, to begin with, education, as you ave rightly pointed. SA has got some world class higher educational institutions (University of Cape Town is listed among top 200 in the world!), with equally high class ICT facilities and you will agree with me that it didn't come about by chance. It all came about by deliberate policy.

    But education is just the beginning. You also need to create an environment where education itself is valued so that the entire community is fully behind what you've created. In particular you need the private sector to support higher education by forming partnerships with universities and funding research and development projects. You need the industry to drive education and vice versa. You also need to encourage the industry to provide scholarships and internships to deserving students. Just look back at how successful the ZCCM sponsorships and internships worked so well back in the day. (The Zedian is proud to announce he is a product of that!)

    ZCCM produced the vast majority of engineers in the country, and since it's collapse, the deficit is clear for all to see and feel. We need to reverse that by encouraging industry to step in and work with institutions of learning. It would also help if we could compel foreign companies to employ locals.

    I recently read about a Malaysian/Chinese company that was going to be manufacturing mobile handsets in Zambia. I'm not sure about the viability of such a business, but such projects are to be encouraged, if the business case is viable.

    The current ICT policy is something of a mess, with the World Bank having recently been drawn in by stake holders to try and infuse sense in our current Transport and Communications Minister. One of the sticking points is the fees for an operator has to pay for an international voice gateway, currently pegged at an unbelievable $18m. Other issues include an ineffective and difficult regulator pushing confusing policies. You can follow threads on this forum for more on that.

    There are a lot of opportunities in the mobile sector which is yet untapped. In fact word has it that the West is looking to Africa for new ideas on mobile applications!

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  18. Let me respond to Henry Kyambalesa on inflation. The traditional distinction between two causes of inflation, cost-push and demand-pull, is not valid. If, for instance, the price of oil rises, people respond by using less of it or/and using less of other commodities and services, or paying less for them. We cannot get away from admitting that general inflation, as distinct from individual price rises, is, as Friedman demonstrated, “always and everywhere a monetary phenomenon”.

    Your statement that more inflation was desirable implied to me that you expected to cause it by ‘minting money’, an activity you reserve by implication for central governments when you deny it to provincial governments. Unfortunately cash creation by government remains easy in Zambia, since we have resisted making the central bank independent with specific instructions to maintain price stability.

    In response to MrK, I have never said that the mining companies should not be taxed. Of course they should be. But I have grave misgivings on the wisdom and morality of abrogating agreements. On revenue from mining taxes, reliable estimates are again important, and very difficult to make. How will MrK’s figures be affected by the copper price collapse from $8,250 in June to $4,700today?

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  19. Murray,

    In response to MrK, I have never said that the mining companies should not be taxed. Of course they should be. But I have grave misgivings on the wisdom and morality of abrogating agreements.

    Didn't Anglo-Amercan abrogate their agreements when they left Zambia? And don't the mines and their representatives continuously threaten to leave Zambia if they don't get everything just their way?

    Or doesn't living up to agreements extend to the mining companies themselves?

    On revenue from mining taxes, reliable estimates are again important, and very difficult to make. How will MrK’s figures be affected by the copper price collapse from $8,250 in June to $4,700today?

    All the more reason not to waste money on expanding capacity. I mean if prices are going down, why expand production?

    I'm basing my numbers on estimates from 2004, when the copper price was between $2000 and $3000 per tonne.

    Back in 2005, the cost of production for Lumwana mine was 76 cents per pound. The same year, the price of copper was between about $1,40 and $2,25 per pound. So with a cost of $0,76 and a price between $1,40 and $2,35, that would give at least Lumwana a profit margin of 45% to 66%. My guess is that the rest of the industry is not far from that.

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  20. Murray,

    I would be interested to learn about literature that considers the traditional distinction between the two causes of inflation (supply-induced and demand-pull inflation) as being invalid.


    Milton Friedman argued that "inflation is always and everywhere a monetary phenomenon" mainly to emphasize that inflation had nothing to do with aggressive unions, greedy businesses or even oil cartels -- the bad guys who took the blame for inflationary trends of the 1970s. Prices shot up everywhere because, in his view, the American federal government made the supply of money grow faster than the real economy created value.

    Let us briefly consider Friedman’s monetary economics and Keynesian economics, which I have excerpted and adapted from Wikipedia, the Free Encyclopedia.

