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Friday, 29 June 2012

What is to be done about NAPSA?

Its certainly interesting to hear that the National Pension Scheme Authority (NAPSA) has invested K5 trillion "in various sectors of the country’s economy to enhance job creation". The Acting DG Yollard Kachinda recently pointed to the Levy Business Junction Park as one good example through which NAPSA had contributed to job creation.

And yet - the basic questions have never been asked with respect to NAPSA - where does it it fit in the Government agenda? Where should it be investing its money to properly contribute to real job creation? NAPSA is sitting on a huge load of cash (which of course belongs to the public). But it has failed to use it efficiently and talk of corruption is rife.

At present NAPSA is focused on such mediocre projects and investing in Government securities and bonds. Perhaps what we need is for Government to identify local Zambian fund managers who could then think though how NAPSA's trillions of Kwacha could be used for locally driven job creating initiatives. The model of course would require some intellectual capital - to think through it. And of course there may natural concerns about using pension funds and investing them in initiatives with speculative returns. So the model has to be thought through - including the vital question : what businesses can NAPSA fundes be invested in that can create employment with guaranteed normal return - but at a more grander scale than Levy Junction?

Thats the sort of debate I expect Mr Kachinda to be inviting the public to take part in. But I don't blame him because why invite trouble when no one is bothered?

Thursday, 28 June 2012

Will dual citizenship increase unemployment?

Yes, according to President Michael Sata :
President Michael Sata said that amending the law to allow dual citizenship has its consequences. Mr Sata said that if the law is changed, there will be more Zambians and jobs will be taken away by other nationalities living in the country. The President was responding to a question from a Zambian living in England during a dinner hosted for him at the Zambian High Commissioner’s residence. Mr Sata has advised Zambians living abroad to return home and compete for jobs with their compatriots.The President also said that he has a duty to protect the majority of Zambians especially poor citizens.
No, according to Clive Chirwa :
The world has now shrank into a global culture and economy. For this reason many countries are now endorsing dual citizenships. The results are colossal in terms of economic development. Let us name a few of these countries Austria, Australia, Belgium, Brazil...Can you associate these countries with consequences due to dual citizenship? Can you see that by having more citizens these countries have lost out on the employment front because the foreigners have taken those jobs? In my eyes and I believe in yours too, I see development, low poverty rate, collective riches, pure prosperity, technological advances, literate upbringing and above all excellent governance. Dual Citizenship has helped many of the countries in the list to develop far more quickly than they would have done otherwise. Let us take some examples: (i) Israel – ranked fourth in the world in scientific activity and a major player in high-tech industries. It designs and builds aeroplanes (Astra, Gulfstream, etc.). It develops technologies for agriculture so that high yields can be harvested in the desert sand (while we have failed despite having good soil). All these advancements are due to transfer of technology by its dual citizens working overseas and helping their motherland. As a result thousands of jobs are created by the dual nationals.....(iii) Ghana – a country that has realised the economic benefits of dual citizenship through fostering trade and broadening investments opportunities. In the last ten years Ghana has seen its skill and expert population increase tremendously due to dual citizenship. Ghana’s dual citizens have set up shops in their country by developing roads, housing, building machineries, developing free medical care, utility facilities and many more. Thanks to the Ghanaian government that has welcomed dual nationals with open arms as they have brought with them free technology transfer and business acumen....

Wednesday, 27 June 2012

Zambia Mining Revenue Taxes, 2nd Edition

An update to the figures for 2009 we have previously made available - which were supplied by ZRA (which has since been removed from their website - they no longer provide detailed copper tax revenues). According to the recent EITI report in 2009 mining companies paid the following in taxes (all figures in Million Kwacha)

Pay- As-You-Earn - 564,822
Import VAT - 298,230
Mineral Royalty Tax - 242,192
Company Income Tax - 209,721
VAT (non refundable) - 165,579
Import Duty - 114,219
Withholding Taxes - 59,010
Excise Duty - 1,113

As you can see, mining companies only paid US$60m in MINING tax. This is actually not too dismilar from the US$50m figure quoted in our monthly essay - Debunking the Government's case for low mining taxation in Zambia - which was based on ZRA figures before EITI reconciliation.  All the other taxes are just general business taxes - that all businesses pay. These are not mining taxes. You can find the above table in the EITI report for 2009, page 27.

