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Wednesday, 23 June 2010

Musokotwane's flawed ideology

Hon Situmbeko Musokotwane (Minister of Finance) on why government has sold ZAMTEL :

“An economy in private hands represents the best opportunity for the people. The private sector is less wasteful but if you over politicise this [ZAMTEL] issue, you will lose credibility and you will suffer in future…In 2000 when the mines were still with the government, copper production went down by 66 per cent but after privatisation, it has gone up again and jobs are secure.”
There’s only one problem with this argument - ZAMTEL has not gone private, it has been sold to another government. Evidently “an economy in private hands” does not represent the best opportunity for the Zambian people. If that was the case it would have been sold to private hands and not Libyan government hands! What Musokotwane really meant that was that “An economy in non-Zambian hands represents the best opportunity for the Zambian people”. The problem with Musokotwane's investment policy is that he does not seem to understand that non-Zambian is not necessarily private. That is Musokotwane’s flawed ideology.

30 comments:

  1. The problem I have seen with Musokotwane is that he is not a gifted politician. When he stands on a podium he gets mixed up between politics and his economics knowledge. Let his aid Kapwepwe do the explaining on most of these dicy issues

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  2. Actually, I think what Hon. Musokotwane meant is that he would be happy to see Zamtel in non-Zambian government hands. For example, he would be happy to see Zamtel in private Zambian hands.

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  3. Kafue,

    Where exactly do you get that conclusion in the statement? Let us not just contradict for the sake of doing so it wastes valueable time. I have provided the exact quote by the Minister. He simply has forgotten that ZAMTEL is not in private hands.

    As it turns out, I am in conversation with Hon Musokotwane. I have asked him to clarify this statement. Who knows may be he'll read your explanation and adapt it.

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  4. The full extract:

    Dr Musokotwane said it was premature to talk about the details of the sale and that the government did not release the RP Capital valuation report to avoid bidders finding out the value of Zamtel.

    “The valuation report is never released because bidders will bid around that figure which makes the seller to lose the opportunity to obtain a higher value. It’ only a guideline for the seller,” Dr Musokotwane said. “Zamtel got the best value possible. It is not true to say it was undervalued because the market determines the price. The same happened during the sale of Zanaco and the Mosi-o-tunya Hotel in Livingstone (which was sold to Sun International) but look what has happened now. Everybody is happy and those places are making profits. LAP GreenN has a healthy balance sheet that is strong enough to secure jobs and create confidence.”

    He said parastatal companies like Zamtel, slowed the economy as decisions were made slowly because of the bureaucracy connected to the government.

    “An economy in private hands represents the best opportunity for the people. The private sector is less wasteful but if you over politicise this issue, you will lose credibility and you will suffer in future,” he said. “Those aspiring for government will one day be faced with the same decision. You will rejoice when the benefits are seen. Government is convinced that Zamtel will turn around. In 2000 when the mines were still with the government, copper production went down by 66 per cent but after privatisation, it has gone up again and jobs are secure.”


    The bold contextualises what follows.

    His whole argument is that ZAMTEL is going private - it is being privatised! Infact we should stop calling it privatisation because that is not what has happened. What has happened is merely a foreign government take over.

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  5. Cho,

    Non-Zambian government hands means:

    1. Private Zambian hands
    2. Foreign private hands
    3. Foreign government hands

    I think Hon. Musokotwane would be happy with any of the above choices as the Zambian government would not have to subsidize Zamtel.

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  6. Kafue,

    I am not talking about what he would be happy with.

    I know what non-Zambian means.

    I am telling you what he said.

    He said PRIVATE HANDS...not non-Zambian government hands.

    I am not sure where you are getting this non-Zambian government hands from his statement.

    Where???

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  7. Cho,

    It is implied. By privatizing, one implies any other entity apart from the government controlling the territory where the enterprise is located.

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  8. This ideology further entrenches our inferiority complex that foreigners can always do it better than we can. Little wonder, we just throw up our hands and say “why bother”. What country sells 75% of its national telecom to another? Exactly where is the benefit for Zambians?

