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Saturday, 31 October 2009

FSP Reform, 3rd Edition

Reports earlier this week that Government will next year liberalize the importation and distribution of agriculture inputs in the country. According to FSRP Director Chance Kabaghe the "government will subsidize the inputs by printing vouchers that would be distributed through out the country so that agro-dealers could easily get the voucher representing a certain amount from farmers and cash them at any bank...the two companies that used to get government tenders to distribute fertilizers will have to compete with others agro dealers to get the tenders". We have previously discussed FSP reforms here.

Friday, 30 October 2009

Reflections on corruption

In the last three years of the Zambian Economist we have touched on a number of important areas. It occurred to me that for some of the more contentious issues, certain areas remain unexplored (or recorded). As such I thought it might be useful to review some of these topics on a monthly basis and see if we can plug some of the remaining gaps. This post focuses on the a key unrecorded gap on corruption – existing posts and previous exchanges on corruption, including our “corruption wars” series, can be found here.

A key feature that stands out in many discussions of corruption, especially in the mainstream Zambian media, is the tendency to treat corruption as homogeneous (or uniform). Very little distinction is often made between different forms of corruption, with commentators unconsciously veering from one typology to the next without much clarity. It is common to find commentator say “corruption is on the increase”, with full expectation that all readers fully grasp what is meant. It is true that in some instances, particularly on this website, attempts are made to distinguish between outcomes of corruption e.g. distinguishing between corruption that is hurtful to society in general and that which hits the poor most. However, in nearly all discussions on this site, the variety of corruption has not received much focus.

The failure to distinguish between forms naturally impact on the quality of the debates and the effectiveness of proposed solutions. Until we have a full view of the many forms of corruption and their associated impacts on society, we are not going to be clear in our retelling of history or indeed where the focus of policy interventions should be. It remains my fundamental belief that part of the reason why the fight against corruption has been ineffective is poor understanding in both government and the public on the nature of corruption, and therefore how best to tackle it.

The Laws of Zambia (ACC Act No 42 of 1996) defines corruption as “the soliciting, accepting, giving or offering of a gratification by way of a bribe or other personal temptation or inducement, or the misuse of abuse of a public office for private advantage or benefit”. This is a wide ranging definition, which suggests several vices that could feasibly qualify as corruption.

The most obvious form of corruption in Zambia is bribery. Bribes are usually offered to allow a smooth transaction to take place. Politicians are often derided for suggesting that tackling corruption must start with each and every Zambian. What they usually mean is that in many sphere of life most Zambians pay one bribe after the other. If Zambians could start saying NO to paying or accepting bribes that would eliminate bribe. Not a very helpful approach because it turns the issue of bribe into a moral question whose answers go beyond conventional policy tools. It is true though that one cannot get anything done in Zambia rapidly without some form of underhand payment. Private bribes are always difficult to gauge, and indeed there’s much debate over whether they matter at all. However, there’s a lot of statistics on bribing public officials. In the 2007 World Bank Enterprise Surveys, nearly 15% businesses expected to make informal payments to public officials, while 28% expected to make gifts to secure government contracts.

The natural question of course is whether bribes are damaging to our economy. The empirical evidence is somewhat mixed. What we can say with some confidence is that the idea that bribery is beneficial is misguided. While bribes in a very narrow sense can be seen as a lubricator that may speed things up and help entrepreneurs get on with wealth creation in specific instances, in a broader sense, these must be considered as an obstacle to development. This is mainly because the cumbersome procedures that bribes are supposed to help overcome are usually created and maintained precisely because of their corruption potential and substantial real resources may be devoted to contesting the associated rents. This leads to pure waste and misallocation of scarce resources.

The implication appears to be that the best way to tackle the culture of bribery is remove the “opportunity” to bribe. At the practical level it means that if we want to stop our police officers from being corrupt, we must move rapidly to eliminate the many pointless road blocks that permeate our society. Similarly, we must remove excessive legislation that provides opportunities for businesses to bribe. A lot of empirical evidence demonstrates a strong relationship between graft and various measures of excessive regulation e.g. the number of days to open a business. It’s well known of course that one of the things that encourages informality and keeps small firms from developing is excessive legislation. The only way for them to keep doing business is through illegal activities because the route to formality is peddled with higher taxes and other excessive requirements.

A key challenge of tackling bribery of course is detection. The same cannot be said for the other evil of corruption – public theft. The general public may not know which official has greasy fingers until they are caught, but they can sense when public money has been stolen. The most popular form of this vice is the so called “grand corruption”. The Task Force on Corruption was predicated to investigate the alleged grand theft committed by the Chiluba Administration. The “grand” in the end has not quite fitted the original billing as the main suspect Second Republican President Frederick Chiluba was subsequently been acquitted of more serious criminal charges. What remains on the table is a civil case involving $40m, which is also under challenge. Many ordinary Zambians appear to have “believed”, rightly or wrongly, that billions of dollars had been stolen but thus far nothing has been proven. It is left to the historians to assess what truly transpired. In recent months the theft charges have shifted to “administrative robbery”. The recent Ministry of Health “Kapoka scandal”, ZAWA, RDA, Legal Aid Board and many other cases have highlighted significant levels of administrative theft perpetuated by supposedly loyal civil servants.

These public theft cases have been met with significant uproar from ordinary members of the public, much more so than the “systematic bribery” which perhaps occurs at a much larger scale on a daily basis. As we have noted this may be due to poor detection, but it might also be attributed to issues of injustice. Zambians may be willing to accept / pay bribes because it is embedded in our culture, but public theft appears to run counter to the principle of natural justice. It explicitly violates access to things which are inherently our right. By stealing, the official is robbing money away from the poor in a most explicit way than bribery does. It is this feature that causes much consternation within our society.

It should be noted of course that at the surface there appears little correlation between public theft and economic development. Therefore, we must dig deeper and focus on those elements of public theft which are most damaging. This is likely to be capital flight. Where money has been stolen and siphoned out of the country, we have significant cause to worry. Donors also have significant cause for worry because much of the money shipped abroad appears to directly correlate with higher aid payments. The upshot of all this is that in addition to measures that government can take to improve governance, a concerted approach requires deeper engagement by donors and foreign partners in helping recover lost funds.

Sometimes of course money stolen from public funds is not simply whisked abroad, it is used to ferment other forms of corruption – a good example of this is political corruption. Since the dawn of multi-party politics Zambia has witnessed an unprecedented rise in political corruption. Increased electoral competition has given many social actors especially chiefs unparalleled opportunities to emerge as "kingmakers". Securing support from such “kingmakers” does not come cheap. It often involves paying significant sums of money, investment in chiefs’ places, new vehicles and other things designed to capture their support.

During the 2008 presidential bye-elections, Chief Mwene Kahare of the Nkoya people was rounded up with other chiefs, and found himself in a not so expensive lodge, he was quick to express utter disappointment at the then MMD presidential aspirant Rupiah Banda: "Those who are always flying, the MMD, had to dump us in those lodges in Kaoma and we were even starving....In the morning, it was just an order from the District Commissioner's office that 'you take them back'. I feel that was very disappointing". It appears the price of political support was not cheap, and not just for chiefs. Mr Banda achieved fame in Katete not co-opting chiefs but for alleged “food based corruption”. The then Vice President found himself under severe condemnation when pictures surfaced showing him distributing food to recipients under an effective "cash based programme", during his campaign trail.

