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Sunday, 14 December 2014

Annual Sabbatical

Dear Friends,

As is customary since we started the Zambian Economist (website and Facebook page) in 2007, we taking some weeks off to recharge the batteries and switch off from social media and active writing. Over the years we have come to value this period.

This means that we wont be reached through the website, Facebook or Twitter. We also will not be able to respond to non-urgent emails or queries or requests for interviews until 7 January 2015.

Many thanks for your continued readership. We are certainly astonished by the progress of this website and its enormous growth in readership. We are even more shocked by how our Facebook Page has also grown over the last year. We started off with 25k facebook readers and ended the year now just under 50k facebook readers.  

In fact our reach at through social media has been well over 100,000 reads often for certain post. Combining the website, facebook and Twitter has often meant our digital foot print is well above that. We are being read and doing our bit to encourage discussion of economic issues. We are also trying very hard to promote other platforms about Zambia which share the same ideals of meaningful debate and analysis. 

It is fair to say that 2014 has been a roller coaster. We particularly enjoyed the debate on the fiscal and monetary challenges. And very saddened by the death of President Michael Sata. The death has plunged Zambia into great political and  economic uncertainty as it enters 2015.

Its fair to say that 2015 is shaping up to be a very crucial year for the country, particularly with the presidential by-elections and what it means for the national Budget, the current PF infrastructure programme, labour and mining issues.

We must also not that we are only 19 months away from the 2016 General Elections, unless the incoming president decides to dissolve parliament sooner because he or she is unable to govern with the MPs in the House.

What is clear is that economic analysis has never been more desperately needed! And we hope to be here to contribute a small bit to these issues from 15 January 2015, God willing!

Wishing you a very special Christmas!

Every blessing,

Chola Mukanga
Copyright © Zambian Economist 2014

Friday, 12 December 2014

Does Zambia need a mother for a president?

The NGOCC has called on Zambians especially women to support Edith Nawakwi in the presidential by-elections. NGOCC Chairperson Sara Longwe recently released a press statement urging “all well-meaning Zambians, especially women to support [Nakakwi]…because at this critical moment that we decide our fate for the next 50 years, it is time Zambians give a woman the chance to lead this great nation”.

The NGOCC says we need Nawakwi because “women are naturally compassionate, loving, caring and understand the complex needs of the community and indeed the country” As a mother “Ms Nawakwi will provide leadership that will accelerate the social economic development of our country”. In short her qualification is that she is a woman and she has children. It is not clear what childless women make of that.

Monday, 8 December 2014

Mining companies stampede on Zambia

Finance Minister Alexander Chikwanda, who has been busy quietly doing his job in the middle of the collapsing governance of the country under Scott's watch, has finally spoken on the pressing mining tax issue that is threatening the viability of the 2015 budget.

Chikwanda says he has successfully resisted the “stampede” by some companies trying to force amendments to his taxation plans: “[the mining tax changes] will pass through in its current form...These people don’t allow us to think about our own ideas, they just want to think for us...some mining companies want to stampede us to change the tax regime”.

It will be interesting to see whether that bold declaration does stand. It has not been easy for Chikwanda. Mining companies led by Barrick Gold have been heavily lobbying Vice President Guy Scott to force through the changes. They have also lobbied opposition parties, many who are already in the pocket book of mining companies.

Friday, 5 December 2014

The collapse of governance in Zambia

Vice President Scott's protege Miles Sampa is allegedly running a red beret militia that urgently needs to be investigated and removed from the streets by our policing authorities. If unchecked it will set Zambia on fire. Sadly, this development is only one of many signs that governance is collapsing in Zambia at the hands of the so called Cartel. A coalition of greedy people who want to control the future of the country. We are sleep walking into a national catastrophe.


Over the last few weeks we have been tracking the developments within the country. It is evidently clear to us that at the root of the problem is Vice President Guy Scott who seems to be a perpetual law breaker during this transition period. We have seen his take illegal decisions such as transferring office bearers to support his political aims (See Elias Munshya's excellent piece). He has also blatantly broken the law by clearly ignoring a Court order, a fact which he has been exposed by the lawyer who was present at his illegal conference. He has encouraged political thugs like Silvia Masebo and Chishima Kambwili to attack ZNBC journalists in broad daylight.

Wednesday, 3 December 2014

The cost of inaction

The Electoral Commission of Zambia (ECZ) announced this week that it will spend around K344 million ($55m) in administrative costs to conduct the 2015 presidential elections. The administrative cost may increase because the actual cost of printing ballot papers will only be known once the size of the ballot paper has been agreed. That in turn depends on the number of contenders.

The last time the cost rose to $70m. This time we probably we will definitely get above $60m as a conservative estimate. Even if part of this cost is funded by aid from foreign governments, Zambia still bear a significant share. Also there are non-administrative costs like providing additional security, as well as indirect costs in form of lost productivity and diversion of public funds to less efficient areas.

Monday, 1 December 2014

The End of Scott and the Rise of Lungu

It has been another day of drama today in the chaotic Patriotic Front (PF. New PF president Edgar Lungu held a press briefing where he fired Bridget Atanga, as expected, and appointed Davies Chama the new SG. It is an interesting move. Perhaps Mulenga Sata was sidelined for this role because his loyalty is yet unproven. He also now has the adoption certificate.

As Lungu was announcing the changes a parallel “illegal” PF conference hurriedly cobbled together from Kabwe residents and cadres from the streets were led by Guy Scott. We say “illegal” because it turns out the Lungu camp had already obtained an injunction against the purported conference. The injunction was served on Scott and his friends.

Monday, 24 November 2014

Economic developments (Debt, Aviation, Health)

Some interesting economic news that may have escaped your attention in the middle of the current political excitment! 

Finance Minister Alexander Chikwanda wants Cabinet to approve a US$100m loan in order to repay another LAP GreenN loan obtained in 2011 to upgrade Zamtel. Chikwanda is apparently seeking $100m from Exim Bank of China to pay ZTE on behalf of LAP GreenN. In June 2010, theLAP GreenN acquired a 75 per cent stake in Zamtel, only to be nationalised in 2012 by PF. (Source : The Post)

Saturday, 22 November 2014

Sata's economic legacy

What is Michael Sata’s economic legacy? Here is how the Fredson Yamba (Treasury Secretary) explained it in a press release after Sata died :
Under [Sata’s] able leadership and guidance, the economy grew by more than 6 percent per annum, well above the Sub- Saharan Africa average, while inflation has been contained within single-digits. The external sector, especially non-traditional exports grew significantly with agriculture exports exceeding US$1 billion dollars, the highest in the history of the country. This reflects his will for the country to diversify the economy.. 
As Zambians we also witnessed an unprecedented focus on capital investment in social and economic infrastructure, particularly in health, education, roads, rails, and energy sectors. Recognizing the high unemployment levels in the country particularly among our youth, the Government did put in place an Industrialization and Job Creation Strategy. This strategy is bearing fruit as seen through a sustained increase in additional jobs and incomes, which is important in lowering poverty... 
As a mark of growing investor confidence, Foreign Direct Investment has continued to grow reaching the peak of US $1.73 billion in 2012, the highest in 12 years. The investments have been broad-based-covering Government’s priority economic sectors, namely agriculture, tourism, labour and export-led manufacturing, mining and construction. This is a reflection of the improved investment environment in the country, made possible by policy consistency and workable pro-private sector strategies.. 
(Source: “Zambia's economic performance under President Michael Sata”, Ministry of Finance, 30 October 2014)
It is true that the economy grew, but it was growing around the same levels before Sata came to power! Same thing with inflation in single digits. The point on agriculture sector is interesting but that was because we subsidised more agriculture exports than before. It is also hardly a vast increase. Certainly no deep structural diversification took place.

