Energy Watch (Oil Supply)

Commodities trade Trafigura has been awarded a $500 million contract to supply Africa's top copper producer with petrol and diesel for one year. Trafigura will supply Zambia with 216 million litres of petrol and 21 million litres of diesel during the contract period starting from October. Energy Permanent Secretary George Zulu declared, "The country is now assured of a stable and continuous supply of fuel".

Good work, but can we now liberalise the market? The problems facing oil supply in Zambia are the same problems facing maize marketing. Inefficient government involvement in systems where its role should be purely to maintain strategic reserves and leave the rest to market forces, underpinned by appropriate favourable taxation framework. We need to be bold and courageous to transform this country. With a year under its belt, its time for PF to take risks and upset entrenched interests for a better Zambia!

Reforming the Police Public Complaints Authority

By Chola Mukanga

Government recently signalled its intention to reform the Police Public Complaints Authority (PPCA) picking up some of the crucial issues many stakeholders have flagged up in the past. Ngosa Simbyakula (Home Affairs D. Minister) agrees that the PPCA as currently administered complaints concerning the Zambia Police Service using a weak legal and institutional framework. Its mandate needs to be strengthened.

Refugee Situation in Zambia

A recent parliamentary report on the refugee situation in Zambia highlights the urgent need to deal with local integration of about 10,000 Angolan refugees. Sorting out their citizenship is morally right and makes good economic sense.

Prison Farming

Zambia Prisons Service is setting up a milling plant in Kabwe to fully add value to maize and other crops produced by inmates throughout the country every year. The service has already started constructing the plant which will have the capacity of producing 560 tonnes of mealie meal per week. It is a good development, but it would even be better if such initiatives are linked into broader rehabilitation programmes for prisoners, empowering them once they come out of prison. If this is only about ensuring the prison service has money, then it clearly it is too narrow an ambition. 

Mining Watch (Various)

A miner died earlier this month at Mopani Copper Mines (MCM) in Mufulira after falling into a pit while working underground. He joins many quiet victims of our poor safety conditions in the mines. The incident did not get much media publicity.

Budget Disbursements (January - July 2012)

Ministry of Finance update on the budget disbursement over the period January - July 2012. It estimates that K13.1 trillion has been disbursed across a range of areas including infrastructure development, poverty reduction programs, debt service, personal emoluments and general operations of Ministries Provinces and Spending Agencies.

The SADC Conference and "African solutions"

By Jessica Achberger

The 32nd annual SADC conference, which took place in Maputo, represent President Sata's first appearance before the regional development community.

In a report on Sata's maiden speech, The Times of Zambia explained that Sata stressed "peace, stability and security." Notably, he also stressed "African solutions" to African development issues. He rightly noted that security was the main historical issue to hinder inter-regional trade in Southern Africa, and that it should be the first priority of the SADC community.

SADC represents the most important grouping of economic partners for Zambia, particularly in terms of trade. Regional partnerships are key for sustainable economic growth and Sata's speech emphasised these points. However, how will the SADC conference move beyond rhetoric?

A New Airport Infrastructure Fund

By Chola Mukanga

The National Airports Corporation (NACL) last week announced the introduction of an infrastructure development levy to be paid by all departing passengers at airports. All domestic passengers will pay around US$6. All international passengers will pay around $11. these charges are in addition to existing taxes and charges. The levy comes into effect on September 1, 2012.

That announcement is not entirely surprising. NACL has recently announced that it 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.

Crop Marketing in Zambia

A recently parliamentary report (embedded below) on the state of crop marketing in Zambia observes  :

There is lack of a comprehensive policy and legal framework to guide proper functioning of agriculture marketing.....The cost of doing business in Zambia is very high. This is partly due to poor infrastructure,high interest rates and high transport costs. The infrastructure around the country is extremely poor. It is of the view that the developmentof infrastructure, particularly roads, is extremely important in increasing access to markets and reducing the cost of marketing

On FRA the lid is lifted :

The FRA maize floor price announced by the Government does not take into account the costof production by small-scale farmers. This makes the price of a 50 Kg bag in Zambia morelucrative than what is obtaining in the region and, therefore, encouraging commercial farmers,both from Zambia and other countries, to sell maize to FRA. Effectively, the Government issubsidising the price of maize for the sellers in the region.

It suggests that the solution is partly big government :

A comprehensive legal framework, to be called Agricultural Marketing Act, should besubmitted for enactment by Parliament as a matter of urgency. The Act should provide for the establishment of the Agricultural Marketing Council as a statutory body to advise Government on market related issues, to monitor and analyse the performance of the agricultural market, and to investigate and advise on all statutory interventions in the market

Thankfully, it is also partly about sorting out the FRA, along the lines we have previously suggested :

In order to prevent confusion, a separate buying organisation away from the FRA should be put in place. This will require the FRA Act to be repealed so as to allow it to purchase maize at competitive bidding from the market for strategic reasons....Functions of the FRA should be streamlined by maintaining its original responsibility of keeping strategic reserves...

