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Tuesday, 31 July 2012

Zambia’s Looming Dual-Healthcare Crisis (Monthly Essay)

The July 2012 short essay is now published below. The essay has been penned by our resident contributor Jessica Achberger on the looming dual health crisis.
Zambia's Looming Dual Healthcare Crisis

ZAMBIA 2012 IMF Country Report (Article 4 Consultation)

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2012 Article IV consultation with Zambia, key documents have been released to the public and are included in the report embedded below (useful facts and figures about the economy and other analyses) :

Monday, 30 July 2012

Energy Watch (New Pipeline), 3rd Edition

Discussions continue over the proposed construction of the Bwana Mkubwa oil refinery and pipeline in Ndola is still on. The project is intended to be a joint venture of Samsung Engineering (South Korea), Maysen &  Borowski Zambia and OSD (Australia). The capital cost of the proposed Bwana Mkubwa refinery and pipeline project and pipeline is approximately USD $1.7 billion and USD $1.6 billion respectively. No clear details on how this is to be funded.

This is a development in relation to this Australian investment not this Angolan investment. The latter remains unresolved publicly after miscommunication between various ministries.

Sunday, 29 July 2012

Compulsory listing for parastatals?

GRZ will require all parastatals to list on stock exchange(LuSE), in a move designed to "enhance capitalisation and afford Zambians a chance to own stock". In theory this could help invigorate the small equity market and bring greater transparency. But as we have seen with ZCCM-IH that wont necessarily lift the cover of darkness. Presumably those that can't list will die. Let us not forget the hapless Daily Mail &Times of Zambia are parastatals. Mr Chikwanda's statement is embedded below. 

Saturday, 28 July 2012

Policy changes that would enable tourism to grow

By Ruth Henson

The following policy changes would enable tourism to grow :

  1. Remove or drastically reduce visa fees.  Charging for tourists to enter Zambia is like charging customers for entering a shop. It will discourage many people from entering or they will enter less frequently.
  2. Reduce or remove the vast array of fees licences and levies on tourist (and other) businesses as these add to the cost and make Zambia a more expensive destination than neighbouring countries. Too many parts of Government have developed their own revenue collection systems without service delivery to match. For example council rates were instituted to pay for provision of water, sewage, roads, rubbish collection and street lighting. Councils no longer provide water or sewage, charge (again) for collecting rubbish and do little road maintenance. ZNTB, Zawa and National heritage charge fees which seem to be used for little or nothing beyond funding their existence.
  3. Market Zambia to the world in form of regular (weekly for example) interesting stories about various happenings in Zambia so that there is name recognition at international level. Market all levels of tourism from the backpacker to the five star hotel. At present it is mostly the top end of the market that ZNTB represents.
  4. Maintain a more favourable exchange rate. Letting the kwacha devalue more would make Zambia a cheaper destination.
  5. Relax the rules on tourists using other currencies to pay for tourist services. Tourism is an export product and as such should be allowed to be priced in other currencies as long as payment is accepted in kwacha as well.
  6. Avoid abrupt policy changes without warning which disrupt pricing and other requirements leading to Zambia getting a reputation as an unreliable destination.
With thanks to those of my customers and friends who are in tourism.

Thursday, 26 July 2012

Poor Journalism (Daily Mail), 2nd Edition

Daily Mail's Chimwemwe Mwale has a rather poorly written article on the Police Public Complaints Authority (PPCA). It is certainly helpful in bringing to light that such an organisation exists, but woefully concludes :
The operations of the PPCA are testimony of government’s commitment to upholding the tenets of democracy and good governance as evidenced in its efforts to balance the judicial scale for both police officers and members of the public. It has also been seemingly a big relief to Zambians that the price of democracy paid in full has made it possible for the police to be policed!
Let us help Mr Mwale see the bigger picture so that next time he can do some proper articles! For those not in the know, the PPCA was established in 2003 with the power to investigate complaints from the public against the police as well as injuries or deaths in police custody. [Its website can be found here ] The PPCA submits its findings and recommendations to the Director of Public Prosecutions (DPP), IGP and ACC. It is practically toothless as an oversight mechanism for providing checks and balances. It is in theory meant to act as deterrent to abuse of police power and violation of people's rights. But it does not have the powers to do any of that.

