Find us on Google+

Monday, 30 November 2009

Committee Report : Economic Affairs

First report of the Committee on Economic Affairs and Labour for the fourth session of the tenth national assembly appointed on thursday, 24th september 2009. Nothing out of the ordinary, aside from some strong language on the need to unbundle ZESCO - something we have previously discussed (e.g. here and here ) :

ZESCO, which is a major player in the energy sector, is in-efficient and undercapitalised due to poor management and a bloated management structure. ZESCO must be restructured by unbundling it into generation, supply and distribution components to run as separate entities. Unbundling ZESCO will make it more efficient and responsive to the current challenges in the sector. This will address the inefficiency that exists in ZESCO.
1st Committee Report - Economic Affairs 2009

Sunday, 29 November 2009

Saturday, 28 November 2009

Ministerial Statement : Public Private Partnerships

Ministerial Statement made to Parliament on 27th November, 2009 by the Minister of Finance and National Planning, Hon. Dr Situmbeko Musokotwane, MP on Public Private Partnerships.
Ministerial Statementn on Public Private Partnerships

What the World Bank is up to in Zambia..

A useful update report on the main World Bank projects in Zambia.

Friday, 27 November 2009

Mine Watch (Kansanshi)

Canada's First Quantum Minerals (FQM) reported today that copper production at Kansanshi rose to 182,500 tonnes in the first nine months to September 2009 compared with output of 153,300 tonnes in the same period last year. FQM attributes this to a "28% reduction in production costs" between January 2009 and September 2009, relative to same period in 2008. The low production costs are apparently as result of "cost saving initiatives" implemented in quarter four of 2008 and lower oil and sulphur prices.

Mine Watch (Lumwana)

Reports mid week that Lumwana plans to raise copper output through greater efficiency and also plans to build a uranium plant. According to its new MD, Adam Wright, the company would in 2010 ramp up production to 170,000 tonnes from a projected 110,000 this year. The company is continues with the stockpiling of uranium from its Mulundwe pit and are looking into building a uranium processing facility in future. Lumwana uranium deposits are known to be staggering.

Rise of local radio..

We have previously touched on the increase of local radio stations. Mpika is fighting for its own even as Mwinilunga comes under government's radar of bureacrats. Both stories illustrate the value of local radio and its increasing role in shaping political dialogue. But a more important point is that local radio helps achieve three critical barriers that local people face - coordinating themselves for social good; lack of information; and "national language" requirements. No longer do people have to listen to "English powered stations", they can communicate to each other on radio in their languages.

Thursday, 26 November 2009

Inflation Statistics - November 2009

The annual rate of inflation, as measured by the all items Consumer Price Index (CPI), declined by 0.8 of a percentage point from 12.3 percent in October, 2009 to 11.5 percent in November, 2009. The decline of 0.8 of a percentage point in the annual inflation rate in November 2009 was as a result of "decreases in some food and non-food prices". More detail via the CSO Press Release.

Mining Reflections: Proposition Two

Proposition 2: The local mining communities are not benefiting from the nation’s mineral wealth
The stronger version of the above statement would be expressed as: the people are not just neutral to the existence of the mines in their areas, the communities are currently suffering because of the mines. Or to put it even more starkly - mines are doing more harm than good to our local communities.

For the purpose of this discussion, “mining community” is taken to mean broadly the local area, typically a district, where mining activities are located, but principally excluding the mining employees. That rider is not critical as most workers usually come from outside to take up jobs. Historically this has been the case and underpins the rural-urban drift phenomenon. Similarly, in recent times we have seen mines essentially become magnets of migrant labour, not just from other parts of Zambia but also from abroad (e.g. Chinese labourers). Related to that of course is the general point that jobs precisely understood are means not an end. What matters is the impact on local personal incomes. We will return to this issue in future posts, the purpose here is simply to note that for clarity, the question of employment is dealt with, without changing overall conclusions in the current narrative.

With the house keeping done, we can now turn to the central question: does the benefit of new mining activities to local communities, as currently delivered, outweigh the costs?

The most obvious benefit that any mining investor can give local communities is local tax revenues. These taxes can either be compensatory or predicated on local “exogenous rights” i.e. taxes that recognise the pre-eminence of local rights with respect to the mining resource in question. Mining companies’ contribution through local taxes is essential for Zambia because it represents the only legislated benefits to local people. Unlike in developed countries, Zambian local councils have no alternative value capture mechanisms and their power remains stunted in terms of engaging investors for local benefit. Even arrangements are not punitive on investors are restricted by central government, as Solwezi found out. In short local taxes are the only way local people capture development benefits from mining in a legally enforceable way.

At present local tax revenues are essentially negligible. There is currently no automatic mechanism for diverting resource revenues to the ground, which has meant many mining communities do not see direct benefits of new local investments. In 2008 KCM released a caption of how much they were paying. This showed that only 2% of KCM's mining taxes are local - assuming all of it goes to the local people. A meagre contribution by any standard..

The current injustice has not been lost on many parliamentarians who continue to call for a better settlement through the establishment of mining communities development funds (MCDFs). Some warn that should government fail to establish MCDFs, people living in mining communities would have no option but to start agitating for it. Nkana MP Mwenya Musenga is a principal advocate :
“.....many countries in the world have a development fund that benefits communities that live in mine areas. If we do not establish this fund in Zambia, even the mine developments that we are talking about like in North Western Province and Southern Province will not amount to anything.....There’s so much excitement for North Western Province but many years down the line, once the investors have made their profits and when there is no more mining to talk about, we’ll just be lamenting like we are doing for the Copperbelt.....the government should retain at least 40 per cent of the profits from the mines to benefit mining communities and cities....This money could be shared between the local authority for that particular town and communities surrounding the mine...”.
The Levy Patrick Mwanawasa (LPM) government toyed with a similar idea establishing trust funds that will make mining companies “contribute funds towards the sustainability of local communities”. These trust funds were to be controlled and managed by the communities themselves. That idea has never seen the light of day, and time after time people continue to agitate for it.

In theory, the government can set up these local arrangements without the need for new legislation. The Mines and Mineral Development Act 2008 does have a provision for sharing mineral royalties but it does not specify who they should shared with. Para 136 states "The Minister responsible for Finance shall, in consultation with the Minister [responsible for Mines], a mineral royalty sharing scheme for distributing royalty revenues". There’s no provision within the legislation on what this mechanism should be. Equally there are no penalties to government for failing to implement a revenue sharing mechanism. It appears to be another case where parliamentarians fail asleep at critical moments of voting on the Act. Incidentally, even if government was taken to court, as one MP recently suggested, it's not clear the outcome would be a local sharing agreement acceptable to local people.

Normally the problem of poor local taxation would not be a significant problem if local communities are in some way integrated in the local economic system with the mines. The usual way of doing this is through the activities of the mines having sufficient linkages to local business. The reality is direct directly the opposite, a fact which has forced the government in recent years to initiate its own policies of empowerment.

