It appears that Finance Minister Alexander Chikwanda is addicted to intellectual and moral error. Here is what he said recently in the Post on mining companies and borrowing :
"...we are putting in place measures to generate enough revenue so that we can avoid borrowing. Of course, some people are saying windfall taxes for the mines but that is a 'fetish' which some people want to hang on to whether it is logical or not. We do understand that contribution of the mining sector is very low at five per cent but we shouldn't just look at taxes; there are other factors like having the mines generating 70 per cent of foreign exchange and creating jobs. Ideally, we want to see the mines contributing about 10 per cent and ZRA is being strengthened to ensure efficient revenue collection." (The Post)This is economic bumbling. Such language does not mean anything, but designed to fool the economic illiterate. Of course people are easily fooled because his statement has gone unchallenged for over a week! So, what do we make of the latest Chikwanomics?
Before I answer that question let me just say that it is appalling to see Chikwanda using bad language about Zambians again. He starts off by saying that people demanding the windfall tax have a "fetish". A fetish is defined by most dictionaries as "a form of sexual desire in which gratification is linked to an abnormal degree to a particular object, item of clothing, part of the body, etc".
I don't think this is an acceptable use of language by a minister. There's no sexual gratification or unbridled excitement involved in those who have demanded it. Now if people start insulting him and call him all sorts of names, he will turn round and say he is 80 years old and a grandad. He will also say people don't have any respect for his office. When it is clear that this use of language is very demeaning to others. We must learn to disagree honestly and respectfully.
Let's get back to the question, it is again clear Chikwanda has no understanding of basic economics, and that is no insult because not everyone wishes to understand economics. He says that mining companies already benefits ordinary Zambians through "foreigh exchange" earnings. How is that a benefit to anyone? In what meaningful economic sense is foreign exchange an end in itself to ordinary Zambians? In what sense does it result in an increase in social welfare to qualify as a benefit?
This is a old way of thinking from UNIP times. It seems that in Zambia 'earning Forex' has, since the 1980s' "Forex shortage", been seen as a 'benefit'. But we need to get over such economic folly and recognise that foreign exchange is not additional income. It is part of total money supply held in a different currency. To have forex you give up your Kwacha, so your total remains the same. It is embarrassing that this even needs explaining!
As if that is not bad enough, he then says the other benefit is that mining companies are "creating jobs". This logic is actually borrowed from President Banda who once forcefully said, "there is little point in taking in a few million dollars in tax if thousands of jobs are lost as a result". According to our politicians any appraisal of Zambia's mining policies must account for the allegedly huge benefits she receives from job creation.
That posture is misleading because it is built on incomplete understanding of the value of jobs in an economy. New jobs are only valuable if the jobs created are strictly additional to the national economy. The mining jobs he is referring are increasingly simply diverted from elsewhere. This happens largely due to skills shortage which leads to the same workers moving to better jobs, or more common in Zambia we import workers while Zambian graduates languish without jobs or end-up not working in an area they specialise in.
This is clear because we continue to see not only expatriates come in from abroad but also workers from urban areas move to North Western province to take newer jobs, without corresponding reduction in urban unemployment. We also continue to see that mining is becoming more mechanised so the jobs impact will continue to be limited. One wonders what price Chikwanda is willing to pay just to have a few non-additional jobs that may not last for long!
But even when such jobs are additional we must then ask : are workers benefiting as they should? The truth is that the quality of a large portion of mining jobs has been largely poor. This is demonstrated by the constant tragic loss of lives. One of the unspoken tragedies over the last decade is how many of our people continue to die due to the general disregard for lives by many mining companies. It has stopped becoming news.
Which brings us to the "quality" dimension. It is not just any job creation that matters, but a high quality mining job. In Zambia many of these "mining jobs" are full of casualised workers. Casualisation has come with poor wages. This has occurred through two complementary routes.
First, the opportunity to have casual workers has provided an incentive to mining companies to get rid of contracted workers and hire casual employees. This has often led to reduction in contracted workers and reduced their bargaining power. Mining union power is being eroded as casualisation amplifies - the wages of contracted workers have therefore remained stagnant. Secondly, casualisation has reduced the opportunities for long term contracted work. The overall result is that the quality of employment from additional mining investment is generally poor.
Causal workers have no long term pension benefits to speak of. This is clearly a concern because many of these casual workers tend to be ex-miners. Without long term pension security there's no transfer of wealth across generations and many people become again dependent on the state. The modern day mining worker is a casual worker living and working for today to support his family, but no security for tomorrow.
The "new jobs" also comes with poor labour rights. This is particularly pertinent for many employees of Chinese mining companies who are known to have been denied meaningful union rights. When the issue of jobs is raised, Zambians must surely ask - of what quality? Our mining workers can now be added to the list of losers from the current mining policy, alongside mining communities and the country as a whole. It is development Jim, but not as we know it!
In light of the above, it is amazing Chikwanda is now content with borrowing and meekly asking mining companies increase contribution to 10% of revenue from a depleting resource. And he hopes to achieve this by ZRA "being strengthened". Quite staggering. Chikwanda says it is unfair to ask more from mining companies than 10%. I say it is a crime to require anything less. When are we going to end this soft bigotry of low expectations?
Chola Mukanga | Economist
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