Wednesday, 25 July 2012

Parastatal Madness, 18th Edition

We have long observed that the failure of parastatals to perform has largely been down to the failure by central government to pay parastatals the debt owed to them. A recent parliamentary report (embedded below) sheds more light on the scale of government debt. Ministry of Finance estimate that Government owes nearly K400bn to ZAMTEL, ZESCO, Water Utilities and other institutions. The largest debt is to NAPSA at K163bn. The committee observes that Government is "more inclined to repay the commercial banks at the expense of pensioners and individuals suppliers...and more inclined to service external debt rather than domestic debt".

Tuesday, 24 July 2012

The Sands of Time : The Syrian End Game (Part 4)

By Mpundu Mukanga (PhD)

In the previous article (Part 3), I explicitly stated that should major world powers fail to come to a comprehensive and binding resolution on Syria the only logical conclusion for the country would be an escalation of violence culminating in a brutal civil war. Since then diplomatic efforts have all but failed and Syria in on a dangerous path to an all-out internal armed conflict.

On 7th July 2012, during the friends of Syria meeting in Paris, the USA was the first nation to declare that it would openly provide non-lethal assistance to the rebel movement sighting diplomatic failure and civilian massacres attributed to the Assad regime. The problem with the statement is that there are more than 20 rebel groups operating in Syria with minimal or no coordination between them, and most of these groups are radically opposed to the presence of the USA or any foreign powers in the Middle East.

Monday, 23 July 2012

Minimum Wage Changes are Final

By Jessica Achberger

Many employers have followed with interest and concern the changes to the Zambian minimum wage, first published in the  Government Gazette on 4 July 2012. The Times of Zambia reported on 12 July that for some categories, the wage increases would be as much as 100 percent. Domestic workers' salaries, for instance, have been raised from K250,000 to K420,000 in basic pay per month.

Now, the changes have now been made final. Reported by the Times of Zambia, Labour and Social Security Minister, Fackson Shamenda, argued:

...Government was ready to get whatever humiliation over the minimum wage because the move was aimed at improving the working conditions of the poor people on whose premise the PF Government campaigned.
Asked by Mr Namulambe on what the immediate and long term effects of the raised minimum wages on the economy were, Mr Shamenda said Government expected increased productivity from highly motivated workers.
"The raised wages will stimulate consumption by putting more money in the pockets of low income earners and the standard of living for the poorest and most vulnerable workers will be increased," he said.
How this will affect overall unemployment levels, however, is another question. While it is true that the minimum wage in many sectors was long overdue for an increase, this is a very significant rise with little warning for employers to adjust their budgets accordingly. Therefore, it remains to be seen whether the increase causes a spike in unemployment levels from employers who are unprepared to follow the new minimum wage requirements so quickly. 

Sunday, 22 July 2012

Zambia Domestic and External Debt

A useful fairly recent EAZ paper on the status of Zambia's domestic and external debt. The currently external debt is just under US$2bn, with the last debt sustainability analysis pointing to a headroom of around US1bn. But without the analysis been made widely available for scrutiny it is difficult to place much faith in that. The case remains strong for a proper debt management bill, which was a PF manifesto / electoral commitment - and noises are still be heard in that direction.

Friday, 20 July 2012

IMF - Zambia Watch (July 2012)

IMF Executive Board Concludes 2012 Article IV Consultation 
Public Information Notice (PIN) No. 12/82
July 19, 2012

On June 13, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Zambia.

Background

Zambia has achieved high and sustained growth and macroeconomic stability over the past decade, but poverty remains high. Real gross domestic product (GDP) growth averaged 5.2 percent in 2000–10 (or 3.1 percent per capita); inflation declined from 30 percent to single digits; debt declined sharply; and international reserves increased to comfortable levels.

Thursday, 19 July 2012

A Call for Writers

We are planning to allow on a limited basis - two or three additional Zambian writers or writers on Zambia to share their thoughts on Zambia and Africa on Zambian Economist.