Who deserves a state funeral?

Government has set out new policy on state funerals:

Evans Chibiliti [Cabinet Secretary] says the personalities entitled to state funerals are the President, Vice-President, Chief Justice, Speaker of the National Assembly and Cabinet ministers.... all former holders of these offices will be accorded the status of a state funeral and the period of mourning for a serving President is seven days while that of a former President is five days....five days of national mourning will be accorded to a serving Vice-President and three days to a former Vice- President.....Speaker of the National Assembly and Cabinet ministers will all be accorded three days of national mourning while former holders of these offices will be accorded one day.

That is a lot of state funerals and at considerable cost, when one considers that “the logistics for a state funeral shall include the provision of caskets, tents and firewood, gun salute and escort..". Unfortunately that's the not the end of it because we are also told : "the President shall reserve the right to decide which other persons shall be accorded a state or official funeral other than those listed in the guidelines and in such circumstances". So nothing new then. The policy does not give the criteria that the President will use. Even his aunt can be given a state funeral. At least we now know how much it will cost!

Aid Watch (Japan)

Japan recently donated US$8 million for the drilling of 200 boreholes in Luapula Province. According to Japan's Ambassador Akio Egawa, "the gesture is aimed at supplementing Government efforts to provide clean drinking water". One though has to question the value for money of these boreholes at that price. Unless of course it is the usual aid mirage : large figure quote but small amount actually given.

PAYE is not a Mining Tax

“PAYE is tax paid by workers and when this is removed from their tax bracket, the mines contribute very little to the treasury"

- Miles Sampa (Finance D. Minister)

Well, well.... Glad we are nearly on the same page. I say nearly because even if you include PAYE we are still getting less than 10% of total mineral export revenue. If you consider subsidies on electricity, no duty on fuel, etc we look foolish indeed. That is before you consider that our precious stones are not even taxed properly or controlled. We are losing out big time. As things stand it is certainly more money in foreign pockets. But the statement by Mr Sampa at-least does suggest that Government now appreciates this elementary point. Now can we please do something about it? 

How much should the President earn?

That question has exercised minds following the March 2012 increase of presidential and ministerial salaries. There's much dispute on the precise level of the increase, but a scan of the legislation suggests the increase is staggeringly high, certainly a near doubling of the pay. More money in ministerial and presidential pockets, some have cried. And yet the issue is not really about the level of pay, but the basis on which the pay is set.

Desolation of Kankoyo

"We hope the government can do something to help us. We are really suffering. The sulphur dioxide is eating away our roofs and we have chest pains and constant cough. My husband is always sick. Every two days he is sick"

Kankoyo resident Christine Sibanda bemoans the desolation of Kankoyo. It is an open question of what can be regarded as the most polluted town in Zambia. Not too long ago that prize went to Kabwe when it appeared as the 8th polluted place on earth. Which makes you wonder. I went to Butondo Secondary in Mufulira after spending a few years at St Clements in Mansa. Ever since I can remember Kankoyo has been a tragedy. We have previously touched on the need to re-think mining policy in our essay here. 

Aviation Watch (New Routes)

Not technically "new" but Emirates Airline are now planning to fly daily between Lusaka and Dubai starting October 1, 2012 following the increased number of passengers carried on this route in less than six months. The airline launched its five times a week service to Lusaka and Harare in February 2012 and has since carried over 43,000 passengers on the route : “The flight has been successful; our load factors are above 80 percent thanks to the trade, Government support and Civil Aviation Authority that have played a key role in our success". More detail via Daily Mail.

Oil Supply in Zambia

A recent parliamentary report on the state of petroleum industry in Zambia is embedded below. It notes that :

"....petroleum products in Zambia, which are the highest in the region, could be cheaper....fuel products are being kept superficially high due to impediments in the petroleum sector which include issues of policy, planning, recapitalisation, procurement and taxation...".

It's solution? More big government :

"There is need for a transparent tendering system for the procurement of crude oil and finished products with preference being given to oil marketing companies already invested in Zambia. In this regard......recommend that an independent, professional statutory body be established and charged with procurement of petroleum products. This will enhance efficiency, transparency and accountability in the procurement of petroleum feedstock..."

That of course is not the answer. The problems facing oil supply in Zambia are the same problems facing maize marketing. Inefficient government involvement in systems where its role should be purely to maintain strategic reserves and leave the rest to market forces, underpinned by appropriate favourable taxation framework. It is not rocket science! 

Investment Watch (Various)

Zambian Breweries Plc, a unit of global brewer SABMiller recently announced plans to begin production at its new US$90 million brewery by mid-November. The new brewery will be in Ndola with annual production capacity of 100 million litres, or 267 million bottles, a year. The company concluded a rights issue in December through which it raised $US$70 million of the total financing.

