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Tuesday, 30 April 2013

Zambia is Vulnerable

Copper prices have been falling in recent months, and if truth be told they have been falling since 2011. They have lost about $3000 per tonne over the last two years. That fall has coincided with a slowdown in China's growth - and naturally all commodities have been taking a battering.

Monday, 29 April 2013

Agriculture Policy As A Retrospective Bribe?

Photo: I used to think that FRA subsidies were invebted by MMD as a BRIBE to rural dwellers to vote for them, until I saw this graphic. It shows the subsides were a REWARD for voting for them.

An helpful chart from Jayne & Hichaambwa's presentation on The De-Linking of Agricultural Growth and Poverty Reduction . The pattern is clearly that fertilizer support program (FSP) has largely followed political victories, in effect acting as a reward or "retrospective bribe". However, one could also interpret this as politicians doing their bit to "respond" to their constituency. If so, that would presumably be a good thing since we want politicians to listen to the people. 

Are the politicians following the masses or are they driving the policy? Its probably a bit of both. Especially given that FSP is predicated on achieving sustainable maize prices to keep the urban masses on the leash. What matters of course in the end is whether FSP and FRA policies are coherent in the long term. The answer to that question seems be a definite no - as discussed here. And that is why the chart matters. We want politicians to act based on the best long term interests of the public not just for short term expediency

Copyright © Zambian Economist 2013

Friday, 26 April 2013

Debt Watch (World Bank), 3rd Edition

Government recently signed a KR150 million (US$29.8 million) loan agreement with the World Bank to "enable small scale farmers improve agriculture productivity and boost food security". The long term loan facility would be spent on agricultural productivity programmes for the Agricultural Productivity Programme for the Southern Africa (APPSA). More detail via Lusaka Times

Copyright © Zambian Economist 2013

Thursday, 25 April 2013

Maize Yields : Zambia vs. World

Photo: What does this comparison tell us?

Another excellent graphic from Rhoda Mofya-Mukuka (IAPRI) presentation, "Persistence Rural Poverty Amidst Significant Agricultural growth. Where are we going wrong?" .  Rather than offer my own take on the matter, here is how she explained to our Facebook readers
"This particular slide simply shows that maize yields (metric tonnes per hectare) in Zambia has potential for improvement. GMO aside, the hybride maize seed that is distributed through the Farmer Input Support Program (FISP), has potential to yield 8 MT per hectare  Smallholder farmers can also manage this yield because the sizes of their farms are usually small and manageable.."
Copyright © Zambian Economist 2013

Wednesday, 24 April 2013

ZRL Board on Clive Chirwa

Board of Directors


Following a series of press statements in the Daily Nation and Lusaka Times attributed to the Managing Director of Zambia Railways Limited, Clive Chirwa, members of the Board of Directors that are not in Government would like to make a response in order to protect the integrity of innocent people whose only reason for accepting appointment to sit on the Board by His Excellency the President was to diligently serve the Nation in this important assignment. Public interest and commentary following the statements made by Clive Chirwa is clearly understandable especially when an immediate rebut was restrained for about a week now on the request from Government. Considering that Clive Chirwa has continued, on a daily basis, to misinform the Nation on the true happenings in the Board, the laws of the Land and that of natural justice demand that truth must be made known to enable the public appreciate better what is really happening in this Public Company. We shall respond to the main utterances made in turn:

Aid Watch (China), 2nd Edition

China recently donated 480 mobile solar panels valued at KR5 million (K5 billion) to help lit up rural areas in selected parts of the country. The solar panels generate 200 watts and are able to be used in an office or by a sizeable family. Energy Minister Yamfwa Mukanga received the equipment from Chinese embassy economic and commercial counsellor Zhijing Chai on behalf of Government. He said the donation demonstrates "the true friendship that exists between Zambia and China" and that "time and change of Government have not affected Zambia’s cordial relations with China". More detail via Daily Mail.