This is part of the aim to widen the project, and frankly, give me a break from time to - "even young men grow weary". Also "iron sharpens iron". We want the quality to rise on many issues. But crucially if I were unable to write, for whatever reason, the writing can still continue. We are all mortal.

Now I already have two volunteers. They'll start writing ASAP. There's probably room to add one or two more. If you are impartial - have an interest in Zambia's development and general economic / political economy issues - and enjoy writing constructive thoughts (short or long posts) - please drop me an email. With a very brief word about yourself - and why you want to join up!


This is a huge step for me because for the last 5 years this has really been a personal project. But now I think it can grow in this direction. But we can't risk it's impartiality or quality. At the same time it is right that a new generation of Zambians start taking control of the intellectual direction of our country. This is a good opportunity.

The writers may write short to long posts as they feel right. You can write as often or as little as you have time. Total freedom - within our overall vision.

Wednesday, 18 July 2012

Aviation Watch (Solwezi Airport)

Solwezi airport runway is expanding to allow more and bigger planes such as the 737s, which should enhance freight and general travel. The runway will be longer from 1.3km to around 2.7km. It has also been widened from 20m to 36m. The airport investment is being funded wholly by First Quantum Minerals (FQM) to the tune of US$8m. And to protect its investment FQM has started fencing off the perimeter of the entire airport area. Given the wider investments taking place in the area, it should not come as surprise if this becomes the first properly owned private international airport in the future. 5 – 10 years from now, if not sooner! Much depends on demand and the extent to which it would justify investment in associated road and terminal infrastructure. But FQM has the money! 

Tuesday, 17 July 2012

Aid Watch (USA)

Zambia’s education sector has received financial assistance from the United States Agency for International Development (USAID) with an investment in the range of US $100 million. The funds will be spread over five years to National In-Service Teachers College in Chongwe. There are five projects under the National In-Service programme that USAID is funding and are primarily aimed at improving reading skills for over one million people.

Monday, 16 July 2012

FRA reform, 2nd Edition

Government is in the process of developing a new legal framework that will address the current flaws in the crop marketing system. Agriculture Minister Emmanuel Chenda recently told Parliament that the new comprehensive agricultural marketing legal framework will regulate the marketing of all agricultural commodities, livestock and fisheries products and provide for a level playing field for all market players. Mr Chenda says currently poor Zambians are subsidising consumption in other countries. An issue which we have discussed many times on this website. 

Friday, 13 July 2012

Poor Policy Alert (Chishimba Kambwili)

“As Government, we are working on modalities that will compel all firms in the country that do not support sport to pay tax that will go towards various sports disciplines. We will come up with a bill that will be presented to Parliament on how to regulate firms on paying tax that will help sport"

Apparently GRZ will not allow any investor to dictate terms and conditions on any sport they have failed to sponsor. He also warned that "investors will find it difficult if they do not work with sports associations"By investors presumably he means mining companies. I admire his quest to see Zambians benefit from mining companies but any infrastructure tax must prioritise real infrastructure. Funding sports is a wrong priority. It is also unfair. Why should a mining company be mandated to fund sports infrastructure which they have no interest in? And what about other businesses? We are failing to think right about issues in our country.

Thursday, 12 July 2012

Diversification Misunderstood, 2nd Edition

A recent article by the Chamber of Mines in the Daily Mail urges Zambians to end the obsession with mining and start diversifying away to Agriculture and Manufacturing. We readily agree, except - diversification is not cheap! It needs money! That money can only come from taxing mines properly! The reason we want high tax revenues is precisely to aid diversification. Without mineral tax revenues there will be no proper diversification programme. We have previously touched on this in a monthly essay - Five Questions on Diversification

Wednesday, 11 July 2012

A restriction of export earnings?

GRZ is planning to introduce policy measures to stop companies from externalising all their export earnings, according to Finance Minister Alexander Chikwanda :
“We are in the process of enforcing policy to ensure that export companies including the mines do not externalise all their export earnings. This has been disadvantaging the country. This enabling environment was introduced by our colleagues in the opposition who we replaced, but we want to correct this and introduce an enabling environment for both the investors and the people"
Mr Chikwanda has been talking to Mr Sichinga who sounded out this policy in 2010. Others like David Panabantu have also championed it. The problem is that proponent of this idea have not adequately explained the trade-offs. Its strikes me that there are essentially two strong short / medium term impacts.

