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Thursday, 15 December 2011

Merry Xmas and Happy 2012

Dear Friends,

As is customary since this website was founded, I will be taking 1 month off to recharge the batteries. Over the years I have come to value this period and I hope you agree that it has served us well. I am conscious though that we have not achieved everything I hoped to do this year regarding this project, so the break will be a good time for reflecting on how best we move forward.

Many thanks for all your support through this year. As always your encouragement and many website visits continues to be a great source of encourage. A special thank you to those who have financially contributed. Your funds are vital in helping with buying books to review, maintaining the domain and paying for some resources we need. I am always humbled that you consider the work worthy supporting financially given the myriads of choices you have!

Another huge thanks to our many Facebook and Twitter readers. Your contributions continue to be insightful and relevant. They provide a valuable source to steer the thinking and prioritise issues that need to be covered.

Wishing you all a wonder Xmas and fantastic 2012!!

May the Lord keep you safe and secure during the festive period.

See you on 15 January 2012, God willing.

Chola Mukanga
Founder, Zambian Economist
http://www.zambian-economist.com
Email : cho@zambian-economist.com
Twitter : http://www.twitter.com/cholamukanga 

Corruption in Zambia - The Quest for A Successful Struggle

By Chola Mukanga

The election of the Patriotic Front has thrust the fight against corruption firmly back on the national agenda. An agenda built around the commitment to “zero tolerance” on corruption in all areas of national life. President Michael Sata set out this direction in his inaugural speech to Parliament[i]:
I am sounding a timely warning that my Government has taken a zero tolerance against corruption in both the public and private sectors. Those who allow themselves to engage in corruption must know that they are taking a serious risk and that once caught they will be prosecuted irrespective of their status or position.
This new direction presents both an opportunity and challenge. It is an opportunity because we now have a clean start that appears to be winning accolades, as illustrated by the timely decision by the European Investment Bank (EIB) to resume funding to Zambia. The EIB observed, We are pleased to note the public statements by President Sata and his Government, declaring the fight against corruption a key priority…. [and] the numerous institutional changes aimed at strengthening corporate governance; including the changes in leadership at both ZESCO and the Anti-Corruption Commission….In view of these developments, I am pleased to inform you that the European Investment Bank has decided to lift restrictions on EIB’s activities in the public sector in Zambia.”.  
It is a challenge because we are still in the embryonic stage of this renewed quest. Zambia is awakening from an MMD era of unprecedented scandals in our young history.  The inevitable question on every Zambian’s mind is: will this renewed fight succeed where others have failed so miserably?

Defining success
The answer to that question naturally depends on what is meant by “success”. What are we aiming for? The new Government defines it as “zero tolerance”, meaning no corruption taking place in every sphere of Zambian life. But it should immediately be obvious that though the slogan is necessary in galvanising our attitude (and gaining international confidence) it tells us nothing about what realistically we are working to. Indeed, there’s a danger that without a proper defined criteria of success the slogan may be hostage to fortune.
This is particularly the case because the multifaceted nature of corruption[ii] means it will always be here. It is part of the total depravity of man. More importantly even if we are able to heroically reduce it to zero, it may not be financially or economically sound to do so.  By all means let us fight for zero corruption, but at what cost? Therefore there’s a pressing need in this early and enthusiastic stage the new struggle against plunder to develop deliberate and specific targets that the new Government should be aiming for to allow citizens to properly hold it to account on the level of progress being made.
As a starting point we should be clear that measures of success must be specific and not the vague promises we were accustomed to under the failed and corrupt regime of the past. Statements such “corruption is reducing” or “that institution is back on track” won’t do. Let us be clear about what sort of corruption we have in mind and where our efforts to should focus on. Zambia has very little financial resources. We need to be intelligent in our fight against corruption.
Economic intuition suggests that it is more efficient that the fight against corruption focuses initially on areas of corruption which may be more harmful in terms of growth and equity. Corruption is likely to be more detrimental where it is likely to disproportionately affect the poor compared to the rich, leading to larger income inequalities over time. Corruption is likely to be most harmful where it “hits people twice” e.g. in hospitals, schools and police. Corruption is likely to be more damaging to society where it affects those institutions that are there to prevent it.  Defining these areas as specific targets to reduce corruption would refocus our struggle and deliver tangible results that can be verified by all Zambians.
The indicators of success must be measurable. The problem with the MMD fight against corruption is that it had no real agreed measurable indicators. How do we know corruption has reduced in Mwansabombwe? How do we assess whether the civil service has increased in corruption? Key parameters must be agreed that are routinely measured and tracked by a specific publicly accountable body.  These benchmarks on national performance against corruption would include local and sector based perception indicators, financial leakage, number of arrests, timeliness of corrupt cases in court, etc. Such data should be kept in public and routinely updated document. In short, underpinning the struggle against corruption must be a clear public service agreement supported by hard and routinely collected data.
Of course it is not good measuring things that we are unlikely to do anything about. So it is vital that such targets are based on policy goals that are achievable and realistic. Realistic indicators of success give impetus to Government to strive to bring them about and allow the public to be justified in their disgust when such targets are not being met. People will not care about any outcome that they know full well will not be delivered. We must move from hollow promises of a better tomorrow to more timely and realistic commitments e.g. “traffic police bribery reduced by 10% by July 2012”.  These are the sort of milestones that we desperately need.