Thursday, 20 November 2014

Monetary Policy Statement (November 2014)

Editor's note:  BOZ Governor Michael Gondwe yesterday delivered the following Monetary Policy Statement. It is intended as a quarterly snapshot of the state of the economy, with particular focus on the monetary side. 
The Monetary Policy Committee (MPC) met yesterday, 18 th November 2014, to consider developments in the domestic economy over the third quarter of 2014. In its deliberations, the MPC also considered global economic developments and their likely ramifications on the Central Bank’s ability to achieve its core objective of maintaining price stability.

GLOBAL ECONOMIC DEVELOPMENTS

The prospects for global growth have worsened since the August MPC meeting, with repercussions on commodity prices and global financial flows.

Thursday, 13 November 2014

Hichilema stutters on the economy

Hakainde Hichilema  (UPND) has kicked off the bid for your presidential vote with an interesting press release.  Here are the key quotes relating to the economy :
“It is time to strengthen our economy to allow for job creation, stable prices and wealth redistribution. We can only do this through prudent economic management. We need a strong and stable economy to support our middle class and SMEs which are basically struggling for survival. The middle class and SMEs are key to economic growth. We must support our economic development with a strong agriculture sector, free appropriate and good quality education, and quality healthcare” 
“We must continue with the infrastructure development but at an accelerated pace. Infrastructure is the conduit for economic development. I have always maintained that where a good road goes, development goes. Nonetheless, infrastructure development must be done in such a manner that it does not hurt economic fundamentals. We must increase our revenue collection capacity to fund our infrastructure as opposed to borrowing expensive money. And in some cases we must partner with the private sector (Private Public Partnerships) so as to reduce pressure on the public purse” 
(Source: UPND)
From the above we can summarise that HH is promising free and good quality education and health care. He also broadly plans to continue Sata’s infrastructure delivery. HH plans to deliver this via increasing "revenue collection capacity” rather than “borrowing expensively”. This could either mean more taxes on ordinary Zambians or mantaining the new mining fiscal regime which is facing a serious backlash.

Tuesday, 11 November 2014

Zambia after Sata

Zambia is pregnant with opportunities but the country is facing delicate economic risks that demands focused leadership. Given the strong focus that Michael Sata placed on social infrastructure in transport, health and education, coupled with ramping up of social cash transfers it is reasonable to assume that poverty will hopefully fall in the next few years.

If PF can focus on sorting out the politics of the country, including delivering a new constitution, the future for Zambia may well be very bright. That is a big “if”. At the moment the PF leaders appear completely oblivious to the economic potential and risks facing the country. The risks have been there for the last year or so, other risks were triggered by the Budget 2015, and yet others by Michael Sata’s death. Surprisingly, though it was public knowledge he was sick, PF appeared to have made no contingency planning.

Monday, 10 November 2014

Drug quality and global trade

Editor's note:  The article below is taken from a VoxEU publication 'Drug quality and global trade' by Attaran et al. It finds that drug quality is poorer among Indian-labelled drugs purchased inside African countries than among those purchased inside India or middle-income countries. 
Data from the Pharmaceutical Security Institute indicate that poor-quality medicines were found in 124 countries in 2011, with the problem more severe in low- and mid-income countries than in developed countries (IOM 2013). While much attention has been focused on intellectual property rights protection (notably issues surrounding the WTO's TRIPS agreement), poor-quality samples were more prevalent in cheap, generic drugs than in expensive, innovator-branded drugs when we tested drug samples from 18 low-to-mid-income countries (Bate et al. 2011). Moreover, many people in developing countries have to rely on cheaper, generic drugs for most diseases, and the percentage of imports in drug supply is as high as 70% in African countries (UNAIDS 2013). From the public-health perspective, international trade is arguably more important on the low end than on the high end of drug quality.

Tuesday, 4 November 2014

Shocking political incompetence

It has been another day of shocking political incompetence in PF. We woke up to news that Nixon Chilangwa MP had naively taken on the most unwanted job in the country. He had accepted the job of PF Secretary General after Davies Mwila MP turned it down. Mwila's resignation brought much embarrassment to VP Guy Scott. As Chilangwa was accepting the appointment, riots from overnight were still continuing by students and PF cadres.

Pardoning Criminals

The last act of President Michael Sata was to pardon 975 inmates as Zambia marked the National Independence Golden Jubilee. The president has powers under Article 59 of the Constitution of Zambia to exercise the prerogative of mercy, which includes pardoning criminals.

This is the second largest number of inmates released on presidential amnesty in the history of Zambia after more than 2,318 were released in 2012, also by Michael Sata. The total number of criminals allowed back on Zambian streets since the PF came to power now stands at around 5,700.

The driving reason for the releases are that "the conditions in the prisons have always been a concern of the Patriotic Front (PF) Government, and this move is in line with the Patriotic Front manifesto of turning the prisons into correctional facilities”', according to the Home Affairs Minister Simbyakula. In short we need these large amnesties because of appalling prison conditions.

Monday, 3 November 2014

A complete circus

A few stories you may have missed.

There's circus in PF today. Guy Scott fired PF Secretary General Edgar Lungu MP and appointed Davies Mwila MP. Only for Mwila to decline the appointment publicly saying, "he cannot belittle the late head of State by not mourning him with dignity". Information reaching us is that Edgar Lungu has also in fact refused to step down.

Cabinet Ministers are lining up behind Edgar and are calling on Guy Scott to rescind his decision. Tourism Minister Jean Kapata says Scott should not make a decision alone without involving the central committee of governing party. Chishimba Kambwili MP says some cabinet ministers will be meet Scott to iron out the matter.

In two other related stories :

Constitutional Lawyer John Sangwa has told ZNBC that, as we have said before, it is wrong to call Guy Scott 'Acting President'  because the constitution does NOT provide for that position. He is still Vice President Scott and that should be the correct address.

Separately, Zambia Voice Executive Director Chilufya Tayali says his organisation is taking  the succession matter to court contending that VP Scott does not qualify to exercise the delegated presidential functions. This follows revelations that the Attorney General misled the country, and possibly cabinet, over the George Mpombo precedent. It turns out there was no such precedent.

Sunday, 2 November 2014

Is it time for Zambia to RESET?

The death of President Michael Sata has generated many questions from our readers. One of the questions we are being asked is this. Is it possible for the presidential by-election to be combined with the referendum on the draft constitution?

The simple answer is yes. There is nothing, in theory, that is stops the PF government from combining both events. However, the status of the draft constitution is that it is merely a draft document. Parliament has not sat to debate it nor have the public properly considered it. PF released the document under duress and offered no roadmap. Just when people started reading it President Michael Sata died.

Saturday, 1 November 2014

Profiting from Sata's death

We are already getting some indications of what the death of President Sata may mean for some economic policies. There are reports that Government may be backing away from plans to impose a 20 percent royalty rate on open pit mining in the country, according to Barrick Gold executives.

Finance Minister Alexander Chikwanda announced earlier this month that that from January royalties on open pit mines will rise to 20 percent and on underground mines to 8 percent from 6 percent currently.