The Katete incident is probably the high point of exposing alleged political corruption. In general, buying the electorate either through chiefs or directly has not achieved the same prominence of disgust as other corrupt vices. This may be attributed to several reasons. First, the seasonal aspect of political corruption means that it is not continuous but occurs when an election is called. Secondly, the shackled state of the Government media means that we don’t hear as much coverage as we would like. Thirdly, there’s a poor understanding of the extent and scope of political corruption. Fourthly, the lack of enforcement mechanisms to bring it to bear makes for a rather despondent subject. Finally, related to the first and fourth points is that political corruption may not necessary lead to rampant “economic” negatives. If one considers “food based corruption”, it’s quite obvious that in the short term the voter gains food. Indeed the optimal solution might be to allow all parties to dish out food as they please! In the long term of course this would clearly undermine governance either through an “arms race effect” (race to the most corrupt deviation) or through hoarding of supplies by the party in government in order to give it away at a latter stage. The real problem of course is that in so far as this form of corruption distorts individual voting patterns, it undermines electoral institutions and ensures that poor leaders remain in power.

A key determinant of successful electioneering is campaign finance which is usually sourced from multinational companies that lobby policy changes. In its purest form lobbying is perfectly legal as it simply seeks influence legislators to see the merit of a given policy proposal. To some extent we all lobby politicians all the time. The problem is the specific form of lobbying which allows people with particular interests who represent a minority to gain special access to government, and through monetary contributions and favors, develop controversial relationships with government. This constitutes a form of back door corruption, which unfortunately in Zambia is very prevalent.

One of the interesting questions we face as a nation as we chart our way forward is the extent to which the supposed reduction in public theft during the Mwanawasa years (not fully supported by real evidence beyond a few high profile cases and public utterances), has simply been substituted by more lobbying from foreign dominated firms. There's certainly influence peddling going on in our country by many multinational firms, as recently presented in a new paper, which has shown that lobbying has affected industrial competition and ultimately productivity. Add to that the fiasco of the government failure to effectively implement a fiscal regime for the mining industry, in face of very strong arm twisting (and subsequent abolition of the windfall tax). Mining has always been a sphere of much lobbying at much expense to our poor people. The report For Whom The Windfalls? catalogues the clouds that hangs over the now abolished Development Agreements (DAs), which to date has not been lifted through a credible public inquiry.

DAs sympathisers would of course say that the problem was not lobbying, but poor mismanagement on the part of government. The argument is that often public officials suffer from significant asymmetric information which puts them at a disadvantage when negotiating a deal. I am reminded of Edith Nawakwi’s plea of such ignorance in justifying the sale of mines at giveaway prices “We were told by advisers, who included the International Monetary Fund and the World Bank, that not in my lifetime would the price of copper change. They put production models on the table and told us that there was no copper in Nchanga mine, Mufulira was supposed to have five years life left and all the production models that could be employed were showing that, for the next 20 years, Zambian copper would not make a profit. [Conversely, if we privatised] we would be able to access debt relief, and this was a huge carrot in front of us - like waving medicine in front of a dying woman. We had no option [but to go ahead]”. No one seriously believes Ms Nawakwi’s poor attempt to shift the blame on the IMF / World Bank, but it does illustrate that often workers are only too ready to plead incompetence rather than the more serious charges of conniving with foreign forces to defraud Zambia.

In recent months, similar challenges have emerged for external observers or law enforcement agencies in being able to distinguish between corruption and pure mismanagement. Earlier this year the Auditor General “revealed that the Zambian mission in Brussels [in 2007] spent over K1 billion on school fees, but the payments were not supported by invoices and receipts”. This clearly is a case of not following proper management practices, but it may also be the case that such practices are deliberate in order to justify theft of public funds.

A more celebrated case relates the famous purchase of hearses, which were allegedly bought at an inflated price of $29,000 per hearse when the actual price was only a third of the amount quoted. The late Minister Benny Temashimba after much pressure from political opponents declared : "I believe that there were irregularities in the transaction and if it is proved that the price of the hearses was not inflated and that the terms of conditions were adhered to, I will resign as minister on principle". The case has gone quiet and the public still awaits to understand whether this is a simple oversight / ignorance by Local Government civil servants or a more elaborate plan to defraud the State of Zambia,

Financial reward is not the only motivation for corrupt activities, other considerations usually come into play. One such vice is nepotism, the favouritism granted to relatives or friends, without regard to their merit (“tribalism” probably falls within the scope).

Town clerks are not headline makers, but Livingstone Town’s George Kalenga hit news headlines in 2007 when in a letter to all heads of departments at the council, warned : “I have observed for quite sometime now that the phenomenon of employing relations in this council, especially those falling in the category of ‘casual’ is on the increase….This sort of scenario is to a greater extent contributing to the poor performance by the said category of employees who are supposed to carry out specific duties because of our personal attachment to them”. What followed was an intense debate on the scourge of nepotism.

However, until recent times “nepotism” was rarely discussed in the press. Everyone of course knew it was there but it was not a factor of political dialogue.This is perhaps surprising because it is arguably the most prevalent form of corruption in our society. A fact which is unsurprising given the traditional nature of our society where family relations often dictate economic and social arrangements in our villages. One perhaps can go even further to say that the prevalent nature of nepotism may well be a function of undeveloped impersonal forms of exchange. The market has not fully taken hold at every level of our society and thus instead of competing on merit in every sphere, we are tied to relying on family members, etc.

In the broader scheme of things, Mr Kalenga’s sentiments appears to coincide with a growing realisation in the Third Republic that the destruction of the “One Zambia, One Nation” motto under the Chiluba Administration, was giving way to an undercurrent of growing regionalism which appears to have culminated in the emergence of the so called “family tree” under President Mwanawasa. The late President achieved some positive things during his tenure, but undoubtedly many will also remember his legacy, rightly or wrongly, as nepotistic. Interestingly, when quizzed publicly over his nepotistic tendencies, President Mwanawasa’s rehearsed rhetorical response was: “do you guys expect me to appoint or help my enemies?” No, Mr President, but we do expect you to appoint people on merit. Since his death Mwanawasa’s allies, such as George Mpombo and Amos Mapulenga, have moved swiftly to “clarify” this image.

Whatever the truth behind Mwanawasa’s appointments, it is clear that nepotism is prevalent in our society. In many ways it may be worse than other forms of corruption because it substantially weakens lines of authority and promotes incompetent people over those who are better qualified, inevitably turning the institutions of government into personal toys. More worryingly, it does not just misallocate resources but it also inevitably discriminates against capable individuals, in favour of less competent family or tribal relations. Unfortunately, its ‘quiet’ nature also makes it much more challenging to tackle. This must change if we are to make substantial headway.

So what are we to conclude? I think as one reflects between the many vices of corruption, it becomes readily clear that as a nation we face significant challenges in eliminating corruption. We should be upfront that corruption will always be here. Nepotism will always exist, so will public theft and other banes. The question is one of scale. In our reading of history and the quest to develop mechanisms for combating this social evil it is vital that we deepen our understanding of the complex issues involved. Blanket assessment of corruption makes headlines, but it does not help move the country forward.

Fighting corruption...

An interesting feature of the Sierra Leone approach to fighting corruption :

The fight against corruption in Sierra Leone has taken on a new face. Government and civil society are now working together to stamp out rampant fraud.... In the past, the ACC was been described as a "toothless bull dog". But under the new regime of President Ernest Koroma – who came to power on a ticket of zero tolerance - it has been recovering its teeth. Whent Koroma’s regime took power in 2007, it was quick to review the Anti Corruption Act of 1991 and strengthen it with a new one last year.

The new act gave the ACC the power to send cases directly to court, for the first time. Previously the ACC was required to send all their cases to the Attorney General for approval first. As a result many cases against top government officials perished on the table of the Attorney General who never prosecuted these matters.
I have previously dismissed adopting this approach in Zambia for the Auditor General because it is "likely to be costly and would cut across the responsibilities of the Director of Public Prosecution and the Attorney General". I suppose if I was being consistent I would have to apply the same argument to the ACC. In addition, I am a bit skeptical that this really does work. As I have previously noted, bringing cases to the court is one thing, ensuring they don't get held up in court and serve the appropriate sentence is another.

