Tuesday, October 4, 2011

Using Taxes for Business ...

I was shocked to listen to this "enlightened citizen" on what Government should do about taxes to businesses in order to improve the business climate. Unfortunately he touched an area I have great interest in - Taxes!

I don't know why people in Zambia think business can only do well when they don't pay taxes! Please! Businesses have to take taxes into account whenever they take all other costs into account! What sense will that bring? A company will be better off not paying taxes and not have infrastructure or buildings to operate from? Or be exposed to all manner of crime? Or operate without knowing what tomorrow will be like as there may be a possibility of war or demonstrations?

Taxes have a serious place in a country and will mean the success or failure of a company. They enable a government to operate, carry out policies, employ law enforcement and construct roads and airports which the same company paying taxes will use to either sell his produce or transport it to its clients. Bottom line, it makes a country function. Failure to pay taxes results in a country borrowing money which will mean its citizens have to pay more taxes, or run-down infrastructure! If companies don't pay taxes, the government will still need to function and so citizen will be taxed more in PAYE, VAT or other taxes to raise the much needed cash.

So, anyone talking about taxes should really understand the situation on the ground before they open their mouth. Zambia is surrounded by poverty! It relies on donors to meet some expenses! So the taxes are not raising enough revenue for its operations. Remember the gold rule of economics - Never borrow for consumption! You can only borrow for investment as you are assured of raising the borrowed amounts. So as long as the government is borrowing to meet consumption purposes, we are doomed! And since our taxes have not yielded enough money to run the basic functions of government, we should never even think of avoiding taxes! Taxes to an economics exist as real as death to any human being. Death is certain, and so taxes are also certain.

I think we all need to take a different approach to taxation and move with them in a way that we respect paying taxes! It is shocking to find even church leaders want to buy vehicles without paying taxes!? Money donated by the people. That money donated has actually a law which will allow people donating to claim taxes out of it! I'm sorry, but that is real greedy and we must root this out and as Zambians understand that taxes are what makes Zambia!

We will gain more by being patriotic by paying taxes than buying flags at the time of a football match. Imagine if each Zambian spent K20,000.00 for the betterment of the country or to help the country with infrastructure development? That's how University of Zambia was built. And now people's children are getting an education unmatched! This is an example of a tax working. So we should now make it a point and make sure foreign investors understand that much as we appreciate the business they bring here, they should pay for peace, infrastructure, stability, resources, human capital and so on. They can do that by paying taxes. These in turn will make them have a business to run and move along. Remember, they are just here to make money - nothing else! If it was not for money, they would have not been here.

Thursday, September 29, 2011

Zambians lackadaisical???

I have always been a person advocating for serious approach to work and all associated with it. I think a lot more can be done when we take it with hard work and the seriousness it deserves.

I proudly say, the lazy people are always willing to let things be the way they are and are not keen on seeing change or fighting for it. Partly I assumed was the casual approach that most of us Zambians have to certain things. However, in all the countries that Zambians have gone to or emigrated to, the situation is different. They work harder, are united like a serious community, are found in all high earning positions etc. So the coming of the Chinese seem to show us as being lazy?? Well, I think the cultural differences may show up in areas of serious concern.

The China-Zambia relation has been one of mistrust and serious concern economically. They are known to pay less to Zambian workers, have little or no respect for the country's laws and feel like the bosses of this small population. Chinese goods are considered fake and weak or unreliable. Words like "gonga" are always associated with Chinese goods. In particular the Chinese dual-sim phones with TV! And they come in many shapes some claiming to be Iphone, others Nokia and those that have no name to steal, are simply called MP4 phones. Now whoever got a chance to buy one, will confess of the ills of these phones.

Now I wondered why we always say we have a lot of Chinese people among us and yet, we never see them in night clubs, malls, or mingling among us. So to read on The Economist that these people consider us lazy ... or by the exact terminology lackadaisical made me wonder. So my first action was to coin the exact meaning of this word. To understand the perspective as I saw it, I will quote the meaning I came across it.

    lack·a·dai·si·cal

    adjective /ˌlakəˈdāzikəl/ 

    1. Lacking enthusiasm and determination; carelessly lazy
      • - a lackadaisical defense left the Spurs adrift in the second half

So is it "carelessly lazy" or "lacking enthusiasm and determination" that Zambians have? Seriously I think we need a serious check with such words being labelled on us.

