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Sunday, 31 May 2009

Mosquito FM

Mosquito FM is a feature documentary that will explore "the deadly malaria endemic ravaging the remote North Western Province of Zambia by documenting the impact of a new community radio station on the health of a village and the lives of the youth who volunteer to be members of the first team of bicycle reporters" :

James Tembo, Detective (A Zambian Film)

A unique film follows the work of a detective in modern Zambia who is hired to look for the missing body of an executed religious figure named 'Joshua' (a re-setting of the biblical narrative). We get a glimpse into Zambian life as we follow Tembo through a series of interviews.

Part 1 (20:27)


Part 2 (24:42)


Part 3 (15:06)

Linking Zambia (Auditor General Office)

The Auditor General Office appears to have a website.  Not sure how long the website has been operational, but it is a great development.

Linking Zambia (Economics Association of Zambia)

The Economics Association of Zambia now appear to have a functioning and regularly updated website.

Saturday, 30 May 2009

Quiet Plunder?

"We are not against the press, we are just saying 'write the truth about MMD, write the truth about Rupiah Banda, write the truth about Kunda, write the truth about Jeff Kaande', respect the leadership.....The most unfortunate part is that Daily Mail and Times of Zambia if they are here, you are not helping us also even though you are ours.......for the past six months we are just reading 'Rupiah Banda', 'George Kunda must resign', 'Jeff Kaande is giving money to cadres.' Hmmm there's no other news?"
Jeff Kaande boldly claiming that the MMD owns the Daily Mail and Times of Zambia. But isn't this plunder of national resources? To take national property and call it yours, is clearly a form of theft. Yes, formal transfer into MMD hands is not there, but de-facto theft is clearly at play here because to all intents and purposes  Jeff Kaande and his friends clearly believe and forcefully demand that national assets like the Times of Zambia and Daily Mail are property of the MMD. More detail via this Post article

Telecommunication powered growth

A new paper  investigates the different effects that mobile and land-line phones may have on economic development, accounting for the possibility that causation may run in both directions. While previous studies have generally found that telecommunication is positively related to growth, few have looked at how mobile telecommunications specifically impacts on economic growth, especially where the growth in mobile telephony is disproportionate relative to the level of land-line telephony (we have previous discussed various micro studies e.g here, here and here). The key conclusion :
We find the current importance of traditional land-line phones for economic growth to be negligible in the sub-Saharan region. On the other hand, the contribution of cellular phones to economic growth has been growing in importance. While it is obvious that cellular phone use has been growing, we document that the impact itself of a single cellular phone has also been growing. Moreover, we find that the marginal impact of cellular phones is greater wherever land-line phones are rare. Combining these two results with the fact that cellular phone infrastructure is comparatively cheap, and the policy implication is clear – more cellular phone infrastructure should be encouraged in the sub-Saharan region, as it is the more cost-effective and beneficial technology.
Closer to home, the natural implication of this result is the relentless push for further deregulation of the international gateway, as well as elimination of cross subsidisation from ZAMTEL to Cell Z which distorts competition (further discussion of these issues  here). We continue to champion both issues on this blog. But what particularly struck me is this early observation in the paper : 
Mobile and land-line (fixed-line) telephones offer great promise for improving economic well being in Africa.... The two technologies, however, are imperfect substitutes, offering different types of services. Clearly, mobile phones offer most, and possibly all, of the services of land-line telephones. The opposite statement is less true. Land-line telephones do not offer text message services or mobileinternet access. Often, all that is required for an efficient decision to be made is a price quote. In this regard, a simple text message is far more cost-effective.
I have to say that I see no obvious reason  why individuals would prefer fixed lines over mobile. By extension, it would seem to me that fixed land lines only become important nationally, as a compliment to broadband services. But I am no telecommunications expert, I defer these issues to Zedian and others.  In particular, I would be interested to know what others think on a specific question : is there a future for fixed telephone lines in Zambia or should our communication strategy centre around expanding mobile telephony, as implied by the conclusions in the paper ?  The answer has obvious implications for the future of ZAMTEL and how quickly every dot on these maps will be all red.

Corruption Watch (Ministry of Health)

It appears the early estimates of plunder at the Ministry of Health were significantly underestimated. According to the Auditor General Anna Chifungula preliminary investigations reveal that the figure stolen by corrupt civil servants was not K10bn but something like K27 billion, with the possibility that more money might have been stolen. The Secretary to the Cabinet Dr Joshua Kanganja has revealed that  32 workers are now on forced leave. More detail via this Post article

Update : The Zambia Watchdog has more on this fast moving investigation report, suggesting that the a former First Lady may be implicated : 
Officers investigating the theft of billions of Kwacha from ministry of health have picked up former PS in that Ministry Simon Miti. The Watchdog has been informed that the police are now hunting for Henry Kapoko. Dr. Miti was said to have been at the police headquarters since 8 hours on Saturday.

Meanwhile, investigations are said to have extended to a former first lady and the bank that hosts the ministry accounts. Sources have disclosed that investigators want to know why the ministry of health is maintaining both its Foreign and Kwacha accounts at one of the smallest banks in Zambia, First Alliance Bank. Sources say that investigations have been extended to the Chief Executive Officer of First Alliance Bank Suresh Gupta. The investigators want to find out how certain payments were authorized.  

And sources have disclosed that investigative wings are probing how one former republican First Lady (wife of president) acquired K47 billion which is allegedly stashed at one of the small banks in Zambia. The investigators believe this money is part of the loot from the ministry of health.


On Thursday, local government minister Ben Tetamashimba announced that the mother of all corruption will soon be uncovered. “I am not saying the father, I am saying the mother of all corruption in Zambia will soon be uncovered,” he said.

Linking Zambia (ZED Clips)

Your home for Zambian music videos / audio - Zed Clips . From what I can see this is simply an organised video library of Zambian You Tube videos. But I might be wrong..

Friday, 29 May 2009

Remittances Vs Conditional Cash Transfers

A new paper sheds new light on the impact of public and private transfers on credit markets, focusing on conditional cash transfers and remittances in rural Nicaragua. The paper finds that the reduction in income risk provided by remittances changes borrowers’ expected marginal returns to a loan and/or their creditworthiness, as perceived by lenders more effectively than conditional cash transfers from Government. In short, what makes remittances so powerful is their resilience (a strong signal to bankers). If Governments can work to increase remittances, it would help substantially in lifting people out of poverty:

Our findings show that, on average, CCTs did not have a significant effect on the likelihood of requesting a loan, while remittances increased it. The successful enforcement of the use of CCTs on long-term investments like education and health, shown in the literature1, seems to have left unchanged expected marginal returns to the short-term loans these households have access to or their creditworthiness as perceived by lenders. Likewise, any unspent part of the CCT seems to have left unchanged expected marginal returns to a loan and the lender’s perception of the household’s creditworthiness. 
Remittances, on the other hand, are the result of a household strategy to reduce income variability and overcome liquidity constraints. Its positive effect on the decision to request a loan suggests access to remittances improved their expected marginal returns to a loan and/or their creditworthiness as perceived by lenders, through the reduction in income risk. This positive effect seems to offset any other substitution effect caused by the rise in liquidity that may discourage the request of a loan. 