Prerequisites for success
Of course measuring success is only the beginning. Ultimately success in fighting corruption will depend on Government developing the necessary conditions to breed success. This is particularly crucial in the embryonic stage. There are three key indispensible conditions.
First, there’s need for sustained policy credibility. The fight against corruption must be a truly people driven agenda. A “Zambian Project”, not just the vision of the person in State House. One of the tragedies of the Mwanawasa administration is that the fight against corruption was personalised through Presidential Executive Orders which rightly conveyed the impression that it was a personal creation designed to fulfil whatever Mr Mwanawasa had in mind. Creating private presidential armies to fight corruption is not good governance, no matter how successful those armies might be.
Similarly, reliance on foreign donors for such an important struggle undermines Zambia’s sovereignty. Let us fight corruption, but let us not sell our country in the process. The new PF government deserves applaud, for now, for not reinstating the Task Force and shunning foreign funding in this area. Zambia must always bear 100% the burden of delivering justice because it is the foundation of our society. If the foundation is on borrowed capital, will the house stand? The Government must now go beyond that by creating an adequate legislative and political framework that will truly put Zambia on a credible and sustained path towards a low corruption and high growth equilibrium.
The second condition is financial sustainability. The fight against corruption must provide value for money over the medium to long term. It is true that there's no price that can be put on rule of law and justice in general, but we have to remember that the fight against corruption wont by itself deliver these things. It is only a part, albeit an important one. That means that any fight against corruption must, like all forms of policy, be undertaken within the context of an efficient and cost cutting government, with an eye on spending money where it is most needed.
Over the last two decades Zambians have seen initiative after initiative undertaken without being sufficiently underpinned by effective cost benefit analysis. This has led to grossly inefficient arrangements whose costs, if ever quantified, would outweigh benefits. Zambia is a country that relies on donor funding and external borrowing to feed its people. Each K1 being spent must rightly be evaluated against competing alternatives. More importantly, if the fight against corruption is to succeed the supply of funding must be sustainable. It’s the irony of life that we need money to stop money being lost. A new strategy for corruption must therefore be underpinned by the need for delivering solutions that that are economically efficient.
The third condition is that the fight against corruption should be forged as part of a holistic and broad struggle for development. Corruption is best addressed as part of a wider debate on what we think are key constraints to Zambia’s development. The days of long running editorials on one person are a distraction to real debate, which should focus on how we can make our institutions better and indifferent to the personalities of the day. Zambia's number one problem is that we have a "poor institutional framework” that exists only to serve the rich and corrupt elite. A credible institutional framework goes beyond simply tackling corruption. It is about introducing stronger governance and accountability structures. Participatory democracy and effective decentralisation are among those things that have been empirically verified to work. We simply cannot expect to win the fight against corruption if power is unnecessarily centralised.

Delivering success 
When the conditions are right, it becomes easier to take forward policies that deliver results. A top priority is that we need new policies that encourage greater detection of corrupt activities.  High levels of detection act as a deterrence to would be perpetrators. In short, information is vital in the struggle for corruption.
The prime source of such information is whistle blowers. The existing legislation on legal protection for whistle blowers unfortunately contains significant deficiencies[iii] that urgently need to be corrected by the new Government.  Although the current legislation claims to provide for "a framework within which public interest disclosure shall be independently and rigorously dealt with", it is quite clear that the framework is particularly inadequate in so far as it relates to investigating agencies. The legislation requires investigating authorities to investigate themselves which clearly does not encourage whistle blowing. Similarly, the current legislation contains no monetary incentive or financial reward for whistle-blowing, further diminishing of any prospect of whistle blowing.
The media has an important role in disseminating information. The media such as newspapers, television or radio are useful and often necessary methods of publicising corruption to the electorate, to empower the community to punish corrupt officials.  A key proposal therefore is that new Government should formally privatise Government controlled papers. Empirical evidence[iv] demonstrates that a government dominated press is positively associated with corruption. A free press provides greater information than a government controlled press to the public on government and public sector misbehaviour including corruption. The best way to encourage corruption therefore is to ensure Government owns the television and owns the main newspapers. World over, it is accepted: if you want to know how serious a Government is in fighting corruption, just look at how much media it controls.
Further media reforms must include having an established and trusted media outlet in the community and using media that can best reach the community based on its education level. Our local radio stations should be supported as avenues for greater and more localised detectors and publishers of malpractices. Though Zambia continues to see a significant rise in local radio stations many continue to face serious administrative and operational problems. Local advertising revenue is not sufficient to make such radio stations sustainable. Hence there’s need for Government to do more to supplement funding in these areas. A viable community radio station fund is needed. 
Of course the citizens can only do so much and that is why Watchdog institutions exist (Auditor General, ACC, DEC and Police Service) to help detect such vices. Unfortunately, these institutions are some of the most corrupt institutions in the country. Evidence increasingly shows that where auditors and policing authorities are corrupt, initiatives to tackle corruption, indeed monitoring in general, becomes toothless. It is for this reason that high priority should be placed on improving their capacity. This will include not just monitoring the monitors better but creating incentives within these organisations to avoid corruption e.g. through greater competition for jobs and improved pay packages. It cannot be denied that these Watchdog institutions have generally been the most underfunded in the country. As Director General, Rosewine Wandi recently noted, "the ACC faces several challenges such as lack of adequate funding from the Government to enable us execute our operations effectively...” Simply put the institutions are broke.

Improved detection must be accompanied by rapid improvement in prosecution. The current approach to prosecution is costly to the tax payer because cases take a long time. We need a new judicial process for convicting corrupt criminals that is swift and definite. No point of having long prison sentences and good detection, if you cannot actually convict people efficiently and at minimal cost to the tax payer. A corruption fight without an efficient court system has little deterrent effect on corruption and is therefore a pure social cost.

The Government should seriously consider setting up Special Corruption Courts, if necessary on a pilot basis. These would constitute specially selected judges and dedicated courts to exclusively handle corruption and economic crimes related cases. The experiences of establishing special corruption courts can be seen in Pakistan, Philippines and Kenya. There’s no reason why Zambia cannot be learn from such countries on pitfalls to avoid. Many international organisations support such initiatives and indeed recently Nigeria has initiated[v] a similar pilot for two years. The approach is to use a unified general system with judges who have already acquired expertise in handling corruption cases. These could be restricted to look at cases involving more than K100m.

The final jigsaw is increased punishment. There is need for introduction of stiffer penalties for corruption. Firing people is not enough to dissuade them from corruption because often such individuals are fairly mobile and would be able to find another job. Stiffer penalties in form of longer sentencing periods are needed. The problem at present is that not only do cases take long to resolve, but when these cases are concluded people serve short sentences. For justice to work, it is critical that people are not just punished but are seen to be punished. This policy prescription is in line with the stated intention of the President in his inaugural speech to Parliament[vi]:  “To restore public confidence in [the fight against corruption], the PF Government shall amend the Anti Corruption Commission Act to introduce much stiffer penalties for corruption offences, re-instate the abuse of office clause … ”.
Crucially, the three policy elements – detection, prosecution and punishment – must be treated as a unbroken trinity. Policy initiatives that utilise a combination of these three can prevent corruption by drastically increasing the expected cost for being corrupt (increasing the probability of being caught engaging in corrupt activities, and increasing the punishment for being corrupt). Detection on its own is ineffective, because the individual must face a punishment for being corrupt. Similarly, increasing the incentive to stay honest has no effect when the probability of getting caught is too small.
Zambia has a remarkable new political opportunity to wage a successful fight against corruption. This vision requires translating the President’s stated intentions into practical ideas to deliver a less corrupt Zambia. We won’t achieve this unless we are clear about what success looks like; the environment that will help create that success; and the practical initiatives needed to bring it about.


