The Patriotic Front (PF) - the largest opposition party in Zambia - has adopted "change" as their core theme for their campaign this year. Indeed, their recently unveiled manifesto promises a significant departure from virtually all policies implemented by the ruling part - the Movement for Multi-party Democracy (MMD) - in the last 20 years. This essay offers an analysis of the promises contained in the PF manifesto and attempts to assess whether they represent genuine, viable change and an alternative to the current policies of the MMD.
In the balance of this assessment is a host of critical questions: PF proposed approach to converting Zambia's vastly improving economic growth forecasts into meaningful and sustainable economic development (that creates viable jobs and consequently reduces poverty); policy on how to handle revenues from mining operations (the single most important sector in the Zambian economy); and finally, constitutional (as well as institutional) reforms that Zambians hope can advance their young democracy, help curb corruption and foster a sense of responsible governance.
PF Utopia - The Promises
Beginning with the foreword by the PF president, the promise of the PF manifesto is a Zambia where jobs are plenty, individuals (and companies alike) pay low taxes (even lower for families with children), while the value of incomes and savings is protected by a low inflation rate and a fixed exchange rate. For those that want to borrow, there will be government assured low interest rates.
This is a fantastic scenario for individuals particularly, as they most certainly will have much larger disposable incomes. But the good news of the PF manifesto doesn’t end there! Add to these awesome perks for a Zambian citizen under a PF government, free education from grade 1 to 12 and free health-care for all. Furthermore, the “responsibility” that most working Zambians have of helping their less economically able relatives will be taken off their shoulders as the PF government provides welfare benefits for the poor.
And of course, the promised large (very large indeed) government driven infrastructure programme will ensure better transportation, electricity and communication infrastructure, while improving service delivery in all public sectors of the economy.
You could be forgiven for mistaking this idealistic picture the PF manifesto creates with the biblical description of paradise. The PF manifesto promises to deliver for Zambians in five years, what has eluded previous Zambian governments in the last five decades.
The Missing Details
What fascinates - or worries - most about this manifesto is not what it says, but rather, what’s missing; the details of how this PF utopia can be achieved! Exactly how would PF simultaneously (and vastly) increase public sector spending, while lowering taxes and refusing to borrow from external partners? As a matter of course, the PF manifesto does not put a value to how much all these promised freebies will cost, nor does it specify where it will raise additional financing.
Lower Taxes, Increased Demand?
The promise of low taxes (income tax, VAT, fuel levy, corporate tax) is not supported by any numbers. Nowhere in this manifesto are the numbers given of what current revenues are from these taxes (although they are publicly available in the national budget), and consequently how any shortfall reaulting from increased government spending will be met.
In theory, one would argue (as does the PF manifesto), that increased household disposable income will increase demand (which, stated in economics 101 jargon means shifting the aggregate demand curve to the right). The premise (or perhaps, assumption) is that there will be a corresponding increase in supply (or, a shift in the aggregate supply curve to the left) i.e., local production of goods and services increasing correspondingly to meet this hoped-for increase in demand.
In other words, as Zambians spend more on goods and services, employment should (and the PF manifesto promises it will) increase and the economy will move to a new and higher level of production i.e., positive GDP. The cycle should go on, and on, leading to sustainable economic growth and consequently development. But this is in theory! In reality, the Zambian economy is not closed - Zambia is part of the global economic village.
Zambia Not A Closed Economy
As you may have guessed by now, the apparent PF assumption is that ours is a closed economy where all goods and services are produced in Zambia. Put differently, that the increased demand arising from higher disposable income will only be for goods and services produced in Zambia, by Zambians. The reality, unfortunately, suggests Zambians have an appetite for foreign manufactured goods - cellphones, vehicles, TVs etc (Zambia does not currently manufacture these goods - although some are assembled locally. PS: PF subtly proposes imposing protectionist tariffs - a tax increase anyone?). Is it possible, as I suspect, the nuveau rich Zambians under a PF government may opt to import more and more foreign goods and services that are not locally produced? After all, higher disposable incomes from lower taxes, inevitably, should make this (demand for foreign manufactured goods) a very attractive option.