On one hand, these are the companies that give slave wages and expect people to work and be productive? I have heard of people say 'work as you are paid' and 'you are valued as a worker, as much as you are paid'. Lackadaisical!? Maybe our change in country management, especially that people say the new leader has no room for laziness will make us move from being considered lackadaisical! Hard work is what I feel has been a problem in many aspects of the Zambian life but I don't think we ever reached a level of carelessly lazy! We have done a lot more with the little that we are given. I know corruption is a big issue in the country. And a serious approach to that will make things a lot better.

Lackadaisical is a word that we Zambians should not be placed next to. We have to do our ultimate best in all that we have. We can start by cleaning out the mess that corruption has brought, make every single investor abide by the laws of the land and bring value to their investment and not seem to be begging for investment. I firmly believe anyone coming to invest will have looked at the business gain before they get on the plane to Lusaka! So why should they come and ask for incentives? Or make requests which have no business logic! This is the disaster we have to work on!!

We need to start from scratch and make an investment worth while. No need to have investors for the sake of being investors when the overall value addition is zero!

Translating PF Manifesto into Economic Policy

I took my time to read the PF Manifesto and see how it can be translated into Economic policy.

One think is for sure, it has good things embedded in it, but the whole 'workability' of it, needs understanding the variables concerned. A simple example: There is increased Government expenditure accompanying a reduction in taxation. To all of us, this may look an impossibility and totally not possible. You can not increase your spending while keeping your revenues constant or even reducing revenue. Impossible? Well, not when you read through and realize the logic behind the increase compared to the current levels.

Tax compliance has been Government's worst enemy. How many of us have been offered a deal in the shops in town "Do you want a receipt? or no receipt for this purchase?". You say no receipt and you pay less the tax! But that's like shooting yourself in the foot. The less you pay tax, the less money government will have and the less services and structures you will see around town. We as Zambians need to develop a culture of saying no receipt and walk out of the shop and call ZRA to come and arrest that shop owner. You will pay less yes, but you might just be paying with your life as the same tax would have been used to buy medicines and repair hospitals you will need. How can we expect government to finance its operations when we spend all our time dodging paying taxes?

So if compliance levels in tax payments are increased, more revenues will reach the treasury and more can be done. With the levels of compliance right now, we need to find ways that people will start paying taxes and receive more. But I should mention that, past trends of paying taxes and government officials wasting tax payer's money has led to this behavior. We need to find ways that we can make people understand that taxes are what makes the economy and government move.

We can only expect a reduction in Pay As You Earn (PAYE), if Value Added Tax (VAT) performs well and government can finance its operations. The failure of the other taxes, the more you pay through PAYE. So imagine you getting your "no receipt" deal in Kamwala shopping area, but having to pay more in PAYE. Who has been fooled? The government will have to find a way to finance its operations or reduce the services it provides for you.

Simple consumption taxes like VAT seem useless to be paid, but they mean a lot in terms of your PAYE going up or down. So the less taxes you pay, will actually mean the more taxes you will pay! Funny but that's how the system will work!

So with this perspective of increasing compliance on the pay of us tax payers, and just the fact that the Manifesto has only seen a problem in terms of numbers on revenue and expenditure, can the Manifesto be translated into Economic policy and Economic vehicle for Zambia?

We also need to look at the impact of reducing cabinet as a means of reducing expenditure on the part of government. If the expenditure has been reduced through merging of Ministries, we just need the numbers to how much has been saved from such a move. For sure there is logic in merging Education with Science and Technology, but will this, apart from one or two posts of permamnent secretary and Minister and his deputy, result in major reduction in expenditure? If it will, then we have half solved the problem (bearing in mind of the numbers!). There is less expenditure which is wasted and can now be pushed into 15 bags of fertilizer and not 5! Such perspective surely will need serious compliance levels for tax payers. There has to be a way that we can make people pay what they should - the way the Chinese companies increased workers' salaries by simply following the law of the land.

Can such reaction be expected from traders? Or do we need to send ZRA the way it operated the time VAT was introduced? If so, we need to start now as mind you, 90 days have dropped to a lesser figure already!

Thursday, May 5, 2011

Economics of Growth or Development

There is always a way in which something easily be judged and presented for verification. Even the ideas of a nation doing well has a way that it can be evaluated and presented for verification by someone or anyone to prove the results. I blog more when I feel low, that too can be analyzed in that perspective and like all things which have a way of being analysed, one can easily seen how many blogs I have actively been writing to assess my mood, if I felt low in the past month or not. All these are ways in which one can assess.

The Economics of Growth or simply put, The Economics of Economic Growth, have also there ways in which one can assess the progress a nation is making in attaining certain benchmarks in growth or whatever one wants to find out. And from these, we can see if we have made progress, or gone back in time by taking two steps backwards for every step we took forward. Each of these steps that were undertaken presents a yard stick on which certain levels can be assessed and evaluated.

