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Wednesday, 9 March 2011

Banda on the Economy

2 comments:

  1. The Folly of Relying on Agriculture And Mining. By Potpher Mbulo

    This is for thought provocation in economics. Diversification of the economy away from the mines into agriculture is a foolish call. I say so because Zambian industry’s major problem is not unique. As a matter of fact, African’s industries at large might exhibit varying symptoms but have the same disease. The colonial rulers left an indelible filthy mark by way of the Ricardian Law of comparative advantage.

    Ricardian Law of Comparative Advantage may be compared to absolute advantage. When one entity (be it a company or a country) is able to produce more efficiently than another entity it has an absolute advantage: that is, assuming equal inputs, the entity with an absolute advantage will have a greater output

    Sadly enough post independent governments also over-emphasize development of agriculture and mining in Africa at the expense of industrial development even in the long run. This indeed has been the trend since the colonial era. Given Africa’s large endowment of land it is perceived that its comparative advantage is inevitably natural resources and so Africa should forget about manufacturing. But African leaders should realize that real return on investment is in adding value to raw materials to transform them into finished goods because at each value chain you can reap money though direct taxes of the profits. Failure to do this Africa will continue to wallow in poverty, being parasitic and dictated to at world prices. Zambia started well with import-substitution strategies to replace imports by manufacturing goods domestically essentially in order to meet domestic demand. But with the advent of Structured Adjustment Programmes (SAPs), intensive international competition and globalization forced the country to shift to export-oriented strategy which requires production of quality products for exports at low prices. Here is where countries are told to export raw materials in agriculture and mining.

    There is a negative correlation between average income of citizens and percentage of people active in agriculture. Even so true is GDP per capita with percentage of Labor in Agriculture. See the data for the year 2006 below:
    COUNTRY_________________GDP Per Capita_________________% OF LABOUR IN AGRICULTURE

    USA_____________________$44,155.00______________________2%
    France__________________$36,546.72______________________3.2%
    Japan___________________$34,022.94______________________3.8%
    Brazil__________________$5,659.74_______________________16.1%
    Turkey__________________$5,521.47_______________________45.5%
    Thailand________________$3,186.54_______________________55.7%
    Zambia__________________$919.50_________________________68.6%

    I’m definitely sure that the above statistics can reflect the same trends even for mining. So please let’s forget about agriculture and mining. Oops! Let’s concentrate on manufacturing i.e. value addition. LOL

    ReplyDelete
  2. The Folly of Relying on Agriculture And Mining

    By Potpher Mbulo
    DATE: 14-03-2011

    This is for thought provocation in economics. Diversification of the economy away from the mines into agriculture is a foolish call. I say so because Zambian industry’s major problem is not unique. As a matter of fact, African’s industries at large might exhibit varying symptoms but have the same disease. The colonial rulers left an indelible filthy mark by way of the Ricardian Law of comparative advantage.


    Ricardian Law of Comparative Advantage may be compared to absolute advantage. When one entity (be it a company or a country) is able to produce more efficiently than another entity it has an absolute advantage: that is, assuming equal inputs, the entity with an absolute advantage will have a greater output


    Sadly enough post independent governments also over-emphasize development of agriculture and mining in Africa at the expense of industrial development even in the long run. This indeed has been the trend since the colonial era. Given Africa’s large endowment of land it is perceived that its comparative advantage is inevitably natural resources and so Africa should forget about manufacturing. But African leaders should realize that real return on investment is in adding value to raw materials to transform them into finished goods because at each value chain you can reap money though direct taxes of the profits. Failure to do this Africa will continue to wallow in poverty, being parasitic and dictated to at world prices. Zambia started well with import-substitution strategies to replace imports by manufacturing goods domestically essentially in order to meet domestic demand. But with the advent of Structured Adjustment Programmes (SAPs), intensive international competition and globalization forced the country to shift to export-oriented strategy which requires production of quality products for exports at low prices. Here is where countries are told to export raw materials in agriculture and mining.


    There is a negative correlation between average income of citizens and percentage of people active in agriculture. Even so true is GDP per capita with percentage of Labor in Agriculture. See the data for the year 2006 below:

    COUNTRY______GDP Per Capita___% OF LABOUR IN AGRICULTURE

    USA__________$44,155.00__________2%
    France_______$36,546.72__________3.2%
    Japan________$34,022.94__________3.8%
    Brazil________$5,659.74__________16.1%
    Turkey________$5,521.47__________45.5%
    Thailand______$3,186.54__________55.7%
    Zambia___________$919.50_________68.6%

    I’m definitely sure that the above statistics can reflect the same trends even for mining. So please let’s forget about agriculture and mining. Oops! Let’s concentrate on manufacturing i.e. value addition. LOL

    ReplyDelete

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