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Friday, 28 September 2012

Green Paper - MTEF 2013 - 2015 and Budget 2013

The Government has released the Medium Term Expenditure Framework (MTEF) for 2013 to 2015 and the outline for the 2013 budget. This is the first MTEF that has been wholly prepared by the current Government. It is also the PF broad plan for re-election as the MTEF runs to 2015. 

Green Paper: 2013 - 2015 Medium Term Expenditure Framework

Thursday, 27 September 2012

Aid and Democratic Assistance

In recent times there has been a gradual reduction of donor aid to Zambia. The last budget had less than a fifth of donor aid contributions. A recent paper cautions against immediate donor exit from Zambia and suggests greater effort should be made on funding governance priorities in face of weak forces of restraint (opposition and civil society) :
The impact of aid in terms of democratic consolidation is linked to the development of the party system, the efficacy of key democratic institutions, and accountability in relation to tolerance of participation by the media and civil society in the political process. The study suggests that there are many good reasons for so-called traditional donors to phase out aid to Zambia. Zambia has recorded economic growth for the most part of this decade, but poverty levels still stand at near 70 per cent and both equity issues and poor human development indicators provide reasons for concern. The study cautions against an aid exit at a time when economic growth and new foreign partners may strengthen the executive office vis-à-vis civil society, opposition and agencies of restraint. The study argues for an enhanced emphasis on democracy assistance that may strengthen stakeholders and institutions with capacity to hold the executive to account for their policy actions in terms of development.
Whether donors heed the call for this reprioritisation is another question. The real question is how such “democratic assistance” is given. Any new support has to avoid the tainted and bloodstained approach as that undertaken by the Netherlands Institute for Multi Party Democracy (NIMD). Its funding for “democratic assistance” to MMD in 2009 only fuelled violence in bye-elections of 2009. Money given to MMD was being used to buy and ship cadres to electoral areas and breed violence and intimidate old people. Then there was the record of electoral fraud and general intimidation of voters in many parts by self-appointed cadres.

Wednesday, 26 September 2012

Road Carnage!

A fascinating recent article notes that with poor emergency care people injured on Zambia's roads often experience needless complications. There's a telling static :"There are more than 20,000 road traffic accidents every year in Zambia, resulting in an estimated 3,000 deaths and exponentially more injuries and disabilities. The country has less than 0.02% of the world’s registered vehicles, but almost 14 times the proportion of fatalities from road traffic accidents".  More detail via UK Guardian

Tuesday, 25 September 2012

Mining Watch (Various)

A unit of China Nonferrous Mining Corp has won ZEMA approval to build a $832 million copper mine that will add 60,000 tonnes to the country's annual output of the metal. This is part of NFC's South East Ore Body Project.

Caledonia Mining Corporation has been told by the Government it must meet a number of conditions in order to continue holding the mining licence covering the company’s Nama base metals project. According to a letter from the Ministry of Mines the company is currently not complying with certain requirements governing the licences it holds. It has been asked to give a written assurance it will remedy the situation.

Government plans to create the small-scale miners’ revolving fund to foster active involvement of ordinary Zambians in mining. According to Mines Deputy Minister Richard Musukwa the revolving fund is expected to be up and running by the end of this year. The idea seems interesting but it is lacking in details. Presumably this would be funded from ZCCM-IH funds rather than tax payers. It would be a tragedy for ordinary Zambians who pay more tax than mining companies to then end up funding yet more investment in the same sector sector.

Monday, 24 September 2012

Maize Policy : A Farmers View

By Ruth Henson

The ZNFU did a Maize study about 10 or 15 years ago. It showed that Zambia was the most expensive country in the region in which to grow maize. This was partly due to high transport costs for inputs and partly to low yields.

The study also showed that if the price is completely left to the free market it will fluctuate between import parity (in deficit years) and export parity (in surplus years). At the time of the study, the effective export price at the farm gate was Zero as the world market price was equal to the transport cost. The effective import price was equal to double the world market price, again due to the high transport cost.

