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Thursday, 24 May 2012

Talking unemployment without solutions..

A recent IMF high-level international conference co-sponsored by GRZ, ILO, and the IMF to discuss solutions for sustained, broad-based, and employment-intensive growth appears to have drawn blanks - with no clear policy outputs. Whilst acknowledging the urgent need for a solution, the participants appear only to suggest the following :
"Unemployment has grown across the world since the onset of the global financial crisis...There is now a need to incorporate employment creation into the formulation of macroeconomic policies to improve employment outcomes. That is why the ILO and the IMF are supporting this national dialogue"
- Martin Clemensson (ILO)
“Growth and jobs are inseparable, and Zambia must invest in social protection, diversify its economy, and reduce its dependency on copper”
- Jaap Wienen (ITUC)
“We need to steer employment creation in the right direction. For that we need coherence and balance across policies, as well as coordination and dialogue among institutions and stakeholders. This conference has marked an important step in that direction”
- Fackson Shamenda (GRZ)

All of this must disappoint Vice President Guy Scott who recently noted that the Patriotic Front will lose power in 2016 if it does not solve the unemployment problems. Separately Alexander Chikwanda is targeting a million jobs before then. But with no clear national development plan (the MMD's sixth national development plan appears to have been abandoned) that puts jobs at the heart of development, there's no clear path to achieving 100,000 jobs let alone a million! 

What should Government be doing to reduce unemployment?


  1. 1) Windfall Tax

    Zambia is losing between $3 billion and $5 billion A YEAR because the mines were privatised. That money is not going into infrastructure projects, cheap loans for entrepreneurs, social services, etc.

    So it is useless to talk about a national development plan, without the willingness to fund it. Why would it be a good thing for Zambia to give away so much money? Future growth of the mining sector? Mining is completely dependent on international commodities prices, and if we are going to see a decade of low prices, what exactly did privatisation benefit the Zambian economy?

    2) IMF Advice

    Clemensson: "There is now a need to incorporate employment creation into the formulation of macroeconomic policies to improve employment outcomes. That is why the ILO and the IMF are supporting this national dialogue"

    The IMF represents the trillionair banking dynasties. That is why they never developed a country, why their policy prescriptions are the same for every single country in the world (they are always pushing trillionaire style globalisation - deregulation, privatisation, free trade). Right now these policies are crushing the Greek and British economies - but isn't that real estate cheap? That's perfect for individuals who already accumulated trillions of dollars in wealth, and can now transfer that cash for title deeds on the cheap. Not everyone loses out when there are economic depressions, some people expand their family fortunes.

  2. Agriculture: Zambia's laws are hard on farmers and they should be fixed. Also their needs to be a program of education. The fertilizer subsidies should be increased and managed better so that small scale farmers don't have to fight every year for fertilizer. Farmers need to be given the deeds to their land so they can borrow money.

    Salaula should be highly taxed to build up the textile industry.

    The government should create more business friendly rules. Registering a new business needs to be simplified. Also firing employees should be easier. You should be able to fire any reason so long as you pay 3 months severance.

    The government should make more efforts to hire locally for road construction projects. For example, I don't think it takes that much machinery to patch pot holes in the road. For dirt roads especially and digging drainage ditches.

    From there, it's also a matter of just building specific industries and talking to specific companies. For example, take tanneries. There are probably five of them in Zambia? What can be done to build them up? Building them up will help farmers. Also people could use the leather locally to build finished products. It's a multiplier.

    We need more factories to can fruit and sell fruit juice. This will create jobs in the cities, bring in foreign exchange and help farmers.

    The import taxes could be tweaked to encourage specific industries. Tax televisions but drop all tax on computers. Tax home refrigerators but drop the tax on industrial refrigerators.

    Build up the university system. The university system is not being used strategically right now. The curriculum from grade 1 should be redesigned to prepare people for working.

    Give out work permits freely. That's good for employers and it's good for the country. More workers means more jobs.


  3. We need to drastically reduce hindrances to business. Especially licences and fees that are in effect taxes. It would also be worth considering offering tax breaks for employment rather than tax breaks for equipment. At present it is a businesses interests to replace an employee with a tax deductable machine.
    The government could also employ a lot more teachers, nurses and doctors, and construction companies to build schools and clinics.

  4. MrK - the mines were COSTING Zambia at least a million dollars a day before privatisation (which Zambia had to borrow) so how privatisation has lost Zambia between $3 and $5 billion a year beats me.

  5. Anonymous,

    MrK - the mines were COSTING Zambia at least a million dollars a day before privatisation

    Mines don't cost you anything if you shut them down. The mines were not costing the Zambian government 'at least' $365 million a year. Think about it - the Zambian government didn't have $365 million a year or more to give away to anything.

    The Zambian government had many options - including closing loss making mines. The fact is that in 1999, the government was put under extreme pressure to privatise the mines in order to get 'debt relief' from the IMF.

    This is the same IMF/World Bank that 'predicted' that copper prices would not rise within Edith Nawakwi's lifetime, a few years before the biggest run in copper and commodities prices in living memory.

    That act cost the Zambian state at least $3 billion a year in lost profits from copper production. The copper industry is about $5 billion a year, of which $3 billion are pure profits, and this has been the case since 2004. So, in 8 years, you can conservatively estimate that Zambia has lost $24 billion in profits. And that is putting it at the low endm, because it doesn't take into account undeclared turnover and smuggling.

    Quoting from the Mopani Report:

    Thus, under the influence of its lenders – especially the World Bank – and following the election of a new government in 1991, Zambia decided to dismantle and privatize its mines. The price of copper was very low at the time, and the country was heavily in debt. Mrs Edith Nawakwi, former finance minister responsible for supervising the privatizations, commented: “We were told by advisers, who included the International Monetary Fund and the World Bank, that not in my lifetime would the price of copper change. They put production models on the table and told us that there [was] no copper in Nchanga mine, Mufulira was supposed to have five years’ life left and all the production models that could be employed were showing that, for the next 20 years, Zambian copper would not make a profit. [Conversely, if we privatised] we would be able to access debt relief, and this was a huge carrot in front of us – like waving medicine in front of a dying woman. We had no option [but to go ahead]”6.


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