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Wednesday, 15 October 2008

Ease of doing business in Zambia (2009)

A previous blog flagged this up, well now a full report on Zambia has been prepared. If you don't like the scribd version, you can access other versions here.


  1. I would urge anyone to get a copy of Roger Tangri's "The Politics Of Patronage In Africa".


    Furthermore, unlike governments in East Asia which did so much to nurture and support private sector enterprises in diverse ways (credit, subsidies, information), African regimes have done little to provide various forms of assistance - institutional, technical, infrastructure, microeconomic - which are vital for the fostering the conditions for rigorous private enterprise.

    In Uganda, indigenous business has pressed the government in vain to permit payments by installments so that public enterprise assets could be by Ugandans rather than foreigners.

    In fact, compared to the rhetoric, very little has been done officially in many areas of entrepreneurial promotion including providing fiscal investment incentives, concessional credits, preferred access to government contracts, attractive tax conditions, export subsidies, and so on.

    In Tanzania, businessmen argue that "there are no programs to support" the private sector.

    Rather than providing credit, private banks are speculating in Treasury Bills instead of assisting economic actors.

    Sound familiar? If the government had addressed this issue, before they tried to lower inflation to single digits (the IMF's 'Sound Money' theory), we would not be wondering why interest rates had not followed inflation into single digits.

    We can try and analyze what the problems in Zambia are, but as they are so similar to problems throughout the continent, we should avoid keeping to reinvent the wheel and look at what problems have been come up with in other locations.

    The real question is: why are African governments so hostile to indigenous business?

  2. MrK,

    Tough question!

    I don't think they are "consciously hostile"....what I think is that they are "relatively hostile"... such as they simply care more about foreign opposed to not caring about domestic firms..

    And the reason for that is simple : "they are are captured"..

    See a new blog on a similar topic -
    Lobbying Vs Corruption

  3. Maybe it is the same, but even in Zambia you can see there is a lot of clientelism going on.

    As such, parliamentary democracy could be seen as impeding the development of an independent indigenous class of business owners.

    At least, progress would depend on keeping politicians out of business.

    To give one very recent example, from today's The Post, Teta threatens Easterners:

    Meanwhile, Vice-President Banda directed that all defence force personnel and civil servants who are farmers should access the subsidised fertiliser, which is now costing K50,000.

    Why would only government employees get subsidized fertilizer, not all farmers?

    To me, it seems like central government politicians use the suppression of an independent middle class to maintain what little power they have. Maybe even to prevent political competition.

  4. MrK,

    ”As such, parliamentary democracy could be seen as impeding the development of an independent indigenous class of business owners. At least, progress would depend on keeping politicians out of business. “

    I fully agree. Though my overaching concern is the imbalance of clientelism between domestic and foreign firms. In short I don’t think we can fully eliminate clientelism, but atleast we should have laws in place that levels the playing field. I remain worried that the media has taken the eye off the ball with this one. The obsession with corruption is understandable, but when you have large corporations that are able to bully governments on tax and rumoured to fund campaigns of parties, lobbying clearly is the reason.

    ”To me, it seems like central government politicians use the suppression of an independent middle class to maintain what little power they have. Maybe even to prevent political competition.”

    Indeed! I mentioned this in a previous blog called “In rich Zambians palm”. Political competition has much to do with access to resources. If you are poor, most likely you wont have a voice unless the rules of the game change so substantially that it becomes very cheap to compete…or the poor finds ingenious ways to change the status quo.

  5. Very interesting questions amid necessarily bleak observations. I'd like to haul in a quote from Cho's series on Chiefs,

    [i]The current constitution, amended in 1996, specifically defines the institution of chief as “a corporation sole with perpetual succession and with capacity to sue and be sued and to hold assets or properties in trust for itself and the peoples concerned”[/i]

    I think this may give Zambia a comparative advantage in formation of relatively strong domestic industries, albeit unexploited, relative to the continental mean. The Chief is already a corporation, already has assets (and liabilities no doubt) with clear title.

    Last year we referenced the Warm Springs Reservation in the US as a practical localized model for leveraging raw material exports into processed material exports into finished product exports and tourism. They have finally turned a raw colonial deal into a vibrant future, primarily by concentrating less on political power and independence and more on capitalizing economically on what concessions they already had (in their case timber and to a lesser degree fish).