Chola Mukanga is an economist and founder of the Zambian Economist which provides independent economic perspectives on Zambia's progress towards meaningful development for her people

Copyright: Zambian Economist, 2013
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Tuesday, 13 December 2011

Debt Watch (China), 4th Edition

The Government has entered into yet another debt deal with China. This week Alexander Chikwanda received an economic and technical cooperation grant agreement (free money) amounting to US$7m and then proceeded to borrow US$10m on top. We are told the the money will be used "in the fight against poverty and projects to be agreed upon by the two governments". So we are borrowing money that we do not even know where its going to be used? One assumes that China would have been content just to give the US$7m without lending the extra. 

Mr Chikwanda was also keen to reiterate that it is "Government’s desire to access Chinese financial assistance and technical expertise to extend the TAZARA railway line project to Angola".
 So more debt coming.  The problems with all of these loans (small or large) is that they are just arbitrary and without any clear audit trails. Our hope (faint) is that Mr Chikwanda will slow down a bit and put his thinking cap on.  It does not not make sense to keep on borrowing without a proper debt management strategy underpinned by appropriate legislation. Its my view that until that is done there should be no more borrowing, big or small.

Related Posts:

Debt Watch (China), 3rd Edition
Debt Watch (China), 2nd Edition
Debt Watch (China)

Monday, 12 December 2011

A Poor Statement

If this misguided statement from Mines Minister Simuusa on the current mining regime is anything to go by we are in for some problems on the mining front: 
"For now (the royalties) will stay, but if it becomes a crisis, if prices crash, we might have to review the regime... not in 2012 but for 2013, in the next budget..."
One assumes that Mr Simuusa is trying to reassure mining companies that the Government is sensitive to the global pressures. But this statement is misguided for a number of reasons.

First, it shows the current mining regime is not well conceived. A good mining taxation regime does not constant  adjustment. We were told by the Finance Minister Alexander Chikwanda that the new regime is sufficient to capture appropriate revenue. If that indeed is the case, why would the Government already be talking about possible scenarios that would require reversals? Isn't it better to design a tax regime that automatically adjusts in the low revenue years? 

Saturday, 10 December 2011

Top 5 Books of 2011

As we edge closer to the end of 2011, and our impending annual blogging break (due 15 December), I thought it was prudent to share our customary look at the top books released in 2011. Once again a difficult choice. As always the list reflects what I found interesting, fresh, challenging and inspiring. The list of course reflects my broader reading of new books. You will naturally have read other interesting new releases. Would be interested to see what you found eye catching.

Product Details(5) Dancing In The Glory of Monsters by Jason Sterns seeks to offer a narrative of the wars that have been raging in the Democratic Republic of Congo. It is particularly useful in terms of drawing out the various roles played by its neighbours, especially the Rwandan government. It is naturally graphic and certainly not for the faint hearted. I suppose if there's a downside is that it is often unbalanced and could have done with better polishing or story telling. But certainly one of the most important books released this year and a must read for students of African affairs. You can't understand Africa until you understand the Congo. The book offers a great start in that area.

Friday, 9 December 2011

Parastatal Madness, 15th Edition

More revelation of broken parastatals. Minister for Transport, Works, Supply and Communication Yamfwa Mukanga has demanded an explanation from Zampost management on its decision to renovate the post master general's house at a cost of K2 billion. To add to that the company owes Roraima Financial Services K12 billion for money transfer services and has other historical debts in taxes to Government and other parastatal institutions. 

Thursday, 8 December 2011

Why have farming subsidies failed to reduce poverty?

The past two years are a tribute to Zambian farmers: they have responded admirably to government efforts to promote maize production. Being the most important staple food in Zambia, maize surpluses contribute to food security and benefit the nation. But the smallest farmers in Zambia— those cultivating less than 2 hectares who account for over 70% of all the smallholder farms in the country —participated only marginally in the maize production expansion of 2010/11. These farmers received relatively little FISP fertiliser and sold very little maize, hence they were unable to benefit from the FRA producer price of 65,000 kwacha per bag. The farmers benefiting the most from the government’s expenditures on supporting maize prices were clearly those selling the most maize.

Wednesday, 7 December 2011

A Failure of Reason

An interesting development in Msanzala :
Msanzala independent member of parliament Colonel Joseph Lungu has allegedly resigned and has immediately joined the ruling Patriotic Front. Col Lungu said he had decided to join the ruling party in order to ensure development of Msanzala which had lagged behind for some time. Col Lungu said he felt he could not take development to the area as an independent parliamentarian. He hoped to be adopted by the PF and promised that he would continue with development projects for the area.
It is not often one comes across a complete failure of reason, but this is a good candidate. This appears foolish at many levels. There's much that can be said for the costly nature of his decision and the possibility of better alternative arrangements. For example, someone might rightly ask, why not just enter an arrangement with PF? Surely that would deliver the same results! It can't be job seeking because MMD MPs are already in government without switching sides!

But what I wanted to comment on is the report that "Col Lungu said he felt he could not take development to the area as an independent parliamentarian". There are two problems with this idea. The immediate one is that it promotes corruption among parliamentarians. There's a view being espoused here that one must have a strong relationship (nepotistic) with the current administration in order for your area to be developed. This is very divisive. Government exists to serve all people regardless of political affiliation. Unfortunately this is one of those cancerous vices introduced by the failed MMD regime with its promotion of regionalism (Lambaland, Bembaland, etc) and corruption based politics. George Kunda and Dora Siliya were notorious for suggesting that only by having an MP from the ruling party was development possible. 

A related and more serious problem is that it perpetuates the misguided view that the legislature only matters when the representatives in question are members of the current administration. This reinforces the huge misconceptions people have about MPs. The role of the MP is poorly understood, and  Col Lungu sadly does not get it. In fact neither does Silvia Masebo when she claimed she is now poised to "deliver development" to Chongwe. Unless Ms Masebo is relying on corrupt favours, she is incapable of delivering development. In fact it is not her primary job to deliver development to Chongwe. 

