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Thursday, 28 February 2013

Aid Watch (Denmark)

Denmark has given Zambia US$89 million for improvement of water and sanitation services in Ndola, Luanshya and Masaiti. Local Government D. Minister John Kufuna says the money will be released soon to Kafubu Water and Sewerage Company (KWSC) who will implement the project. He says the Government will continue sourcing money to improve water supply and sanitation services in the country because most of the equipment (e.g pumps) is obsolete and needs total replacement. KWSC plans to use the grant to upgrade pipes and service new areas. It also plans to extend sewerage facilities to new areas in Ndola, Luanshya and Masaiti.

A recent study by the Water and Sanitation Program (WSP) suggests poor sanitation (mostly water related) costs Zambia US$190m each year. This sum is the equivalent of US$16per person in Zambia per year or 1.3% of the national GDP. Hence the donor community is focusing much of the aid on water and sanitation.

For example, the Germany government last year committed itself to fund K550bn (€81m) over three years. It's Urban Water Supply and Sanitation programme supports improvement of water infrastructure in Eastern Province through the Eastern Water and Sewerage Company (EWSC). The programme includes 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.

The entire sector depends on donors! All the 11 Commercial Utilities (CUs) providers are all in a deplorable state. MMD allowed then to become riddled with corruption and poor management. They cannot survive without these foreign grants - foreign aid grants are passed through the Devolution Trust Funds (DTF), National Water Supply and Sanitation Council (NWASCO) and Ministry of Local Government and Housing.

How can we have an entire sector dependent on donors?

Sadly, no one at the Ministry of Local Government or NWASCO seems to have a clear idea of what do about our water supply problems. But then again they all have boreholes! Zambia has an abundance of water - and we can't even get water and sanitation sorted out. Mind boggling incompetence. 

Wednesday, 27 February 2013

A Problem of Immunity, 2nd Edition

Justice Minister Wynter Kabimba says Government will now seek to lift the 4th President's immunity to facilitate prosecution :
"You cannot be prosecuted unless your immunity is lifted by Parliament; that is what the law says. You can even be charged, what you cannot do is prosecute. To be charged is not the same as to be prosecuted. The Constitution says you shall not be prosecuted; it does not say you shall not be charged for any civil or criminal wrong that you did during the time when you were head of state...The ACC was saying to Mr Banda, 'come here because according to our investigations, there are issues we would like to clarify with you...Now you cannot claim immunity against that...Now that he has been given an opportunity to go to the ACC for him to go and answer questions and without submitting to the ACC, he has pleaded immunity, we have no choice now but to take the matter to Parliament so that his immunity against prosecution can be lifted, so this is not an academic exercise."
(Source : The Post)

It should be clarified that though presidential immunity relates to solely to "legal proceedings", it is more or less equivalent to immunity from criminal investigations as well because some of the criminal evidence can only be obtained by search warrants or record warn and caution statements from the presidential suspect. This is certainly the way investigating agencies currently understand the provisions. So either the Justice Minister does not understand the law or he is playing political football with an assumed ignorant public.

The more important point is that it is now time to reform presidential immunity. As we concluded last year. The best way forward is to allow the President to enjoy criminal immunity during the presidency but ensure but this immunity expires automatically upon leaving office. This concedes the argument for him to get on with the job unimpeded and free from countless criminal lawsuits. But in doing so we should be clear that what would be happening is “suspending prosecutions” rather than introduction of criminal immunity. The public needs to understand that no one is above the law. It is vital that criminal prosecutions can be brought at immediately when he/she leaves for crimes committed against the State.

It is time to end this madness - the timing is right because the constitution is under review. The only puzzle is why no one appears willing to change the law!

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Tuesday, 26 February 2013

Zambia Government Ministers List

The full list of ministers in the current PF administration.

President – Mr. Michael Sata
Vice President – Dr. Guy Scott.