    A tribal corporation has advantages, since it can build off existing social structures to decrease antagonism between labor and management, and make use of what local autonomy or influence it has to streamline many of the cumbersome procedures and costs described in the WB report. As long as new enterprises are designed in part to provide a market for existing local production, there is likely to be a coordination of pricing, supply and demand for key inputs.

    So if you have honey, start making cosmetics, packaged sweets, candles and liquors. If you have fish, can them, make fish oil dietary supplement capsules, flash freeze prize catches or specialty species for the restaurant market, reprocess wastes into fertilizers.

    Consistent local demand for basic raw material can open avenues to diversify into related products, ie commercial honey production dovetails nicely with flowers, orchards or vineyards. Although the pilot projects in Zambia seem to have had limited success due to lack of expertise, Asians have had long success pairing fish and plant species to the benefit of both, the most common being rice and tilapia, and modern technological aquaculture has yet to really scratch the surface of what symbiosis makes possible.

    We have often discussed the problems of forming domestic corporations with access to capital and land with which to develop rural areas, as well as those surrounding the role of Chiefs in attracting investment to meet the development needs of their people and securing an independent, appropriate and meaningful voice in national political discourse. I am beginning to wonder if I was missing the forest for all the trees in the way, if Chiefs can secure local development by enhanced use of their status as corporations and the assets held in trust for the Tribes, then they will attract the attention and respect of the national audience almost as a matter of course.

    A long time ago the US government tried to break up the economic cohesion of tribes by dividing all reservation lands into individual farm parcels for each head of household. In Warm Springs they thought that was insane, since the ground is frozen solid half the year, and the fish are in the valley while the forest is on the mountain slopes. You need them all to live well up there, so they agreed and then proceeded to ignore most of the boundaries while conducting their own affairs. The little farms are still there, but all the new development is far from them, and no family relies solely on them for their welfare.

    If they can overcome that as a tiny minority with limited resources and autonomy in the face of a gigantic and often racist bureaucracy, Zambia can overcome her own cumbersome land tenure process. If land leased outside the Tribe ceases to be considered as under customary law, then perhaps it is possible to formally lease it to the tribal corporation instead, and sublet to outsiders without surrendering ownership. Finding ways to rent land without losing it seems key to securing reliable revenue streams for most tribal corporations to use for further development.

  6. Yakima,

    Thanks for the inadvertent reminder that I have some unfinished business on chiefs! I hope to resume the series after the current election fever, which has helped bring some of the issues to the forefront.

    I think there are several issues to the "tribal corporation" model.

    The first is the basic question of why chiefs who clearly have so many advantages have not taken these corporations forward. Is it because there's no perceived advantages or simply poor access to funding or lack of technical know how or may be some other unexplained factor ?

    As you explain, certainly land and other resources is not a constraint. Chiefs also should be able to borrow since they have access to land and their "legal position" should serve them better to influence other players. So at the moment I remain baffled, on their lack of entreprenueral zeal.

    Perhaps its history. I mean as I noted in the blog Traditional Authorities - Part 1 : Chiefs in colonial Zambia , during colonial times chiefs worked well within their constraints and were local engines of growth. Certainly many of the local stores that emerged where led by them. They used the "native treasuries" to their advantage were able to invest into these activities. After independence, with the One Party state reforms, I think that entreprenueral spirit was restricted, and perhaps the chiefs are only again beginning to realise the opportunities that exist.

    I say beginning, because we have seen some signs of this happening. A friend of mine recently explained to me how a chief in Northern Province has worked to develop a "tribal corporation". They have set up an "company" run by Chief and has his sub-headmen as partners. Their main goal is to encourage self reliance through agriculture, and tourism. The ground is good in the area, so the chief has been soliciting for funds through the company from donors, locals and people in the diaspora, as well foreign investors. At the moment, on the agric side, they have establish smaller subsidiaries or enterprises where subjects are able to source for seed and fertilizer. Their produce is first supplied to the locals and the excess is exported. They have also collaborated with a few NGos. The Germans and the Swedes are funding a few of their projects. On the tourism side, there is much work required but the plan is to exploit the vast natural scenic locations the area offers from bush, to hot springs to water falls. The intention is to structure the deal in such away that the locals have control but through the enterprise. This has all been the vision of one chief in Northern Province!

    There has also been one or two recent developments where chiefs have entered into partnerships with foreigners with regards prospecting for minerals.

