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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.
The point on “unprecedented focus on capital investment” is very true though we must remember that Banda started the Formula One roads (as an election gimmick). Some of the investment in energy being delivered now were also started during Banda’s time. Sata is to be commended for the focus on social infrastructure investment on education and health. It is very surprising that Yamba forgot to commend Sata for this.

The point on job creation is complicated. Job creation has been increasing as the economy continues to grow. However, these increases as a result of private sector led growth have been small.  Part of the problem is that mining remains at the heart of our growth model. The sector is not labour intensive.

The other problem is that part of the growth has been led by large public sector spending. The jobs have increased but off the back of a bloated public sector with huge burden on taxpayer. The net value of such jobs can therefore be argued to be minimal. And of course we must remember that Sata also created unemployment by firing nurses!

Most importantly the whole phenomenon of youth unemployment was not been sufficiently addressed by Sata, although the road projects are trying to make a dent in this area. The only problem is that many such jobs have been of poor quality jobs with no long term career development or pension.

As for Foreign Direct Investment (FDI), again there is nothing special in what Yamba mentions. FDI was rising before Sata came and has responded generally to general global performance and the attractiveness of Africa as an investment destination. There has been no “step change”. Zambia has also not given sufficient thought to how we can develop new sources of comparative advantage rather than rely on FDI. The emphasis on foreign direct investment seems quite misplaced.

Yamba then concludes by saying, “this is a reflection of the improved investment environment in the country, made possible by policy consistency…” One would be forgiven for falling off the chair by that statement. Sata can be commended for many things, but policy consistency is not one of them! He has certainly improved investment opportunities for the Chinese but he alienated many investors.

Reading Yamba’s statement one cannot help but agree with Giacomo Macola’s excellent historical assessment that Zambia’s intellectual space continues to occupied by "ego-documents" and "dehumanised and monolithic commemorative monuments". We have narratives penned by Zambian politicians devoid of any intellectual rigour and only serves to distort our reading of history.

This is not to say that Sata achieved nothing. We are still reviewing his economic and political legacy, even as it still plays out in front our eyes at this delicate time. We are merely saying that Yamba’s assessment is not only incomplete (by not mentioning the important social infrastructure drive of Sata) but also dishonouring to Sata by labelling his failings as achievements. Sata like every human being deserves honest reflection and tributes.

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

1 comment:

  1. Your observations on this piece of comedy are all entirely apposite.

    But worse....once the impending doom that is about to descend on Zambia takes hold then any talk of jobs, wealth creation, tax revenue and prosperity will be firmly in the past. No not necessarily another PF Govt, though goodness knows that would be bad enough. No, worse still will be the almost immediate closure of Lumwana Copper Mine and its 8000 jobs....the end to any foreign investment in Zambia for at least a decade and then the aaccelerated decay of Zambia's remaining mines as mining in Zambia becomes uneconomic. I predict an irreversible crash in Zambia's mining industry within 18 months unless ABC's proposed Mining Tax in his 2015 Budget is scrapped. Has anyone got the number for the World Bank?

    Fred

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