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?

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.

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.

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. 

Justice Watch (Human Rights, Courts, Prisons)

The Human Rights Commission (HRC) wants GRZ to build modern prison infrastructure to reduce prison congestion. HRC is concerned “with the deplorable conditions in Zambian prisons and police cells in the country..[which] are not fit for human habitation”. It is also calling on GRZ to end use of torture in investigations and interrogation by law enforcement officers and make it a criminal offence [Source: Mwebantu]

Killing the Kwacha : BOZ Response

A recent statement from the Governor of the Bank of Zambia on the challenges facing the Zambian economy, especially the Kwacha :

GOVERNOR'S STATEMENT ON RECENT DEVELOPMENTS IN THE FOREIGN EXCHANGE MARKET

June 10, 2014

The Bank of Zambia wishes to take this opportunity to update the public on recent developments in the foreign exchange market and the measures that have been taken to stabilize the recent instability in the Kwacha. As a result of additional measures implemented on May 30, 2014, the exchange rate has shown signs of stability over the past week.

IMF - Zambia Watch (June 2014)

Editor's note: The latest IMF statement on Zambia released on 6 June diplomatically suggests that Zambia's  macroeconomic situation in the country, though potentially promising, is unfortunately a mess and needs fixing urgently. It has been poorly managed. Hence the need for "forceful measures". It bluntly says that monetary policy is currently abnormal. The real question is what can be done to restore the situation. It appears Government now wants IMF funding, possibly a bailout. That appears to be the hint of GRZ's request for an "economic program that could be supported by a Fund arrangement".  The short term impact of course is that the possibility of an IMF route atleast suggests that GRZ are desperately trying to find a way of restoring policy credibility. And they seem committing themselves to an IMF programme as the best way of signalling that.  At what price? We wait to see.

Statement at the Conclusion of an IMF Staff Visit to Zambia

Press Release No. 14/264

June 6, 2014

An International Monetary Fund (IMF) team led by Byung Jang visited Lusaka during May 27–June 6 to review economic developments and discuss the macroeconomic framework with the Zambian authorities. The mission met with Finance Minister Alexander Chikwanda, Bank of Zambia Governor Michael Gondwe, and other senior government officials, as well as representatives from the private sector and civil society.

PEGNet Conference 2014 (September 18-19th)

Editor's note: The Poverty Reduction Equity and Growth Network (PEGNet) will be holding its eighth annual conference on "Employment strategies in the developing world - How to create sufficient, productive and decent jobs" on September 18 and 19 in Lusaka Zambia. They would like submissions from Zambian researchers. See the prepared statement below.

We would like to remind you that the Call for Submissions for the PEGNet (Poverty Equity and Growth Network) Conference 2014 is now open. We invite submissions from researchers, practitioners and others actively involved in the field of development for our Call for Papers that has been attached to this document.

Submissions

Please email your extended abstracts to pegnet@ifw-kiel.de  in a pdf or Word file and indicate 'PEGNet Conference 2014' in the subject heading. Abstracts should have more than 400 words but should not exceed three pages. Priority will be given to empirical research with clear implications for policy design and implementation. They can either address the conference theme, explained in detail below or PEGNet's core research areas which are poverty reduction, inequality and growth.

To nationalise or not to nationalise?

President Michael Sata says nationalisation is an option if KCM does not change its ways :

"The mines should be honest. Let me single the mine out…Vedanta and KCM should be honest. The Indians must be honest. The Zambians and miners themselves are saying 'let us nationalise KCM', but when the situation becomes alarming, the government will consider that. You tell them, I'm waiting for a report from the Ministry of Mines and as soon as I have the report, I will table the report in Cabinet....Let the copper which KCM is exporting from Zambia bring dollars back, because KCM is exporting so many things. Why should they export concentrates to go and be processed in South Africa? When there was Anglo American and other companies, the kwacha was very strong. But these Vedanta, who are the owners of KCM, let them be honest. If they are honest to us, the situation is going to be completely different."

PRESIDENT MICHAEL SATA

(Source : The Post)

Mining Developments (Production, Revenues, Taxation)

Zambia's copper production is expected to reach 1.5 million tonnes in 2016 due to investment in mining infrastructure and technology. Zambia Extractive Industries Transparency Initiative (ZEITI) says the increase will also be driven by the opening of new mining projects and increased foreign investment in the country. Zambia is currently the world’s sixth largest copper producer with around 0.8m tonnes [Source: Daily Mail]

Mining Minister Christopher Yaluma says there will be a serious improvement on mining tax collection this year due to increase in copper production. However he says that how much is ultimately collected on the processes GRZ has put in place. In his words, "if we are careless, we won't account for quite a good number of tax". Yaluma says givernment has rejected the introduction of a windfall tax because "it is [less] favourable to the government operation" [Source: The Post]

Strike Watch (Public Sector)

Countrywide strikes by civil servants are looming as all the ten Public Service Unions of the country have declared a collective dispute with the Patriotic Front (PF) government for failed salary negotiations. (Source: Daily Nation). 

Zambia Congress of Trade Unions (ZCTU) secretary general Roy Mwamba has charged that government did not honour the 2013 collective agreement which expired in January this year and the salary negotiations have failed because government is not ready to listen to the demands of the workers.

Transport Developments (Road, Ports, Water)

Transport Minister Yamfwa Mukanga recently commissioned the Kapiri Mposhi weighbridge, which has been rehabilitated at a cost of K31 million. The new bridge has the capacity to clear 1,000 trucks per day, 500 more than the old weighbridge. The weighbridge is the first of its kind in Zambia and should a help decongest other facilities in the country [Source: Daily Mail]

The Chiawa Bridge across the Kafue River in Chirundu will be commissioned next month. The Bridge is being constructed at a cost of $53 million by China Henan. The project had been delayed by six months due to delays by ZESCO to relocate its infrastructure among other factors. However, it now looks to be on track. When completed the bridge will link Chirundu, Chiawa and Lusaka through Leopards Hill Road [Source : ZNBC]

The Kwacha can be rescued

Editor's note : Dr Mbita Chitala provides some reflections on the challenges facing the Kwacha and how it can be rescued. In particular, he argues that Zambia should impose capital controls, move away from a floating exchange rate system, and get rid of the current economic managers in order to restore confidence :

Many Zambians are disturbed that the Kwacha has continued to depreciate raising the spectre of compromising our economic performance and further increasing the poverty and inequality of our people. The free fall of our Kwacha has been on account of three reasons.

First, the PF government exchange rate policy inherited from the MMD government of using market-determined (termed floating) exchange rates where the value of the Kwacha is determined by market forces; Secondly, the unfettered international private capital flows such as the Euro Bond and other foreign bank borrowing, Portfolio Investment, Foreign Direct Investment and other Transnational Corporations activities, and ; thirdly, the lack of confidence in our economy managers occasioned by the costly introduction of SI 33 and the suspension of SI 33 and SI 55 without altering the content of our economic management.

On the falling Kwacha

Editor's note : the article below is from a statement released last week by Hakainde Hichilema (UPND) on the ongoing depreciation and volatility of the Zambian Kwacha,. It appears to support the disastrous removal of SI33 and SI55 and calls for the reimposition of the windfall tax :

The continual sliding of the Kwacha is not only an indication of the PF’s failure to run the economy, but it actually borders on economic sabotage.

It is unacceptable and embarrassing that since PF took over power in 2011, our currency can today be on free fall where it is always being declared as the worst performing currency in the world, as if there are no people running a government in place.