Statutory Instrument No. 33 of 2012 - Yipppiiiieeee!!!!

The introduction of Statutory Instrument No. 33 of 2012 by the Bank of Zambia is a welcome move for any one interested in making our country Zambia better economically. I find this, an action worth celebrating over.

For starters, it was not making sense to have Kwacha which is ignored in most transactions within the republic as people preferred to trade in US Dollar. The fact that we have a legal tender, we should use it. Why should rental for housing be in US dollars and yet that house is in Zambia, in Zambian economy? There is no problem with one basing the rent on US Dollar, but that must be a good reason to do so. This action undermined kwacha and made it useless as everything was being backed by the dollar.

Dollarisation

This is a term used when citizens of a country use foreign currency (a US Dollar in this case) in parallel to or instead of the domestic currency as a medium of exchange within the domestic economy. So Zambia using any other currency to quote for prices or to demand payment of any services or goods is dollarisation.

Zambia was one country you could quote your goods and services in any currency with no shame. If there was a visit from Congo, they could have even bought in Congo currency.

But this brought with it many problems which are so severe in most cases it can even be damaging to the economy. A stop to this measure was not only needed, but was needed fast!

Benefits of S.I. 33 of 2012
There are so many positive effects that have been mentioned when issues are refered to the S.I. in question. But all in alll, I think there is only one positive effect that can be linked to this measure and the rest are merely as a result of this. This is the issue of controlling monetary policy of a country by the authorities that may be. There is no point in having monetary policy if at the end of the day, the monetary policy in the country is actually controlled from outside the country.

Zambia has a legal tender of Kwacha. So the authorities will defend and protect the Kwacha as it is the sole currency of the economy. Use of dollar or rand, will mean we tie our economic activities to another monetary authority and can even do away with some functions of the central bank. This is only useful in a country which is in a crisis.

So economic players should actually look at this measure and the great benefit it will come with.

Mis-Understandings
One common mis-understanding of the S.I. has been on the international trade. Most people expect the S.I. to block international trade and has thus brought an imbalance in the economy. Some "wise" people went as far as claiming we can't have the S.I. when Zambia is an importing country.

• Domestic trade is supposed to be conducted in the legal tender of the country. You can never go to the USA and expect to rent a house or buy a TV in Euros or Rands! But you expect this to be done in Zambia? But the problem has been that this dollarisation was left unchecked! So the S.I. simply reminds you of what currency you will use to trade in. It was shameful to walk into these "Real Estate" companies from South Africa even quoting in rands but never in Kwacha!
• International trade can continue and be conducted in any currency you wish. The only thing one needs to know is that the Kwacha is a convertible currency. That said, you can then simply pay even in Rupees as long as you use the bank system to send your money. They will in turn get your kwacha but send rupees. Simple like all other countries do.
• The bank system use will make sure the monetary authorities have control over the transactions and enable citizens buy things from anywhere in the world at no cost to our currency! Thats why when you travel out of the country, you get your usual ATM but with draw dollars or rands depending on which country you are in. The system is able to handle all transactions.
• We have a duty to protect our country and that starts with the currency. Parallel monetary policy has not helped the country at all. (Parallel in the sense that although we have our own monetary policy, it is controlled by currencies that have an embedded monetary policy of the country they come from. We had houses being sold and quoted in dollars leading to the weakening of the Kwacha every single day. Now we can concentrate on making Kwacha strong and viable in the world trade. That starts by making sure it is a legal tender for this country. I don't think I can go buy a car in South Africa with a Kwacha, why should we make possible for anyone else to come and use their currency in our country? 

This is one of the positive issues that economic players in the country should be happy about. After all, the benefits are for all the people around.

I think this measure has been one that has taken too long to be implemented and I'm one of those that think we can do a lot more to help the country prosper!

Well done for S.I. 33 of 2012!


I have heard talk about the problems of the S.I. Basically, the only "errors" the first "errors" I saw was reference to the wrong Act (the typo of year), but that would not injure the spirit of a good law. So we just need to correct that typo and a problematic paragraph and we are good to go. We need such progressive directions in this country to get something out.

