Comments on Zambian Economist: Living with a ‘leaking’ bucket…

BB,As it turns out we now have a network in place ...

2007-11-29T23:52:12.579Z

BB,

As it turns out we now have a network in place of Zambians across the globe - called ZASN.
We have the following websites:
www.zasn.org
www.zasnusa.org
and the Yahoo user group
http://groups.yahoo.com/group/ZambiaAbroadSkillsNetwork/

We are very hopeful that this will work.

Please drop me an e-mail:

mwansabombwe1-blog@yahoo.co.uk

It would be good to have you on board. We want as many Zambian professionals as possible.

Cho, just came across your blog by accident. Stran...

2007-11-29T22:07:13.957Z

Cho, just came across your blog by accident. Strangely I put forward a proposal similar to SANSA but based my approach on lessons learnt from my many colleagues from the far east whom I have been associated with over the last ten years. I put the proposals to several government leaders and not one has acknowledged or shown in interest?. So what can one do.As an engineer and a Director in a leading European firm I thought I had a lot to offer but obviously my gestures are not wanted.

BB

Chola, " Many thanks for your thoughts. It is very...

2007-03-16T22:39:09.411Z

Chola,

" Many thanks for your thoughts. It is very insightful and quite deep! There's a lot to chew on here, but just a few comments if I may. "

Thanks to you. It is a lot of fun getting all this out. :) I'll try to answer all of your points but the quality of the answers will have to vary.

" 1. I agree that the brain drain issue is a symptom of a bigger problem, but what I hoped to show is that even symptoms can be accommodated when the cure seems elusive. My proposal is an attempt to accommodate that problem, while we work on longer term solutions! "

I have no problem with that.

" 2. I am not sure I understand what you mean by "Obviously, professionals are heading for greener pastures, because in Zambia, there is no real middle class". The link between the middle class and the brain drain is not obvious. Perhaps you care to expand on this? "

The link is that the middle class feeds upon itself. It takes a large middle class, to make sure that all children can go to college or university without state help. It takes middle class parents to properly prepare children for college.

In the US, a place like Silicon Valley didn't come out of nowhere. What happened was that there were several good universities, and that venture capitalists started to set up shop there. If you look at the curriculae of the people who had the biggest influence during the boom there, they were very often Ivy League university graduates. Does it really take Ivy leaguers to lend money? No. However, what happens is that people go to school together, get to know eachother over a period of years, and then set up businesses. This is how Silicon Valley became such a concentration of highly innovative technology firms. Wealth builds upon wealth, and that includes the social capital of connections, networking, cultural familiarity, etc.

The ideal would be, that for instance UNZA graduates had access to financing, and started to set up businesses in Zambia. They could then employ their colleagues, turn projects into profitable products or services, etc.

Somehow, that is not happening to the degree that is necessary. I don't know if that is because the everyday limitations on business in Zambia (high fuel prices, high taxation, bureaucratic red tape, etc.), however, it means that there are very limited employment opportunities.

" 3. You quote $47 billion of natural resources wasted. What is the source for this? "

I'll get back to you on that, but it is an old number and considering how commodities prices have shot up, that might be higher. I do have that Zambia now exports $2.5 billion per year in copper and cobalt alone.

(Source: CIA Factbook - 64% of Zambia's exports are copper/cobalt and estimated total exports of all products and services for 2006 was $3.9 billion. 0.64 x $3.9 billion is $2.5 billion. https://www.cia.gov/cia/publications/factbook/print/za.html )

" 4. On Government reform, the theory you espouse is doable, but suffers from two problems: a) there's an issue with whether equal splits of $1m a year is desirable. For one thing different areas are unequal. There's need for the funding to reflect this unequalness in development. Also equal funding does not reward effort. In short it could act as big disentive. b) There's the issue of the scale economies. Some of the things can only be done effectively if people team up. Put it this way, $1m may be enough to build a small local road but not enough for a larger motorway. Such projects would require those units to come together and put the money together. Central Government is best placed to resolve such "market failures" and tap into the scale economies that such larger projects bring. "

Well I would always remain flexible. It may make sense for instance, to have Super Councils in highly urbanized areas like Lusaka, where it may make more sense to have 500,000 people per council instead of 30,000. If proximity and existing infrastructure make that more productive, that that is ok too.

The real point is that the nation's resources are distributed in a manner that is fair, apolitical and transparant. No more of this nonsense of 'you didn't vote for me, you won't see development'. Which is a direct assault on democracy itself.