A country can be called 'Third world' or 'Less Developed Country - LDC' or indeed 'Developed Country' based on certain evaluations or certain benchmarks that it must achieve to be called that. It's this strict following of measurements or sticking to certain aspects of the whole economy that will grade a Nation or degrade it. What issues are considered will determine what a nation is looked at as being.

My economics of growth or development has very few aspects to be looked at. These matter and are good yard sticks to measure any such progress with great easy and accuracy they can be a basis for any evaluation of a nation. With rich tools at our dispossal, using these aspects as measures can surely make analysis easy.

The measurements of development of any nation based on the ideals of simply analysis are:
  • Economic growth
  • Reduction of Poverty
  • Efficient utilization of economic resources
These stand out as a good measure of how well a nation is doing. The definition of these are as vital as any other measure that one can place on a nation for developmental assessment.

Economic Growth
The simplest definition of Economic growth that I know is 'Annual rate of change of real Gross Domestic Product (GDP)', but lets use as many of these as we possibly can make the understanding as inclusive as we can 'long-term expansion of the productive potential of the economy.' (tutor2u.net) sounds the best possible technical yet simple definition of economic growth.
From the two above, we see that economic growth has the basics of any form of growth in life. There is change, and that change is obviously leading to better production, increase in quantity of a good, etc.

This is important as it qualifies what your measurement of that growth will be. If Zambia's economy grows by 7%, it should be clear what elements are being addressed and what implications they have on the people or citizens of that country. What has really changed and what does the change entail for the ordinary person. As only the resulting changes will have an implication on the life of the people.

Reduction of Poverty
Many people see economic growth and reduction of poverty as one and the same. But think about this. If a country produces produce and the following year it increases that production. Will poverty be reduced or will that change be merely an increase in the production of goods? Clearly, the two will not be the same. Reduction of poverty is simply an improvement in the living standards of people while economic growth can be taken as an improvement in the 'producing standards'.

Reduction of poverty has many aspects, and a collection of improvements in these aspects will surely be an improvement of a country's outlook. For example, reduction of unemployment levels will result in a number of people having work and earning a living hence better off than before.

Poverty provides a politically filled aspect of day to day living - especially in Zambia. The government may sound and blow their trumpets at the gains and the resulting economiy growth, the opposition will also roar on the unemployment levels and the low living standards of the common man. Surely one is politically correct and the other isn't, right? Wrong! There is economic growth indeed. But the poverty levels are not changing. Or maybe they are changing slowly!

So they are both politically correct. And the result is one section fondly loved by the well-to-do and the other loved by the common people and unemployed. They appeal to different people as these relate to what is being said and truelly believe the voice they follow has the truth being spread.

For an observer, you simply expect that if economic growth is happening, this should surelu lead to other aspects of an economy to benefits from this growth. It then may lead to lower unemployment levels, inexpensive goods and generally a well fed and looked after population. Unless we expect this economic growth to be strangely setup.

Efficient Utilization of Resources
This generic explaination produces a situation which will have less wastage and more output which will be fairly distributed amongest the people. Its this utilization which will determine what a country gets from the resources. This grouping of resources if not limited to production resources of raw materials but goes further as to include people. A developed country will use its labour in productive ventures and will not waste man hours through shrinking.

So a mixture of the development of these things will surely have a bearing on classifying a country as developed or developing. And should be evaluated in looking at the country and its resources.

Thursday, April 28, 2011

The Economics of Kaunda's Humanism

Happy Birthday Kenneth D. Kaunda

I have never had anyone person linked with socialism or communism to talk about in my economics beliefs, except Kaunda. The former Zambian president has impressed me, not with what he has done, but what those that came after him failed to do. I'm a strong believer of letting the forces of the market determine what is produced, supplied and consumed. But only to the extent that Government oversees these activities through fiscal, monetary measures and also any that will ensure equity and avoid abuse from the capitalist.

So Kaunda would is expected to rank low in my list of great men in my economics, but this man has really impressed me in what he did for his country and the region. He had done more public works than you normally would have expected of him. But this is little compared to what we could have. But yet, I argue, none who took over as a president of this country came even close to what he did! So then, his works stand out, not because of what he failed to do or could have done, but because whoever came after, was interested in other issues than the welfare of the Zambia people. I have weaknesses with that. I prefer to see works standing that cadres shouting or writing books of what they did or did not do when Kaunda's works still stand! If they have fallen (like most roads and streets in many cities), its because the current leadership or the one they took over from has failed to simply maintain the infrastructure. That is the sad story.