Friday, 21 September 2012

A new tax for health?

Health Minister Joseph Kasonde says Government plans to set up a National Health Fund and that every Zambian will have to contribute towards the new health fund. He say the diminishing resources in the health sector have forced his ministry to find other means of raising funds to mitigate the problem.  The Health Fund will underpin what he calls "the creation of a national health insurance scheme". In other words this will be mandatory contribution. A tax by another name. Since Zambia has poor health infrastructure the scheme can only work if it is mandatory otherwise few would opt-in! 

Thursday, 20 September 2012

Should the Zambian Government invest in railways?

As Government seeks to spend a large portion of the recent $750m infrastructure pot on the financially beleaguered (and poorly mismanaged) Zambia Railways Limited - currently $120m but it could rise substantially, especially with TAZARA also in likely to take a share - there has been no meaningful debate on whether this is a top priority. Indeed whether it is necessary at all. The question remains, should the Zambian Government invest in railways? A recent paper by Raballand and Whitworth concludes :
With the poor economic and financial returns to railway investment and the uncertainty over Congolese traffic, public investment in railways in current circumstances appears highly risky. Few of the new rail routes proposed in the Sixth National Development Plan appear economically viable under any circumstances. While certain new routes could possibly be viable if mines are prepared to sign long term contracts, such decisions are best left to the private sector. Given its poor track record in railways and the under funding of essential public services, rather than investing in railways itself, the Government’s role should be to: (a) facilitate private investment in the sector; and (b) ensure that trucks cover the full cost of the damage they cause to the roads by enforcing appropriate road user charges.

Wednesday, 19 September 2012

Kwacha Rebasing Technical Paper

By Jessica Achberger

As we approach the rebasing of the Kwacha, there are still many unanswered questions as to the procedure. In a technical paper from earlier this month, the Bank of Zambia explains the outline procedure for rebasing. The paper is embedded below.

Tuesday, 18 September 2012

Mine Watch (Various)

The Mwekera Copper project in Ndola  is on track to begin construction next year, with initial investment of US$5 million already made on the mine’s groundwork. The Chinese led firm, Macrolink, had earlier this year been served a "default notice" by Government for being slow in taking forward the project. It appears momentum has now resumed. This is a vital project for Ndola.

The proposal by Australia’s Zambezi Resources Ltd to develop a $494 million open cast copper mine in a game reserve has been rejected on environmental concerns. Zambezi Resources’ Zambian subsidiary Mwembeshi Resources said in March it planned to start copper production at the Kangaluwe project in the Lower Zambezi National Park by 2015. But a spokeswoman for Zambia’s environmental management agency, which has to approve all huge infrastructure projects, told Reuters the project had been rejected.

Mines Minister Yamfwa Mukanga on the next phase of mineral development in Zambia :
We have 16 producing copper mines, three new ones coming on stream in two years, backed up by existing and new smelting and refinery capacity..and known reserves for at least 50 years of future production. However, we have reshaped our mining investment strategy as we need to intensify exploration for the development of new mines and mineral based exports to deliver a new level of long term benefits from our resources...This more intense focus includes required new investment in our oil and gas potential, boosting manufacturing capacity to process a wider spectrum of minerals, and to parallel that growth with new manufacturing capacity for mining industry consumables....There is a major gap in Zambia’s economy in downstream processing our gemstones industrial minerals and dimensional stone and there are few if any local manufacturers of mining equipment such as drill rods, bits, jack hammers and piping....On that basis, we need both junior and large mining companies and resources investment houses, to install Zambia on their high priority investment agendas.
Construction of the K250 billion Universal Mining and Chemical Industries Limited (UMCIL) Iron ore processing plant in Kafue, has reached an advanced stage and is scheduled to be completed in February next year. This is Phase 2 of the Kafue integrated Iron and Steel project, called the Direct Reduced Iron (DRI). It is expected to create 1,000 jobs. Phase 1 of the project (costing $120m) is already fully operational, producing 7,000 tonnes of finished rolled iron and steel products per month for the local and regional markets. It has been targeting the local market and has exported to the Southern Africa Development Community (SADC) and the Great Lakes Region. It employs 700 jobs.