Ministerial Statement : Abolition of Task Force

Ministerial Statement made to Parliament on 29th October, 2009 by His Honour The Vice President and Minister of Justice, Hon. George Kunda, SC, MP on the Task Force on Corruption.
Ministerial Statement on The Task Force on Corruption

Thursday, 29 October 2009

ERB Press Release : New Fuel Prices

The Energy Regulation Board of Zambia press statement on new fuel prices on all petroleum products :
Cost Plus Oct 2009 Price Review Press Statement

IMF - Zambia Watch (October 2009)

Statement at the Conclusion of an IMF Staff Mission to Zambia
Press Release No. 09/373
October 28, 2009

An International Monetary Fund (IMF) mission visited Lusaka October 15–28 to conduct the discussions for the 2009 Article IV consultation1 and for the third review of Zambia’s Poverty Reduction and Growth Facility (PRGF) with the IMF. The mission met with the Minister of Finance and National Planning, Hon. Situmbeko Musokotwane; Governor of the Bank of Zambia, Dr. Caleb Fundanga; other senior officials; and representatives of the business community, labor unions, civil society, and Zambia’s cooperating partners. The mission is grateful to the authorities for the fruitful discussions and warm hospitality over the last two weeks.

At the conclusion of the mission in Lusaka today, Mr. George Tsibouris, mission chief for Zambia, released the following statement:

“I am pleased to say that we have reached ad referendum understandings on macroeconomic and structural policies for 2010 that would pave the way for the completion of the third review under Zambia’s PRGF arrangement with the IMF.

“Against the background of the global economic crisis, the Zambian economy has shown considerable resilience, and economic growth is now expected to exceed 5 percent in 2009. Mining and agriculture have shown strong gains in output; nonetheless, there have been job losses in mining and some financial difficulties in the agricultural sector. Inflation is moderating, assisted by a softening of food prices and a limited reversal of the earlier depreciation of the Kwacha; the revised inflation target of 12 percent by end-2009 is well within reach. The external position has also strengthened, both because of the earlier-than-expected recovery in copper prices and the exchange rate-related compression of imports. Zambia’s reserve position at about US$1.7 billion is now stronger than it has been in almost four decades, thanks in part to the recent Special Drawing Rights (SDR) allocation of US$629 million from the IMF.

“While the overall performance of the economy has held up well, government revenue collections, particularly of import-related taxes, have fallen short of expectations. In order to preserve targets for domestically-financed capital spending, the government has accessed some financing from the Bank of Zambia. There have also been delays in the disbursement of donor aid, both budget and sector support, which has further hampered government’s ability to meet spending targets. The government is to be commended for its handling of fiscal policy in 2009.

“The economic program for 2010 is premised on a budget, now being discussed in Parliament, that maintains an appropriately supportive stance in a resource-constrained environment. Monetary policy aims at containing inflation while providing adequate credit for the private sector. The outlook is for some pick up in economic growth and a further easing of inflation into single digits by the end of the year. The external position is expected to remain strong.

“Looking ahead, Zambia faces a number of challenges that need to be addressed if robust economic growth is to be sustained over the medium term. Key among these is the need to increase fiscal space for infrastructure and social sector spending to support the diversification of the economy and poverty reduction. This will require both the mobilization of additional domestic resources by reversing the downward trend in tax revenue collections seen in recent years and, equally importantly, by ensuring that public spending is cost-effective. Particular attention needs to be paid to the public sector wage bill, which currently consumes more than one half of domestically-generated resources, and could end up displacing other high priority needs.

“The IMF Executive Board is expected to discuss the third review under the PRGF arrangement and the 2009 Article IV consultation by late-December 2009.”

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.

The cost of a larger parliament (Guest Blog)

I have noticed that the news article by Patrick Jabani entitled “NCC Adopts New Electoral System in Zambia” recently appeared in both the Times of Zambia and The Post. In the article, Comrade Jabani has made a good summary of arguments for and against the adoption of Article 159(1) of the Republican constitution that is currently being crafted, which is intended to increase the number of Members of Parliament (MPs) from 150 to 280. [It is perhaps important to note here that the current membership of Parliament is actually 150 elected MPs + 8 MPs nominated by the Republican president.]

Unfortunately, the article does not address the cost associated with the proposed increase in the number of MPs.

In this regard, I wish to reiterate my initial position that Zambia cannot afford to implement the proposal that has been recommended by the National Constitutional Conference (NCC). There is really no wisdom in seeking to increase the number of constituencies when some of the existing constituencies cannot even generate enough tax revenue to meet the cost of maintaining their MPs.

It is unfortunate that such a recommendation is made at a time when tens of thousands of Grade 7 and Grade 9 students have continued to be spilled onto the streets every year, the healthcare system cannot meet the basic needs of the majority of citizens, the majority of Zambians have no access to clean water and electricity, the country still faces problems with garbage collection and disposal, a critical shortage of decent public housing has compelled so many of our fellow citizens to live in shanty townships nationwide, public infrastructure and services are still deficient, civil servants are still not adequately compensated for their services, and, among many other socio-economic ills, crime and unemployment are still widespread.

I have, therefore, found it necessary to provide some information about the cost of increasing the number of MPs from 150 (as suggested by Jabani) to 280. In this endeavor, I have assumed that the Speaker, Deputy Speaker, Chief Whip, and Leader of the Opposition in Parliament are remunerated the same as a Private Member in terms of salary, special allowance and utility; I have also assumed that the constituency allowance available to each MP is equivalent to that paid to a Nominated member in Zambian Kwacha (K) per year, and that there are no costs associated with personal-to-holder cars and other fringe benefits:

61,009,773 Salary
16,665,752 Special allowance
23,200,000 Utility
11,600,000 Constituency allowance
K112, 475,525 per MP x 150 MPs = K16,871,328,750.


K112, 475,525 per MP x 280 MPs
= K31,492,147,000.

The cost of additional MPs per year:
K31,492,147,000 – K16,871,328,750
= K14,620,818,250 (US$3,187,377).

It seems the huge allowances which members of the National Constitutional Conference are receiving have intoxicated them so much that they have become incapable of thinking about the catalogue of socio-economic woes which the government cannot address mainly due to the lack of financial and material resources.

Rather than increasing the number of MPs, we should actually have been considering the prospect of reducing the number and restricting their functions to legislative matters. Parliament would still be representative and able to function effectively as the legislative organ of our national government, with only 72 elected MPs, for example, so that 1 MP could be elected from each of the existing 72 districts.

If we cannot reduce the number of MPs, we need to continue to have a parliament with 158 members (or 150 as suggested by Jabani). Representation in the governance of the country by women and the youth, among others, can be achieved through appointments to Permanent-Secretary positions, and to positions in Cabinet and government agencies.

It is irresponsible and ill-advised for NCC members to think about representation without seriously considering the cost associated with it.

Our country’s meager tax revenues will not be sufficient to maintain such a large parliament and a highly bloated cabinet. And we cannot continue to borrow until we push the country back into the debt trap. Besides, donor countries too are not likely to continue extending a helping hand while we continue to misuse our meager resources.

There is a need for NCC members and the government to realize that donor countries do not have unlimited 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 funds.

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

By the way, MPs should not be involved in the implementation of development projects; this should be the function of government ministries and local authorities. Besides, the provinces are already saturated with such portfolios as district commissioners, provincial ministers and provincial permanent secretaries, all of whom are supposed to complement the executive branch of the government in the implementation of development projects. To reiterate, we need to restrict the role of parliament to legislative functions — that is, law-making.