The immediate impact would be a stronger Kwacha. Whilst this may have its benefits (reduces import costs for machinery, etc), it could have potentially significant negative effects on our export competitiveness. We might possibly have to kiss diversification good bye. Incidentally the MFEZs may also suffer if a stronger Kwacha led to higher labour costs. Then we have reduced purchasing power of aid inflows (conversely making it easier to pay back debt) and remittances.

The other effect would be to increase bank deposits potentially increasing domestic savings. This would have the likely effect of reducing the need for foreign borrowing at higher rates relaxing the "external constraint". Real interest rates may decline and growth would increase if interest rates are a significant binding constraint on the economy. It strikes me that the real issue regarding interest rates is the absence of financial intermediation in rural areas. The challenge is widening banking services to rural areas to allow people to save and invest. This is beginning to happen with increased banking expansions and some element of subsidised credit.

Tuesday, 10 July 2012

Aviation Watch (NACL)

NACL is planning to take forward significant redevelopment of Kenneth Kaunda International Airport over the next few years. A new terminal building designed for International arrivals and departures would replace the current facility at a cost of about US$200 million while aprons and taxiways would also be constructed and a new control tower would be developed. Apparently the plans are based on a $725,000 American funded study by the aviation consultancy group, Leigh Fischer Associates.

But none of this is new. These plans have been on the table for a long time. Perhaps there's new momntum. But we still have no clarity where this $200m is coming from. Who will pay for these redevelopments? We have previously offered reflections on what needs to be done to deliver new infrastructure

Monday, 9 July 2012

And another thing...

A strange statement from Vice President Guy Scott :
“If you look at the Copperbelt it is an eyesore and roads are full of portholes unlike the way it was during the colonial times when companies like Roan Selection Trust existed. The mining industry in those days was very much part of the Zambian society. My concern about the mining industry and the energy industry for that matter is that they become domesticated, they become part of Zambia’s life, part of Zambia’s social life. If you look around in the Copperbelt even today it looks like one big ghost town in most places.”
- Vice President Guy Scott (Source : The Post)

A question arises - do we want mining companies to pay fair taxes or do we want them to develop local areas on behalf of Government? You can't have both! We have previously proposed a system that would held resolve this tension - more here

Mining Watch (Various)

Recent interesting mining related news stories.

Local people have come out gainst Mwembeshi Resources plan to establish a multi-million dollar to damage in Lower Zambezi National Park. The bribes appear to have failed this time.

Konkola Copper Mines (KCM) plans to extend the life at its Nchanga operation, one of its biggest mines, by more than 25 years. The company is investing in modern methods to access copper from an upper ore body beyond 2013, when mining at the site would otherwise have ended. The total cost of the project, expected to add 35 000 t/y of copper to KCM’s output, is $180-million, and KCM has so far spent about $70-million. KCM produced 200 000 t of copper in total in 2011/2012 and has broader plans to raise production to 400 000 t/y in the next four to five years. Those plans include completion of its flagship Konkola Deep Mining Project by December this year, ramping up copper production there to 200 000t from the current 15 000. The company has spent close to $1-billion on that project.

Mopani Copper Mines, majority owned by Glencore International Plc, is wrapping up a feasibility study which could see it sink $1.5 billion into another copper project. The investment, in addition to $2 billion already invested to upgrade operations, would double Mopani’s underground production of copper to 150,000 tonnes per annum. Preliminary indications from the feasibility study showed that mine life at both its Nkana and Mufulira operations would be extended beyond 30 years with this new investment, The timing of this announcement is not entirely random, as evidenced by this line from the CEO : "Clearly this goes back to having a stable fiscal regime so that we can pay back the loans. As long as we can have a very stable environment I think we will be here for a long time".

Friday, 6 July 2012

Aviation Watch (Zambezi Airlines)

Zambezi Airlines recently announced that it is taking back to the skies after ceasing operation for 7 months. The airlines says it has learnt its lesson. The plan is to operate a fleet of CRJ200 aircraft, with initial service covering Lusaka, Harare, Dar es Salaam, Johannesburg, Ndola and Lubumbashi. More detail via Daily Mail.

