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Saturday, 6 February 2010

Progressive analysis...

An important contribution by Campbell Lumbila in  response to the post  A New Vision for Zambia?.

State Led Capitalism? Sounds interesting and I get the idea,and I must say am in support of such an approach to a certain extent.

Direct government invlovement in the economy is warranted provided there are strong safe guards. I doubt that our political enviroment is mature enough to not infuse politics into the running of partially state owned companies. If this issue is not addressed by Mr. Sata or anyone advocating for this approach, then we should not trust their word. There needs to be a legally binding commitment from government that they will let businesses run according to sound business and economic principles without any political interfirance whatsoever.

Secondly, the government must have an exit strategy. For example if the state owns 50% of an enterprise they must give a time frame for when they will be begin reducing their shares so that in the end we could have comapnies that are totally privately owned. The best thing to do will be to auction at least 50% of state owned shares in a company to the Zambian public.

Thirdly, partially state owned companies should aggresively pursue to go public and be listed on the stock exchange to ensure that Zambians have the opportunity to own a stake in them.

I have always said that government cannot be a by-stander in the economy, leaving it totally in private hands. Government must be a catalyst and act to ensure that the private sector survives and creates jobs BUT doing so for the short and not long term

Campbell's response captures exactly what we are constantly looking for - not ideas on why something can't work, but moving beyond that and beginning to analyse the conditions under which such ideas may be more effective. Politicians rarely change their ideology, but they are open to better ways of making their ideas more effective. So you won't turn Mr Sata into a capitalist any more than you will turn Mr Banda into a social justice champion. What you can do is work within their ideological systems to produce better outcomes.

Generally, I hold that answers are rarely black and white, rather the informed analyst' job is to progressively search for ways of uncovering conditions under which ideas work of fail. State capitalism is neither good or bad - the question is under what conditions would it work for Zambia ? The emphasis is on Zambia because while examples from other nations are useful, there's no substitute to local knowledge - each country is different and therefore general lessons can only take us a short distance. This means that the World Bank or IMF can't give you solutions for Zambia. We Zambians are our best experts. We are the people who must come up with Zambian solutions to Zambian problems.

Now on Campbell's insightful views. I largely agree, though I retain  some questions on "legal guarantees". I always doubt the credibility of such guarantees unless our judicial system is robust to safeguard rule of law. But certainly the question of "exit strategy" and need for aggressive pursuit to "go public" appear very cardinal.

The key of course with any reform strategy is to define the outcome. What does Zambia want for the infrastructure or organisation in question ? If we want ZAMTEL or ZESCO to deliver cost effective service, the only way for government to guarantee that is through direct control or privatisation with very strong regulation. Of course there's no guarantee it will continue to exist! If we want the companies to simply become profitable, with greater investment in the long term, then the approach might be to privatise with guarantees against asset stripping. There are many approaches but the key point is that :  outcomes should shape policy.  Before we talk about whether to decouple companies or nationalise them or keep them private, we should ask ourselves the basic question : what do we want to achive?

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