Thursday, 28 May 2009

Filling the void ?

Zambezi Airlines plans to launch flights to Johannesburg route next week and the Dar es Salaam route early July. This announcement comes off the back of their latest acquisitions of two Boeing 737-500s. Zambezi Airlines currently operates domestic flights to Ndola, Kitwe, Livingstone and Chipata using 30-seater Embraer Brasilia 120 aircraft.  More detail via this Daily Mail article. 

Corruption Watch (Legal Aid Board)

The Drug Enforcement Commission (DEC) is conducting a forensic audit on suspected fraud and money laundering activities involving close to K2 billion at the Legal Aid Board under the Ministry of Justice. According to Post sources "The officers from DEC...are carrying out a forensic audit on suspected money laundering activities. This has led to the suspension of about three or four officers from accounts, procurement and administration respectively pending investigations in the matter...The investigations involve the procurement of vehicles for the board. There is also the issue of houses in Livingstone and Kabwe. It is suspected that the prices for these houses were inflated." More detail via The Post.

The rise of Mwinilunga?

The Copperbelt Energy Company (CEC) is partnering with Tata Africa to develop a new hydro electric generation plant in Mwinilunga at an estimated cost of K400 billion.  Construction will start after completion of feasibility studies which are under way at a site along Kabompo River, with construction to last up to four years. More detail via this Daily Mail article

Mwinilunga of course is the city which we were promised by China's Zhonghui International Mining Group would be bigger than Lumwana, with the intended  investment of up to £2bn, off the back of an open pit mining project. Since then the company has been acquiring land and taking local chiefs to China.  

Inflation Statistics - May 2009

The annual rate of inflation, as measured by the all items Consumer Price Index (CPI), increased by 0.4 percentage points from 14.3 percent in March 2009 to 14.7 percent in April 2009. The increase in the annual inflation rate in  MY 2009 was mainly attributed to increases in the prices of food and non-food products. The Government remains confident that its inflation (10%) and GDP (5.8%) targets are on course. 
CSO May 2009 CPI Press Release


Corruption Watch (Ministry of Health)

IRIN provides some important quotes from the Dutch Government and SIDA. Interesting to see the emphasis on the "Dutch taxpayer". If only Zambian's had the same rage over the plunder of national resources :
The governments of the Netherlands and Sweden announced they had suspended aid after a whistleblower alerted Zambia's Anti-Corruption Commission [ACC] to the embezzlement of over US$2 million from the health ministry by top government officials. "The misuse of Dutch taxpayers' money is unacceptable," said Development Cooperation Minister Bert Koenders in a statement, adding that Dutch aid would be put on hold until the ACC and Zambia's Auditor General released the findings from their investigations. 

Donors fund 55 percent of the country's health budget. The Dutch government, the largest supporter of Zambia's tuberculosis (TB) programme, contributes about 13 million euros (US$18 million) annually to rural healthcare, preventing malaria, TB and HIV, and training medical staff. The Swedish International Development Cooperation Agency (SIDA) had earmarked 88 million kroner (about $12 million) for Zambia's health ministry before the scandal broke, but will now await the ACC's findings before releasing the funds. "SIDA will not accept any abuse of development money," Charlotta Norrby, head of SIDA in Zambia, told local media.
Update (29 May 2009) : Health Minister Kapembwa Simbao earlier today laid out the likely impact of aid suspension on the health system : 
During a joint briefing in Lusaka on the financing of the health sector after withdrawal of aid by some donors, Simbao said K24 billion was required every month to meet hospital requirements in the country.

"District hospitals will be the most affected since their allocation amounts to K16 billion per month and these funds is meant for feeding of patients, operations, HIV programmes, nursing and clinical duties, among other programmes.  So you can see the difficulties that we will undergo through," Simbao said. "So we are considering reducing or suspending funding to certain areas without causing damage and we have in mind items like seminars and others that can be pushed forward to next year."

Wednesday, 27 May 2009

How does corporate America really view Africa?

A  new report released by Baird's Communications Management Consultants and ABI on The Conversation Behind the Boardroom: How Corporate America Really Views Africa. The report seeks to address the central question : Why has Africa not attracted more interest from the U.S. business community?  The short answer :

U.S. executives point out that Africa is only one of many possible destinations that American corporations consider for investment. Investment is highly competitive, and many countries are vying to become the destination of choice for capital. That said, U.S. companies in some sectors, particularly technology, now regard Africa as the last frontier for growth. These companies believe that Africa, with its market of about 1 billion people, can no longer be ignored. Even with this interest, Africa faces tough competition and huge hurdles to attract U.S. investment.

Globally, competition for American FDI is high. Countries from all regions showcase their advantages, align their offers to U.S. needs, clamor for attention, and invest in their own countries to attract additional investment. Consequently, U.S. corporations do not lack investment choices, and they rarely consider African nations.

Further, news about Africa is mostly about chaos and unrest. Africa is not active or aggressive enough about attracting investment; the voices of the few countries that are making an effort get lost in the surrounding negative noise. Some African countries are making special efforts to assist foreign companies that invest. For example, Nigeria’s president regularly engages with the local leaders of foreign companies to help cut through bureaucratic tape.

U.S. corporations need a strong and specific draw from Africa to make investment worthwhile. This can be the pull of a big market or a big source of critical raw materials or a belief that there is a competitive advantage to early entry into African markets. The survey data show that few of these pulls exist or are not sufficiently strong to be effective in the near term.

Corruption Watch (NHCC)

I suppose its about time Zambian Economist opened a thread to record the increasing plunder of national resources (or improvement in detection, depending on your perspective) that is now being heavily trailed in the media. As well as efforts being taken to eradicate the scourge. 

We have read the Ministry of Health saga and the associated suspension of aid by SIDA and Dutch Government, but it appears this scourge has extended to the National Heritage Conservation Commission (NHCC)!   

The Daily Mail reported that Executive Director, Donald Chikumbi and his financial manager Richard Nyirenda have been suspended, while the commission’s human resources manager, Enos Kalenga has been dismissed with immediate effect to prepare for the audit.

