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Friday, 29 November 2013

Policy Chaos at BOZ

Policy confusion continues to rock the Bank of Zambia (BOZ) as the Kwacha slides further. BOZ is struggling to halt the depreciation of the currency which is now at its weakest level in five years. And they do not know what to do.

Media interviews with leading figures at the BOZ suggests that the Bank is lost for options. BOZ's Financial Director Emmanuel Pamu says the Kwacha is merely on a “random walk" and that BOZ is not "concerned too much" because it expects "some correction.” He believes that the kwacha will be in “equilibrium” at a rate of 5.30 to 5.40 per dollar. A surprising hint that PF is now resigned to a Kwacha at that level at best. Is this the new policy?

Thursday, 28 November 2013

The PF and Intra-Party Violence

Editor’s note: This is a guest post by Henry Kyambalesa, an Adjunct Professor in the School for Professional Studies at Regis University, Denver, USA, as well as an Independent Business and Management Researcher and Consultant. He is has written a number of books and regularly reflects on issues facing Zambia. 
There is an urgent need for the Patriotic Front (PF) to show leadership in addressing the increasing levels of political violence among its members, otherwise we risk having political hooliganism entrenched in our country’s democratic institutions that will eventually be difficult to address.

It is hard to understand why political cadres threaten to harm or kill other citizens who have different political views and/or those who support different individuals or political candidates!

Wednesday, 27 November 2013

Reviving Kapiri Glass Factory

Kapiri Glass Factory is allegedly set to reopen its operations in July 2014 under a new local investor Chimsoro Milling Company Limited. This follows the recapitalization and re-investment into latest machinery and technology at the once defunct company and will operate under a new name called Kapiri Glass Manufacturing (KGM) Limited.

KGM General Manager Sunil Malik says the equipment is currently being installed at the factory to replace the obsolete one will enable the company produce over 75 tons of glass per day. This will translate into 21,000 tons of glass per annum or 20 million bottles per year. The glass factory will cerate employment to over 200 local people once fully operational.

Tuesday, 26 November 2013

Rogue Investors or Whistle blowers?

Government recently revoked the work permit of Konkola Copper Mines (KCM)'s CEO Kishore Kumar over KCM’s plans job cuts. The move has been celebrated by some who see this as a strong stance by PF against foreign investors. What has been worrying is that no one has yet pointed out that GRZ's recent actions appear to be part of its addiction to cancelling "work permit" in dubious circumstances.

Of course PF is not the first to be obsessed with bundling foreigners out of the country. An historical glance suggests that the recent actions are merely a continuation of the selective shameful practices of the past, when any foreigner who did not toe the party line was unceremoniously bundled out of the country on flimsy grounds. Why shouldn’t a foreign CEO take decisions that safeguards the financial viability of his company? Why should they be victimised for merely doing their job?

Monday, 25 November 2013

Explaining Zambia's Poverty

I have previously noted that there's a poverty of papers and books on Zambia's economic history. This new paper by Alan Whitworth is a welcome addition to the little information that currently exists! Those who don't learn from history are bound to repeat the mistakes. And according to this paper the current PF government appears not to have learnt the lessons of the past. Well worth the read! 



Facebook Discussion 

Thursday, 21 November 2013

Free Falling Kwacha

This chart is quite revealing because it shows the clear trend of the Kwacha over the last 3 years. Whilst some of the Kwacha’s current slide is seasonal, as retailers tend to buy most of their importants in advance of Christiams to avoid a slowdow in shipping activity, it is clear that the factors driving its decline are much more substantial.


Over the last month we have seen the Kwacha experience it's sharpest fall since PF came power and the lowest value in five years, if not more. The currency has substantially eroded in value since PF came to power in 2011. It is also clear that the ban in use of dollars, Kwacha rebasing and exchange control restrictions have not stemmed this substantial decline.

Wednesday, 20 November 2013

Who will weep for our street children?