The primary role of an MP is to vote on legislation and make laws on behalf of their constituency (the "legislative function"). They also have an additional function of representing the views of their constituency to Parliament e.g. special problems they are facing which the executive branch has failed to address ("advocacy function"). It is not the role of an MP to bring economic development, since in a well functioning society such functions would be performed by an effective local government with appropriate support from central government. The MP's role is simply to ensure that the local preferences are fully reflected in national decisions. Once the MP brings the problem to the attention of the Executive, it is expected that they would follow through where they can. 

Unfortunately in our country, the local government is non-existent, due to ineffective capacity and molestation by the Executive (e.g. through large unpaid debts). So the MP has assumed the de-facto role of a leader. MPs have absolutely zero levers to deliver development, besides the Constituency Development Fund, which has its own problems. In fact many spend their personal fortunes to appease their constituency ending up in bankruptcy.

I should also point that to the extent that voting systems define the extent to which MPs are "connected" to their constituency, we can expect that the balance between the "legislative function" and "advocacy" to vary from one system to the next. Under the current system we expect that MPs are significantly tied to local communities, but where you have a national Proportional Representation system, the "advocacy function" is slightly diminished. Incidentally, I have previously advocated a different system that supports greater role for chiefs (enhances their "advocacy function") within a stronger decentralised framework. Under that system the role of the MP would be purely "legislative". A monthly essay is coming on in the new year. 

Tuesday, 6 December 2011

The Grand Inga Project, 2nd Edition

The Grand Inga Project is not dead. Last month President Zuma (RSA) signed a deal with President Kabila (DRC) in the first step of the project designed to "save Africa". The project could dwarf China's Three Gorges Dam  is meant to come onstream by 2025. Still in the feasibility stages, the Grand Inga, expected to generate 40,000 megawatts, could be a long-term solution to all our power problems, but investors have held back due to political risk and its $60 billion price tag.  A fascinating article explores whether the project could finally come fruition. 

Monday, 5 December 2011

Mine Watch (Muntanga)

Denison Mines Corp recently announced that it could potentially boost the resource estimate at its Mutanga project by 16 to 24 million pounds of uranium, based on exploration drilling completed this year. However, it has warned that though the results look promising, it has not done enough drilling to properly define an increase in the resources. Exploration at Mutanga will continue in 2012.

Denison produces uranium and vanadium in the United States. Denison is among other companies that have quietly corned uranium mining in Zambia with a range of small lucrative projects. We have been promised that its Mutanga and Dimbwe Deposits in Siavonga will create approximately 300 jobs in 2012. But everyone is silent on how much money will go into the national pocket. The old dreams of a uranium powered Zambia runs hollow indeed!

Investment Watch (Lime)

Lions Group Quarries (LGQ) Limited, a local firm is planning to construct a lime plant in Kafue district at a cost of US$30 million. The project is expected create 200 jobs. According to Environmental Impact Assessment (EIA) the new plant, which will be located next to its existing quarry and crusher plant located in Lusaka West, will produce 400 tonnes per day as start-up production capacity with production expected to rise to 800 tonnes per day after three years.

Mine Watch (Mimbula)

Konkola Copper Mines has announced plans to resume output at the Mimbula open pit mine as part of Vedanta'ss strategy to extend mine life at its operations. KCM plans to carry out activities at Mimbula including extension of the power line to the site as well as pit de-watering and de-silting as mining has not taken place there since the 1970s. The opening of the Mimbula mine, located on the Copperbelt, is still under evaluation with further details forthcoming.

Friday, 2 December 2011

Budget 2012 : National Budget for Agriculture

The ACF / IAPRI policy presentation on the Budget -  2012 Zambian Agriculture Budget Analysis. As the selected graphics below show (click to enlarge), there has been such deviation from actual allocations in previous budgets, that the word "budget" does not carry much meaning. We hope this will change under the new government.



Thursday, 1 December 2011

Equality through employment

Andres Velasco argues that the best way to tack rising inequality is through job creation. Focusing on evidence Chile, he argues that if poor households had the same access to jobs as the middle classes enjoy, the gap between rich and poor would narrow by half.

“Do you feel it trickle down?” ask the protesters occupying Wall Street and parts of financial districts from London to San Francisco. They are not alone in their anxiety. Income inequality is a top concern not only in tent cities across the United States, but also among street protesters in Taipei, Tel Aviv, Cairo, Athens, Madrid, Santiago, and elsewhere.

Wednesday, 30 November 2011

How do we reduce unemployment?

IMF's Masood Ahmed on potential policy prescriptions for unemployment in Central Asia :
A good starting point is to develop better labor statistics, which would help policymakers get a firmer grip on the scale and scope of the unemployment problem and, in turn, help them formulate policies to tackle it.

On a basic level, governments in the region could do more to nurture private-sector development, particularly in sectors outside of mining, oil, and gas. Countries in the Caucasus and Central Asia have made important strides in improving the business environment, but many still lag behind on several indicators, especially the ease of trading across borders—in such areas as the number of documents, procedures, and days needed to export and import. And the region’s low scores on several widely cited governance indicators show that these governments still have work to do on eliminating corruption.

All of these policies could form part of a longer-term strategy for attracting investment and creating jobs in the region. Such a plan is vital, because growth alone is not enough.

It is also important to focus on delivering appropriate education to fit the needs of the economy. To that end, improving education systems to better equip young people with the skills demanded by the marketplace would help solve the skills mismatch problem, where it exists.
We are currently thinking about the same issue in the context of Zambia as part of our Readers Weekly - here and here. A synthesis from these ongoing discussions will be published in due course. What is interesting is that there's nothing magical suggested by Masood Ahmed, but the starting point is cardinal and this is where the previous MMD government failed when it refused to accept proposed legislation to improve employment statistics.  Without data its fruitless to even begin to tackle the problem.

