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Thursday, 22 July 2010

Quick notes

Zambia  is apparently seeking US $7 billion to boost the energy sector and provide electricity to meet demand from the mines. Its not clear where GRZ will get the money from. Zambia's external debt spiked up over recent external borrowing by ZESCO.

A new World Bank report assesses how open countries are to foreign direct investment. The report reveals what we already know : Zambia is very open - more open than any country in Europe, the USA or China. Infact it appears that all poor countries are very open!

An interesting piece in the Daily Nation over the housing woes of former presidents. Former Ghanaian president Jerry Rawlings has joined Botswana's ex-president Festus Mogae who has publicly expressed his frustrations about the sorry state of his retirement home and office.

WiFi networks are unfurling across SA's towns and cities, thanks to advances in wireless technology and the relatively low cost of the equipment needed to set up or become part of a wireless network, Wugs - or Wireless User Groups.

Swaziland's judiciary is concerned by an absence of detention facilities for children, which forces them to share jail cells with adult criminals. This opens the potential for sexual abuse in a country with the highest HIV / AIDs infection rate in the world.

14 comments:

  1. Swaziland's judiciary is concerned by an absence of detention facilities for children, which forces them to share jail cells with adult criminals. This opens the potential for sexual abuse in a country with the highest HIV / AIDs infection rate in the world.

    On Swaziland having 'the highest HIV/AIDS infection rate in the world.

    First, there is no reason *why* that would be the case. Secondly, this is based on surveys of pregnant women at antenatal clinics, using a single ELISA screening test only.

    In other words, it is based on a fraudulent means of data collection.

    This is what happened in Swaziland, when instead of using the ANC survey of pregnant women (used by the HIV advocacy agency UNAIDS), they used a statistically representative survey method called DHS (Demographic And Health Survey), championed by the CDC (the Center for Disease Control in Atlanta).

    UNICEF DHS IN SWAZILAND

    MBABANE, 27 August (PLUSNEWS) - A dramatically lower number of Swazi teenage girls are being infected by HIV than was previously estimated, suggesting a turning point in the battle against HIV/AIDS in a country with the world's highest HIV infection rates.

    The findings in the report, 'A Baseline Study on HIV Risk Factors', commissioned by the UN Childrens' Fund (UNICEF) are derived from interviews and blood tests of over 1,000 Swazis in two rural areas and revealed that only six percent of girls aged from 15 to 19 were found to be HIV-positive, with most of the HIV infections occurring among older girls.

    "This is the first time we have had data from a scientifically accurate survey of randomly selected households. It confirms some trends we had suspected, but which were belied by previous HIV estimates," said Dr Alan Brody, country representative for UNICEF.

    "This is different from anything that has been seen before. The conventional wisdom is that many more girls were infected," he told PlusNews.

    The study was prompted by the results of the government's 2002 sero-surveillance study, which estimated that 32.5 percent of teenage girls between the ages of 15 and 19 were HIV-positive.

    END QUOTE

    The data is being cooked, to make it seem that really there is somewhere on the planet where HIV is a risk for the general population.

    Now the statistically representative surveys still use only a single ELISA to determine if a subject is positive or negative. So if they started using Western Blot as a confirmation test, there is no telling what would be left of the 6% figure. But obviously the 32% figure has always been wrong.

    Also, this 'massive' level of HIV infection is not reflected in the country's population growth (as usual) (x1000):

    1990 882
    2000 1144 (+29%)
    2010 1354 (+18%)

    (Source: US Census Bureau - click on 'Data Access', select Swaziland and the years 1990, 2000 and 2010)

    In other words, in the 20 years between 1990 and 2010, the population of Swaziland increased 53%. Admittedly, that is not as dramatic as that other 'world epicenter of AIDS' Uganda, whose population increased 100% in 20 years (Uganda went from 14 million in 1985 to 28 million in 2005).

    The truth is that the way the data is collected and the type of surveys used are intended to give high national infection rates.

    It is pure fraud.