Copyright © Zambian Economist 2013

Tuesday, 23 April 2013

Batoka Power Project, 2nd Edition

About 25 companies have expressed interest in the development of the 1,600 Megawatts (MW) Batoka Hydro power plant between Zambia and Zimbabwe. Zesco MD Cyprian Chitundu says of the 25 companies, two are local while the rest are from Brazil, China and Europe. The construction of the US$5 billion power project awaits review of a feasibility study which was done 20 years ago. The Government is having discussions with the World Bank to finance the renewal of the study and are hoping that this can be done by the end of the year so that the project can get underway.

The previous estimate for Batoka put it around $2.5bn, but now Chitundu is saying $5bn. In short, it is all guess work at present. I suppose the cost is of little consequence here given that this will be under the design, build and operate model. A private player will fund, build and operate it for some years and then transfer ownership some years down the line after it has recouped its investment. Zimbabwe and Zimbabwe will be buying power from the private player. It certainly speaks volumes that this appears oversubscribed! A great development.

Copyright © Zambian Economist 2013

Monday, 22 April 2013

Is the FRA damaging crop diversification?

Helpful graphic from Rhoda Mofya-Mukuka (IAPRI) presentation, "Persistence Rural Poverty Amidst Significant Agricultural growth. Where are we going wrong?" . The message here seems to be clear. maize subsidies have increased the area of maize cultivated but it has also led to relative move away from other crops. In short the large subsidies have distorted crop diversification. At the very least agriculture diversification is being hampered. I know there are some who think that the response to that problem is more subsidies to other crops, but surely we all see the obvious folly in that - no? 

Copyright © Zambian Economist 2013

Friday, 19 April 2013

Failing Maize Prices Controls

JCTR summarises well how GRZ price control has failed to reduce the price of mealie-meal in April 2013 press release :

From August 2012, instability in the price of mealie-meal across the country was a cause for concern. To mitigate the instability, government intervened directly by engaging millers, to reduce the price of mealie-meal by an average of K 2, 000 (KR2). Notwithstanding government intervention, the price continued to be high across the country.

According to the evidence obtained by the JCTR through the basic needs basket surveys, the price of the commodity continued to not only be high but was increasing. Apart from Lusaka where the cost of mealie-meal only reduced marginally by K400 from K47, 400 to K47, 000 recorded in September 2012 and October 2012, respectively, other towns across Zambia showed varying increases in the commodity price.

The remaining towns recorded varying mealie-meal price increases from September 2012 to October 2012, respectively; K46,300 to K54, 500 in Kasama, K37, 300 to K41, 600 in Livingstone, K42, 200 to K46, 300 in Mansa,K49, 200 to K49, 700 in Ndola, K49, 000 to K49, 300 in Luanshya and K43, 400 to K43, 900 in Monze.

That the price of mealie-meal continued to be high implies government’s intervention was not effective in making the commodity affordable across the nation. Not long, government directed that the retail price of a 25Kg be K50, 000 (KR50). Yet again this intervention was not effective. Last week government intervened again to raise prices of Mealie-meal from their earlier ceiling price of K50, 000 to K55, 000 per 25 Kg bag. This was done on account of factoring in the transportation costs.

(Source : JCTR)
In short price controls are not the answer. What we need is to get agriculture policy back on track by dealing with the big issues : FRA reforms; improving commodity exchange; removing export and import restrictions; improving physical infrastructure; widening credit access to smallholder farmers; improving "market discovery" for small farmers; better investment in education and research.; targeted subsidies to support mechanised farming, coupled with the on-going policy of farming blocks; and, removing distortions in fertiliser / input market by giving the private sector a greater role. More discussion of these ideas here

Copyright © Zambian Economist 2013

Thursday, 18 April 2013

GRZ and New Mining Investments

Government is allegedly plans to leverage its land and mineral ownership to negotiate a shareholding of not less than 25% in all new  mining projects. In an interview with Metal Bulletin, Mines Minister Yamfwa Mukanga says government has no intention of nationalising the sector. Rather it hopes to see its shareholding in future mining projects rising to 35%, but its role in the mining sector will be limited to being a minority shareholder and regulating the mining environment.