Tuesday, 26 June 2012

Mine Watch (Statutory Instrument)

As pressure grows on Government to increase mining revenue - an announcement last week from the Ministry of Mines that under the new Statutory Instrument number 34 of 2012, mining companies would now be required to submit reports on the recovery percentages and efficiency of all mining and metallurgical processes and balance sheet showing the disposition of all metal and mineral products depleted from the ore reserves. Other requirements for mining companies include providing a statement of work carried out on capital products and expenditure and availing quantities and grade of end products produced, quantities sold and average price of selling prices.

Monday, 25 June 2012

How do we create youth employment?

Some interesting observations from Murray Sanderson on what is needed to solve the problem of youth unemployment. The approach can perhaps be summarised as one focused on removing "regulatory constraints" e.g minimum wage, pension contribution requirements. Not in a blanket way but specifically for those employing young people  to "enable youngsters to get a foot in the employer’s door, and then to receive on-the-job training and experience". The big question of course is the extent to which such constraints are currently the "binding" ones - its an empirical question, something not addressed in the article - but one certainly hopes someone in the Ministry of Labour knows the answer. 

There is general agreement that Zambia suffers from a crisis of unemployment, and that to create enough jobs we need massive economic development.

But that is a long and difficult journey, and jobs are needed now. Zambia has countless thousands of unemployed people looking for jobs.

Friday, 22 June 2012

Strike Watch (Sugar)

A strike over wages at Zambia Sugar, a unit of South Africa's Illovo Sugar, has now been resolved after the company awarded permanent workers a 15 percent pay rise on Saturday. Workers at the company's Nakambala Sugar Estate went on strike on strike last week demanding a 35 percent pay rise, which led to the loss of 2,000 tonnes of production per day. As part of the deal seasonal workers were granted a 12 percent wage hike. More detail via Reuters.

Thursday, 21 June 2012

Aid Watch (Germany)

The Germany government recently signed a three year support programme to Zambia worth around  K550bn (€81m). Eastern Province with get around K106.5bn under the Urban Water Supply and Sanitation programme. The three-phase project will utilise K46.5bn towards the improvement of the water infrastructure in the towns through the Eastern Water and Sewerage Company (EWSC). The first phase towards water infrastructure would cover Petauke, Lundazi, Mambwe and Chama. The works will include drilling of boreholes, installation of pumps, construction of storage reservoirs, laying of pipes, construction of water kiosks, and rehabilitation of sanitation facilities in schools and hospitals as well as maintenance works on Lundazi Dam. 

Wednesday, 20 June 2012

Investment Watch (Various)

A collection of recent investment stories :

Aqua Harvest Limited, a local fish farm company plans to develop a fish farm on Lake Kariba, Siavonga at a cost of US$4.9 million. The project will be funded through a mixture of equity and debt financing. 

AGCO, Your Agriculture Company, a worldwide manufacturer and distributor of agricultural equipment has launched a 150 hectare (371 acre) farm and learning centre near Lusaka.

Hitachi has launched a US$15m mining equipment re-manufacturing plant with the employment capacity of 150 people.

Tuesday, 19 June 2012

Aid Watch (Sweden)

The Swedish government has resumed aid funding to Zambia with the announcement of K33.5 billion support to the Ministry of Health to be chanelled to various health activities. The funds are programmed for broad range of support including provision of essential drugs and medical supplies, infrastructure development, especially in training schools and support towards the Zambia Demographic Survey. Sweden had previously frozen its support following the Kapoka scandal which led to losses over K10bn. More detail here and here.

Monday, 18 June 2012

Why Tax Dodging is Bad for Zambia

Christian Aid’s Carlotte Marshall reports on how tax dodging by some multi-national mining companies is costing Zambia millions in tax revenue – making it impossible to repair our failing healthcare system. Campaigners at Rio+20 conference this week will tell delegates how getting international companies to pay the taxes they owe would generate billions in funding for sustainable development.

Saturday, 16 June 2012

Are Zambians about to get their dues from foreign miners?

Zambia Daily Deputy Editor Anthony Mukwita has written an important article for the for this important article for the Bureau of Investigative Journalism on mining policies in Zambia. We are thankful to him for flagging up our paper. We just hope that Mr Mukwita will now publish his powerful article in his paper. Surely, ordinary Zambians deserve to read what he has written?

Zambia is Africa’s top copper producer and it is in the midst of a spectacular boom. The scale of international investment – a reported $6bn – means Zambia will soon ‘overtake’ Australia and Indonesia to become the world’s fifth largest copper producer.

Thursday, 14 June 2012

A stagnating beef industry

ZAMBEEF recently announced plans to import cattle from Tanzania due to the scarcity of beef on the local market. The company says the decline in the population of cattle in the country in the recent years has resulted in scarcity of beef. The imports will come from Tanzania which has about 22 million herds of cattle compared to Zambia's 3 million. 