Tuesday, 29 November 2011

Zambia Budget 2012 - Yellow Book Estimates

The comprehensive line by line annual activity 2012 budget as published in the Yellow Book (2049 pages). This is an invaluable resource for anyone who wants to know where the Government money will be going in 2012.
Zambia Budget 2012 Yellow Book of Estimates

Monday, 28 November 2011

Zambia Analysis Magazine

A new magazine that shares our vision to inject proper analysis in the public debate. This is not a Zambian Economist project but we are hoping to contribute at least one article per month. We may also recommend some of our contributors to write. This is a good way to expand influence and it's all part of our new vision, "creating a better Zambia, one idea at a time".  Embedded below is the November 2011 version, which is going out for free. The magazine is printed as a hard copy and sold in stores across the country. Future versions will be available digitally (by subscription). You can keep in touch with Zambia Analysis via their Facebook page
Zambia Analysis-2011 11 Web

Corruption Watch (Banda Adminstration), 2nd Edition

More revelations of the rampant nepotism and organised plunder that took place under President Banda. The Post is reporting that former Mines Minister Maxwell apparently instructed his ministry officials to favour fellow minister Gabriel Namulambe, then inspector general of police Francis Kabonde and former defence permanent secretary Nicholas Kwendakwema with mining rights contrary to the law.

In a letter signed on December 21, 2010 to the Director of Mines and the Director of Geological Survey, Mr Mwale ordered the two officials to give Gabriel Namulambe, the then Minister of Works and Supply, mining rights for areas in Luapula and North/Western Provinces. In June 29, 2011, Mr Mwale instructed the two officials to favour Mr Kabonde, Dr Kwendakwema and others with mining rights in Mumbwa District, west of Lusaka, in Central Province. More detail via the Post

A nation that locks up babies, 2nd Edition

Deputy Minister of Mother and Child Health Jean Kapata discovered the national hobby of locking up infants in prison is alive and well, during her tour of Lusaka Central Prison last week:
"Our main interest is the children who are in prison because their mothers have been incarcerated. We will sit down with the Ministry of Home Affairs and come up with lasting solutions....the Department of Social Welfare is mandated to look after children who are in prison with their incarcerated mothers and any other vulnerable ones, hence our stake in the prisons".
We have children being born and staying in congested prisons. A shameful situation that we have previously flagged up. At Lusaka Central Prison alone, there are "three boys and three girls and a newly-born baby". This is at a prison which was built in 1924 to hold less than 240 inmates but now has 1,162 inmates. There appears little prospect that the new Government will sort this situation out urgently because for a start issues of related to prison reforms are not in the PF manifesto and never got mentioned in the President's speech. 

This practice apart from being a violation of human rights is also economically foolish. We are raising prisoners - how will these children grow up? We are current preparing a paper on juvenile justice addressing this issue and the low minimum age of criminal responsibility. 

Mine Watch (Munali)

The nation's sole nickel mine, Munali Nickel Mine, which halted operations earlier this month after experiencing cash flow problems, is expected to resume production in January 2012 after completing the ongoing restructuring program. The company expects to get a suitable investment partner to recapitalize the mine by the end of December. More detail via Market Watch.

Saturday, 26 November 2011

Readers Weekly : Tujilijili - To Ban or Not to Ban?

Tujilijili has apparently become a Zambian obsession especially among youths who use it as a tranquillising drug to "keep their demons at bay".  For the uninitiated, Tujilijili is a strong alcohol sold in a sachet for about K500 per sachet. The alcoholic content is over 40 per cent, equivalent to whiskey and other known spirit brands like Vodka. Some have been calling for the drink to be banned but without clearly explaining how such a ban would work (and financed) or indeed the rationale for a ban. This week, Local Government Minister Nkandu Luo said Government will soon make a comprehensive statement onTujilijili. 

To delve deeper into this issue, we asked our readers, whether the drink should be banned or alternative regulation is needed. The following is a selected sample of “properly identified" responses :

Mweemba Mwiinde :
No! They should not be banned. The problem is not the quality of the content but rather the packaging. Naturally, liquor should be packaged in big bottles that command a higher price. If anything becomes too affordable, it becomes a problem. Johnnies is as good or bad a Brandy as any other. I have tried it. Problem is it is affordable to all and it is therefore abuses. Consider the company that makes these Tujilijili pays taxes, employes people that have families to feed and educate. What becomes of them?

Aviation Watch (New Routes)

KLM Royal Dutch Airlines are entering the Zambia - Europe market, is move that signals greater competition to British Airways dominance. It announced this week that it will make its first flight to Lusaka from Amsterdam on May 15, 2012, using the Airbus A330-200. It will  be departing from Schiphol (Airport) on Tuesdays, Thursdays, and Saturdays at 12:30 hours, arriving in Lusaka the same day at 22:10 hours. The return fligh will depart Lusaka at 23:55 hours on Tuesday, Thursday, and Saturday nights and arrive in Amsterdam at 09:55 hours the next morning. The  new route creates a direct link between Zambia’s flourishing flower industry and the Netherlands, which is the largest junction in the worldwide flower industry. It will also boost the growth of Zambia’s tourism as it offers a wide variety of tourist attractions.

The potential for Zambia to emerge as a credible second aviation hub for the SADC behind South Africa cannot be underestimated. Zambia has a unique geographical advantage that should be harnessed by an effective aviation policy. A key challenge is to ensure that safety remains paramount. Which is why this latest pronouncement by Transport, Works, Supply and Communications Minister Yamfwa Mukanga is much needed. The lack of radar equipment for airports in the
 country is not a way to encourage an emerging hub. Similarly, as the Minister has noted in the past, having a stronger domestic carrier is also vital. The best way to do that of course is to follow the models elsewhere in emerging economies where public and private partnerships have ensured a strong aviation industry.

Friday, 25 November 2011

Corruption Watch (Banda Administration)

The fight against corruption seems to be gaining momentum as Inspector General Malama uncovers Austin Liato's hidden stash of K2.1bn.

Thursday, 24 November 2011

An Economic Sabotage

A media report on the ZAMTEL Commission findings :


The Post has some other interesting revelations, including this statement :
"On RP Capital, the recommendation of the commission of inquiry was that a civil lawsuit be immediately instituted to recover the excess fees paid to RP Capital. It also recommended that RP Capital, its affiliates and employees must be immediately barred from conducting business in Zambia. It was also recommended that a civil lawsuit be immediately instituted against RP Capital and Simmons and Simmons for professional misconduct and negligence in qualifying LAP Green despite LAP Green's failing of all the three mandatory prequalification criteria."

How do we bring the informal sector in the fold?