So what economics would I call this? I know it will be a socialist kind, but maybe call it by what he believed in "Humanism". I did a quick search online for what it really means and I have found many links to one kind or the other. I have no idea which one Kaunda linked himself with.
http://en.wikipedia.org/wiki/Humanism
http://www.humanism.org.uk/humanism

But what 'Humanism Economics' was it if there is anything like that. The close one I could find was Humanistic economics which is associated with E. F. Schumacher a German born economist. This aspect of economics as Wikipedia puts it: "Proponents argue for "humanity-first" economic theories as opposed to the ideas in mainstream economic theory which they see as putting financial gain before people."

So was Kaunda following the doctrines of Humanistic economics? After all, his intentions shows he had people to look after. Most of his decisions were centered on people's welfare - regardless of where they were from. So does that take him to that level?

I know many South African freedom fighters love the man and what he did for them in the spirit of helping 'fellow man'. They adore his efforts. Many people in Zambia appreciate him after years of political power condemnation of him, only to stand less than him on what they did for this country. It is such ideas which make me ask the doctrine of one such called humanism relating to economics. How many writers came up with theories of what this school of thought had about human beings? Can it be a moderate socialism? A hybrid of capitalism and socialism with positive aspects from both schools married in one? Can people be made the center of every action? What can we produce in a nation if the main focus is on creating and uplifting the lives of the people? Can economics really be human centered and not financial gain centered?

I still search for answers to those questions. In so doing I wish to thank Kenneth D. Kaunda for having taken your time to look at an angle we may wish to look at when we approach matters that concern our beloved country. I still see many buildings that you built, many roads, hospitals, clinics, houses and I wonder every day what the para-statal companies now sold would have been turned into, if we had a well calculated effort to push the country out of poverty into the mainstream glory we desire. A regional super-house. I know that dream fades every day, I just wonder which economics will save the country.

Happy birthday!

Sunday, March 20, 2011

Potential of the Zambian Music Industry

Music is known as a 'main hobby' by main people. As everyone of us has a link to music regardless of what we do in life or what we consider our hobby.

Zambian music has been on an upward trend for now. We had a great music industry years back. It not only was enjoyed in neighbouring countries, but sold as far as Kenya and Uganda. This not only contributed sizable income to musicians like Paul Ngozi or Air Power Band, but was a contribution to our economy. Musicians did not only attract attention as role models for the younger generation, but they could live reasonably well compared to other careers.

However, a period of silence in music did not help the industry. Not only was the following cut completely down, but the musicians themselves lost identity. We forgot what Zambian music was. The great Witch sang in English and local languages, but now, if you sing in English, its 'Zambianism' is questioned. So the question is then brought into light, what is 'Zambian music'?

The issue of identity is a crucial one when you are trying to promote music back to the level where it had once been. The identity and the economics of the industry will need to be looked at in a serious way. If a Zambian writes in English, like Dambisa Moyo, will that make it lesser Zambian than her writing 'Dead Aid' in Nyanja? If not, then why would that count differently to Zambian music?

JK has gained international recognition from being part of one8. Has he become less Zambian? Cri$i$ has been on the scene since the days I rapped! He has received little attention as a great musician because he has very few Nyanja or Bemba rhymes! But hes music is as Zambian as the Luangwa river! We need o address this fact alot more to have any influence and impact in the world industry. We can't compare ourselves to South African music as they not only have a great market and industry for their music regardless of the language. We have to aim at less than 13million Zambians. Of that 13million, not all can afford to buy the CD. Moreover, even the percentage that can buy will not be a Nyanja or Bemba speaking person. So language not only will kill your worthiness, but will reduce your potential market even further by making it impossible to sell in neighbouring countries - well, unless it is in Nyanja as Malawi becomes a potential market. Now contrast that with a great song done in English? I'm sure you don't have to be an economist to see the returns on that as being greater than the others.

I know Kalindula cannot produce an English version, but seriously, all these young artists struggling to do an RnB version in Bemba or Ragga in Nyanja should give us a world of opportunities the other way round. After all, I believe there is a generation of musicians who would produce better Kalindula than the Kali-rap (Kalindula and Rap)!