I should point out that naturally it is difficult to distinguish between "mismanagement" and "corruption".  For the avoidance of doubt our "corruption watch" will include any suggested plunder of national resources, intentional or otherwise.

Parastatals and Competition Law

An important contribution from Andrew Kashita on the current competition law vis-a-vis parastatal companies.  If Andrew's assessment is correct, it appears some strategic incoherence is at play by the ZCC. Mr Kaira may be trying to mask his incompetence by alluding to clauses that do not exist.  We have previously touched on this issue here.  Certainly its time we all took a closer look at the "Competition and Fair Trade Act 1994"
Competition law and state-owned firms, Andrew Kashita, The Post (subscription), Commentary :
I refer to the story of May 19, 2009 in which the executive director of the Zambia Competition Commission (ZCC) is reported to have announced the proposals to lift the exemption of state-owned companies from the application of the competition and fair trade act, 1994. 

I was saddened and disappointed to see this claim, 15 years after this law was put on the statute book. There is nowhere in the Act where the exemption is conferred on state-owned companies.

The preamble itself states: "to encourage competition in the economy by prohibiting anti-competitive trade practices; to regulate monopolies and concentration of economic power; to protect consumer welfare; to strengthen the efficiency of production and distribution of goods and services.

The definition of a monopoly is " a dominant undertaking ...which produces, supplies, distributes or otherwise controls not less than half of the total goods of any description that are produced, supplied or distributed throughout Zambia or any substantial part of Zambia...". The same goes for services.

The quoted section 3(f): "...activities expressly approved or required under a treaty or agreement to which the Republic of Zambia is a party" has been misconstrued by the ZCC.

By common understanding, a ‘treaty’ or ‘agreement’ to which the government is a party means treaties or bilateral agreements with other countries or protocols and those signed with such bodies as the United Nations, African Union or SADC. These are the bodies in which other countries are signatories, and they rarely deal with trading organisations.

The Act deals with trading organisations in which the government has joint investments with other countries being trading entities which have provisions for dealing with revisions of operating (i.e. trading) charges and there are not many of these. The examples are TAZARA and charges at bridges such as Sesheke crossing into Namibia; at Kazungula when the bridge is built but not the present pontoons to and from Botswana. TAZARA also faces competition on the road throughout its length.

There are no treaties or agreements with other countries in respect of Zesco, Zamtel, Zambia Railways or even Cell Z which are all trading companies.

These companies and other activities are not exempted from the Competition Law.

The report went on to say that ZCC can only recommend to the minister in respect of state-owned companies flouting the law. This is incorrect.

Under the minister incorporation Act, in this capacity, the minister holds shares, bonds or other instruments on behalf of the government but he also as a shareholder, has powers to sue and be sued. His actions under this Act bind his successors, i.e. the government.

It is sad to see such a misunderstanding and misinterpretation of the law.

He said "we have no mandate to punish those who abuse the law but to recommend...to the government". This is wrong.

Section 14(1) authorises the executive director to obtain a court warrant to enter premises, access the books of accounts or other documents relating to the trade or business... and the taking of the copies of an such books of accounts or other documents.

Anyone aggrieved by the action of the executive director of ZCC may appeal to the High Court and the Supreme Court.

Person is defined to include companies, associations, partnerships, etc. With regard to prosecutions, section 16 (1) says "any person who:-

a) contravenes or fails to comply with any provision of this Act...or any directive or order lawfully given or any requirement lawfully imposed under this Act....

(b) omits or refuses to furnish any information when required to do so,

(c) refuses to produce any documents when required to do so, or

(d) knowingly furnishes any false information to the Commission....

shall be guilty of an offence and shall be liable on conviction to a fine not exceeding K10 million or imprisonment for a term not exceeding five years or both.

Most Acts now contain references to "penalty units" to deal with the varying kwacha value. But this has nothing to do with the principal claim that ZCC has no power to take action against state-owned companies.

Before concluding this discourse, let us refer to the announcement by the Cotton Association of Zambia and the Zambia Cotton Ginnery Association of a uniform price per kilogramme to be paid to the cotton farmers. This follows what are referred to as lengthy deliberations by various representatives numbering at least eleven. This appeared in the Times of Zambia of May 20, 2009 on page 15.

The price is what will be paid to the growers and clearly contravenes Part III: Anti Competitive Practices etc, section 7 (1) "Any category of agreements, decisions and concerted practices which have as their objectives, the prevention, restriction or distortion of competition to an appreciable extent in Zambia... are declared anti-competitive trade practices and are thereby prohibited".

Specifically, section 7(2)(g) colluding, in the case of monopolies of two or more manufacturers, wholesalers, retailers, contractors, suppliers of services, in setting a uniform price in order to eliminate competition..." is prohibited.

The only time ZCC is required to get the approval of the minister is in sections 13 and 17 when regulations are required to be made governing; (a) anything which under this Act is required or permitted to be prescribed; (b) any forms necessary or expedient for the purposes of this Act; (c) any fees payable in respect of any service provided by the Commission; (d) such other matters as are necessary or expedient for the better carrying out of the purposes of this Act.

In conclusion, the ZCC claim is false. The requirement to extend the penalty or fine beyond K 10 million is a routine matter which the government dealt with long before now. ZCC has a primary duty to protect consumer welfare. No state-owned trading company in Zambia is exempt from obeying the competition and fair trade Act. what is missing is enforcement by ZCC.

Tuesday, 26 May 2009

World Soil Database

The Harmonized World Soil Database combines several different datasets on soil quality around the world (FAO's Soil Map of the World, World Inventory of Soil Emission Potential (WISE), etc.). I think we have touched on this before, but thought a separate blog was necessary for ease of reference. 

EAZ's Dead Aid Debate

Dambisa Moyo, author of Dead Aid (reviewed here), was recently in Zambia to promulgate her views. Fr Henriot reports on arguments, the tone and feelings from a debate hosted by the Economics Association of Zambia (EAZ). 
Dead Aid: lively debate, deeper issues, Fr Pete Henriot, The Post (subscription), Commentary :

It was a very packed room and the debate was also very packed! Last Friday night’s programme of the Economics Association of Zambia (EAZ) featured Dr Dambisa Moyo presenting her thought-provoking book, Dead Aid.  As lively as the debate was about her arguments, I thought much more significant was the revelation in the discussion of several deeper issues facing the future of development in Zambia.

So, first let me sketch some comments on the debate about the book, and then offer some highlights of the deeper issues coming out of the discussions.