" 5. Under Government reform, you also mention checks and balances. In my view that can only happen under Participatory Budgeting. Incidentally I agree with you that the current system of governance is top heavy, but I think what we really need are provincial GOvernors with tax raising powers. "

One of the reasons that KK drew more and more powers to the presidency and the center, was the fear of tribalism and secession (starting before Zambian independence, with the bloody Lumpa uprising). Just look at the last election, and how easily the country could be split regionally.

What is needed, is a powerful way of distributing services, that cannot be exploited by tribalist or regionalist (or central government) politicians by withholding basic services from one region or the other.

" 6. I disagree with the state owning all natural resources. Perhaps you care to explain what you mean by "state ownership". If it is a socialist type of approach then am afraid I disagree, because the market has always proved that it knows better! The private sector can deliver good development if the rules of the game are clearly defined. What we need is a strong Executive, legislature, and Judiciary not state control of things! Most of the problems you highlight can be resolved without state ownership! "

I think that Zambia's natural resources are beyond private ownership. They are there to benefit every citizen. Therefore, their sell-off to multinational corporations amounts to treason.

What I want to see, is that the state owns the mines, and operations are performed by private companies. These companies cannot actually own the mine they work at, as is the case today. The fact that for instance Equinox Corportion owns Lumwana Mine, means that all profits go to Equinox. This is unacceptable. All the profits should go to the state, so they can be used for infrastructure, and to support local government.

I am not for state ownership of any other part of the economy, but the mines are different, because of the huge flow of revenues they represent. This revenue is vital in building a modern economy, and cannot be substituted by anything else (no donor aid, no loans, etc.).

" 7. You have some interesting and radical ideas on Land Reform. Very persuasive, but I was left feeling that we need more clarity. What is the aim of Land Reform? Is it redistribution (you hint this towards the end) or economic empowerment? If it is the latter then the policies you suggest are inadequate. What is missing with land and farming is proper credit markets. A lot of studies on Zambian farming continue to show that "access to credit" is poor. My blog titled "access to credit in Zambia not getting better" is a testament that this is where we are failing!! The Milken Index is quite clear on this. "

The aim of land reform is to create hundreds of thousands of 100 hectare, medium sized farms. So it would be both a redistribution of wealth (land) and economic empowerment (of the newly fledged farmers and their families, as well as their surrounding economies).

I don't think the problems of agriculture can be reduced to credit markets - although everything helps. The basic problem is that present day subsistence farmers operations are very small, too small to provide a good living and too small to facilitate mechanization, or diversification on any kind of commercially viable scale. The other problems are that 80% of arable land is not under cultivation, and that most agriculture is rain fed.

So we can wait for 100 years, for these tiny farms to grow, or we can shorten the development period and simply hand out land to already successful subsistence farmers who want it, and support them with mechanization, inputs, etc., knowing that their income will rise so much, that they will pay back most of it or more through future taxation.

For an alternative way of rainwater and runoff catchment in a dry climate, check out the late P.A. Yeomans in Australia, and his Keyline Systems.

http://www.keyline.com.au/ad1ans.htm
http://www.soilandhealth.org/01aglibrary/010125yeomans/010125ch8.html

This is basically a system for catching rainwater runoff and keeping it on the land as long as possible. This creates all kinds of positive effects - reliability of the availability of water; ponds for fisheries; water for lifestock; keeping carbon in the soil (which is getting big in environmentalist circles). On farm rainwater catchment is a reasonable alternative in the absence of river irrigation.

" Should have added...that it goes without saying that the three areas you have identified are the key...Any serious politician must surely start with these three... "

When this happens, Zambia will be on the road to real wealth, wealth that is sustainable and spread out throughout the population instead being the privilege of a small elite and syphoned off to western corporations.

MrK,Should have added...that it goes without sayin...

2007-03-15T01:14:45.151Z

MrK,

Should have added...that it goes without saying that the three areas you have identified are the key...Any serious politician must surely start with these three...
So whilst I have questions in some areas(as most economists tend to !!) , I think the topics are broadly the right ones to focus on!!! You thoughts on land reform especially deserves much attention.

MrK,Many thanks for your thoughts. It is very insi...

2007-03-15T01:07:01.279Z

MrK,

Many thanks for your thoughts. It is very insightful and quite deep! There's a lot to chew on here, but just a few comments if I may.

1. I agree that the brain drain issue is a symptom of a bigger problem, but what I hoped to show is that even symptoms can be accommodated when the cure seems elusive. My proposal is an attempt to accommodate that problem, while we work on longer term solutions!