Improving the Music Industry
There are two aspects that we need to improve our music in order to make any meaning contribution to the world.
  1. The Music Economics: We need to work out the economics in the industry and not only make music that sells, but music that sells to the largest possible audience. That way, we will maximize returns in the music industry investments, push the market value of our music products and claim a percentage of the world music industry.
  2. Find and define what Zambian music is. No one person or small group of people can. This is an identity that must be established by our music as compared to the whole world.
The economics of music have to be understood and systems put in place to have any such impact as outlined. There is potential in the industry, but like all potential, it is worthless unless that potential can be turned into a finished product. A product worth of not only Zambian market, but SADC and COMESA. Then it can be counted not only on the African continent, but the world market. Right now, we have no returns from the industry worth talking about. We also need to look at other elements that will make our returns be meaningful. We produce CDs which are pirated with 5minutes of being pressed! The world over, has slowly been moving from CDs and Vinyl to online and digital format. There is more returns from live performances that CD sells. Is there a single online store for Zambian music? No! We have plenty streaming websites, and anyone on earth can hear Zambian music. I have even come across torrents that have alot of Zambia mp3s included. Who benefits from this? Not one Zambian musician. But that shows you that people out there world appreciate Zambian music if we know how to market it, and produce high quality products which will even bring in revenue for the country, so that more investment can be called for in the industry.

We need to unite and help Zambian music develop penetrate markets and bring us returns. Thats the only way, we will appreciate the potential returns that can be enjoyed from Zambian music.

Saturday, March 5, 2011

Facebook Vs Google

Google or Facebook?
I have been using google from the time it started. I have used all its tools that come within what I do. And they made a perfect pair for me when Android was made to work on my favourite brand of smart phones - HTC. How long have I been with google products? - well I really wish I knew!

Facebook came with a bang. I finally found a website I couldn't leave even for an hour! I could play games (Mafia Wars), could link up with alot of my lost friends! It was just awesome. I could find myself browsing facebook in meetings, serminars, church or even on the bus! Me hooked maximal! No other website has ever taken me like it did! This was a life!

The interesting economics of these two web giants are my main ineterest here. We have on one hand google and on the other facebook. But who are they?

Google started in 1996 by students from Stanford - Lawrence "Larry" Page and Sergey Mikhaylovich Brin. This was merely a search engine, but its ranking proved not only effective but made sure it was not merely a search engine, but a world leader in all searches! And in 2004 when it was floated, the valuation was about $23 billion. Interestingly, the main site is the simplest i ever knew. I don't think it has changed much from the day I first pointed my browser to it!

Facebook is the young man of the two. Started in 2004 has grown at such a pace, it competes with google which started 6 years before. It was started by the now famous Mark Zuckerberg and friends from Havard University. Its a pioneer of social network success! Even some HTC phones have now a dedicated button! Thats success.

Both successful and multi-million comapnies, each claiming to be the giant in their own right. Which of these would i pick because of its sound economics presentation? And really who do I think would stand on top longer?

Who can be on top longer?
Google has been in the business longer. It has not only stuck with the core business that it started with. It has been on the offensive from the start. Once it settled in the search engine seat, it slowly too over the webmail seat where the likes of yahoo, hotmail and lycos were the main players. It never stopped there, it established its roots in IM. Now people talk about google-talk even from their private domain names. Then it attacked the mobile/ pda and smart phone operating system field which was dominated by microsoft! Again, came out with sweet results and we use Android like nothing existed before. Did it run out ideas there, no! It realized it can be a player in computer operating system too. through Chrome OS! I personally appreciated the introduction of its influency in browser world. Mostly because I didn't like the way microsoft pushed out Netscape. So any one coming to that fight, I will bring water and a towel!

On the other hand, my facebook interest has been dying over time. I really don't like the idea of privacy being eliminated and efforts to make it more and more privacy oriented have come out to help me solidify that interest. Has worked but bugs time to time makes me rethink of what i should put up on facebook. I love meeting my old mates and checking what they are up to. But some things just make me stay off some time. I have heard of people being stalked and phone numbers being taken. Really you are responsible for puting stuff online, but what does facebook have to do with it. Well, i think its the whole idea of social networking obstacles in the world of humans! We just can't be safe around them. I think facebook needs to find some screw which will make it stay forever. I know my mates who have left facebook for sone reason or the other. I know no one who has left google - just saying.

We 'google' stuff almost on an hourly basis. We can lose interest in facebook with time. But for a search engine to redefine the word 'search' on which its mere definition relies is an achievement. So for google to lose fashion, I wont be shocked, I will look at what can or has replaced it! Because to replace awesome, you have to be twice awesome!

Like someone I know said "people get tired of facebook, but we love our google, I mean people use google to find facebook".

My Choice...
So my choice for obvious economic sense, would be Google. It has stood the test of time, and promises an even bigger future. And so taking their side 'Google don't be evil' because you are here to stay!


Maybe it should be taken as a basis of defining a good business. Be in business longer, but have an even longer future. No one beats that!

Monday, February 14, 2011

No Romance without Kwacha!

