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Wednesday, 30 September 2009

Is the economic freedom index flawed?

Dr Guy Scott (Patriotic Front Vice President) is not too impressed with ZIPPA's Economic Freedom of the World 2009 index. I have not seen the ZIPPA index, but I suspect it draws on the latest CATO Institute Index for Economic Freedom. That puts Zambia's economic freedom in 2007 ahead of other African nations. The only problem is that Heritage Foundation's 2009 Economic Freedom Index does not rank Zambia top in Africa. I'll leave to others to reconcile the two indexes. Interestingly, Dr Scott forgot to hit on the main problem with all indexes : Zambia should score highly because the index places great weight on lower tax rates. For similar reasons, Zambia appears to be making progress on the Ease of Doing Business Index - see here:

Freedom for Whom? Guy Scott, The Business Post, Commentary :

“Zambia ranked top in Africa! In the Economic Freedom of the World 2009 Annual Report, just released by the Zambia Institute for Public Policy Analysis (ZIPPA), Zambia is ranked 49 out of 141 countries. And it now has the highest ranking in Africa, one above Botswana, with Kenya at 54 and South Africa at 57. “This”, said Professor Muyunda Mwanalushi, ZIPPA’s Chairman, “is most encouraging…...”

I received this item as a special email bulletin from ZIPPA last week. ZIPPA is a Zambian ‘think tank’ that operates mainly on the internet (and from the Copperbelt) and which has a somewhat neoliberal coloration, different of course from Yours Truly, the one-man Keynesian think tank in the Business Post. It is the local associate of an international network called “Free the World” which campaigns vigorously for smaller government, lower taxes, greater freedom in doing business, freer markets, and so forth.

Now it is very rare, perhaps unheard of, for Zambia to be top of anything (even a bad thing) in Africa, so I naturally took an interest in Mwanalushi’s claim in the opening paragraph. First, is economic freedom, assuming this is a well-defined quality, an unalloyed benefit to a country? The professor helpfully appended to his email a short article by one Eustace Davie of the “Free Market Foundation” that ends with the unqualified claim:

“Countries that have greater economic freedom have higher economic growth and higher per capita incomes than less free countries. People in freer countries are healthier, live longer, are more productive, have more political rights and civil liberties, and the incomes of the poorest 10 per cent are far higher than those in less free countries. The key ingredients of economic freedom are personal choice, voluntary exchange co-ordinated by markets, freedom to enter and compete in markets, and protection of persons and their property from aggression by others.”

So it may seem that economic freedom is a great boon to those who have it (in greater amounts than Kenya and South Africa – wow!). However, we must remind ourselves that the world economic nightmare of the last year (and perhaps the next year or two) was caused by excessive economic freedom – excessive application of the free market and “greed is good” principles in the absence of regulation. It is one thing to have supermarkets full of affordable goods, it is another to be placing peoples’ savings into gonga assets such as sub-prime mortgage backed derivatives. When a market deals in non-perishables and starts to regard its own past performance as a metric for present and future performance, then it can spiral upwards in a self-inflating “boom” (think stocks and shares, think housing bubbles). Booms invariably turn to busts, despite the fact that there is always a bogus theory to explain why “this boom” will not. Far from being collectively wise, one might reasonably conclude that the IQ of the market is equal to that of the dullest player

All this is familiar to addicts of this column (yes, you exist, I keep meeting you) and perhaps we can lay off the subject of the malfunctioning of financial market capitalism for now and come home to Zambia – where we will interview some people and ask their opinion about economic freedom and its benefits.

“Good morning Mr/Ms. Lusaka Street Vendor - or should I say former street vendor? You have just been forcibly removed from your patch on Lumumba Road by a heavily armed policeman force-fed on allowances provided, under protest, by the Lusaka City Council. How do you feel about the level of economic freedom in your sector?”

“Freedom? <>

One problem with understanding the street vending problem is that employed or otherwise wealthy Zambians have adopted an attitude towards vendors that was once the monopoly of white madams and bwanas. Once upon a time it was a matter of race, with the whites demanding the “disappearance” (in the nicest possible non-South American way of course) of the scruffy blacks from the streets of the Central Business District. Now it is a matter of class, with made-it blacks becoming madams and bwanas themselves – perpetuating attitudes towards the poor and unsightly that are 100 per cent derived from the colonial era. When the police have done the job, such posh people rejoice “No more vendors!” without wondering, for a second, where they have gone. They have conveniently “disappeared”. How do you expect such superior people to stick their noses close to the problem and actually try and understand it?

Well, where have all the vendors gone, short time passing? Have they gone, as per some theories, into the legal markets? Last week I described how, at the height of the One Party State, markets in Lusaka were controlled by UNIP committees. Admission, stall rentals, retail prices and other things were controlled by these committees. The principle was “collectivist” (we must all make a living) and “political” (you must be a member of UNIP to be one of us). With the coming of multiparty politics things have changed – but for the worse. Access to the markets is still “political” to a great extent, with would-be entrants having to swear allegiance to the MMD in many cases. But there has also been an explosion of “rentier” or “cartel” business, with individuals or groups taking control of whole markets or blocks within markets. These middlemen have in many cases obtained their ownership of market stalls, at very low cost, by dint of influence that may be political or through family networks or simply through corruption. An outsider wanting a stall must then pay, either a purchase price or a rent, to the rentier. Even legal vending patches, of which there are a few, have been “privatized” in this way and the poorer end of the retail trade, typically operating with a capital sum in the region of K2 to K10 million, is unable to meet the costs of becoming legal; hence the illegal street vending.

We students of real economics are very fortunate to have a kind of supernova of the political/rentier phenomenon happening as we think. A former Minister of Local Government and Housing (call her minister One) was given aid money to completely rebuild Soweto market, turning it from “old Soweto” to “new Soweto”. With great effort Minister One persuaded the 2,500 or so tenants at the market to vacate their stalls, but to do so only on the condition that they made sure their names were entered on a master list of priority applicants for the new stalls. She established a committee to carry out this exercise, fully aware there would be some monkey business (taking a few backhanders or succumbing to political pressure), but also ensuring that the bona fide tenants would flush out the illegitimate newcomers if there was any shortage of new stalls to go round.

Along comes Minister Two. He abolishes the committee, negates the list of tenants, and, under pressure from what we can loosely call cadres and rentiers, opens a new list in which most of the original tenants are missing. Clearly the potential for creating illegal street trading is very great. What would you do if you were flushed from your legal stall by the machinations of people with more influence than you?

This is but the tip of the very convoluted street politics. If you don’t fully grasp it don’t worry: I don’t and I am not sure your average Sicilian would. Certainly Minister Three is having trouble getting his head round it all. But we can be sure that the issues are not simple, and that with the passage of not much time the vendors will be back. This is a country in which no new formal jobs are being created, in which only a madman would borrow money at prevailing interest rates, and in which such activities as farming are as uncertain (and politicised) as anything else. What do you expect the people you regard as your “inferiors” to do?

Is the freedom index only for rich and posh people?

Note to vendors: count your lucky stars that you are not in Namibia. They adhere to colonial attitudes there also; but they are GERMAN colonial attitudes. Cripes. I wonder where they come in the economic freedom rankings.

Empowering the Luano Community

A Vedanta Group update on how Konkola Copper Mines is working to empower the Luano Community in Chingola through an innovative goat draft project - an interesting alternative to microfinance:

Konkola Copper Mines (KCM) - Empowering the Luano Community

Konkola Copper Mines (KCM), a company of Vedanta group in copper business is the largest copper producer in Zambia. The company is equally committed to bringing social and economic empowerment in the region. Recently KCM has been focusing towards Luano community.

Chingola’s Luano area is about 22 km from the town centre and its main community occupation is farming. The economic condition of the community living in Luano are far from being satisfactory. The community struggles to just manage the basic necessities like salt, money for milling their maize and paying the school fees. Most of the members of this community are not connected to the national power grid and have lower literacy levels and poor road network. The biggest challenge is to find exactly what may suit the targeted community and the general climate for the projects. Yet there is nothing that may perfectly suit this rural community than farming projects.

To avoid creating any dependency, KCM spent over K53 million (more than USD 10,000) to source 300 goats for 100 families on condition that they pass on the first offspring to other needy families belonging to the same cooperative and who are on the waiting list. The goat passing-on project is aimed at reducing poverty levels among the non-mining community of miners.

One would wonder how KCM identified such a remote community under its corporate social responsibility (CSR) project. KCM manager for CSR Ms. Sampa Chitah explained that KCM had been working with the Ministry of Agriculture and Cooperatives to help in finding the needy communities. This has helped in breaking the chains of dependency. Over the years, the animals reproduce, leading to a greater supply of surplus products for the generation of income.