Not “either-or”

Moyo’s presentation at the EAZ meeting (and in several other public appearances last week) defended the two major theses of her study. First, foreign aid for Africa has failed to promote development, and second, there are alternatives that are more promising. She speaks of Africa in general, but her argument is applicable to her homeland, Zambia. 

What has aid brought Africa and Zambia? Corruption, dependency, dysfunctional governments, lost opportunities, debt burdens, conflicts, et cetera. Certainly no positive and long-lasting gains! Add to that the depressing story of non-African “do-gooders” spreading terrible stories about Africa in order to appeal for more help for us poor folk!

And what are the alternatives for Africa and Zambia? More foreign investors, closer business relationships with China, engagement with bond markets (negotiated debts), trade, more use of local money and remittances from overseas Zambians, et cetera. Coupled with ending aid, all this would stimulate more local entrepreneurship and a brighter future. 

Moyo argues in person as persuasively as she argues in print and must be taken seriously. But I thought that one of panel respondents, my JCTR colleague Humphrey Mulemba, stated the most telling critique of her arguments: “It isn’t either-or!” Just as there can be another side to the dark picture she paints of aid, so there is another side to the bright picture she paints of her liberal alternatives. 

For example, some foreign aid received by Zambia has indeed worked well in creating employment and long-term development. One thinks of feeder roads in rural areas, or clinics and schools in many parts of the country. And assistance to meeting the HIV and AIDS pandemic has certainly been life-saving.

And some of Moyo’s alternatives are certainly open to questioning. Foreign investors have dubious records of promoting corruption, returns in bond markets aren’t too likely if the global economic crisis continues, and Chinese connections need much closer evaluation for social benefits as our recent Zambian experience well demonstrates. 

The point made by Mulemba that deeper thought is needed in order to break out of an “either-or” approach was echoed by one of the first audience respondents, a woman who asked for more nuanced argument. Two concluding respondents, Zambian Aids Council Chairperson Bishop Joshua Banda and former Bank of Zambia Governor Jacob Mwanza, made similar points about the need to dialogue between the two positions if we in Zambia were really to move forward.

Clearly, a simplistic one-way approach is neither correct nor helpful.

Audience feelings

But what fascinated me more upon reflection was the general tone of reactions from the audience on Friday evening. I hope I’m fair in thinking that much deeper issues were being touched upon than the question of the pluses and minuses of foreign aid for Zambia. Central to the issues being raised was a widespread feeling of disappointment, dismay, even disgust, about the current role of our government, Parliament, and political parties - both ruling party and opposition parties - in addressing the country’s needs. 

Repeatedly during the discussion there arose grievances about failures of our political leaders to seriously address the ineffectiveness of government development policy. Moyo’s complaints about corruption were cheered with examples given from the audience of current scandals in too many GRZ offices. (A gentleman who identified himself as an employee in the Ministry of Health had difficulty in making his intervention amidst raucous heckles from the audience!) 

Criticisms about the lack of effective policies were reinforced with examples of indabas with unfulfilled recommendations, international meetings that appear never to result in meaningful implementations and foreign travel (complete with expensive airport send-offs and returns) that seemed only to benefit the travelers and not the people who remained home. Moyo’s call to innovate was countered with citations of mediocre leadership. There seemed to be a feeling that the current crop of politicians of whatever party is more innovative in hurling petty insults than in proposing solid programmes. 

Enough is enough!

I got a sense that the hearty applause directed toward the thesis laid out by Moyo was in reality at the deepest level a cry of “enough is enough!” to the current drift of government policy, politicians' dialogue and citizenry passivity. Zambia is simply too rich a country to have two-thirds of its population living below a demeaning and unacceptable poverty line! 

Yes, I believe that the lively debate about this particular book should really tell us here in Zambia something much more profound than the ups and downs, positives and negatives, of foreign aid and its various alternatives. One of the panelists at the EAZ event, Dr Fred Mutesa from UNZA, called for us to “think outside the box” of ordinary development discourse. I feel that two of the major hindrances to that exercise are selfishness (unwillingness to sacrifice power and profit) and lack of serious feeling of what people are suffering (absence from real-life contact). 

Coming back from the Friday evening discussion, I wished that some key government leaders and politicians from different parties had been there to hear the cries of people who want and expect something better from them. 

Sad example

Let me cite one very sad example, the fact that on the very day of this spirited debate about good governance the National Constitutional Conference (NCC) froze in facing up to the challenge of greater accountability and transparency. Led by key Government officials and ruling party members, the NCC failed to endorse the well designed, widely debated, and convincingly accepted constitutional clause that mandated parliamentary oversight of new loans negotiated by the government. 

At the very moment of unfolding and mounting scandals in government about lack of accountability and transparency – scandals that are resulting in massive suspensions of funding for live-saving assistance to key ministries – leading politicians are rejecting more accountability and transparency in aid programmes! Do they not see the irresponsibility displayed by such action? A chance to turn back the consequences of Moyo’s anti-aid arguments is simply rejected out of hand.

For me, the lively debate provoked here in Zambia over Dead Aid is a “wake-up call” to pay greater attention to much deeper issues of the relevance and credibility of political leadership. Am I right or wrong?

Rule of Law and Development

An ODI brief on "Why rule of law matters for development". Alternatively the graph below from the note sets out the "ideal rule of law framework" - (click to enlarge) :



Linking Zambia (APRM Zambia)

African Peer Review Mechanism (APRM) website for Zambia - Governance Secretariat. (HT : FlavaFM)

Monday, 25 May 2009

The Politics of Poverty

"Yes! Actually, they are using us and we are not prepared to be used forever, only a fool can be used forever. I, as president for the New Generation Party, am not going to accept to be abused or used forever...We want a portion of the national cake to come to the New Generation. Ici Bemba chitila ati, pakwakana ubunga tapabenshi? Tapaba insoni. Batupeleko na ifwekalya ka K40 billion [In Bemba they say: when sharing mealie meal you should not feel shy. They should also give us part of that K40 billion]."
New Generation Party President Humphrey Siulapwa claiming that the MMD has been abusing him and his colleagues for the last five years to campaign and defend government programmes "without rewards". This truly must be the lowest form of the "politics of poverty" yet, first coined by Oswald Mphande and then ably defined by Ken Ngondo

ZIBAC Resolutions

The FlavaFM blog carries a good summary of the main "resolutions" from the recently held Zambia International Business Advisory Council (ZIBAC), as narrated by Evans Chibiliti :

    1. The Zambia Wildlife Authority and tourism department should quickly be restructured.
    2. Zambia should urgently complement investment in extension services, research, rural roads and irrigation in order for it to achieve meaningful economic progress.
    3. The conference also called for a predictable export policy, especially for food grains and to improve land tenure systems and security of title.
    4. For infrastructure enhancement, it was recommended that there should be cost-effective tariffs at Zesco, while managing it commercially, reviewing efficiency and reviewing the firm’s salary structure.
    5. For petroleum, creating a tax regime to contribute to an enabling environment and establishing sufficient petroleum storage capacity across the country for a uniform pricing are necessary.
    6. In telecommunications, there is need to submit three Information communication and technology bills to Parliament by August 2009 and to reduce international gateway fees by December this year.
    7. The gathering also felt the need to formulate a responsive business model and restructuring for a viable competitive company to commence by June 2009, besides addressing the cost of restructuring.
    8. The conference also recommended revamping operations of bulk transportation through railway and called for infrastructure rehabilitation.
    9. In labour law reforms, the tripartite council agreed that redundancy packages, employment rights, decent work, employment security and casualisation should be dealt with.
    10. The delegates called for high-level political will and accountability from the president’s office for private sector development reforms to take place.