Henry Kyambalesa
(Guest Blogger)

Wednesday, 28 October 2009

Zambia...the no tax economy

We know that Zambia is the low tax economy. But this revelation from Finance Minister Musokotwane shows how desperate we are to become the "no tax" economy :

“The reason for the revenue not coming from the mining companies is that we recognise that we have to allow them to recover the losses because they spent money to bring in equipment, things like hiring staff which all went up with the recent high international metal prices…so, we allow the companies to write-off losses against profits. I believe that at the moment, only First Quantum Minerals who operates Kansanshi has exhausted the right of that period to pay back the loans and are now in a position to pay normal taxes.”

Tuesday, 27 October 2009

Booming modern structures..

Zambia's property boom continues :

We are developing this project which is themed as the 'Copperbelt City' and it will be a mixed use development facility costing US $ 160 million and will comprise housing units, a 210 room hotel, 134 retail shops, six screen cinema halls and food courts, conference facilities among other structures. In fact this will be the largest single investment on the Copperbelt outside the mining industry...And our contractors shall soon move on site since ECZ has approved our impact assessment report but we are applying to government to give us the Investment Protection and Promotion Agreement (IPPA) because this is a huge investment and funding is already secured...
TGP Properties Limited, Phoenix Materials Chairman Phesto Musonda on the need to put up modern structures.

Should Indeni be privatised?

The Yes Camp:

"Indeni has failed everyone including general public and government, so the best way is to have the company sold so that the private sector can take over and stop inconviencing people every time the machinery breaks down at Indeni. Once the private sector takes over they will help the company to improve technology, and introduce innovation in the company for it to regain its viability"
- Gershom Musonda
(Centre for Elections and Government)
The No Camp:
The Private Sector Development Association (PSDA) has supported calls for government to become the sole owner of Indeni Petroleum Refinery Company. Association Chairman Mr. Yusuf Dodia noted that the Energy sector is one of the most important and sensitive sectors that requires attention through proper management. He explained that the proper management can only be achieved if government takes over the operations of the company with a considerable investment. He said that government should ensure that it invests by upgrading and rehabilitating the plant to meet the maximum safety standards.

Monday, 26 October 2009

The myth of a development parliamentarian..

"We have been told that opposition MPs from Southern Province have been boasting and telling people lies that they are bringing development to this province. Actually they come to our offices begging for help from us and when we help them they don't tell our people that it is government that is doing all these things"
Vice President George Kunda speaking in Southern Province earlier this month on why it is pointless to vote for the opposition. Obviously in Mr Kunda's mind "government" is all about the "executive" branch. The legistlature only matters when the representatives in question are members of the current administration. What he should have actually done is correct the misconception about MPs. The role of the MP is poorly understood, and it is certainly not as implied by Mr Kunda, to "deliver development".

The primary role of an MP is to vote on legislation and make laws on behalf of their constituency ("legislative function"). They also have an additional function of representing the views of their constituency to Parliament e.g. special problems they are facing which the executive branch has failed to address ("advocacy function"). It is not the role of an MP to bring economic development, since in a well functioning society such functions would be performed by an effective local government with appropriate support from central government. The MP's role is simply to ensure that the local preferences are fully reflected in national decisions. Once the MP brings the problem to the attention of the Executive, it is expected that they would follow through where they can. Mr Kunda (the Head of Government Business in Parliament) sees that as "begging".

Unfortunately in our country, the local government is non-existent, due to ineffective capacity and molestation by the Executive (e.g. through large unpaid debts). So the MP has assumed the de-facto role of a leader. MPs have absolutely zero levers to deliver development, besides the Constituency Development Fund, which has its own problems. In fact many spend their personal fortunes to appease their constituency ending up in bankruptcy.

I should also point that to the extent that voting systems define the extent to which MPs are "connected" to their constituency, we can expect that the balance between the "legislative function" and "advocacy" to vary from one system to the next. Under the current system we expect that MPs are significantly tied to local communities, but where you have a national Proportion Representation system, the "advocacy function" is slightly diminished. Incidentally, I have previously advocated a different system that supports greater role for chiefs (enhances their "advocacy function") within a stronger decentralised framework. Under that system the role of the MP would be purely "legislative". See A traditional approach to Zambia's development.

Intellectual Poverty (Gershom Musonda)

CEG Trustee Gershom Musonda says the two former Ministers should not force the ruling party to go for a convention as the party has stated before that it has no money to hold a convention. Mr. Musonda told ZANIS in an interview in Lusaka today Mr. Mpombo and Mr. Magande should know and understand that forcing a convention could result in the ruling party using public resources.
As reported by ZANIS. The extrordinary argument appears to be that Mpombo should not pursue intra-party democracy because it will force MMD to steal. The argument is not only morally wrongly, but its also illogical. If MMD will abuse state resources during the convention, as implied by Mr Musonda, what is stopping them from abusing those resources now? Mr Musonda appears to regard stealing for the purposes of the convention as a moral imperative. I disagree, thieves don't need to be "forced to steal" they just steal because they choose to steal. If MMD will indeed abuse public resources during the convention, it must follow that they are abusing them now. In which case, Mr Musonda should be focusing his energy on exposing such abuse not fighting Mpombo's push for intra-party democracy.

The politics of parliamentary seats

The map above (source) is useful in understanding how the balance of power might shift following NCC decision to increase the level of elected constituency MPs from 150 to 240 [the remaining 30 would be chosen through PR, with the President being able to nominate a further 10]. If the delimitation formula relies on density (as per Article 77, Constitution of Zambia 1991 (Amended in 1996), one would expect the power to shift urban area and the south [previous discussions on this here].

In fact this might explain why Pf President Michael Sata has not been pleased that the statutory delimitation exercise which was suppose to begin this year and completed next year has not started. This would certainly have altered boundaries substantially within the existing quota. With that in mind, it begs the question why the MMD has allowed additional seats (plus a PR element), since this would certainly force a new delimitation exercise, with potentially unfavourable consequences. One possibility might be that the MMD so far has been able to field candidates in every constituency. More parliamentary seats gives the opposition more territories to fight over and an extremely expensive process for individual opposition candidates. The Opposition has been quite disorganised over 150 seats, contesting 240 would require substantial improvement on their part.

One thing is clear, 2011 is going to be quite complicated in terms of the legislature. More on the new electoral system via The Post.

Sunday, 25 October 2009

Ministerial Statement : Total's Indeni Shares

Ministerial Statement made to Parliament on 23rd October, 2009 by the Minister of Energy and Water Development, Hon Kenneth Konga, MP on Government's acquisition of Total's Indeni shares.
Ministerial Statement : Acquistion of Indeni Shares

Biofuel powered Lufwanyama?

The Rural Electrification Authority is apparently set develop a bio-power generating plant in Lufwanyama. The bio- power will be generated using the by-products from the saw mills in the area. This appears to be the first bio-fuel project that is being directly championed by the REA. Previous announced projects have been private. It remains to be see whether this is merely an attempt to appease the locals after the stoppage of the Rural Electrification Programme. Something that has apparently angered local chiefs.

Finance for marketeers

An interesting report earlier this month that Zambia National Marketeers Association(ZANAMA) is now providing loans to its members to boost their businesses.

Saturday, 24 October 2009

Budget 2010 : Beyond Figures

The PWC Zambia assessment of Budget 2010 - a useful summary of key measures :
Budget Bulletin 2010

Friday, 23 October 2009

Soft aviation infrastructure...