President – Mr. Michael Sata
Vice President – Dr. Guy Scott

Cabinet Ministers (20)

Minister of Agriculture and Livestock – Mr. Robert Sichinga
Minister of Chiefs and Traditional Affairs- Professor Nkandu Luo
Minister of Commerce, Trade and Industry – Mr. Emmanuel Chenda
Minister of Community Development, Mother and Child Health – Dr. Katema
Minister of Defence – Mr. Geoffery Mwamba
Minister of Education, Science, Vocational and Early Education – Dr. John Phiri
Minister of Finance – Mr. Alexander Bwalya Chikwanda
Minister of Foreign Affairs – Dr. Lungu
Minister of Gender and Child Development – Mrs. Inonge Wina
Minister of Health – Dr. Kasonde
Minister of Home Affairs and Deputy Chief Whip Mr. E.C. Lungu
Minister of Information and Broadcasting – Mr. Sakeni
Minister of Justice – Mr. Winter Kabimba
Minister of Labour and Social Security – Mr. Fackson Shamenda
Minister of Lands, Natural Resources and Environment – Mr. Wilbur Simuusa
Minister of Local Government and Housing – Mrs Emmerine Kabanshi
Minister of Mines, Energy and Water and Chief Whip Mr. Yamfwa Mukanga
Minister of Tourism and Arts – Sylvia Masebo
Minister of Transport, Works, Supply and Communication – Mr. Yaluma
Minister of Youth and Sport – Mr. Chishimba Kambwili
Attorney-General: Mumba Malila

Deputy Minister (37)

Transport Watch (Various)

Recent transport related developments:

Item 1#  The terminal at Harry Mwaanga Nkumbula International Airport in Livingstone is cracking. The airport is also slowly sinking, according to National Airports Corporation. Transport Permanent Secretary Muyenga Atanga has assured the Parliamentary Committee that the terminal has "not deteriorated to life threatening levels"

Item 2# Negotiations have reached an advanced stage to relocate Simon Mwansa Kapwepwe International Airport from Ndola's Ndeke area to Chichele plantation. Kamfinsa MP Moses Chishimba has opposed the proposed tempering with Chichele Forest Reserve.

Item 3# Government will introduce a National Airline before the end of this year. Transport Minster Christopher Yaluma has appointed a cross government team of officials to spearhead the setting up of the national flag carrier. The team will submit a report to government on the issue next month.

Item 4# Ethiopian Airlines, the fastest growing airline in Africa, has announced further expansion of its service to the continent with new flights to Ndola. The new schedule of three flights per week will begin on March 31st, 2013. Ndola will be Ethiopian’s 45th African and the 72nd international destination. It will also be its second destination in Zambia next to Lusaka.

(Sources : ZNBC, Various)

Item 2# is interesting. But even better is that we should privatise these airports. We need to liberalise this sector. NACL is corrupt, mismanaged and broke . The best thing is to move towards full liberalisation with private sector able to bid and own these airports. We have many promises of turning Zambia into a regional passenger and cargo hub! My view is that NACL are not well placed to take forward this vision. We need to break up ownership of these airports and allow them to compete. Separate ownership will provide better incentive for improvement in service and so forth.

Item 3# is not a priority in a country where 2 in 3 people can barely afford a meal - and many of our children roam the streets totally robed of their future. Why should our poor taxpayers fund airlines they will never use? Poor priorities are killing our people. We mourn about people dying in road accidents. When are we going to start mourning for those killed through hunger and poor decision making? We are a nation of infinite contradictions.

Friday, 22 February 2013

Mining Watch (Mimbula)

Konkola Copper Mines (KCM) recently confirmed that it is proceeding with plans to resume output at the Mimbula open pit mine as part of Vedanta's strategy to extend mine life at its operations. KCM has been carrying out feasibility studies since 2011 at Mimbula including extension of the power line to the site as well as pit de-watering and de-silting as mining has not taken place there since the 1970s. The feasibility has been completed and now it plans to invest US$200m.

The company is currently awaiting environmental approvals for the project. The production capacity of the mine had not yet been established but early indications suggest that it has huge deposits of copper. Subject to approval, mining of ore should start April 2014. The Mimbula open pit mine is expected to create a maximum of 600 jobs.

The outlook for copper production is looking very positive. Copper production is expected to exceed 1.5m tonnes in 2015 from the current 0.8m tonnes. Among new projects due to come online are the expansion of Lumwana Copper Mine, First Quantum's $2bn greenfield Trident project, China Nonferrous Mining Corporation's $832m copper project and the Lubambe mine jointly owned by Brazil's Vale, African Rainbow Minerals and state-owned ZCCM Investments Holdings.