Barrick Gold (owners of Lumwana Copper Mine) have been threatening government over the issue, suggesting that it would mean closure of Lumwana. They told Reuters on Thursday that “our sense is there would be movement away from that number….that's certainly the direction discussions were going”

Friday, 31 October 2014

ZCCM-IH Annual Report 2014

The latest ZCCM-IH Annual Report is embedded below. ZCCM-IH is the investments holding company majority owned by the GRZ and holds minority equity interests in the successor mining companies created after the unbundling and privatization of Zambia Consolidated Copper Mines (ZCCM) in 2000. It is public listed on the LuSE. Its shares also trade on the Euronext stock exchange in Paris.



Under the current shareholding structure, GRZ holds 87.53 % whilst 12.47% is held by minority shareholders. Following privatization of ZCCM in 2000, ZCCM-IH inherited debt of approximately USD 363 million on its balance sheet. And for the next ten years the company was technically insolvent - and therefore unable to pay any dividends to its shareholders on account of this legacy debt.

Thursday, 30 October 2014

Funding and Regulating Higher Education in Zambia

By Henry Kyambalesa

The news concerning the thousands of our fellow citizens who have withdrawn from the University of Zambia where they were accepted to pursue studies because they could not get government bursaries is disgraceful. It is shameful that at a time when our beloved country is about to celebrate 50 years of independence, we cannot afford to provide bursaries and/or loans to all our fellow citizens who have worked so hard over the years to finally get a nod to pursue higher education.

In 1917, a philosopher by the name Alfred North Whitehead warned about the ill-fated destiny of any given country that does not make meaningful investments in its people’s education that is perhaps truer today than it was during his time; he said: “In the conditions of modern life, the rule is absolute ... [a nation] which does not value [education] ... is doomed.”

Accessible and high-quality education can, therefore, be said to be the most important investment a government can make, simply because it is practically not possible for any country to succeed in the pursuit of other human endeavors without adequate pools of skilled and enlightened citizens.

Wednesday, 29 October 2014

President Sata is dead

Government has announced the death of President Michael Sata. Below is the address to the nation by the Secretary to the Cabinet Roland Msiska :
Fellow country men and women.

As you are aware, His Excellency Mr. Michael Chilufya Sata, President of the Republic of Zambia has been receiving medical attention in London, in the United Kingdom. He left Zambia with the first lady and other close members of the family on October 20, 2014.

However, it is with a very heavy heart that i address you today, to inform the nation that our beloved President and Leader, His Excellency, Mr Michael Chilufya Sata has passed on.

The head of state passed on, on October 28, 2014 in London at 23:11 hours Zambian time at King Edward VII Hospital Beaumont, Central London. His spouse, the First Lady of the Republic of Zambia, Dr Christine Kaseba-Sata, his son the Mayor of Lusaka, Mulenga Sata and others were present at the bedside at the time of his passing on.

President Sata was born on July 6, 1937. Mr. Sata became the fifth president of Zambia on September 23 2011 after a popular poll.

President Sata’s demise is deeply regretted. During this difficult period, I urge all of you to remain calm, united and peaceful during this very difficult period. The nation will be kept informed of other details regarding the funeral and burial arrangements.

God bless Zambia

Dr. Roland Msiska
Secretary to Cabinet
May God strengthen Dr Kaseba Sata and the all the family members. Very sad news indeed for them and the whole country. May God also give Vice President Guy Scott and the Cabinet all the necessary wisdom as they rule the country for the next 90 days. It is a weighty situation for Dr Scott, but every tragedy is also pregnant with opportunity to refashion the country positively.

The demise of Mr Sata inevitable leaves PF without a designated successor. It is very unlikely that Guy Scott would stand. Therefore PF will need to quickly move to identify a party president. That process is fraught with difficulties because we are dealing with at least four bases of power : the Cabinet members; Members of Parliament; Members of the Central Committee; and, the party in general. The opposition will of course need to coalesce to stand any chance of an upset. Very interesting days ahead politically. 

Copyright © Zambian Economist 2014

Saturday, 25 October 2014

Zambia's Sovereign Wealth Fund

Alexander Chikwanda in the Budget 2015 announced that Government is establishing a Sovereign Wealth Fund [SWF] :
A culture of living hand-to-mouth does not safeguard the interest of posterity. We have the duty and responsibility to secure the future of the next generations. In this regard, I have allocated K100 million for the establishment of a sovereign wealth fund. Going forward, a significant proportion of the dividends from state-owned enterprises that will fall under the Industrial Development Corporation [IDC] will form part of the fund" 
There’s currently no publicly available government policy document that explains the nature, purpose and governance framework of the new SWF. A scan through the revised Sixth National Development Plan (SNDP) mentions the IDC but says nothing on the new SWF. The only information we have is what is stated in Chikwanda's budget statement.

Friday, 24 October 2014

Draft Constitution of Zambia

The Government has now published the draft Constitution of Zambia after persistent demands by civil society and other members of public. There is no roadmap on what happens next. What is clear is that we are not going to have a new constitution before 2016 because the time has run out. The Patriotic Front (PF) may choose to pursue a selective amendment approach if they can reach consensus with the opposition. However, the most optimistic outcome would be a referendum at the same time as the general election. That too is highly unlikely because the current draft is still quite a flawed documents in many parts. And of course PF disagrees with many parts within it. 

Friday, 17 October 2014

Zambia's Sixth National Development Plan

I have been forgetting to share this document, though I suspect many of you may already have downloaded it from other sources. This is the plan that defines what the Patriotic Front are allegedly aiming for in Zambia as they seek re-election in 2016.



Copyright © Zambian Economist 2014

Wednesday, 15 October 2014

A new mining tax regime

Finance Minister Alexander Chikwanda last week delivered the Budget Statement 2015. As the Post newspaper already revealed, government is reducing its share in ZCCM-IH to 60%. Chikwanda also appeared to signal that the contentious VAT rule is here to stay. The big one of course is the redesign of the tax regime for mining operations by replacing the current two tier system with the following mining tax structure:

(a) 8 percent Mineral Royalty for underground mining operations as a final tax;
(b) 20 percent Mineral Royalty for open cast mining operations as a final tax.
(c) 30 percent Corporate IncomeTax rate on income earned from tolling; and
(d) 30 percent Corporate Income Tax rate on income earned from processing of purchased mineral ores, concentrates and any other semi-processed minerals, currently taxed as income from mining operations

Effectively what the measures do is increase underground mining royalties to 8 percent from 6 percent. It has also introduced a 30 percent corporate processing and smelting tax. Another 30 percent tax would be applied to income earned from “tolling”, industry-speak for an agreement to process another producers raw materials.

Sunday, 12 October 2014

2015 Budget in Words

A visual representation of the Budget yesterday as delivered.  I thought it was worth showing how the word "continue" stands out. The main surprise is how often the word governance is used!


AUTHOR 
Chola Mukanga 
Economist | Researcher 
Copyright © Zambian Economist 2014

Friday, 10 October 2014

Zambia Budget 2015

Finance Minister Alexander Chikwanda delivered the Budget Statement 2015 earlier today. I have read through it but not fully process it. Everything in the Budget was leaked to the Post newspaper. There are no surprises in that sense. In short it a budget short of new things - the word "continue" seems to be all over it. However it does contain important proposals relation to the mining fiscal regime and ZCCM-IH. More discussion on the proposals in due course. 



AUTHOR
Chola Mukanga
Economist | Researcher
Copyright © Zambian Economist 2014

Monday, 6 October 2014

New Kwacha Trading on JSE

By Mawano Kambeu

On October 3rd, 2014 the Zambian Kwacha, Nigerian Naira and Kenyan Shilling debuted the Johannesburg Stock Exchange (JSE). This is the largest and most liquid stick exchange in Africa. The move has been heralded as a milestone by Government but with little explanation in the media about what it really means for ordinary Zambians. This article is designed to address some common questions that have been posed by the public.