    This makes my blood boil…

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  9. The benefit for Zambians is that the money which would have been spent on subsidizing Zamtel can now be spent on schools, hospitals, roads, etc. Zamtel has had a lot of problems in the past - old copper line infrastructure, unpaid government bills, etc.

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  10. Telecom is not a limited resource like copper. If one believes that there are profits to be made in telecom, they can always build their own telecom infrastructure assuming the laws of the country allow it.

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  11. Kafue,

    "It is implied"

    It is not! You have offered no proof and I have shown you all the text.

    No where does he imply that. I am always happy to respond to comments, but we have to not waste time on speculation. He said what he said, and that is within the context.

    I believe Hon Musokotwane has achieved the impossible. He has convinced people that this is PRIVATISATION i.e. moving from government control to private hands. You yourself have just used the term!

    It is not.

    This is a BILATERAL ARRANGEMENT between ONE GOVERNMENT and ANOTHER.

    That is what we call it.

    Such an arrangement has shifted OWNERSHIP from the ZAMBIAN GOVERNMENT to the LIBYAN GOVERNMENT

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  12. Miss Bwalya,

    "This ideology further entrenches our inferiority complex that foreigners can always do it better than we can. Little wonder, we just throw up our hands and say “why bother”. What country sells 75% of its national telecom to another?"

    Mind boggling indeed!

    I feel quite bad about this deal. Not because I ideologically oppose PRIVATISATION, but because this is NOT privatisation. It is a poor executed BILATERAL ARRANGEMENT.

    Remember that CHINESE GOVERNMENT already runs your copper mines. Those were mainly BILATERAL ARRANGEMENTS as well.

    We are in danger of having key areas of our national architecture owned by FOREIGN GOVERNMENTS.

    We are already owned through AID.

    May be we should just declare servitude?

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  13. Cho,

    LAP Green Network is part of the Libya - Africa Investment Portfolio, which is part of the Libyan Investment Authority, the sovereign wealth fund for Libya.

    Sovereign wealth funds are an important source of capital for companies throughout the world, in both developed and developing countries. So, although the Libyan sovereign wealth fund is owned by Libya, that is the usual case with these funds, they are owned by their governments. Nothing unusual in Zamtel's case.

    http://www.lapgreenn.com/overview.php

    http://www.swfinstitute.org/fund/libya.php

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  14. Kafue,

    You are telling me what I know already.

    LAP Green Network is owned by a Libya Government.

    It is registered as a parastatal and a property of the Libyan people.

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  15. By the way, I think the link you waant is this one :

    http://www.libyaninvestmentauthority.com/

    "The LIA (Libyan Investment Authority) is a Libyan government organization established on August 28, 2006, by the GPCO (General People's Committee of Libya) to manage the value of Libya's oil revenues and to diversify the dependence of national income. It is a holding company that manages investment funds of the government coming from the oil and gas industry in various areas of the international finance market."

    Unless you are denying LAP is not a owned by the Libyan government then I don't see the point of this exchange.

    The central issue is that Musokotwane needs to recognise that this is not privatisation. And he should stop misleading people on the same.

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  16. I should add that no one denies this.

    Hon Musokotwane and ZDA's Chipwende - both who I continue to correspond with, do not deny this.

    They actually speak off-line of "equity funds" not PRIVATISATION.

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  17. Kafue, my question lies in the 75% stake which will be held by the Libyan govt. This undoubtedly translates to at least 75% of profits made leaving the country. How will that benefit Zambians?

    Furthermore, we will lose out when middle and upper management is staffed with non-Zambians, yet again keeping vital technical and management skills out of reach. I’m by no means suggesting we keep those at the helm who have nothing other than political connections to thank for their jobs but why must we continue this vicious cycle of servitude?

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  18. I think that you are mistaken about this being a transfer to another Government. I'm sure you will find ample evidence across the world that Sovereign Wealth Funds, particularly those of oil rich Governments, are run as ruthlessly private sector operations.