Thursday, 21 February 2013

Regulating Higher Education

By Chola Mukanga

Government has drafted the High Education Bill, which is intended to put in place a new regulatory for higher learning institutions in the country. Education Minister John Phiri says once enacted into law, higher learning institutions operating below the required standards will face the law. He believes that there are too many higher learning institutions that do not befit the title "higher learning".

The draft Bill is a direct fulfilment of the PF Manifesto, which promised to create a new independent regulatory body to register and enforce education standards in public and private universities. The PF initiative of course builds on what the MMD administration begun with introduction of a National Qualifications Framework in Education Bill 2011. Indeed it should be clear for the record that MMD also called for such a new Regulator in its manifesto. One hopes the proposed new Regulator will sort out our current higher education mess.

Wednesday, 20 February 2013

Tax Avoidance in Zambia

ActionAid recently exposed tax avoidance by Associated British Food Group in Zambia. Full press release below.

ActionAid Press Release

A new investigation released today by ActionAid has revealed that the Associated British Foods group (ABF), owner of Silver Spoon sugar, Ryvita and Primark, is dodging its tax bill in Zambia, one of the world’s poorest countries.

The report, Sweet Nothings, which is the result of 12 months of research focusing on the multinational’s sugar operations in Zambia, has discovered that since 2007:

>>Zambia Sugar has generated profits of $123 million, but admits to paying “virtually no corporate tax” in Zambia.

>>It has found legal ways to siphon over US$83.7 million (US$13 million a year) – a third of pre-tax profits – out of Zambia into tax havens including Ireland, Mauritius and the Netherlands.

>>Zambian public services have lost an estimated US$27 million as a result of the company’s tax avoidance schemes and special tax breaks which is enough money to put 48,000 children in school.

Tuesday, 19 February 2013

Higher mining ownership?

ZCCM-IH is pushing for higher dividends from its investments in Zambian subsidiaries of Vedanta Resources (Mopani) and Glencore International (Konkola), among others . The government owned investment arm also wants to negotiate increased stakes in local mines, though talks have to commence, according to the ZCCM-IH CEO, “Clearly, it is a matter that keeps coming up regarding the level of shareholding that we should have...It is something that we will have to deal with at some point.”

Government has maintained minority stakes ranging from 10 percent to 21 percent in some mining companies, which it holds through ZCCM-IH. It wants the companies in which it has shareholdings to alter their dividend policies to improve transparency and increase payouts. At present dividends are the last priority for some companies, which has led to little benefit to country.

The new ZCCM-IH policy will also focus on buying stakes of as much as 35 percent in new mining projects, such as Nava Bharat Pte Ltd.’s Maamba Collieries. It also wants to boost ownership of existing operations, though this will clearly depend on how well it will negotiate. Government has no intention of any compulsory acquisition, because that is going backward.

We have previously flagged up the new ZCCM-IH policy framework. Private investors who own about 12% in ZCCM have been cautiously optimistic of how the ZCCM-IH has now got back on track. The Ministry of Mines must be commended for the good work for getting ZCCM-IH back on track. It is quite clear there's also renewed momentum to do more. 

Monday, 18 February 2013

New Mining Taxes?

Finance Minister Alexander Chikwanda recently signalled that Government is considering introducing new "tax measures" in mining :
"...We will introduce measures and relook at the tax system in the mining sector. Our mining sector has not contributed much compared to the rest of the region. So we want to engage local experts and ensure we have the statistics on mineral production and exports, and then we will find modalities to effect new tax measures to increase revenue collection..."
I commend Mr Chikwanda for his honesty that we are losing out. As well as his latest signal that change is on the way. Two additional observations on his statement.

First, the suggestion is interesting - but remains vague. What are these measures? We need details not merely promises of more study. It is not theoretical physics. These are straightforward issues. The obvious option is increasing revenue based taxes e.g windfall taxation or raising mineral royalties perhaps to 10%. Profit taxes do not work. Alternatively explore an infrastructure based tax that can be ring fenced to be spent in mining areas - that would be a win-win proposal for everyone. And it would ease pressure on mining companies for Corporate Social Responsibility projects. Which are mere bribes against citizens demanding higher taxes and better pay.