    ReplyDelete
  2. Investment in Africa - Five Influencing Factors:

    http://www.usafricainvestment.com/summary.html#survey

    ReplyDelete
  3. Kafue001,

    Interesting overview:

    INSIDER’S VIEW

    "We look at the spending power of the country, its political stability, and the corruption index."

    * Risks versus rewards -- U.S. corporations look at "risk adjusted ROI" when considering Africa as an investment destination. Given the currently perceived risks in Africa, the rewards have to be very high to make it worthwhile to invest. Presently, U.S. corporations say that there are very few visible promises of high future returns to justify significant interest in investing.

    * Supportive business framework -- Transportation and communications infrastructure, trained or trainable human resources, and equitable trade and employment practices are essential elements to support corporate investment. Currently, these elements are insufficient.

    * A welcoming environment -- In order for U.S. companies to employ locals, African countries must do a better job of providing education and health services to the potential workforce. By making it easy for companies to set up and do business, African countries will show a willingness to encourage FDI.


    In other words, scrap all the policies the World Bank and IMF have been forcing on compliant countries in Africa, including Zambia.

    User fees for eduction, healthcare, and investment in infrastructure. Now who would have thought of that, as being of interest to business?

    Of course, there is only one way of financing all of the above without crashing the currency by borrowing, which is to massively tax the one industry that is working, the mining industry.


    U.S. Business Wish List

    INSIDER’S VIEW

    "Educate your people so that we can employ them."

    To attract FDI, corporate America asks African nations to do several things:

    * Invest in the health and education of the African people to create a large pool of skilled and productive human resources.

    INSIDER’S VIEW

    "There need to be investments in education and health so that there’s a growing layer of the population that eventually can afford to buy our products."

    * Invest in and maintain infrastructure -- transportation, communications, electricity, and security -- so that there will be a reliable society in which to operate.


    Perhaps they need to have a little talk with the IMF and World Bank.

    ReplyDelete
  4. INSIDER’S VIEW

    "Are there investments in infrastructure -- roads and hospitals and electricity grids and telecommunication grids?"

    * Build a functioning legal system to ensure the rule of law, transparency, and fair play.

    INSIDER’S VIEW

    "Create environments in which you feel reasonably confident that your intellectual property rights and other legal protections are in place to be able to do business without being blindsided."

    * Create a positive climate for foreign investments by reducing bureaucratic processes, eliminating corruption, and reforming tax systems, irrespective of country of origin.


    Those are not conditions that benefit only foreign business in Zambia, but also (maybe especially) local businesses.

    In other words, start dedicating policy to building up Zambian businesses and business conditions, and foreign businesses will follow.



    INSIDER’S VIEW

    "Executives need to feel confident that the government is going to honor contracts and not change the rules of the game when we need to proceed with any kind of business transaction."

    * Ensure stable political environments -- that may or may not be based on western democratic principles -- that work toward the common good of all stakeholders in society.


    Well there is one way to ensure that contracts are honored, and that is to ensure that they are in the mutual interest, and not some closed door deal that robs the people of Zambia blind, while foreign businesses illegally bribe local politicians and officials.

    In other words, transparancy, openness, accountability, and consultation. Instead of secrecy, adamancy, nepotism and nchekeleko.

    Although this is sort of helpful, what they are really saying is that the Zambian government should make Zambia a good place to do business for ZAMBIAN businesses.

    Now if we can only convince the ruling party of that concept...

    My prescription would be:

    1) Massively tax the mines to fund economic diversification
    2) Investment in human capital - free education and healthcare
    3) Infrastructure investment - to open up the country to start doing business within the various regions, as well as a massive jobs creation project
    4) Invest in agriculture - irrigation, roads, storage facilities, marketing and sales support for farmers,
    5) Invest in manufacturing
    6) If FDI is attracted, there must be a sunset clause on foreign ownership, and 'Build, Operate, Transfer' is an interesting concept
    7) Decentralize government revenues by handing 50% of national revenues to local government, and make them responsible for basic government servcices - education, healthcare, policing, utilities and administrative issues (national licenses, registration)
    8) Reduce capital goods lending rates to 5% or lower, in fact reduce all lending rates down from the 20% range

    ReplyDelete
  5. Mr K,

    Massively taxing the mines is not the answer to obtain funding for education, infrastructure, health, etc. Besides breaking the terms of the development agreements and reducing investors confidence, it will also discourage future mining investment. See Australia where some mining projects had been cancelled before the proposed tax increase had been renegotiated:

    http://moneymorning.com/2010/07/05/mining-super-tax-3/

    Scrapping user fees for education and health would result in the deterioration of these systems due to lack of funding.