Resolutions 3, 5 & 6 are certainly areas we have been pushing for. 4, 7 & 8 are absolutely disappointing and don't fully address the structural problems. In particular, 8 needed to focus on changing the underlying of bulk road users towards greater rail investment, as we have previously discussed. Lack of time prevents me from providing the appropriate URLs to the relevant posts, but regular contributors should be able to verify via usual searches / tag cloud.

Booming Kigali ?

The Rwandan capital of Kigali is undergoing major urbanization that many there believe will transform the city to look like Chicago by the year 2020 :

Can income transfers to poor families help children?

A new piece from Vox EU on income transfer. Though focused on experiences from developed countries its relevant to the wider debate on social cash transfers to the poor in developing nations :


Since the 1990s, many countries have reformed their systems of transfers to low-income families with an eye toward improving work incentives—helping people make a transition from welfare to work. Empirical evidence on transfer programs such as the Earned Income Tax Credit in the US or the Working Tax Credit in the UK, appears to be surprisingly robust. Well-designed transfer systems can have a strong influence on parents’ choice to work or not. This focus on welfare-to-work, however, seems to have diminished the attention paid to another important goal of well-designed transfer systems—improving the wellbeing of recipient families.

How does extra income affect family wellbeing?

Researchers and policy-makers have long been interested in figuring out the effect of income—or the lack of income—on families and children. The eternal problem for this research, however, was trying to establish causal relationships. Some of the same factors that might lead people to have lower income (impaired mental or physical health; a troubled childhood; lesser mental or physical capacity; less ambition or drive) might also lead their families to experience more problems. For this reason it has been difficult to attribute causally the family problems to the income shortfalls.

Of late, several researchers have found ways to overcome this empirical challenge through creative use of data. The primary focus of much of this scholarship has been education outcomes—and test scores specifically. Blau (1999), for example, finds that $10,000 of income leads to around a ¼ standard deviation increase in test scores. Dahl and Lochner (2008) find bigger results, with a $10,000 increase leading to an increase of about 60% of a standard deviation in test scores.

While convincing, this work is somewhat limited by the narrowness of the outcomes considered. Increased family income could improve children’s outcomes through at least two distinct channels. First, direct investments of new money in education (books, educational toys, tutoring) could improve long-run child outcomes. The developmental psychology literature has referred to this as the ‘resources’ channel (Yeung et al, 2002), and this has been the primary focus of most economic analysis. But the lack of income in a family might lead to aggravation, stress, and more troubled relations among family members. These environmental conditions could affect children’s long-run wellbeing by impairing their emotional, physical, and academic development. This channel is called the ‘family process’ channel and has been explored far less in the economics literature.

Evidence from the Canadian child benefit system

In a recent working paper, we address the impact of increased transfers to poorer families on children’s and families’ outcomes. Our study brings two advantages. First, we study Canadian children over a time period in which transfers to families underwent substantial reform; reform that differed through time, across provinces, and across family types. This extent of policy variation is useful because it allows us to examine the impact of extra family income by comparing similar families who happen to live in different provinces or are studied in different years. The second advantage of our study is that we have available a large and detailed survey, the National Longitudinal Study of Children and Youth (NLSCY), which allows us to broaden our focus to include several measures indicative of an active ‘family process’ channel.

We have results in three spheres.
  • First, we find that an extra $1,000 of child benefits leads to an increase of about 0.07 of a standard deviation in the math scores and the Peabody Picture Vocabulary Test, a standard measure of language ability for young children ages four through six.
These findings are of the same magnitude as the Dahl and Lochner (2008) study mentioned earlier, which helps to corroborate their result.
  • Second, we examine the impact of child benefits on indicators of mental and emotional wellbeing using standardised psychometric scores available in the NLSCY. We find that more child benefit income leads to lower aggression in children and decreases in depression scores for mothers.
  • Finally, for physical health we find little evidence of improvements related to increased child benefits—although we do find a decrease in families reporting their children have been hungry due to lack of food.
We also break down our results by gender, finding stark differences across boys and girls.
  • Girls seem to show greater response on the mental health and behavioural scores while boys show greater response on test scores.
This certainly suggests that the channels through which benefit income helps these families may indeed be different for boys than for girls.

Finding that benefit income can improve the emotional and mental health of children is not only important for child health. Recent research by Currie and Stabile (2008) and Currie, Stabile, Manivong, and Roos (2008) shows that improvements in child mental health lead to long-term academic success, which is strongly correlated with improved earnings.

Implications for policy

The economic troubles of the past few months have generated a global whirl of policy activity as fiscal stimulus packages are being crafted, designed, and implemented around the world at fast speeds. In the US, President Obama included enhancements to family transfers in his election platform and it seems likely that improved transfers will be a part of the fiscal debates in Washington over the next month. It wouldn’t be surprising if similar measures were considered as part of stimulus packages elsewhere, as well. Our research suggests that well-designed income transfers can not only help families make their way back to employment, but also improve the educational, mental health, and behavioural outcomes of the next generation.

References

Blau, David M. (1999), “The effect of income on child development,” The Review of Economics and Statistics, Vol. 81, No. 2, pp. 261-276.
Currie, Janet and Mark Stabile (2008), “Mental Health in Childhood and Human Capital,” forthcoming in An Economic Perspective on the Problems of Disadvantaged Youth, Jonathan Gruber (ed.) (Chicago: University of Chicago for NBER).
Currie, Janet, Mark Stabile, Phongsack Manivong, and Leslie L Roos, (2008) “
Child Health and Young Adult Outcomes” NBER Working Paper No.14482.
Dahl, Gordon and Lance Lochner (2008), “
The impact of family income on child achievment: Evidence from the Earned Income Tax Credit,” NBER Working Paper No. 14599.
Milligan, Kevin and Mark Stabile (2008), “
Do child tax benefits affect the wellbeing of children? Evidence from Canadian Child Benefit Expansions.” NBER Working Paper No. 14624.
Yeung, W. Jean, Miriam Linver, and Jeanne Brooks-Gunn (2002), “
How Money Matters for Young Children’s Development: Parental Investment and Family Processes,” Child Development, Vol. 73, No. 6, pp. 1861-1879.