The benefits of having local mines in the areas have not accrued to local economies because many mining companies simply feed suppliers, manufacturers and markets outside the country. The many local suppliers that used to exist prior to the privatisation process of the early 1990s have all but withered away. This is partly due to the fact that foreign companies come with their own supply chains. Undoubtedly the larger problem is that local companies are currently unable to compete on quality and price with foreign suppliers. This can only be remedied by significant input from government to provide a system of incentives and resources that would tilt the balance. A proper starting point is development of a robust industrial policy designed to support local suppliers and to build a local manufacturing base processing copper.

No industrial policy has emerged as yet, but there has been some promising signs that government taking proactive steps which a future visionary approach may build on. The move by LPM to increase tax on copper concentrates has helped incentivise mining companies to provide more smelting facilities, though the energy deficit has not helped. The current government would also be quick to point out that its export led model of Multi Facility Economic Zones (MFEZs) is yet another mechanism to allow local mining communities to benefit from additional investments. That remains to be seen and significant questions exists on the general policy around MFEZs which go beyond our current series. What is clear is that not enough has been done to directly empowerment local communities per se. It is therefore difficult to argue that any local communities benefit from mining activities.

So the benefits are negligible, what about the costs to local communities?

One might excuse the non-existence of benefits as a “fact of life”, but what is unacceptable to any person who values human life are the huge and unpriced externalities that local communities endure from the mines. A prominent aspect of this is the so called “ecological debt” which has led to visible loss of lives even as many of our people die quietly.

The day is November 6, 2006, women and children living on the banks of the Kafue have just been awaken by the Zambian sun. What do they see? A strange sight! The wonderful Kafue River has turned turquoise. Our precious investor Vedanta has accidentally discharged its toxic waste into it. Panic sets in Chingola, where 100,000 who draw water directly from the river are now deprived of drinking water for at least two days. In the next few weeks thousands flock for hospital check-ups after eating fish from the river. Analyses of the Kafue’s water later show that it contained 38.5mg manganese, 10mg copper and 1mg cobalt per litre: concentrations 1.7 times, 10 times and 10.7 times higher respectively than the limits set by the World Health Organisation. With a pH of 1.5, the Kafue has become a river of acid.

A few weeks more, a Vedanta employee admits the company’s responsibility, only to be sacked on the spot. Reports abound that the company is threatening to withdraw advertising from Times of Zambia if the incident is reported. Will the editors curve in? Surprising not, as public pressure leads the Environmental Council of Zambia to call Vendanta to book and halt to its mining activities. The company reluctantly pays $2.5m. Then business starts up again. The price of copper continues to rise, and with it, the pollution unabated and our people never suffer quietly. An unauthorised visit by a foreign investigative reporter two years or so later to the massive Vedanta site during the rainy season revealed a vision from Dante’s Inferno: 3km from the mines, the pollution control dam was overflowing, spewing copper-coloured water, reeking of acid, into a tributary of the Kafue.

The stories are endless and Vendata is not alone. In January 2008 acid waste from Chingola’s mines reached the ground water at Mufulira, around 40km away. More than 800 people in the township adjoining the Mopani Copper Mines (MCM) complained of diarrhoea, abdominal pain and vomiting. The mine is co-owned by the Swiss group Glencore and the Canadian company First Quantum Minerals (FQM), and the joint venture was set up with the help of the European Investment Bank.

Mufulira’s mining townships for years have borne the full brunt of the environmental damage. Kankoyo, home to 30,000 people, is an eye sore on an otherwise fertile and verdant landscape. I used to pass through this neighbourhood everyday on my way to Butondo Secondary School. Only two things grow in Kankoyo: avocado trees and cactus. In exchange for this damage the economic input consist of open sewers, dilapidated shacks with tin roofs corroded by acid rain, abandoned pharmacies, and grocers’ shops with broken windows. That is the legacy of the mining companies. When the mines eventually close, is this all they'll leave behind?

Whilst the environmental impacts have gain public attention in recent years, less reported are the broader negatives impacts of the mines on local infrastructure. When FQM announced in March 2007 that it was planning to spend K1bn to rehabilitate roads in Ndola, the move was applauded. It was good to see a mining company recognise the negative effects it imposes on local roads and seek to correct it. But FQM’s actions are a drop in a forgotten ocean, where many mining companies continue to free ride and use the roads with impunity. A fact well observed by Enock Kavindele :
“.....As it stands, the [road] repair and rehabilitation costs are borne entirely by the government and cease to be their problem. In the next three years, both Kitwe to Chingola road and the Kitwe to Lumwana road will be completely damaged.....All this heavy traffic combined with all other road users will place an extraordinary strain on all services, utilities and infrastructure....the combined Democratic Republic of Congo (DRC) and Zambian mines related freight volumes in 2010 would be 2,400 000 tonnes of copper ore per annum..... In Chingola, this will translate to having a truck on the roads every three minutes to and from. Roads in the town will become completely congested with the route between Chingola and Kitwe becoming almost impassable not to mention the hazardous conditions that will be faced by normal motorists and pedestrians".
Of course, it should not surprise anyone that mining companies free ride and when they do act to “correct”, it is done purely for selfish reasons. There's no such thing as "social responsibility" because mining companies are motivated purely by profit and will always act in the interest of their shareholders. If using an existing road is cheaper than building a new one, then they use the existing one. The same goes for local schools and hospitals. When they occasionally provide a new school or fund the local football team, they "appear" to be socially responsible. Their true motivations are always those of the company. Unfortunately, it is one thing to abuse local roads in a developed country (not that they’ll let you), it’s quite another to destroy local roads where local councils have no financial capacity to replenish.

The other problem of course with the mining companies’ free riding of infrastructure is that it has led to zero incentives for investing in inter-urban infrastructure such as rail or motorways. Until the government realigns these incentives it becomes difficult to develop long term infrastructure for the common good of mining urban areas, and indeed the nation as a whole.

Taken together, the environmental and infrastructural impacts, significantly outweigh the small benefits identified. The mining companies response to all of this is perhaps better reflected by Vendata’s Social Responsibility Manager Sampa Chita attitude to the environmental genocide: “Of course we pollute…but all the mines do. It was worse in ZCCM’s days...We are fed up being blamed. You cannot run a mine without causing pollution.” That may be true but the comparison to ZCCM is wrong for two reasons. First, it is morally wrong to pursue profit at the expense of human life. Second, our new masters cannot be compared with ZCCM because these new investors pollute for free without any form of social compensation. ZCCM provided almost everything that held society together in the Copperbelt : jobs, hospitals, schools, housing, and a wide range of social services including HIV-AIDS and malaria awareness and prevention programmes. In many ways ZCCM compensated for any environmental damage directly to local communities through other mechanisms. Our new masters, with their focus on ‘core business’ the provision of social infrastructure goes beyond this remit. They have therefore done nothing to compensate our people in any way for their misdeeds.

Our people living in mining communities are humble and peaceful people. Their only crime is that the creator has endowed them with a precious gift - the minerals below their feet. It cannot be denied that they do not enjoy these precious gifts and continue to pay a huge price. It is a situation which would never be allowed in any society that values its citizens.

Next stop - Proposition Three.

Other posts in this series :

Note: I am hoping to make future posts much shorter, but the early posts have demanded a proper grounding.