Whenever I watch a documentary about child slavery, I can't help but wonder how many of Zambia's street children probably end up in one form of slavery or another. Child slavery and our growing number of street children are invariably linked. As long as children are on the street they remain vulnerable to all sorts of abuse.

For girls on the streets especially it is like a death sentence. It's too dangerous. When you add in the problem of AIDs it makes one despair. A theme touched on in Princess Kasune Zulu’s remarkable book ‘Warrior Princess’.

It is no surprise we continue to witness a growth in human trafficking. Sadly the problem has not commanded as much public attention as it should. The closest information I am aware of is the very rough 2006 Central Statistical Office survey which revealed that 22% of girls and 20% boys reported knowledge of human trafficking. 15% reported knowing someone who had been trafficked. But those statistics did not specifically sample street children.

Monday, 18 November 2013

A Development Blueprint for Zambia

Editor’s note: This is a guest post by Michael Chishala, a Zambian writer and regular contributor to the discussions on the ZE Facebook page.  Follow him on Facebook
Many armchair critics rightly observe that many other armchair critics complain about problems in Zambia without offering solutions (ironically, they equally offer no solutions either). So today, let's debate some ideas about what specific steps a government of a poor nation needs to do to produce prosperity. I shall do things in reverse. Steps first with explanations, and then the main reasoning behind.

THE SOLUTIONS

Year One

a) Drastically cut the size of government to ten Ministries and get rid of all Deputy Ministers (we do not need 70 ministers). Reduce some ministries to small departments. A Kwacha in private hands produces more than a Kwacha in government's hands (they are driven by politics of the belly and the desire to remain in power forever).

Friday, 15 November 2013

How competent are Zambian graduates?

Editor’s note: This is a guest post by Sue Clayton, a lawyer and regular contributor to ZE Facebook discussions.
I think it is highly presumptuous to accept, on the basis that many believe it to be true, that Zambian graduates are losing out to foreigner graduates [as implied in a previous blog]. I think the key here is competence which we must not confuse with ability.

The world over intelligent “educated” people are incompetent, either down to poor education and training or their own attitudes or the environment in which they operate. We need an open discussion about competence because having a degree does not confer competence and does not entitle one to anything – but it should demand “professionalism” of the holder.

I believe professionalism encompasses competent performance of one’s job, being honest, and working for the best interests on the employer within the law. It means working until the job is complete whatever it takes, remembering one’s duty to one’s client or customer or patient. It requires maintaining and always striving to improve standards, proving oneself, humility and co-operation.

Thursday, 14 November 2013

Are expatriates taking Zambian graduate jobs?

One of the most common complaints I get is that many Zambian graduates do not have access to jobs because the jobs are normally given to foreign expatriates. Many see the challenge of unemployment as being largely compounded by the presence of foreign experts doing jobs that can be competently executed by Zambian graduates.

There are three fundamental questions help us unpack this issue :

(1). Are Zambian graduates really not getting the jobs that they are equally competent to do, and may even be able to do at lower wages?

(2). If the answer to (1) is yes, is this a failure of the market, or is this effectively a failure of government?

(3). What is the appropriate way of addressing these market or government failures, assuming they exist?

Wednesday, 13 November 2013

The Problem of Unemployment

Hakainde Hichilema (UPND) has responded poorly on the KCM crisis with this suggestion :
“The PF government has the responsibilities of lowering the cost of doing business, not just for KCM, but for other mining companies and businesses as well, so as to enhance employment creation. For example, the PF should re-instate the fuel subsidy which was removed and is now a burden to our people and business sector. There are many other ways a responsible government can institute to lower the cost of doing business to save existing jobs and enhance employment creation…” (Source: UPND)
This is a rather poor suggestion for three reasons. First, the government is broke and cannot afford to reinstate the fuel subsidies. Can we please move the debate beyond subsidies? They are not coming back and rightly so!

