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Friday, 21 November 2008

A resurgency of chiefdom led capitalism?

Regular readers of Zambia Economist will not have missed what appears to a growing movement of local chiefs to secure a share for their subjects (or perhaps just for themselves). Senior Chief Kalilele is the latest to join the ranks (in contrast to Chief Sinazongwe's method):

Senior Chief Kalilele of the Lamba people of Solwezi has appealed to the Government to grant him a licence for small-scale mining in his chiefdom. The traditional leader, who has formed a mining company, Fyesu Minerals Limited, said in an interview at his palace that he planned to start mining copper.

“There are copper deposits all over my chiefdom, but people are not mining it because of the difficulties faced in the acquisition of small-scale mining licences,” the chief said.

Chief Kalilele was hopeful that he would be granted a licence two years after Chief Chizela, of the Kaonde in Mufumbwe, became the first traditional leader to get a full-scale mining licence. The chief, who also wants a timber licence, said he needed to earn extra income as money received from the Government was not enough to support his family and subjects.

Chief Kalilele is certainly not alone. 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 a "company" run by the 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 agriculture 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. 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 . 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, and with no government help! There has also been one or two recent developments where Chiefs have entered into partnerships with foreigners with regards prospecting for minerals e.g. Chief Chizela's deal:

"As part of the consideration for the transaction, Mayfair Mining & Minerals, Inc. will pay US$50,000 to Chief Chizela IX within 14 days of the date of signing the agreement. Upon completion of all preliminary due diligence and preliminary geological survey work by Mayfair, estimated to take three months from the date of the agreement, and if Mayfair then decides to proceed with the projects, the Company will loan the Chief an interest-free sum of US$500,000, which will be repaid only from any future dividends paid as part of his 40% shareholding in Mayfair Kalengwa Limited."

All of this has led to interesting questions in my mind on why chiefs who clearly have so many advantages in developing their own mining companies and other business have all of sudden just started moving towards that direction. Related to this is the question of what is preventing others. 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 I have explained in the past (and other contributors have highlighted) 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.

The obvious, and most natural, explanation is history! As I note 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 were led by them. They used the "native treasuries" to their advantage, investing in a lot of profitable activities whose revenues partly funded the independence struggle. After independence, with the One Party state reforms, that entrepreneurial spirit was restricted (the land reforms did not help), and perhaps Chiefs are only again beginning to realise the opportunities that exist within their chiefdoms!

Of course there's the question of whether this resurgency of Chiefdom led capitalism is a good thing. I'll side step that for now, as that will require a blog on its own (a side effect could be the impact on land reform, and the delicate issue of traditional boundaries). For now it suffices to say that those who wish to see the current resurgency not simply fade away face two challenges.
First, the lack of a coherent framework from government that is understood by chiefs, and even one government can encourage them to take up. Secondly, increasing "foreign influence" , as Zambia become more and more open, may leave many chiefs vulnerable, unless government takes the lead in regulating these interactions, and encouraging them in a positive direction.

Government can certainly do more, especially in the area of "market discovery" and reducing other transaction costs. 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. But all of this depends on whether government truly believes, as I do, that there's no coherent rural development strategy that can emerge without dealing with how chiefs can be useful agents for economic change. Crucially, that model needs to first identify how best to widen this resurgence in chiefdom led capitalism.

4 comments:

  1. Cho,

    I tend to agree with Chief Chibesakunda, in that lack of decent transport infrastructure is perhaps the single greatest impediment to rural development, with electrification a close second. This is a problem with an apparent solution, and from a Lusaka-based company even: Ramogatia Construction is reputedly available to supply Ecobond method of road construction utilizing 97% local materials (the remaining 3% is delivered in liquid form and is comparable in cost to milk), as well as local labour requiring minimal training and tools.

    This is also an excellent material for constructing small earthen dams and reservoirs with minimal permeability. This is exactly the kind of dramatic reduction in materials costs and emphasis on job creation (labour expenditures tend to cycle further through the local economy) which might enable an ambitious Chief to undertake such construction projects on Tribal lands independently of the central government. As with any such project, financing is likely to pose a major obstacle, however with so much less of the construction overhead "exported" as it were, it takes much less time for such a project to pay for itself in increased transport or irrigation efficiency.

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  2. Yakima,

    Excellent post as always. I have added the Ecobond link to my website, right next to the link to Grancrete sprayon structural cement. Under Green Alternatives.

    Together with solar energy as an energy source, anything that makes it possible to cheaply construct feeder roads (among many other things) will hugely benefit Africa.

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  3. Cho,
    You have probably heard of the Bafokeng in RSA whose royal family and the subjects run a foundation which controls most of the mining and other business interests in the area around Rustenburg. Infrastuructural and social development in that part of South Africa is amazing.

    ReplyDelete
  4. THE ROYAL BAFOKENG NATION

    They have several 50/50 joint ventures. Quote:

    Royal Bafokeng Holdings is responsible for the management and development of the commercial assets of the Royal Bafokeng Nation, with the overall business objective of maximising their returns to enable the RBN to deliver sustainable benefits to the community.

    Mining (79.6%)

    RBH has a significant portfolio in the resources sector with interests in platinum (Implats and Bafokeng Rasimone Mine) and ferrochrome (Merafe) as well as Coal Mining (SACMH).

    Industrial (0.3%)

    Industrial assets comprise a 26% share in Metuba, a joint venture with engineering firms Metix (37%) and TTC Technology (37%).

    Financial (0.7%)

    Financial assets make up the smallest asset class in the investment portfolio and include an investment in Zurich Insurance Company South Africa.

    Manufacturing (1.6%)

    The investments are in Astrapak, Metair Investments and Bafokeng Concor Technicrete, a joint venture with Concor Technicrete.

    Services (4.0%)

    The investments are in: Fraser Alexander, MB Technologies, Senwes, DHL Express, Pasco Risk, Zaptronix, Praxima, M-Tech Industrial and MOGS.

    Sport (0.1%)

    The investments are in Premier Soccer League club Platinum Stars FC and Platinum Leopards Currie Cup rugby franchise.

    Cash (13.7%)

    RBH manages a cash portfolio on behalf of RBN

    ReplyDelete

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