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Monday, 30 September 2013

Corruption Watch (Southern Province)

The ACC recently arrested former Southern Province Permanent Secretary Edwin Zumbunu for corrupt practices. According to the ACC between 1st May, 2012 and the 31st August, 2012 Edwin Zumbunu in role as Permanent Secretary for Southern Province wilfully failed to comply with applicable procedure relating to procurement when he approved works for the construction of a wall fence at the Southern Province Minister’s official residence. The works were allegedly valued at more than K195,000 (in rebased prices).

Edwin Zumbunu was fired exactly a year ago by President Sata following allegations of corruption. The Zambian Watchdog had revealed the extent of Zumbunu's corrupt activities. Zumbunu had dismissed all the allegations levelled against him.

Friday, 27 September 2013

Shang'ombo on the rise!

The Government has started construction of the US$40 million United States dollars Shangombo-Rivungu canal in Shangombo district has kicked off. The contractor from Clay Disposal, a South African Company engaged to construct the canal is already on site.

The 3 year project will link Zambia to the port of Robito in Angola, and is expected to accelerate cross border trade between the two countries. The project is due to flagged off by Transport Minister Yamfwa Mukanga and his Angolan counterpart in due course.

Press Release : Office of the Acting President


LUSAKA, 27th SEPTEMBER, 2013. Government is deeply concerned with recent media reports attributed in some cases, to senior government officials alleging that there is the practice of tribalism in the Patriotic Front (PF) and in government.

It is indisputable that Zambia's biggest asset is its peace and unity and that all its people live in harmony. In fact, Zambia's natural unity is its fortress and anyone attempting to bring disunity based on tribe or ethnic grouping is strongly frowned upon.

Therefore the careless talk about tribalism is dangerous, regrettable and only serves to sow seeds of disunity. The talk is counter-productive to the well-being of the country and must be curbed immediately.

We must emphasize that the recent happenings in the Patriotic Front are purely internal debate and the normalpractice of internal democracy. The political differences in the PF party will be resolved using established channels and its internal grievance handling process.

We should state that Government is functioning normally and there is no paralysis, fear or dysfunction as alleged by certain media reports. It is, therefore, naïve and illusory for the Opposition to assume that the internal differences in the PF will result in their reaping political fortunes. Over the years, the PF has demonstrated that it is a resilient and strong party that eventually overcomes its internal challenges and has emerged stronger and united.

Diversity of views can never be at variance with the dictates or imperatives of unity. The PF Party will also not yield to selfish interests or private cleavages perpetrated by persons or individualsattempting to hijack the party or pursue agendas which are adrift with the national development agenda.

The Opposition will also not succeed in derailing government's ambitious development agenda. It is, therefore,desirable that all leaders in the PF work together for the good of the party and country.

Government is committed to its national development program and will not be dissuaded by activities that undermine this noble agenda. Government is also focused in ensuring that poverty levels are significantly reduced, and that jobs and wealth are created.

Hon. Alexander B. Chikwanda M.P
Acting President and Minister of Finance
Republic of Zambia

Thursday, 26 September 2013

Rotten Judges

President Michael Sata recently suspended two High Court Judges Emilia Sunkutu and Timothy Katenekwa and has appointed separate tribunals to investigate them on various charges.

Although the charges have not been specified, the suspensions are alleged to be connected to alleged incompetence and misconduct. The suspensions follow complaints processed through the Judicial Complaints Authority, unlike the Chikopa Tribunal which was called following complaints by debtors who owe the Development Bank of Zambia more than K18 billion.

Wednesday, 25 September 2013

North West Railways Project, 2nd Edition

It appears the North West Railway is struggling to materialise. Government revealed recently that it is in the process of advertising the North-West Railway (NWR) project to local and foreign investors who may be interested to develop the infrastructure. Transport Deputy Minister Panji Kaunda says the project is still at the "planning stage".

The negotiations with the project initiators, principally Kavindele, are yet to be finalised. Government had opened discussions with Mr Kavindele but that, they did not come to a conclusion, hence the need for the resumption of talks so that the matter could be finalised.