What is actually being traded on JSE?

The forex market on the JSE is not a currency bureau, where people can buy and sell the kwacha. This is a futures market, where investors and businesses that import or export can buy Currency Options or Currency futures, which belong to the derivatives market.

Sunday, 5 October 2014

VAT refund crisis

Glencore (owners of Mopani Copper Mines) last week halted operations at its Sable Zinc Kabwe mine because of withheld valued-added tax refunds owed to the company. Mopani has also suspended part of an $800 million plan to boost production of copper by 50 percent.

The Zambia Revenue Authority has held back on paying mostly mining companies more than $600 million VAT refunds, because it says exporters haven’t complied with a rule requiring import documents from the countries the products end up in. Mopani alone is owed more than $200 million in refunds.

Thursday, 2 October 2014

A Comment on Elias Chipmo's article on VAT refund.

It is refreshing to read Elias Chipimo's insightful contribution on the VAT refund - see the article VAT refunds to mining exporters . Our only observation is that what he has written is factually correct. And we would like to offer some additional points that perhaps he could have made more clearer.

First, the way VAT is applied is an issue of "international best practice" rather than international legality. Every country is entitled to apply VAT refunds in a way that is consistent with its domestic policy and laws. Whether you follow best practice is a question of knowledge and competition rather cast iron laws.

Secondly, the article could have more explicitly noted that ZRA is merely trying to enforce the law and regulations as it understands them today. The fact that previous Finance Ministers have coerced ZRA to act in a certain way is irrelevant to the discussion. We need to distinguish policy and best practice from the legal position of the actors involved. We felt that this distinction was not adequately addressed in the article.

Wednesday, 1 October 2014

VAT refunds to mining exporters

By Elias Chipimo

Let me start with a surprising statement: every finance minister since 1997 has been refunding mining companies for the VAT that they pay when they bring goods and equipment into this country. This includes Edith Nawakwi (under President Chiluba), Peter Magande (under President Mwanawasa) and Situmbeko Musokotwane (under President Banda).

It was therefore surprising to see the current finance minister, Mr. Alexander Chikwanda, being criticised in the media recently by some of his predecessors for advocating VAT refunds to mining companies - something they themselves did regularly over the past 17 years.

Sunday, 28 September 2014

The Mining VAT U-turn

Government appears to have completely U-turned on the $600m VAT refund to exporters, with the larger bulk owed to mines and other exporters. ZRA says the U-turn is due to "widespread concern on the matter".

Minister Minister Chris Yaluma says "ZRA will do what they think is right and like they said, they have got the autonomy to run as best as they can to ensure all needed revenues are collected...They are trying to do what they can do best in the interest of the country.” (Source: The Post). No word from Alexander Chikwanda but it appears the U-turn may have President Sata's backing.

Monday, 22 September 2014

Growth and government size in Zambia

By Henry Kyambalesa

In this article, the term "economic growth" refers to an increase in a country's total output of goods and services over a given period. The term "economic development" refers to improvements in the standards of living of a country's citizens. These include sustained and pronounced improvements in per capita income, life expectancy, literacy levels, human capital, healthcare services, food security, public housing, transportation infrastructure, and leisure and recreation.

Saturday, 20 September 2014

Zambia Fitch Rating (September 2014)

Editor's note: Fitch today affirmed Zambia's credit rating at 'B', and revised the outlook to positive owing largely to the rebased GDP figures, government revoking BoP regulations and promises to consolidate fiscal spending as part of the ongoing discussion with the IMF on a new austerity programme.  The Fitch assessment does not appear to reflect current information on some issues so some the risks it flags requires deeper consideration. 
Fitch Ratings has revised the Outlook on Zambia's Long-term foreign and local currency Issuer Default Ratings (IDR) to Positive from Stable and affirmed the IDRs at 'B'. The issue ratings on Zambia's senior unsecured foreign and local currency bonds have also been affirmed at 'B'. The Country Ceiling has been affirmed at 'B+' and the Short-term foreign currency IDR at 'B'.


Friday, 19 September 2014

President Sata : Parliament Speech 2014

Editor's note : President Michael Sata earlier today delivered the highly anticipated speech to parliament set out the government's agenda in the next parliamentary year. Full speech below, with minor editorial edits for ease of reading.
I am privileged and honoured today to be with you and the members of parliament on this important day of our national calendar to officially open the fourth session of the eleventh national assembly. It is now three years since the patriotic front government took office, and there are only two years before the next elections.

Wednesday, 17 September 2014

Cash transfers

Community Development Minister Emerine Kabanshi recently announced that the Government plans to extend the cash transfer scheme to cater for up one million households. Government has sensed that it is onto an election winner.

GRZ is currently running two cash protection schemes that gives support to the vulnerable in the community : social cash transfer and social protection fund. The cash transfer is a bi-monthly cash allowance of $25 and $50 dollars for vulnerable households and households where there are people with disabilities respectively.

Monday, 15 September 2014

Zambia's chaotic land administration

By Bruce Chooma

Zambia is in a bizarre position when it comes to land administration and management. No one knows how much land is available for various purposes. For over 20 years the Zambian government has insisted that only 6% of land in Zambia is state land the remaining 94% is customary. The truth is that a lot of land has since been converted from customary to state land across the country but without any reliable system of records at the Ministry of Lands.

Zambia has a dual system of land tenure of customary and leasehold tenure. The land is vested in the President on behalf of all Zambians. However, the issue of vestment is one that lacks widespread consensus particularly among the traditional leadership.

Friday, 12 September 2014

Sell them!

“It is our hope also that the government will help companies like Times of Zambia where workers have gone for three or four months without getting paid. Workers have been patient, we have met the labour and information ministries but the request we made to the Ministry of Finance is still pending and they are the ones who hold the key...If this money is paid, then the Times of Zambia can also manage to pay the workers"

LEONARD HIKAUMBA
(Source: The Post)
We keep going in circles on this one. How long will government continue to bail out these newspapers? We should sell all state newspapers and ensure no more money is wasted on producing propaganda that no one is interested in. At the very least one of them must be sold urgently. You don't need both.

Wednesday, 10 September 2014

Infrastructure and development

A recent World Bank blog piece  about infrastructure and development makes the following interesting comment :
"Will public investment in infrastructure be sufficient for unleashing faster economic growth in Sub-Saharan Africa? The evidence, both academic and empirical seems to say not necessarily. We see from the works of Rodrik, Hausmann and Velasco (2005)  that developing economies face multiple constraints to growth, and that public policy should focus on removing the binding constraints that really matter. However, that requires an accurate diagnosis of the binding constraints to growth" 
It is not sufficient just building infrastructure we need to be clear whether it is a binding constraint. And the good news is that in Zambia's case it is one of the binding constraints. The last constraints study actually suggested that the key binding constraints to inclusive growth are low investment in human capital, low infrastructure services and coordination failures.  In fact Zambia is addressing the first two except the last one - governance remains very poor and we can only hope that the recent political changes will now move the country forward in a better direction.

Monday, 8 September 2014

Judicial system and growth

A recent IMF working paper has an interesting summary of the latest empirical evidence on the channels linking the judicial system and growth :
Development of credit markets and cost of credit. Weak contract enforcement raises the cost of borrowing, and shortens loan maturities (Bae and Goyal, 2009; Laeven and Majnoni, 2003), with a detrimental impact on investment, the depth of mortgage markets, and GDP (Bianco et al., 2002; Laeven et al., 2003; Djankov et al., 2008).