Secondly, any reforms must be done differently. I feel we are missing the basic point. The problem with our mining policies is that they are party political policies, not policies of the Zambian people. Mr Chikwanda must remember that to have good mining policies, it is not just about changing taxes or laws, it is how they are changed. Policies forced by PF without a Green Paper and public consultation will do nothing to build a lasting environment for growth because it will have no full buy-in of all Zambians. Lack of consultation and unilateralism is hurting our country in many areas.

We talk about "one Zambia, one nation", but in my view right now there's nothing "one nation", as far as mining taxation policy is concerned because successive governments have treated it as personal to order without people participation. As long as that continues every government that comes along will constantly alter its mining taxation policies because we people ownership. We need a Zambian solution, not a PF or NAREP or MMD solution. GRZ and investors have to realise it is in everyone's long term interests to push for transparency within a publicly agreed framework. Anything else is not sustainable. The approach should be consultative and transparent. Only that will deliver stability in mining policies and facilitate long term investment.

The next step therefore is for GRZ to set out a comprehensive national policy on mining. And consult with the people for a good period. Let us all comment and debate on it. And then let it be implemented after parliamentary scrutiny - and let it stand the test of time. Mining is too important to be left to the care of few individuals no matter how smart or well intentioned our politicians may be. It is a national issue.

Friday, 15 February 2013

Death Penalty, 6th Edition

The death penalty is here to stay. Delegates at nearly all provincial constitutional conferences have retained article 28 clause (3) of current draft constitution, which states that “A person may be deprived of life if that person has been convicted of a capital offence and sentenced to death”

The arguments advanced by the delegates for the death penalty seems to largely rest on its alleged "deterrent effect". Chifumu Banda MP says Zambia needs to maintain the death penalty because "some people would take advantage of the deletion and go on rampage killing people". He goes to suggest that, “people found guilty of murder by courts of law should be meted with capital punishment as a way of deterring other criminals that claim the lives of innocent people...".

Dora Siliya MP says we need to learn from other countries who are allegedly facing problems because of abolishing capital punishment. In her words, “other countries are now regretting because they abolished capital punishment and implemented life in prison because killings have now doubled and committing various atrocities.."

There are many credible reasons for having the death penalty. But the reasons being offered appears to be refuted in academic literature. One paper published in 2009 drawing on USA evidence concludes : "with state-level data from 1995 to 2006, this paper failed to find meaningful deterrent effect of death penalty...results show that even the state with most execution record does not have statistically meaningful lower homicide rate than no death penalty states...". One needs to be cautious about transferring results from different contexts but I think we can reasonably assume that Chifumu and Siliya are worryingly offering the wrong reasons.

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Thursday, 14 February 2013

Poverty and Power in Zambia

By Chola Mukanga

Poverty is first and foremost a deficiency of power, in particular political power. The reason for this is that economic and political controls are interlinked. Where people have little political power they will also be economically poor. Where people are poor economically, they will also usually have little political power. In Zambia the poverty of power manifests itself nationally and individually.

Nationally, Zambia has very little power. Although the country gained “independence” long ago our future is still shaped by large external powerful forces. These hold ultimate power and dictate the affairs of the nation – they rule us from the dark shadows. It is easy to see the poverty in power across the donor table. It is easy to see it when we beg for investment. The large external forces that control Zambia’s power range from business interests; NGOs; foreign governments – and of course in recent times China has increased its influence in the affairs of our country. This poverty of power is not theoretical. It is directly linked to the poverty of individuals because collectively as a country we have placed ourselves in a situation where we rely on others to shape our future.

Wednesday, 13 February 2013

Is federalism the answer?

Delegates at the recently ended Southern Province Constitutional Convention proposed that Zambia adopts a federal system of governance. They amended the Preamble to the first draft constitution, dropping the words “devolved system of governance” and replacing it with the words “federal system of governance”. The delegates believe the amendment will allow the local people to "manage their own resources in a more amicable manner".

This will be interesting because PF through Wynter Kabimba have already rejected the idea. The real issue with federalism is - of what sort? Zambia already has some element of federalism because at the basic level federal structures are any structures that exist at two distinct levels – the “central” and “local”, each within a well defined scope so that it enjoys autonomy with respect to that scope.

The BIG issue that needs national debate is the degree of federalism that is needed to support social and economic progress in Zambia. Ultimately this is a question about what society we want. The USA federal system is different from the Switzerland or Comoros or Nigeria or Australia. Each country must ask the question - What model of government suits us? Not all issues must be fully devolved. Indeed not all issues are currently devolved, even though we have elements of federalism. Some issues can only be efficiently or fairly handled at the central government level. We need to be clear what those are.

