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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.


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”