Update (4 December 2009) :

A small admission from the Government that mining and industrial activities have contributed to the rise in problems associated with "waste management, climate change, deforestation, and land degradation". But with the rider that "despite the many environmental challenges the nation is faced with, [government] is confident that the legislative police and institutional frame works put in place by government are sufficient to ensure that sustainable development is attained in protecting the environment and utilization of the countrie's natural resources".

The National Data Archive

An important announcement from the Central Statistics Office :

CSO embarks on the new method of data dissemination!

The Central Statistical Office (CSO) has embarked on a new method of disseminating micro-data and related meta-data. Other than disseminating information through various channels such as the CSO website, hard copies and soft copies, CSO will now disseminate its micro and meta data to all its data users through the web based National Data Archive (NADA).

CSO, whose main responsibility is to promote increased utilization of statistical information for effective decision making and informed debate on the economy by all major stakeholders, will be disseminating its’ micro data through the web based National Data Archive (NADA).

The web based National Data Archive(NADA) was implemented in partnership with the World Bank, PARIS 21 and the German Technical Cooperation (GTZ). The NADA has been established to promote best practice and international standards for the documentation of micro data amongst data producers in the country and also to provide equitable access to micro data in the interest of all citizens. Other reasons for the establishment of the NADA are to promote the effective use of existing survey and census data for statistical and research purposes, thereby encouraging a diverse range of analytical work through secondary research and also to ensure the long term preservation of micro data and the related metadata, and their continued viability and usability in the future.

CSO has therefore used this system to document, disseminate and preserve data from its Surveys and Censuses. The National Data Archive seeks to minimize the information loss while ensuring an acceptable level of disclosure risk. Where the data is particularly sensitive, access is only provided on-site in our data enclave under strict conditions, and only for research purposes.

CSO has so far documented and uploaded two (2) Censuses and twenty-one (21) Surveys using the NADA System. Some of these include the 2000 Census of Population and Housing, the 2005 Labour Force Survey, the 2007 Zambia Demographic and Health Survey and the 2008 Crop Forecast Survey.

The general public can visit our website to have access to the NADA. Request forms found on the NADA site can be used to request for further information on the NADA.

Enquiries can also be sent to:
The Director, Central Statistical Office, Lusaka
Tele/Fax: +260-211-253468

Wednesday, 25 November 2009

Corruption Watch (ZRA), 2nd Edition

Another update on the alleged quiet ZRA corruption scandal (previously discussed here) :

Government is investigating allegations of misappropriation of funds at the Zambia Revenue Authority(ZRA) Finance and National Planning Minister, Dr. Situmbeko Musokotwane has since described the abuse of resources at the authority as a crime.
He says government's silence over the matter is aimed at not alarming the suspects.
Dr Musokotwane was responding to questions from Journalists during the Fifth National Development Plan(FNDP)midterm review briefing in Lusaka on Thursday.About 76 Billion Kwacha is alleged to have gone unaccounted for at the country's revenue collection authority. Recently a former ZRA employee gave MUVI TV NEWS documents alleging that colossal sums of money were paid to different companies and individuals for various services which were not provided to the Authority.

Tuesday, 24 November 2009

Press Release : Mining Strikes

Press Release by Konkola Copper Mining Plc :

Press Statement

KCM wishes to reiterate its commitment to improving the conditions of service for its union-represented employees by working hand-in-hand with their respective unions.

The recent unfortunate disturbances that occurred at the Nchanga Integrated Unit where, in effect an illegal strike that resulted in millions of Kwacha worth of property and have been rightly condemned by both the Mineworkers Union of Zambia (MUZ) and the National Union Mineworkers and Allied Unions (NUMAW).

Apart from the damage done in and outside the plant area, another regrettable result of the disturbances is that certain employees suspected to have taken part in the rioting are being subjected to the due disciplinary process as set out in the Company’s Code of Conduct.

Others arrested by Zambia Police on suspicion of breaching the Laws of the land are being put through the due judicial process. KCM views both processes as critical in the maintenance of law and order as well as industrial harmony and will not interfere in the outcomes any way.

Employees who feel aggrieved by the outcome of the processes against them are free to appeal against the verdicts as provided for in both the Company’s Disciplinary Code and the Laws of Zambia (for those appearing before courts).

KCM Management pledges to continue to work with the national unions representing its employees to resume salary negotiations as soon as the situation has normalized and complete peace has returned to the plant.

These negotiations, which were suspended by mutual consent between the workers’ representatives and Management, are set to resume today (Tuesday, November 24, 2009).

Issued : Tuesday, November 24, 2009

Mining Reflections: Proposition One

Proposition 1: Zambia earns very little revenue from its vast wealth of mineral resources
At first this appears to be an obvious statement to most regular readers of the Zambian Economist. However, it is worth stating this upfront because the current Rupiah Bwezani Banda (RBB) led government continues to dispute this basic proposition. Moreover, they (and their sympathisers) tend to advance misleading counter-arguments to justify their intransigence. Any counter-perspective to that offered by the powers that be, as I do here, must first debunk these flawed ideas before setting out a positive case. This is the approach taken. The government's arguments essentially rests on three arguments :
  • Investment in Zambia has grown significantly, as much as $4bn has been invested in the mines. Without the current fiscal regime Zambia would never have the sort of investment it has had. Indeed part of the reason why Lumwana was built was due to the favourable regime, For 25 years, Zambia had no new mines opening, now we see plenty of new ventures being proposed under the visionary policies of the MMD led government over the two decades.

  • Related to the point above, significant jobs have been created from new investment opportunities. Zambia may be losing out from mining taxes but it is benefiting significantly from new jobs. This is very much at the heart of the RBB thesis : "We must ensure that we do not kill the goose that lays the golden egg. There is little point in taking in a few million dollars in tax if thousands of jobs are lost as a result”. In short any appraisal of Zambia's mining policies must account for the huge benefits we have supposedly got from these new jobs.

  • It is a misconception that Zambia does not benefit from the good performance of mining companies because ZCCM –IH is a state owned venture and it owns share from in joint venture with foreign mining corporations. Therefore as the transnational companies soar in their mining profits ZCCM-IH gains significant windfall. A "them Vs us" approach does not therefore quite reflect reality on the ground, where ZCCM - IH is allegedly a "big player"with assets over $1bn.
Picking up these points at random. It is true that ZCCM-IH does have interests in many of these companies, but it hardly possesses a controlling interest stake in any of the key joint investments e.g. FQM’s Kansanshi and Vendata’s Konkola. More worryingly it’s been clear for a while that ZCCM –IH has not been receiving meaningful dividends from its jointly owned projects. A fact which led to rumours last year that government was planning to convert these financial liabilities into equity, thereaby raising substantially its stake in the mines. That the government recognised this possibility is a clear testament that the ZCCM-IH model has not worked. Indeed, what seems to concern many people is that ZCCM - IH is not "empowering" ordinary Zambans. If ZCCM-IH was owned by ordinary Zambians a potential argument can be constructed that some money does filter back to ordinary Zambians via the "theoretical dividends".