    The aim should be to enable the population to fund education, health, infrastructure, etc. from their own resources. In other words to provide them with jobs that will give them the income to fund these systems. In this respect, increasing business activity through MFEZs, etc should be the first priority, this will increase the number of jobs and the income available to fund these systems and the rest will follow.

    To summarize, at Zambia's current stage of development, increasing the level of business activity and the number of jobs should be the first priority and taxation comes in later (this is especally so since we live in a globally competitive world and other countries are offering tax incentives to attract MFEZs/investment).

    Over the long run, the focus should be on increasing skills of the population as this will result in higher incomes. This is what I regard as the biggest constraint to development since education takes time.

    By the way, if you look at mining's share of a developed economy such as the U.S., it is a small fraction of the economy, ($183 billion sales out of $21 trillion total sales in 2002). Mining is not the answer to everything.

    http://en.wikipedia.org/wiki/Economy_of_the_United_States_by_sector

    ReplyDelete
  6. Kafue001,

    Massively taxing the mines is not the answer to obtain funding for education, infrastructure, health, etc.

    Then please explain to me how this is going to be paid for without going into debt. And if so, why going into debt is preferable to taxing the mines.

    Scrapping user fees for education and health would result in the deterioration of these systems due to lack of funding.

    Only if you don't tax the mines. If you tax the mines, there is enough money to educate all the children in Zambia through college.

    So what is your alternative form of finance, which is preferable to taxing the mines?

    And just saying 'well people should have jobs' is not enough - jobs don't manufacture themselves. Also, we've seen what happens when there is no enforced minimum wage. People are not able to finance their children's education.

    Jobs need to be created, which requires capital. Give me a good reason why that capital should not come from taxing the mines and their $5 billion a year turnover.

    By the way, applying neoliberal economics to the mines has not worked. It has not created a wealthy middle class, even among those who do have jobs in the mining sector. It has not led economic diversification. It has not led to reinvestment of capital in other economic sectors in Zambia.

    We have given that economic philosophy 19 years, and it has not worked.

    So I ask you, what is the alternative to taxing the mines, which could easily net the government $1.2 billion a year in taxes.

    Remember that borrowing simply puts more pressure on the Kwacha.

    ReplyDelete
  7. MrK,

    The most important way to fund education, health, infrastructure is through increasing the income of the population by providing them with more and better jobs. This is done by attracting overseas investment since the large amounts of capital needed for development are available there. A person with an increased income can afford to spend more on health, education, taxes for infrastructure etc.

    For college education, the best way for low income people to pay for it is by the person taking out a loan, as is common in places such as America. In this respect government can work on setting up loan schemes for college. Debt as such is not bad if it is paid back, for example when the person starts working after college. Similarly debt incurred for constructing hydroelectric dams, toll roads, railways is not bad if it can be paid back from the revenue produced by these assets, and debt financing for these assets is common practice in many countries.

    Taxing the mines outside the agreed upon rates in the development agreements is not good as it would not be legal (assuming the courts upheld the agreements) and it would decrease investor confidence.

    ReplyDelete
  8. Africa makes the cover of Barron's magazine (an important American business publication):

    http://letterdash.com/Tatamkulu/africa-makes-the-cover-of-barrons-magazine

    ReplyDelete
  9. Kafue001,

    The most important way to fund education, health, infrastructure is through increasing the income of the population by providing them with more and better jobs.

    Even with the massive tax holidays, unlimited expatriation of profits, and the right to hire expatriates (which undermines your argument that foreign investment will bring jobs for Zambians), they still only create 58,000 jobs in a 5 million strong workforce. Unemployment has not been dented by this policy.