'No Romance without Finance...
You need a J.O.B if you wanna get with ME'

Some interesting words from one of the world's famous oldies song. So can this be a good thing to start stating the obvious that Valentines and romance in particular has been commercialized? Gone are the days that you could link romance with such things as the river, sunsets, star-gazing, etc. Nowadays, believe this formula has an interesting truth

Romance + $$$ = Love

Can it really?

Lusaka woke up on an interesting note today. I saw alot of Red - shirts, dresses, gift boxes, wrappers, etc. Some one even exclaimed "How romantic!!!" This got me thinking...

How possible is it to think of love without a link to finances. I couldn't find a simple path to such bliss. Most things love included has been commercialized and really now depends on exchange rates, bank account balances, liquidity, currency, buying rates, etc! Love and romance are in a financial economy! You need so many things to conduct romantic activities, from movies, to romantic outings!

Looking at the way, moneys seems to be running all aspects of our lives, I believe the cyber space is one which makes money be a little out of the picture. Only cost is the connection charges and sometimes thats not much when u browse on mobile devices for blogs. So if money matters that much, in cyber space it should be that much. So how do we link the financial aspects of the cyber space and romance? We need to geek out a solution - as geeks are the noble citizens of the cyber space.

To my suprise, googling Valentines for geeks was an interesting result. I found many presents with interesting price tags, from a few dollars to hundreds of dollars! Geeks spend money on valentines. So what would be the financial returns in the cyber space valentine's day? How can we measure the magnitude of 'geek love'? If cyber space can link with normal world in romantic values of every day life and presents, we need to find a way to value this and tax it!

I miss the days I would go online to shut myself from everyday life and troubles and just be. Now, I have to watch out for adverts, phishing sites, malware, spy-ware, etc. I believe the economists must come up with a way to value such elements and give chance to the tax man to collect some Kwacha.

Anyway, thats a comic way of enjoying valentines day. I think you can have a laugh at some of these geek links:

http://www.mb.com.ph/articles/304260/a-geeky-valentine

http://www.thinkgeek.com/interests/valentines/

http://walyou.com/gift-ideas-for-him-her-valentines-day-2011/

http://www.geeksaresexy.net/2009/02/07/the-geek-guide-to-valentines-day-gifts/

http://www.coolest-gadgets.com/20090209/11-geeky-or-gadgety-valentine-gifts/

Thursday, February 3, 2011

Zambia-China Relation

There has been alot of debate on Chinese investments in Zambia and the negative/ positive results this will achieve. I have not had a good time to look at alot of these investments and loans that Zambia gets from China. So I will reserve my comments on the topics for now. I would have done a good service to myself had I taken my reading on China - Zambia relation and come up with a good academic paper on the issue, I may look at that and see how it goes in the near future.

Anyway, this appeared like good reading. I came across it as I searched for that elusive bi-lateral agreement between Zambia and China of 2003! I copied and paste, then informed the author, not good, but better late than never right???

--------------------------------------------------------

Zambia: From the World Bank to China and Back

By Peter Bosshard*


African governments have often praised Chinese investment as the panacea for their infrastructure sectors. Zambia’s experience demonstrates that it is not. A Chinese hydropower project on the Kafue River has brought up the whole conundrum of financial problems, environmental impacts, hydro dependency and delays that is typical for large dams. Mining is the mainstay of Zambia’s formal economy, and consumes a lot of energy. When the copper sector started booming in 2002, finding new sources of energy became a necessity.

Since the mid-1990s, the Zambian government had tried to attract funding from the World Bank and private investors for the Lower Kafue Gorge Dam, a 750 megawatt hydropower project on a tributary of the Zambezi River. In December 2003, the government signed a Memorandum of Understanding to build the dam project with Sinohydro, a large Chinese hydropower developer. China Exim Bank was supposed to provide 85 percent of the funding. “After the World Bank dragged its feet on the project for years, we reached an MoU with the Chinese within three weeks”, Israel Phiri, a Zambian government official, announced triumphantly in 2004. Lower Kafue Gorge seemed to become a symbol for the fast pace of Chinese dam building around the world.

Or so Zambia’s government hoped. During the next few years, it repeatedly issued promising statements about the progress of the project. First, construction was supposed to begin in 2004. Later, construction was supposed to start in 2006. In January 2007, the country’s energy and water minister announced again that Lower Kafue Gorge was “coming through very well”, and that Zambia would negotiate a construction contract for the project very soon. The government also kept signing agreements for other hydropower projects left and right. Yet on the ground, nothing happened.