Interesting comments from the Proflight Chief Executive, Anthony Irwin on aviation training :

“We are in a good location to provide auxiliary services to many airlines in the region, and Zambia has a pool of aviation professionals who were well trained in the 1970s and 1980s....Zambia Air Services Training Institute (ZASTI) has fairly wonderful facilities, but the institution has been terribly under-funded in recent times. I certainly believe that ZASTI could do very well because training is becoming a challenge for the industry...”
This essentially reinforces the case we made here. ZASTI must be considered as critical to aviation development. The key is to ensure that the institute is privatised to allow it to expand and grow. It has good staff and good students. We can become an exporter of pilots in the region if we made it private. That is the appropriate solution to the problem highlighted by Mr Irwin.

Thursday, 22 October 2009

Fictional ZAMTEL bidders?

The Zambia Development Agency today released the press statement on the ZAMTEL "bidding process", setting out that 8 companies have now prequalified :

Eight international companies and consortia have successfully prequalified to participate in the privatisation of Zambia Telecommunications Limited (Zamtel). The eight were among the 30 bidders who applied to prequalify in the partial sale of the telecommunications company after the Zambia Development Agency (ZDA) officially announced its privatisation in September this year.

These include Altimo Hodlings/Vimpelcom of Russia, Libyan LAP Greencom Limited/LAP Green Networks, Portugal’s Portugal Telecom, Telkom SA Limited of South Africa, UNITEL of Angola and two of India’s telecommunications giants Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited (MTNL).

The only problem is that no one seems to have told Russia’s Vimpelcom. The Chief Executive of the Russian fixed-to-mobile telecoms group flatly denied that Vimpelcom has ever been involved in a bid to buy Zamtel. Make that what you will, but it does not inspire confidence in the processn and once again raise profound questions over the integrity of the entire process.

A Memo to Zambia

Dear Zambia,

Many congratulations!! This week you turn 45. Since birth you have continued to be an oasis of peace in the midst of regional turmoil. You have never allowed your people to be defined by the region they hail from or their tribal descendants. Under the banner of 'One Zambia, One Nation' you have moved from one peaceful political transition to next. As you no doubt know, you and your children are now in markedly different position, than those who shed their blood for your freedom would have hoped. But even as relative peace and calm has continued to prevail, some of your neighbours may well pose the question – what have you done with it?

Your children are much poorer today than three decades ago. Although your economy has shown signs of stable growth in recent years, one in four of your children live on less than $2 a day. Like a forsaken bad mother, many of your children have run away from home and sought greener pastures, never to return. Your physical and human infrastructure is broken. You have been blessed with abundant water yet many of your children have no clean water to drink. You have much mineral wealth, yet your people live in housing conditions much worse than 19th century Europe. The Creator has blessed you with plenty of mineral wealth, copper, manganese, nickel, coal and yes many precious stones, but you have turned out to be poor steward, preferring to see your children suffer than ensure a proper return on your wealth. $10bn of copper revenues alone in the last four years, your have only seen less than $300m from that.

As I write, you have failed to provide reliable electrical power to your children. This week of your independence anniversary many of your people are running around looking for fuel. A visitor from another planet may be mistaken that your year is probably is 1809 and not 2009, for your economic thinking of late continues to be tribal. It’s within this context that I write you this short memo offering broad advice that you should reflect on, even as your children drink Kachasu to drown their independence day misery. But before we get there it is important that we first look through the mirror of truth. It should be plainly clear that your independence is an illusion. I say this not to denigrate the great things you have achieved but merely to state the obvious. For two simple reasons.

First, the idea that you can enjoy political independence without economic independence is an illusion. Political and economic independence are symbiotically linked. The reason for this is that 'political power' is derived from being able to determine your own choices and living according to how you want. Clearly as you continue to rely on someone else to put food on your Zambian children’s plate or forgive your debts or sell your resources at prices that someone else dictates in London, that person or country exerts political leverage on you through economic forces. I think you get the point, no need for me to mention China.

Secondly, and more worryingly, although some of your children in leadership undoubtedly enjoy individual freedoms many of your people suffer daily from social injustice. The voices of the weak are suppressed, and cries of mothers are never heard again thanks to the scourge of HIV and many other diseases ravaging our rural areas. Media freedoms are not immune. In this year alone, the world has looked in horror as you have allowed your leaders to continue persecuting journalists and quenching the anti-corruption torch. Where is a poor old woman going to run for justice, when the police forces only respond to bribes? Who will publicly dare report oppression when newspapers papers are used as mouth pieces to spread the propaganda of those in leadership? The Prophet Amos reminds us "let justice flow like a river, and righteousness like an overflowing stream". As a supposedly "christian nation" don't you think it is worth considering putting these words into action?

It is natural at this point for you to ask : What must I do? Am I eternally condemned to this fate? Is my destined already written? Will I always wallow in poverty? The truth is no one really knows. For you are both a victim of history conspired by 'great powers' and also that of the injustice of leaders you have chosen to lord over you. I fear when at the end of the age, your account is reviewed, you and your children will be found wanting because when history came calling to pursue justice for the poor and prosperity for all, you responded with corruption and poor governance. You have allowed your leaders to wield rods on the backs of poor mothers and orphans from Shang'ombo to Mpweto.

You may not guarantee a good future in this life for your grand children but you should strive to give them a fighting chance for the the next 45 years. You can start this very week, by focusing on three simple areas.

First, you need political and institutional reform. By this I mean reforms that seeks to overcome two key challenges. First, being able to institutionalise the system of government that diminishes the role of your leaders as rent seekers. Currently many of your leaders govern purely to enlarge their pockets. They have ransacked your treasuries and deposited significant wealth in Europe. Until you introduce processes that prevents them from doing so you will wallow in poverty. Secondly, strive to develop systems that are able to kick out incompetent and shallow leaders. This calls for contestable electoral arrangements. Your present leaders have governed for nearly two decades and overseen rampant corruption and the emergence of a vampire state that feeds off its own people. Yet your people have not been able to kick them out. Until the electoral system is more contestable and leaders can be hired and fired easily, corruption and malpractice will continue unabated. In short, both issues call for a strong constitution that guarantees freedom of press, strong rule of law, limits the powers of the executive, delivers a majority and more representative leadership, and would stand the test of time. Always remember that economic policies only work if you guarantee certain conditions (property rights, certainty in governance, limits to state intrusion, etc) via an institutional reform programme.

Secondly, you must develop a distinctly Zambian philosophy of development - what works for you and your children. This really can only be based on ensuring that you reinforce your traditions and values within a constitutional framework. Not only do you need a national dialogue on what development means to your people but you also need to understand the form of education that would help you move towards that goal. Your current generation of academics have failed to help define what type of development you should seek to achieve, or those that have, have often shunned public debate. There has been no discussion on what politicians ought to aim for in terms of the nature of local and national development. Economic growth has been discussed, but not development! Unfortunately failure to address that has meant that you have not addressed the second most important issue - the mechanisms and structures that you and your children need to deliver that development.

Finally, you need to develop credible thinkers. No development or economic renewal has ever occurred without home grown thinkers. The debate over your future must start in your classrooms, offering a Zambian centred education that encourages your children to think of Zambian solutions first before they engage a western text book. This does not mean you should ditch the whole system, nor is it practical to do so given that all knowledge is inherently beneficial. What you can do is learn some good things from outside about ‘development’ and reject those not conducive to your way of thinking. What you need is to harness the good that is consistent with your Zambian way of doing things and reject those that are in conflict with your inbuilt idea of development. This process of harnessing in my opinion must start in your classrooms - education. Your leaders need to support young Zambians to learn the differences in their cultural settings from the text books they use and invent local solutions for local circumstances.

The person who started micro credit schemes that continue to empower women around the world was Mohammed Yunus from Bangladesh. Yunus saw a problem for his people and realised that giving small loans to very poor people on credit could make a difference. Contrary to conventional wisdom at the time he realised that poor people had an untapped demand for credit and that traditional local culture ensured that they would pay back because of social stigma. Today Grameen Bank is legendary. Yunus saw something unique about his culture and invented a solution consistent with it that has reaped benefits to others beyond Bangladesh. You too, if your children can agree on a Zambian philosophy of development, provide the right institutions to support that development and ensure a Zambian centred education, you would most certainly come up with unique solutions to improve your plight.