Why I oppose the proposed Freedom of Information Act

New Information PS Emmanuel Mwamba recently announced that the Freedom of Information (FOI) bill cannot be taken forward as it currently stands because there’s need to go back to the drawing board to reconcile the various pieces of legislation. The process is getting more complicated by the day and there appears a lack of clear timeline given the issues are also being addressed in the Draft Constitution. The delay is good news because before we do anything the government should produce a comprehensive Impact Assessment that explains the costs and benefits of this legislation. Not just guess work.

As I understand it the proposal under consideration is to have an Act of parliament that gives ordinary Zambians the right to ask any public sector organisation for all the recorded information they have on any subject. Anyone would be able to make a request for information. Such requests for data would need to be handled under the relevant legislation to accommodate data protection and national security concerns.

Tuesday, 24 September 2013

MF - Zambia Watch (September 2013)

I am finally vindicated by the IMF. Please read their latest statement on Zambia released this evening below. Take a closer look at the deficit estimate. 
Press Release No. 13/357
September 24, 2013

An International Monetary Fund (IMF) team led by John Wakeman-Linn visited Lusaka during September 17-24 to conclude the 2013 Article IV Consultation discussions with Zambia. The discussions focused on recent economic developments and the policies needed to ensure macroeconomic stability and continued growth. The mission met with Finance Minister Alexander Chikwanda, Bank of Zambia Governor Michael Gondwe, and other senior government officials, as well as representatives from the private sector and civil society. The mission would like to express its sincere gratitude to the Zambian authorities for their excellent cooperation and warm hospitality

Mr. Wakeman-Linn issued the following statement in Lusaka today, outlining the mission's preliminary conclusions:

“The Zambian economy has continued to expand at a rapid pace, although experiencing pressures in some areas. Overall output growth is projected at 6 percent in 2013, with the decline from 7.2 percent growth in 2012 largely due to lower agricultural production. Copper production has continued to increase strongly despite lower prices on the international market, and the economy has also benefitted from high levels of foreign direct investment and rapid growth in non-traditional exports. Moreover, at 7.1 percent year-on-year in the latest data, inflation has remained broadly at last year’s level.

“The main economic challenges are in the fiscal area. Government expenditures in 2013 will be significantly above budget, including from fuel subsidies incurred before retail prices were raised on May 1, the civil service wage increase that came into effect this month, and costs of covering the Food Reserve Agency’s operations and outstanding debt. In addition, revenue is short of target. Altogether, the budget deficit for the year is now expected to reach about 8½ percent of GDP.

“The mission very much welcomes the authorities’ plans to comprehensively address the fiscal challenges in the budget for 2014. With a combination of stepped-up revenue collection and tight expenditure control, the draft budget aims to bring the deficit to about 5 percent of GDP, similar to what was originally planned for 2013. Ensuring that this budget is adhered to will be important for macroeconomic stability and hence the foundation that will support continued strong growth of the Zambian economy.

Mine Watch (LCM)

Luanshya Copper Mines (LCM) will next year embark on the construction of a US$50m cobalt processing plant. The plant would be constructed using feed from Baluba Mine, would be situated at Muliashi Mine. The feasibility study has already been done and the company has started making preparations including procuring of equipment. The construction will take a year to complete and the plant will employ around 200 people. The project should help improve LCM's financial profile as the mine grapples with increasing costs in other areas and declining copper prices And of course, any new investments in mining at this time is good news indeed. More detail via Times of Zambia

Monday, 23 September 2013

Random Thoughts, 7th Edition

In case you have been wondering what happened to the ZANACO probe instituted in January 2012 by President Sata led by former Justice Minister Sebastian Zulu. Apparently the Government has closed the probe. And Rabobank will continue to manage it. Earlier this month Finance Minister Alexander Chikwanda said the probe report into the privatisation of Zanaco has been overtaken by time. In a response to a question, he hurriedly responded, "We don't want negatives; Zanaco is growing…I will not deal with that question. It has been overtaken by time". I like to record things here as a matter of public record. So there you have it - case closed allegedly. I wonder how much that cost? And how many other inquiries have not publicly reported!

Friday, 20 September 2013

Abandoning Zambia!

British Airways recently suspended its flights into Lusaka due to low revenues the route has been contributing to the airline's business. The airline, which has flights directly into Lusaka on Mondays, Thursdays and Saturdays, will cease operations next month and affected workers will receive a severance package.