I have long argued for this and I am glad the minister is thinking bold and taking this forward. Taking a 25% - 35% on all new projects is a step in the right direction. Presumably through ZCCM-IH. This idea is actually not that new. The MMD had previously hinted at taking a 25% in an effort to "have a stronger influence in decision-making". But that rationale was weak because as the current Minister notes 25% is a minority interest. It is better to see a minimum stake of this sort as predicated on increasing revenue and encouraging general national control over scare resources.

Wednesday, 17 April 2013

Sixth National Development Plan 2011-15

The current government is committed to taking forward the Sixth National Development Plan (2011-15). The document was largely drafted by MMD. Therefore it is  important to read this alongside the new Ministry level strategic plans which had some PF input (e.g. Ministry of Finance Strategic Plan). 

Copyright © Zambian Economist 2013

Tuesday, 16 April 2013

Forever in debt

Finance Deputy Minister Miles Sampa recently signalled that Government intends to borrow more from the international markets" :
“...We are sitting around 30 percent of GDP ratio and we would be comfortable to increase that to around 45 percent of GDP and we would be going back to the international market as soon as all arrangements are put in place. Our debut issuance was very successful, remember it was oversubscribed and we believe the interest in Zambia among the foreign investors is still high and we want to cash in on that...We should not be scared to borrow as long as we are able to pay back...We have said no to increasing taxes for our people because we are a caring government. So taxes won’t go up and our only choice is borrowing from the market. There is no country that does not borrow, the USA, Japan, name them, they all borrow to develop but what is important is paying back...”
There's no doubt Zambia is able to borrow more. But the borrowing is being done without Parliamentary oversight and general scrutiny. If we had a proper Debt Management Bill in place then the situation would be different. Right now the Government has not published its Debt Sustainability Analysis. So how do we know it is sustainable to borrow? How do we know we can afford to pay back without significant cost cutting in other areas? I have previously touched on this issue here

Sampa also has a poor understanding of economics. Debt incurred today means higher taxes tomorrow than would have been the case. So to say we don't want to tax people just does not make sense. You are taxing future generations by borrowing today! How do you think that debt will be paid back? Of course this argument does not strictly apply to domestic borrowing (an issue of much debate in Europe), but it certainly applies to external debt. This is very cardinal. It is never wise to build an economy on large foreign borrowing because it makes us poorer in the long term. 

What is clear is that when Sampa thinks about "people", he only thinks about voters in 2016. He does not really care about Zambians living beyond 2016 - for now. If large debts are incurred by Sampa and his friends at the Ministry of Finance, that's for future governments to worry about. But as citizens we must care because it is us who will still pay it back. Our interests diverge from Sampa's interests and therein lies there problem.

Copyright © Zambian Economist 2013

Monday, 15 April 2013

Mwanawasa's Moment

As I was digging through the archives, I can across this statement by President Mwanawasa. A truly rare moment in Zambian politics  :
"Those of you who know me, know that I am not arrogant, that I am prepared to change direction if the idea is good. And those of you who know me, know that I am difficult to change if I know what I am doing is correct....All of these people, I give them so much honour because not only are they elders, but they are statesmen. Now I am only a human being and some of these things upset me and at certain times I speak out perhaps speaking more than I should....I apologise for the hard stand I took on Dr Kaunda a few days ago although what I said was true. I should not have said them in that manner; it's only that I was angry because I have done so much for my father (Dr Kaunda). I feel sincerely sorry for what I did. I also want to say sorry to the Catholic bishops. There has been a lot of debate in the nation and I briefed the bishops when I met them in Lusaka...I will invite the Catholic bishops so that we can reconcile and they should tell me the way we should proceed."
- President Mwanawasa
(February 2005 at Nakambala grounds, Mazabuka)

I think we need to do more to look back. We are a nation lacking in proper historians. As a result we forget too quickly and miss the lessons of the past.

Copyright © Zambian Economist 2013

Friday, 12 April 2013

Youths, Politics and Voting Age

Former MMD Lusaka Province Youth Secretary, James Lukuku recently launched his political party called the Republican Progressive Party (RPP). Mr Lukuku says the PF government has failed to address the plight of the youth who are leaders of tomorrow, hence his decision to launch RPP. According to him youths are think tanks who have the reservoir of knowledge to govern Zambia in a right way because elderly people have allegedly failed to run this nation. It is imperative that young people take over from old people.