There’s no answer out there to help you overcome your present predicament. The answer lies in you first recognising that you have squandered four decades of people. Then you should seek to renew your faith and trust in your children and empowering them to be full partners. If you can do this, may be like Nehemiah you may just this week begin rebuilding the broken walls. If that happens, then this memo to you has not been wasted and the path to true independence may be in sight.

This week of celebrations, I plead with you to give future generations of Zambians a fighting chance for the next 45 years.


Zambian Economist

Wednesday, 21 October 2009

Budget 2010 : National Budget for Agriculture

I have been eagerly waiting for this year's ACF / FSRP policy presentation on the Budget. Wonderful assessment as usual - see What is in the 2010 National Budget for Zambian Agriculture? ACF/FSRP in Collaboration with MACO/CSO. Breakfast Budget Review Meeting: Pamodzi Hotel, Lusaka -20 Oct, 2010. A couple of extracts from the policy presentation :

The detailed assessment is very much in line with my preliminary thoughts here. Two important areas that are picked up in Slide 7 which will surely hinder agriculture : the increase in the fees payable under the Lands Act might hinder access to land; and the increase in the excise duty payable on the diesel does increase increase the cost of farming.

Tuesday, 20 October 2009

Remittances by Zambians abroad..

Fantastic reporting by Chiwoyu Sinyangwe. This is the first time we are having a proper public record of how much is being sent by the Zambian diaspora on a monthly basis, through "official channels". Would be good to see BOZ now publish these statistics in their quarterly briefs:

Remittances by Zambians in the diaspora jumped from K24.4 billion in January to K35.5 billion last August owing to investible opportunities in the country, the Bank of Zambia (BoZ) has revealed. According to recent statistics released by BoZ head of public Relations Kanguya Mayondi, the January figure was a leap from last year’s which closed December at the paltry K4.8 billion from K3.4 billion recorded the previous month.

Mayondi stated that in the first eight months of this year, the country had recorded an increase in remittances except in July when they slowed down to K27.4 billion compared with K31.1 billion the month before. He, however, did not explain the drop in the inflows from Zambians in diaspora in the month of July.

And commenting on the development separately, BoZ governor Dr Caleb Fundanga attributed the increase to an improvement in collection of information and the country’s economic climate. “We also have now the tools to be able to do something in terms of financial products which address the inflows,” Dr Fundanga said. He said currently, there were more Zambians abroad. “…but also the economic environment has improved. In the past some of the Zambians who went abroad did not want anything to do with Zambia; they just said ‘to hell’!” Dr Fundanga said. “But now, most Zambians abroad are seeing hope so they want to bring in money to build a house, you have seen them. Some of them are genuinely coming to invest in new businesses. That is also because in the past, they could not come because they knew if they invest, the money would just be lost but now they know they can grow the money.”

Monday, 19 October 2009

The politics of Zambian petroleum, 2nd Edition

The suspension of the 25% duty on fuel imports to help "avert" the fuel crisis, following calls by oil marketing companies (OMCs) that they would delay diesel and petrol imports until the tax was scrapped, should not surprise regular readers of Zambian Economist. On the politics of Zambian petroleum we cautioned :

Increasing the taxes may prop-up Indeni and ensure that it remains viable, but it sends the wrong signals to OMCs (and Indeni). In the event that Indeni had to shut down due to an emergency, the OMCs may well be unable to resume imports in quick time as they would have no incentive currently to develop their supply chains.
Our Government appears not just deaf to economic logic, but blind for they do not seem to be capable of reading. A friend in Lusaka is fond of reminding me that government "has many PhD brains" and for a while I agreed with him. But what sort of brains are these if they cannot even understand basic issues ?

Update (20 October 2009) : Meanwhile ZNBC are reporting that Government is about to take over Total's share bringing Indeni back to 100% GRZ ownership. It appears Total are not happy with the "PhD brains" at Ministry of Energy :
Government has opened discussions with TOTAL to take over the company's shares in Indeni. This follows the decision by TOTAL to pull out of the country's only oil refinery. Mr MUMBA said the pull out of TOTAL from Indeni is not new because government was aware of the decision. Mr MUMBA said TOTAL had stopped supplying crude to Indeni two years ago and informed government of its intention to sale the 50 per cent shares held in Indeni. He, however, said the pull out of Total from Indeni has nothing to do with the current petrol shortage being experienced in the country. Government and TOTAL both hold 50 percent shares in Indeni.
Mr Mumba is being "economical with the truth". The last time I heard GRZ was looking for an equity partner to take 30% with GRZ and Indeni retaining equal shares. This was 2009 not 2 years ago. So Mr Mumba, what happened?

Sunday, 18 October 2009

IITA Press Release : Zambian Agriculture

Press Release by IITA :

Zambia to become agric support hub for Southern Africa

Lusaka, Zambia - Zambia is set to become the regional focal point for agricultural research support in southern Africa as the International Institute of Tropical Agriculture (IITA) picked the country to host its Southern Africa Administrative Hub to assist its Research for Development (R4D) activities in the region.

According to Dr Bryan Harvey, Chair of IITA’s Board of Trustees, the institute has, since 2004, been working on how to more effectively and efficiently establish itself in sub-Saharan Africa. To achieve this, IITA decided to focus its administrative support systems at three focal points: the West, East, and South.

The West will be covered by IITA-Nigeria, and the East by IITA-Tanzania. And after an extensive selection and deliberation process, the institute picked Zambia to be the focal point in the South.

The Southern Administrative Hub will support Zambia, Malawi, Mozambique, Zimbabwe, Lesotho, Swaziland, Botswana, Namibia, South Africa, and, as needed, the DR Congo.

Dr Bryan speaking during a forum on the role of research and training in enhancing food security, organized by the Institute and the University of Zambia said that the selection of the country to cover Southern Africa was not easy. IITA had to decide among Mozambique, Malawi, Zambia, Zimbabwe and South Africa – all equally good candidates.

The move to have the Southern Administrative Hub in Zambia also effectively establishes IITA-Zambia.

Prior to this, IITA has had a long and productive history of working with the country.

In the early 1980s, IITA, partnering with the Zambian Agricultural Research Institute (ZARI) and other national partners, launched a massive program to fight two of cassava’s deadliest pests - the mealy bug and the green mite - saving thousands of hectares of the crop. The successes achieved in the country were then replicated in other cassava-producing countries in sub-Saharan Africa.

To formalize its presence in Zambia, IITA’s Board of Trustees–the institute’s governing body–is meeting in Lusaka on 17-20 October to discuss ways to push IITA-Zambia partnership forward and the future of the hub, among other things.

The Open Forum held on 15 October coincided with the celebration of World Food Day and was held at the university.


For more information, please contact:

Dr David Chikoye,
R4D Director for Southern Africa

Catherine Njuguna,
Regional Corporate Communications Officer (East Africa)

Jeffrey T Oliver,
Corporate Communications Officer (International)
Communication Office
Ibadan, Nigeria


About IITA
Africa has complex problems that plague agriculture and people's lives. We develop agricultural solutions with our partners to tackle hunger and poverty. Our award winning research for development (R4D) is based on focused, authoritative thinking anchored on the development needs of sub-Saharan Africa. We work with partners in Africa and beyond to reduce producer and consumer risks, enhance crop quality and productivity, and generate wealth from agriculture. IITA is an international non-profit R4D organization founded in 1967, governed by a Board of Trustees, and supported primarily by the CGIAR.