"We have suspended our three flights into Lusaka from London with effect from October 27, 2013. The route has not been making a profitable contribution in recent past and affected staff shall be given a severance package," George Mawadri, the airline's commercial manager for east and central Africa, was quoted as saying by the Post.

The Agriculture Challenge

The contribution of Zambia agricultural sector to GDP has been falling over the last decade. Agricultural growth has not kept pace with growth in other sectors of the economy. The falling share of fishing is particularly noticeable. A long neglected sector.

IThe general declining trend is worrying given the percent of Zambians who depend on agricultural for their livelihoods. Overall GDP growth combined with a declining contribution from agriculture in a primarily agrarian country like Zambia indicates a widening income gap between urban wage earners and the rural poor. It largely explains why inequality has been on the rise.

President Sata : Parliament Speech 2013 (Transcript)

The full transcript of President Michael's speech to Parliament on Friday, 20 September 2013:





Wednesday, 18 September 2013

Debt Watch (OFID)

Zambia recently borrowed US$10 million from the the OPEC Fund for International Development (OFID) to help fund the education sector. The US$10 million loan will co-finance the construction of three technical colleges in Petauke, Sesheke and Solwezi districts. As a co-finance arrangement Government will need to meet the rest. The loan agreement was signed by OFID Director General, Mr. Suleiman J. Al-Herbish and Ms. Mwitwa Mulonda, Charge D’Affairs at the Zambian Embassy in Germany, who signed on behalf of the Zambian Government.

Tuesday, 17 September 2013

Corruption in Court, 3rd Edition

The ACC recently arrested an Assistant Local Court Clerk based at Kasama Local Court for corrupt practices. It is alleged He narrated that Brian Kabala on 14th August, 2013 solicited for K850 and actually received K500.00 from Mr. Daniel Chitete Mutambo as an inducement or reward for him to facilitate a favourable judgment for Mr. Mutambo in a matter that he (Mr. Mutambo) was sued for divorce by his wife. He was arrested following "a surveillance operation conducted by the Commission".

This is yet another case involving corruption in the courts. There are coming quite fast. It is good to see the ACC focusing in this area intensively - and actually doing some "surveillance" work.

Monday, 16 September 2013

Parastatal Madness, 20th Edition

North Western Water and Sewerage Company (NWWSC) is owed K7m by Government institutions or half of its annual billing revenue. The debt has built up over many years which has crippled the utility company to the point that it has failed to maintain many water leakages or replace burst water pipes. The company is also failing to meet its statutory obligations to the Zambia Revenue Authority and National Pensions Scheme Authority.

The story is the same in every utility company. Lusaka Water and Sewerage Company (LWSC) is is owed more than staggering K50m in unpaid bills. Sometime back the Southern Water and Sewerage Company (SWASCO) was ordered to reconnect water to all prisons in the province disconnected.

A Formidable First Lady!

It is difficult to deny that Dr Kaseba is not only intelligent but very hard working. Two years now of the PF government she has quietly emerged as a formidable First Lady. It is no secret that Zambia has a deficit of credible women political leaders. Perhaps their moment may arrive in 2016 in the shape of Dr Kaseba. Everything is possible. 

Chola Mukanga | Economist
Copyright © Zambian Economist 2013

Friday, 13 September 2013

What has happened to Cassava?

If the chart above correct then there's something wrong with Government's policy on Cassava production. Five years ago we were talking about a boom in production. Now it appears not only is it stagnant but a sharp reverse has taken place. It eliminates all hopes of commercialising this sector - see the previous post on this.

Chola Mukanga | Economist
Copyright © Zambian Economist 2013

Thursday, 12 September 2013

Why we need economic history

An excellent short essay on the value that economic history brings to understanding economics and economic policy. I found this particularly relevant to Zambia because there's no comprehensive economic history books on Zambia. One wonders what is being taught in economic departments at UNZA and Copperbelt.  So one wonders where the current policies are coming from if they are not informed systematically by the past. Those who don't learn from history are bound to repeat the mistakes. 