Secondly, giving a fuel subsidy as a bribe to KCM is simply subsiding jobs. If we want to subsidise workers it may be better to give them money directly. But clearly that would be foolish because presumably the retrenched workers will get a severance packages. If they don’t get a severance package, then the real issue lies with our labour laws. Why don't we actually focus on getting our labour laws right?

Finally, lowering the cost of doing business should not be entertained if it comes with lower mining taxation. Everyone knows that taxation is the biggest constraint to doing business. Equally no right thinking Zambia would ever advocate for low mining taxations. In short, Zambians have to realise that not every job is worth saving. If the economics don't stuck up for KCM let them close and jobs be created everywhere. Have we not read Schumpeter?

The job of government is not to save jobs but to create conditions that allows the private sector to create  new ones! Unemployment is part of the creative destruction process. Let the market decide what jobs we need and don’t need. Government's job is merely to create efficient and fair conditions. It is also wrong to ask poor people to subsidise jobs at KCM by reinstating other subsidies. It is merely cost shifting!

The problem in all this debate is a lack of appreciation of two issues. First, as VP Guy Scott has said before, it is not Vedanta’s job, or any company for that matter, to worry about employment levels in the country. It is a job for government.

Tuesday, 12 November 2013

GRZ Vs Mining Companies (6th Edition)

Vedanta Resources owned Konkola Copper Mines Plc is suing Zambia Revenue Authority over a K3.2 billion ($586 million) tax charge relating to exports of copper cathode. KCM wants the Lusaka High Court to quash ZRA’s decision to charge a 16 percent VAT on the exports from January 2011 to March 2013, according to court papers. KCM also wants the court to reverse the authority’s decision to levy the tax from July.

Monday, 11 November 2013

The Mining Employment Problem

KCM plans to cut at least 1,529 jobs by March 2014. The policy is with immediate effect. Some have already being laid off, though KCM disputes that. It cites the coming to end of the lifespan of some of the mines at Nchanga (Nchanga Open Pit and the Nchanga Underground Lower Ore Body) in the next three years as contributing factors.

Over the years, copper grades at Nchanga underground have significantly decreased, from an average of five per cent up to the 1980s, to three per cent in 2000 and currently 1.6 per cent, while open cast mine grades had dropped from three per cent to one point zero today.

To make matters worse KCM's annual output is around 8 tonnes per employee compared to the global average of 100 tonnes. The reason is that the Nchanga operations are still using the costly conventional method of mining compared to mechanised /automated mining used by its global competitors. So KCM is shifting towards mechanisation and automation for all of its operations in order to increase productivity. Which means job losses!

Friday, 8 November 2013

Free Riding Justice

William Harrington (Former Transport Minister) is asking for financial assistance to ensure justice is done. Mr Harrington intends to move a motion in the High Court to probe Tourism Minister Sylvia Masebo over allegations of abuse of authority regarding the operations at ZAWA. This follows a recent High Court ruling that Mr Harrington has the right to a judicial review against Masebo. Contrary to the position taken by Acting Chief Justice Lombe Chibesakunda who continues to refuse to appoint a Tribunal to probe Masebo.

Unfortunately the High Court did not award him costs for his action against Justice Chibesakunda because “the matter had been moved in public interest". This means Harrignton has to continue carrying the financial cost alone even though his actions benefits the public in general. He is now considering giving up the fight due to lack of financial resources. Unless other stakeholders who wish to see justice in the matter come on board, the judgment granted in his favour would remain on paper.

Thursday, 7 November 2013

Where Next for ZESCO?

Government has approved the proposal by ZESCO to increase electricity tariffs. Energy Minister Christopher Yaluma says that the Energy Regulation Board (ERB) approved ZESCO’s application, without indicating by how much the tariffs will rise.

Earlier this year ZESCO applied for electricity tariffs to increase 26% on average in order to meet its operational costs, high inflation and meet rising demand for electricity in the country. Yaluma says that the new electricity tariffs will increase less than 26%, but he has refused to state the exact amount. We have to wait for ERB to announce how much has been approved.