Sunday, 24 May 2009

Aid Cronies

An important contribution to the aid debate from Jeff Sachs addresses the contradictions within the growing anti-aid brigade :

The debate about foreign aid has become farcical. The big opponents of aid today are Dambisa Moyo, an African-born economist who reportedly received scholarships so that she could go to Harvard and Oxford but sees nothing wrong with denying $10 in aid to an African child for an anti-malaria bed net. Her colleague in opposing aid, Bill Easterly, received large-scale government support from the National Science Foundation for his own graduate training.

I certainly don't begrudge any of them the help that they got. Far from it. I believe in this kind of help. And I'd find Moyo's views cruel and mistaken even she did not get the scholarships that have been reported (Easterly mentioned his receipt of NSF support in the same book in which he denounces aid). I begrudge them trying to pull up the ladder for those still left behind. Before peddling their simplistic concoction of free markets and self-help, they and we should think about the realities of life, in which all of us need help at some time or other and in countless ways, and even more importantly we should think about the life-and-death consequences for impoverished people who are denied that help.

Nine million children die each year of extreme poverty and disease conditions which are almost all preventable or treatable or both. Impoverished countries, with impoverished governments, can't solve these problems on their own. Yet with help they can. The Global Fund to Fight AIDS, TB, and Malaria, and the Global Alliance on Vaccines and Immunizations are both saving lives by the millions, and at remarkably low cost. Goldman Sachs, Ms. Moyo's former employer, gives out more in annual bonuses to its workers than the entire rich world gives to the Global Fund each year to help save the lives of poor children. And when Goldman Sachs got into financial trouble it got bailed-out by the US Government. Rich people have an uncanny ability to oppose aid for everybody but themselves.

Recently Paul Kagame, President of Rwanda, wrote an op-ed for the Financial Times praising Moyo's fresh thinking. This is extraordinary. His government has depended on aid for more than a decade. Nearly half the budget revenues currently come from aid. Rwanda currently imports around $800 million of merchandise each year, but only earns $250 million or so in exports. So how does it do it? Aid, of course, helped to pay for around $450 million of the imports. Without foreign aid, Rwanda's pathbreaking public health successes and strong current economic growth would collapse. Kagame's op-ed did not help FT readers to understand this.

Americans are predisposed to like the anti-aid message. They believe that the poor have only themselves (or perhaps their governments) to blame. They overestimate the actual aid from the US by around thirty times, so they imagine that vast sums are flowing to Africa that are then squandered. Many believe, typically in private, that by saving African children we would be creating a population explosion, so better to let the kids die now rather than grow up hungry. (I'm asked about this constantly, usually in whispers, after lectures). They don't understand the most basic point of worldwide experience: when children survive rather than die in large numbers, households choose to have many fewer children, in fact more than compensating for the decline in child mortality. Africa's high child mortality is ironically a core reason why Africa's population is continuing to soar rather than stabilize as in other parts of the world.

Of course, most Americans know little about the many crucially successful aid efforts, because Moyo, Easterly, and others lump all kinds of programs - the good and the bad - into one big undifferentiated mass, rather than helping people to understand what is working and how it can be expanded, and what is not working, and should therefore be cut back. Nor do Americans hear that many poor countries graduate from the need for aid over time, precisely because aid programs help to spur economic growth and successfully prepare countries to tackle future priorities. US aid to India for increased food production in the 1960s paved the way for India's growth takeoff afterwards. There are countless other examples in which countries have benefited from aid and then graduated, including Korea, Malaysia, Taiwan, Israel, and others. Egypt is on that path today, and Rwanda, Tanzania, Ghana, and others will be as well if both donors and recipients carry forward with a sensible assistance strategies.

Here are some of the most effective kinds of aid efforts: support for peasant farmers to help them grow more food, childhood vaccines, malaria control with bed nets and medicines, de-worming, mid-day school meals, training and salaries for community health workers, all-weather roads, electricity supplies, safe drinking water, treadle pumps for small-scale irrigation, directly observed therapy for tuberculosis, antiretroviral medicines for AIDS sufferers, clean low-cost cook stoves to prevent respiratory disease of young children. Shipment of food from the US is a kind of aid that should be cut back, with more attention on growing local food in Africa.

Out of every $100 of US national income, our government currently provides the grand sum of 5 cents in aid to all of Africa. Out of that same $100, we have found around $10 for the stimulus package and bank bailouts and another $5 for the military. It is not wonderful that what has caught the public's eye are proposals to cut today's 5 cents to 4 or 3 cents or perhaps zero.
The article is very much a direct echo of two critical posts we have posted on this subject - Dead Aid, By Dambisa Moyo (A Review) and The Kagame Mirage

A point Sachs does not address, and couldn't due to the sensitive nature of the issue,  relates to what this debate says about Africans themselves.  As this debate has evolved it has become clear to me that many of the current generation of Internet savvy Africans suffer from an objective failure to objectively analyse issues. Many of the contributions I have read from Africans on this issue has been symptomatic of our general failure as a continent - we are too lazy or fundamentally unable to hold those in influential positions to account, be they politicians, writers, academics or otherwise. The irony for me is that we want our political leaders to be accountable, but we ourselves can hardly discern the huge analytical flaws in those that would be our opinion leaders. Is the problem really with our leaders or ourselves? I lament!

Saturday, 23 May 2009

The Fallacy of Beneficial Corruption

A new paper challenges the idea that corruption greases the wheels of development. Presenting both the theoretical and empirical case, it concludes that corruption has a negative impact on sustainable development. Previous studies have found a mixed picture in relation to GDP (a narrower measure than considered in the new paper). Although it does not deal with important issues of measuring corruption or the importance of distinguishing between different forms, it's nevertheless use in terms of raising questions on the robustness of existing measures : 
Does corruption, then, sand or grease the wheels? While corruption in a very narrow sense can be seen as a lubricator that may speed things up and help entrepreneurs getting on with wealth creation in specific instances, in a broader sense, corruption must be considered as an obstacle to development. This is so for a number of related reasons. One is the fallacy of efficient corruption: the cumbersome procedures that corruption is supposed to help overcome may be 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 to misallocation of resources. There is also a fallacy of composition lurking: undisputed, but isolated, instances of efficiency-enhancing corruption at the micro-economic level cannot be taken as evidence that corruption can be efficiency-enhancing at the macroeconomic level.