Monday, 17 September 2012

Rail vs Road

The Chartered Institute of Logistics and Transport (CILT)recently expressed concern over the unfair competition between rail and road via Daily Mail :
Mr Chipuwa explained that the road transporter does not meet the full cost of the infrastructure and is able to charge lower transport rates to the shipper or traveller, whereas the railway operator who meets the full cost of the track maintenance is forced to charge high tariffs compared to road users in order to recover costs. "Roads are constructed and maintained by Government with very little contribution from road users in form of road user charges. On the other hand, railway infrastructure is funded fully by the railway operator. In the Zambian context, this is further exacerbated by the fact that the railway operators pay the road levy for the fuel consumed by locomotives. This is indirectly subsidising the competitor who is the road transporter. The two factors mean that the railway operators namely Railway Systems of Zamia (RSZ) and Tazara become artificially expensive and, therefore, uncompetitive compared to road transport", Mr Chipuwa said.

Friday, 14 September 2012

Zambia's International Bond Issue

Government this week sold a long-awaited $750 million Eurobond - the largest in Sub-Saharan Africa - in an effort to tap international capital to meet its infrastructure funding needs. The maiden 10-year dollar bond was issued with a 5.625 percent yield. A rate more superior than some Eurozone member states struggling with debt (e.g Portugal). More than $11 billion of orders were received for the issue - signalling the overwhelming confidence in the nation's future prospects. Full statement below - which sadly is vague on key areas e.g. need for a debt management strategy and the criteria for infrastructure prioritisation. Once again we are being let down by a poor opposition and civil society, which is failing to hold this government properly to account on the need for a proper debt acquisition policy. Especially given that Mr Chikwanda thinks there's further room to borrow more. The borrower is a slave of the lender. If we are to borrow more, the slaves (the people) surely need to have a greater say in the process. 

Thursday, 13 September 2012

British MPs on FRA Spending

British MPs have called on the UK Government to urge Zambia to stop subsidising maize growers after discovering the initiative cost Zambia four times the British aid it received last year. A report by the Commons International Development Select Committee found £225 million - 8% of Zambia’s government budget - was spent on trading maize at a loss in 2011. This figure dwarfed the sum received in aid from Britain, Zambia’s biggest donor, which stood at £55m last year. The committee dubbed the subsidy, which was introduced by the last Zambian government, as excessive. Abolition could deliver free secondary education to 300,000 children, build 50 new high schools and recruit 10,000 more teachers, it said. Currently, education is only free until the age of 14 for Zambians. The reports are embedded below.

Wednesday, 12 September 2012

Compulsory Acquisition of Railway Concession Rights

Government this week revoked the concession agreement of the Railway systems of Zambia and placed it under Zambia Railways Limited with immediate effect. Finance Minister Alexander Chikwanda says the repossession has been necessitated by mismanagement of the assets which has resulted in significant deterioration. Full statement is embedded below.

Tuesday, 11 September 2012

Resource Blessing

Joseph Stiglitz on how resource rich countries, like Zambia, can maximize from their rich mineral endowments:
There are well known antidotes to each of these problems: a low exchange rate, a stabilization fund, careful investment of resource revenues (including in the country’s people), a ban on borrowing, and transparency (so citizens can at least see the money coming in and going out). But there is a growing consensus that these measures, while necessary, are insufficient. Newly enriched countries need to take several more steps in order to increase the likelihood of a “resource blessing.”