    Monetarism is a school of economic thought concerning the determination of national income and monetary economics. It focuses on the supply of money in an economy as the primary means by which the rate of inflation is determined. It focuses on the macroeconomic effects of the supply of money and central banking. Formulated by Milton Friedman, it argues that excessive expansion of the money supply is inherently inflationary, and that monetary authorities should focus solely on maintaining price stability.

    The theory draws its roots from two almost diametrically opposed ideas: the hard money policies that dominated monetary thinking in the late 19th century, and the monetary theories of John Maynard Keynes, who, working in the inter-war period during the failure of the restored gold standard, proposed a demand-driven model for money which was the foundation of macroeconomics. While Keynes had focused on the value stability of currency, with the resulting panics based on an insufficient money supply leading to alternate currency and collapse, then Friedman focused on price stability, which is the equilibrium between supply and demand for money.

    Friedman and Anna Schwartz wrote an influential book, "Monetary History of the United States 1867-1960," in which they argued that "inflation is always and everywhere a monetary phenomenon." They advocated a central bank policy aimed at keeping the supply and demand for money at equilibrium, as measured by growth in productivity and demand. In their contention, the Great Depression of 1930 was caused by a massive contraction of the money supply and not by the lack of investment Keynes had argued. They also maintained that post-war inflation was caused by an over-expansion of the money supply.

    The Keynesian vs. monetarist debate was, therefore, merely about whether fiscal or monetary policy was the more effective tool of demand management.

    Since 1990, the classical form of monetarism has been questioned because of events which many economists have interpreted as being inexplicable in monetarist terms, namely, the unhinging of the money supply growth from inflation in the 1990s and the failure of pure monetary policy to stimulate the American economy in the 2001-2003 period. Alan Greenspan, former chairman of the Federal Reserve, has argued that the 1990s decoupling was explained by a virtuous cycle of productivity and investment on one hand, and a certain degree of “irrational exuberance” in the investment sector.

    Economist Robert Solow of MIT has suggested that the 2001-2003 failure of the expected economic recovery should be attributed not to monetary policy failure but to the breakdown in productivity growth in crucial sectors of the economy, most particularly retail trade. He noted that five sectors produced all of the productivity gains of the 1990s, and that while the growth of retail and wholesale trade produced the smallest growth, they were by far the largest sectors of the economy experiencing net increase of productivity.

    In all, inflation occurs when most prices are rising by some degree across a country's entire economy. This is caused by four possible factors, each of which is related to basic economic principles of changes in supply and demand:

    1) Increase in the money supply;
    2) Decrease in the demand for money;
    3) Decrease in the aggregate supply of goods and services; or
    4) Increase in the aggregate demand for goods and services.

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  21. I should have perhaps provided some brief notes on the four possible causes of inflation thus:

    1) Increase in the Money Supply: Through "expansionary monetary policies" by reducing interest rates to increase the supply of money, and/or "expansionary fiscal policies" by reducing taxes in order to allow individuals and institutions to keep more of their incomes for investment, savings and consumption.

    2) Decrease in the Demand for Money: Through "contractionary monetary policies."

    3) Decrease in the Aggregate Supply of Goods and Services: Caused by high costs of production due to costly inputs and/or inefficient suppliers, slack capacity utilization, and/or inadequate numbers of suppliers.

    4) Increase in the Aggregate Demand for Goods and Services: Caused by lavish government expenditure, high wages and salaries, very low taxes, and/or low interest rates.

    By the way, I have not stated anywhere in my contributions that "more inflation was desirable." Here is what I have stated in this regard: "We should expect to attain a relatively high annual rate of inflation of around 20% owing to contemplated reductions in taxes and interest rates intended to stimulate both the supply of goods and services and the demand for goods and services in order to bolster job creation and economic growth. We need to reverse the current emphasis on stabilising inflation at the expense of job creation and economic growth. By the way, the attainment of single-digit inflation is a target that is appropriate for countries that have already achieved a high level of job creation and socio-economic development. Zambia is clearly not one of such countries!"

    With respect to Cho's questions about mining taxes, etc., I would adopt the tax regime that came into effect on April 1, 2008, which provided for an increase in mineral royalty from 0.6% to 3%, corporate tax from 25% to 30%, a new 15% variable profit tax on taxable income above 8%, and a minimum 25% windfall profit tax.