The Local Manufacturing Solution
This conundrum - where increased disposable income may encourage more imports from abroad, the PF manifesto supposes, will be addressed through a new and productive manufacturing sector in Zambia. Indeed it maybe the only hope, since surely increasing tariffs on imports would be increasing taxes which the PF have insisted will not happen.
This leads to some big-ticket questions: do Zambians currently have the skills, innovation potential and capital (PF promises less reliance on foreign direct investment) to setup a manufacturing sector (or services, for that matter) able to compete with what is produced in other countries; and given a choice, will Zambians demand more local goods (at least in the medium term) to support the PF encouraged "labour intensive" local manufacturing and services sectors?
Tried, Tested and Disastrous
If all what the PF promises sounds eerily familiar to the reader, it is because we have tried a lot of this before - under UNIP between 1973 and 1991. During that 18 year period a manufacturing sector was established along with protectionist policies (both of which the PF manifesto promises to re-introduce albeit under a different guise). Pointless to re-hash how that turned out, but critical in understanding how these second republic policies under PF will pun out!
Economic Reality & The Numbers
Zambia’s 2011 budget is approximately US$4.4 billion, funded predominantly by tax revenues which account for nearly three-quarters of the total (or approximately US$3.2 billion). A significant proportion of tax revenues comes from a combination of income tax (PAYE) and value added tax (VAT) - US$1.1 billion. One would assume - as this is not stated in the PF manifesto - the shortfall in revenues once taxes are reduced will come from the promised revision of taxes on mining operations and a more efficient - and broad - tax system (street vendors beware). Without detail on what the new proposed mining tax regime will be (since 2001, Zambia has experimented with three regimes on taxing copper mining operations), it is impossible to determine what revenues will be collected.
Whatever the case, taxes from mines and revenues from other sources, hitherto unspecified in the PF manifesto, would have to be significantly large - perhaps astronomically so - to finance free education, free health-care, provide welfare to the very poor, build 2 million new houses, improve roads and electricity etc - all of which the PF manifesto promises to do between 2011 and 2016.
In fact, of the 28 sections comprising the PF manifesto, increases in budget allocations are promised for 14 of them (including four sections of what the manifesto terms “core programmes” - mining is conspicuously absent). Increases in budget allocation are promised largely in percentages. In the PF world "whole" must not be represented by 100%. I find these glaring incongruity in the numbers presented in this manifesto insulting to most Zambians, as promised increases in budget allocations to the various sectors can never add up to 100%. Stated differently, since PF promises to increase allocations in virtually all sectors, either the size of the budget has to grow to account for the increase, OR as I suspect is the case here, authors of the PF manifesto have a low aptitude in mathematics. Remember, Zambia's budget is only $4.4 billion and PF has not specified how it can grow this.
One has to consider that an alternative source of funding for the ambitious PF programmes would have to be borrowing. However, in the most pointed language, the PF promises to do away with lending (or at least reduce it). This potentially means that the current MMD government plans to issue bonds (on the back of a Standard & Poors B+ rating for Zambia's Soveriegn bonds) will be scraped! It must be pointed out, and as is typical of this PF manifesto, it is silent on the specifics. Surprising indeed, as one can scarcely think of a country that has developed in the last 300 years without issuing bonds on the back of solid fiscal and monetary policies. However, the ill defined fiscal and monetary policy in the PF manifesto would be a hindrance to the bond issue route.
Agrarian Reforms Anyone?
A very ambitious programme under the PF manifesto is the promise to diversify the agricultural sector, away from Zambia’s staple crop - maize (a resource intensive crop that is not indigenous to Zambia nor suitable for Zambia’s climate). In other words, PF is promising to end Zambians love affair with Nshima. On paper, this is a great proposal but in reality it is more idealistic than it is practical. In fact, crop diversification has been tried many times before (most recently between 2001 and 2006) and failed, for the simple reason that Zambians just cannot give up Nshima - easily! The market for maize far outstrips that of more traditional crops such as cassava. The question is, will Zambians change their menus to provide the market that supports crop diversification? Here again, the PF manifesto promise is not supported by any detailed study - the details are missing!