Saturday, 17 October 2009

Corruption Watch (ZNBC)

The focus on corruption earlier this year turned to ZNBC, but went cold with the report by auditors still to be made available. However, news broke on Friday that heads have rolled :

“The ZNBC Board of Directors has terminated the contract for the Director General Joseph Salasini as part of the re-organisation of the management of the corporation announced last week by the Minister of Information and Broadcasting Services,” Seyuba stated. "Three directors responsible for: Programmes Mr Maxwell Ng’andu; Finance Mr Millen Siamiyoba; and Marketing and Sales, Mr Anthony Mhlanga have also had their contracts terminated while the board will not renew the contract for the Director of Human Resources, Miss Sepiso Kwaleyela which ends next month."

He stated that the board made the decisions in order to serve the interests of the corporation. “It has become clear that the industrial environment at the corporation over the past few months had deteriorated significantly and was no longer condusive for the advancement of the objectives of the national broadcaster. The board has had to make these decisions to serve the best interests of ZNBC and to save the situation from degenerating further,” Seyuba stated.

“Other measures to be instituted as part of the reorganisation will include the immediate addressing of operational weaknesses pointed out by an audit conducted by the Auditor General at the invitation of the Ministry of Information and Broadcasting Services. The board is determined to ensure that the financial status of the company is strengthened while improving ZNBC programming.”

Friday, 16 October 2009

Corruption Watch (Water Affairs Department)

Reports that over K1 billion meant for the development of water projects in Lufwanyama District is alleged to have been "misplaced" by officials from the Copperbelt Provincial Water Affairs department and accounting Unit. According to the Copperbelt Permanent Secretary, Villie Lombanyama, despite government releasing over K1 billion for the construction of the first water well at Kankuso in Lufwanyama, no significant works have been done at the project site. Apparently another K160 million which was released for the construction of a Water well at St. Mary‘s Catholic school and K10 million meant for fuel has also been "misapplied".

Thursday, 15 October 2009

The Lembani Trust

Its hard getting hold of good Zambian titles especially for those living outside Zambia. Which is why the Lembani Trust is a fantastic development. Led by British, European and Zambian scholars, The Lembani Trust seeks to publish Zambian academics who have limited access to academic outlets, while also increasing the availability of scholarly writing about Africa, in Africa. I am told by those close to the project, more titles will be available soon. It looks like we will have wonderful material for our regular book reviews.

Incomplete advocacy..

The National Union of Miners and Allied Workers (NUMAW) have allegedly "supported calls by the International Monetary Fund (IMF) for government to increase the mineral royalties and corporate taxes in order to increase its revenue". Quite an odd position for a mining union when one considers that higher taxes presumably are not necessarily beneficial to employees. In the absence of stronger legislation, an arbitrary higher tax on mining activities could lead to the mining companies extracting revenues through other means. Most notably through lower wages or spend less on safety or environment pollution. Higher mining taxes are a necessary but insufficient condition for uplifting our people. This is why I continue to advocate for a more holistic approach to the issue - see A Human Approach to the Mining Debate.

Wednesday, 14 October 2009

Diversifying through higher taxes..

The IMF makes its position known :

"Continued growth and diversification of the Zambian economy requires an increase in Government resources for high-priority spending on investment and social sectors. In view of fiscal trends, this represents a major challenge. Government must increase its take [of mining taxes] and contain pressure for increases in current spending particularly salaries and benefits".
You can't diversify without money. I have repeatedly made this point - see A mid-week rant.....on the state we are in.. and five questions on diversification. Anyone who tells you that they are serious about diversification, but insist on collecting as little mining tax as possible are lying to you. At the current pace and without changing the fiscal regime Zambia will remain undeveloped well into 2100. After all according to Gregory Clark's A Farewell to Alms, Europe was like Zambia today in 1850.

JCTR Press Release : Zambia Budget 2010

Press Release by JCTR :


The possibility of Zambia attaining 5% economic growth by the end of 2009 if economic conditions continue to improve is commendable. It is important however, to note that growth for its sake is not sufficient. “What is significant is how this growth can lead to sustained poverty reduction by creating quality jobs and investing in human capital, especially education and health”, says Miniva Chibuye, Coordinator of the Social Conditions Programme of the JCTR. The success of every budget is not only measured by how well it will improve the economy but also how responsive it will be to the needs of the poor. Growth should therefore be treated as a means to an end and not an end in itself. “As such”, says Ms. Chibuye, “the strength of the recently presented 2010 budget lies in how well it aligns itself to the objectives of the country’s Fifth National Development Plan (FNDP) coming to a close at the end of 2010 as well as other important international commitments such as the Millennium Development Goals”.

As investment in formal education, skills development and health increases the potential of generating opportunities for growth, spending in these important sectors should be prioritised. The following observations were made from the 2010 budget address made on 09 October 2009 in Lusaka :

The progressive increase of the education budget from the 2009 17.2% to 19.9% of the total national budget is a positive development. Moreover, this allocation is in line with the recommended 20% committed in the Cairo Protocol although it falls slightly short of the 22.4% planned for in the FNDP. If properly applied, the budget certainly will sustain the achievements made so far on the education MDG target. “However”, says Ms. Chibuye, “while the quantitative measure of education expressed through ‘years of schooling’ is important, the elements of quality measured by the levels of literacy, numeracy and general cognitive development should not be ignored”. This is even more so after the latest alarming rates of child health by the Zambia Demographic Health Survey, which revealed that 45% of the Zambian children are stunted, a sign of unbalanced and in most cases inadequate diets. To achieve quality education therefore, more allocation should have been made towards school health and nutrition, particularly scaling up the school feeding programmes. Among other things, successful implementation of school nutrition programmes improves attendance and the cognitive development of children. These are essential elements for the future of the country’s economic potential.

Likewise, attainment of economic goals and full human development requires a healthy nation to work productively and creatively. Hence, the value of investing in health by any economy is unquestionable. In this regard, the drastic cut in the budget from 11.9% in 2009 to 8.2% in 2010 attributed to the withdrawal of support from cooperating partners is a cause for deep concern. The health situation within the country is already desperate going by drug shortages and lack of well trained health personnel, particularly in rural areas. Unless the government revises the health budget, the FNDP’s vision of “providing Zambians with equity of access to cost-effective, quality health care as close to the family as possible” will not be achieved by the end of 2010. This also has the possibility of reversing the commendable progress made towards the 2015 MDG target on health. It is our hope that as the budget is being debated in parliament, this issue will be given the serious attention that it deserves.

When it comes to the budgetary allocation to social protection, the JCTR has noted with concern that about 44% of the total budget for social protection has been provided as grants to the public service pension fund to cater for early retirement from the civil service. While this is important, social protection should be distinguished from social security benefits. The pension fund is better placed within the Ministry of Labour rather than Ministry of Community Development and Social Services. However, it should be realised that social grants such as cash transfers when properly implemented has a positive effect on reducing poverty and inequality. According to Ms. Chibuye, “the 2010 allocation for social protection is unlikely to cover the targeted 20% of the population suffering from critical levels of poverty and deprivation. The consequence of this is that the vulnerable population will have little opportunity to participate and contribute to long term growth prospects within the country”.

Furthermore, the ever rising cost of living within Lusaka and other towns in Zambia presents to the country an extremely serious challenge upon which all efforts must be concentrated. For example, the JCTR Basic Needs Basket, a survey of the cost of living for an average family of six showed an increase in the cost of basic food and essential non-food items. In Lusaka, the total cost of basic food items and essential non-food items such as housing, water and electricity for the month of September was K2, 260,680 compared to K2, 235,730 in August. This upward adjustment was largely as a result of price increases in the staple mealie meal, green vegetables and dairy products. The total cost of basic food items was K801, 850 signifying a nominal increase of K14,550 when compared to the August cost of food amounting to K787,300. Whether people can access their basic needs or not has serious implications on individual and family well-being and consequently, the future development of the country.