    I would, however, have preferred the previous 31.7% mining taxes by reducing corporate tax, variable profit tax and windfall profit tax. This, I believe, would leave adequate resources to mining companies for social investments in their host communities.

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  22. Mr Kyambalesa,

    Thank you for presenting your Agenda in this forum, which is so conducive to idea sharing and thoughtful feedback. I realize that we are bouncing you around the document fairly haphazardly, my apologies, the downside of actually having a detailed and defensible list of national priorities I suppose.

    That said, I would like to inquire a bit on priority #9 (Affordable Water and Electricity), as to whether you would contemplate taking direct steps to foster investment in rural, sustainable, and sustainable rural electrification over and above the general economic stimulus you anticipate from tax cuts and (central bank?) interest rate cuts. For example the German strategy of providing a price support guarantee for all solar power sold to public grids (ie if the market price per kWh dropped below a certain point, the government would make up the difference,) appears to have been wildly successful compared to countries where the risk of market price fluctuation discourages investors from taking on the relatively slow returns of solar installations.

    Solar power is particularly well suited to rapid deployment of limited or application specific electricity to isolated rural and agricultural communities. For example, in areas off the electric grid and unlikely to be connected soon, incentives to invest in solar irrigation pumps could significantly increase farm outputs even as larger electrification efforts proceed.

    I would like to similarly suggest attention to water utility programs in South Africa which seem to be having good success using a three tiered pressure and pricing scheme for widespread provision of water at an overhead and operating cost appropriate to differences in household incomes and needs. The program provides for full pressure piping only to those homes or businesses which require it, low pressure filling rooftop water tanks for those with more limited needs, and very low pressure drip systems for those with little or no means to pay for service provision or pipe installation.

    I realize that your proposal for conferences and consultations with public and private players in the utility sector would invite such ideas, however I am somewhat concerned that those which emphasize rapid deployment of partial service might be ruled out by your position as stated in priority #10(2b). While I understand that subsection 2 of priority #10 addresses the specific problem of forced relocation of squatter communities before proper resettlement sites have been prepared, what if any effect would such a policy have on public support for voluntary resettlement programs to areas with partial utilities, or those designed to provide limited utility service to squatter communities already in place?

    Likewise some highly effective rural programs such as PlayPump, which attempts to combine school attendance incentives with manual pumping of water otherwise carried by hand, may fall short of long term development goals while providing vital intermediate and stop-gap measures in the meantime. I would like to assume that your far-reaching goals and vision of a prosperous and sustainably developed nation, as described by this ambitious Agenda, will incorporate sufficient flexibility so as to accommodate local peculiarity of circumstance and limited successes rather than making perfection the enemy of good; however my experience with politics in general behooves me to try and coax an unambiguous statement out of you on the subject (nothing at all personal).

    Thank you for your time and attention.

    ReplyDelete
  23. I would like to add two ideas that could be relevant to development.

    1) Cooperatives

    If money can be made available from the mines, the old cooperatives seem to be an obvious place to pick up from. KK wrote this article about the issue here...


    2) Provinces

    Has anyone ever given thought to the idea that provinces could coincide with old kingdoms/tribes? What if they united people and areas across existing state borders?

    If you look at Europe, many provinces and German bundesstaten are based around old ethnic/tribal/baronies. It could make language issues in education easier. It could also help with social cohesion, and restore a role for traditional leadership.

    Just a few thoughts.

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  24. Yakima,

    Thank you for your observations.

    Let me provide more information about our contemplated programs relating to the supply of water and electricity, and the relocation of squatter compounds.

    I will, thereafter, attempt to answer any questions you will have on these issues upon reading the additional information.

    THE SUPPLY OF ELECTRICITY

    In spite of our profound commitment to economic liberalization, and in the best interest of the Zambian people, Zambia Electricity Supply Corporation (ZESCO) should be regarded as a sacred cow and should, therefore, be a commercial entity whose operations needs to be closely monitored by the government. The current "commercialization" rather than "privatization" of the Company should be deemed necessary since privatization of an enterprise makes economic sense only when the nature of activities in which it is involved provide for entry of as many competitors as the size of its market can allow. In general, the supply of electricity, like the supply of water, is among obvious cases that call for direct government involvement due to the following factors:

    Natural Monopoly:
    ZESCO is a natural monopoly; it operates in an industry where it makes economic sense for the existence of only one supplier. Privatization of the company so that its operations can be dictated by the market forces of supply and demand when there can never be alternative suppliers of electricity to provide choices to households and commercial and industrial consumers will give the company absolute power to wreck the Zambian economy through exorbitant and exploitative electricity tariffs.