"To improve access to economic opportunities and achieve more inclusive growth, policy makers will need to reduce the costs and burdens of entering the formal economy. Changing labor regulations can make it less expensive for employers to hire workers formally. More straightforward rules for establishing and operating a business will encourage entrepreneurs to start businesses on a formal basis. Enforcing the rules fairly and consistently means that firms share not only the responsibilities but also the benefits of operating formally. Simpler tax regulations and stronger administration will complement these reforms. At the same time, workers in the informal sector will need help in acquiring the skills demanded by the formal sector". 
IMF's Masood Ahmed on how to bring the informal sector in the fold. The policy suggestions seem fairly sensible and quite obvious. The clear problem for many governments, including our own, is that to tackle informality requires sacrificing today (e.g. through lowering taxes, reducing fees) for larger benefits tomorrow. Governments who are long term minded therefore always do better at tackling informality. The citizens may not always give them that long. 

Wednesday, 23 November 2011

Should Tujilijili be banned?

Tujilijili (or Tujiri jiri) is apparently becoming a Zambian obsession especially among youths who use them as a tranquillising drug to "keep their demons at bay". Tujilijili is a strong alcohol sold in a sachet for about K1, 000 per sachet. The alcoholic content is over 40 per cent, equivalent to whiskey and other known spirit brands like vodka and brandy.

There has been some calls for this drink to be banned. This week we are asking - should it be banned? What are the costs and benefits of doing so? How would such a ban be enforced?

A sample of responses from "properly identified persons" will be published under the Readers Weekly column.

Those on Facebook can leave their comments here.

Tuesday, 22 November 2011

Legal Empowerment

A recent piece argues that the fight against poverty cannot be sustainable unless it is accompanied by "legal empowerment". This embodies legal arrangements that create a  sustainable between citizens and the state by empowering citizens to hold public institutions accountable. In practice it means ensuring "that laws and policies reside not only in books or courtrooms, but also on the street and in the home, within the grasp of every person". The argument is a variant of  Acemoglu - Robinson  thesis which says that for poverty to reduce there must be a fundamental redistribution of power within society. Legal empowerment is vital component in that it levels the playing field (if properly done). The lesson for Zambia is that we can't claim to  serious about reducing poverty without a well articulated legal and justice reform programme. In my view this remains a large hole in the new Government programme.

Inspired by Anna Hazare’s hunger strike, thousands of people gathered at Ramlila Grounds in New Delhi to protest governmental corruption. Protesters here and around the country pressed for a specific political change – a new institution to combat corruption– and, in principle, they won. Parliament passed a resolution accepting their demands and is now drafting a bill accordingly.

Monday, 21 November 2011

Justice that Heals (Guest Blog)

It is good that the source of MMD campaign funds is being probed. The excessive use of funds in the election was an insult to our people who are living in overwhelming levels of poverty. Over 60% of Zambians live in abject poverty. It was disheartening to see trees clothed with bright blue campaign materials while those who walked by were dressed in rags.

Many Zambians were confused. How can a political party sponsor such a lavish in a nation where two thirds of its people live in frightening poverty! Where did they get money to buy thousands of bicycles, millions of t-shirts, and dozens of vehicles? Who funded all the buses and where did they get the millions they paid for billboards and state of the art advertising? Many have suggested that two months prior to the elections the MMD was spending more money on their campaign than the government itself.

Where is the Windfall Tax?

Many people were demanding that the Zambian people should benefit from the country’s mineral wealth. They were expecting the PF Government to adequately tax the Mining Sector to generate financial resources in order to provide better roads, schools, hospitals and other infrastructure. The people were calling for the re-introduction of windfall tax on copper revenue. With copper prices remaining above US$7,000 per tonne, the mines are still gaining unexpected income which is above the planned threshold of US$2,500 to US$3,000 per tonne to make profit. The PF campaigned on the platform of re-introducing the windfall tax. What has changed?
From UPND's assessment of  Budget 2012. You can read the rest here

Saturday, 19 November 2011

Konkola Copper Mines Vs. Nyasulu and Others

An important High Court ruling where KCM was ordered to pay K10 billion as general and punitive damages to 2, 000 Chingola residents who suffered consequences of the company discharging effluent from its mining operations into Kafue River, the source of their water. The case was actively championed for the people by James Nyasulu Chimkowora.
Konkola Copper Mines Vs Nyasulu and Others

Friday, 18 November 2011

Preventing Corruption and Freedom of Information

A recent JCTR article makes the following observations on the link between fighting corruption and the Freedom of Information (FOI) Bill :
Promoting the right to freedom of expression is another way of preventing corruption. This right facilitates participation and it is significant to all the efforts we enlist in our fight against corruption. Government can then make certain that free flow of information is allowed. This would encourage us to denounce corruption cases. Yet since most of the information we may receive is transmitted through reporters and editors, who can be bribed, it may not be enough that we simply advocate for the protection of these rights. Information is vital to preventing corruption. If the people have a right and access to public information, then they can know what is going on in their society and hence be able to freely and actively participate in the fight against corruption. It is for this reason that the Freedom of Information Bill becomes law and be enshrined in the constitution.
There are three fundamental problems with the above assessment.

Thursday, 17 November 2011

The Rise of African Aviation

A recent piece argues that despite lacklustre safety records and incomplete liberalisation, air travel in Africa is showing signs of taking off. This does appear to the case - we are beginning to see African airlines now competing in the long haul market (where returns are high). African airlines are acquiring new widebody airliners at a greater rate than the global airline average. Last year, 32 per cent of African airline demand was for widebodies, as against 23 per cent for the global industry. This has led to new routes. In 2006, there were only 32 weekly flights involving just eight city pairs between the whole of Africa and the USA. By last year, these figures had jumped to 67 weekly flights between 14 city pairs. And a lot of these flights were by African airlines. An area for expansion is Europe - Africa pair where European legacy carriers continue to dominate through restriction of appropriate land slots and lobbying African governments at the expense of African carriers. Unfortunately, the article does not touch on these issues - but still worth a read. 

On July 8 2011 a Hewa Bora Airways aircraft, operated by a private Congolese company, crashed in bad weather after missing the runway at Kisangani airport, killing 127 people. Although blacklisted by the EU and the US, Hewa Bora had long been considered the best of the DRC’s airlines, but this means little in a country which holds the world record for aircraft crashes.

Is Chinese farming history misapplied in Africa?