Then there's the question of thinking through some of the negatives. For example, there are huge dangers of large distributional and inequality problems. Under a federal system provinces will compete with one another. That is a good thing but competition of that kind is optimal where there’s perfect mobility of people and resources in general. If you find yourself in western province under a corrupt governor heavily influenced by regional politics, you will begin to envy other provinces. Deep structural inequalities due to resource endowments may create problems of instability, as we seen in Nigeria with huge inequalities in the north. Without accountability federal systems can create more problems than it solves.

In short it is not obvious the extent to which a proper debate has been had on this issue. A huge change towards deep federalism requires strong public debate. It would represent a deep structural change to how we govern ourselves. Government needs to facilitate discussion more widely - before we make up our minds.

Tuesday, 12 February 2013

Investment Mirage?

"As you may be aware, Zambia has a housing deficit of nearly 1.4 million units and the interest by our colleagues to invest in Southern Province and Choma in particular is most welcome... They have capacity to mobilise US$10 billion of investment in various projects in Southern Province..."
- Chileshe Mulenga 
(Southern Province Permanent Secretary)

A claim earlier this month by Mr Mulenga. Apparently some Indian investors are alleged to be interested in investing in Southern Province with around US$10 billion. They are interested in real estate, agriculture, mining, steel works and putting up a cement plant. We are told they have already engaged the Choma Municipal Council on the possibility of setting up a shopping mall in the new provincial capital of Southern Province.

One hopes this is a genuine case of 'from India with love'. But the story stirred memories of a famous Russian mirage. During the Banda administration Zambian newspapers went crazy with reports of three Russian metals companies who were allegedly going to invest $2 billion in Zambia. Later after some easy digging by bloggers, it was discovered that our Russian friends were used to making grand claims that never materialised. They were not even good enough to be called infestors, much more like impostors. One hopes Mr Mulenga has not fallen prey to an Indian mirage. Or worse he has lost his stability as public servant and is now just politicking to help sway bye-election results.

Monday, 11 February 2013

Is Cassava the answer?

Helen Zulu writes in the Times of Zambia that escalating mealie meal prices may be solved by increasing cassava production as a substitute for maize. It could help to stabilise the escalating mealie meal prizes as cassava has many advantages when compared with maize both from the agronomic perspective as well as its multiple economic uses. It is also relatively more drought tolerant than maize.

Cassava production has actually been growing rapidly since the early 1990s, as farmers have sought to diversify their food staple production out of maize and into cassava. The removal of heavy subsidies for maize production and marketing coupled with the government withdrawal of a guaranteed maize market, from the early 1990s onward, reduced incentives to grow maize, leading farmers to look for other more profitable crops. At the same time new varieties have come on stream with wider market appeal. Despite the progress, cassava remains extremely under-commercialised, and there are fears that unless the commercial market can be developed further it will all come to a stop.

According to FSRP research, a key constraint in commercialising cassava is the price. As a general rule of thumb, cassava substitution for maize becomes commercially attractive where the price of dried cassava lies about 60% to 70% of the price of maize in Zambia. A low cassava price, in turn, requires high on-farm productivity, low marketing costs and close proximity to processing facilities.

So as well as the need to accelerate expansion of improved cassava varieties and agronomic practices, we must tackle the proximity problem. Cassava price is normally higher than maize price because of the long distances cassava must transit from cassava producing areas (Luapula, Northern and North Western) to the feed and food industries in Copperbelt, Central and Lusaka provinces. Given the high cost of transport in Zambia, it seems that increased cassava production on the Copperbelt, Central and Lusaka provinces offers the best likelihood of making low-cost cassava available to urban consumers. Alternatively we should focus on establishing processing facilities near current major production centres, and hope the economies of scale will lower the cost.

A combination of these initiatives will all contribute to improved incentives for cassava commercialization. Unfortunately, even these initiatives will not be enough as long as we keep subsidising maize heavily! Giving large subsidies on maize and talking about large booms in cassava is contradictory. Again we see the incoherence of current government thinking. Policy after policy it is the same story.