    Cost Considerations:
    There are a lot of vital projects which are in the national interest but which a private enterprise can either be unwilling or unable to undertake for economic reasons — such as the expansion of Zambia's electricity grid nationwide for purposes of rural electrification and improved agricultural output. A government which has a genuine desire to implement such vital projects would, therefore, do well not to privatize ZESCO because the cost of implementing the projects through a privately owned electricity company is likely to dry up the public treasury.

    Security Considerations:
    We need to be mindful of the enormous potential risks associated with becoming totally dependent on a private electricity supplier to light up the nation's homes and power its commercial and industrial undertakings. Our country’s enemies — terrorists included — can bring the entire nation to a standstill by a single flip of a switch!

    Strategic Considerations:
    Unreasonably high and unstable electricity tariffs which are likely to culminate from the privatization of a monopoly, among other inclement factors, can very easily fan away skilled personnel and locally based investors to other countries where utility and other costs are relatively lower and more stable.

    Strict and direct governmental control over the supply of electricity would, therefore, enable us to charge relatively more affordable and stable electricity tariffs nationwide. In fact, low and stable utility costs, among other factors, should enable the national government and provincial governments to lure investors from countries which have relatively high and unstable utility costs, while retaining business operators currently doing business in Zambia. Besides, the rampant depletion of woodlands occasioned mainly by charcoal burning and fire-wood collection can be reduced greatly through affordable electricity tariffs.

    Source of Revenue:
    State ownership of ZESCO is among the many viable ways in which we should be assured of governmental sources of revenue that do not over-burden tax payers. Such alternative sources of revenue should also enable us to minimize or avoid borrowing needed funds from external sources.

    Other Energy Sources. — We should, however, provide attractive incentives to the private sector to engage in the exploration and/or supply of other forms of renewable and environmentally friendly sources of energy — including natural gas, solar energy, wind-generated electricity, ethanol, methanol, and propane.

    Energy Research. — We should also invest massively in research relating to low-cost and environmentally friendly sources of energy, and in energy conservation. To be considered in this endeavor will be research projects concerning the use of natural gas, electric power, ethanol, methanol, and propane as alternatives to gasoline in order to reduce air pollution, and to lessen Zambia’s dependence on costly imported oil.

    Oil Refining and Marketing. — We should seriously consider the findings of a study commissioned by the Chiluba administration (completed in December 1999) in order to streamline the importation, refining and nationwide distribution of petroleum products. We want to determine how the infrastructure and institutional framework of the oil industry — consisting of the TAZAMA pipeline, Zambia National Oil Company (ZNOC), Indeni Petroleum Refinery, and private oil distributors like Agip, BP, Caltex, Engen, Exxon Mobil, Jovenna, Pegausus, and Total — can efficiently and effectively serve Zambia’s long-term oil needs.

    The management of strategic oil reserves should also be carefully studied and enhanced. Ultimately, we would want consumers of petroleum products — including gas oil (diesel), premium gasoline (petrol), jet fuel, liquefied petroleum gas, industrial and domestic kerosene, light and heavy fuel gas, bitumen, and related products — to be afforded the least possible prices.

    Finally, we would also seriously consider the prospect of splitting ZESCO into (a) Generation, (b) Transmission, and (c) Distribution functions if such a measure would result in greater efficiency and effectiveness in the supply of electrical power nationwide.

    WATER AND SEWERAGE MANAGEMENT

    The WSMU should assume the functions of the National Water Supply and Sanitation Council (NWASCO), which was established through the Water Supply and Sanitation Act No. 28 of 1997. In the performance of its functions, the Unit should take into consideration all other pieces of legislation which have a direct or indirect bearing on sanitation and the supply of water; that is: the Water Act (Chapter 198), the Environmental Protection and Pollution Control Act (Chapter 204), the Public Health Act (Chapter 295), the Local Government Act (Chapter 281), the Zambezi River Authority Act (Chapter 467) — a Zambia-Zimbabwe inter-state Act, the Mines and Minerals Act (Chapter 213), and the Forests Act No. 7 of 1999.