2. I am not sure I understand what you mean by "Obviously, professionals are heading for greener pastures, because in Zambia, there is no real middle class". The link between the middle class and the brain drain is not obvious. Perhaps you care to expand on this?

3. You quote $47 billion of natural resources wasted. What is the source for this?

4. On Government reform, the theory you espouse is doable, but suffers from two problems: a) there's an issue with whether equal splits of $1m a year is desirable. For one thing different areas are unequal. There's need for the funding to reflect this unequalness in development. Also equal funding does not reward effort. In short it could act as big disentive. b) There's the issue of the scale economies. Some of the things can only be done effectively if people team up. Put it this way, $1m may be enough to build a small local road but not enough for a larger motorway. Such projects would require those units to come together and put the money together. Central Government is best placed to resolve such "market failures" and tap into the scale economies that such larger projects bring.

5. Under Government reform, you also mention checks and balances. In my view that can only happen under Participatory Budgeting. Incidentally I agree with you that the current system of governance is top heavy, but I think what we really need are provincial GOvernors with tax raising powers.

6. I disagree with the state owning all natural resources. Perhaps you care to explain what you mean by "state ownership". If it is a socialist type of approach then am afraid I disagree, because the market has always proved that it knows better! The private sector can deliver good development if the rules of the game are clearly defined. What we need is a strong Executive, legislature, and Judiciary not state control of things! Most of the problems you highlight can be resolved without state ownership!

7. You have some interesting and radical ideas on Land Reform. Very persuasive, but I was left feeling that we need more clarity. What is the aim of Land Reform? Is it redistribution (you hint this towards the end) or economic empowerment? If it is the latter then the policies you suggest are inadequate. What is missing with land and farming is proper credit markets. A lot of studies on Zambian farming continue to show that "access to credit" is poor. My blog titled "access to credit in Zambia not getting better" is a testament that this is where we are failing!! The Milken Index is quite clear on this.

Let's forget about the leak, and let's start talki...

2007-03-13T12:14:02.948Z

Let's forget about the leak, and let's start talking about the bucket.

This whole 'brain drain' issue is about fixating on the symptom, not the solution.

I have not heard a single intelligent word coming from Levy Mwanawasa, when it comes to the domestic economy, or domestic policy.

Obviously, professionals are heading for greener pastures, because in Zambia, there is no real middle class. There are the masses of poor, and then there is the small neocolonial elite, who basically live off the scraps of the massive mining industry, which is now no longer in government or even Zambian hands. Thanks to the calamitous 'suggestions' by the IMF/WB, and the compliance of successive MMD governments. Remember that after these suggestions were put into place, the Kwatcha HALO'd from 113 to the dollar, to over 4,800 to the dollar. That is not government overspending, that is the disappearance of $47 billion of known natural reserves from Zambian hands.

I have a suggestion to turn Zambia around thought. It isn't going to be 'easy', and it isn't going to be quick, but it will be dramatic.

1) Government Reform

Decentralize government. Most modern nations funnel half of their revenues into local government. Unlike the Mwanawasa government, which seems to think a lot of unfunded mandates, budgets as well as responsibilities should be decentralized. I imagine a government system, where there are 350 local government units, of 30,000 people each, receiving $1million (or more) per year, to do the following:

a) education
b) healthcare
c) policing/security
d) public amenities
e) administration

Apart from making sure that 1/3 or more of national revenues ($1.1 billion in 2004) are spent all around the country, and boosting local economies, there are many, many advantages over the current system. The 30,000 people size means that any notion of region or even tribe are done away with. 30,000 people is simply too small to pander to any of Zambia's 72 tribes, 9 provinces or 4 regions.

I would say that money should be collected and disbursed to both local and central government by the ZRA, which should have it's own financial police, and should routinely monitor all local government expenditures.

There should checks and balances in the system, like monitoring of local government expenditures, but also by democratically electing council leaders.

In two words, the Zambian government is top heavy. There are (I have counted) 29 ministries. Every ministry has 1 minister, 2 deputy ministers, a permanent secretary, etc. The Ministry of Local Government receives more state money than all local councils combined. And to what end? Do these 29 ministries make Zambia the bests governed country in the world? Or are 80% of the people living on less than a dollar per day?

The massive concentration on central government and government from the ministries must end, and make place for government through local government. I hope people will bring this up whenever a president creates another ministry to cater to some political hot topic issue.

2) Economic Reform

The state should own all natural resources. The time for the colonial era practice of selling concessions should be over. In fact, it would be best if selling concessions was banned all over Africa. Because this is how neocolonial elites are created and sustained. It doesn't just pander to corruption, it is corruption. Instead, the state should maintain ownership of the mines, while exploitation should be done by private companies, preferrably Zambian, but international if necessary. These companies must run without politial appointments, and should be payed on a cost only basis, with small incentives as benchmark payments.