Relative to its outstanding natural grazing advantages, Zambia has a comparatively small cattle population. Our 3 million head of cattle translates in a 0.14 head of cattle per hectare of land suitable for grazing. In comparison, Zimbabwe has three times as many head of cattle per hectare of grazing land and Kenya more than four times as many. Our beef industry only contributes less than 1 percent of GDP. 

Consumption is also relatively low. Beef consumption per capita is lower than elsewhere in sub-Saharan Africa and in the developing world at large, and milk consumption per capita is estimated at two-thirds below the World Health Organization’s recommended guidelines. International trade in beef and dairy products is limited, and there are very few exports of beef or dairy products through formal trade channels. Recorded imports of dairy products to Zambia are five times the value of exports but, overall, trade is not significant in either the beef or dairy industries. 

Simply put - there's something structurally wrong about our country in this area. Those interested to read more can check out this fact sheet fom the World Bank produced last year. 

Wednesday, 13 June 2012

Windfall Taxation - A Critical Analysis (Monthly Essay)

The May 2012 short essay (11 pages) is now published below - a little later than planned. The essay has been penned by our resident contributor Dr Kaela B Mulenga on the important question of the mining windfall tax. The June essay will be available towards the back end of the month as usual!
Windfall Tax in Zambia - A Critical Analysis

Tuesday, 12 June 2012

Local Purchases and Payments in Kwacha

The Minister of Finance signed Statutory Instrument No. 33 of 2012 on 7 May 2012 which became effective on 18 May 2012. Statutory Instrument No. 33 of 2012 prohibits the quoting, paying or demanding to be paid or receiving foreign currency as legal tender for goods, services or any other domestic transactions. Since then, there have been a number of questions raised seeking clarifications on Statutory Instrument No. 33 of 2012. The Bank of Zambia document embedded below provides further detail.
Local Purchases and Payments in Kwacha

Monday, 11 June 2012

A $500m Eurobond?

Ministry of Finance recently selected Barclays and Deutsche Bank as book runners for a debut $500 million, 10-year Eurobond. The issue is expected in the next eight weeks of signing the contract with the two banks, making it the first debut by a sub-Saharan sovereign this year.

Friday, 8 June 2012

Plundered Parastatals

The latest Auditor General’s report on parastatals reveals glaring irregularities and abuse of funds amounting to over K1 trillion. 21 institutions had their 2010 accounts combed, revealing irregularities such as unretired imprest (totalling K 1.5 billion), unsupported payments (K 35.3 billion) and irregular payments (K 651.7 billion). Other irregularities included failure to follow tender procedures and pay statutory contributions. Money was unaccounted for, misapplied, not recovered from loans and misappropriated. Parastatals found wanting included Citizens Economic Empowerment Commission, Electoral Commission of Zambia, National Housing Authority, National Pension Scheme Authority, Road Traffic and Safety Agency, University of Zambia, University Teaching Hospital, Zambia Revenue Authority and ZESCO.

Several examples were highlighted in the media: The Citizens Economic Empowerment Commission spent K9.1 billion on operational activities without seeking authority from the Secretary to the Treasury. Zampost rented a house for its Lusaka area manager – despite that same house being owned by the area manager. The University Teaching Hospital had made payments of K5.7 billion without supporting documents such as receipts or invoices. The National Housing Authority had not paid the Ministry of Finance K3.7 billion collected from the sale of properties seized by the old Taskforce on Corruption. The National Institute of Public Administration procured goods and services worth K2.4 billion without the required three competitive quotations.

And the list goes on. We are hoping to get hold of the report and dig into a little more detail on the website after we complete the constitution review.

Thursday, 7 June 2012

Is the grain levy the answer for council funding?

One of the ideas being pushed by Local Government Minister Nkandu Luo as a source of funding for local councils is the re-introduction of the "Grain Levy" which was abolished in 2009. The levy was a tax charged by on anyone transporting grain from one district to another. It was a tax on mobility.

Farmers are naturally not happy with Luo's intentions because of the potential negative effects it will have on the lives of the farmers. Many farmers argue that the grain levy will push the cost of production costs at a time that Zambia should be looking to expand its exports. Others argue that the real problem is what happens with the money. Crop levy funds will not in any way help the farming communities as these funds end up being misapplied and not accounted for properly. They bemoan more money leaving their pockets and mysteriously entering blackholes. The answer to that might be to ensure that such funds are used for local roads grading. 

