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

This month's short essay examines revisits the corruption question and suggests a credible approach to dealing with it. The essay is embedded below (PDF downloadable) and the HTML version can be found via our Facebook page for those using handheld devices. We continue to value your feedback on these essays and as well as potential topics for 2012. 
Corruption in Zambia - The Quest for a Successful Struggle

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.