However, the present situation, where foreign companies own Zambia's wealth, are simply leaving the people and the country poor, and standing on the world's economic sidelines. As we all know and can attest to. This has to change. Selling off the mines was a criminal act, treasonous, and should be reversed immediately. (A massive windfall tax, strict enforcement of labour laws and environmental laws, go-slow actions on companies that will not comply, there are a myriad of legal and non-violent options for getting the mines back.)

I estimate that every year, Zambia is missing out on $1.6 billion in lost copper and cobalt sales. Compare that to the government's income of $1.1 billion in tax revenues (mostly from the huge PAYE sweated out of the workers of the country and massive, stifling taxes on legal businesses), and $600 million in donor money (now there is a humiliating term if ever there was one - Zambia is giving much more to the world than it is receiving, and yet one would never know it looking at the size of donor aid in the national budget; and forgetting the implications for national sovereignty that go with it).

Indigenous business is being stifled by massive taxation, yet foreign companies are given decade long tax hollidays to set up shop in Zambia - which neatly gets back to the original issue of the braindrain, and why this is a symptom, not a cause.

3) Land Reform

80% of Zambia's agricultural land is not under cultivation. We should strive for a position where every present day subsistance farmer has access to 100 hectares, instead of the present 2-3 hectares.

One hundred hectares allowes a farmer and his family to earn $10,000 per year or more, from just growing staple crops, using only 50 hectares.

(Good land produces 2 tonnes of maize per hectare, which I think is still sold for $200 per tonne. 2 x 50 x $200 = $20,000, and presuming half of that is spent on operating costs, that would leave a family with $10,000 per year; compare that with the average annual wage of $280 and that would be a huge step up.)

This would have the effect of distributing wealth and wealth creation into the country side; it would eliminate poverty; it would create the need for for semi-professional jobs (doctors, laywers, accountants, mechanics, veterinarians, suppliers of inputs, teachers) in the countryside; it would slow or stop urbanisation; (in combination with a good food storage/distribution network) it would eliminate famine; it would turn Zambia into a food exporting country.

Obviously, these farmers would need some startup help, mainly with access to machinery and some education, but these businesses would be inherently profitable. There would also be more than enough room for expansion into dairy farming, cattle herding, agroforrestry, etc.

Also, only a tiny percentage of arable land is irrigated, with the rest depending on rainfall. There are two sustainable alternatives to rainfed agriculture. One, riverine irrigation - Zambia has 10% of Africa's fresh water resources. Two, rainwater catchment systems. I would suggest something like Keyline, as well as the use of swales (strategically dug shallow ditches), which slow the movement of water across the land. If you compare a rainforrest and a desert, what you are looking at is not good soil versus bad soil, but slow movement of water versus fast movement of water across the land. Plants are great at absorbing water, but the soil (humus) is even better. If land is systematically logged with water, drainage becomes very slow, vegetation can grow and protect the soil even more, and poor soil becomes rich soil.

This could be a huge works project, that would do a lot to alleviate the massive unemployment.

To get back to the land issue - the whole issue at the ministry of lands is I think hugely important, but it is also a minor issue when compared to actual land distribution. Is the situation in Zambia really so different than that in Zimbabwe - or Malawi, Tanzania, Kenya, Botswana, Namibia or South Africa? There has to be a distribution of (unused) land to the poor subsistence farmers, and without pay. This would be a near instant solution to a lot of economic problems. Obviously, there would have to be a continuous monitoring of possible bottlenecks in the agricultural production process (land, machinery, fertilizer, marketing, transportation, etc.) but it would be a huge new beginning.

Lastly, I think that the rest of the state's money should be used to create infrastructure - roads, bridges, large scale irrigation, etc. This would make business in the country much more feasible, and it would create huge mass employment opportunities. And none of these will come from 'foreign investors'. As the MMD, UPND and even PF seem to believe.

Conclusion

The above have cronicled most of the Zambia's inefficiencies. This is where the real opportunities lie. The waiting is only for someone who will put all of the above into action.

NOW, WHO IS GOING TO MAKE POLITICAL CAPITAL OUT OF ALL THESE OPPORTUNITIES??? :)

You have 4 years to set up a party, and run on this simple 3 point platform for the 2011 elections.

For some miraculous reason, none of the political parties are willing to go this far. Which is why people cannot make a real distinction between them.