A fascinating article looking at what if any Africa should be learning from China's agriculture history. It naturally concludes that "this is not the first time that sub-Saharan Africa has been sold a set of flawed policies based on a misreading of another region's history and experiences". And therefore, there's need for "Africa's leaders ought to carefully study their comparative world history before accepting this advice"

As sub-Saharan Africa grapples with high food prices in some regions and famine in others, many experts argue that increasing food production through a programme of hybrid seeds and chemical inputs is the way to go.

This approach, marketed as a "New Green Revolution" for Africa, is increasingly supported by a triumphant telling of China's history with this method in the 1970s and 1980s. This Chinese success story is not only distorted, but it is being misapplied in Africa.

Tuesday, 15 November 2011

A crisis of economics?

A recent piece suggests that the current crisis of capitalism has exposed the need for big picture economics. Until economics revisits its roots, it will fail to come up with an alternative economic system to replace capitalism. There are three problems with the basic thesis as presented. First, many economists pretty much think from a systems perspective. It seems to me that what policy makers take on board is not always aligned with how economists think day to day. Second, the word "capitalism" does not help because what we have is not pure capitalism as narrowly understood. Finally, it is not immediately clear that the real revolution needed is in economics. A strong case can be made that the crisis is much about the crisis of "democracy" than it is about economics. The events taking place will leave their lasting impact not so much on economic thinking but on how individuals in the western world relate to their governments. With those caveats, see the essay below :

It's become commonplace to criticize the “Occupy” movement for failing to offer an alternative vision. But the thousands of activists in the streets of New York and London aren’t the only ones lacking perspective: economists, to whom we might expect to turn for such vision, have long since given up thinking in terms of economic systems — and we are all the worse for it.

Monday, 14 November 2011

From China with abuse

"I asked, “What have I done wrong?” and [the supervisor] replied, “Don’t you know you’re not supposed to talk, you’re a slave.” [My boss] and his supervisor spoke in Chinese for several minutes, and then he said I was fired. After being fired, I went to the safety officer and took him to the workplace. Then I went to see the HR [human resources] officer, who confirmed that he had been to the site where the problem started. He was very defensive of the Chinese, he didn't even address the issue of working near the fire without fire safety equipment. HR told me to go home, that they would finish their investigations. I have taken the case to court..."
From a new hard hitting report on the human rights abuse of Chinese companies in Zambia. Sadly, all of this is nothing new to many of our readers. Nevertheless it is useful to have a report that independently brings to these issues. The recommendations there are also useful, particularly the need to increase monetary fines and increase capacity at the Ministry of Mines in relation to safety. 

Constitution and Media Reform

An interesting and balanced Op'ed in the Post on constitutional and media reform by Sichuwa Sichuwa :

Last week, a wall of silence over the constitution-making process and public media reforms was broken by two major official pronouncements from senior government officials. One was from Minister of Justice Sebastian Zulu who proffered that the constitution-making process will take more than ninety days, contrary to the PF slogan of completing the process within that period of coming to power.

Friday, 11 November 2011

Zambia Budget 2012

The Finance Minister, Hon Alexander Chikwanda delivered the Budget Statement today. Further analysis to follow, but key changes appears to be the increase in tax exemption on PAYE; increase in mineral royalty taxation; and, general re-prioritisation of spending on the four priority sectors identified in the recent President Speech. There's also commitment to the usual fiscal and monetary arrangements. Those interested in taxation only should see Budget Highlights. The rest should regard this as compulsory reading over the weekend!  [Those on handheld devices who want a word version should drop us an email - cho@zambian-economist.com]
2012 Budget Address by Hon Chikwanda

Zambia 2012 Budget Highlights

Thursday, 10 November 2011

Skills Training in Zambia

Former Minister Abel Chambeshi has an interesting Op'ed that calls for increased skills training through introduction of a training levy. The idea had allegedly been tried and opposed in the past, but the renewed quest to tackle unemployment may see the idea back on the table. Unfortunately, the article does not explore the downside of such an approach, including being a de-facto taxes on business. That said, the idea of a sustainable fund for skills and training is attractive, though the benefits to contributing businesses themselves are somewhat overstated. The idea is better coined from a national angle rather than trying to justify that this is in the interests of the businesses. 

It is so refreshing to hear His Excellency Mr Michael Sata include Skills training and self employment for young Entrepreneurs, as primary tasks that will occupy the attention of his administration during his term of office.

Wednesday, 9 November 2011

2011 Human Development Report

The UN released recently released its new edition of its human development index (HDI) report. The HDI represents a push for a broader definition of well-being and provides a composite measure of three basic dimensions of human development: health, education and income. Zambia's HDI is 0.430, which gives puts us at the rank of 164 out of 187 countries with comparable data. The HDI of Sub-Saharan Africa as a region is 0.463, placing Zambia below the regional average.  

You can access the Zambia report here

Tuesday, 8 November 2011

Collective Repentance

The Times of Zambia acknowledges its shameful behaviour in recent past :
It is no exaggeration to State that the public media, which is expected to act as public watchdogs so as to strengthen checks and balances, has often been mocked by critics as Government lapdogs because of its servile attitude.

In the recent past, the two State-owned dailies—the Times of Zambia and Zambia Daily Mail-- became conduits of crude and grotesque propaganda emanating from the MMD and targeting the most popular opposition figure at the time, who triumphed in the presidential election. The litany of unethical and unprofessional practices that have been documented is long. Suffice it to say that the current ownership pattern of the public media has eroded professionalism and undermined the country’s democratic dispensation. This situation has to be reversed to restore credibility and lend credence to the whole concept of “public media.” If the concept of public media is to have real meaning, the ownership has to reflect the diversity of our country.

Political pluralism would be rendered a farce without a media freed from the encumbrances of State ownership, and enjoying unfettered freedom to check the politicians’propensity to abuse power. Once the envisaged reforms are implemented, we believe the public media would be better positioned to play its role in a democratic political set-up such as the one which obtains in Zambia. In the broadcasting sector, we strongly believe that the national broadcaster, ZNBC, should similarly be transformed into a public broadcaster along the same lines as the BBC in the United Kingdom. Government monopoly in the media sector is a carry-over from the old political order during single party rule. This is incompatible with the current democratic dispensation and, therefore, untenable.
It is refreshing to read such an honest examination. But more important is that the Times of Zambia recognises the intrinsic link between ownership and media independence. The current Government is to be commended for taking a bold step in this direction, though questions still remain on the details. In particular, there's need to avoid a piece meal approach to media reform. We need a White Paper on media policy that can be consulted on and then decisions should be made. In the mean time, its great to have our papers back! 