Because poor households devote over 50% of their income to buying food items, the sustained increase in food prices substantially reduces their income. Relating this to the tax measures provided for in the budget, the increase in the income tax threshold by K100, 000 from K700, 000 to K800, 000 while the tax bands were left unchanged is welcome. However, in light of the high cost of living, the K100, 000 is likely to be eroded by not only the high cost of food but also the proposed 3% increase on excise duty for diesel effective in January 2010 and the recent unprecedented increase in the cost of electricity. In real terms therefore, the tax relief will not have a positive increase in the purchasing power for the employees, especially those with lower wages. The constant recommendation to broaden the tax base to also include the informal sector should be implemented if some relief is to be provided to the few formal sector employees.

Furthermore, in line with the budget theme of “Enhancing Growth Through Competitiveness and Diversification”, it is imperative that other productive sectors such as agriculture are prioritised away from the traditional mining sector. Investment in agriculture is key as it acts as both a strong driver for economic growth and a source of poverty reduction. An analysis of the 2010 budget shows an aggregate increase in allocation to the sector from K1, 096.3 billion to K1, 139.0 billion. However, as a percentage of the total budget, the sector allocation has reduced from 7.2% in 2009 to 6.8% in 2010. This falls short of the 10% commitment made in the Maputo declaration or the 9% of the budget planned for in the FNDP by 2010. While the revision from Fertiliser Support Programme to Farmer Input Support Programme will cover more people, it is necessary to recognise that this may not necessarily lead to increased yield. To help achieve this, the government should deliberately support the implementation of sustainable agriculture practices and increase funding under extension officers.

The JCTR reminds the government that the success of this budget is very dependent upon the full implementation of these programmes and may need revision of allocations, especially within the health sector and social protection. Indeed, investment in these social sectors breeds multiplier effects to the rest of the economy.

[For more information, contact the Social Conditions Programme of the Jesuit Centre for Theological Reflection, P. O. Box 37774, Lusaka, Zambia; Tel: 260-211-290410; fax: 260-211-290759; e-mail:; internet:]

Tuesday, 13 October 2009

Banda's Legacy (Guest Blog)

There has been so much talking about “continuing with the Mwanawasa legacy” by Movement for Multi-party Democracy (MMD) leaders recently. A legacy whose content they have not been able to explain to the Zambian people.

If the so-called “legacy” includes the introduction of free education up to Grade 7, it does not match the legacy of the United National Independence Party (UNIP), which provided free education from Grade 1 through university from independence until the mid-1980s.

If the “legacy” includes the provision of “free” healthcare to rural dwellers, it does not match UNIP’s free healthcare for all Zambians from independence until the mid-1980s. If it is about the fight against corruption, the scourge had never been pervasive until the MMD assumed power.

There is, however, still a great opportunity for President Rupiah Banda to leave his own legacy rather than continue to sing about someone else’s questionable legacy. Let me suggest some of the potential initiatives which President Banda can pursue if he is interested in leaving a legacy after his term of office:

  1. Creation of a smaller Cabinet with fewer Ministers, and abolition of the positions of Deputy Minister and District Commissioner, among other sinecures.

  2. Operationalization of the Independent Broadcasting Authority (IBA) in order for the broadcasting industry to be regulated by an independent body.

  3. Enactment of the Freedom of Information (FoI) Bill and make it possible for journalists to access information that is vital to both the media and members of the public.

  4. Creation of an autonomous “Bureau of Statistics and Archives” and place the Zambia Daily Mail under its auspices. The Bureau should replace the Central Statistics Office (CSO) so that it can freely and independently collect, process, maintain, and publish essential data and information about our beloved country, and should incorporate the National Archives of Zambia.

  5. Establishment of an Electoral Complaints Authority of Zambia (ECAZ), which should assume the functions of the Electoral Commission of Zambia (ECZ) stipulated in Clauses 6 through 8 of Article 112 of the Draft Constitution prepared by the Mung’omba Constitutional Review Commission (CRC). These functions could be designated as a separate Article and amended accordingly. There is a need for a separate governmental watchdog designed to monitor the activities of officers of the ECZ, and the conduct of elections in the country. This will hopefully lessen the vulnerability of the ECZ and the electoral process to the influences, manipulation and/or machinations of unscrupulous politicians and political parties.

  6. Conversion of the Disaster Management and Mitigation Unit (DMMU), which is currently vested in the Office of the Vice-President, into an autonomous “National Emergency Management Agency” (NEMA). The agency needs to be made autonomous in order for it to perform its duties without any political meddling or manipulation by government officials to achieve partisan objectives, and should incorporate the functions of the Public Welfare Assistance Scheme currently administered through the Ministry of Community Development and Social Services, which includes the Social Cash Transfer Scheme. NEMA should be accountable to the Parliamentary Committee on Health, Community Development and Social Welfare.
I make these suggestions knowing very well that some of the MMD leaders are likely to interpret the gesture as an insult to the President and his administration.

Henry Kyambalesa
(Guest Blogger / Agenda for Change)

Sunday, 11 October 2009

The quest to become SADC's hub, 2nd Edition

We have previously discussed Mozambique's plan for a $900 million upgrade of the Nacala and Beira ports and associated surface access infrastructure. Well, the surface infrastructure element includes the latest announcement of a $500 million railway line by 2015 to ship coal from its Moatize mines to the port of Nacala.

Saturday, 10 October 2009

Is our tourism policy flawed?

That is the impression one gets from this editorial piece from the Times of Zambia :

Why, for example, should tourist bookings and reservations for a visit to Zambia be done offshore using foreign booking agents when the same can be done by ably qualified Zambian companies. Tourists are simply flown into the country with foreign tour guides and they come in to enjoy the facilities while the bulk of the money remains in offshore accounts of foreign companies.

The little money that remains in the country is usually from entry charges to view the Victoria Falls or animals in a game park. While it is appreciated that ours is a liberalised economy, it should also be borne in mind that more economic development could only be achieved if the available capital is quickly re-invested in other ventures.

As Ms Mung'omba said, the privatisation process did not empower Zambians because citizens did not have money to buy the companies, and those that attempted ended up selling the firms to foreigners. The process left citizens dis-empowered. Ms Mung'omba has a point when she says before foreign investors externalise their money, the profits could be used to empower the citizens. It is important that what Ms Mung'omba is saying is considered so that Zambians can also see and feel the benefits of foreign investment.
One suspects the Minister of Tourism, Catherine Namugala does not share this assessment. Earlier this year in defence of the government removal of "illegal squatters" from the Prime Wildlife Areas of Sichifulo Game Management Area, she trumpted the "job creation" and "foreign exchange" benefits. [For the avoidance of doubt, additional foreign exchange is not a benefit - its simply Kwacha converted into foreign money. One never feels they are better off by swapping Kwachas into US $ at an airport].

Friday, 9 October 2009

Zambia Budget 2010

The Finance Minister, Situmbeko Musokotwane MP delivered the Budget Statement today. Formal analysis to follow, but on a quick read this appears to be a pretty disappointing budget : the size of the budget is actually lower than last year's budget in real terms (accounting for inflation); agriculture budget is also lower when we compare actual spending in 2009 and 2010 allocations; government debt has gone up (external and domestic) as government has had to borrow due to reduction in donor money thanks to corruption allegations; and to cap it all off, over a third appears go on general government services with significant proportions gobbled up by the Census, Voter and National Registration. Important but still unproductive activities.

Zambia Budget 2010

Update :
And here goes the overview of main tax changes :
2010 Budget Hightlights