Ms Chitah said the Luano goat draft project was among many programmes KCM has undertaken. Others are sustainable livelihood programmes, mentorship of widows of former miners and support rendered to Mutende and Luwi orphanages.

The sustainability of the projects was highlighted by Chingola veterinary officer, Mr. Peter Kabungo, who urged farmers never to break the chain of recipients because through the draft goat project, the people of Luano could help families to become accountable to each other and restore their dignity and self-respect.

Dr. Kabungo said Government is happy with KCM’s quick response to the call made at the Copperbelt Agriculture and Commercial Show in which the Government appealed for diversification as noticed from the theme ‘Productivity in Adversity’. He said this was a call to diversify overdependence from copper to other minerals and agriculture for sustainability.

Dr. Kabungo also added, in conclusion, that stakeholders and the Ministry of Agriculture and Cooperatives should ensure that the farmers are helped with the needed chemicals and the Ministry of Agriculture in the district is to be in constant touch with the farmers.

Tuesday, 29 September 2009

Zambia : A Leadership Vacuum (Guest Blog)

Zambians have harbored very high expectations about the socio-economic prospects of their country since October 1964 when the country gained political independence from European colonial powers. Equating political independence with not only self-rule, but also with genuine democracy and prosperity, they have continued to believe that the transfer of political power to African hands will eventually create greater opportunities for them to enhance their socio-economic well-being.

Unfortunately, the country has continued to wallow in waves of misfortunes from the time of what has come to be characterized as "nominal" or "flag" independence. It has become equated with a catalogue of unprecedented socio-economic ills – including poverty, malnutrition, disease, ignorance, illiteracy, corruption, widespread unemployment, rampant crime and lawlessness, and homelessness.

But how could a country that was once described by the World Bank as having been one of the richest countries in sub-Saharan Africa at independence in 1964 become one of the poorest 44 years later – with nearly 70% of its people wallowing in abject poverty? How could this happen to a country that was born with a copper spoon in its mouth?

The Achilles’ heel of post-independence Zambia seems to be the lack of competent leaders needed to initiate and successfully implement viable policies designed to tackle the Herculean tasks of the post-colonial era.

In this post, I wish to provide a bird’s-eye view of the contribution poor leadership has made to the country’s socio-economic malaise. It is not intended to be an indictment on MMD or UNIP leadership. Rather, it is an attempt to share my views concerning some of the salient and unbearable effects of incompetent leadership on the well-being of Zambians.

First, our initial failure to diversify economic activities away from the mining industry subjected the national economy to the vagaries of steep decreases in copper prices and production levels. To date, we have continued to give lip-service to the issue of economic diversification from copper mining to manufacturing, tourism, agriculture, and other sectors of the country’s economy.

Second, the creation of the Central Committee (a somewhat parallel structure to the National Assembly) and the position of Prime Minister that followed the introduction of a one-party State in 1972 contributed to the mismanagement of our beloved country’s meager public resources.

Third, socialist policies during the UNIP era barred both local and foreign private investors from certain commercial and industrial sectors of the country’s economy and recommended the creation of state companies to operate in such sectors of the economy from the late 1960s to 1991. The policies (which former president, Dr. Kenneth Kaunda, promulgated through his April 1968, August 1969, and November 1970 addresses to the UNIP National Council) ushered in an era of state enterprises.

Naturally, the monopolistic position enjoyed by state companies in the country’s economy culminated in complacence and gross inefficiency because, in the absence of competition, they apparently found it unnecessary to seek innovative ways and means of improving the quality and quantity of their product offerings. The rampant commodity shortages which the country experienced during the UNIP era were largely a direct result of the socialist policies of the government of the day.

Fourth, our country’s postponement of macro-economic adjustment on May 1, 1987 exacerbated the socio-economic problems facing the country. The adjustment would have enabled us to create a competitive and more productive socio-economic system early enough to forestall any further deterioration of the economy.

Fifth, there have been just too many political appointments by Republican presidents that have not seemed to add any value to the resolution of the catalogue of socio-economic woes facing the majority of Zambians. Such appointments to sinecures have apparently become a routine feature of governance! As a result, we have created a nation-state where the common people are generally left to their own devices while the Republican President, the Republican Vice President, Cabinet Ministers, Deputy Ministers, District Commissioners, and other government officials have continued to revel in conspicuous, state-financed luxury.

Recently, Finance Minister Situmbeko Musokotwane was quoted as having said that Zambia will not stop seeking loans because it does not have adequate resources. How then are we going to pay back the loans?

Clearly, the MMD government wants to continue to mortgage our country and the future of our children and grandchildren through such loans. There is no attempt whatsoever to trim the highly bloated government in order to make it live within its means!

There is a need for government leaders to realize that donor countries, like Zambia, do not have unlimited financial and material resources. They have to make do with scarce resources by going through public expenditures line by line, program by program, agency by agency, department by department, and ministry by ministry in order to eliminate unnecessary application of public resources.

We need to start doing the same in order to wean our country from its current addiction to loans, its over-dependence on donor funding, as well as attain economic independence and sustained socio-economic development mostly with our own local resources.

If we had leaders with vision and compass, the strikes and go-slows by teachers, nurses and resident doctors which have currently engulfed the country would have been prevented by planning ahead to improve the conditions of service of employees on government payroll. Unfortunately, we have leaders who would rather buy hearses and plan to secure a US$53 million loan to purchase mobile clinics!

With respect to the US$53 million deal, there is absolutely nothing wrong for President Banda to be stubborn or arrogant if he was planning to spend his personal money to buy the mobile clinics. The initial negative reaction to the deal from various segments of Zambian society was adequate for any wise leader to think twice about the deal.

By the way, the deal is unacceptable for the following reasons:

(a) The following should be prioritized rather than the mobile clinics: provision of free healthcare for all Zambians; construction of more permanent healthcare facilities nationwide; provision of adequate medicines and medical equipment; improvements in facilities at all referral healthcare centers to make it possible for them to accommodate Zambians (including government officials) who are fond of trekking to foreign countries for treatment; research designed to find cures for HIV/AIDS, cancer, tuberculosis, and other deadly diseases; and hiring, retention and training of health personnel.

(b) It would be irresponsible for the authorities to buy mobile health facilities that are likely to last only a few years, given the poor state of roads in rural areas.

(c) There are a lot of rural communities today where there are no motorable roads!

(d) The recurrent costs of maintaining the mobile clinics after spending the US$53 million to seal the 2-year contract would be prohibitive.

(e) It is not clear how the mobile clinics would be used – would they be driven around in rural communities on a regular basis in the hope of finding a sick person?

And what kind of leaders do we have in the MMD who keep trekking to foreign countries for medical treatment without making any meaningful effort to improve healthcare delivery in their own country for every citizen, including them?

Sixth, there is a seemingly unwritten requirement that the Republican president needs to reshuffle his Cabinet occasionally, which has resulted in government ministers being shunted from one ministry to another as though they are jacks of all trades. There seems to be no meaningful purpose for such reshuffles, other than to use them as a means of reminding the Cabinet ministers about who their boss is – the President!

Seventh, the apparent obsession for speedy privatization of state companies by MMD leaders during the 1990s without considering the fact that they were merely shifting the monopolistic positions enjoyed by such companies from government to private hands caused dislocations in the national economy. As could be expected, new private investments were not quickly made in the lines of business involved to provide the necessary competition to the buyers of the companies.

There was a need for a cautious and well-calculated pace of privatization designed to enable the government put in place a sound competition policy, a strong market for securities, and the necessary legislation to enforce contracts, among other things. Also, it was essential for the government to determine whether or not there were some economic sectors in which it would make sense for continued involvement by the government.

The privatization of state companies could not, therefore, yield expected benefits, which would have included the following: stimulation of private investment, economic empowerment of citizens through stock ownership, promotion of competition and efficiency in commerce and industry, beefing up government coffers through the sale of government holdings in state companies, reduced public-sector borrowing and government spending, and easing the financial burden of state companies on the public treasury.

Eighth, the prevalence of both petty corruption and grand corruption in the country has been a clear reflection of poor governance. The situation is likely to get worse with the single-source procurement which President Rupiah Banda’s administration seems to have adopted. Meanwhile, corruption will continue to subvert the political process in our beloved country; it will continue to thwart economic growth and stability; it will continue to undermine honest enterprise; it will continue to discourage foreign direct investment; it will continue to tarnish Zambia’s image; and it will continue to erode the country’s moral fiber.

Ninth, Zambia has lacked leaders who understand the need to make a quick transition from campaigning to governing upon being appointed or elected to positions of authority, and has also lacked leaders who recognize citizens’ right to vote for candidates of their choice without being threatened that their communities will be excluded from the development process if they do not vote for candidates fielded by the ruling political party.

