The Fallacy of Unsustainable Debt?

Lord Skildesky neatly draws out how personal (credit card) debt differs from national debt, with the inevitable conclusion that the current narrative being espoused by Eurozone countries is leading them to the abyss :

Does Debt Matter? Robert Skidelsky, Project Syndicate, Commentary :

Europe is now haunted by the specter of debt. All European leaders quail before it. To exorcise the demon, they are putting their economies through the wringer.

It doesn’t seem to be helping. Their economies are still tumbling, and the debt continues to grow. The credit ratings agency Standard & Poor’s has just downgraded the sovereign-debt ratings of nine eurozone countries, including France. The United Kingdom is likely to follow.

Supporting creative rural enterprises

One of the areas which has been flagged up where more government attention is needed is the in the area of arts and crafts.  A recent media report notes that youths in Kafue are calling on the Zambia Tourism Board [ZTB] to consider marketing artifacts instead of "only concentrating on promoting natural wonders like the Victoria Falls alone". Kafue Crafts Centre's Lloyd Ndopu observes that, "Zambia Tourism Board should market the art and crafts as well, instead of only concentrating on marketing natural wonders to the outside world. Another thing is that we would like ZTB to provide linkages with bigger partners and greater markets".

The Handicrafts Association of Zambia have previous called for such a more proactive approach from Government in this area, going beyond simply "advertising". Peru's hat making provides a good example of how small initiatives can tap into rural culture to help create employment. In Zambia we have seen mild growth in village tourism. Beyond culture, the Zambian Soap Company provides a good example of what can be accomplished working with local people. 

In short, there are plenty of job stimulation opportunities for rural Zambians. The problem that the villages face is not being aware of these business opportunities, lack of capital and of course the challenges of marketing themselves abroad. In all of these three areas Government can do something to help. In terms of business opportunities, Government can work with rural Zambians to identify 'opportunities' for job creation. The key here is for Government to create an enabling environment where local people can create employment for themselves within the existing cultural settings. The 'enabling approach' is critical because 'opportunities' would would vary from place to place and we cannot simply expect everyone to make crafts!

This is why the recent announcement that Government has embarked on a national resource audit is welcome news. The idea is to comprehensive resource mapping in all the provinces to ascertain their economic potential that could lead to industrial clusters for small and medium enterprises. According to Commerce Minister Sichinga, "we are doing the resource auditing in each district and want to build industries around it and once we finish the auditing, we will establish institutions in these districts and we will also be working with members of Parliament to verify the kind of products found in their areas. We need to put in place appropriate infrastructure, such as tarred roads connecting each district, reliable energy and water supply, health and education facilities. As such, the ministry will work closely with the relevant institutions to make this strategy a reality". This vision appears to fit in with the need to aid the market discovery process. But Mr Sichinga forgot to flag up (and we hope has not forgotten)  is the need to improve access to credit - an issue we have discussed on this website many times here!

The angle which needs to looked at is how best to market abroad, in particular the role that creating networks can play. Many people have proposed used Zambian embassies abroad to help connect Zambian producers with foreign markets for these "creative enterprises", but we should also consider using Zambians abroad. There's much that Zambians abroad can do to group together and raise capital and tap into these business opportunities and work with Zambians in rural areas. Government strategy must include pro-actively engaging Zambians abroad to create such networks. There's much that can be gained from collective investments from Zambians abroad, instead of investing individually. The problem is that coordinating failures inhibit such networking and that is where Government should be stepping in to help. That brings us to another thorny question : what policies should government pursue that aids how such Zambian networks abroad can maximise rural economic growth? 

Zambia Tourism (CNN Report)

ZRA Commission Report

Cabinet at its sitting on Wednesday 25th January, 2012 accepted without reservations the report on the findings of the Commission of Inquiry into the operations of Zambia Revenue Authority. Cabinet has reversed fraudulent procurements regarding Zambia Revenue Authority related contracts with Bradwell International, and Cargo Scan. Cabinet has also directed the reversal of the concession of the borders namely; Kasumbalesa, Nakonde, Jimbe, Kipushi, Mwami and Chanida and the reversal of tax concession offered to Varum Beverages Limited, the promoters of the Pepsi Zambia Project. The Ministerial Statement and ZRA Commission Report is embedded below.