    On top of that, you presume that FDI can be attracted while ensuring wages for Zambian workers that are high enough to finance education, healthcare, etc. from taxes on those wages, while competing with other low wage countries.

    I'm sorry, but you have not convinced me that basic services can be financed from income tax, provided by jobs created by foreign investors.

    Also, why do you think it is moral to tax workers, but not foreign investors?

    ReplyDelete
  10. MrK,

    We live in a competitive world. If other countries are offering tax holidays to attract investment, then Zambia should do the same if they want their business. Morality has nothing to do with not taxing foreign investors, competition with other countries and the more important need to provide jobs for workers are the reasons for tax holidays. MFEZs have unlimited potential to create employment compared to mining which has physical limitations based on physical access to mineral ores, which is the reason why MFEZs are very important.

    58,000 jobs for MFEZs is not the limitation for the number of jobs, if more investment could be attracted, then it could be more. We are still in the early stages for MFEZs, so it is premature to judge the effects on unemployment.

    Basic services need not be financed simply from income tax. They can also be financed from user fees, which people are better able to afford if they have jobs in MFEZs.

    As income levels rise and the number of people employed increases, this will have a snowballing effect on the rest of the economy and prosperity will increase.

    ReplyDelete
  11. Kafue001,

    We live in a competitive world. If other countries are offering tax holidays to attract investment, then Zambia should do the same if they want their business.

    What they are offering first and foremost, are low wages. In other words, the argument that Zambian services can be financed by high wages paid by foreign corporations would mean that Zambia would become 'uncompetitive', if those wages were raised high enough to make a difference. FDI would simply go to Malawi, or Mozambique, or any country that (as Zambia does right now) undermines the power of labour to demand a higher wages.

    In other words, your argument that taxation of wages are somehow a substitute for direct taxation of FDI doesn't hold up.

    Because if there was an equivalence between taxes that can be raised from wages paid by FDI, and earnings made by FDI, there wouldn't be an argument. Because FDI would be paying higher (wage) costs instead of higher income taxes. And yet they (and you) object to higher income taxes. If they were equivalent, it wouldn't matter to them.

    Morality has nothing to do with not taxing foreign investors, competition with other countries and the more important need to provide jobs for workers are the reasons for tax holidays.

    Oh but it does. You insist that FDI should never be directly taxed, just that workers incomes should be taxed. That is immoral. We have seen what the shift of the tax burdon from corporations to labour has done in Zambia.

    Basic services need not be financed simply from income tax. They can also be financed from user fees, which people are better able to afford if they have jobs in MFEZs.

    Again, another assault on people's incomes. What neoliberals always forget in their quest to maximize their own corporate profits, is that wages are demand. No wages, no demand for goods and services.

    What higher income tax, user fees, etc. do is impoverish the worker, and lead to the collapse of demand that characterized not only the Great Depression of 1929-1932, but also the Great Depression of today. Not hyperinflation, but a complete collapse of the consumer.

    And if you have an example of a country that developed that way, please feel free to mention it.

    ReplyDelete
  12. Mr K,

    Economic development is just what it states itself to be. Countries with low skill levels earn low wages. As skill levels increase, then wages will increase. So if the majority of Zambians already possessed a high level of technological skills, then industries requiring them would invest here and they would earn high wages. However their skill and experience levels are low, hence starting wages are low. Over time as skill levels increase, wages will increase. The more immediate problem is unemployment, that should be tackled first and the focus in the long run should be on improving skill levels. You seem to be mixing up the different stages of economic development with desired outcomes.

    Malaysia and other Asian countries are examples of successful MFEZ growth:

    http://www.zamnet.zm/newsys/news/viewnews.cgi?category=6&id=1118742964

    ReplyDelete
  13. Business in Africa: Booming, but trade barriers still high:

    http://www.csmonitor.com/World/Africa/Africa-Monitor/2010/0802/Business-in-Africa-Booming-but-trade-barriers-still-high

    ReplyDelete
  14. South Africa Tries to Climb the Industrial Ladder:

    http://www.nytimes.com/2010/08/03/business/global/03rand.html?pagewanted=1&_r=1

    ReplyDelete

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