Economical Progress in Africa

I have always taken a different view when you look at African Economic progress. Most problems that stem from Africa have never been Economic problems, they have been political.

If the problems where economic, we would simply educate the technocrats and produce economic progress. However, these problems are political! And you can't take politicians to school and educate them in politics. What has made be wonder with awe, is not the top political leadership that lets Africa down, it has been the advisors or some small political muscles that pull strings and lead the country to disaster.

Now this blog is not about politics, I would condemn so many things about politics not just in Zambia but in all African countries. My aim on this matter is try to reconcile the political problems and the failure to move economically - that totally comes from political problems.

Can Economics Cure Political Problems

I would love the answer to be yes to that. I really do! But it always lead to one conclusion which always even leads people into insulting politicians as to why that problem can not be solved.

Look at Zambia now, the politicians have changed, has the economics changed? The sad answer is no! The politicians has one disease which they never learn to cure all the time and in circles and in leads to many failing to have great political life - they ignore technocrats!

The most interesting result has been the usually labeling of technocrats as opposition cadres! One thing is for sure. The same people were labeled as following the current policies when the MMD was in power. It was common when one politician's desires are meant with proper and sound advice to turn and say these chaps are PF! Now the same PF would look at the technocrats as MMD!

Its a never-ending blame game. The only solution is to learn what technocrats do and then follow things through.

I Know It All

This has been the greatest problem in economics. By definition, an economist will read, research, find solutions and recommend to the powers that be. The usual activity among many countries in Africa has been to reject what you are told and issue your own solutions on the matter as you know it all!

Any educated follow of politics will always sight that problem and fun enough, very few politicians ever learn what to do. So the same problems you blame one government, is the same problem you will bring about. What is interesting is always reconciling what is said to former leaders and the new crop of leaders. The day, this trend will be repaired, is the day we will see progress.

What I'm sure about and have seen it growing is that, every country that performs well, avoids rent-seeking behaviour. And believe me, the same people who backed and were "darlings" of one government and led to its fall, will be "darlings" of the party that is now leading and was in opposition. The technocrats see this and they wonder why politicians are so blind.

Hope Out There

The economics to make a country progress is out there. In the same offices that the former ruling party was controlling and is now in the hands of the new government. I can assure you, the first thing they will do is remove the people they think made the other government unpopular, bring in new stuff. But treat them the same way the other party treated people he had. There is no progress. New bosses but the behavior is the same the advise is also thrown out the window in the same manner.

I will give you an example. Zambia has a problem of funds to invest in sectors that will generate economic activity and lead to backward and forward linkages in all sectors in process lead to demand creation and economic progress. Simple.

What is needed? Each economic player contributing his fair share of investment, responsibility and hard work. Any government that takes that as religion will bring more good to the people than any known foreign investment. All of us paying our share of taxes, anyone in the position of power using the power to ensure the resources are directed at intended targets, and companies tasked to do their part of economic activity sticking to that role.

But Our Problems:

1. The government of the day will negotiate with companies of what they should not pay! So the next person will now wonder why he should pay when government has chosen some "angels" not to pay. Then the role of rent-seekers is cut in stone. Each company will come and see a minister or a president and when they fail, there is always the deputy minister! And they feel power to shout at any technocrat who "delays" the granting of incentives. Labels them "opposition!" and wonders how the country could develop! What is funny is that the same incentive may have been drafted by the same technocrat that is now considered an enemy of the government.
2. Lack of appreciating the system. One government comes in, condemns the whole technocratic system spoils the little progress made in the past, and then sets in to develop a better system with no idea what was bad in the previous system. The only people with access to both systems are the technocrats who can be a useful resource of knowledge and progressivity.
3. Then the technocrat is thought of being a fool, when in actual fact only the technocrat knows who the fool is. Why not take the system, study it and improve on it? The one thing our brothers in the Western world have so wonderfully done.

So now with this problems highlighted, can our new government prevent politics into disturbing economics?