    Operators' Licences:
    All water supply and sanitation service providers (except those that supply water and sanitation services for their own use) should obtain operators' licences as required by law — including the 10 commercial utilities, the 22 local authorities, and the 6 private providers that are currently operating in the country.

    Municipal Water Works:
    We should favor a trend toward greater participation by municipal authorities in the supply of water and the provision of sanitation services. The provision of water and sanitation services to clusters of employees by private providers — that is, employer-organizations — should also be encouraged through tax incentives. Here is why: it will not be possible for our beloved country to achieve the Millennium Development Goal of reducing by half the proportion of citizens who do not currently have sustainable access to safe drinking water by 2015 through profit-seeking water suppliers and sewerage companies.

    DEMOLITIONS OF ILLEGAL STRUCTURES

    The demolition of houses and small business entities alleged to have been built in illegal settlements, or on plots of land that were dubiously acquired, should be planned and conducted with due consideration of the welfare of families involved. There are just too many citizens who would be consigned to destitution and homelessness by such exercises.

    The fate of school-going children and sickly residents who are likely to be adversely affected by the demolition of their homes, for instance, should be factored into the demolition exercises.

    With good planning, it could be more reasonable to carryout the demolition exercises during the dry season and when schools are in recess. Adequate advance notice to families involved could also be made in order to make the exercises less traumatic to the families. There are certainly humane ways in which the implementation of the law or municipal ordinances can be fitted with a human face!

    We need to find ways and means of humanely dealing with the issue of illegal settlements, houses and/or business entities. Besides, we should seriously consider the prospect of providing adequately for government-funded housing schemes nationwide. We have a few suggestions for addressing the housing needs of unemployed and low-income citizens nationwide:

    The National Housing Authority:
    The National Assembly needs to consider converting the National Housing Authority (NHA) into an autonomous, self-sustaining and revenue-generating entity, which should incorporate all existing national public housing projects and programs. Its mandate should include:

    (a) Provision of low-cost housing units for low-income families nationwide;

    (b) Stipulation of fair eligibility requirements to be met by applicants for low-income public housing;

    (c) Generation of rules of occupancy, and determination of rental and other related charges; and

    (d) Management of a home-ownership scheme for low-income families to be financed through low interest mortgages.

    Each and every adult resident of a public housing unit would need to contribute at least sixteen (16) hours per month of community service within the local community in which he/she resides. Exemptions to this "community service requirement" could be considered for residents who would meet the following conditions:

    (a) 55 years of age or older;

    (b) Physically or mentally disabled;

    (c) Primary caretaker of a disabled person, or a child who is under seven (7) years of age;

    (d) Attending school, a program of study, or training; or

    (e) Employed on a temporary, part-time, or full-time basis.

    The NHA would also need to devise a grievance procedure and guidelines for resolving any and all the issues and matters relating to non-compliance with this requirement. The grievance procedure and guidelines to be devised would need to be consistent with the principles of due process and non-discrimination, and would have to ensure that political or any other form of affiliation would not become a factor in dealing with housing issues.

    Moratorium on Demolitions:
    Meanwhile, the National Assembly should act proactively by urgently placing a moratorium on demolitions of illegal structures and forced relocation of squatter compounds nationwide until the following conditions, among other considerations, are met:

    (a) Adequate low-cost public housing units are provided by the NHA as suggested above; and/or

    (b) Site and service areas designated by local authorities for re-settlement are furnished with running water, electricity, health care facilities, police protection, public transportation routes and portals, and other essential public services and facilities.

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  25. Professor. A bit late but I wish to comment on the following item:-

    Priority 3: Decentralisation of Power

    We should decentralise economic and decision-making power to provinces by ensuring that dis-tricts and provinces are administered by elected district mayors, provincial governors, provincial police commanding officers, and provincial prisons commanding officers. We need to make it possible for citizens nationwide to assume and exercise greater authority over the socio-economic affairs of their communities.

    There is a need for citizens to elect leaders in their respective districts and provinces rather than have leaders like District Commissioners, Provincial Ministers and Provincial Permanent Secretaries imposed on them by the central government!

    Besides, such decentralisation of power would make it possible for districts and provinces to function as nurseries for national leaders.