A Little Good News
Although the fundamental premise of the PF manifesto is badly broken i.e., it does not make financial sense, there are few twinkles of hope. Perhaps the most promising piece over the 52 page length of a largely fantastical manifesto can be found in Section 21. Here the manifesto ventures into a crucial element for sustainable development (which has largely been ignored in the last 20 years) - a prioritization of teaching science and maths in schools, coupled with a corresponding investment in scientific research and promotion of collaboration between science and industry. There is even an interesting and entirely fresh idea to create national awards for achievements in scientific and technological research!
There are few examples in the world where sustainable development has been achieved without the bedrock of science and maths. Here (section 21), the PF manifesto get a B+ (would have been an A+ had the details - regarding specific budget allocations, numbers of science specific schools envisioned to be built and number of teachers to be trained - been provided).
Of course, no serious critique would ignore the proposals in the PF manifesto which require legislative reform and not just the promise to throw more money at the problem. These mainly covered in sections 22 (Legal and Constitutional Reform); 23 (Electoral Reforms); 24 (Good Governance and Public Service Reforms); 25 (Judicial Institutional Reforms); 26 (The Church and Civil Society Organisations in National Development); 27 (Media Reforms); and 28 (International Relations and Cooperation).
Most commendable are the proposals for amendments to the Electoral Commission Act (that established the Electoral Commission of Zambia - ECZ - in 1996), reform of the Electoral Act of 2006 and corresponding promise for government (or public) funding of political parties with representation in parliament. These suggested proposals, if implemented correctly, should strengthen the independence of ECZ and possibly lessen foreign influence (as Americans call it, lobbyists) on policies crafted by political parties (especially those in opposition). These proposed reforms, along with reforms to strengthen the Office of the Auditor General, Anti-Corruption Commission (ACC), Drug Enforcement Commission (DEC), Office of the Investigator General and the Human Rights Commission are what Zambians have been asking for and expect. Another B+ here.
The PF manifesto promises to make civil service appointments purely on merit, sound promising. In a diverse society such as is Zambia, this promise ought to have been followed by a requirement for tribal balancing (this is an inescapable reality in a country with a reported 73 tribes and 16 tribal groupings). We have seen how in the past, merit has been applied to promote into the civil service only individuals from politically favourable regions or tribes. There has to be an open, even legislated process, that ensures fair tribal representation (based on merit, of course). Here, I am afraid, the promises in the PF manifesto fall short of the expectations of many Zambians! Merit alone will not cut it!
On constitutional reform, the PF manifesto promises a process that includes “a Committee of Experts.” As the details are not provided on who the stakeholders in this “Committee of Experts” will be, one can only hope it will not be a fiasco on the proportions of the recently failed constitutional amendment bid.
The PF manifesto is heavy on "good-to-hear" soundbites, but incredibly thin on detail - the "how?" question. Without the details, and specifics, the PF manifesto is nothing more than hollow rumblings aimed at exciting the uninformed and unsophisticated masses! Even the very positive constitutional and institutional governace reforms promised are only as good as the people making the promises (the question is, can PF be trusted to keep their word on the good aspects of their manifesto?). Frankly, the last time I read similarly crafted and fantastic promises was in the bible - but PF is no God! In fact, without divine intervention, it is inconceivable how this utopia can be achieved. It is certainly not change you can believe in.
2001 - 2009 mining houses were exempt from taxes through the development agreements; 2008 - 2009 windfall taxes were introduced which attracted 25% for copper copper prices at US$2.5 per pound, 50% for copper prices between US$2.5 and US$3 per pound and 75% for copper prices above US$3. Corporate taxes were also increased from 25% to 30% and mineral royalties were also increased from 0.3% to 5% (NB: the windfall taxes are effective only when revenues of a mining house are twice the cost of production); 2009 - present windfall taxes were scrapped, in favour of taxes of 15% on profits. Corporate taxes were reduced to 25% but mineral royalties remained flat at 5%.
Education Development; Health Services; Agriculture Development; Local Government and Housing.
If there is proof that Zambia desperately needs investment in science and mathematics, this is it - a political party manifesto with promises that cannot stand up to basic mathematics.
The above post was written by a special guest. We have withheld the name at the exceptional request of the author.
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