Thursday, 4 September 2014

Ebola and growth prospects

A fascinating comment in Business Week on the potential of the ebola virus on the West African region :

"Sierra Leone’s prospects were bright before the worst-ever outbreak of the virus. The economy was expected to grow 14 percent this year, almost three times faster than the average for sub-Saharan Africa. In neighboring Liberia and Guinea, rich iron-ore deposits were luring billions of dollars in foreign investment and fueling growth. Then, in December, the first case of Ebola appeared in Guinea. Its emergence at first was seen as a short-term outbreak with limited economic impact. The disease now threatens to cripple three economies with a combined gross domestic product of about $13 billion. Commodity companies are slowing production, and airlines are shutting routes. In Liberia, the government says the epidemic threatens to derail progress made since the end of the civil war in 2003. Sierra Leone has canceled its first sale of bonds open to foreigners"
Things have a way of falling apart in Africa. If it is not wars then its nature. Given the regional turbulence in West Africa Ebola is the last thing the region needed. One can only hope that the region's government have sufficient fiscal space to boost demand post Ebola.

Paradox of Populism

Populist leaders...start out attacking their opponents’ corruption and accuse them of hijacking the state for a self-serving political establishment that excludes the interests of ordinary people. Yet, when in power, they end up behaving exactly the same, treating the state as their or their party’s property and engaging in, or at least condoning, corruption. Usually, this apparent hypocrisy does not hurt populists’ electoral prospects"
From Jan-Werner Mueller's fascinating piece on the paradox of populism. It has a lot of resonance with much of the African experience.  The authors suggest that the reason why this paradox exist is because populism erodes the distinction between government and the people.

Tuesday, 2 September 2014

Lessons from Mangango

By Bruce Choma 

The victory recorded by the Patriotic Front in the recently held by-election in Mangango is no mean achievement for them as a party seeking to establish national character.

Opposition political parties in Zambia still have a lot to learn about the voting attitude of people in rural areas. They need to take a few steps back and ask themselves critical questions around their strategy and messaging.

The Mangango polls were marred with electoral violence with clashes mainly between cadres and agents of the ruling Patriotic Front and the UPND. This did not do well to level the playing field and to an extent contributed to voter apathy.

Sunday, 31 August 2014

Mangango, PF and 2016 elections

By Michael Chishala

On 20 August 2014 (the day after the Mangango by-election), an article was published on Zambian Economist (ZE) Facebook page claiming that "...if elections were held today across the country, PF would win it comfortably because they continue to consolidate the rural vote, capitalising on their better organisation and financial resources." Furthermore, "It also means that any broadly reasonable candidate for PF in 2016 should secure re-election, provided PF do not do anything stupid between now and then." I wish to respectfully disagree with both the conclusions and reasoning in the article as follows:

Saturday, 30 August 2014

Zambia Annual Economic Report 2013

I was going through my report archive and I stumbled on this report. After checking I have concluded that unfortunately I have not shared it before. It has some helpful statistics pertaining to the Zambian economy last year. 



AUTHOR
Chola Mukanga
Economist | Consultant | Researcher
Copyright © Zambian Economist 2014

Tuesday, 26 August 2014

When the party equals the government

A couple of months ago, a long time ally of the Zambian Economist, asked us an important question : ‘Why do you always refer to government as the “PF government?’ We suspected she felt we were inadvertently promoting a one party state. We explained that we use the term pejoratively. We would love to refer to government as the Zambian government. Unfortunately, PF does not draw distinctions between PF and government, so until it does we shall continue to call it the PF government.

That remains our view. However, what we should have also said is that every government since independence has behaved this way. It is wrong to single out PF out. We have had UNIP and MMD governments where the party was equal to government. For example, in 2011 Dora Siliya MP who was serving as an MMD minister said this:

“A lot of people are busy saying the MMD government is abusing ZNBC because ZNBC only covers the MMD government. Yes, ZNBC has to cover us because it shows government developmental projects...Even when Sata comes into power, ZNBC will be covering him alone. THIS IS OUR TIME. Those who want to be feeling bad about themselves when they wake up every day, they should be buying The Post newspapers because it always talks about negative things, saying things are bad in the country when the economy is doing well...”- Dora Siliya (Source : The Post)

Siliya’s argument is that others ate in the past, and now it was MMD's turn to control the levers of power (and eat). We can actually find similar statements from Chiluba, Banda and Mwanawasa. In short whether it is UNIP, PF or MMD all parties once in government believe the party is equal to the government.

This is why we continue to see cadres filling important positions and diminish the effectiveness of government. Government is the party cadres' paradise and the poor peoples' hell. All parties in government are quick to claimnational resources are theirs. They use State positions (especially diplomatic postings) to reward their party cadres (and foreign campaign funders). While this helps the party of the day (at the moment PF) to achieve its political aims it has two serious implications.

First, it puts ordinary citizens in an adversarial position against their government. Consider a NAREP supporter who loves their party but also wants to support their government, as a patriotic citizen, to deliver meaningful development to its people. Unfortunately he / she can't do that because the policeman is now a PF cadre instead of a legitimate government employee. The permanent secretary appointed by President Sata is not a legitimate civil servant but merely a political cadre. How is the PS going to relate to NAREP cadres who in practice are his real employers?

Secondly, it is eliminates the legitimacy of a sitting government. This is the more serious issue. When the party equals government, it essentially means the party in question has usurped state power and using it to reward itself at the expense of the poor. This of course has serious consequences. In some countries it would be considered treason, but in our country it’s the practical effects that are worrying.

Consider the Barotse riots. It was clear that the riots were organised by those aggrieved by "government" actions / statements on the issue. But were they? Or were they grieved by the actions of PF and MMD ( as usurpers of state power)? Was PF acting as a legitimate government or acting as a bunch of cadres with a mindset of "this is our time" to eat in the Dora Siliya mode? When legitimacy is gone it breeds chaos. Equating government with the party is therefore not a way to govern. It breeds violence which disproportionately affects the poor.

The other point to note is that the coalescing of the party with government complicates issues for independent analysts like Zambian Economist. While we aspire to ensure that our take is as non-partisan as it can be, it virtually becomes practically impossible to do so because the party is the same as the government in Zambia. It is this point that the our friends in PF and MMD have always missed when they criticise us.

They should recognise that those of us who stand in defence of the Zambian people will always side with our poor in our critique. We care about their oppressors. In doing that it will most certainly mean that we have no choice but to attack the misguided practices of the party in government because we look for government and we see only the image of PF (as we saw MMD in the past).

Our friends in the Western world have an easier task because in real democracies it is clear where the government ends and the party in government starts. Not so with us. The PF cadre is also the permanent secretary, he is also the police man, he is also the journalist, he is also.....[fill in the blanks].

AUTHOR Chola Mukanga Economist | Consultant | Researcher Copyright © Zambian Economist 2014

Green Paper - MTEF 2015 - 2017 and Budget 2015

The Government has released the Medium Term Expenditure Framework (MTEF) for 2015 - 2017 and the outline for the 2015 budget. This is essentially the PF plan for re-election as the MTEF runs to 2017.