    My comment

    In my view enough assessment of the ills of the current system of local governement and failure to decentralise has been done in many studies.

    I wish to contribute a personal experiential view of things regarding the operations of local authorities in Zambia. Councils in Zambia have peformed dismmally in my opinion due to poor policy design by Government. It is improtant for policy reforms to be undertaken urgently on the local government sector.

    One of the presidential candidates is proposing increased CDF disbursements, to K 1bn per constituency. Given the poor accountability of councils today, and unresolved audit queries relating to misuse of CDF funds, poor governance, and ill qualified personnel, unpaid staff (salary arrears up to 20 months in some councils), tribalism, corruption - you name it; the way forward is sector reforms taking into account a) review of policy and principles of local governance, assessment of institutional alignment to sustainability and service delivery, sector regulation, citizenship participation, and increased development polarization as opposed to political expediency. Indeed why not go the whole hog to federalism, and set up Provincial cabinets, and review electoral system for mayors.

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  26. Let me respond to comments about my views on agreements and inflation. MrK asks, Didn't Anglo-American abrogate their agreements when they left Zambia? Even if they did, two wrongs don't make a right. Nor can the breach of an agreement by one company justify the offended party breaking its agreements with other unrelated companies.

    In reply to Kyambalesa, I do not find Wikipedia pesuasive on money supply and inflation. Friedman challenged his critics to cite an instance where high inflation was not caused by a big increase in money supply. I don't think anyone has risen to that challenge. How about an example? Zimbabwe perhaps?

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  27. Murray,

    Let me respond to comments about my views on agreements and inflation. MrK asks, Didn't Anglo-American abrogate their agreements when they left Zambia? Even if they did, two wrongs don't make a right.

    That's sidestepping. If you believe in the sanctity of agreements, it can only apply to both sides, not just the government side.

    And does anyone ever get called on that first wrong? You seem overly protective of corporations, who frankly can stand up for themselves, as we have seen again and again.

    So you are basically saying that Western corporations should not run any risk, only the African people should. Because they are the ones who are paying for this neoliberal experiment in corporate rule - just as the American people are paying for theirs. They are paying through the absence of wealth accumulation, infrastructure creation, the elimination of government services, the elimination of protection for labour, environmental pollution... All so they can get a low paying job in the mines, or some PRC Chinese company.

    And another thing. This supremacy of the foreign corporations leads to a situation where people are scared that the corporations might leave. That is unacceptable, especially where it undermines the actual expressed will of the people, democracy itself.

    Home grown companies do not pack up and leave, or threaten to do so. And that is why local businesses must be brought up so they can become the main actors in the economy.

    Nor can the breach of an agreement by one company justify the offended party breaking its agreements with other unrelated companies.

    Actually it can. Check out this list of governments backing out of debts incurred by previous governments.

    http://www.jubileeiraq.org/odiousdebt.htm

    Quote: 19?? - Boer War in South Africa

    The Boer Republic borrowed money in order to try to repel the British in South Africa. After the end of the Boer War, the Supreme Court of the Transvaal declared that the debts had devolved upon Britain as the new sovereign. However Britain refused all legal responsibility, denying that the Boer Republic could validly issue debt.


    Why would that principle not apply to any new government. Especially when the previous debts were incurred under dubious circumstances, with no transparancy or accountability at the time.

    At least that would put the onus on the government to be absolutely open and public whenever they take on loans, unlike the previous situation where secrecy was the norm.

    Another quote, and an example of colonialism applied to Europe itself:

    1919 - Treaty of Versailles repudiates Polish Debts

    The German government (and its Prussian predecessor) operated a fund to enable ethnic Germans to buy estates in Poland in order to colonize the country. Since few Poles were prepared to sell, the government enacted a compulsory purchase law in 1908 and issue bonds to finance the purchases. At Versailles, the Reparation Commission refused to charge these bonds to the newly liberated state of Poland as a just reversal of “…one of the greatest wrongs of which history has record.”


    Hitler of course had similar plans for the Poles. Interesting that these intentions already existed under Wilhelm II.

    I don't think anyone has risen to that challenge.

    Don't crop failures regularly increase food price inflation? That would have nothing to do with increasing the money supply. Of course, the money supply can be increased in reaction to that - like happened in Zimbabwe. So it are really the causes of the increase in money supply that are interesting.