Tenth, the monopoly which the party and its government have continued to maintain over the public news media is a clear reflection of dictatorial tendencies among government leaders. One wonders how public officials gauge the needs and expectations of the citizenry when the Times of Zambia, the Zambia Daily Mail, the Zambia National Broadcasting Corporation, and the Zambia News and Information Services are maintained mainly for the purpose of showering empty praises on government leaders!

We, therefore, need government 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 need leaders who 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, rather than clueless figureheads!

As we get closer to the 2011 general elections, we are going to be continually warned by MMD cadres and supporters that we should not experiment with leadership – somewhat suggesting that the deadwood among our current crop of government leaders hold the key to Zambia’s future!

We are also likely to be bombarded by rehearsed calls from the same folks that the President should be given more time to complete his projects and programs beyond 2011. Such calls are, of course, meaningless because any new Republican president would be obliged to adopt and implement existing projects and programs that are designed to benefit communities nationwide – projects and programs initiated by previous administrations!

One would perhaps do well to conclude this post with the following depiction of the depressing state of affairs obtaining in our country excerpted from a 2004 Social Watch report (cited by Bivan Saluseki in The Post newspaper of July 2, 2004):

"Even though the country has not formally been at war since independence in 1964, prevailing conditions affecting human existence are equivalent to those in a country at war."

Henry Kyambalesa
(Guest Blogger / Agenda for Change)

Quote of the day (Ackson Senjani)

"In debating the Presidential speech this year, I am not going to talk about the malaise and hopelessness which is afflicting the society. I will not. I am going to flip the coin on the other side and talk about the poverty of leadership, as the main cause of all the malaise and hopelessness that this country is faced."

Linking Zambia (Breeze FM)

The website of Breeze FM in Chipata.

Monday, 28 September 2009

Rising violence against women?

A recent Central Statistics Office (CSO) article reports a significant increase in violence against women between 2001 and 2007. Its not clear why violence should increase over the suggested period. I suspect this may well be the case of more women coming forward and being confident of reporting such violence, in which case there's a silver lining there.

Violence against women on the increase, CSO September 2009 Bulletin, Commentary :

The Zambia Demographic and Health Survey (ZDHS) conducted every four years, collects information on various social and health issues including violence against women. In the 2001/02 and 2007 surveys, respondents were asked whether they had experienced physical violence by a husband/partner or any other person in the 12 months prior to the surveys. Results from the surveys show that cases of violence against women in Zambia had increased.

The results show that the proportion of women who reported having experienced physical violence in the 12 months prior to the surveys increased from 23 percent in 2001/2 to 33 percent in 2007. The increase was observed in all age groups apart from the age group 15-19 years.

The results further show that cases on the violence against women increased by almost the same proportions in both rural and urban areas (10 percentage points in urban areas and 9 percentage points in rural areas, respectively).

At provincial level, Luapula recorded the highest increase in the proportion of women who reported having experienced physical violence in the 12 months prior to the surveys with 25 percentage points. This was followed by North-Western Province with 22 percentage points. Western province recorded the lowest increase with 1 percentage point.
(click charts to enlarge)

Inflation Statistics - September 2009

The annual rate of inflation, as measured by the all items Consumer Price Index (CPI), decreased by 1.3 percentage points from 14.3 percent in August 2009 to 13.0 percent in September 2009. The decline in the annual inflation rate in September 2009 was "mainly due to the decrease in food prices, new motor vehicle prices and airfares" (code for appreciation in Kwacha). More detail via the CSO September Bulletin.

Sunday, 27 September 2009

Luapula Manganese, 2nd Edition

An interesting development on an issue we have previously discussed here. A company is exploring setting up the refinery in the province, although it is currently hampered by good old ZESCO :

Power outages affect Genesis Group of Companies expansion in Luapula, ZANIS (September 24, 2009) :

Genesis Group of Companies (GGC) Chief Executive Officer (CEO) Brett Brannigan says the low power electricity supply by ZESCO has hindered his company's expansion and operations in Luapula province. Speaking in an interview with ZANIS in Mansa today, Mr Brannigan said his firm has not been able to open up a smelter to process manganese ore for export.

The CEO said that the company required about 18-megawatts to set up a smelter but pointed out that the power utility company in Luapula province (ZESCO ) only six megawatts to the mining firm. Mr. Brannigan said his company could not go ahead opening the smelter without guarantee from ZESCO to increase the electricity output in the area.

He said the manganese refining process requires adequate and specific power supply adding that if partially refined the manganese ore turns into a rock which takes months to be refined again. However, Mr. Brannigan said that the mining firm has plans to set up a smelter by mid 2010 once the Copperbelt Energy Company (CEC) starts providing power to the mine in Luapula Province.

Mr. Brannigan revealed that CEC has been talking with GGC to have power supplied to the mining firm once the project is done.

He explained that even though Base metals prices have not yet recovered on the international market GCC exports between 4000 and 5000 metric tones of manganese per month. He said there is market for manganese ore on the Copperbelt noting that it was sad the his company has not been able to sell to mining firms because its manganese is not refined.

Mr. Brannigan said that the aim of the company was to create job opportunities and increase revenue in Luapula province by partnering with small scale miners who have mining licenses.

He explained that when the company came to Luapula province it opted to partner with small scale miners in order for the people of Luapula province to be empowered.

He further explained that GGC would have bought mining rights when it came to Luapula province but did not buy mining rights because it wanted to assist small scale miners by partnering with them to enhance development.

He said government wanted GGC to set up a smelter in Mansa in order to create alternative opportunities for others to develop more businesses in Luapula province. He said the company provides employment for the local people as evident by the 300 permanent Zambians workers against four foreign workers employed by GGC.

Mr. Brannigan said GGC was partnering with small scale miners which in turn assisted to uplift the living standards of people because it is the second largest employer in Luapula province from government which was giving a lot of contributions to NAPSA and the community.

Leather powered development?

Interesting to see that a recent call by local chiefs on Government to do more and harness the great potential in the province for establishing leather tanneries in Western province has not gone unanswered. Western Province Permanent Secretary Ikanuke Noyoo is currently leading a Zambian delegation to Ethiopia to understand how it has managed to develop a booming leather industry.

Rural finance..

Another interesting private credit scheme designed to empower local farmers (a similar scheme can be found here):

New Munda Credit Management and Rural Banking Facility helps farmers in Mongu (Source : ZANIS, September 23, 2009)

Mongu District Acting Commissioner Mishengo Mishengo has hailed the new Munda Credit Management and Rural Banking Facility which he said help contribute to the growth of the agriculture sector.

Mr. Mishengo congratulated the association for its initiative it has taken of forming linkages with business institutions that support farming business.

He added that scheme and rural banking concepts will reduce pressure on the available programmes such as the fertiliser support input programme, the food security park and other community based initiatives by co-operating partners.

He further added that there will also be greater need to liaise closely with structures such as farmers associations which are already on the ground.

He said his office's desire is to see that the economy of the province in general and Mongu district in particular is improved to better levels.

The DC said this when he graced at the sensitisation meeting on the held at Community hall in Mongu District yesterday.

Munda credit facility is an innovative loan scheme created to carter for the needs of small scale farmers who are members of the National Peasant and Small Scale Farmers of Zambia (NAPSSFZ)

Saturday, 26 September 2009

Aid for auditing..

The Danish Government this week gave K3bn to the Auditor General's Office for the recruitment of around 15 members of staff to cover the increased workload for the next six months. For her part, Ms Chifungula is looking for even more money : “My office still has a total number of 169 staff vacancies even to be able to meet all the planned activities. These vacancies could have been filled in within this year as the last phase of the restructuring exercise but could not because of inadequate funds”. This of course is not the first time the Auditor General has asked for more money. The last time she was calling for better wages, as the solution to prevent her own staff from becoming corrupt. What is clear is that she certainly thinks more should be done to help her office, and money appears to be the immediate answer. The donors appear to share this view.

The Auditor General's Office certainly needs more funding to help uncover more mismanagement, but the real problem is "the day after". The Auditor General has revealed many corruption / mismanagement scandals but very little has been done. With the additional resources, one expects that we will get even larger reports and more revelations of scandals (previous reports here and here). But will this more money and larger reports fundamentally alter public sector attitudes towards plunder? I have my doubts.

The scepticism is fundamentally drawn from a rudimentally match-up between the weak constitutional position that the Auditor General currently occupies and the corrupt national apparatus she's battling against. The Auditor General's position holds no weight constitutionally and until recently her reports were simply ignored.