Both the micro and macro evidence evaluated here support this view. Quantitative evidence from field studies and surveys points to substantial costs of corruption. At the macro level, although the search for a negative effect of corruption on the average growth rate of GDP per capita has failed to produce convincing and robust evidence, this does not imply that corruption is irrelevant (or even beneficial) at the macro-economic level. At least in societies with otherwise good governance and strong political institutions, corruption reduces growth at the margin. More importantly, even if the average effect of corruption on GDP growth is close to zero, the new evidence presented above suggests that corruption is a significant hindrance for sustainable development. Arguably, I have only scratched the surface. Much more work is needed to establish how robust and causal the correlation between corruption and the growth rate of genuine wealth per capita is and to construct better measures of genuine wealth. Nevertheless, as Dasgupta (2009) rightly points out, we should be shifting our attention away from growth in GDP per capita to growth in genuine wealth and start asking questions about what role economic, political and legal institutions play in promoting accumulation of genuine wealth and sustainable development.

Friday, 22 May 2009

A possible Chinese banking crisis?

The BBC have finally bowed to pressure on allowing their clips to be embedded on blogs. So I thought we try out the feature :)

Friday Review of Zambian Blogs

Gershom comments on MECOZ's recent attempts to re-assert itself through significant lobbying of media organisations :
By calling for a Law Association of Zambia-like statute, there are a lot of things that will need to be taken into account, such as education levels of practitioners with the very minimum being a degree. Where will it leave non-degree holders? With the lawyers, there is no short-cut. With journalism, everyone with an opinion can write. Friends (and relatives), think deeply about MECOZ and what you want before you regret a few years down the road.
We have previously discussed the MECOZ madness here

Zambia Diaspora Connect publishes the statement from Home Affairs Ministry on new passports. There's a three month concession for the Zambian diaspora but the statement is still buried in unanswered questions. The blog also published the Indaba report as well as personal experiences of  individual members of the ZDC Delegation. 

Lusaka Gossip discusses the recent corruption revelations that have been unearthed, including the K10bn debacle at the Ministry of Health :
Investigations on corruption must be extended to all the people that have constructed mansions in New Kasama and in many parts of Lusaka. Some of the people who now own the mansions are Civil Servants whose incomes can hardly afford them a one roomed shack. ...As corruption has worsened and become an institutionalized cartel, there is urgent need for all upright Zambians and other stakeholders to support President Rupiah Banda in the fight against corruption.
On a light note, Lusaka Consensus highlights some interesting YouTube Zambian videos. The explosive use of You Tube by the music industry has been the most growing area of Zambians' use of the internet. 

Zambia's recovery plan?

Clive Chirwa puts the quest for manufacturing at the heart of his Zambia's recovery plan. A much improved contribution than we have previously seen from him (previous contributions can be found herehere and here):

Up until earlier this year, ‘globalisation’ or ‘investor attraction’ was the word on everyone’s lips and was regarded as God send to African countries that at last saw real money being pumped into their economies. The big multinational corporations, market speculators, opportunists for quick bucks and just investors propped by their nations jumped on the band wagon to Africa. Many countries including Zambia bent backwards in pampering them with incentives.

It is now clear that “investor attraction” has failed to rid the world of poverty according to a number of economists in Europe, Japan and USA. Rather than being an unremitting force for our development, “investor attraction” has shown its true colours by abandoning us at the slight drop in commodity prices and hence partly precipitating our recession. This shows how multinationals have become more powerful than governments, controlling global financial institutions that have marginalised the likes of IMF and World Bank, making their own rules and regulations, and walking into and out of our lives whenever they feel convenient. Hence, fuelling the “race to the bottom” as Zambia searches to attract and retain investments. Meanwhile the so-called “investors” are taking advantage of this crisis to cut jobs and then skim off huge profits while paying very little tax.

I believe in a free market economy and Zambia should embrace every potential contributor to our development. But what this crisis is showing us is that there are some core businesses of a nation that require the tight control of government. In Zambia’s case natural resources are key to our survival since they provide about 90 per cent of our revenue with copper at the top bringing in about 70-80 per cent of that income. Zambia’s total dependency on copper raw material means that every time its price, set far away in London, fluctuates, it takes the kwacha’s value with it and the people suffer. The exchange rate has followed closely changes in copper prices for decades. What we want is to urgently decouple the kwacha value from copper price. We can do that very easily by innovating and therefore take our copper to finished products, while at the same time proactively creating a market for them. If we do not do that, large negative effects are expected in output, fiscal and external accounts, and in the financial sector. According to the Word Bank, our account deficit is expected this year to reach 10 per cent of GDP. Two years ago in 2007 it was just 4 per cent. The fiscal deficit has already worsened, led by the low copper revenues and will become worse to reach 3 per cent of GDP this year. The financial sector on the other hand is showing some signs of exposure to domestic and international downside risks. This is how the effects of global financial crisis are affecting Zambia.

Our international reserves, which were nicely and conscientiously built by our government through good governance and prudence are dwindling fast, falling by 28 per cent since their peak of $1.4 billion in July 2008. We must stop this depletion of our reserves by seriously looking into innovation and some slight diversification of our main income spinner wherever appropriate.

Indeed the World Bank has now concluded that for Zambia to survive in the long term, and eradicate poverty, it must diversify its attention from raw material export. By doing so our country will rise again to the growth levels of 6 per cent that we saw happening up to July 2008 and we shall surpass that as our economy structure changes from mono to multi.

In addition to this, we must make sure that this time, our government plays a bigger role in initiating our growth. I have been saying this for years that nobody will come to develop our country. It is our duty as Zambians to do so and not to totally depend on investors who are just temporary participants and heavily governed by the “Invisible Hand” theory first coined by the father of capitalism Professor Adam Smith. According to Professor Smith, this is a concept showing that people act in their own interest and not all self-interest has beneficial effects on the community.

Recently I was invited to Oslo in Norway, the only country in the Western World still recording growth. During lunch we touched upon the economic prowess in this downturn. A comment was made by a good Norwegian friend that “it is a great pity to see Africa not moving at all since the 1960s. Before, it was the British and the French who milked you and now it is the Chinese taking over. Open your eyes, how can you allow to be constantly chocked. It is euthanasia for a nation like Zambia. Look at Norway, our government controls all the North Sea oil reserves to finished products. Our capitalism is different. We believe in private enterprise and free market, but when it comes to natural resources the government makes sure it controls that. This is why we have built $360 billion in reserves. We enjoy a surplus of 11 per cent and our ledger is entirely free of debt, while the USA has a deficit of 12.9 per cent of GDP and $11 trillion in debt. Our GDP per capita is $52,000.

