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Saturday, 4 June 2016

UPND Manifesto: Job Creation

Today we begin a review of the UPND 2016-21 manifesto. It sets out a ten point plan to govern and develop Zambia. The first policy priority of a future UPND led government is to "create jobs and business opportunities”. Here is our broad assessment of this manifesto commitment.

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What are the main specific proposals?

The UPND is promising to create jobs and business opportunities for everyone. It plans to achieve this by “establishing a supportive environment for business that promotes economic growth and diversification”. UPND proposes to achieve this through four initiatives:

(a) securing the mining sector as a way of “revitalising the once upon a time vibrant mining towns on the copperbelt”;
(b) working with industry to “open up opportunities in underdeveloped sectors such as tourism, agro-processing and manufacturing”;
(c) support Zambians “to set up businesses focused on value addition”; and,
(d) equip Zambians with “real skills” and “empower those who want to start their own business”.

What is the rationale for the proposals?


The UPND believes that at the root of Zambia’s unemployment challenge is a poor environment that stifles job creation. It believes “the country is in crisis”. As evidence, it points to government having taken on “unsustainable volume of debt”, which it believes has “discouraged much needed investment”. It believes Zambia’s macroeconomic challenges are at the root of the unemployment challenge, as it sees it.

It is worth noting that the UPND does not provide any statistics to back up its characterisation of Zambia’s economic predicament. There are no unemployment rate figures or data relating to the macroeconomic environment in the manifesto. We are given a unsourced figure of 200,000 people entering the labour market annually but its unclear where this comes from or over what time horizon.

What is our assessment? 

The UPND rightly recognises that unemployment is one of the key pressing challenges facing Zambia. Zambia has a young and fast growing population and labor force. The national population is projected to almost double by 2030.

The current structure of the economy and sources of growth are such that formal wage jobs are being created slowly. This pace is nowhere close to being able to absorb the new cohorts of youth that are entering the labor market. In that sense, there is certainly need to ensure that jobs are created and people have a decent living.

What UPND fails to recognise is that the picture of Zambia’s unemployment is more nuanced. The truth is that a large number of Zambians are already working because they cannot afford not to work. Zambia has a very large informal sector which means that in fact only 1 in 10 people who want to work don’t actually work.

Indeed a lot of this unemployment is largely concentrated in urban areas where in fact poverty turns out to be lower. What this tells us is that potential policy prescriptions for poverty reduction may not necessarily be the same as policies for reducing unemployment - at least at the national level.

A more important point is that the real challenge facing Zambia is not necessary getting people into jobs, but getting people into high quality jobs that contributes to poverty reduction. Many of the people currently working are concentrated mostly in seasonal farming and non-farm self employment. It is therefore important that tangible policies are put forward that are focused on improving the earnings of the working poor by improving their productivity, as this would also help tackle poverty.

This is what UPND should be focused on because Zambia's history shows that macroeconomic stability and growth are necessary but insufficient condition of creating jobs. One does not need to be a genius to recognise that unemployment has been higher in Zambia in the past under more stable macroeconomic environment.

Given UPND’s failure to properly diagnose the employment problem, it is no surprise that it's suggested prescriptions are awfully inadequate.

For example, the UPND’s answer to creating a good business environment that in turn creates jobs is mining. The mining sector is certainly an important sector of the economy given it plays a vital role in earning foreign exchange and generating tax revenues. As we have seen recently, reduced mining activity not only leads to direct job losses (in 2015 we lost about 10,000 direct mining jobs), but it also leads to wider catalytic unemployment from dependent sectors (e.g. hospitality, catering, etc).

The problem is that if our challenge is simply to produce lots of jobs, as UPND wrongly diagnoses, then depending on mining is a wrong long term strategy because the long term picture is that mining will contribute less and less to our employment picture because it is not a labour intensive sector. This is becoming pronounced as technology improves and companies seek to raise productivity by automation. So whilst the quality of jobs in mining may increase (in terms of higher pay), its share of jobs across the economy will inevitably fall. So a mining focused strategy for job creation that UPND proposes is intellectual deficient.

So what should UPND have focused on?

If we accept that the number one jobs challenge is creating higher quality jobs then what Zambia needs is a strategy that accelerates the pace of growth of formal jobs in the private sector. Here there are no magic solutions. What we need are multifaceted and long-term policies not hollow platitudes. Our view is that the key is to start where people are.

This means improving smallholder productivity in agriculture so the earnings for people go up. Many people are already involved in agriculture, so what we need is to simply ensure they are more productive in that activity. This suggests that what we really need is an agriculture strategy that is focused on delivering inclusive rural growth. The truth is that this is an area that the current government is already alert to.

The current administration already recognises that maize subsidies which have been the corner of agricultural policy and spending do not benefit smallholders enough and are subject to leakages. So some of these have been phased out, and new ways are being sort to address leakage. There is also a recognition that public sector investments in form of local roads, water access and electricity are key in driving agricultural growth and intensifying smallholder agriculture.

One area the current government is failing to address is access to credit so that farmers can mechanize and apply appropriate amount of fertilizers. Similarly, though we have heard much about farm blocks we have still to see tangible delivery in these areas.

Another area worth exploring is for government to provide a supportive environment for nonfarm home businesses and microenterprises. Nearly everyone in Zambia owns a business (whether selling chickens or running a kantemba). What we need to do is create an environment that brings these people into the formal sector by reforming the tax system, cutting red tape, and ensuring greater support from the government.

We need to get rid of all the constraints and disincentives that stops people registering their businesses, so that they can now have access to finance and space to work in a cost-effective way. We also need to widen the availability of business education and skills to everyone (mothers, youths, the old) in order to empower in their sectors of interest.

We have to improve foundational skills in basic education and expanding access to secondary education and skills training, especially for the poor. This is the only way to address contraints to self-employment and productivity in agriculture, small enterprises and formal sector employment.

These are the sort of proposals UPND should be focusing on. Sadly reading Page 9 of the new UPND manifesto demonstrates a lack of knowledge and thought about how to address this important issue. UPND has not convinced us that it has a plan to "create jobs and business opportunities".

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In the next post we will review their plans to "reduce inequality".


AUTHOR
Chola Mukanga
Copyright © Zambian Economist 2016

1 comment:

  1. I. P. A. Manning5 June 2016 at 09:15

    In order to greatly bolster rural productivity it is imperative that customary area be totally safeguarded and the powers of the executive curbed in that respect. Agriculture must become conservation agriculture with the use of chemical fertilisers and herbicides strictly controlled. Zambia's soils are already depleted.

    The climate catastrophe gathers pace and will nullify such SNDP nonsense as 'becoming a middle-income country' by the time the population has already doubled. Zambia's submission to the Paris jive festival was lamentable. It is time to realise that that we are faced with an unimaginable change in Mother Earth, one rural Zambians are equipped to deal with as long as they are given the right support and industrial agriculture and state rent collecting kept away from them.

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