    There is ample evidence of this from Norway, Singapore, and the Middle East.

    So while you respond to Kafue's comment by saying "I am telling you what he said", you also provide your opinion in your original piece.

    I humbly disagree with your opinion, defend Musokotwane's quote, and agree with Kafue's points.

    On the issue of Zambian versus Non-Zambian, it is pretty evident that Zambia does not have the relative technical expertise to run an efficient telecom company. Zain/Bharti, MTN are both foreign managed. Zamtel, which is Zambian owned, is in a state of disaster, although I agree that it is difficult to tell whether this is because it is in Zambian hands or because it was run aground by the Government. Nontheless, it is well accepted within the local discussions that Zamtel is probably better off in foreign managed hands, with Zambian equity participation, as it is currently set up.


    YM
    LSK

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  19. Miss Bwalya,

    Profits flow to the owners of capital. If the Libyans invest capital, then profits should flow to them. Zamtel is no different from any other company in this regard. Keep in mind that over the years Zamtel has accumulated substantial debt, so besides its assets, it also has debt. If it needs additional capital to operate, it should be prepared to pay the investors profits.

    Why do you assume middle and upper management will be staffed by non-Zambians? Will LAP not keep them?

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  20. Cho,

    I still stand by my assertion that privatize is a suitable term for this transaction. Unless Zamtel is directly run by a Libyan government minister with a Libyan operating agenda in mind, I would agree with Anonymous's point that Sovereign Wealth Funds generally treat their investments as private sector operations.

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  21. Kafue,

    I respect your views on these matters. I do not mean to be harsh in what I will say - please bear with me if I do.

    My point is merely that you have failed to comprehend that this company is OWNED by the LIBYAN GOVERNMENT.

    They are the RESIDUAL CLAIMANT.

    This I am afraid is too simple a point for me and you to keep debating and waste both of our time. At least I will say for myself this is too basic a discussion to take up my valuable Zambian Economist maintenance time!

    You seem to confuse the basic concepts of OPERATIONAL CONTROL from RESIDUAL CONTROL.

    I am deeply surprised. This is my final comment on this. As nothing I will say will change your mind.

    You have also not provided the PROOF that I have grossly misrepresented Hon Musokotwane. No where have you demonstrated that what he said is contrary to what I stated. You given only beliefs not sustained rational evidence from the article.

    I recognise that I am open to scrutiny but I would rather we addressed the facts on the table and not second guessing what Hon Musokotwane meant. As I said, I will publish Hon Musokotwane's response if and when I have it via our exchanges. I remain convinced that he has not recognised that this is A BILATERAL AGREEMENT with a shift in RESIDUAL CONTROL from ONE GOVERNMENT to ANOTHER.

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  22. Mr. Capitalist23 June 2010 at 21:06

    It is private in a Zambian sense. ZAMTEL under LAP will not operate under Zambian govt subsidies/grants. It will have to compete to be profitable therefore supporting the Free-Market economic policy I am a fan of.

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  23. Mr. Capitalist23 June 2010 at 21:11

    "What Musokotwane really meant that was that “An economy in non-Zambian hands represents the best opportunity for the Zambian people”."

    This is totally taking it out of context. He did not say this nor mean this. He said in private hands. How many Zambian companies bid for ZAMTEL?? Why didn't a company come up with a fund where it will pull funds from the Zambian people to raise capital to bid for ZAMTEL and give people a chance to own a share in ZAMTEL.

    Not a single govt official stopped Zambians or Zambian owned companies from bidding for ZAMTEL. Not a single one.

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  24. Mr Capitalist,

    "It is private in a Zambian sense"

    I think you mean in the MMD / Musokotwane sense. But I get your point that from Hon Musokotwane's perspective, being out of government hands means PRIVATE.

    That is the point I was trying to make.

    It actually isn't the case.

    In this context, it is BILATERAL ARRANGEMENT that involves transfer of RESIDUAL CONTROL from one government to the next.