First, these countries must do more to ensure that their citizens get the full value of the resources. There is an unavoidable conflict of interest between (usually foreign) natural-resource companies and host countries: the former want to minimize what they pay, while the latter need to maximize it. Well designed, competitive, transparent auctions can generate much more revenue than sweetheart deals. Contracts, too, should be transparent, and should ensure that if prices soar – as they have repeatedly – the windfall gain does not go only to the company.

Unfortunately, many countries have already signed bad contracts that give a disproportionate share of the resources’ value to private foreign companies. But there is a simple answer: renegotiate; if that is impossible, impose a windfall-profit tax. All over the world, countries have been doing this. Of course, natural-resource companies will push back, emphasize the sanctity of contracts, and threaten to leave. But the outcome is typically otherwise. A fair renegotiation can be the basis of a better long-term relationship.
You can read the entire article via Project Syndicate. On auctions, that would be more useful in the context of where government has assume a greater role in exploration activities. At present the one who finds the minerals on the ground proceeds to apply for a mining license and starts digging. Unless they are guaranteed that they may dig for it eventually they wont undertake the exploration. So when do you set up the auction?  Clearly only after government has undertaken exploration - but if government has no resource capacity to do that or it regards it as too speculative, or "it is in a hurry to develop", you end up with a bounty hunter system - which is what we have at present. My view is that Government should restrict exploration activities for the private sector to areas where it is speculative. Surely someone knows which area is likely to have certain minerals. Well, if that's the case then we should undertake exploration in those areas ourselves, which would then enable us to undertake auctions down the line. 

Monday, 10 September 2012

What Money Can't Buy (A Review)

By Chola Mukanga

Michael Sandel’s What Money Can't Buy : The Moral Limits of Markets aims to awaken the public to the increasingly perverse role prices play in our lives. Everything appears to be up for sale. We appear to have moved from having a market to being a market. This triumphal encroachment of the price mechanism in every facet of life has been defended by its proponents as necessary for our “social good”. Sandel believes it’s precisely the opposite. Far from being neutral, as usually assumed by economists, prices corrupt the good things we value and care about in life. Reliance on prices diminishes social value hence the urgent need for everyone to take a step back and decide the moral limits of markets. For in doing so we are ultimately defining what society we want to live in.

Friday, 7 September 2012

Minimum Wage is Necessary

By Charles Ntumwa

Those members of Zambian Economist, who read the article by Jessica Achberger on the minimum wage, must have felt (as I did) angry and dismayed, at what the Zambian Government had done. An increase of this size is unheard of in the developed world, apart from the precedent set up by President Truman many years ago  back in 1950 when the national minimum wage in United States was raised by 87%. Zambia is a developing country, with the economy just beginning to bear some fruit. Largely due to the help of the Chinese who need our minerals for their development back in China. 

PF Economic Achievements, by the Numbers

By Jessica Achberger

What has the PF government achieved economically in the last year? So much of the media attention has been on President Sata's stand against corruption. People have been fired, boards dissolved, and charges brought against members of the previous administration. However, what we must now question, one year on, is what tangible economic factors have improved.

Kennedy Sakeni, Chief Government Spokesperson and Information and Broadcasting Services Minister, recently spoke to the Times of Zambia about Zambia's rise to economic prosperity. Mr. Sakeni stated that, in the first six months of 2012, Zambia saw a distinct rise in a number of economic factors. By the numbers:

