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Wednesday, 4 February 2009

Respond to the Budget 2009

The Minister of Finance, Hon Situmbeko Musokotwane would value your reaction to the latest Budget. Seriously...its not a joke!

Email : situmbeko.musokotwane@mofnp.gov.zm

Worth copying the Ministry of Finance Press Officer Mr Kandeta:

Email : ckandeta@yahoo.com

Perhaps someone can invite him to the blog to discuss the issues raised here, here and here?

2 comments:

  1. My e-mail sent to the Finance Minister (any responses will not be posted, at least not word for word, to maintain e-mail privacy):

    Dear Finance Minister Situmbeko Musokotwane,

    I hope you and your family are doing fine. Thank you for reading this e-mail.

    I would like to comment on the 2009 Budget, and it's relevance to the present global economic crises, otherwise known as The Second Great Depression. I think the budget is not doing anywhere near enough, does not address the country's economic problems in an incisive way, and is distracted by too many side issues, such as the development of tourist attractions, in a time when the western consumer has as good as disappeared and is not coming back for many years, maybe a decade. As such, the emphasis should be on securing the food supply and creating gainful alternative employment for the thousands who are being laid off.

    Agriculture

    The very first priority in this budget should be increasing food production and availability. I don't see anything which addresses this issue directly, beyond fiscal policy. The government must go far beyond simply handing out fertilizer. What is needed is comprehensive agrarian reform. What is also needed is a sense of urgency, because the present global crisis can easily deteriorate into famine - the signs are there already not only in Zambia, but Malawi, Zimbabwe and many other countries - if people are not returned to the land and at least can grow their own food. At the same time, it is obvious that, rather than be at the whim of foreign investors making extortionate demands by threatening to leave and take jobs with them, miners can return to farming when copper prices are low. Let unprofitable mines close and reopen them when times are better. Agriculture would be a great way to mitigate the shock of joblosses.

    Also, the dependence on chemical fertilizer should be phased out. There are many organic fertilizers which can be made inside the country. For instance, Southern Province has a strong cattle sector. Cattle bones can be ground into bonemeal and provide an organic source of phosphorus (K). Blood can be collected, dried and ground into bloodmeal, a very effective source of nitrogen (N). But beyond that, the use of nitrogen fixing crops (legumes) before nitrogen using crops (maize) can drastically reduce the need for chemical fertilizer. At a later phase, organic farmers can grow fertilizer through worm castings and large worm bins, which are easy to produce. Worm castings are a very high quality organic fertilizer, which does not burn plant roots.

    Organic agriculture is more labour intensive and at the same time requires fewer off-farm inputs, which reduces both need for foreign exchange, creates jobs and helps secure the food supply, all at the same time. Because organic agriculture also creates a thick layer of humus, it can mitigate the effect of flooding by allowing more water to soak into the soil, in effect making the soil perform the same function as large reservoirs do. This is also why flooding often follows deforestation, as forests can store water on higher ground, for longer periods of time.

    The government should

    * upscale the present subsistence farmers into becoming small scale commercial farmers

    This can be done by comprehensively reforming the way agriculture is done. I would like to see the creation of thousands of (approximately) 100 hectare, organic farms, which can be the backbone of agriculture as a profession for subsistence farmers, as well as go a long way in securing the food supply, while at the same time maximizing job creation and create cashflow into the rural areas, where most people still live.

    * secure property rights for subsistence farmers

    We always hear about some investor coming in and throwing 'squatters' off the land. Even though these 'squatters' may have lived and worked on that land for generations. How is a farmer supposed to invest in anything, when their land can be taken away from them at the whim of an investor, chief, politician or just a competitor? There should be a way to create title deeds for indigenous Zambians, which have a limited saleability, so the land does not simply become subject to speculation instead of farming. Also, there should be greater legal recognition of the right of usufruct by farmers in communal areas, something nearly as strong as a title deed. These are all things the government can do through parliament, whithout incurring much cost.

    * Create works projects

    With only 3% of arable land under permanent irrigation, agriculture in Zambia depends on rainfall, making the month of November a crucial deadline for farmers, extension officers, etc. This can be mitigated by creating irrigation works that make water available throughout the year. Adding to this is the fact that only 20% of arable land is in use, and 70% of the population live on less than $1/day and/or are not formally employed, and the solution seems obvious.