AUTHOR
Chola Mukanga
Economist | Consultant | Researcher
Copyright © Zambian Economist 2014

Sunday, 24 August 2014

Intellectual Poverty (ZCTU)

“We reject the continued artificial suffering of public service workers that comes with the imposition of the wage freeze while the cost of living continues to rise... In view of the escalating bank lending rates, Government should introduce fixed interest rates for public service employees whose incomes have remained static in the face of increasing interest rates and high cost of living...as the cost of accommodation keeps rising, government must consider providing social housing for public service workers because accommodation continues to take up a big share of workers incomes.”
ROY MWABA
ZCTU General Secretary
(Source: Lusaka Times)

The ZCTU sharing  its proposals for the 2015 budget. These demands by the ZCTU are in addition to the proposal for an increase in the minimum taxable taxable threshold from K 3,000 to 4,000 because of a "rise in the cost of living". Even if one believes the proposals are needed, we surely must ask the basic question : where is government going to get the money to do all these things?

Friday, 22 August 2014

On the Kindle

We are currently kindling 'Journey toward Justice : Personal Encounters in the Global South' by Nicholas P. Wolterstorff. The greatest moral philosopher alive today. What he observes about injustice in Honduras is fascinating:
"..It is commonly said that the failure of Honduran officials to deal with crime against the poor is due to corruption—graft and bribery...Though there are indeed corrupt officials, the fundamental problem is not corruption but fear and a pervasive lack of trust. Poor people do not trust the police, the judicial system, or the bureaucracy. The police do not trust the prosecutors; the prosecutors do not trust the police. The result is that the poor are afraid to take action when they are the victims of crime or illegal treatment; they fear that if they file a report with the police or some government official, the person or organization that wronged them will retaliate. The police and prosecutors likewise fear that they will be the victims of retaliation if they take action. There is plenty of evidence that these fears are warranted. What I saw, more clearly than ever before, is that justice in ALL its forms is impossible in the midst of pervasive fear and distrust.

Wednesday, 20 August 2014

Facebook Debate : Is Zambia a loser country?

Zambia Is  A Loser Country 
By Anonymous

Ours is a loser country. Everything about this country is depressing and uninspiring. Here, everything is politics. The whole lot of Zambian leadership is an inferior species incapable of moving forward. We deserve the poverty we are experiencing because of the leadership we have allowed to govern the country. There is an erroneous belief that our pitiful condition is the result of lack of money. No. Progress is not a priority here. No amount of money can develop this country. Poverty has become part of the Zambian culture.

Monday, 18 August 2014

Eurobonds : weighing the risks against gains

Editor’s note: A recent article from Albert Halwampa (ZIPAR) on the costs and benefits of external borrowing through Eurobonds. It argues for a comprehensive legal and institutional framework to address the risks associated with this form of debt instrument. 
There has been recent media speculation about the government issuing another Eurobond – the third in two years. Earlier this month, the Ministry of Agriculture and Livestock talked about the possibility of floating a bond to plug the US$400 million financing gap in agriculture. This has resulted in apprehension in some quarters of the economy regarding the risks associated with this seemingly allure of Eurobonds. I therefore attempt to weigh some of these risks.

Saturday, 16 August 2014

Kabimbanomics

“Members of parliament go through difficulties and I know the distances because I travel across the country myself, if we want MPs to serve the people to the degree that we expect them and promote democracy and interact with the people we should facilitate...How do we facilitate that, we facilitate that through emoluments. If you want to curb corruption, to ensure that our MPs do not fall in category of people who do not have the interest of people at heart then we should look at the issue of emoluments. You can justify the demands [for a pay rise].”
WYNTER KABIMBA MP
(PF Secretary General)

There are three problems with. Kabimba's misguided argument.

First, Kabimba argues that additional wages would reduce corruption among parliamentarians. That is a myth. Empirical evidence decisively concludes that the "systematic evidence on the relationship between pay and corruption is ambiguous". Most importantly, paying higher wages reduces corruption, if and only if, the monitoring apparatus is effective. In other words, wage incentives might reduce bribery and corruption but only under a well functioning enforcement apparatus. This apparatus is essentially good effective institutions. Lets get the ACC and DEC be more accountable in following up parliamentary corruption. This is what Kabimba should focus on, and then we can look at higher wages if necessary.

Thursday, 14 August 2014

Why Do We Have Members of Parliament?

When former Msanzala MP Joseph Lungu resigned and joined the PF in 2012 his only reason was that he wanted to “ensure development of Msanzala which had lagged behind for some time”. Mr Lungu said he felt he could not take development to his area as an independent parliamentarian.

A year or so later Howard Sikwela became the the first parliamentarian to abandon UPND in this parliament. He said, "One asks a question, where would an MP get resources to develop his constituency? Of course it is from the Government of the day. An MP must think development, talk development and dream development. It is with a heavy heart that today I have to announce my resignation as area MP and as a member of UPND”.

Tuesday, 12 August 2014

Zambia's Quest for Real Develoment

By Henry Kyambalesa

With a Human Development Index (HDI) score of 0.561, Zambia is currently ranked 141st out of 187 countries – a rank that falls within the 'medium human development' category. And while there was a declining trend in the country's HDI between 1980 and 1990, there has been a rising trend in the Index between 1990 to date. This is certainly a good trajectory!

Saturday, 9 August 2014

This Week They Said

We feel like foreigners in our own country and this makes us very sad. We are very peaceful people with no intention of promoting anarchy
Susanne Matale revealing that the church is facing unprecedented intimidation in its quest for freedom of assembly and praying for the country.
Power is addictive for it offers infinite possibilities. Once you taste it you want more. There is the lust for power in Scott’s eyes
Field Ruwe suggesting that VP Scott senses a big moment for a power grab as debate intensifies over President Sata's health. 
It is not right for any institution which is not even making any profit to go on strike and say we want money when they are not even making any profit. It is only that government as a mother will come in and assist
Yamfwa Mukanga MP on the maternal instincts of the PF government. He was commenting on whether TAZARA workers should go on strike over pay. GRZ has now settled the $3m arrears.
We cannot have a president who does not speak to the people. Every President in the world holds a press conference where they are subjected to scrutiny by journalists
Muhabi Lungu bemoaning the  public disappearance of President Sata for nearly two months and Mr Sata's refusal to host a press conference or give an interview.
To comment on an international disgraced lawyer, I think government is above that. Who is he anyway? Is he a politician or what does he want to do? If he is a politician we will send him to the appropriate party officials to respond to him
Joseph Katema MP commenting without commenting. He was responding to concerns raised by international human rights lawyer Robert Amsterdam who has been a thorn in the flesh of the PF.

Thursday, 7 August 2014

Road rehabilitation and construction in Zambia

Editor's note: an important recent ministerial statement on the 'Road Rehabilitation and Construction in Zambia' by the Transport Minister Yamfwa Mukanga MP. This is an helpful and unfiltered statement on where road construction is at present. We have made some minor editorial changes to enhance readability. 
The Road Development Agency (RDA) was established by the Public Roads Act No.12 of 2002 with the following specific functions: "To provide for the care, maintenance and construction of public roads in Zambia; to regulate maximum weights permissible for transport on roads; and to provide for matters connected with and incidental to the foregoing"

Tuesday, 5 August 2014

March of Freedom

Facebook Inc is launching a mobile app that gives users in Zambia free access to a handful of online services on mobile phones, broadening an effort to boost Internet usage in underdeveloped countries.

The Internet.org app will offer, in partnership with wireless operator Airtel, more than a dozen services including online encyclopedia Wikipedia, websites devoted to weather, job listings and health information, as well as Facebook's own social network and messaging service.

Sunday, 3 August 2014

Bye, Bye Zambia!