The reasons for the delays seem to lie in the problems of Zambia’s electricity sector. According to a recent report by the International Monetary Fund (IMF), the country’s state-owned electricity utility is “a troubled company, beset by inefficiencies and high costs”. One third of all customers are unmetered, and staffing costs and distribution losses are very high. Tariffs are low by regional standards, but at $500-600, connection fees are unrealistically high for the large majority of the population. The IMF report proposes to steeply increase electricity tariffs for all consumers. The government in turn argues that the World Bank’s push for privatizing the electricity sector was unrealistic, and the main cause for the electricity shortage.

Unlike the IMF, China officially attaches no strings to its loans and grants. Yet in February 2007, a senior OECD official observed that China Exim Bank “does not hesitate to discuss changes in project-related governance to ensure loan repayment (e.g., pressure to raise electricity tariffs to finance hydropower projects), while claiming that it does not specify firm conditions”. China may be dragging its feet over Lower Kafue Gorge for the same reasons as the World Bank five years earlier.

Sinohydro also interfered with the environmental impact assessment for the project. The dam would have serious impacts on the Kafue Flats, a wetland of international importance with two national parks. Anabela Lemos and Daniel Ribeiro, two experts on the Zambezi, report that Zambia’s power utility chose the project site after a balanced assessment of economic, social and environment factors. However, Sinohydro told the utility that this was not how they did things in China and that they wanted the site to be assessed only according to economic factors. In the end, the original site was selected, but, Lemos and Ribeiro say, “the role of the Chinese dam builders in trying to focus only on the economics of the project does not bode well”.

On February 26, a representative of Zambia’s power company announced that her utility was now discussing a $600 million financing package to boost power generation with financiers from Japan, India and western countries. The first priority was on the Lower Kafue Gorge Project. The World Bank’s International Finance Corporation was undertaking a feasibility study for the project. The IMF estimates that completing the dam would take six to eight years, with mobilization of finance as “a central challenge”. Five years after Zambia turned from the World Bank to Sinohydro, Lower Kafue Gorge seems to be back to square one.

While the government chases its dream of multiple new dam projects, the country’s existing power infrastructure is falling into disrepair. According to the IMF, more than a quarter of Zambia’s power plant capacity is currently being repaired because of neglected maintenance. In mid-February, the failure of a generator caused widespread power outages. Maintaining infrastructure is just as important as building new projects, but less prestigious and often neglected.

Meanwhile, the country’s power sector strategy with its focus on large projects has left poor people in the dark. A full 98 percent of rural people and 60 percent of urban dwellers don’t have access to electricity. In July 2007, the power utility began to ration electricity supply to residential consumers in order to service the growing mining industry. And the proposed new hydropower projects will not be used to expand power supply to rural areas, but to serve the mining companies and export power to other countries.

I am not an expert on Zambia’s power sector, but supporting mining companies through large dams seems to be a highly questionable development strategy. If the copper boom fades away in another five or ten years, Zambia will be straddled with an overcapacity of expensive power plants. If Zambia guarantees the mining sector a secure supply of power from additional hydropower projects but climate change reduces the stream flow in the Zambezi Basin, the government will have to cut out residential consumers from power supply altogether in order to fulfill its guarantees to the mining companies.

It seems to me that mining companies could take care of their own power supply by developing their own projects (as long as they follow the state’s social and environmental guidelines), or by negotiating power purchase agreements with foreign suppliers. Rather than taking on huge risks for a few private companies, the state and international financial institutions should concentrate their resources on expanding access to electricity in poor areas, particularly in the countryside. This will not require risky and potentially destructive dam projects, but support for decentralized, renewable energy technologies.

*Peter Bosshard is the policy director of International Rivers. His blog appears at www.internationalrivers.org/en/blog/peter-bosshard


Wednesday, February 2, 2011

Economic Inequality in Zambia

I have been told that almost all our problems in Zambian economics (from a maximum of 3 possible problems that I wanted narrowed down) are Inequality, Duality and Non-diversification. I will try and address these issues and see where we stand in Zambia on these aspects.

I will start with Inequality as I believe it is not only vital, but an aspect of Zambia's economy which has received a fair share of screams in the political arena. So a look at this will have a much more needed avenue to the problems of Zambia.

Economic Inequality
Defined as: Wealth and Income differences. This is differences in the distribution of economic assets or resources among the people (mainly between the rich and the poor). Street-wise definition would present a better understanding as it simply says "the gap between the rich and the poor".

Of course we can't call for an absolute equality in economic status, where all citizens are economically equal, as that is not only impossible but the mere existence of such a situation would present difficulties in running the economy itself. But a situation of a smaller gap between the rich and poor, would present a good economy as it will mean, resources are at least equitably distributed - under those cirmstances. The bigger the gap between the rich and the poor however, the more the resources are unequally distributed. As dramatically put "no citizen shall be rich enough to buy another and none so poor as to be forced to sell himself." (Rousseau?)