Politics of Poverty in Zambia

By Chola Mukanga

When Keith Mukata, MP (Commerce D. Minister) came under pressure on why he was serving under PF when he was elected under MMD, he employed a hodgepodge of justifications:
The law is on our side, the people of Zambia who elected us, are on our side, they have no problem with us serving in government.....Serving as a minister for me is not a job if that is what they think, it is a service, maybe for other people. I probably used to make much more money in my law practice than now. When I travel (as deputy minister), I have to supplement the travel with my own money. If it were a job, I should not be running projects in my constituency[i]
Mr Mukata’s argument seeks to combine moral, political and efficiency reasoning with a personal touch to it! Not everyone agreed with his arguments.  Not long after that statement was made, Isaac Banda resigned from the PF government as Mines D. Minister for exactly the opposite reasons. In his resignation statement, he observed that the people of Zambia had elected him on an MMD ticket and therefore it would be political prostitution, so to speak, to continue being in government without a new electoral mandate. Either he resigned or went back to the people who elected him.
The current “rebel ministers” are of course not alone in serving across party lines and openly contravening party orders. This is a feature of our politics which has amplified over the last decade.  Members of Parliament (MPs) elected by the people on one party ticket nearly always choose to cross the floor when they have been offered a government job or money. It is rare to see a resignation because many fear of losing the seat if they stood again on the new party of choice, so they remain at odds with their own party whilst eating from the government plate. The term “rebel” naturally evokes memories of those 22 or so PF MPs who decided to attend the National Constitutional Conference (NCC) because the allowances offered at the time were too great to resist. A decision which fractured the PF and undermined its ability to successfully win the presidential bye-election (2008) and secure a larger mandate in 2011. It had more or less spent three years before coming into government in endless court battles with its rebel MPs which also prevented it from being a more effective opposition at that time that it would have been without the saga.   
It is also not just MPs.  The MMD in its corrupt prime even sponsored pseudo parties in addition to countless political non-government organisations under its payroll.  Many political party presidents have prostituted themselves just to feed their children and drive expensive cars. Humphrey Siulapwa in 2009 claimed that the MMD has been abusing him and his New Generation Party[ii] colleagues for over five years to campaign and defend government programmes "without rewards”:
Yes! Actually, they are using us and we are not prepared to be used forever, only a fool can be used forever. I, as president for the New Generation Party, am not going to accept to be abused or used forever...We want a portion of the national cake to come to the New Generation. Ici Bemba chitila ati, pakwakana ubunga tapabenshi? Tapaba insoni. Batupeleko na ifwekalya ka K40 billion [In Bemba they say: when sharing mealie meal you should not feel shy. They should also give us part of that K40 billion].
It is the prevalence of such actions that led the late Ken Ngondo to popularise the phrase, “politics of poverty” after losing the Milanzi bye-election in 2008[iii]. He rightly observed that greed had killed Zambian politics with people following those with the resources: 
In politics of poverty, the highest bidder always wins elections. I had no money to corrupt, bribe and buy votes from the electorate the way MMD was doing. It is not a secret but this is what our friends in the ruling party who are in control of taxpayers’ money were doing in Milanzi
At one level this behaviour is predictable in a utilitarian society with an unregulated democratic process, where those who value votes can buy them from those who don’t. Some may even say there’s actually something “democratic” about it. The ability to “freely choose” which organisation you wish to join and even the freedom to change your mind after 48 hours, as was once the case with a certain Charles Msiska in 2007!  A reasonable case can be made that democracy functions best when people are free to adopt whatever position they like and when they like. 