KLM is pulling out of Zambia effective 29 October 2014 in a move described by the Zambia Tourism Board (ZTB) as "devastating and bad for tourism in Zambia". According to a KLM statement :
The recent optimisations in the airline’s network portfolio in East Africa means connections to Europe and the United States [will be] in combination with KLM’s strategic and long-term partner Kenya Airways via Nairobi. From Nairobi, passengers can choose from services to London Heathrow, Amsterdam Schiphol and Paris Charles de Gaulle in Kenya Airways’ newest equipment including the Dreamliner and with KLM’s recently updated World Business Class.

Saturday, 2 August 2014

This Week They Said

“They are preaching bad omen against the President but at the same time they want to see him … we want to ask through our party leadership at national level not to allow this to happen because their thinking is negative. The calls for the opposition to meet the President are in bad faith and should not be condoned because the President is working as he should be in line with the mandate that the Zambian people gave to him and the PF”
SMART MWILA
(PF Kapiri Mponshi)

Friday, 1 August 2014

The State of Konkola Copper Mines

Editor's note: an important ministerial statement was issued recently by Mines Minister Chris Yaluma on Konkola Copper Mines PLC. It seemed to contain rather interesting statements against President Sata’s threat to nationalise against KCM.
Konkola copper mines plc (KCM) has of late come under increasing public debate and media attention following the attempt by the company to lay off 1,529 employees. This is in addition to the media report of 15th May, 2014 in which Mr Anil Agarwal, Chairman of Vedanta Resources limited was quoted as having said that he is making US$500 million from KCM, a mine he bought for a song (US$25 million) and not the asking price of US$400 million.

Wednesday, 30 July 2014

Zambia's mining policy chaos

A confused picture is emerging on Zambia’s mining taxation policy. Mines Minister Christopher Yaluma recently said ., “It is our responsibility and obligation to ensure that we provide an enabling environment for the mines to sustain their operations in the country. We are looking at revisiting the tax regime. Anytime from now we are going to make known [the changes] after cabinet approval.”

That statement was made on 28 June 2014. It was interpreted by many, including mining companies, as suggesting that mining taxes were going to be reduced. This was because Yaluma’s statement came shortly after FQM announced that it would hold back from investing $1 billion in Zambia. 

Monday, 28 July 2014

Who will defend press freedom in Zambia ?

Editor's note : An important article on the ongoing attack on press freedom in Zambia by Bruce Chooma. Media freedom is important because as Nobel Laureate Amartya Sen reminds us "development is freedom". 
The work of journalists is becoming increasingly difficult in Zambia due to growing intolerance by the state to independent media and a rise in cases of harassment of journalists. A recent report by Freedom House, a US based human rights organisation showed that in 2013, Zambia fell 21 places from 72 to 93 out of 180 and landed in the category of states that are classified as “not free”. 

Friday, 25 July 2014

Reforming CDF (ZIPAR Response)

Editor's note:  A very helpful response from ZIPAR on some of the questions that the were raised by Zambian Economist readers on Facebook and Twitter pages. You can also follow the discussion to the article below via Facebook.
CDF reform should begin with guaranteeing a fairer distribution of resources across Zambia– before embarking on more comprehensive reform.
On Monday we published an article calling for reform of the Constituency Development Fund (CDF). It argued that the CDF should be allocated on the basis of a measure of need with resources targeted on the most deprived constituencies. The original article is available here.This has provoked a series of interesting responses and comments which are welcome contributions to this important debate.

20 ideas to cut wasteful government spending in Zambia

A while back we asked for ideas on how Zambia can cut wasteful spending. The need to cut down on bye-elections and reduce on infrastructure spending are known. We wanted to identify simple ideas that are often missed. Here are some of the ideas that you came up with.

1# - Reduce the size of cabinet to no more than 12 with each ministry having only one supporting junior minister and one permanent secretary who runs the ministry. All provincial deputy ministries should be scrapped.

2# - Abolish the post of District Commissioner as it merely duplicates other functions. Make the Town Clerk the Chief Executive Officer and introduce an enhanced role for directly elected mayors to improve accountability.

Wednesday, 23 July 2014

Does Zambia need to change how CDF is allocated?

Editor’s note: An helpful article from Tamara Billima-Mulenga (ZIPAR) on the Constituency Development Fund (CDF). It does not address the fundamental problems, nsmely CDF corrupts the proper functions of MPs; encourages corruption and mismanagement; and, is a poor attempt at “fiscal decentralisation”. But the paper is helpful in contributing to the debate in this area. We need more such discussions to ensure public money is being properly utilised. 
As the Ministry of Finance commences the preparation of the 2015 National budget, it is worth asking how the government allocates spending across the different programmes it funds. These decisions are often based on existing historic allocations and developmental plans. It is, however, rare for the government to base spending decisions on some measure of ‘need’: that is targeting funding at those areas that experience higher levels of poverty, or where the cost of delivering services is higher.

Monday, 21 July 2014

13 ideas to improve road safety

Earlier this year we asked for ideas on reducing road traffic accidents on our very active Facebook page. Its taken a while to sort through the many detailed comments. Here are the best 13 ideas you came up with.  The ideas are over and above basic existing initiatives being undertaken by GRZ such as building more roads, more dual carriageways, increased road maintenance and mode switch. And of course all the ideas would require a proper cost benefit analysis before taking them forward.

1# - Introduce restrictions on where drivers can drive depending on existing experience e.g. those with less than one year driving experience could be banned from driving on intercity roads.

Saturday, 19 July 2014

Are some lives worth more than others?

On 3rd January 2011, PF President Michael Sata wrote to President Banda following his wife's treatment in South Africa arranged by the Zambian government. He expressed "profound gratitude" to President Banda for "the consideration, compassion and care extended to [Christine Kaseba] during the period of her illness and stay at Milpark Hospital". Mr Sata was particularly "pleased to see that [Christine Kaseba's] life was saved due to the government’s prompt action to evacuate her".

Friday, 18 July 2014

State of Railway Infrastructure in Zambia

Editor's note: the article below is from the recent Parliamentary Committee on Communications, and Transport  report (July 2014) which covers wide range of areas. We have extracted the article on fiscal decentralisation for ease of access. Some minor edits have been made for ease of reading. 
The Committee resolved to undertake a study on the state of railway infrastructure in Zambia. The objective of the study was to: (i) find out if there was any policy on the maintenance and management of the railway infrastructure in Zambia; (ii) establish the state of railway stations, railway lines, locomotives and wagons in Zambia; (iii) assess the challenges, if any, faced in the maintenance and management of railway infrastructure in Zambia; (iv) find out if there were any measures that had been put in place to revamp the railway system; and (v) make recommendations to the Executive on the way forward.

Friday, 11 July 2014

Fiscal Decentralisation in Zambia

Editor's note: the article below is from  the recent Parliamentary Committee on Estimates report (July 2014) which covers wide range of areas. We have extracted the article on fiscal decentralisation for ease of access. Some minor edits have been made for ease of reading. 
The revised Decentralisation Policy was launched by His Excellency the President, Mr Michael Chilufya Sata on 16th June, 2013. Fiscal Decentralisation is part of the broader framework of the revised Decentralisation Policy. It entails the devolution of some budgetary powers to the local authorities.

Thursday, 10 July 2014

Swiss made poverty?

A telling quote from a recent article on how mispricing and the opacity of commodities trading in Switzerland is contributing to Africa's underdevelopment :
Switzerland is a global hub for trade in commodities, and so exerts a significant influence on Africa's development. But critics say the way commodities are traded through the country is shrouded in opacity and this ultimately deprives developing regions such as Africa of revenue….