On the issue of investment, without doubt Zambia has significantly increased foreign direct investment to the mining sector. But the fundamental question : what has driven this investment? Although tax competition is used usually to justify the level of tax, it is clear from literature that the key driver of foreign direct investment tends to be political stability, cheap / diverse labour and, most importantly, prevailing global economic forces. Zambia’s mining industry is booming because the prices of commodities are high and will continue to be high for some time, aside from few fluctuations because of the long term global imbalance between demand and supply. Of equal importance is that the investors are confident of the political ambiance in the country. With these points in mind, and the fact that Zambia is already at the bottom of the world's mineral fiscal systems, the flexibility for increasing the level of taxation is huge. Zambia’s current low fiscal regime allows sufficient headroom for companies to make large profits even as they pay fair wages and mining taxes. There's no economist worth their salt who would argue that increasing mineral taxation, on its own, would reduce investment. The tax competition argument is therefore rejected in the Zambian case.

But there’s a broader point also to be made – lower taxes may attract “wrong investors”. Many of the investors Zambia has attracted in the mining industry have been nothing short of short term vultures (term used is "infestors"), whose primary interest is to come into the country to siphon resources on the cheap and vacate premises when the going gets tough. Poorly designed incentives coupled with a friendly regulatory structure continues to undermine Zambia and its workers. Jobs may have been created, but we have seen time and time again people only to be laid off.

With regards to the RBB thesis of job creation we can easily reject that because the counter-factual is all wrong. The so called jobs created by the MMD led government of the last two decades are essentially the jobs they destroyed through the disastrous privatisation project of the early 1990s. But suppose we can allow RBB the argument that he has created jobs, how far does the argument go? Not very far because the real the central question of course relate to the “quality of jobs”. The argument regarding job creation treats jobs as homogeneous and an end in themselves. The goal of government is to provide a conducive environment where individuals can create value adding jobs and thereby foster wealth creation. Pointing to jobs founded on casualisation is not wealth creation.

We shall return to one or two of these issues in future propositions. For now it sufficient to simply note that the above three government arguments do not sufficiently undermine our basic premise. Quite the contrary, the government's counter-arguments are useful in helping us identify some areas were potential exists for improvement but ignorance has led to sub-optimal outcomes and general injustice to our people.

With the counter-arguments disposed off we can now put forward five positive reasons that underpins my belief that Zambia is being fleeced.

First, the average tax rate implied by the RBB fiscal regime is significantly low. Zambia has one of the lowest tax regimes in the world. Prior to 2008, the effective tax rate stood at around 32%, with the Levy Patrick Mwanawasa (LPM) changes it was intended to rise to 47%. LPM put it best : "with these new measures, the Zambian tax regime still remains competitive and moves Zambia into the media position in international comparisons at 47% effective tax rate. The effective tax will not adversely affect the companies' viability as their returns will remain well within the international norms". In short Zambia was to tax more than Tanzania but less than resource rich nations Botswana, Mozambique and Angola. More on that in a second. What is clear is that RBB has now reduced Zambia's tax levels back to the lowest mining tax country in the world.

Secondly, the level of mining revenue actually collected under existing obligations is pitiful. There are many instances of mining companies refusing to pay taxes even where the Zambia Revenue Authority (ZRA) has correctly identified their obligations. In 2008, Zambia earned over $3bn from copper exports, but of the $421m that should have made its way into our Treasury, only $200m was actually collected - that is just over 6% (other estimates put this at around 3% to 5%). Even though we have some of the lowest taxes in the world, the mining companies threatened litigation. That was before the risk of redundancies, on the back of falling prices, offered them a new way to put pressure on our government. It is still unclear whether these companies have paid their windfall tax obligations under the 2008-2009 fiscal year. Arguably the biggest failure is the inability of ZRA to correctly overcome the asymmetric information problems, where the mining companies have more knowledge than ZRA on the exact nature of the mining costs. In addition, mining companies have erected sophisticated mechanisms of tax avoidance by channelling their profits through offshore companies in islands like Mauritius. This is effectively robbing a beggar.

Thirdly, our country compares very poorly to other resource rich nations. Chile is the usual comparator but more immediate abound. The Debswana model of 50% government ownership in Botswana diamond mines is well known. An even better example that puts us to shame is a neighbour recovering from a prolonged civil war. The rapid development of diamond mining activities in Angola has been heavily trailed in the last few years, but what is not often reported is the remarkable difference between its non-oil mineral framework and our own, which is allowing the Luanda government significant revenues. Typically, a diamond mining company in Angola has to take on a large number of associated Angolan personnel at the exploration stage, thereafter the developer is expected to fund 100% of the capital expenditure although owning only around 40% of the mine. The rest of the equity is held by the Angolan government through Endiama and by nominated private Angolan investors all of whom are entitled to a “free carry.” Once completed, the developer has priority over revenues until the capex outlay is recovered but may still get only about 80% of the initial revenues because of profit share agreements with the Angolans. It is therefore no surprise that Angola is benefiting greatly and growing at a faster pace than Zambia. The combination of oil and diamond revenue has paved way for significant investment in infrastructure.

Fourthly, Zambia continues to lose significantly from non-copper industries. A good example of this is emeralds. It has been known for a long time that Zambia has the world’s second largest emerald deposit after Colombia in South America and also boasts of Africa’s biggest amethyst and aquamarine fields, but the government coffers and the economic plight of our people does not reflect this reality. We get very little from this significant wealth. At the heart of this problem is that the industry remains unregulated and probably should have a stronger element of state production. This logical conclusion becomes self evident once we recognise that our current approach of simply providing licenses is irrational, as ordinary Zambians have have limited incentives to develop the mines in face of unregulated foreign emerald cartels. It is simply cheaper and more immediately rewarding for many Zambians to allow foreign production (by charging the "fee") rather than develop the mine themselves. To successfully develop these mines not only do you need credit, but also access to established supply chains. The foreign investor has all these things in abundance and crucially they are able to harness the economies of scale that are associated with pooling licences together. Bizarrely the more attractive gemstone becomes the more foreign investors push out the locals! Unfortunately for Zambia these foreign operators keep their cash abroad where they live! The gemstone industry (estimate over billions of dollars) is a classic example of wealth lost from Zambia. Time fails me to speak of other lost opportunities such as manganese and uranium.

Finally, the current GDP contribution of mineral resources is minimal. A huge fallacy perpetuated by ignorant observers is that copper is the life blood of Zambia's economy. Recent GDP numbers in face of a global down turn should help check that madness. Copper was the life blood of Zambia's economy prior to privatisation when it represented a greater share of government revenue and GDP growth. Purely in terms of actual contribution to GDP growth the mining sector has not contributed to the economy as it should. This of course comes as no surprise because with around 6% of mining revenue remaining in the country there’s not much contribution it can make to the economy.

Figure 1: Sectoral Contribution to GDP (2008)
With this in mind, it is clear that the country as a whole is losing out from this industry on a grand scale. When judged against other countries and considering that copper is our exogenous right the status quo represents substantial level of injustice and unfair play against our people. The definition of this gross injustice goes beyond revenue considerations. Proposition 2 will expand on this dimension.

Update (3rd December) :

Dr Mpande at the School of Mines, UNZA has put together this wonderful chart showing that Zambia's tax take is in effect negative given the VAT rebates.

Update (6th December):
In the narrative, I touched on the gemstone problem. The Gemstones and Allied Workers Union of Zambia is also equally concerned.