    How about an example? Zimbabwe perhaps?

    That didn't last long. The only thing Zimbabwe is an example of, is that, contrary to what Margaret Thatcher sanctimoniously claimed, sanctions do work.

    In early 2002, the government of Zimbabwe had it's access to foreign currency eliminated overnight, because of a sanctions bill introduced by the Bush administration, called the Zimbabwe Democracy and Economic Recovery Act of 2001:

    (c) MULTILATERAL FINANCING RESTRICTION- Until the President makes the certification described in subsection (d), and except as may be required to meet basic human needs or for good governance, the Secretary of the Treasury shall instruct the United States executive director to each international financial institution to oppose and vote against--

    (1) any extension by the respective institution of any loan, credit, or guarantee to the Government of Zimbabwe; or

    (2) any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution.


    Now that did two things. On the one hand it prevented the government of Zimbabwe from taking out new loans or credit. At the same time unlike in Zambia, it kept all the old debt on the books, complete with the obligation to service those loans.

    The government of Zimbabwe came under these broad ranging financial sanctions in early 2002, and high inflation turned into hyperinflation in late 2003.

    That is what Zimbabwe is an example of.

    And that is why African countries and economies can never again be dependent on the west.

    ReplyDelete
  28. In addition to MrK's example of a crop failure leading to food inflation, here is an article on "Inflation and Oil Prices" excerpted from:

    http://tutor2u.net/economics/content/topics/inflation/oli_prices.htm/

    Introduction

    How strong is the relationship between changes in crude oil prices and inflation? In theory the causal relationship is fairly clear. An increase in oil prices such as that seen in the second half of 2000 causes an inward shift in short run aggregate supply and puts upward pressure on the price level – in other words a sharp jump in the price of crude oil causes an exogenous inflationary shock and the impact will be greatest when a country is (a) a large-scale importer of oil and (b) has many industries that use oil as an essential input in the production process.

    Research suggests that a $3-4 rise in oil prices can be expected to add directly about 0.1% to UK consumer price inflation after about two years. This is not in itself a major contributor to higher prices.

    Of greater impact are the knock-on effects of increased costs through the supply-chain. The second-round effects on inflation are more complicated, as businesses pass through higher costs. Analysis from economists at the Bank of England has estimated that a $1 rise in oil adds a further 0.1% to inflation after two years (including the petrol effect). A doubling in oil prices would have many other inflationary effects: increasing the cost of heating oil and aviation fuel, plastics, chemicals, as well as raising the material costs of all firms (which would likely be passed onto consumers).

    But other factors might help to limit the inflationary impact of this exogenous shock. Consider the impact of higher oil prices on aggregate demand. Firstly, an increase in inflation acts to reduce the growth of real incomes putting downward pressure on consumer demand (the main component of AD). Higher inputs costs will also squeeze company profit margins which together with a slower growth of demand will lead to cutbacks in planned investment spending.

    The monetary policy authorities might respond to rising oil prices by increasing short-term interest rates which acts to dampen down spending. A rise in interest rates is by no means automatic, because the Bank of England for example takes a full range of inflation indicators into account when setting interest rates. But if policy is tightened, we would expect to see slower economic growth, a possible rise in unemployment and a diminution in the ability of workers to ask for pay increases that keep pace with inflation.

    Deflationary policies designed to control cost-push inflation will have the effect of reducing real national output below potential (creating a negative output gap). Indeed if a slowdown becomes a recession, then the demand for oil will decline putting downward pressure on international oil prices.

    Key Evaluation Points

    The evidence for the UK is that fluctuations in crude oil prices are no longer as important in influencing the rate of inflation as they were ten or twenty years previously. Our oil-energy dependency ratio has declined and the flexibility of our labor and product markets has increased which has the effect that pay is more flexible in response to changes in inflationary pressure (wages no longer automatically rise when inflation surges) and many businesses have witnessed a decline in their ability to immediately pass on increases in input costs when there are short term changes in raw material prices.

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  29. this is the retrogressive piece of writing i have ever read. nothing suggested here is sustainable and all these are tried and failed ideas. what a mess.no wonder our electricity and water supply are of poor quality. there is nothing free on earth someone had got to pay the bill. such policies encourage laziness and discourage innovation and hard work.

    ReplyDelete

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