A Market for Lemons

Justice Permanent Secretary Patricia Jere has observed that lawyers are shunning the opportunity because "of the huge work load and lack of incentives...lawyers shunned to work as magistrates in preference to private practice which was more lucrative...vacancies had not been filled because there were no magistrates on the market". Poor incentives are certainly part of the problem, but it still leaves us with an incomplete picture. I would suggest that there at least additional observations to be made. 

The first is that a large part of the problem is poor reputation. The politicisation of the judiciary and general rampant corruption has forced many legal minds who are sincere in their duties to avoid working for the government. Being a magistrate goes far beyond simply doing a job, its about public service. When the public sector becomes tainted it becomes difficult to attract people. 

A more serious problem Ms Jere would do well to consider is the poor quality of remaining  magistrates. The poor reputation of the judiciary does not just prevent people from joining, but also leads to the exit of good magistrates and attraction of poor ones (those who can't make it as lawyers and are too corrupt). This is a classic market for lemons, with only the bad eggs left. Good wages alone wont fix this problem. What it needs is improvement in the professional standards, strong leadership at the top of judiciary and greater commitment to rooting out corrupt magistrates.  

Public Notice

ZAMBIA INSTITUTE FOR POLICY ANALYSIS AND RESEARCH

IN CONJUNCTION WITH

ECONOMICS ASSOCIATION OF ZAMBIA

PRESENTS A PUBLIC DISCUSSION FORUM

TOPIC “Should the Zambian Government Invest in Railways”


DATE: Thursday, 26th January 2012

VENUE: Taj Pamodzi Hotel, Club Lounge

TIME: 18:00 – 20:00 Hours

Presenter: Mr. Alan Whiteworth- Technical Advisor, Zambia Institute for
Policy Analysis and Research (ZIPAR)

Discussants: Mr. Nelson Nyangu – Director Planning, Ministry of Transport
& Communications
Mr. Trevor Simumba – International Business Consultant

Moderator : Mr. Emmaunel Hachipuka –Former Chairperson of the Public
Accounts Committee (PAC) of the
National Assembly of Zambia.

ENTRY IS FREE, FREE, FREE!

THE GENERAL PUBLIC AND MEDIA ARE ALL INVITED.

For Details: Contact ZIPAR, Tel: 252566, OR 0977967996
E-mail: info@zipar.org.zm

eazambia@iconnect.zm

A Portrait of Poverty, 2nd Edition

"No one has ever assisted me neither my relatives nor the church where I congregate, my life has always been one of pain and strife"

Ms Albertina Mwewa on her life living as one of the blind beggars on the streets of Lusaka. Nancy Handabile's insightful piece Blind and Surving on the Streets chronicles her daily challenges. Her story is one in which poverty reinforces poverty - from birth to the grave. Ms Mwewa was born in a poor family of six in Samfya. When she was three, she suffered blindness. Due to her blindness she never went to school and instead got married at a very tender age to a fellow blind man with whom she had seven children. She has lost four children due to poverty and general illnesses which has compounded her sorrow in life. As if that is not enough trouble to add to her list of woes, Ms Mwewa is facing the odds of life all alone having divorced her polygamous husband who went and married another woman with sight. So now she is stuck on the streets begging to pay rent and children to support.

Related Post : 

A Portrait of Poverty

Delivering good health on the cheap

Charles Kenny argues that better health need not wait on economic development nor does it rely on extensive network of hospitals staffed with doctors. Rather what is needed is a widespread access to basic health tools and services, not least vaccination programmes, skilled birth attendants, and clinics stocked with antimalarials and basic antibiotics. These things form part of cheap interventions that can deliver reduced mortality in poor countries. A very relevant issue for Zambia as health is one of the four core areas of the new government. We have previously touched on Kenny's ideas here.

Don't wait for wealth — better health needs basic tools, Charles Kenny, SciDevNet, Commentary :

The conventional wisdom is that wealthier is healthier: staying alive longer takes expensive stuff, and so a country's quickest way to better health for its people is economic development.