Reasonable concern
So the question must be asked. Does it matter that a parliamentarians can disregard their party position and the constituency that elected them to cross the floor financially (more money in their pocket) but without actually crossing the floor in substance (still claiming they represent their constituency)?
I think it does matter a great deal. For one thing, it is morally wrong. Morality matters because we are moral beings. Unless we get our ethics sorted out we are valueless as a people. Surely dignity and truth stands for something in Zambia? Serving in a government without the consent of your party is wrong and we must not be ashamed to say so. We should not be afraid to say it is morally reprehensive and undermines who we are as people – that is to say moral beings fashioned in the very image of our Creator. It is morally wrong because when Zambians voted for these rebel ministers they voted for him for a particular party, with a particular positional mandate and particular promises.  The party was MMD. The position is that they were opposed to PF policies and favoured. The promise they made is that they will serve faithfully. What has changed? The answer is that interests of their local communities have not changed. It is the personal interests of these representatives to enlarge their pockets that threaten to override the interests of the majority.
In undermining the wishes of those who elected them, they also undermine our democratic institutions. For our democracy to work it requires a level of trust between those elected and those who put them there. The question we must ask is simple: when Zambians go to vote, who do they vote for? The party or individual? Research[iv] has shown that Zambians usually vote for the party ahead of the person. It is not that these rebel ministers and others like them are worthy characters per se that got them elected (perhaps we should not be surprised they switched) but their party ticket appealed to the voters. People voted for MMD. It is the same with PF. Anyone on a PF ticket in Luapula or Copperbelt would have stood a high chance of winning.
Some may object that democracy is surely strengthened because of the “greater good” that may come out of these deputy ministers’ efforts whilst serving under PF. We may even say that by crossing the floor they have provided us with much needed cross party consensus at a time when the party in government has fewer MPs than the opposition. But such thinking is flawed and not grounded in reasonable facts. These facts are that the local people in those constituencies are being treated like idiots by the rebel ministers. As a result their confidence in the democratic system has been shaken. An electoral covenant has been defiled and we are all democratically poorer for it.
But it is not just an assault on democracy it also undermines a key social asset – our values. Here what we are talking about is the corrosive effect of these politicians beyond moral and democratic considerations. By choosing to chase money instead of sticking to their elected task, they are fostering the corrosion of our politics. Politics has become commodified. Michael Sandel offers similar insights in his latest book on the moral limits of markets[v]. But I want to quote a Zambian former ACC Commissioner Akashambatwa Mbikusita[vi] who once observed:
Some people who are aspiring for high political positions now look at the size of their pockets...People now think leadership is purchasable therefore, they can use their falsely acquired wealth to buy votes....This issue of buying leadership is confusing because people now think all it takes to lead Zambia is to buy votes. This is a great insult one can have against citizens who sacrificed a lot for Zambia’s independence.
And this commodification of leadership is there for all to see throughout our country. At the local level political parties continue to engage in buying local leadership. Zambia's grass root democracy has been dependent on votes and people buying since independence. It is difficult to even imagine local people becoming engaged in the political process without some form of immediate return e.g. a good bottle of Kachasu or Chibuku or a job promised. I have long suspected that without such inducements on voting day, in many of our villages no one would bother to vote because the returns from voting are minimal.  The politics of poverty is corroding our lives far beyond the political office. Therein is the endless causal chain. The people do not value their votes because they get no tangible development out of politicians. The politicians do not bother to change their ways because the people do not bother to hold them to account. In between that our values are being eroded which further reinforces the commodification of politics. A perpetual dance of death now envelopes us all.
It is of course a costly dance. For all the rebel ministers’ moral protestations at the root of their actions is selfishness. This selfishness imposes significant economic costs on all. Economists call these ‘external costs’ because these are costs not “internalised” or “borne” by the players involved. They fall on all of us. To be exact, all what we have discussed so far are costs on us in one way or another. But here we are focusing more narrowly on the financial ones. These are many and can be substantial if, for example, MMD persisted in hounding them out of government, as has happened this week with the forced resignation of one of the rebels following a failure to prevent an expulsion injunction.  When bye-elections happen resources misallocated that could be usefully employed elsewhere. Estimates of a typical bye-election vary but the direct costs can be more than K2bn.  To this we must add other economic costs which are not immediately monetisable e.g. lost output to the economy as ministers’ troop to and fro to argue the case for why the ruling party should have the mandate, and so forth. But even if the bye-election does not take place there would still be legal challenges, as was the case in the Masumba saga[vii], and other things which also impose costs.  All these costs are disproportional because they are funded by poor taxpayers who are double victims. The MPs let them down and now it’s their money funding bye-elections and the justice system.   