I have noticed (with sadness) that most Zambian politicians are always taken by ideas of Economic growth. What will this translate into? How will they define Economic growth?

This has little to do with the inequalities that face its people. It is in its crudest possible sense, mere politiking. I would appreciate a look and addressing issues of economic inequalities before we address issues of economic growth. As this will create a situation where the benefits of economic growth will be equitably distributed among the people. Under the existing structures, the more Zambia's economy grows, the wider the gap between the poor and the rich grows (unless specific measures are taken). I think it will make sense to aim at reducing inequalities in the economy also as it will translate into better living, if it's accompanied by meaningful changes in income distribution. No sense in having a growing economy with more than 70% of the people in absolute poverty. Or having a very rich elite benefiting from the economy and the majority of the people in absolute poverty. So we should aim at having a growth, with specific distributional policies aimed at making the gap between the rich and poor smaller and ensuring everyone benefits from the endorements of the country. Any other direction will result in bad and non-benefitial growth - if that is even achieved.

Ideas of empowering citizens will produce better results, if there is political will to achieve equitable distribution of resources in the country. Such sad statictics make me think we need to re-visit the planning aspects of our economy:

"80 percent of the population in terms of earnings were reported to have acquired only 31.3 percent of the total income, while the top 20 percent of the population claimed 68.67 percent of the total income" (April 2008, CSO monthly).

A good economic idea, would be to have policies which will encourage and move the poorest of the poor, to a more meaningful economic standing. This would greatly improve the living standards of the people, encourage them to aim higher, educate their children, and live a moderate life. Under the prevailing situation, the poor are seriously trapped in the poverty trap. Where movement to any meaningful economic life is not only limited, but in some cases even impossible. And so they end up taking their children out of school, abuse them through child labour, prostitution and early marriages. Their children will either go through the same path or even worse.

On the other hand, the rich keep getting richer. Corruption is the order of the day. It gets so bad that you even expect all government workers to be corrupt in one or the other. If there are policies which would get some of this money enjoyed by the rich and ploughed into education and health, we will have a better people living a better life.

Where Do We Start From?
This is easy. Leave it to the economist to design, you will produce a good product. Add politicians to the equation, eveything is a mess! And yet, its the politicians who ultimately decide what to do. I believe having a very honest political team, could even do better than the economist. Unfortunately, politics in Zambia is all about getting rich and not providing a service! Every project has to be looked at with 'benefits for me' or 'blocking X's party or X himself from enjoying this'. The politics of the belly as one once coined the phrase!

The African Problem
Africa would move fast than most places on this planet. It has the resources to do it. From oil to Uranium. It can ultimately live with no worries about tomorrow as its endorements have whatever the African people need. However, Africa is always hurt and destroyed by it people. The selfish politician running the country, and the people close to him. Sometimes you wonder if we got our independence to early before people could understand the true meaning of a 'States Man' or maybe the colonial masters trained the wrong people to start with. Our freedom fighters had a vision of the continent. They sacrificed alot to achieve what we have achieved now.

But the worse group came after these left. In some cases, the ideas they had before independence died with the new found power of being a President of such a country! Corruption, brutality, rigging, self-enriching method of governance has spread in all corners of Africa. Inequality came like wild fires.

So maybe to rid this continet of inequality is to start with leadership. We need to put in motion a system that will favour systems and governements that strive to address inequalities of the people. Then we can set in motion, economics which addresses these problems. Its not a one country problem, its an African problem.

Solutions!
Besides the mere fact of changing the politics of any one country, the solution of inequality is to put in place 'Pro-Poor' Economic pathways. An economy must recognise the problems of the poor, find simplest possible ways of addressing these problems, setup mechanisms which will address these and any problems which will result from the elimination efforts.

Over the next blogs, I will look at the remaining problems and address possible 'Pro-Poor' solutions.

Monday, January 31, 2011

Kwacha Economics - The Dawn

Welcome to my new blog dealing with economics issues.

I set aside most IT issues that I have blogged on, and take my time to look at issues in the economics arena.

Why Kwacha Economics?
Lets start with the definition of Kwacha Ngwee, it self, the money unit of Zambia. As wikipedia simply puts it:-
The name derives from the Nyanja and Bemba word for "dawn", alluding to the Zambian nationalist slogan of a "new dawn of freedom". The name ngwee translates as "bright" in the Nyanja language.

Need I say more? This is my new dawn of economics blogs. Let my thoughts make my economics come bright as the morning sun of a new dawn...