Thursday, 5 July 2012

Energy Watch (Electricty Tariffs)

Government recently announced that it will gradually raise the electricity tariffs it charges mining firms so that by 2015 they reflect the true cost of producing power : "We would like to see a situation where all the mines pay cost-reflective tariffs and we want to see this migration by 2015". No more subsidies. The tragedy of Zambia is that mining companies are actually subsidised in Zambia. Especially, if you consider the environmental damaged. The external cost of mining in Zambia means that taken together - we are subsidising pollution and externalisation of large profits to Swiss accounts.

Wednesday, 4 July 2012

A Cry for Fair Taxes

Over the last month we have seen increasing pressure on Government to increase tax revenues. Here are two recent examples of pressure :
“While mining companies have been making huge profits, the local communities have suffered increased impoverishment due to mining activities which have negatively affected the livelihood of our people"

"We cannot call for windfall tax because Government has ruled out this tax but there is need for continued debate so that the country can come up with other ways of getting more taxes from the mines without killing the goose that lays the eggs".

It appears that we may be winning the argument again. We won it in 2008 when President Mwanawasa accepted the argument to raise the taxes - that year saw the Mines and Minerals Development Act 2008. I am sensing another victory may be our hands. 

Tuesday, 3 July 2012

Dambisa Moyo's China

I have been trying to steer clear of the latest book offering from Dambisa Moyo Winner Take All. This recent review in the Daily Telegraph rather echoes what we have come to expect from Moyo :
This Zambian economist became famous with Dead Aid, a trenchant attack on the development industry. In Winner Take All, she has produced a flawed and frustrating book, simplistic, poorly written, careless with facts and largely devoid of originality. This latter point is most telling. There is no point approaching a subject of this importance unless you are willing to do some original reporting. Aside from one paragraph on page 90, which describes a scene at an unnamed international conference, nothing in Winner Take All suggests that Moyo has travelled anywhere, seen anything for herself, or interviewed anyone. Instead, this book clearly owes much to Google: the author relies entirely on reports downloaded from the United Nations and sundry think tanks......
Moyo appears to have maintained the poor analytical form in a rather strange new article in the New York Times on China and Africa relations. Aside from its poor arguments, what I found rather strange is that it reads like a point for point silent refutation of the points we raised in the BBC Africa Magazine piece in April. The extended version of that article was published as a monthly essay - China's New Colonialism in Africa.  Then there's the bizarre perpetuated belief that "aid" only comes from the West. Do we really need to debate such basic points? China provides lots of aid to Africa, but in Moyo's book that's "investment". By all means let us debate what China's new imperialism means  but intellectual dishonesty must be avoided - it does not advance the debate. Moyo's full article is reproduced below :

In June 2011, Secretary of State Hillary Rodham Clinton gave a speech in Zambia warning of a “new colonialism” threatening the African continent. “We saw that during colonial times, it is easy to come in, take out natural resources, pay off leaders and leave,” she said, in a thinly veiled swipe at China.

Monday, 2 July 2012

A Manifesto for Economic Sense

We have signed the Manifesto for Economic Sense put together by leading economists and which is growing daily. I encourage you to read it and sign it. Let us together end the madness of austerity that is crippling western economies further and in turn has slowed down the global economic engine. The conclusion below from the manifesto says it best : 
As a result of their mistaken ideas, many Western policy-makers are inflicting massive suffering on their peoples. But the ideas they espouse about how to handle recessions were rejected by nearly all economists after the disasters of the 1930s, and for the following forty years or so the West enjoyed an unparalleled period of economic stability and low unemployment. It is tragic that in recent years the old ideas have again taken root. But we can no longer accept a situation where mistaken fears of higher interest rates weigh more highly with policy-makers than the horrors of mass unemployment.

Better policies will differ between countries and need detailed debate. But they must be based on a correct analysis of the problem. We therefore urge all economists and others who agree with the broad thrust of this Manifesto to register their agreement at www.manifestoforeconomicsense.org, and to publically argue the case for a sounder approach. The whole world suffers when men and women are silent about what they know is wrong.