If we left it to investors, we too, would have been milked by oil multinationals”.

It was extremely embarrassing to hear the naked truth; hence I dropped my eyes to avoid contact as I was saying to myself “he is right”. Why can’t we do it ourselves and move out of this self-imposed misery? We have been independent for more than 44 years, but our economy and development has barely moved from the position left to us by the British. It is as though we have been in a coma or hibernation for all these years. That is why I am now seriously advocating using this opportunity of the economic crisis to wake up and really make sure we put up a stimulus plan for us in the short, medium and long term. This time we should not be arm-twisted by the IMF and World Bank to liberalise our economies as we adjust our fiscal structures. We must also improve our current GDP per capita that stand at $1,400 and go back to our path of growth that stood at 6 per cent to greater heights.

The only way we are going to resume the better days and go beyond those yesteryear targets is to build up our international reserves once more through a prosperity route that is stipulated in our stimulus plan. This involves expanding and redesigning the means we generate income. The question is: how is Zambia going to respond to this downturn?

Zambia is not USA, Britain, Russia, German or other countries that have provided multi-billion dollar stimulus plans. We just do not have that sort of money. But we are extremely rich in natural resources despite being poor on the balance sheet. Our challenges are much more complex than other African countries in the sense that we are landlocked, we have inadequate access to markets, poverty is too high, we are too weak in fiscal strategy and dependent on pie-in-the-sky investors to come and show us how to do things. Because of these challenges, Zambia needs a stimulus package to mitigate the contagion of this crisis that originated from the developed world. Our stimulus should properly integrate sets of trade, monetary and fiscal measures. This will provide assistance to facilitate economic adjustment and nurture our investments in human and physical capital. The stimulus plan should provide and support appropriate safety nets for those most vulnerable and most exposed to the crisis such as the mining sector and their suppliers. The private sector and particularly the small and medium enterprises should be propped as they will be the ones to create wealth necessary for poverty reduction once they have been shown the way by giving them innovation tools.

Zambia must not be complacent as to rely on the G20 aid package to Africa of $20 billion plus 0.7 per cent of the stimulus of the developed world to “vulnerable fund for Africa”. It is time we started living in the real world by abolishing the counting of aid as our income in our national budget. This is totally unacceptable and must be deleted in future budgets. Income is something you earn and the stimulus plan here must reflect that.

In the absence of real mega external resources, Zambia should contemplate a modest fiscal stimulus as the way of propping up the economy’s growth. It is unlikely that tax reductions will yield great gains in growth, as many of the efficiency-reducing taxes have already been reduced through enormous unemployment by companies who have gone bust and by those investors who want to maximise their profit. So our major gains will come from expenditure increases. How this is spent is extremely important. Building a conference centre and a football stadium now is ill advised. For the simple reason that although jobs are created in the short term these do not add value to future jobs creation because no money is being made for re-investment. Priority in government expenditure must become the driver the take us out of this recession. This money would have been better utilised in building the manufacturing base. We will come to that later.

In this downturn, the stimulus plan should be able to create jobs and support those existing jobs that are under threat. The more people work, the bigger is the take home pay for the government in the form of PAYE, corporation tax and royalties. To be blunt why not re-acquire some mines into ZCCM? Norwegians, Russians and now USA, Great Britain, Germany are all doing it. Western governments running banks, car industries, mines and so on was never on the vocabulary of those nations. But we are in extraordinary times, and Zambia must now recoup what belongs to the people, that is the only way we will generate reserves towards the sizes of Norwegians and Chinese.

The stimulus should also be directed at real maintenance and construction of infrastructure such as roads, energy or electricity grids, water supply, and the long-term neglected railway system. As a land locked country our railway system needs to be re-built. The longer we leave it the more expensive it will become. Without us having these infrastructures performing perfectly, there will be no development. This is our chance to spend while in the downturn so that we are ready for the big things to come when the market and the world economy is on the upturn. This action will create real jobs. Spending $200 million on non-revenue spinning enterprises like a football stadium and business centre in this downturn is an absurd and myopic strategy. I know His Excellency never made the decision. Wisdom is now required to achieve the most effective sequencing to ensure the stimulus create and stimulate a multiplier effect in sectors with highest potential.

That is why I believe manufacturing is at the top. Many people in Zambia have said we should go the agriculture route. I have a problem with this despite that agriculture is essential. But this will never lift Zambia out of poverty or even create an economic transformation. Agriculture will never employ more people than manufacturing will.

The world around us has shown for instance that Great Britain and America each has 1 per cent and 3 per cent respectively of their total population employed in agriculture and they feed 65 million and 260 million respectively. As you can see agriculture is not a job creation sector, indeed what we want is to mechanise our agriculture and make it more efficient so that we are be able to have two if not three harvests of maize, wheat and other farming products per year. This will boost food reserves and security.

For development and for the purpose of taking us out of the recession, we need stimulus package in ventures that guarantee increasing returns to scale. This is manufacturing, not agriculture or tourism. It is time that our dependency on primary products takes another level to value adding ventures which will create more jobs and expand the revenue base.

We know that Zambia has in the past been growing by 6 per cent. This was because of high copper prices and therefore it was a myth development. If you want to see the real growth, it is better to compare countries by what they made their money from. You will find that high-growth economies have vibrant manufacturing sector. The output shares of manufacturing in national income and exports are good indicators. In Africa, South Africa ranks en par with developed countries in economic terms because of the manufacturing capacity. Zambia had a good percentage of 32 per cent in 1990 as contribution of manufacturing to GDP. This has dropped tremendously after privatisation and we need to go back to that and beyond if we have to develop further. Only this time our manufacturing must concentrate on value addition in copper and other natural resources sold as raw materials.

People might ask, why should we go for manufacturing? It is well established that the sector is superior in productivity increases, economies of scale and spurring all-round linkages. The sector is a big stimulus incentive as it also demands and absorbs a mix of high- and low skilled labour. Only manufacturing will save us. We must really do it in a planned manner to have maximum impact. Like in Norway, I would like our government to create prime value addition industries in copper, cobalt and nickel based industries. Then after that, private entrepreneurs will build up supply and converter chains. A think tank should identify the necessary products and next week I will show you a lot of those that have very high value additions despite using very little base material. Do not miss the third part of the Recovery Plan - The Execution Strategy. You might find some ideas for your business.