The merits of a new party aside, what is interesting is Mr Lukuku's  implicit assessment that young people have failed to make an impact on the political structure of the country - and therefore need political help. The youths of course make the majority of the country but they remain "clients" and not power players. This comes as no surprise because youths have no "economic power" from which "political power" is derived.  And without political power they will remain just as they are. Jobless and poorly organised.

One of the big reasons youths have no political power (and by extension no economic power) is due to the voting age. At present young people cannot vote until until 18 years of age. The current Draft Constitution under consultation continues this with Article 74 - "A citizen who has attained the age of eighteen years is entitled to be registered as a voter and vote in any election by secret ballot". The voting is age is too high for our country and keeps many young people out of the political process.

Thursday, 11 April 2013

Mining and Employment

An interesting statement from Vice President Scott on the public pressure for mining jobs:
“Ideally, Vedanta wouldn’t really be worried about Zambian employment levels as it is not their issue…But we are pressurizing them to worry about exactly that. There is a concern that there is a disconnect between investment and employment…”
Isn't the real question whether the disconnect between mining investment and employment is real or imagined? Although mining generates significant revenue the transmission from growth in mining investment to jobs is not automatic because the sector is not labour-intensive. Relying on mining companies (even pressuring them) to create jobs is a wrong policy focus in my view.

Ministry of Finance Strategic Plan 2012-2016

The full strategic plan for the Ministry of Finance is now embedded below. Some useful annexes are in this document:

Copyright © Zambian Economist 2013

Wednesday, 10 April 2013

Banning Abnormal Loads

Transport Minister Christopher Yaluma wants to ban the movement of heavy loads (known as abnormal loads) on the roads. “we are committed to rehabilitation works of TAZARA. So once the rehabilitation of the railway line is completed, I will issue a Statutory Instrument to burn abnormal load on the road network". Tanzania and Zambia has agreed to rehabilitate the line but are currently looking for finances. All the money is currently just going on salaries. TAZARA needs about US$ 700m to revamp it.

The idea to ban heavy loads makes no sense because not all heavy loads are ferried between Tanzania and Zambia. It is also economic folly because it is better to tax the vehicles proportional to the road damage than force them to use a less preferred mode. I know the Minister wants to help TAZARA but this is not the way to do it. 

Tuesday, 9 April 2013

Poor Journalism (Daily Mail), 3rd Edition

The infamous Bank of Zambia (Amendment) Act 2013 was given presidential ascent last week. The hapless Daily Mail declared:
“...In a key move aimed at halting illegal capital flight, President Sata has assented to the Bank of Zambia (BoZ) Bill which gives powers to the central bank to monitor transactions of investors locally and abroad…”
Illegal capital flight?? Who writes this stuff? Is that what the Act is designed to do? The media is not helping the government explain the new legislation. May be the Daily Mail actually needs to start hiring the right people.

Monday, 8 April 2013

Political Defections

Education Deputy Minister Patrick Ngoma recently defected from MMD to PF . He cited lack of leadership in MMD as well as "progressive development programmes initiated by the PF Government" as his reasons for leaving MMD. Media reports suggested that more than 1,200 MMD members in Luangwa went along with him. For their part, MMD had already moved to expel him having anticipated the defection.

Earlier this year we had another defection. More than 400 MMD members in Mwansabombwe District of Luapula province have defected to the Patriotic Front. The defectors were led by six constituency officials and their District Chairman Fredrick Mwenya and former MMD Provincial chairman Emmanuel Chungu. They defected because they were allegedly "impressed with the way the PF Government has solved the problem of non payments of salaries at Kawambwa Tea Company".

Friday, 5 April 2013

A SADC Without Visas?