    There are roads to be upgraded, and small scale irrigation works can both create jobs and create irrigation for farms, making year-around agriculture a possibility and doubling agricultural output that way. At the same time, the annual floods which have such a high cost connected to them in terms of lives and property lost, can be completely prevented by storing water on higher ground and using it for gravity based irrigation. All this is relatively low-tech, which means it can be implemented on a large scale with limited costs.

    I would urge anyone in government to take a look at the following methods:

    1) Permaculture Water Harvesting
    http://www.youtube.com/watch?v=kPrfNVzDNME

    This use of swales to harvest water on high ground and let it seep into the soil has many advantages. It is low tech, all that is required is to dig ditches that are level and on the contour of the landscape. This can be done by the National Service, traditional authorities, the Army, and miners themselves as they already are experts at earth moving to begin with. The advantages are obvious - storing water in the soil prevents evaporation, it prevents erosion, prevents flooding, and it makes water available over longer periods of time for agriculture and consumption.

    Zambia has massive water resources, however, much of it goes to waste because of absence of irrigation works. All the water that flows into it's rivers and lakes could be made to move across the landscape at a much slower rate, making it available for agriculture and human consumption. I would say this is the core of agricultural development.

    2) Keyline Designs
    http://www.keyline.com.au/ad1ans.htm

    Keyline Designs uses the idea of evenly distributing water across the landscape as it's main organising principle, from digging swales on contour, to plowing on contour, which also gives water the greatest amount of time to soak into the soil.

    Mines, windfall tax, and the economy

    With all the job creation potential in infrastructure and agriculture, the purpose of the mining industry is to capitalize the Zambian economy and development and not to 'bring jobs', as a former president used to say. Whereas mining only employs 58,000 people, agriculture already employs over 1,000,000 people out of Zambia's 5,000,000 strong workforce.

    * Instead of borrowing, why not use profits from mining to spur development?

    * Or, why doesn't the government create stocks of copper or other metals, as support for the currency? The state could mine them at a cost only basis, and sell them when prices rise. I don't understand why only foreign companies should mine Zambia's resources.

    * Why doesn't the government farm out the operating of the mines to privately owned mine management companies, while maintaining ownership of them and the minerals. These mining companies could be compensated with a small percentage of profits (say upto 10%), so the government can use most of the profits to invest in the economy? The government could shut down unprofitable mines until prices rise, and re-employ miners in agriculture or road construction.

    * Why doesn't the government demand that all a foreign company's costs are spent inside the economy, by requiring the use of Zambian suppliers only? Many suppliers would have to be trained up, but the raising of production standards and technology transfer would have a direct impact on the Zambian economy, both by raising wages and by creating a Zambian manufacturing sector.

    * Alternatively the government could only court foreign companies in sectors with large overheads and low gross profits, so most of the turnover is actually spent in the economy. This would have a large multiplier effect on the economy, an effect that was missing from the Development Agreements.

    The key to economic growth and wealth retention is the re-investment of costs or profits (or both) inside the local or national economy. If reinvestment works for Warren Buffett, how could it be 'socialist' or un-capitalist? The least the government could do is prioritize the multiplier effect when attracting foreign investors.

    Because of the principle of reinvestment, I am generally against attracting FDI, but it can be done in a way that maximizes the impact on the Zambian economy.

    Emergency Measures

    However, to ensure food security in the short term, there are other things the government can do:

    * Revamp the NCZ to increase fertilizer production. This would lower the price of fertilizer by making more of it available through increased production instead of price manipulation.

    * Revamp the old farm cooperatives to increase extension services to farmers

    * Create rural roads to open up farms and areas of the country so crops can make it to market

    * Increase storage facilities of the FRA

    In other words, increase the hard and soft infrastructure of agriculture in the short run, and professionalize subsistence farmers in the medium and long run.

    Sincerely,


    Just to get the thought juices flowing, I would recommend the following popular books:


    Making Your Small Farm Profitable, by Ron Macher (publisher of Small Farm Today)

    Powernomics - The national plan empower Black America, by dr. Claud Anderson (former Assistant Secretary of the US Department of Commerce under Jimmy Carter)

    ReplyDelete
  2. Mrk,

    Very good!

    I'll upload this as a guest blog so other people can pick it up.

    ReplyDelete

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