Reversing the tide
The case is therefore overwhelming clear. The politics of poverty is costing the nation. But what exactly drives this problem? Why do so many politicians switch sides? A significant part is moral. The 15th century Italian Dominican friar and preacher in Renaissance Florence Girolamo Savonarola once said, “The devil uses the rich to oppress the poor”.  In our country it is perhaps more true to say he uses our politicians.  Where there are corpses the vultures gather.  It is not farfetched to say there’s something rotten about the morality of our political system and it is that rottenness that attracts the poorest candidates. People of high moral values are dissuaded to become politicians or MPs in Zambia because there’s no integrity. We have what economists call a “market of lemons”. We have become a morally bankrupt nation – a shadow of the country I grew up on the shores of Lake Mweru. 
We all share the blame for the mess we are in.  A large part of the problem is the failure of the Zambian voter to make informed decisions. This could be due to lack of information on the candidates or it is costly to process such information given other competing demands. Lack of confidence in the democratic process may also increase the cost of accessing information relative to the benefits of making an informed decision. Why waste time and effort finding out who is telling the truth when the votes might be rigged or MPs may switch sides tomorrow?  And of course it is the political parties who surely carry the bulk of the blame. There’s a clear absence of policy and ideological framework within Zambia's main political parties. This makes it difficult for the party members and elected representatives to be loyal and convey a clear and differentiated message to the electorate. There’s also the failure of political parties to properly screen their candidates, due to resource pressures or poor organisational skills.
But all hope is not lost! We can start to reverse this tide. The moral question is beyond the scope of this essay. But what we can say there’s an urgent need for a deeper examination particularly within the church whether more is being done to influence Zambian political development – as ‘salt and light’ in the world.  We should even be bold enough to question whether the ‘Christian declaration’ is doing more than good. All must be up for discussion to build a stronger moral foundation for our beloved country.
Where I can offer immediate advice is that we need urgent political and constitutional renewal. Politically, the challenge is for political parties to build parties that are resilient in face of this politics of poverty.  They must learn to avoid political prostitution. The onus is political parties to ensure they have an adequate candidate in place that reflects their values and won’t easily sell their souls for money. Equally important is that  they must find ways in which their organisations limits the incentives for financially driven candidates to switch sides, perhaps through stronger contractual arrangements with candidates they adopt. New scrutiny process must be supported by clear policy and ideological statements to anchor their political aspirations. The creation of intra party think tanks and centres of learning would help them in this respect. They must depart from short term goals of simply getting elected towards a robust transformational agenda for Zambia.
Constitutional renewal is vital because there’s much the law can do to realign incentives of political players. Political switching happens because of the weak incentives in our electoral system that does not penalise people who cross the floor for financial gain. We must therefore fix these weak incentives. This calls for a revised electoral system that would achieve two things: sufficiently dissuade MPs from switching sides just for personal financial gain; and, minimises the possibility of punishing those who switch for genuine reasons and maximise the possibility of punishing those who switch for personal gain. The introduction of proportional representation currently under consideration in the Draft Constitution is welcome, despite its other flaws. If we do retain the current representation system it would be important to consider economic and social case for automatic parliamentary recall of MPs by their constituencies. These things of course need to be accompanied by general improvement in information flows between politicians and voters. We can fix a lot of things in Zambia if we improved information. It is not about freedom of information (a meaningless endeavour for the common man), is about building a society where disclosure and intensive scrutiny is presumed and not begged for.
Ending political poverty is key to ending economic poverty because it is costing us a nation, morally, socially and financially. We owe it future generations to do what we can to end it now.

Chola Mukanga is an economist and founder of the Zambian Economist which provides independent economic perspectives on Zambia's progress towards meaningful development for her people

Copyright: Zambian Economist, 2013

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Thursday, 6 September 2012

The Challenge of Manufacturing

Dani Rodrik on why it is more difficult now to emulate the East Asian tigers' rapid transformation from agrarian slow growing economies to rapid industrialized countries :
Successful long-term development therefore requires a two-pronged push. It requires an industrialization drive, accompanied by the steady accumulation of human capital and institutional capabilities to sustain services-driven growth once industrialization reaches its limits. Without the industrialization drive, economic takeoff becomes quite difficult. Without sustained investments in human capital and institution-building, growth is condemned to peter out.

