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Monday, 17 August 2015

Broke Parastatals

An interesting statement from Finance Minister Alexander Chikwanda. He says only 7 parastatals are currently declaring dividends. The rest are loss making :
There are as many as forty State-owned enterprises. Of these, seven parastatal companies declared dividends..This is a small figure, meaning that the other parastatal companies are not performing to the expectation of the taxpayers who put money in these entities. We are, therefore, at liberty to show concern that so many State-owned enterprises are not declaring dividends... it would be logical to wind down the companies that are not doing well because the alternative would be to overburden the already over-extended taxpayers to find money to run the parastatal organisations. Therefore, I think that it is quite a reasonable proposition that companies that are not doing well, and may not do well in the foreseeable future be liquidated (Source : National Assembly)
The seven parastatal companies that declared dividends mentioned by Alexander Chikwanda are (a) Afrox Zambia Limited; (b) Kagem Mining Limited Company; (d) Mofed London; (e) Nanga Farms Private Limited Company; (f) Zambia National Commercial Bank (ZANACO); and, (g) Mulungushi Village Complex Limited.

Saturday, 15 August 2015

Austerity or Bust?

A recent article by the Government think tank ZIPAR on Zambia's rising Eurobond debts carries the following observation :
With the [current] economic malaise, it is therefore not surprising that the [recent] third Eurobond, at an annual interest rate of 9.375%, is more expensive than the 2012 and 2014 Eurobonds whose interest rates were 5.375% and 8.5%, respectively. This means Zambia will pay US$117.2 million annually in interest until 2025 on this new Eurobond alone. Between now and 2022, interest payments for the three Eurobonds will increase from US$125 million to over US$240 million annually (Source : ZIPAR)
We would suggest that the situation is actually much worse than painted by ZIPAR. Government does not just need to pay back the interest, it also needs to pay back the principal (the actual money owed), when the three bonds mature on different dates.

Wednesday, 12 August 2015

The Constitution of Zambia (Amendment) Bill 2015

The Government has published the Constitution of Zambia (Amendment) Bill 2015 which will take forward the enactment of specific clauses which are not subject to the referendum. The public are asked to study and engage their parliamentarians before it makes it way into the House. You can read the accompanying Constitution of Zambia Bill, 2015 (12 pages)  via the National Assembly. 

Copyright © Zambian Economist 2015

Monday, 10 August 2015

Corruption, Poverty and the Capable State

Editor's note : Ricardo Hausmann argues that preoccupation with fighting corruption does not end poverty, and in many cases does not produce growth. What produces growth is having a capable state, which necessarily reduces corruption and does much more. The article does not examine the important issue of different forms of corruption and the relationship with inequality. However, it's basic premise seems sound. The unexplored question of course is, what produces a capable state?
Countries are poor because governments are corrupt. And, unless they ensure that public resources are not stolen, and that public power is not used for private gain, they will remain poor, right?

It certainly is tempting to believe so. Here, after all, is a narrative that neatly aligns the promise of prosperity with the struggle against injustice. As Pope Francis said on his recent trip to Latin America: "corruption is the moth, the gangrene of a people." The corrupt deserve to be "tied to a rock and cast into the sea."  Perhaps they do. But that won't necessarily make their countries more prosperous.