The current economic and financial crisis has given rise to a vigorous debate about the state of economics, and the training which graduate and undergraduates economics students are receiving. Importantly, among those arguing most strongly for a change in the way that young economists are trained are the ultimate employers of these students, in both the private and the public sector. Employers are increasingly complaining that young economists don't understand how the financial system actually works, and are ill-prepared to think about appropriate policies at a time of crisis.

Wednesday, 11 September 2013

Chikwanda's Economic Suicide

Alexander Chikwanda misses the mark again. I was struck by this line from this recent Ministry of Finance spending update :
In line with Government’s commitment to ensure the availability of affordable credit to public service workers, a total of K23 million was released to facilitate the operationalization and commencement of disbursements under the Public Service Micro-Finance Company..." (Source : Ministry of Finance)
Chikwanda has gone ahead and created a government owned micro bank that has started lending funds to civil servants at five per cent with a budgeted capital of K70 million. Here is how he justified it :
Our people have suffered a lot, and there have been situations where people are charged 50 per cent interest rate. This is unacceptable because it is exploitation and it should not continue....Microfinance institutions will have to adjust lending rates downwards or sink because the micro bank is lending at five per cent (Source : The Post)
Chikwanda is again guilty of very poor economics and bad management of public funds. This mini-bank won’t trigger rates downward! The reasons for the current rates are structural. We have previously noted the large risk premium (lending rates minus savings rate) currently standing at 12.8% gap. Clearly the reason for high lending rates is partly due to lack of collateral and credit history.

Tuesday, 10 September 2013

Zambia's Prison Congestion

Congestion at Mongu central prison has worsened with 527 prisoners sharing 180 bed spaces. This scenario has made the inmates to devise a rota system of sleeping on the available thin mattresses after every hour.

The Human Rights Commission says the lack of bed space and beddings for prisoners is an infringement of their human rights. It has called on Government to build an ultra modern prison in Mongu district in-order to deal with the issue of congestion as the district given its rapid expansion. As well consider relocating the prison away from the township area to a secluded location.

Can't someone sue the Government for failing to fulfil its legal obligations? Or is there a law that allows Government to treat human beings like animals? What is wrong with us? There's no reason why a normal society should allow such things to continue.

Monday, 9 September 2013

Should the crop levy return?

Local councils are increasing pressure on Government to reintroduce the grain / crop levy. Mkushi District Council says reintroducing the crop levy would "enable the council provide quality services to the people in the area". 

The Institute of Local Government Administrators of Zambia (ILGAZ) agrees. It is calling on Government to reconsider bringing back the grain levy to "help broaden the revenue base especially for councils located in rural areas." (Source : The Post)

In 2012 the Local Government Minister at the time Nkandu Luo promised to re-introduce the levy as a source of funding for local councils. The levy was a tax charged by on anyone transporting crop/grain from one district to another. It was effectively a tax on mobility. It was abolished in 2009.

Friday, 6 September 2013

Let us liberalise the oil sector, 2nd Edition

Indeni Petroleum Refinery needs around US$1.7 billion to have a new plant or upgrade to enable it meet the current demand for petroleum products in the country. According to CEO Maybin Noole the current plant has never been rehabilitated for the past 40 years and new infrastructure is required to modernise the plant. All the pieces of equipment at the plant are in an obsolete state and need replacement.

Government has invested US$16 million to rehabilitate the plant so far, but it has no money to invest. Energy Minister Chris Yaluma says, “We want to address the issues at Indeni by ensuring that we find the required money to either rehabilitate the plant or put up a new one". But where will the money come from? The money saved from the fuel subsidies is going on paying new civil servant wage rises and meet Zambia's rising debt burden. We are a country that enjoys self harm!

Thursday, 5 September 2013

Are the Development Agreements making a return?

Zambia might consider tax breaks or incentives to mining companies to discourage them from scaling down capacity due to poor performance of copper prices and rising production costs, particularly for underground copper mines.