For example, a 2010 study by Christian Aid showed that as Zambia's copper production soared in the 2000s, Switzerland came to account for more than half of the southern African country's exports of the commodity. But the price of Swiss re-exports of the copper was far higher than that received in Zambia.

In 2008, the study estimated, Zambia's GDP would have been 80 percent higher if the copper leaving its borders in that year alone had received the same price as Switzerland. It's a pattern of trade mispricing that has persisted, critics say.

A study in January by the Centre for Global Development, a trade and aid think tank, estimated that developing countries may be losing between $8 billion and $120 billion a year because of mispricing of commodities in Switzerland….

In other cases, commodities such as copper will be recorded as destined for Switzerland but instead go to a Swiss-based trading house and onwards to, say, China.

Wednesday, 9 July 2014

Tribe, tribalism and culture

Editor’s note:  This article by His Royal Highness Chitimukulu of the Bemba people (“Henry Kanyanta Sosala”) provides important reflections on tribe, tribalism and culture. The article is reproduced from Lusaka Times.

Preamble

A tribe is a political, social and economic unit; it’s like a social class in Europe in which people find their polyglot neighbours in times of distress and helpers in times of need. A tribe offered sanctuary in the old days of tribal wars. A tribe is exclusive and the only way to win acceptance is to be born into a particular tribe. This means that the people of one tribe are united by common citizenship; common language; common racial harmony and common tribal codes, most of which stretch back into pre-history but also by common bloodlines i.e., the blood of the tribe.

Tuesday, 8 July 2014

Morality Matters

The Great Wall of China is thousands of miles long, 30 feet high, and 18 feet thick and was built as security against the northern invaders. It is a massive construction, visible from outer space, and was intended to be impenetrable. In fact, impressive as it was, the wall was breached not by physically breaking the wall down but by a simple ruse: the gatekeepers were bribed. A wall is only as strong as the people protecting it; an economy is only as strong as the people working in it; a business is only as strong as its staff; an army is only as strong as its soldiers. We can build walls to protect us, but walls are as strong (or as weak) as the humans that guard them. One bribe and the gates will open.

JOSH MOODY
(Source: Journey to Joy)
Always good to be reminded that the condition of the human heart is important in every sphere of life, including politics and economics. To have a strong and vibrant Zambia, a strong society and economy, we need strong and morally upright people. Institutions are important but institutions can be uprooted overnight by evil hearts.

AUTHOR
Chola Mukanga
Economist | Consultant | Researcher
Copyright © Zambian Economist 2014

Sunday, 6 July 2014

Politics of Energy Subsidies

A recent article  from Economist Magazine provides some interesting commentary on current trends around the world to get rid of energy subsidies. It notes that energy subsidies have wrrecked budgets and the environment alike :
Of the $500 billion a year the IMF reckons they cost—the equivalent of four times all official foreign aid—half is spent by governments in the Middle East and north Africa, where, on average, it is worth about 20% of government revenues. The proceeds flow overwhelmingly to the car-driving urban elite. In the typical emerging economy the richest fifth of households hoover up 40% of the benefits of fuel subsidies; the poorest fifth get only 7%. But the poorest suffer disproportionately from the distortions that such intervention creates. Egypt spends seven times more on fuel subsidies than on health. Cheap fuel encourages the development of heavy industry rather than the job-rich light manufacturing that offers far more people a route out of poverty.

Friday, 4 July 2014

Presidential Uncertainty

"I am not qualified to stand as president because I am excluded by the same amended 1996 Constitution, which excluded Kaunda and excludes, as far as I understand, Given Lubinda and Mulenga Sata. Both your parents have to be Zambian. So [President Sata] is reluctant in my understanding to appoint someone who could be a target of a petition in the courts... If this man is not qualified to stand as president, how can we make him the Acting President? [President Sata] does not want to have a constitutional crisis, when he is somewhere else. So there is no big deal."

GUY SCOTT
(Source: The Post)
This is the clearest statement from Vice President Scott on the issue yet. The conclusion is actually wrong as many legal minds have made clear. For the simple reason that the person who fulfills the presidential functions is not an "acting president" in a legal sense. Such an office does not exist in the constitution. He or she merely mere fulfils the functions of the president with significant limitations (e.g. he cannot sack anyone). So the person need not be directly eligible to be president to fulfill those functions. They just need to be a government minister. The issue of standing as a president in an election is an entirely different matter. 

Tuesday, 1 July 2014

Parlimanent needs to be smaller not bigger

Editor's note:  Resident contributor Henry Kyambalesa argues in the article below that the latest calls to increase the size of parliament are totally misguided.
In 2010, the National Constitutional Conference (NCC) recommended an increase in the number of Parliamentary seats from 158 to 280 seats. Recently, Electoral Commission of Zambia Chairperson, Comrade Ireen Mambilima, urged the government to amend the Republican constitution in order to increase the number of Parliamentary seats from the current 150 to 235 elective seats.

This is worrisome, for how can some segments of Zambian society have a desire to increase the size of Parliament at a time when our beloved country’s educational system is not adequately catered for, the healthcare system can hardly meet the basic needs of the majority of citizens, public infrastructure and services are still deficient, and, among a host of other socioeconomic woes, civil servants are still not adequately compensated for their services?

Sunday, 29 June 2014

Reflections on Sata's Health

There has been much debate on President Sata’s health. This is expected and it is clearly not the first time. Zambians in the past, sometimes led by Mr Sata, have debated matters of presidential health more vigorously than we are seeing at present. This is to be welcomed because Zambia should not be a Republic of Fear, where people are afraid to say what they think for fear of being insulted, victimised or imprisoned.

President Sata is obviously unwell and this was helpfully confirmed by Labour Minister Fackson Shamenda in May 2014 when he said clearly that ministers were equally "concerned" for his health. The issue has therefore moved beyond simple consideration of the binary question, is he well or not, but to two critical questions: how seriously ill is Mr Sata; and, does it matter to ordinary Zambians?

Friday, 27 June 2014

Debtmania Zambia

GRZ is pressing ahead with plans to issue another $1bn international bond specifically targeted for the agriculture sector by the end of this year. Agriculture Minister Wilbur Simuusa says GRZ is currently doing the paper work for the deal. He says, the new debt is needed because, “[Government] want something specific to agriculture. All the two Eurobonds have mainly gone to ZESCO, Zambia Railways, DBZ and the like and the agriculture sector did not receive much"

The PF government has been on a borrowing spree since it came to power. So far it has borrowed nearly $1.8bn in Eurobonds alone. And there countless loans from China, Saudi Arabia and similar countries. The new proposal to borrow for agriculture more comes off the heels of separate plans for Zambia to borrow from the IMF around $1bn as part of a new SAP.

Tuesday, 24 June 2014

Another policy reversal

The Bank of Zambia last week increase the amount lenders can charge for credit. The cap on lending rates rises to 28 percent from 21 percent effective immediately.

The PF government introduced maximum lending limits in December 2012 in an effort to force banks to lend money at lower rates and stimulate the economy. Lower borrowing costs were a key pledge of the PF during the 2011. And they thought the easiest way was to set a cap. In exchange PF gave banks a large corporate tax cut in the 2013 budget.

Sunday, 22 June 2014

Maize Market

This chart (click for clarity) provides a great summary of how the maize market is organised in Zambia at the moment. It is easy to see from where market power lies. The interesting question of course is how the situation is likely to evolve this year given the government's intention to by only 500,000 tonnes.