Wednesday, 6 November 2013

A Zambian Conundrum

Editor’s note: This is a guest post by Ntheye Lungu, an analyst and regular contributor to the ZE Facebook page discussions.
Here is a conundrum :

You are a shrewd and very successful businessman. You started off in the mining supply business, before venturing into micro-lending where you made an absolute fortune charging your desperate clients outrageously high interest rates. Over the years, business has been incredible and you now find yourself with excess cash that you would like to invest in other ventures.

It has always fascinated you that although your country is endowed with substantial mineral resources, there are not that many local entrepreneurs who actually own and manage a substantial share of the mining enterprises. The major players involved in mining in your country are all foreign, all largely managed by expatriates (although you are fully aware that the labourers are predominantly local).

Chikwandanomics

Finance Minister Alexander Chikwanda on low mining revenues :
[Members of Parliament] have rightly expressed their disquiet about the paltry contribution of the mining sector to tax revenue. The mining sector in Zambia contributes merely 5 percent to domestic tax revenue while the contribution of the mining sector in the other major SADC mining countries is at 11 percent. The mineral royalty in these countries is 3 percent while it is 6 per cent in Zambia.

The low contribution of the mining sector in Zambia can only be attributed to pervasive fraudulence, a state of affairs we are dealing with by placing a team of experts in Zambia Revenue Authority to design systems which will enable government to determine both the quantities and content of the minerals produced in Zambia.

Only then shall we be able to restructure the taxation of the mining sector in a way that optimises revenue from the sector without impairing the operations of the sector. Minerals are a non-renewable resource and it is only fair that the country gets a fair and reasonable return from its non-replenishable resources, in the process safeguarding the interests of posterity.

(Source : Ministry of Finance)

Tuesday, 5 November 2013

Debt Watch (Saudi Arabia)

The government recently signed two loan agreements with Saudi Arabia worth $40m to buy urea fertiliser ($20m) and renovate the University Teaching Hospital ($20m). This is the third loan agreement with the Saudi Fund for Development under the Patriotic Front government.

Zambia has witnessed unprecedented speed of borrowing over the last two years. Since PF came to power Zambia's external debt is nearly three times what it was 2 years ago. In 2012 alone, Alexander Chikwanda borrowed a staggering 14 times abroad!

Monday, 4 November 2013

Mine Watch (Kabwe)

Berkeley Mineral Resources (BMR), through its Zambian subsidiary Enviro Processing Limited (EPL), is planning to reopen Kabwe Mine and is expected to initially invest US$300 million (about K1.5 billion) in its operations. BMR is listed on the London Stock Exchange Alternative Investment Market. It hopes to commence operations in 2014 / 15.

EPL has been acquiring surface rights in Kabwe and licences over zinc and lead tailing dumps since 2008. It completed the the acquistion of all the relevant assets, surface rights, mining plot and licences in 2012. It says, it “has done a quality intensive verification process of samples in South Africa and we found that there [is] still a large percentage of base minerals in those (tailing) dumps..”. There also other minerals such as indium, silver and gallium inside the tailing dumps.

Friday, 1 November 2013

Bye, Bye ZCCM-IH!

An important recent report which has not had much discussion. The Government recently announced that it plans to cede control of ZCCM-IH. Mines Minister Chris Yaluma says that Cabinet will decide on the size of the divestment and that go is to give up control : “We are not looking back, but looking forward and getting the mining houses TOTALLY into private hands...We have gone past nationalisation and we are not going back.” (Source: Bloomberg)

Government currently owns about 87.6% of ZCCM-IH which in turn owns miniority shares in a number of mining houses. Yaluma’s statement suggests not merely a reduction to shares in ZCCM-IH below 50% as some have suggested, but potentially completely selling its shares and allow individuals (most of them likely to be foreigners) to purchase shares in ZCCM-IH. This is very consistent with a similar statement he gave Metal Bulletin.