Friday, 8 February 2013

Fixing bye-elections

Two more bye-elections are coming - and many more to come! The Supreme Court last week nullified the election of two MMD MPs for electoral malpractice. 

Kapiri Mposhi MP Lawrence Zimba had won the High Court case but his opponent appealed to the Supreme Court, resulting in the removal of the MP. Judge Gregory Phiri said the High Court misdirected itself when it held that there were no electoral malpractices. Mr Zimba was present when Thandiwe Banda was distributing money to groups of women and was also actively involved in the distribution of money. More importantly the Judge said that it is was not necessary to establish that the majority of voters were not prevented from voting for a candidate of their choice. Simply preventing a few voters is electoral malpractice resulting in nullification. Lukulu West MP Misheck Mutelo had appealed to the Supreme Court after his election was nullified by the High Court last year. Supreme Court judge Elizabeth Muyovwe upheld the High Court’s decision to nullify the election on grounds of electoral malpractices.

These are great judgements which uphold the rule of law. There are many more bye-elections coming once the Supreme Court finishes off the appeals. More losses for MMD are coming. The MMD has only itself to blame for its brazen corruption and the impunity it treated the electoral code. Justice is now being done. And so it should be - for it is clear to many who observed the 2011 elections that they were NOT free or fair. The international bodies once who passed them as such, now hide in quietly in shame.

But we have a bigger problem : Mr Mutelo and Mr Zimba have for the last year been eating money that they should not eat. They have received gratuities and allowances at huge cost to taxpayers even though they got there through electoral malpractice. There's something wrong here. The verdicts do not deliver full justice to the Zambian people. A better outcome would be for Mr Mutelo and Mr Zimba to pay back the money to the Zambian people. More importantly there must be compensation to the other candidates too. They lost out on application fees, campaign money, etc. All due to the electoral corruption of these two people. Now those candidates have to pay again to re-contest the seats. That is not fair. We the people also lose by funding yet more bye-elections. This is not acceptable. We are losing out by letting politicians get away with this!

What is the solution? Simple: we need to change the incentives. If an MP has lost a seat through electoral malpractice, they must be made to pay back the money to tax payers and be asked to compensate. I submit that this will fix the problem. The MPs are currently not paying the full external cost of their electoral corruption. If we made the pay, they will stop being corrupt. Fix the incentive, fix the problem. MPs wont go for this solution. We the people must demand it.

Thursday, 7 February 2013

Mine Watch (First Quantum Minerals)

First Quantum Minerals Limited (FQM) will this year start constructing a US$230m (KR1.22bn) power line from Lusaka to Solwezi for its latest mine, Sentinel at Kalumbila. The 330 kilovolts transmission line would cover a distance of about 400 kilometres. The power line would tap power from the Tata / ZESCO owned 120 megawatts Itezhi-tezhi hydro-power station currently under construction. FQM is negotiating with ZESCO to agree construction arrangements.

FQM is investing more than $2 billion in Sentinel Mine which will be Africa's biggest copper mine with a capacity to produce more than 500, 000 tonnes of copper concentrates per year. The mine will be fully operational in the later part of 2014. It says the $250m investment in the power will be easily recovered under five years.

The investment will effectively make Sentinel and Kulumbila self sufficient. Good for them, they won't have to worry about the hapless ZESCO. It's a fascinating arrangement because ZESCO will more or less be contracted to do the grid but ownership of transmission will rest with FQM. Perhaps liberalisation is happening!

The Itezhi-tezhi power project involves the development, construction, operation, and maintenance of a 120 MW base-load hydro power plant at the Itezhi-tezhi dam on the Kafue River. The project is being developed under a 25-year concession by ITPC, a special purpose joint venture formed in 2007 to construct, own and manage the project. ITPC is owned 50% by ZESCO and 50% by Tata Africa Holdings Ltd. (TAHL), which signed a memorandum of understanding in 2006 to develop the project. At the end of the concession period, the power station will revert to the GRZ. All ITPC power will be sold to ZESCO under a long term take-or-pay Power Purchase Agreement (PPA). ZESCO will buy power from ITPC and transmit it through the new transmission line to the national grid. As will FQM if they build the transmission line.