Tourism Minister Sylvia Masebo last week announced that Government has ratified the Convention on the free movement of people in the Southern African Development Community (SADC). Announcing the development she said, "I'm happy to say only yesterday (Monday), our government decided to ratify the free movement of persons within the SADC region, which means that any person moving from Zimbabwe to Zambia, from Zambia to Namibia, from Namibia to Botswana among the 30 members of the SADC region can move freely without visa restrictions, without paying any fees. We have become one when it comes to movement”
This is not quite as simple as Ms Masebo puts it. The Convention actually has to be ratified (transposed into domestic law) by other SADC states before it is fully operational. It will only apply to those Member States that ratify it. That is no simple task because this Convention has been on the books since 2005. In parallel there has been a push for a UNIVISA (an EU Schengen style common visa) which was proposed in another Protocol on Development of Tourism signed by SADC leaders in 1998. That has never been ratified either by some countries. The UNIVISA is necessary to operationalise the 2005 Convention.

Thursday, 4 April 2013

Mining Watch (Anglo American)

Anglo American has returned to Zambia to explore for copper after exiting a decade ago. Anglo is operating in North Western Province where the Ministry of Mines granted it two exploration licences in December 212. According to their spokesperson, “Anglo American sees Zambia as highly prospective for a number of commodities but is currently only interested in copper..we are undertaking early-stage reconnaisance and might drill this year" .

Anglo sold its stake in Konkola Copper Mines to Vedanta Resources in 2004 due to collapsing copper prices at the time. It's new interests are allegedly wider than publicly stated. Local district commissioners told the Times of Zambia that Anglo has expressed interest in exploring for copper, platinum, gold, cobalt, zinc and lead in Kalongo and Chavuma, and for oil and copper in Nyakulenga, Zambezi East.

Copyright © Zambian Economist 2013

Aid Watch (Japan)

Japan recently donated KR17m ($3m)to the Education Sector Pool Fund to improve education standards. Finance Minister Alexander Chikwanda and Japanese Charge D’ Affairs Interim, Hideki Yamaji signed the agreement at the Ministry of Finance. The funds would be utilised on among others, education materials and equipment in secondary and primary schools, education leadership, management training, infrastructure completion, rehabilitation of both primary and secondary schools countrywide and improvement of management information systems. This seems very little and a little baffling to see the fan fare. But I suppose beggars aren't choosers and every little helps! More detail via Times of Zambia.

Wednesday, 3 April 2013

Has government censorship reduced under PF?

Information Minister Kennedy Sakeni believes PF has achieved a great deal  to improve media freedom in Zambia since it came into power :
It has taken this Government less than 12 months to actualize the Independent Broadcasting Authority (IBA) which the MMD Government shelved for many years. The IBA is now operational under the refurbished offices at the Mass Media Complex in Lusaka. The process to recruit a Chief Executive officer and other staff at the organization, is underway.

With Government’s blessings, the media launched their self regulatory body last year which the MMD, with Mr Mulongoti as Minister of Information and Broadcasting Services, had vehemently opposed when they were in office.

Tuesday, 2 April 2013

Is there any hope for the fishing industry in Zambia?

The Fisheries Department in Monze recently echoed the views of other departments across the country that the fishing industry continues to be overlooked in the national strategy for development. It is calling on the government to pump in a lot of money to revamp the industry.

Water accounts for 20% of our land mass, but fisheries only accounts for around 1% of GDP. Fish production in Zambia has averaged between 70,000 and 85,000 tonnes per annum in recent years. With only 10% coming from fish farming.

Monday, 1 April 2013

Is Government failure to regulate hotels turning them into brothels?

Government has threatened to shut down all hotels/lodges across the country that are operating below the required standards. Tourism Minister Sylvia Masebo says some hotels/lodges were not fit to operate because some lodges operated as brothels. She says brothel business was illegal in Zambia and should therefore be discouraged at all levels. She is urging lodge owners to ensure that their premises are well maintained and meet GRZ set standards.

This is a difficult industry to understand. It is chaotic. In 2007 GRZ introduced Tourism and Hospitality Act that supposedly gave GRZ power to deal with these problems. But two years later in 2009, Government announced that a new Hospitality Act was needed to enable the industry "to trade in a transparent manner" and deal with "the mushrooming guest houses that are used as brothels ".