Wednesday, 5 September 2012

The Proposed ZESCO tariff increase for 2013

By Ruth Henson

ZESCO is proposing to increase their tariffs by the following amounts:

Social services                         19%
Commercial                             24%
Maximum demand 1 & 2        27%
Maximum demand 3 & 4        32%
Residential                              37%
Mines – up to cost reflective tariffs by 2015

There is perfectly reasonable business logic for increasing the smallest customers by the largest amount. Electricity, like other commodities is cheaper to supply in larger quantities. Also as commercial and MD customers are using electricity as an input rather than an end product they have to increase product prices when this input goes up. However the domestic consumers are the ones who will switch to using charcoal for cooking and heating and seriously degrade the environment and pollute the air.

Tuesday, 4 September 2012

Mine Watch (Various)

China's Chingfa Mineral Resources Limited last week announced plans to invest about US$500 million in its new mining opportunity in Mokambo. The mine is expected to be fully operational in two years time would allegedly create around 3,000 jobs maximum, will production of about 50,000 tonnes of copper per year. [the employment figures are obviously anybody's guess]. Exploration works end in October

Clive Chirwa has recently been vocal on the issue of mining taxation :
The people who own the mines are taking away 98 per cent of the revenue and our share as a country is two percent. You cannot develop a country like that. You cannot build the roads; you cannot build schools and hospitals. If you look at the performance of those countries where our mineral resources are taken then you can see that we are tremendously losing on everything. China which takes our copper produces more than us…Zambia has just moved from three percent to six per cent on mineral royalty and they are telling us we cannot impose a higher royalty on the mines and they threaten to pull out but in their country they get 24 per cent.

Monday, 3 September 2012

NCZ funding woes

Government today released K42bn to the Nitrogen Chemicals of Zambia, as it struggles to keep the ailing parastatal together (see below). The move follows government failure to find an equity partner, as was recently noted by Agriculture Minister Chenda. No one wants to buy into it, so it is now looking for money - possibly through external borrowing. The company needs above K1.6 trillion. Agriculture Minister Chenda has previously said this is unaffordable because it is more than the total budget of his ministry. 
2012 Budget Releases - Ncz 42 Billion

Saturday, 1 September 2012

Well done, Mr President

President Michael Sata this week fired Justice Minister Sebastian Zulu and Southern Province Permanent Secretary Edwin Zumbunu. Academic Dr Chileshe Mulenga has been appointed the new Southern Province Permanent Secretary. No word on the new justice minister.

We don't know the circumstances surround the firing of the Justice Minister. But we highly commend the President for firing the Southern PS Edwin Zumbunu quickly and decisively. This is the leadership we need.

Only recently we learnt about Mr Zumbunu corrupt activities in relation to the awarding of a contract to construct a K750 million boundary fence at the provincial minister’s residence in Livingstone. Mr Zumbunu had dismissed all the allegations levelled against him. But later, in a dramatic turn of events, Livingstone District Commissioner, Paul Sensele came out strongly to reaffirm the allegations against Mr Zumbunu at a media briefing while kneeling and holding a Bible in his right hand. Mr Sensele even dared Mr Zumbunu to sue him in his personal capacity if the allegations were false, saying he had enough evidence to prove that the allegations against the former Permanent Secretary were true.

The President's action gives confidence to all whistleblowers. We need more of this to really sort out the corrupt mess in this country. more importantly, we hope now that future appointments should be properly vetted. A person is not corrupt overnight. They have a track record. There must be a process by which the public can be consulted before these public officials are confirmed in their posts. This way we ensure all the dirt has been revealed. We can build on this!