Greenbelt are planning to construct a multi-million dollar fertilizer manufacturing plant in Mazabuka starting early next year. The plant will be able to produce over 60,000 tonnes of fertilizer annually to meet the rising demand for the commodity from Nakambala and Kaleya Sugar plantations. At present Greenbelt is producing 34 thousand tonnes for fertilizer at its Mazabuka plant which is under lease. The plan is to expand operations.

New Investment Deal for Zambia and Zimbabwe

By Jessica Achberger

Opening the first Agricultural Show of his Administration, President Sata spoke Saturday of the need to create new economic ties between Zambia and Zimbabwe - alongside controversial leader President Robert Mugabe. The new investment deal between the two countries is to focus on agriculture, tourism and power generation.

The greatest historical trade ties between the two countries have always been within the agriculture sector. For Zambia, exports such as maize and sugar have been rising in tandem with Zimbabwe's imports of soya-beans and fruit. Tourism also represents an important growth sector for both nations, which will jointly host the United Nations World Tourism Organisation (UNWTO) summit in August of 2013. Finally, President Sata emphasised the importance of the Batoka Gorge power project to combat regional power deficits.

Regional cooperation is key for the success of any nation, particularly in Africa. For land-locked Zambia, relations with neighbours have always been paramount. Therefore, although the reign of Mugabe has instigated international sanctions, it does not seem in Zambia's best economic interest to not foster better ties. 

Mandatory national service

GRZ recently announced the reintroduction of a mandatory Zambia National Service (ZNS) skills training for school-leavers. The reintroduction of the ZNS mandatory training for youths will start with Grade 12 school-leavers for the end of year 2013. Trainees would be expected to spend 18 months at the ZNS camps before enrolling for further education at college or university levels. K100 billion was allocated in this year’s budget for the refurbishment of the ZNS infrastructure that would host the youth and that additional funds would be sourced in next year’s budget. According to Youth Minister Kambwili the “training would equip youths with survival skills and that it would be different from the training undertaken during the UNIP government, where it involved military training”.

This has previously been discussed here building on the useful contributions by readers.

A Risk-Free Africa?

By Jessica Achberger

There is little doubt that many countries in Africa, including Zambia, are increasingly catching the eye of international investors. However, all this optimism risks downplaying several critical issues.

In a recent article in The Ghananian Chronicle, KPMG called Africa "Risk-Free for Investors." While the article caveats that the recent panel of KPMG, the sixth of its Africa Conversation series, was convened to identify and explain the complexities of investing in Africa, it made several blanket statements.

For example, the Zambian Economist has long advocated scrutiny when discussing China's investments into Africa. On China, the panel argued:

Substantive investment comes from China, now Africa's biggest trading partner. The panellists agree that China's engagement in Africa is increasingly to the benefit of Africans. China is an important partner in infrastructure development, which enables economic growth.

Habil Olaka, Chief Executive Officer of the Kenyan Bankers Association, said "Unlike the Chinese, many African companies have limited capacity to deliver on major infrastructure projects.

In Kenya, we have seen increased side opportunities for local companies, and this helps people on the ground. African collaboration with the Chinese is a win-win scenario."

It seems to soon too say that there is no longer a risk in Africa, for investors or the nations they invest in. For Zambia, it is crucial that the country remains competitive to outside investors, while ensuring that such investments are sustainable and responsible. 

Zambia - OECD/AfDB Country Report 2012

The 2012 economic assessment from the AfDB and OECD on the Zambian economy is embedded below. It notes the favourable conditions, but highlights the economic vulnerability to external shock in view of a sluggish global economic recovery. Some potential mining exports impacts - though I don't think we need worry too much there except in terms of widening the debt envelope to meet potential budgetary requirements. We must remember that Zambia did very well during the last global slowdown. The report does also note that "high youth unemployment and slow progress in poverty reduction may also overshadow the gains made from strong growth and limited inflation". 

Mining Watch (Various)

It was announced last week that a Chinese company plans to invest $100 million in a new mining project that will produce 600 tonnes of copper cathodes a year. According to ZEMA. China Copper Mines Ltd has applied to build a copper leach plant.. It would seek to exploit five mineral waste dumps created by mining operations at the high-grade Fitula open pit more than 400 km north-west of Lusaka.

GRZ is pressing ahead with plans to compel foreign companies to bank their earnings locally and also control externalisation of export earnings. Finance D Minister Miles Sampa said last week that a new statutory instrument (SI 34) would be issue to “compel exporters especially those in the mining sector to acquire letters of credit from the Government before exporting their products and also ensure that their earnings are banked locally”.

ASTREA Investment Limited plans to set up a US$8m limestone production plant in Masaiti to supplement the current demand of the commodity from mining and agricultural sectors. The company is expected to commence construction immediately the Zambia Environmental Management Agency (ZEMA) approval is granted.