A lost precious stones industry, 2nd Edition

Minister of Mines Wilbur Simuusa last week suggested that Zambia has the capacity to earn about US$700 million from the precious stones market. That dwarfs any amount being collected currently from copper mining. In his words, "The gemstone sector can contribute about US$700 million if properly managed…Government will ensure that sanity is brought in the sector...We want to put the sector in motion. Firstly, there is need to revive the semi precious and precious stones association to boost growth of the sector..". For further discussion of the current problems facing the precious stones industry, see the first edition. 

Wider benefits of education

A recent VoX EU piece reviews a growing body of literature that points to the wider benefits of education e.g. reduction in crime rates, improvement in health and greater civic participation. Unfortunately much of the evidence is US based, but useful nevertheless. 

Given recent budget problems around the world, many governments have proposed sharp cuts to education. What are the likely long-run costs of these cuts? Growing evidence suggests that the lasting impacts of reductions in early childhood investments, school quality, and educational attainment among today’s youth are likely to extend beyond declines in future productivity and earnings. Crime rates are likely to increase, health and mortality are likely to deteriorate, and political and social institutions may suffer.

Monday, 7 November 2011

How should Government go about reducing unemployment?

The biggest challenge facing the current government is reducing unemployment. The budget this week will inevitably begin to address it.

This problem is not unique to Zambia, though it is quite severe in our case. Only 2% of the the Zambian workforce force is in the formal sector (that is to say gainfully employed and paying tax).

As part of the readers weekly column, we are asking:

How should government go about tackling unemployment?

What policies should they implement to decisively and expediently deal with this issue?

Those on Facebook can leave there comments here.

Sunday, 6 November 2011

Fighting Corruption

A recent article by South African based Institute of Security Studies touches on the issues we have touched here, particularly the relevant of SMS and hotlines in offering efficient and accessible way for members of the public to report abuse. 

There was a time a few decades ago when some writers argued a case that corruption might actually bring benefits to society and for that reason tolerated, but these voices have since been silenced. What is less certain is which of the 'best practices' are commendable for its control and prevention in the developing world.

Saturday, 5 November 2011

Readers Weekly : Tackling Traffic Police Corruption

The Zambia Police Service in collaboration with the Road Transport and Safety Agency are planning to set up a new system for payment of fines for traffic offences in effort to curb corruption. According to Inspector-General of Police Martin Malama the aim is to “discourage the practice of paying money to police officers when a traffic offence has been committed”. How this will work in practice is not clear, but one idea he is considering is for erring motorists to be issued with tickets that can be paid at a bank.

Traffic police are widely regarded as the most corrupt element in the police force and tackling the scourge there would send a strong message that the police is being reformed. To delve deeper into this issue, we asked our readers via Facebook, website and email, whether the latest efforts would succeed and if there other ways that need to be explored. The following is a selected sample of “properly identified" responses:

Kondwani Gondwe :
Changing the method of payment is not the solution to stop traffic corruption. It appears like the Inspector General does not know the problem at hand. He should first carry out a survey and ask motorists (especially bus drivers) what the problem really is. Then the police can design a mechanism to curb the problem. The traffic police are taking advantage of the high charges which most motorist would rather not pay and the ignorance of the traffic law. Traffic police make up silly cases to pin offenders for their gain. In my opinion, traffic police are just out to make money and have very little to do with police work. We know that high ranking officer in the police force even set target per week to the patrol officers. Where is the corruption? Right inside the police force not on the road. Will changing the method of payment change anything? it is a good step but maybe in conjunction with other measures.

End of Parastatal Madness?

"Business as usual is over, we all have to pull our socks and roll our sleeves to sustain our institutions. As ZWAMA, you will be entitled to settle all your costs and build a fund that will enable you buy the equipment you require to operate to full capacity...To survive, there is need to change…from 2012 we expect you to be independent and if you want salary increment, work for it. Every deductions taking place whether National Pensions Scheme Authority (NAPSA) or Zambia Revenue Authority (ZRA) should be remitted.."
Commerce Minister Bob Sichinga is drawing a line on parastatals and regulators that have depended on Government grants. From 2012 they are expected to sustain themselves to allow more more to be channelled to poverty reduction. The announcement was prompted by Zambia Weights and Measures Agency (ZWAMA) predicament of being in need of about US$ 1.2 million to meet its capital requirement in the medium term and has a statutory debt of US$1m.

Friday, 4 November 2011

Women, Politics and Development (Guest Blog)

Modern democracy “has inexorably come to mean representative democracy” (Bratton and Van de Walle, 1997, 11). If so, can a system where more than half of the population remains severely under-represented count as a true democracy?

Currently, of the 150 members of parliament (MPs) in Zambia, 16 are women, or 10.7%. In the cabinet there are two female ministers out of 28, and only four female deputy ministers out of 18. And yet women constitute more than half of the total population. We say all the right things; have signed all manner of protocols declaring our commitment to the increased participation of women in the political arena and yet the evidence shows that we continue to lag behind. And in this last election, we lost previously made gains.

When we address the issue of representation, many argue that this is not necessarily about discrimination but rather that many women in general are apathetic about politics and choose not to participate. The inherent weakness of this argument is it fails to underscore the barriers that exist in women’s representation in the legislative and executive branches of government, and does not adequately explain women’s reticence to stand for office.

Wednesday, 2 November 2011

Does Redistributing Income Reduce Poverty?

Jagdish Bhagwati on the case for "growth-first". He believes the merit for redistribution lies less in its ability to reduce poverty, rather in its power to buy stability for the rich. Unfortunately the analysis is quite light. For example, it does not consider different forms of re-distribution or the wider empirical evidence on how growth is sustained in the absence of redistribution :

Many on the left are suspicious of the idea that economic growth helps to reduce poverty in developing countries. They argue that growth-oriented policies seek to increase gross national product, not to ameliorate poverty, and that redistribution is the key to poverty reduction. These assertions, however, are not borne out by the evidence.

Since the 1950’s, developmental economists have understood that growth in GNP is not synonymous with increased welfare. But, even prior to independence, India’s leaders saw growth as essential for reducing poverty and increasing social welfare. In economic terms, growth was an instrument, not a target – the means by which the true targets, like poverty reduction and the social advancement of the masses, would be achieved.