There are two ways to remedy her constitutional position. One way is to ensure that the Auditor General is able to prosecute the cases she uncovers. This would especially apply to more serious cases and would guarantee some end product to her work. As attractive as that sounds, it is likely to be costly and would cut across the responsibilities of the Director of Public Prosecution and the Attorney General. A cheaper alternative is to simply ensure that when the Auditor General's Report is adopted by Parliament, she should send all the information to the relevant investigative wings. The Laws of Zambia should enshrine this process as automatic and emphasise the liability for prosecution squarely on the investigative wings. At the end of each year the investigative wings could be mandated to give an account to Parliament on how they proceeded on each task. Parliament of course would have no big stick to wave, but it could serve a useful role in shouting loud to the public that the relevant investigative wings and DPP are not doing their job.

Which brings us to another dimension that is currently missing - public engagement or ownership of the fight against plunder. In more developed countries the Auditor General is more effective without a prosecutor function. This is largely because the "court of public opinion" holds much more weight and often forces the investigative wings to act. It is not uncommon for example for a member of the public to write to police authorities and ask them to investigate a case. In Zambia the police authorities rarely act based on a public request. Home Affairs Minister, Lameck Mangani was recently asked on Zambia BlogTalk Radio, why is there no website for the Police? The Minister's answer : you can reach the police through me or the Permanent Secretary. After some persuasion from callers, he relented and suggested that the Diaspora should help build such a website, but it was currently not a priority. The Minister probably does have a broader point that resources are scarce, but it does highlight how distant the policing authorities are from the people.

Of course even if the police where more accessible, the public may still not play an active role due to the "free rider" problem. In many instances, people would prefer to sit on their hands and wait for someone else to bear the cost (and I don't just mean financial) of shouting loud about unsanctioned Auditor General's revelations. We see this in many areas. We always want others to do it for us, not us as individuals to do what we can to hold Government to account. I do and we all do it. Its rational! So the only solution is to ensure that mechanisms are put in place that helps avoid having to rely on individuals to informally enforce good government (outside the ballot box).

But there's another problem of course we should not ignore. Uncovering malpractice and getting the law enforcement agencies to act is just one side of the coin - "detection". The other side we continue to emphasise is improved prosecution. The current approach to sentencing and prosecution of corruption is costly to the tax payer. It is long and by the time cases are done people serve short sentences. For justice to work, it is critical that people are not just punished but are seen to be punished. We need a new judicial process for convicting corrupt criminals, that is swift and definite. A corruption fight without an efficient court system has little deterrent effect on corruption - and is therefore a pure social cost. I keep calling for "special corruption courts", which some believe undermines the principle of "justice", but in Zambia there's no justice at present because real justice is not just about respecting "rights" but also about correcting "wrongs".

In short, aid is welcome but it is only a start. We must ensure that reform goes deeper than simply throwing money at auditors.

Friday, 25 September 2009

Costly foreign adventures..

Alexander Chikwanda has a fascinating piece in the The Post. The discusssion on agriculture is particularly interesting, but its the following observation that caught my attention :

A few years back a wise decision was made to close some of the diplomatic missions to cut expenditure. Since then all the closed missions have been reopened and yet new ones opened with all the severe cost implications. Foreign missions are a very costly adventure. Some sombre statistic has remained in my mind arising from one of the pre-budget cabinet meetings when I sat in attendance as president Chiluba’s chief of staff. In 1996 the expenditure on the children of Zambian diplomatic staff was K4.6 billion when the outlay on education services – that is the expenditure on goods and services for the Ministry of Education was K2.5 billion. Ordinarily such injurious disproportions should warrant attention but it appeared and still appears to be a matter of indifference in Government. Zambians happily embrace this culture and legacy of fiscal irresponsibility and even our external benefactors have innocently underwritten our fiscal indiscretions except, I suspect they may not do so in the not too distant future on whatever pretext.
We have previously discussed the issue of embassies here and here. Alexander's observation really does magnify the problem. Reducing the amount of embassies may a well be a necessary, but not sufficient solution.

Doing business in Zambia

A series of interesting videos on "doing business in Zambia" covering tourism, construction and financial sectors

A disastrous "Dead Aid" natural experiment..

Just in case there are still those among us who subscribe to the lunacy of suspending aid as a strong incentive for change. This IRIN report should bring them back to the real world. The freeze in donor funding for health following the corruption scandal is beginning to hit those living with HIV in our rural areas, who were receiving the lion's share of financial HIV/AIDS support.

A bit of weekend relief...

See if you can spot the Zambian delegation's "grand" entrance at the United Nations in this CNN video (Hat Tip : Zedian):

President Banda : UN Speech Transcript

The full transcript of President Rupiah Banda's speech to the United Nations(UN) General Assembly on Thursday, 24 September 2009 :
President Rupiah Banda : Speech to the UN General Assembly 2009

Thursday, 24 September 2009

Ministerial Statement : Pandemic H1N1 2009

Ministerial Statement made to Parliament on 24th September, 2009 by the Acting Minister of Health, Hon. Peter Daka, MP, to update Parliament on the Pandemic (H1N1) 2009 in Zambia.
Ministerial Statement - H1N1 Pandemic 2009

Corruption Watch (Road Development Agency)

New developments in the Road Development Agency (RDA) scam previously trailed here. The Auditor General Office's has now apparently been joined by "three international road experts" to help probe on circumstances that caused the Road Development Agency (RDA) to over-procure by K1 billion last year. The Post sources close to the audit team claim that the European Union (EU), World Bank and the Danish International Development Agency (Danida) have joined the audit process.

On local radio stations..

A recent short paper on the state of local / community radio stations in Zambia. A useful coverage of the growth in radio stations and the various opportunities / challenges they are facing. The paper does not delve into the counter-arguments for regulation, but it is still useful as a general tour of the main issues. Excerpt :

The reaction of government to the arrival of modern community mass media has been somewhat mixed. Reference has already been made to the bold move by government to liberalise the airwaves after the 1991 elections. The mass media sector also had positive encouragement whenever licenses have been granted, and spectrum space created for the establishment of new community media. The year 2002 saw momentous leaps with the enactment by parliament of the Independent Broadcast Authority (IBA) Act, which introduced the idea of self-management for the independent media sector and the Zambia National Broadcasting Corporation (ZNBC) Amendment Act, which took away the power of the Minister of Information to control the broadcast industry, and ZNBC. ZNBC, at least officially, became a public corporation. 2008 also saw another positive development: the introduction of government support for the media fund, which the media fraternity had for long lobbied.

However, sometimes there have been some negative relations also. One problem has been the use of extra-legal tactics to muzzle the press. In January 2001, the dismissal by the government District Administrator (DA) of the 15 board members of Radio Chikaya, an independent community broadcaster, was clearly in breach of the country’s constitution. The DA does not have any such powers as he claimed to have, and gladly, the decision was later reversed.

Occasionally, even in the last two years or so before the workshop, the Minister of Information and Broadcasting Services has warned community media not to air political broadcasts, which he/ she has argued is contrary to license terms for community media. This has left people wondering precisely what the government had in mind because politics is at the heart of many issues and events in society. Scholars and media representatives have complained that this is an attempt to muzzle community media.

Zambia also witnessed the introduction of ad hoc regulations apparently to stifle the new media: e.g. the payment of K40,000,000 Kwacha for all new stations, as well as having to make payments to cover the costs of inspections by government officers (Muzyamba, F, and Nyondo, R.). The introduction of such ad hoc regulations is contrary to the spirit and letter of the IBA (2002) and the ZNBC (Amendment) Act (2002) discussed earlier. The former states that there shall be self-management and regulation for the independent media sector, while the latter took away the power of the Minister of government from dictating to, or running the broadcast industry.

The government of Zambia was, during the early part of 2009, on the verge of introducing compulsory media registration for all practitioners. This was to encourage a situation where only qualified practitioners and ethical journalism would get through. However, the voice in favour of self-regulation appears to have prevailed, at least thus far.

The Panos study referred to earlier also alluded to a fear of “vulnerability to sabotage and intimidation by powers that be” and, in one case, there was claim of power outages in a station when airing material critical of government (Muzyamba, F. and Nyondo, R.).

Overall, it is hoped that there shall be a realisation soon enough that community media constitute, perhaps one of government’s and donors’ biggest allies in the battle against disease, poverty, illiteracy, and other vices. Government support for community mass media is therefore desirable.

RB on Climate Change

Wednesday, 23 September 2009

Realigning economics with reality..

Robert Shiller on the failure of existing economic models and the potential role for "behavioral economics" to help bridge the gap with the real world :

Reinventing Economics, Robert J. Shiller, Project Syndicate, Commentary :

The widespread failure of economists to forecast the financial crisis that erupted in 2008 has much to do with faulty models. This lack of sound models meant that economic policymakers and central bankers received no warning of what was to come.