The obvious problem with levy idea is that there are better alternatives which are more equitable. Perhaps Luo needs to suggest a range of measures and consult on them? One suspects she may not be entirely keen on the answers! The other answer the farmers may not like : abolish the current maize marketing system and divert the money being wasted on councils - assuming it can be properly ring fenced on roads and other critical infrastructure. Government would certainly find support from the World Bank who recently called for it to stop setting prices at which it buys maize from local farmers and allow the prices to be determined by the market to promote sustainable growth in the agriculture industry. It said, the "old policy has not resulted in significant reduction in rural poverty and job creation. This policy direction has also limited private sector investments in the agriculture sector".

Wednesday, 6 June 2012

A prisoner amnesty

President Sata recently freed 2,318 prisoners under the Presidential Prerogative of Mercy as part of the Africa Freedom Day commemoration. According to Home Affairs Minister Kennedy Sakeni, the gesture was a response to appalling conditions in prisons and is in line with the PF's manifesto of turning the prisons into correctional service facilities. It was also part of Government's commitment to "finding lasting solutions to the persistent problems of congestion in our prisons. We need to have conditions that foster humane treatment in tandem with international standards”.

Presumably it is cheaper to maintain those left behind. More surprising though is that the pardon includes those who were sent to jail for corrupt activities. Perhaps in the future a better criteria can be used. Whatever one thinks of the amnesty, contrary to the Minister's assertion it is not a "lasting solution" to anything. Amnesties will not solve our prison problem which are largely due to an imbalance between supply of prison infrastructure and demand of it.  The demand is not only due to crime levels, but also because we produce many laws that we don't need; have fewer court and judicial capacity which has led to high remand levels which current stand at 35%; and, are spending more money on policing (catching criminals) than on rehabilitation. 

Tuesday, 5 June 2012

Petition : Lower Zambezi National Park

Please sign this important petition against proposed mining in Lower Zambezi National Park, Zambia.


Let's us be the change. Let's make a difference. Please share it around with family and friends and support this great effort to bring the madness to a stop!

Rotten subsidies for rotten maize..

The Food Reserve Agency (FRA) has so far destroyed about 23,978 metric tonnes of rotten maize across the country, as it works its way to the projected 54,235 metric tonnes earmarked for destruction countrywide. The agency recently destroyed huge stockpiles of rotten maize in Mpongwe, Mumbwa and Lufwanyama in its quest to create storage space for the new crop marketing season. A lot of tax payer funds continue to be wasted thanks to the current rotten maize marketing policy previously ushered in by the MMD administration who regarded it a key plank of their rural "control" program. More detail via The Post.

Monday, 4 June 2012

A renewed push for higher mineral taxation?

Saviour Chibiya (Barclays Bank Zambia MD) recently called for an upward revision of mining tax in order for the country to generate more income from its mineral wealth:
“When these concessions were being agreed upon, mines were in a loss situation as they were heavily recapitalising but the situation is different now. There is need to generate more from our diminishing mineral wealth. In 2008 when there was a global financial crisis, mines restructured, people were declared redundant, mines were closed and the Kwacha lost value hitting K5,600 to a US dollar. But when prices rebounded, there was no change for the good of the Zambians"
The call is part of what appears a renewed momentum by many people for Government to do more to ensure a fair outcome for ordinary suffering Zambians. The Opposition appears to have not seized the opportunity in this area. Part of the problem is the discredited record of MMD, with respect to mineral taxation. But UPND's Hakainde Hichilema appears to be now turning his attention to this issue. He recently observed that the country could have realized about K4 trillion if the government had reintroduced the windfall tax for mining companies. The money collected from the mines in form of tax could have been channelled into infrastructure development in the country.

Friday, 1 June 2012

Does Africa still need white guilt?

A recent article by Charles Kenny suggests that the western view of the helpless African, full of "malnutrition and pot-bellied young children desperate for help with flies on their faces" is not only inaccurate but unhelpful:
The white man's burden complex is also a completely inaccurate view of the world. The quality of life across the planet is higher than it has ever been. Incomes are rising -- the proportion of people living on less than $1.25 a day worldwide has been more than but in half since 1990. Mortality is falling -- about two million children born this year will live to their fifth birthday who would have died were mortality rates unchanged from 10 years ago. And education rates are climbing across every developing region -- with more than three quarters of primary school children actually in school in the "basket case" of sub-Saharan Africa, for example. And on the subject of Africa, eight economies in the region ended the last decade twice the size they'd started it.