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  25. Mr. Capitalist23 June 2010 at 21:22

    @ Chola

    If LAP had to start operations in Zambia, what would it be called? Wouldn't it be called a private company? It is not receiving any subsidies nor grants nor orders from the Zambian govt therefore making it a private company.

    It'll still have to compete to be profitable.

    It is a public company in Libya but a private company in Zambia.

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  26. Mr. Capitalist,

    That is a very good question.

    It will indeed be operating as a non-government owned company under Zambian law (that club includes a lot of ownership models e.g. listed to non-listed, from clubs to sole ownership to cooperative arrangementes, etc. And of course now foreign governments).

    But this is not what the discussion is about. This is about the change in RESIDUAL CONTROL and the nature of the PROCESS that underpins that.

    Hon Musokotwane has misled the Zambian people to even compare this to the mining companies. Unless he was thinking of Chinese owned companies. But certainly the privatisation of the early 1990s was privatisation in the sense of there was no BILATERAL ARRANGEMENTS.

    This may seem like an academic discussion, but this is vitally important. Something goes wrong with ZAMTEL in the future the ultimate RESIDUAL CLAIMANT is GADDAFFI.

    I am no left leaning loony!
    I am sure even Kafue (a long-time contributor on this website) will testify.

    The truth is I was one of the early voices to call for the break-up of ZAMTEL and undertake concrete steps towards privatisation long before Hon Musokotwane.

    Just scroll to the bottom and custom search ZAMTEL and privatisation on this website. You will plenty of evidence.

    I am not driven by ideology but rational thought. In this instance Hon Musokotwane has erred. It is not about profitability. Those are basic issues

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  27. Mr Capitalist,

    Some of the posts you might want to look include :

    ZAMTEL monopoly...why I oppose it  which was the first exposition of what was wrong with ZAMTEL

    Proceeding with Care where I argue for a four incremental approach.

    You should also know that A Model for Restructuring ZAMTEL was shared with Mr Chipwende and he responded on it with comments which would now make his position difficult, if they were made available.

    Hope this will help you get a sense where I am coming from.

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  28. Mr. Capitalist23 June 2010 at 22:21

    OK, I'll have a look.

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  29. Dr. Musokotwane in The Post:

    “An economy in private hands represents the best opportunity for the people. The private sector is less wasteful but if you over politicise this [ZAMTEL] issue, you will lose credibility and you will suffer in future…In 2000 when the mines were still with the government, copper production went down by 66 per cent but after privatisation, it has gone up again and jobs are secure.”

    Cho Wrote:

    " There’s only one problem with this argument - ZAMTEL has not gone private, it has been sold to another government. "

    There is another point with this article: copper production did not rise because of private ownership of the mines, or because of previous government inefficiency.

    Copper production went up because in the years following privatisation, the international price of copper tripled and quadrupled. And as a result of private ownership and lack of obligation put on foreign mining companies by the government, Zambia barely benefited from these historically high copper prices. Jobs in mining are scant comfort, when with the mines in Zambian hands, there would have been the money available to diversify the economy beyond mining, which would have created 10 or 20 fold more jobs, and would actually lay the foundation for national development.

    And another neoliberal canard is that the private sector is more efficient than the state. The standard attrition rate for startup companies is 90%. How is that more efficient than the public sector? On the other hand, which business is more efficient than the US Post Office?

    Nor is the private sector free from corruption, as we have seen with countless corporations during the 1980s and 2000s. (ENRON, TYCO, Worldcom, Haliburton, etc.)

    There are ways to run parastatals well, and it has to do with professionalizing their operations, making them more independent from government and preventing political interference. Would it be unjustified to state that in the years leading up to 'privatisation', ZAMTEL was run into the ground by the party in government, through unpaid bills?

    What I think has to happen is to separate the state form the government, and the government from the party in government - no matter which party happens to be in power.

    MrK

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  30. Zamtel interview:

    http://www.itnewsafrica.com/?p=8549&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+itnewsafrica+%28ITNewsAfrica.com%29

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