As George Akerlof and I argue in our recent book Animal Spirits , the current financial crisis was driven by speculative bubbles in the housing market, the stock market, and energy and other commodities markets. Bubbles are caused by feedback loops: rising speculative prices encourage optimism, which encourages more buying, and hence further speculative price increases – until the crash comes.

But you won’t find the word “bubble” in most economics treatises or textbooks. Likewise, a search of working papers produced by central banks and economics departments in recent years yields few instances of “bubbles” even being mentioned. Indeed, the idea that bubbles exist has become so disreputable in much of the economics and finance profession that bringing them up in an economics seminar is like bringing up astrology to a group of astronomers.

The fundamental problem is that a generation of mainstream macroeconomic theorists has come to accept a theory that has an error at its very core: the axiom that people are fully rational. And as the statistician Leonard “Jimmie” Savage showed in 1954, if people follow certain axioms of rationality, they must behave as if they knew all the probabilities and did all the appropriate calculations.

So economists assume that people do indeed use all publicly available information and know, or behave as if they knew, the probabilities of all conceivable future events. They are not influenced by anything but the facts, and probabilities are taken as facts. They update these probabilities as soon as new information becomes available, and so any change in their behavior must be attributable to their rational response to genuinely new information. And if economic actors are always rational, then no bubbles – irrational market responses – are allowed.

But abundant psychological evidence has now shown that people do not satisfy Savage’s axioms of rationality. This is the core element of the behavioral economics revolution that has begun to sweep economics over the last decade or so.

In fact, people almost never know the probabilities of future economic events. They live in a world where economic decisions are fundamentally ambiguous, because the future doesn’t seem to be a mere repetition of a quantifiable past. For many people, it always seems that “this time is different.”

The work of Duke neuroscientists Scott Huettel and Michael Platt has shown, through functional magnetic resonance imaging experiments, that “decision making under ambiguity does not represent a special, more complex case of risky decision making; instead, these two forms of uncertainty are supported by distinct mechanisms.” In other words, different parts of the brain and emotional pathways are involved when ambiguity is present.

Mathematical economist Donald J. Brown and psychologist Laurie R. Santos, both of Yale, are running experiments with human subjects to try to understand how human tolerance for ambiguity in economic decision-making varies over time. They theorize that “bull markets are characterized by ambiguity-seeking behavior and bear markets by ambiguity-avoiding behavior.” These behaviors are aspects of changing confidence, which we are only just beginning to understand.

To be sure, the purely rational theory remains useful for many things. It can be applied with care in areas where the consequences of violating Savage’s axiom are not too severe. Economists have also been right to apply his theory to a range of microeconomic issues, such as why monopolists set higher prices.

But the theory has been overextended. For example, the “Dynamic Stochastic General Equilibrium Model of the Euro Area,” developed by Frank Smets of the European Central Bank and Raf Wouters of the National Bank of Belgium, is very good at giving a precise list of external shocks that are presumed to drive the economy. But nowhere are bubbles modeled: the economy is assumed to do nothing more than respond in a completely rational way to these external shocks.

Milton Friedman (Savage’s mentor and co-author) and Anna J. Schwartz, in their 1963 book A Monetary History of the United States , showed that monetary-policy anomalies – a prime example of an external shock – were a significant factor in the Great Depression of the 1930’s. Economists such as Barry Eichengreen, Jeffrey Sachs, and Ben Bernanke have helped us to understand that these anomalies were the result of individual central banks’ effort to stay on the gold standard, causing them to keep interest rates relatively high despite economic weakness.

To some, this revelation represented a culminating event for economic theory. The worst economic crisis of the twentieth century was explained – and a way to correct it suggested – with a theory that does not rely on bubbles.

Yet events like the Great Depression, as well as the recent crisis, will never be fully understood without understanding bubbles. The fact that monetary-policy mistakes were an important cause of the Great Depression does not mean that we completely understand that crisis, or that other crises (including the current one) fit that mold.

In fact, the failure of economists’ models to forecast the current crisis will mark the beginning of their overhaul. This will happen as economists’ redirect their research efforts by listening to scientists with different expertise. Only then will monetary authorities gain a better understanding of when and how bubbles can derail an economy, and what can be done to prevent that outcome.

Mutharika vs The IMF

“The day you devalue the kwacha, the price of oil, everything will go up for the ordinary person. Even tomatoes the price will go up, even onions will go up. So the inflation goes up....Am saying that the IMF has a contradiction in their mind, they don’t know what they are talking about. They talk about macroeconomic stability. What is stability? Stability is a level. The moment you take one of the parameters and devalue that stability is disturbed. Because then inflation comes in. And they saying they are following macroeconomics. I don’t know what kind of economic are the IMF"
The economist-President of Malawi Bingu wa Mutharika takes on the IMF for providing unsubstantiated advice. The President is something of a serial defiant of the IMF . In 2005, he resisted IMF restrictions on subsiding agriculture and introduced the ‘Farm Input Subsidy programme’ that has gone some way in transforming the agriculture sector and turned Malawi into a food exporter. I can only assume that the IMF think the level of the Kwacha is hurting agriculture exports, that of course has to be balanced against the risks identified by President Mutharika. The problem of course is that IMF and World have little expertise on our economies. They build macroeconomic models based on little data and understanding, then go on to suggest solutions that would are routinely rejected in many developed countries.

An Incentive for Posterity

Emmanuel Mwamba (Second Republican President Frederick Chiluba's Press Adviser) has written a somewhat diplomatic review of Amos Mapulenga's biograph of the Third Republican President Levy Mwanawasa. I have read the book, thanks to a good friend who managed to provide a copy. There are no plans to write a formal review, but the door is open to others to send across their own reviews or respond to Mr Mwamba's assessment :

Levy Patrick Mwanawasa - An Incentive for Posterity, Emmmanuel Mwamba, The Post, Commentary :

When I learnt that Amos Malupenga, managing editor of The Post, was granted a rare privilege to author President Levy Patrick Mwanawasa’s official biography, I personally congratulated him for the honour.

I felt Amos was qualified to write the biography owing to the relationship he enjoyed with the Mwanawasas (Levy and Maureen) at a professional and personal level. I also felt that probably president Mwanawasa could trust him with information and personal material that would help him write the book. This is a critical ingredient in a biography. The subject has to freely give personal and detailed account of his life, trusting that the information will not be abused or misused.

My feelings were further augmented by a quest by many that Zambians ought to pen their own history. A dangerous trend has emerged where everything about Zambia and her people is done by foreigners. It has become increasingly distasteful to see many foreigners branding themselves as ‘experts' on Zambia but who are clearly disconnected from the life and times of Zambia and its people.

The book

The book has 12 chapters. The foreword was written by President of the United Republic of Tanzania, Jakaya Mrisho Kikwete, who had come to know president Mwanawasa through his official engagements and during the many talks they had over the Zimbabwean crisis.

The book traces Mwanawasa’s life from his early and formative days to his school life at Chiwala Secondary School and later his University of Zambia days. It also recounts his professional and political life concluding with his demise.

Amos had the misfortune of writing a biography that was cut short by the cold hand of death of the subject. He was forced to conclude the book under the circumstances. However, the book doesn’t read like an unfinished project.

Mwanawasa granted Amos with liberty, access to information and persons. He was only ‘warned’ to keep away from state secrets!

The book is an interesting piece to read owing to the simple and narrative manner and style Amos took. Most books are difficult to read as authors want to colour their writing styles with flowery or technical language. In fact, many experts state that ‘’to write simply is to write well.

I have read books by other Zambian writers and some books make terrible reading! There are few good local books that are written well. Authors such as John Mwanakatwe, Andrew Sardanis and Francis Kaunda can count in this fortunate category.

Amos’ book is not one you could flip through and hope to get the gist of the story. Some critical facts appear unannounced and without warning. The reader is therefore advised to take time and read everything!

The contributors

The book was enriched by several contributors. Contributors ranged from Dr Julius Sakala, who gave Mwanawasa his first job as an intern at Ndola City Council, to his nemesis Patriotic Front (PF) leader Michael Sata. Others are his former vice-presidents: Enoch Kavindele, Dr Nevers Mumba and now Republican President Mr. Rupiah Banda.

More contributors were Jack Kalala, Dr Simon Miti, Anderson Chibwa, Mutembo Nchito and Mark Chona.

Mwanawasa’s spouse, Maureen, and their children also gave valuable contributions.

Akashambatwa Mbikusita Lewanika gave his views that have become popular with the book. He also gave an ideological perspective of Mwanawasa’s rule.