Parastatal Madness, 16th Edition

We have previously touched on the problems local authorities continue in their effort to recover payments from public (and private) debtors. This has rendered them rendering them virtually broke and ineffective by central government. Lusaka City Council recently revealed that its is owed over K28bn in property land rates by both private and public land owners. The council has completed compiling a list of property owners who have been defaulting in the payment of rates. It its words, it "has been failing to provide social services due to limited resources because many clients have not been paying land rates". It has plans to "prosecute the people who have failed to pay" and will "engage bailiffs to ensure that most of the money owed is paid to the institution". But will this really work against public authority? I am not aware of any case where one public authority has sued another!

But with problems like these, is it any wonder that many local roads are full of potholes or many of our areas lack essential services that would normally be delivered by local authorities? In developed countries, councils owe central government money, in our nation it is the other way round. I remain convinced that the problem is not lack of decentralisation, but lack of effective enforcement of existing debt obligations in our judicial system. The councils have money and probably the capacity to deliver their priorities, but are hindered by a central government that fails to honour legally binding contracts. And of course they are held back by a justice system that fails to ensure judgements against private sector defaulters. 

Prosecution of Corruption

An interesting comment from Charles Mulipi on the Auditor General:

"We need to enhance the role of the Auditor General to make them have responsibility for initiating prosecutions to those who are erring...At the moment, you can be chairman of the Accounts Committee (PAC) and you expose so many things but you still rely on the executive to prosecute, if they want to….”

In its raw form this idea would be costly. A cheaper version of the proposal would focus the Auditor General's prosecutable powers on more serious cases, otherwise she would drown with every case! This is the approach adopted in Sierra Leone where their Anti Corruption Commission Act gives power to the Sierra Leone ACC to send cases directly to court. Prior those changes the Sierra Leone ACC was required to send all their cases to the Attorney General for approval first like is the case in Zambia. As a result many cases against top government officials perished on the table of the Attorney General who never prosecuted these matters.

Debt Watch (India)

Over the holidays, there was an announcement of yet another debt deal without any parliamentary oversight. The Ministry of Foreign Affairs announced that India has given Zambia a credit of US$50 million to finance the reconstruction of pre-fabricated health centres in all the provinces. The credit facility will be repaid over 20 years at an interest rate of 1.75 percent. According Former Minister Kambwili this is part of the PF government intention to "ensure that there is reliable infrastructure as opposed to the former government’s now disused mobile hospitals". 

The Daily Mail observes that "minister could not immediately indicate the number of the pre-fabricated health centres to be procured".  In other words, its appears to be yet another case of accumulating debt without a clear assessment or planning. The idea may be noble, but going into debt without clear facts to hand does not seem like a good way to manage public debt. A larger problem of course is that Parliament continues to be sidelined because no clear debt management strategy exists. There should be a halt to debt procurement until that is resolved - not least because Zambia has not fully capitalised on leveraging domestic sources of revenue. 

ZAMTEL Commission Report

The final report to President Michael Sata of the Commission of Inquiry into the sale of ZAMTEL. The Government has release this confidential report to foster transparency and encourage public debate on the future of ZAMTEL.

Zamtel Commission Report - Government of the Republic of Zambia

Luapula Manganese, 7th Edition

"These mining companies are currently mining without leaving anything for the Government and the council. This is so because the mines are not appearing anywhere in our valuation roll and deeds records, although some of the mining firm’s activities are legal.."

Mansa Town Clerk Bright Mbambai recently confirmed what everyone knows. Government is losing collossal sums through illegal manganese mining in Mansa. He attributes the plunder to failure by manganese extraction firms not formalising their operations with the relevant authorities. The mining companies do not even appear in the Mansa Council Valuation Roll to compel them to pay the taxes through the local authorities. Seven mining companies had so far been issued with large-scale mining licences but that, they had not formalised their operations with the council, leading to the loss of revenue. That's just Mansa - throughout Luapula the picture is the same, with most Manganese disappearing across the DRC border along with other minerals.

Zambian Agricultural Commodity Exchange

An interesting presentation on the constraints facing the development of ZAMACE, including some of the restructuring proposals. The full paper can be found here.

ZAMACE - Institutional Changes and Persistent Challenges - Dec 2011