Monday, 23 November 2009

Lost tourism revenue?

Another interesting comment that challenges government approach to tourism. Rt Hon Gary Nkombo(MP) reckons government is losing a lot of revenue in uncollected tour operators' operation fees and licenses fees in the hospitality industry. According to Hon Nkombo, "for over a year government has not been collecting revenue in the hospitality industry and that some big companies in the industry are not regulated". This argument appears in line with the recent discussion here.

Sunday, 22 November 2009

Mining Reflections: A People Betrayed

We continue our monthly reflections on important areas where significant gaps remain. This month our focus is on the mining question. New political calls to revist the the current fiscal regime in face of rising global prices has again thrust this important sector at the forefront of public discourse. Two key features stand out in this “new debate” : the lack of significant public anger on the raw deal. Aside from a few calls by foreign organisations and several members of parliaments, there are appears limited anger at our current predicament. Zambians have either accepted the “new system” or are tired from the last agitation; and, there’s glaring confusion and general lack of clarity on what the big questions are regarding mineral development in Zambia. Where such “big questions” have been defined by Government and other political players, they appear shaped by foreign forces, with little understanding of what is at stake for the ordinary Zambia. In the next series of posts I will attempt to define the scope of our present challenge by restating some facts and removing some common misunderstandings, with the aim of moving us to develop a unique Zambian approach to what is a big Zambian issue. But before we get there we must understand that our challenge is big because our people currently stand betrayed by those we have elected to lord over us.

In January 2008 President Levy Patrick Mwanawasa (LPM) announced that Zambia was breaking away with the huge stones that had been hang its neck during the Chiluba Administration. The Development Agreements (DAs) were going to be abandoned and instead LPM would put in place a new fiscal regime. Following advice from expensively hired foreign consultants, the President concluded what everyone already knew : Zambia’s “average effective tax rate of 31.7% is 8% lower than the next lowest country in the world.....clearly Zambia’s mining fiscal regime to investors and provides the lowest revenues to the Government”. Zambia was about to take a unilateral step to cancel the DAs and put in place a fair taxation system for the mines that reflected the importance of mineral wealth to our people.

What preceded that statement was a round of international campaign highlighting the unfair nature of the existing fiscal regime, principally led by Christian Aid, Scottish Catholic International Aid Fund (SCIAF) and Action for Southern Africa (ACTSA). Between them they published two significant reports - For Whom the Windfalls? Winners and Losers in the Privatisation of Zambia's Copper Mines and Undermining Zambia’s Development - that forcefully highlighted the scandal and made the world listen. The NGOs argued that Zambia was blackmailed into privatising the nationalised copper industry by the IMF/ World Bank who threatened to withhold debt relief and other aid, as a result less than one penny in every British pound was going to our country, where health and education programmes have collapsed for lack of resources.

The mining companies were feeling the heat, and so was the IMF / World Bank who were forced to join the change camp, concluding emphatically: “[we] commend the Government for taking steps to reform the fiscal regime of the mining sector while preserving Zambia as a competitive, credible, and attractive investment destination, but advocate the inclusion of an additional revenue-sharing mechanism that would capture a higher share of mineral rents for government during period of abnormally high international prices for minerals. Such a device is currently not part of the proposed reforms”. The message was simple : we can’t keep on providing debt relief and aid when you are not willing to use the resources at your disposal.

A significant change in momentum. The NGOs had won the debate largely through high quality reports, workshop and good internet lobbying (on-line petitions, etc). It should never be forgotten that the push for a fair share was a fight fought on our behalf by NGOs whose primary aim was the pursuit of justice, fairness and defence of the poor. Without the support of these NGOs I am pretty sure that nothing would have changed. With their support LPM was embolden and the reforms became irreversible, for a season.

Under the LPM changes the corporate tax rate for mines was set at 30%, mining royalties on base metals at at 3% of gross value (up from 0.6% in most DAs), and withholding tax on interest, royalties, management fees and payments to affiliates or subcontractors in the mining sector were set at a rate of 15%. While many of these measures, especially the increase of royalties had largely been anticipated (having been the subject of previous negotiations), two additional elements - the setting of a windfall tax on base metal revenues and the profit variable tax – took the mining companies by surprise. The windfall tax, was to be triggered at different price levels for different base metals, with . For copper, a price between US$ 2.50 – US$ 3.00/lb, attracted a windfall tax of 25% ; between US$ 3.00 and 3.50, 50%, and 75% for prices above US$ 3.50/lb. At the time of the changes, copper prices were around the US$ 3.60 level, sufficient to trigger the maximum windfall penalty.

The reaction of the mining companies was total uproar, , threatening our country with legal action and all manner of bullying tactics. The full force of these tactics where probably best illustrated when against all expectations, the Patriotic Front President Michael Chilufya Sata (MCS) wrote to LPM demanding the removal of the reversal of the new fiscal regime: “we [Patriotic Front] are not in favour of variable tax or windfall tax based on gross revenue. We therefore suggest that these two taxes be abandoned.....". LPM stood firm, but in many ways the PF pressure, whether motivated by real politick or foreign lobbying, illustrated a fundamental problem in the implementation of the new regime – poor consultation. In typical single mindeness and undemocratic tendencies of LPM, there was no consultation with anyone. Like the DAs before it was all done behind closed door, the only difference is that this time the push was in favour of the people. As good as the intention was, unfortunately the lack of consultation was now leaving a gap that mining companies could exploiting by lobbying other people to their cause.

The other problem with the implementation was the lack of clarity on how the new profit variable tax was meant to operate with regards to the windfall tax. This confusion was later going to be used by the mining companies to build new momentum to reverse the entire regime and exact new concessions in face of a new global recession. Even as LPM's government was forging ahead, new seeds were being sown for reversal.

Fast forward to November 2008. LPM has died and Rupiah Bwezani Banda (RBB) is now Republican President. His narrow ascendancy was greeted with cheers by the mining companies and their supporters, predicting gleefully: "It appears that the onerous tax rates enacted into legislation in Zambia earlier this year are likely to be significantly watered down. And this should enable the country's copper producers to regain a stable economic footing.." It wasn’t long before the global downturn was going to be used by RBB to justify removing the windfall tax "We must ensure that we do not kill the goose that lays the golden egg. There is little point in taking in a few million dollars in tax if thousands of jobs are lost as a result". The ministerial chairs were going to be shuffled round to pave way for the changes – out went the Minister of Finance Ng'andu Magande and the Minister of Minerals Kalombo Mwansa was moved to Home Affairs.

In January 2009, with a new team in place, barely nine months after its introduction, RBB abandoned the LPM changes following what the UK’s Financial Times described as ‘intense lobbying’ of the government by large, foreign owned copper mines. The President gave in with concessions galore, which included scrapping the ‘windfall tax’ which fell due when copper prices exceeded a certain level. In fact, prices had fallen below this level in October 2008, so no further tax was liable. However, companies were keen to get rid of the tax, arguing that it penalized high cost mines because it was levied on the overall value of copper produced, not on profits. The government allowed hedging income to be included as part of mining income for tax purposes. A serious setback to our people as it is relatively easy to demonstrate a loss on hedging (and move any profits offshore), allowing companies to further minimise their tax payments. The government allowed companies to write off 100% of any investment against tax as depreciation in the year in which the expense occurs – well beyond the international norm.