Dr Simon Miti defended his and other doctors’ decision to declare Mwanawasa fit and proper to hold office even under the circumstances of his first stroke. Miti also talked about the difficult decision made to evacuate Sata after a serious heart attack he suffered in 2008.

Sata, who was a fierce critic of Mwanawasa at the time and a source of grievous pain to his family, also made his justifications about their political differences dating back to 1991.

Rona, Mwanawasa’s sister recounted how painful Sata’s utterances were and insists up to now, that Mwanawasa should not have reconciled with Sata. She refuses to ignore or forget Sata’s political attacks on her brother, especially the insensitive comments about Mama Myria Mokola’s death (Mwanawasa’s mother).

She insists that the reconciliation between Sata and her brother should be deemed as personal and did not extend to the Mwanawasa family.

Children Miriam, Matolo, Jackie (though a nephew, grew up in the Mwanawasa household); Chipo, Patrick, Lubona and Ntembe gave detailed personal account of the man and father they called ‘Tiger’.

Their comments are mostly jovial when they talk about the life they shared with Mwanawasa but painful and sorrowful when discussing his demise and absence. For example, Ntembe knew her father so well that she even remembers his favourite television programme - Isidingo!

Miriam, Mwanawasa’s eldest daughter, also gave a memorable account when she recalled her father’s social advice regarding men and how dishonest they can be. She recounts her personal experience with labour minister Austin Liato, the father of her first-born child, who showed affection and love when Mwanawasa was alive. This man in fact, even paid lobola for her but has since shunned her and her daughter after the death of Mwanawasa.

Liato is accused of abandoning even the care and child support of his own daughter and this makes Miriam recollect her father’s advice and caution that now rings loudly true.

She also recounts how her father saved her life when she suffered without suspicions, meningitis, while she was in the USA.

Maureen’s comments are however, guarded and reasoned through. She clearly was attempting to carefully typify and present an acceptable Mwanawasa.

She seems preoccupied with portraying Mwanawasa as a strong, principled and clean man who was so committed to the ideals of serving and saving a country even at his own expense and life. She comes out as Mwanawasa’s best cheer leader.

Yet Mwanawasa himself speaks candidly and with clear abandon. Mwanawasa did not seem to worry about the effect of his own words but he was intent to communicate his life and views in a frank manner. For example, Mwanawasa gave what would be regarded as unkind remarks about UPND leader Hakainde Hichilema, who he viewed as an opportunist, a cheat and one that was not truthful.

Mwanawasa regretted that Hichilema held so much promise but was not truthful and he felt that he missed a great opportunity to work with him.

The worst commentators were Dr Nevers Mumba and Enoch Kavindele whose own speeches after their fall-out with Mwanawasa were so strong but do not bear the resemblance of their new views they gave in the book. Their views are so muted and careful as if measuring and fearing unknown consequences if their true views and account about Mwanawasa. Remember, this book was written when Mwanawasa was alive and Amos refused to take new views after his death as he saw a shifty behaviour in some contributors.

Aka’s comment

It is for this reason that Akashambatwa Mbikusita Lewanika, popularly known as Aka, provided refreshing comments that are so welcome. He gave those strong views when Mwanawasa was alive but gave an account he could defend in private and in public.

Aka, for example, defines Mwanawasa as a professional who struggled to get out of the confines of his narrow legal perspective. He defines Mwanawasa’s law practice as a money-making venture that had most of the times ‘’nothing to do with politics, nothing to do with social programmes altogether.

He described Mwanawasa as a product of UNIP who was following its brand of nationalism. Further, he saw a conflicting Mwanawasa who sometimes sided with employers - a capitalist tendency. He however discloses that though Mwanawasa projected a tough and dictatorial image, he in fact loved debates and challenges, though most of his colleagues did not recognise this quality.

Aka has earlier in the book portrayed Mwanawasa as a conformist and not a revolutionary, a manager (a status quo leader) who was not keen to change anything but merely corrects or improves things. He showed a Mwanawasa who merely got a technical certificate of education (law) and refused to grow out of that box even when times and circumstances demanded for a leader who had a broader perspective and could deal with people and difficulties in a realistic manner.

Aka also comments about the formation of the MMD and Chiluba’s role. In his review of the 1990 Garden House meeting and the struggle for multiparty democracy, Aka portrays second Republican president, Dr Frederick Chiluba as a reluctant revolutionary who was not keen to take enough risks to bring about immediate change. He cites the case of invitation letters to the meeting that should have been done by Chiluba.

Chiluba is said to have relegated this duty to his secretary Newstead Zimba who consequently refused to use ZCTU letter heads and did not sign the letter at all. He portrays Chiluba as one who was concerned about government’s constant threat to stop workers’ contributions to ZCTU. He recounts how he proceeded to host the meeting after a heavy drink of brandy with Remmy Mushota and a night spent listening to recorded speeches of Malcolm X and Martin Luther King Jnr.

He remembers that Chiluba and Chitalu Sampa came to the meeting after 11:00hrs, when in his view, learning that the meeting was not disrupted nor where they arrested! (And he also mentions Chiluba’s maroon suit he was dressed in, with a tone of scorn).

Aka’s views, whether they are a reflection of the truth, are the most memorable and exciting ones as they portray a speaker determined to communicate his views even at the risk of losing friendships and relationships.

President Rupiah Banda describes a Mwanawasa who is moulded by his law practice. He stated that Mwanawasa demanded for evidence when you gave him a report about a matter or a person. These comments seem to summarise many people’s view that characterise Mwanawasa as being influenced heavily by his law practice and he dealt with matters like he was in a court of law.

Mwanawasa’s views about Chiluba and Zimbabwe

Mwanawasa’s interesting comments are about the two subjects that made him famous with the West. The Chiluba and Zimbabwe issues! He strongly parries allegations that he was doing and towing a donor’s agenda when he embarked on the two programmes.

He goes to a large extent to show how he loved Dr Chiluba. He stated that the fight against corruption had alienated him from Chiluba who he regarded as a dear friend who rescued during periods of his life.

His conflicting personality comes to the fore when he discusses and defends the reasons and circumstances that forced him to pursue Chiluba. He felt that he treated Chiluba better than (Chiluba) had treated Kaunda.

On Zimbabwe, Mwanawasa discusses with pain the difficulties he faced on the position he chose to pursue despite the clear stonewalling he faced from his colleagues. SADC heads of state chose to treat Mugabe with kid’s gloves under their policy of Silent Diplomacy.

The regional leaders refused to publicly condemn Mugabe’s undemocratic practices even when the principle of SADC demanded so. Mwanawasa appeared naive especially when he became SADC chair where he chose to issue unilateral and condemnatory statements against Mugabe even when the past record of his colleagues is well known on the matter.

Mwanawasa met the wrath of a well-orchestrated propaganda machinery of Mugabe when he chose to invite Morgan Tsvangirai and attempted to accord him access to the emergency Heads of State Summit in Lusaka. Whatever the case, this meeting was a summit of heads of states and Mwanawasa in his usual way fell back on his law practice, and tried to give ‘both sides’ a chance by inviting Tsvangirai so that he could state his position too!

Mwanawasa recounts how he felt betrayed by Thabo Mbeki when Mbeki ‘supported’ him on the phone but refused to restate the same position in the meeting.

Mwanawasa only received unequivocal support from Botswana’s President, Ian Khama who suffers similar constant accusations that he is an imperial pawn.

The book however descends to a level of patronising towards the end when it steeps into material only good for memorials. Maybe this can be forgiven as this is a section for the author’s epilogue and appendix.


When you strip away the prejudices against Amos and The Post, you realise that this is a good book and a worthy investment. This was Amos’ own initiative though it rides extensively on the infrastructure of The Post. The Post and Mwanawasa had an uncanny relationship where the paper formed part of Mwanawasa’s strong core of allies.

Amos’ narrative style has distinguished itself and the book makes good reading. It meets international packaging and presentation standards. Though the volume is small (296 pages), it was a serious attempt to do a good job.

Some people felt that The Post or Amos can only white-wash Mwanawasa’s legacy but the contents of book betrays those feelings and distinguishes itself as a scholarly piece.

Although it leaves out most of the criticisms Mwanawasa faced vis-a-viz, his 2001 election victory, the constitution-making process, his own corruption allegations, and the strong but invisible hand of Maureen in his presidency, the issues appear left out not deliberately but because the subject demised midstream.

Amos’ fair and objective approach of including and balancing Mwanawasa’s view with those affected gives you an impression that this was not a piece designed for propaganda but a book competing for worthy attention.

He bothered to get the views of Ms Ann Ziba (Mwanawasa’s first wife) and Michael Sata. Mwanawasa spoke strongly on the issues affecting these persons.