Mining companies hit by the sluggish performance of the red metal are holding talks with the Zambian government, which has said it will consider miners’ cases on merit. Mines Minister Christopher Yaluma recently Metal Bulletin that companies facing viability problems are making submissions to government to help ease their plight. Yaluma said that government would be flexible when addressing concerns affecting copper production.
“For most underground mines, production costs have been going up, at a time when the price of copper has not been doing well. We have to look at this situation and see how we can assist...We will decide whether to give tax breaks or concessions or any other form of incentive which can encourage them to produce more. But we also have to look at their performance data, we are looking at a trend spilling over the past six months and whatever proposal each individual companies makes to us, it has to be backed with production data". (Source : Metal Bulletin, August 2013)
Is this even legal? I thought the Mines and Minerals Development Act, 2008 forbids creation of "case by case" development incentives? May be the law was changed. In any case, we fought the Development Agreements for many years. Now Yaluma wants to bring them back. I can't understand how our country operates. I have always said the lack of Parliamentary oversight in Zambia on mining policy is our undoing. We are our own enemies. When are we going to embrace transparency?

 Chola Mukanga | Economist 
Copyright © Zambian Economist 2013

Wednesday, 4 September 2013

Random Thoughts, 6th Edition

Government last month launched the Lusaka 400 kilometres [L400] which involves rehabilitation and construction or upgrading of selected Lusaka urban roads. The L400 project will cost US$348.8 million and is expected to create 500 temporary jobs during the construction phase. This is a great project though it seems to be rather expensive. It also raises the question on whether the real problem with out roads is not the deficit of local authority accountability. 

There has been some renewed momentum to hold to account the corrupt. Edgar Lungu recently announced,“In view of allegations of corruption levelled against the copperbelt provincial commissioner Ms Mary Tembo that she received a motor vehicle from some mining company for her personal use without declaring it to her superiors, His Excellency President Michael Chilufya Sata has with immediate effect suspended her from exercising the powers and functions of her office”. And Brian Hapunda (former PF Southern Province Secretary) is also facing the music for engaging in corrupt activities.

I keep reading : "Open Society Foundation executive director Sunday Chanda said...." I am very disturbed by the repeated quotes of this organisation and gentleman by the Daily Mail and Times of Zambia. Is this another PONGO? It is shameful that these two newspapers have continued the practice from the Banda era of quoting small CSO organisations which produce nothing by way of policy papers or genuine social engagement. All they are sponsored political NGOs (PONGOs). Surely they can find more credible voices?

I suppose I should be more kind. As a longtime critic of journalists at Daily Mail and Times of Zambia, I am rarely interviewed or quoted by them. Calling them corrupt and intellectually bankrupt has not endeared me to them. Hence, I was doubly impressed to see this balanced and excellent article in the Times of Zambia. Particularly since Stanlous Ngosa did not edit my comments about the Education Minister. He is a breath of fresh air! We need more of his kind in these papers.

Chola Mukanga | Economist
Copyright © Zambian Economist 2013

Tuesday, 3 September 2013

Is Zambia's GDP about to get bigger?

Zambia is planning to re-base its GDP later this year. We last rebased our GDP measure in 1994 and a lot has changed since then. The Central Statistics Office (CSO) says, "The mining sector was in disarray at that time..In the last three or four years the mining sector has changed in terms of structure and contribution. There are other sectors that have come on board in the last 10 years or so, and these have also completely changed the structure of the economy".

The CSO will re-base the GDP numbers once it has completed analysis of the economic census. This is expected to be around October. It believes that rebasing will show that the GDP is 20% larger than currently estimated. 

It is customary for countries to rebase their GDP every five years or so to keep up with prices and structure of the economy. More importantly such a rebasing exercise usually includes taking on board new accounting conventions, improved estimation methods and revised statistical classifications. For Zambia this has not happened for nearly 20 years making the GDP and inflation (GDP deflator) figures deeply unreliable.

Monday, 2 September 2013

Growth in Non Traditional Exports

Export diversification is the holy grail of Zambia’s economic policy making. Which is why the chart below provides some encouragement we need to build on. Non traditional exports (NTEs) have been rising driven by the surge in exports of gemstones, burley tobacco and cotton. The challenge is how to sustain this pace.

On going GRZ investment in transport infrastructure should help reduce the cost of doing business further,  provided the projects are properly delivered and maintained. But we also need greater focus on industry specific issues. For example, tourism is currently stagnant. Its progress is being impeded by lack of policy direction from the top, poor marketing and hotel infrastructure especially in Luapula and Northern Provinces.