Unilateralism was once again employed only this time, in act of betrayal of the Zambian people to remove a tax that was not binding at the time, but which mining companies knew soon would be a big bon for them when base metals prices resumed the upward trend. What was left is the standard corporate tax, a mineral royalty of 3 per cent of gross value, and a variable levy on profits. Currently the price of copper is over $3.00 [see graphic below] and showing an upward trend. It wont be long before windfall tax would have beennearing its maximum application (current it would be at 50% application).
RBB has defended the government’s position by noting that “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". An assessment that demonstrates the gap in his knowledge. As I indicated in my previous interview with the Post, everyone knows that although a tax on profits is only excellent in theory, ZRA can never have the internal capacity to effectively force the mines to comply. These are massive mining companies with the best tax lawyers – they will continue to make our people look foolish as we endless chase for revenue. It is bread and butter work for international tax lawyers and accountants to minimise tax liabilities by minimising the paper profits of their employer.

Unsurprisingly the cautious joy many of us felt with the LPM fiscal regime has now given way to feeling of despair. But currently this empty despair because it is not founded on genuine anger for the injustice that currently prevails. It is despair that is not moving us to actively define proper alternatives and lobby government to act. Must we wait for foreign NGOs to agitate on our behalf again? For those of us who are now back to full agitation for a better deal for our people, the story of the last 24 months highlights some important problems which characterises our current approach to mining, which any new mining reforms needs to appropriate reflect. In the next nine posts in this series, I will offer nine separate undeniable propositions on what is fundamentally wrong with the status quo. The do-nothing is not an option, and I plan to show why.

Saturday, 21 November 2009

Competition for Entreprenuership in Education

The 2009 Pan African Competition for Entrepreneurship in Education has been launched! The top prize for the competition is 10,000 USD and there are 1,000 USD prizes for the best entries from every country. What are you waiting for? See below :

2009 Pan-African Awards for Entrepreneurship in Education

How prosperous is Zambia?

That depends on your comparator. According to the recently released 2009 Legatum Prosperity Index, Zambia is not very prosperous globally (89/104), but slightly better regionally (7th in Africa).

The good:

Social Capital - Ranked 21st : Just 12% of all Zambians feel they can trust their fellow citizen, placing Zambia amongst the bottom 15 on this variable. Only 18% of Zambians indicated they had donated to charity in 2008; however, as many as 26% had volunteered and a high 60% of Zambians claimed to have helped a stranger in the same timeframe.* In addition, just 70% feel they can rely on their family and friends in times of need*; however, most people in Zambia feel friends are important to them. The proportion of the population who are members of organisations is the third highest, internationally: 96% are involved in religious organisations, and memberships in sports and arts groups rank within the seven highest rates, worldwide. Zambia is one of the 10 most religious countries in the world, on a self-reported basis, with the majority of the population practising and attending religious services.* This high level of religiosity provides an additional network through which the Zambian community can find social support.
The bad:
Governance - Ranked 77th : The rule of law is neither well respected nor enforced in Zambia and both the quality of commercial regulation and the quality of the governmental bureaucracy are also very poor, ranking the country in the bottom quartile on this variable. While citizens do have some right to self determination through democratic processes, this is limited to some degree by institutional weaknesses, and only 27% of citizens are confident in the honesty of Zambian elections.* More than eight out of 10 people think there is widespread corruption in local businesses and government.* On a positive note, 63% approve of the country’s court system, ranking Zambia in the top 30, and nearly three-quarters have confidence in the Zambian armed forces, an average proportion, worldwide.
The ugly:
Economic Fundamentals - Ranked 102nd : Half of the workforce is unemployed in Zambia, the second highest proportion worldwide, and the inflation rate, at 11%, is among the 15 highest, globaly. Despite a domestic savings rate of 31% of GDP that ranks the country in the top 25, physical capital per worker is very low in Zambia and foreign direct investment is equal to 9% of its GDP. Over one-tenth of all loans in Zambia are in default, while a high interest margin of over nine percentage points shows an inefficient banking sector, ranking the country in the bottom six countries, globally. Household expenditure in Zambia is very low, indicating a small domestic market for local businesses. Zambia’s level of reliance on raw material exports is very high, with a concentration level of 61%; despite this, the country’s exports, as a proportion of its capacity to import, are around the global average.
The methodological report can be found here.

Northrise University, 2nd Edition

Another wondeful video about Northrise University focusing on the impact on Ndola. Previous video here.


Friday, 20 November 2009

Why Have Africans Ignored Dead Aid?

Its certainly not this ignorant and condescending reason put forward by Booker Rising :

It could be that African journalists and academics skew Marxist, and thus are loathe to consider such a pro-capitalist book. Racial issues could be an issue as well. Some black folks do believe that "the white man's ice is colder", or some such old-school adage..
The year is 2009 and people still write things like this. The point is that Dead Aid was written for a specific X-Factor / American idol western generation much devoid of substance or experience of the problems facing our continent. To suggest that we suffer from some racial inferiority in our assessment, well is just foolish.

N.B : This is certainly the last time I quote Booker Rising on this website. I couldn't help alert readers of some of the ignorance that permeates the blogosophere that discusses "African issues".

Tackling Crime (Guest Blog)

Current reports by some news sources around the world concerning the unprecedented incidence of crime and xenophobic sentiments in South Africa have got me pondering whether there is anything we can do in Zambia to save ourselves from experiencing a similar situation.

At present, government leaders in Zambia seem to be oblivious to the spate of criminal activities in the country, probably because their families are relatively safe since they are provided with security at public expense. But as the unemployment situation worsens, and as we continue to spill nearly half of the children who enroll in Grades 7 and 9 onto the streets every year, crime is very likely to get out of control and make it difficult for anyone to live, work and/or shop in a safe environment.

Moreover, violence and threats of violence by MMD riff-ruffs against individuals within and outside the MMD party who are perceived to be enemies of President Rupiah Banda and other government leaders have become a serious threat to safety and security in the nation.

So, failure to contain the widespread unemployment, the increasing number of street kids and violence by MMD hooligans and other political thugs is a good reason why it would not be wrong to conclude that the MMD government has failed to address the escalation in crime in the country. Every family and business in Zambia today has been directly or indirectly affected by robberies, burglaries, vandalism, and other senseless crimes—but there seems to be little effort by the Ministry of Home Affairs to address the situation.

Let me suggest a few initiatives for addressing the current crime wave in Zambia.

Firstly, we need to create a National Crime-Prevention Board and charge it with the responsibility of formulating an effective and efficient national crime-prevention strategy. The Board should be made up of police, prisons and paramilitary commanding officers, as well as representatives of chambers of commerce and industry, private legal practitioners, and civil rights organizations .

Secondly, we need to seriously consider the prospect of transferring the superintendence over the civil police to provincial governments after creating semi-autonomous provinces to be administered by elected provincial governors and district mayors—in which case the Ministry of Home Affairs would have to be abolished. Close superintendence over police functions by local governments is more likely to make it possible for police officers to discharge the following duties more effectively: (a) protection of life and property; (b) preservation of peace and prevention of crime; (c) detection and apprehension of law breakers; (d) enforcement of laws and ordinances; (e) safeguarding the rights and freedoms of members of society; and (f) developing sound police-community relations.