For example, on the subject of the fight against corruption and a matter that seems to be Mwanawasa’s notable legacy, Amos did not get Chiluba or his views in the book, but uses excerpts of Chiluba’s interview to M-net’s Carte Blanche, as a way to balance out Mwanawasa’s views. Although Amos did not get the co-operation of Chiluba on his book project, he should have spoken to or sought the views of Faustin Kabwe, Richard Sakala, Katele Kalumba, Stella Chibanda or any of the generals who suffered the brunt of this fight and are known victims of Mwanawasa’s central policy. This could also have countered those views spoken by Mwanawasa himself, Mutembo Nchito and Mark Chona.

The book is but pricy. Similar works of international standing such as biographies for Bill Clinton, Hillary, Nelson Mandela and Thabo Mbeki are cheaper in comparison. This a local book though printed in South Africa, therefore we are expected to obtain it fairly cheap. I might not be privy to the costs that were sunk in this project but many keen readers have commented about the high price.

Amos has dedicated this book to freedom of speech and expression. I hope my views will be respected!

Tuesday, 22 September 2009

Mine Watch (Western Province)

Mines Minister Maxwell Mwale informed Reuters this week that Mining giant BHP Billiton will next month start exploring for copper, gold and silver in Western Province. The story appears to confirm a similar report from ZANIS last week.

New era of diaspora engagement? 2nd Edition

The President has thrashed out further details of what this "new engagement" with the diaspora may look like. In a speech to Parliament last week, he confirmed earlier reports regarding the Diaspora Desk and the proposed diaspora framework :

"Mr Speaker, following the presentation by our citizens in the diaspora at the National Indaba held earlier in the year, I have decided to set up a liaison office at State House to deal with issues related to the diaspora. In addition, I have directed the Minister of Finance to work with the diaspora to facilitate their participation in growing the economy, through investment in projects of their choice. From the many meetings I have had with Zambians Abroad, I am convinced our people wherever they may be are proud Zambians and we should embrace them as they wish to participate in the building of our economy".
Speaking in New York this week, the President emphasised an area that many Zambians abroad are keen to see some improvement - land acquisition :
He [President Banda] said government was devising ways of easing the process of acquiring land, especially by Zambians living abroad. He said he has since advised the Minister of Finance and National Planning Situmbeko Musokotwane and the Minister of Lands Peter Daka to find ways of making the process of acquiring land uncumbersome. President Banda said land was very valuable hence Zambians, regardless of where they live, should acquire pieces of land for agriculture and other investment. He urged Zambians living abroad who wish to apply for land to specify where they would want to acquire land.

Monday, 21 September 2009

FDI and Taxation

A new paper examines how different public policies affect the level of FDI in developed and developing countries. Particularly of interest to the discussion on this website is the relationship between FDI and taxation. The paper finds that "FDI is sensitive to host country taxation in developed countries, but not in developing countries". This is essentially a confirmation of the Chang critique. The upshot of the paper is that governance and infrastructure improvement should come before obsession with reducing taxes in the name of attracting FDI.

RB on media privatisation..

I wish to inform this House that my Government is considering a policy shift with regard to media ownership. My Government is assessing the possibility of considering privatising some of the state owned media organisations. This decision will help in enhancing competition in the media industry.
A very progressive stance from President Banda and is in line with what the Zambian Economist has been calling for a long time (here, here, here and here). The Zambian public have a window of opportunity to lobby GRZ heavily to see this is done. The government media may oppose this move because they fear job losses, but all lovers of freedom must get behind this possibility.

Update (23/9/09) : Support from the Zambian Union of Journalists.

President Banda : Parliament Speech Transcript

The full transcript of President Rupiah Banda's speech to Parliament on Friday, 18 September 2009 :
President Rupiah Banda : Parliament Opening Speech

Girl child education and transport..

It is estimated that only 20 percent of children who enter primary school in rural Zambia eventually complete Grade 12. The main reason for this is the long distances they must travel to and from school. Girls like Chisulo face the additional risk of being raped en route to class. "Some children walk up to 20 kilometres each day to school and back; in all they spend more than five hours on the road. During this time they are open to verbal abuse, insults and even physical attack if they are girls," Zambia's Deputy Minister of Education, Clement Sinyinda, told IPS.
Excerpt from this recent IPS article that largely reinforces the arguments made on one of earliest posts - Looking beyond Mwabanomics.

Sunday, 20 September 2009

Rural - urban drift, 3rd Edition

In a previous post, it was positively asserted that :

Rural urban drift by itself is neither good or bad. In fact, I would go as far as to agree with most urban economists that urbanization and economic development are intimately related, and the concentration of resources – labor and capital – in our cities is a part of this process. To the extent that people move from rural areas to urban areas in response to market signals, there is no reason for us to worry about the rural urban drift. However, the problem might be with respect to unpriced externalities e.g. pollution, road congestion and epidemics. The right policy response is therefore to price these things (through an appropriate urban tax), and allow the rural urban drift to flourish. The problem of course is how to set such a tax properly.
Well, a new paper reinforces these arguments further, positively stating that urbanisation is good for poverty reduction. More importantly it provides some interesting policy prescriptions to ensure that the rural-urban relationship is a win-win :
Using data on Indian districts between 1981 and 1999, we find that urbanization has a significantly poverty reducing effect on surrounding rural areas...The findings suggest that most of the poverty reducing impact of urbanization occurs through second-round effects rather than through the direct movement of rural poor to urban areas..The results suggest that the effect is causal (from urbanisation to poverty reduction), and that failure to control for causality bias the coefficient of urbanisation downwardly. In our preferred estimations, we find that an increase of urban population by one fifth determines a decrease of between 3 and 6 percentage points in the share of rural poverty.

These poverty reducing effects appear to apply mostly to rural poor relatively closer to the poverty line. Although the very poor do not seem to be negatively affected by urbanization, they are not able to reap the benefits of such a growth. These findings may bear a number of potentially important policy implications :
  • First, they may help re-consider the role of public investment in urban areas for poverty reduction. In fact it is a popular tenet that investments in developing countries need to be concentrated in rural areas in order to reduce poverty, as the poor in developing countries are mainly concentrated there...However, investments in rural areas are often very onerous as substantial resources are needed to reach a population which is scattered around vast territories. To the extent that urbanization may have substantial poverty reducing effects on rural areas, urban investments may become an important complement to rural ones in poverty reduction strategies.

  • Second, our findings run counter the popular myth that rural-urban migration may deplete rural areas causing them to fall further behind. The relatively low rate of urbanisation of India itself may also be due to public policies which have not facilitated (and in certain instance even constrained) rural-urban migration... At the very least, this paper questions the appropriateness of this bias against rural-urban migration.

  • Third, to the extent that the benefits from urbanisation do not spill over to the very poor in rural areas, specific actions may be needed to facilitate these rural dwellers to enjoy the benefits of urbanisation. Examples of these may include developing the types of skills useful for an expanding urban sector; or the provision of capital to cover the fixed costs of rural-urban migration.

When property rights don't help..

An interesting conclusion from a new paper that examines inequality in developing countries :

We find that property rights significantly increase the level of income inequality in the vast majority of developing countries, especially in low-democracy political environments. Suggesting that institutions in these economies tend to serve the interests of a minority. The inequality-increasing effect may be counterbalanced only in systems which are able to develop sufficiently inclusive political institutions. As the democratisation process unfolds, this effect should be reduced, albeit to a limited extent, implying that more political equality modifies the functioning of institutions so to ease economic inequality. The role of democracy seems to be an ‘indirect’ one and is channelled only through the property rights system. In fact, we find no evidence that democracy affects inequality by moderating the effect of financial development, education and asset inequality. Our results seem to support the view that, in the last decades, institutional arrangements in most developing countries have worked according to the interests of dominant groups, thereby not granting opportunities to lower classes.
This is essentially the story of Zambia since 1991 thanks to the IMF / World Bank led reforms and their preoccupation with "private property". Economic liberalisation in the absence genuine transfer of power to the people through fundamental democratic reforms has proved Zambia's undoing. Successive governments have continued to concentrate power in the hands of the few and provided key state resources to domestic and foreign friends. The latter are particularly crucial as key financiers of elections.

Instead of a true level playing field that Zambians prayed for in 1991, what they got was a new system founded on a false liberalism that, to borrow from Van de Walle, "allowed corrupt elites to mobilize political support via clientelism and introduced patrimonial logic in the state bureaucracy, leading to the destruction of the capacity of the state and creating an environment of unpredictability…".

