Merry Christmas and Happy 2013!

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.

Many thanks for all your support through this year, especially those who have made financial contributions. A special thanks to our many Facebook (7900+) and Twitter (2500+) readers. Your contributions continue to be insightful and relevant.

Wishing you all a wonderful Christmas and fantastic 2013!!

See you on 7 January 2013, the Lord willing.

Chola Mukanga
Founder, Zambian Economist
http://www.zambian-economist.com

Constituency Development Funds, 4th Edition

Miles Sampa recently revealed via Facebook that the CDF budget has increased, "after strong submissions from all MPs in general; my Minister has Heard and adjusted the Constituency Development Fund (CDF) in the 2013 Budget from K1BN to K1.3BN per Constituency".  This represents an increase of K0.5bn because previously it was around K0.8bn. The new 2013 budget raised to K1bn and now they have raised it again as the budget is debated.

All of this is baffling of course. As we have noted previously. Not too long ago it was revealed that the Government by its own admission has not measured the impact of the CDF on the socio-economic development of constituencies from inception to date. Two major studies which were conducted by Caritas Zambia and the Economic Association of Zambia (EAZ) on the impact of the CDF which are in public domain have shown rampart corruption and misallocation of funds. So how can GRZ keep increasing this fund?

The better approach there is to abolish it! In its place a better fiscal framework should be put in place. Let councils have proper fiscal decentralisation. Let them spend the money they raise through local taxes. And please, let us ensure MPs stay out of money issues. It corrupts their proper functions : which is creating laws; representation; and, advocacy. Only in Zambia do Members of Parliament worry about local budgets! Such should be the job of a properly functioning council! Not MPs!

How reliable are our GDP numbers?

One of the questions we get often relates to Zambia’s GDP. Recently someone asked : are the GDP growth figures a true reflection of Zambia’s economic performance?

The simple answer is no because GDP has several limitations for a country such as ours.

First, GDP measures the value of output produced in Zambia. But only that which is officially recorded. It does not capture our large informal sector (believed to be around 40% - 60% of gross national income), where the bulk of transactions are not recorded. So countries which record transactions better will have higher GDP than Zambia but that does not mean our true national output is smaller.

Secondly, GDP does not take into account negative externalities. So if you produce more copper and you cause sickness to people around Kankoyo, they say GDP has increased. But that is only because we are not producing the 'right amount' of copper in a safe and humane way. The true cost of producing copper is not being included.

Which leads to the third point. GDP does not measure quality of life. It does not tell us whether Zambians today are better in terms of “quality of living” than we were last year. It is a pure measure of income. Quality of life should not be confused with standard of living, a measure of income. Quality of life includes other things e.g. basic human rights, freedom, good mental well being, wealth in general, education, etc. Things that are seen as building blocks of “real development”

And of course it goes without saying, money cannot give you happiness. Especially if societies are highly unequal, like we have we in Zambia. The few control all the resources, mine our copper and keep shuffling national jobs among themselves. We are deeply unequal and as a result deeply unhappy.

A word of caution.

GDP growth may be a potentially useful statistic. It tells us that measured GDP has grown. But we need to be clear what the changes may be signaling. If GDP grows it is not necessarily the case that the economy has grown. It could simply be that more and more businesses are becoming formalised. In short our growth may be due to the fact that we are now better at recording and we have fewer black markets! In practice very little may have changed!

Zambia's Lost Gemstones

By Chola Mukanga

Gemstones are among the most lucrative minerals in the world. They are also stones that Zambia has in abundance. It has the second largest deposits of emeralds in the world and accounts for about 20% of global supplies. The quality of these emerald stones is very good for colour and specific gravity. Zambia also possesses Africa's largest deposits of amethyst and aquamarine, with the quality of the former considered to be amongst the very best in the world. These deposits can be found in Copperbelt, Eastern and Southern provinces, with more discoveries being made in other parts of Zambia as exploration intensifies. 

No tourist visas?

Sylvia Masebo MP (Tourism Minister) recently signalled that Government may soon abolish Visa fees for "tourists" visiting Zambia. The proposal will be tabled before Cabinet, following appeals by some Lodge owners who are complaining that visits to Zambia have been dwindling due to "prohibitive tourist visa fees currently set at US$50 per person". She has promised to consult widely before taking the matter to cabinet for possible consideration.

The proposal will need to be much clearer. Is it no visa fees or no visas period? Logic demands that she must mean the latter because having a visa regime that does not recover costs would be costly to maintain. Presumably part of the visa fees goings towards administration and processing costs. But then again, abolishing visas to Zambia will have other implications. There's the question of losing the "security benefits" of a Visa regime. How much consideration will be given to that?

The obvious question of course is the extent to which the visa costs impacts on demand for tourism. Where is the evidence on this? Just how elasticity is international tourism demand to Zambia? Are the Lodge owners really correct that a US$50 waive will boost demand? It seems to me that what is important is having a common SADC Schengen system that is underpinned by a clear software system. Where individuals can be tracked across borders but would pretty much move freely.

This of course is not the first time these ideas have been proposed.

Zambia Plundered!

The much talked about new documentary of the plunder of Zambia copper by multinationals is available on You Tube. Two things struck me. First, how pivotal the death of Mwanawasa was for the mining companies. If Levy had not died, the windfall tax would never have been reversed and Zambia would be a better country for it. Rupiah Banda was a perfect present for the mining companies. Secondly, I was struck by how we still do not have a public inquiry into the mining privatisation process. Surely that is the mother of all inquiries we need! Everything else pales in comparison!

Please share he video around.