The national government should then work with provincial governments through the Ministry for Local Government, for example, by allocating adequate financial and material resources to police units in order to enhance their capabilities in terms of communications, transportation, crime-fighting gadgets and equipment, and security cameras for installation in town centers and on major roads and streets.

Thirdly, there is a need to continue with the concept of a Police and Prisons Public Complaints Authority at the district level in order to provide an effective mechanism through which members of the public can be afforded the opportunity to keep the operations and conduct of police and prisons officers in check.

Fourthly, it is important to address the factors that induce criminal activity. Although habitual criminals cannot easily be reformed, creation of adequate jobs by stimulating supply and demand through lower taxes and interest rates can greatly reduce the number of citizens who are likely to engage in criminal activities for the purpose of obtaining financial and/or material resources to meet their basic needs.

We also need to provide for free education, and abolish elimination examinations in Grades 7 and 9. Besides, there is a need for pieces of legislation designed to provide for long jail terms and/or heavy fines for gun-totting.

Fifthly, it would be a good idea to make the training of prisons, corrections, and civil police officers the responsibility of the Defence and Security ministry. If such an arrangement can be deemed to be viable, the Lilayi training school could be converted into a Police and Prisons Academy designed to provide centralized, state-of-the-art training for prisons, corrections and civil police officers. Training costs could be met by the central government, while stipends and room and board for trainees could be financed by provincial governments.

The Academy should also be open for enrolment of trainees spon sored by local security companies, and governments and security companies in the African Union (AU). Private and foreign government sponsors should meet the full cost of training for their sponsored trainees.

The Academy should also provide for driving lessons to all trainees who would need such training. Selected trainees should be provided with training designed to equip them with skills in operating security helicopters. Eventually, the central government would need to purchase at least 10 helicopters—1 for training purposes at the Academy, and the remaining 9 to be shared among provincial governments for security operations by the civil police. A maintenance facility for the helicopters could be established in Kabwe district.

It is high time we started pursuing radical, comprehensive and realistic policies designed to make it possible for our people to reap the benefits of independence, democracy and economic liberalization within a short period of time. This may sound highly ambitious, but I believe very strongly that we can uplift the majority of our fellow citizens who are currently wallowing in abject poverty through simple, practical and commonsense solutions to the socio-economic problems facing our beloved country.

Funding for these kinds of endeavors can come from savings which can be realized from reducing the number of Cabinet portfolios by merging and/or abolishing some government ministries and agencies, abolishing the positions of Deputy Minister and District Commissioner, reducing the number of foreign missions by having single embassies to cover clusters of countries, and initiating many other cost-cutting measures.

Government revenue would also be enhanced through income taxes on holders of jobs created through lower interest rates and taxes, and the value-added taxes they would pay through purchases of products.

These are some of the issues MMD leaders should be contemplating instead of their current obsession with discrediting the UPND-PF pact and enacting legislation designed to regulate NGOs and the private media.

Henry Kyambalesa
(Guest Blogger)

A plunderous fight against plunder..

The true cost of the Task Force was revealed this week via this Justice Ministry press release. It turns the Task Force gobbled up a staggering $13.5m in legal fees and in excess of $10m on security and other meaningless tasks. The fight against plunder in the end turned out to simply be another initiative for people to enrich themselves with nothing to show for it. Once again the Zambian people (and some donors) were short changed, as I argued here. News has it that Auditor General is moving in to clear the decks.

Fisheries : A Forgotten Industry

Water accounts for 20% of our land mass, but fisheries only accounts for 1.3% of GDP. A new World Bank paper discusses the potential of fisheries industry in Zambia for poverty reduction.

State controlled wisdom..

Times of Zambia surpassed my expectations late last week when they penned this fantastic editorial on maize exports :

Zambian Consumer Association (ZACA) executive secretary, Muyunda Ililonga has obviously missed the point in calling on the Government not to export maize after the country’s bounty harvest.

According to 2009 crop forecast, the national maize production stood at 1.9 million tonnes as the national consumption is 1.6 million tonnes, leaving an excess of 300,000 tonnes as maize surplus. This simply means that production had exceeded demand locally and that is why many small-scale farmers have been crying that only the Food Reserve Agency (FRA) is giving them a realistic price for the produce.

While the Government may not be able to offer a higher price for maize through the FRA, we feel another way in which to help the farmers is through increased investment in the agriculture sector. Such investment is only possible with adequate resources and that is where the export of surplus produce can help earn the Government foreign exchange.

Although it is true that Zambia needs to build strong strategic food reserves to fall back on in times of need, the truth of the matter is that all this was considered in reaching the decision to export maize to countries such as Kenya. In fact, stakeholders on the monitoring committee looked at local consumption before allowing the export of the commodity.

It should firstly be appreciated that the production of maize is not just about consumption – it is a business and Zambia will be doing herself a great disservice by holding on to the surplus maize, which is on high demand elsewhere in the region. As Zambia National Farmers Union president, Ndambo Ndambo says in the story we carry today, the Government consulted stakeholders before allowing the export of the maize.

We feel there is no cause for apprehension over the Government’s plans to export maize to countries with deficit after a bumper harvest of 1.9 million tonnes and a surplus of more than 300,000 tonnes of maize.
I touched on the folly of export restrictions in previous posts, including A better vision for Agriculture.

Wednesday, 18 November 2009

Child labour in Zambia

A useful ILO / UNICEF report on children's work in Zambia. Abstract :

The report provides an overview of the child labour phenomenon in Zambia – its extent and nature, its determinants, and its consequences on health and education. The report also addresses the national response to child labour, and policy options for its elimination. The analysis considers the economics as well as the social determinants of child labour and follows a cross-sectoral approach, especially in the identification of determinants and strategic options. Particular attention is given to the links between child labour and schooling, and to importance of child labour as a constraint to Education For All.

Tuesday, 17 November 2009

Monday, 16 November 2009

Water Aid in Monze

CAFOD's water provision is making a difference in Kalisowe, a tiny village in the Monze :

Zambia: Water Making a Difference

Sunday, 15 November 2009

Corruption Watch (Lufwanyama Council)

The Lufwanyama Municipal Council has suspended its Director of Works and Supply and two other senior officers for allegedly stealing K338m meant for the construction of seven low cost houses in the area. This follows an audit report which revealed financial irregularities in the construction of the seven houses. More detail via this ZANIS article.

Saturday, 14 November 2009

Hydro Kawambwa?

A Chinese firm is apparently undertaking a feasibility study of developing the Lumangwe Falls hydro-power project in Kawambwa. Once operational the project may generate around 200 mega-watts. Unfortunately the announcement appears to come from the District Commissioner. One is always skeptical of these announcements until the President arrives on the site!

Friday, 13 November 2009

African Infrastructure Report

A new report from the World Bank and African partners, Africa's Infrastructure: A Time for Transformation, highlights the findings of a 24-country study (including Zambia) and urges increased investment in four critical areas: energy, transport, water, and information and communications technology.