    All of this suggests to me to that the problem appears two fold - the lack of a coherent framework from government that is understood by chiefs, and even one government can encourage them to take up. The other being that "foreign influence" is likely to increase, leaving many chiefs vulnerable, unless government takes the lead in regulating these interactions, and encouraging them in a positive direction.

    As you note, and as I have previously agreed, there's a need for government to help with "market discovery" where chiefs are already taking the lead in developing these corporations.

    Coming back to the constraints, I think it was quite instructive reading the views of Chief Chibesakunda on the subject - Insights from Chiefs (Chief Chibesakunda). His views appear to be that chiefs are ready to engage and become engines for development, but they need government to do their bit in terms of infrastructural investment.

    What is clear I think is that there's no coherent rural development strategy that can emerge without dealing with how chiefs can be useful agents for change. Crucially, that model needs to first identify why chiefs are not doing this at a massive scale, and what government can do to help to quicken the pace.

  7. Cho,

    A friend of mine recently explained to me how a chief in Northern Province has worked to develop a "tribal corporation".

    That is really excellent. If there was a way to have more financial transparancy, these corporations could attract money by being floated on the stock exchange. This is something the government could help with.

    perhaps the chiefs are only again beginning to realise the opportunities that exist.

    I think that point is highlighted in this article. Businesses and entrepreneurs need support systems, infrastructure and more. I'm sure chiefs are no different.

    Chief Sinazongwe demands royalties from investors
    By Tovin Ngombe in Sinazongwe
    Tuesday March 27, 2007 [02:00]

    Chief Sinazongwe of the Tonga people has said investors exploiting natural resources in his chiefdom will have to start paying royalties to ease the high poverty levels in the district. At the launch of the Maliko Community Development Trust at his palace, chief Sinazongwe said he could not continue begging from investors.

    "I have been a stupid chief without having a traditional constitution. From now, no investor will get free land and they will be paying royalties either monthly or yearly. All business of any kind will have to pay royalties," he said. He said he was not proud to be chief with the poor infrastructure in the district which had not been developed for the past 48 years. Chief Sinazongwe said his chiefdom had no hospital, high school, good roads, and no good government infrastructure or electricity in the villages. He said the only infrastructure the district had was the Boma office and the Fisheries Training Centre.

    There is a lot of development that is possible here, and a lot of money that is to be made.

  8. For worldwide tribal corporations, see the following links:


    CEDCO - The Cocquille Economic Development Corporation
    They run a casino, a cranberries potting company, a tourism business and a telecommunications company.

    About themselves: "CEDCO acts as the parent corporation for all Coquille Tribal businesses, which range from hospitality and gaming to health care, agriculture and telecommunications. Additionally, we act as a business incubator for developing Tribal businesses, and we actively seek ventures offering a good strategic fit with our business priorities and further diversification of our business base."

    What they mention as their advantages:

    " Tribal status also confers other advantages that can enhance business development efforts:

    Regulatory flexibility - On trust land, tribes have autonomy to make decisions outside of State, County, and City government rules.

    Property tax exemption - On trust land, tribes are not subject to property taxes unless agreed upon with service providers.

    Indian Preference - In certain government contracts, tribes have Small Business Administration set-asides.

    No Permitting cost - On trust land, most development activities are exempt from State Permitting Requirements.

    Employment tax credits - Non-tribal businesses may receive tax credits for hiring tribal members


    Industrial Development Corporation of South Africa ltd

    They say about themselves: Welcome to the IDC website. IDC is a self-financing, state-owned national development finance institution that provides financing to entrepreneurs and businesses engaged in competitive industries. Its primary objectives are to contribute to the generation of balanced, sustainable economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. It achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles

    From India, and financing micro-finance lending:

    Tribal corporation plans to tie up with Kudumbasree

    THIRUVANANTHAPURAM: The National Scheduled Tribes Finance and Development Corporation has decided to tie up with the Kudumbasree Mission to support its micro-finance ventures.

    Corporation chairperson and managing director S. Bhavani told reporters after a review meeting here on Friday that the corporation would give loans up to Rs.3 lakh for self-help groups at 6 per cent interest for micro-finance ventures. The corporation had allocated Rs.4.71 crore for the State of which Rs.3 crore has been absorbed by the 700-odd beneficiaries. A sum of Rs.50 lakh has been sanctioned for 2008-09 for the State.


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