Wednesday, 6 February 2013

Intellectual Poverty in Zambia

By Chola Mukanga

Real poverty is intellectual. Poverty is not an absence of resources or money; rather, it results from an absence of knowledge. History has shown that empires that have dominated for some time have usually gone into decline or failed to tap into potential for lack of generation of new ideas. Economic historians have for some time been puzzled on why Portugal, so prosperous in the 15th century began to decline from thereafter. A lot of reasons can be put forward, but one common and unmistakable reason was the decline in the trade of ideas. In Francis Parry's 1670 observations, "the people are so little curious that no man knows more than what is merely necessary for him". A view echoed by the 18th Century visitor to Portugal, Mary Brearley, "the bulk of the people were disinclined to independence of thought and, in all but few instances, too much averse for intellectual activity to question what they have learned". China a maritime power prior to the 1500s, pretty much failed to take advantage of its dominance and spark an industrial revolution because it began to look inward and was not open to new ideas.

Ideas and new ways of thinking are critical for Zambia to develop. In my view we need as much ideas generation as possible. The pursuit of knowledge and new ways of thinking must drive a modern Zambian state.

Tuesday, 5 February 2013

Investment Boom or Mirage?

Zambia attracted US$10bn worth of investment pledges in 2012, the highest ever recorded pledges in a single year. The figure exceeds the $4bn investment pledges made in 2011. exceeding the targeted $4 billion. The mining sector had the largest share with 40% of the pledges. Manufacturing sector and energy also performed well in terms of attracting investment. Interestingly, the pledges only amounted to 31, 000 worth of employment pledges underlying the difficulty of foreign direct investment actually creating jobs.

Zambia Development Agency (ZDA) attributes the jump in investment pledges to " improved investment climate and stability in major macro-economic indicators". The ZDA explanation for the sudden jump is clearly poor. There's no difference in investment climate between 2011 and 2012. And what does "stability in major macro-economic indicators" have to do with a sudden jump? The most obvious explanation is that there were potential investors who may have kept the powder dry in 2011 waiting for the smooth transition in power after the elections before committing to go ahead. The reasons are therefore likely to political not economical.

This accords well with the literature on Foreign Direct Investment (FDI) which shows that the key drivers of FDI tends to be political stability, cheap and diverse labour and, most importantly, prevailing global economic forces. If we take the largest component mining, it is clearly booming in Zambia because the prices of commodities are high and will continue to be high for some time, aside from few fluctuations because of the long term global imbalance between demand and supply. Of equal importance is that the investors are confident of the political ambiance in the country. This is why all Zambians needs to encourage the government to abandon the old politics and encourage a new politics of tolerance. It is vital for foreign investment.

A final word of caution : the ZDA figures are pledges - not actual investment. Pledges do not equal actual investment. $10bn did not enter the economy in 2012! It was merely a promise that it will enter sometime in the future when such projects come on stream. More importantly, we know in the past that usually only about half of pledges actually ever materialise. However the larger the pledges the better, all things being equal! It would even be better if the pledges were more in labour intensive sectors not capital intensive ones like mining. That would help reduce unemployment.

Monday, 4 February 2013

A New Vision for Zambia Railways (Clive Chirwa)

Prof Clive Chirwa [Zambia Railways CEO] recently set out his new vision for Zambia Railways. Profoundly grateful that he has made this available to us - to aid wider debate on this critical issue.

Friday, 1 February 2013

Securing our Food

By Chola Mukanga

Agriculture is not only one of the most important economic sectors in the country, but it is also the most politically sensitive. 70% of our people live in rural areas and largely practise farming or fishing. The other reason is that it is heavily connected to the issue of land which inevitably draws in traditional leaders and other players. It’s therefore comes as no surprise to many that we have an infinite array of ideas on what should be done to get our agriculture policy back on track. Which is fine but we need to remember that not every voice adds value. It's therefore important that we weigh the issues affecting this sector very carefully.

The latest to join the queue in offering opinion is the  Zambia Consumers Association (ZACA). They recently called for the transformation of the the Food Reserve Agency (FRA) from only a maize storage agency into a wider parastatal with a subsidiary milling company. ZACA Executive Director Muyunda Ililonga says there is need for the role of FRA to be revised so that it can compete with private millers in order to guarantee that consumers are not being exploited. ZACA believes that if FRA had a milling department millers would not take advantage of consumers by hiking mealie meal prices, thereby making the staple food affordable to the average Zambian.