Additional comments to follow after a proper read.

Bank of Zambia Quarterly Brief - Q3 2009

The Bank of Zambia Quarterly Brief as released this week. Nothing out of the ordinary that has not been covered previously, but quite useful in terms of bringing the statistics together. Particularly noticeable though is the substantial reduction on year-on-year foreign direct investment flows from $4.3bn to $1.4bn.
BOZ Quarterly Brief - Speech (Q3 2009)

BOZ Quarterly Brief - Presentation (Q3 2009)

Thursday, 12 November 2009

JCTR Press Release : Zambian Politics

Press Release from The JCTR :


Zambian politics has been interesting in the past three quarters of 2009 for mostly three reasons: (i) Zambian politicians are validating the old adage that “politics is a dirty game,” (ii) Church has been told it has no role in politics but only to praise-sing government, and (iii) politics does not truly serve Zambians who must be the custodians of politics.

“It is so sad that more than 17 years of Zambia’s adoption to multi-party democracy, our politics and governance are still unstable and manifest immaturity to an extent of attempting to shut down all opposing views. This have been manifest in the recent NGO Act, banning of demonstrations over acquittals of prominent figures, criticism of Church’s valid concerns of lack of democracy and good governance in Zambia, and limiting freedom of the press,” states Dominic Liche, Governance Officer at the Jesuit Centre for Theological Reflection (JCTR).

Politics remains that of name-calling, name-dirtying, lies, and just a dirty game to get into positions of power. One just has to read the newspapers (both Government and private) of the day to see this. We are yet to see mature and honest politics that have people’s needs and aspirations at heart. We are yet to see politicians that clearly indicate to us what difference they will make once elected not politicians that strive against all olds to get into power even if it means distributing mealie-meal or promising undo-able things. The Parliamentary by-elections in Chitambo, Kasama, and now in Solwezi are witness to this bad view of politics.

Despite the fact that the Church in Zambia, especially the three Church Mother Bodies, have been instrumental in Zambia’s politics, democracy and service delivery, Church has been told not to meddle in politics and remain in the pulpits. Surprisingly, Churches that sing praises to Government are highly commended by Government. Such hypocrisy is not building our nation but dividing it. For how can the Church remain in the pulpits when they preach to people that are poor, hungry, suffering because of bad policies, lack good healthcare, do not know where public resources go? The Church would be failing to preach the Word of God if they remained in the pulpit and remained blind to the harsh realities that people go through in their day to day lives. Some comments by Government persons who also are Church persons sometimes confuse Government position with Church position. One has only to read the Gospels and see how Jesus Christ interacted with the people of the day (feeding the hungry, welcoming sinners, healing the sick, giving advice to the rich and politicians, and suffering to the cross). It would be sad to see Churches persecuted for telling the truth or trying to work hard to improve the lives of the people they preach to.

It would be hard, given the events of the past three quarters, to confidently assert that politics in Zambia is serving the interests of all Zambians. Whilst it might be serving the interests of few privileged Zambians, the majority of “unnoticed” Zambians continue to suffer in poverty, in rural underdevelopment, in leaders that publicly proclaim they are there only to make laws and not represent their people, in leaders that are not committed to bringing good laws through a good Constitution. The acquittals of prominent persons and the “hallelujahs” that followed from some Government officials leave little to be desired. And when some Zambians expressed themselves about such acquittals, they were either arrested or threatened in the strongest words possible. Little do our leaders realise that the very people they deny freedom of expression, freedom and rights to demand explanations and justifications for use of public resources, rights to demand speedy and realistic national processes, are the ones who vote them in power and keep them in power. The basic requirement of democracy and good governance is that people participate in national processes and that people remain free to assert their wishes in elections and other processes. It is a sham to embrace democracy and good governance in rhetoric, whilst denying persons rights to participate fully in the governance of the country. After all, democracy is rule by the people themselves.

Mr. Liche further asserts that “the Church Social Teaching, the framework within which we work at JCTR, stresses that all decisions should be made for the common good of all in community and should be tested against whether they benefit the most vulnerable in society. We are yet to see if the new Constitution, the African Peer Review Mechanism, the 2010 National Budget, and the National Development Plans, are designed in such a way that they benefit the most vulnerable in society. When we have talked about possible inclusion of justiciable Economic, Social and Cultural Rights in new Constitution, we are told it is too expensive and will bankrupt the nation. But where are resources coming from for increased emoluments for Cabinet and Parliamentarians, for gratuities for Parliamentarians, and for paying National Constitutional Conference (NCC) members with their never-ending NCC? Even when the answer is that these are budgeted for, then why not plan and budget for improving the lives of the poor, improving the lives of those in rural areas, improving not only the GDPs and inflation rates but the real lives of the people?”

When some civil society organisations raised strong moral voices against such “unnecessary” expenditures, they were dubbed enemies of Government. Has anyone tried to honestly calculate such “unnecessary” expenditures and tried to see how many people such would serve in Zambia? If so, where is the conscience of our leaders, most of whom are Christians? Are the interests of politicians (both in ruling and opposition parties) really the people that vote them into power or simply their own? These are questions JCTR poses to our politicians in Zambia.

For more information contact: Church Social Teaching Programme of the Jesuit Centre for Theological Reflection

P. O. Box 37774, Lusaka, Zambia
Tel: +260-211-290410; Fax: +260-211-290759;
E-mail:,; Website:

Legal fight for mineral royalties?

Hon Joseph Katema MP has warned the Governmment that Chingola residents are ready to challenge it in court over its failure to share mineral royalty collected from KCM with the local authority.

“Previously, we had development agreements signed by government with mining conglomerates but when we ushered in the Mining and minerals development amendment Act of 2008, it rendered the development agreements null and void, meaning all companies should abide by the new Act. In the Act, there is a provision in section 136 that there will be sharing of mineral royalty; it is collected by government. A percentage should go to the local council in which extraction of minerals is done...But from 2008 to date, Chingola Municipal Council has not received a single ngwee from mineral royalty tax collected from KCM (Konkola Copper Mines) and the people would like that money to come to the local council. We are ready as residents of Chingola to challenge government in the courts of law. We are ready to take them on in courts locally and even go to International Court of Justice,” he said. ‘Even Solwezi, it is entitled to mineral royalty which First Quantum through Lumwana is paying to government. It is the same with Mufulira, Kalulushi".
The Mines and Mineral Development Act 2008 does have a provision for sharing mineral royalties but it does not specify who they should shared with. Para 136 simply states "The Minister responsible for Finance shall, in consultation with the Minister [responsible for Mines], a mineral royalty sharing scheme for distributing royalty revenues". It strikes that if the Government is guilty of anything its lack of implementation of the revenue mechanism. Its another case of our parliamentarians having fallen asleep at critical moments of drafting the Act. Nothing doubly new there.

Wednesday, 11 November 2009

Corruption Watch (Ministry of Tourism)

Reports last week that two Lusaka lawyers were arrested for trying to swindle govt K2.4bn. The "legal brains" apparently attempted to obtain the money from the Ministry of Tourism Environment and Natural Resources using an inflated bill of claims. More detail via Watchdog Zambia.