The point is not that life was rosy prior to 1991, but that Zambia moved from one extreme of poor governance founded on socialism to another founded on false liberalism. What the country need was economic and political reforms going hand in hand. It is not that economic liberalism was wrong, but that political liberalisation was missing. In the absence of such liberalisation, Zambia should have opted for a much slower pace of economic liberalism. The two must go hand in hand.

Linking Zambia (Barotse Times)

The Barotse Times is a community paper in Western Province.

Blindspots (Rupiah Banda)

"The removal of windfall tax will not lead to loss of government revenue as the variable tax still captures any windfall gain that may arise in the mining sector"
President Rupiah Banda ignoring common wisdom of tax collection. Although many agree that theoretically the profit variable tax can go some way in capturing the necessary revenue from higher copper prices, a windfall tax is easier to implement. It is also easier for the public to check how much revenue government is getting in its coffers. With a profit variable tax it is an accountant's job! Multi nation companies love profit variable taxes because it is easy for them to hide their profits through inflated costs and so forth. Simply put, the mining companies have smarter accountants than the Government. This is why the mining companies have been pushing for removal of the windfall tax. They know they'll pay very little.

More importantly, the President is alone in thinking the current situation is ideal. Only yesterday, the European Union called the current situation "depressing" and asked the Government to review its position by increasing the level of tax and improving collection. Simpler taxation mechanism are key to improving collection.

Regulating media bias...

A timely article that explores the two sources of media bias - political and commercial. The piece argues that advertising has seriously interfered with the quality, accuracy, and breadth of content and programming in the media. It calls for vigorous competition in media markets and public funding of informative media as a public good. The article though written for the European audience has useful lessons in the Zambian context, as we debate media regulation. The question is not so much whether regulation is needed or not, but what is the nature of the problem we are trying to solve and by extension what mechanisms are best placed to deal with it.

Regulating for an independent media: The problems of political and commercial bias, Matthew Ellman & Fabrizio Germano, VOX EU, Commentary :

There is a crisis in media and journalism, and policymakers have to tackle both political and commercial influence in the media.

Political bias has been thoroughly analysed in the economics literature, but commercial bias has received markedly less attention than it deserves. For decades, commercial interests delayed public awareness of tobacco health risks. The literature on tobacco and public health contains the most systematic evidence. Health risks went essentially unreported in the mainstream press for decades (Baker 1994;Bagdikian 2004).

Reporting on climate change and its causes suffered similar delays. More recently, some critics are suggesting that business interests (especially of insurance and pharmaceutical companies) are impeding an informed and balanced media debate on healthcare reform in the US. Others claim that a truly independent media could have helped to avert or mitigate the current financial and housing crises.

In a recent article, we show how advertising can seriously interfere with the quality, accuracy, and breadth of content and programming in the media (Ellman and Germano 2009). Biased content is most likely when competition amongst media outlets is limited or when advertisers are large and can threaten to withdraw their advertising business from the media. The analysis extends to media dependence on any business or state actors that can substantially affect media company profits.
Analysing the delicate interaction between advertisers, financiers, media outlets, and media audiences within a two-sided markets framework generates new insights for policymakers. Our work points to the need for independent media and makes the case for promoting competition and public funding.

Mechanisms of influence

There are two basic mechanisms, beyond direct ownership, through which businesses can distort media reporting. First, the media earn a share of advertising surplus and can therefore benefit from making advertising more effective. Frequent reporting on cancer lowers returns to tobacco advertising. Reports linking carbon emissions to global warming may put off viewers from buying fuel-intensive cars. Dumbing down appears to enhance most types of television advertising.

How far these advertiser preferences influence media outcomes depends on the structure of the media and advertising markets. There is a subtle interaction between the two sides – advertisers and readers – of media markets: even if all advertisers want the same distortion, increased advertising can actually reduce distortions, because the growing advertising surplus leads newspapers to compete more intensely for each reader. This result provides strong support for regulation to maintain competition.

Second, large advertisers can influence even competing media outlets by threatening to withdraw their advertising; numerous small advertisers can exert influence if they share a common interest and can coordinate (e.g., when represented by an advertising agency). As a result, media competition alone is not always sufficient to prevent commercial media bias.

Trends and current media difficulties

The global financial and economic crises have taken away attention from another crisis – the crisis in media and journalism which pre-dates the others and is now deepening and accelerating. Important newspapers around the world have been shutting down, while others file for bankruptcy or are on the verge of doing so. US newspapers have been particularly hard hit – a recent Pew study shows that 15,000 US journalists lost their jobs in 2008. The European Federation of Journalists warns of similar concerns in Europe (Phillips, 2009). Given the vital importance of the media, this problem deserves urgent attention.

The simplest response to media collapse – allowing media companies to merge – is unwise. Some media economists disagree, but their view derives from focusing on ideological, especially demand-driven, bias, where market concentration is somewhat less of a concern. Our research underlines sharply the need to maintain vigorous competition. The hope that the internet by itself will save journalism is not convincing either. The internet presents significant threats as well as important opportunities. Websites permit individuals to reach potentially vast audiences, but there remain important fixed costs, such as in building and maintaining a reputation for quality and breadth. The combination of high fixed costs and minimal variable costs lead some experts to predict more severe market concentration in the mass audience segments than in traditional media.

So far, media providers on the web have had difficulty getting audiences to pay for news; both subscription and micro-payment models have mostly failed. Advertisers are concerned that internet users are less receptive to news-bundled online advertising, and newspapers have lost classified advertising to specialist websites like Craigslist. To add to the troubles, telephone and cable companies are now seeking to extract greater profits by charging content providers for audience access. Such departures from “net neutrality” are hotly contested. A strong form of net neutrality is necessary if the internet is to fulfil its greatest promise; that of a potentially immense diversity of sites that can be created and accessed by anyone from anywhere.

The future development of the internet remains an open question, but it is sobering to recall that the hopes for radical improvements from an earlier technological innovation – radio – went largely unrealised.

Policy recommendations

Our analysis points to two types of policy response. First, it reiterates the importance of regulating for vigorous competition in media markets. Second, it calls for public funding of informative media as a public good, with designs that aim for maximal editorial independence.

The independence challenge is not unlike that faced by central banks. It is more complex and will require ongoing attention to rules and mechanism design, but creating a wide range of media alternatives at least guarantees a diversity of types of bias.

Some options include:

  • creating national endowments for journalism and media to ensure long-term financial independence
  • allocating funds to content-providers as a function of audience and/or via a range of voting mechanisms
  • expansion of the public broadcasting model to provide space and visibility for these outside content-providers
  • subsidising investigative reporting (at the local, national, and international levels) as well as professional training for journalists
  • subsidising media infrastructure (see e.g., Obama and Gordon Brown’s commitments to breach the digital divide)
  • removing advertising from public TV stations, as imminent in France and Spain. This reduces commercial bias of their content and pressures their competitors to reduce bias; it also shifts ad revenues to private media, complementing plans to subsidise media consumption and media entry.
Ackerman and Ayres (2009), Cohen (2009), and Lambert (2007) discuss these and related proposals in depth.

Doing nothing or reducing media competition (deregulating) in response to the current financial straits of our media is definitely the wrong answer.

Ackerman, B., and I. Ayres (2009), “A National Endowment for Journalism,” The Guardian, 31/08/2009.
Anderson, S.P., and J. McLaren (2009), “Media mergers and Media Bias with Rational Consumers,” mimeo, University of Virginia.
Bagdikian, B.H. (2004), The New Media Monopoly, Boston: Beacon Press.
Baker, C.E. (1994), Advertising and a Democratic Press, Princeton: Princeton University Press.
Boykoff, M. (2007), “Flogging a Dead Norm? Media Coverage of Anthropogenic Climate Change in United States and United Kingdom, 2003-2006,” Area 39(4), 470-481.
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Cohen, J. (2009), “Reflections on Information Technology and Democracy,” Boston Review, 3 April 2009.
Curran, J. (2002), Media and Power, London: Routledge.
Della Vigna, S., and E. Kaplan (2007), “The Fox News Effect: Media Bias and Voting,” Quarterly Journal of Economics, 122(3), 1187-1234.
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Ellman, M., and F. Germano (2009), “What do the Papers Sell? A Model of Advertising and Media Bias,” Economic Journal, 119, 680-704.
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Hamilton, J.T. (2004), All the News that’s Fit to Sell, Princeton: Princeton University Press.
Lambert, R. (2007), “The Future of the News in the Digital Era,” Economic Affairs, June 2007.
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Phillips, L. (2009), “Emergency Call on EU to Save Journalism,” EU Observer, 25/03/09.
Reuter, J., and E. Zitzewitz (2006), “Do Ads Influence Editors? Advertising and Bias in the Financial Media,” Quarterly Journal of Economics, 121(1), 197-227.
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