Robbed Twice

Zambia's wealth was stolen during the colonial times. Unfortunately, thats not the only time. We have been robbed once before, and are being robbed right now!

Robbed Once

The colocinal masters came with one agenda - get all the minerals they can and any way that they can. They succeeded and got all the mineral wealth when they ruled over Zambia (then Northern Rhodesia). The result has been a totally poor country and the wealth developed Zimbabwe where a small portion was used by the settlers to develop the land they lived in.

But to all that can see what this country has got, will realize that at the time, it was impossible to fight the big guns with bow and arrows. The red Indians tried it and were almost wiped out of a land now called United States of America. We had to fight differently and in 1964, we won a great battle and got our independence. 

We must always remember what we got from this fight. They stole every piece of mineral they saw and gave nothing in return. The greed with which they came with was exhibited in all that they did and could only "leave" when there was nothing else to do. The truth is they never left.

I sometimes ask God why my people had to suffer all this while and yet we had the wealth that every one thinks and dreams about. I subscribed to the Paradox of Plenty to try and explain the inequality that has resulted from Zambia's copper and mineral wealth, it does not comfort me.

Our own people sold the mineral wealth in many forms. The stories of the Litunga and BRE selling all the mineral wealth and got paid for every extraction is a story Zambians should be familiar with. How it happens and the noise that results every year is because the people who benefited from that wealth want a bigger chunk still. None of the other paramount chiefs ever got what the Litunga got for the minerals in form of "salary" or income at one point reaching 8000 pounds a month. That was a direct benefit of stolen wealth by the way. 

They actually have used this as a point of pride here:

The concession entitled Lewanika to receive the payment of £200 annually and 4% on all minerals and precious stones mined in his territory for a period of twenty years.

I don't care if that happened with the agreement of the people. If it just included their own area would be fine to him as king. But they later wanted to increase the land in order to benefit from the same wealth that lay in other people's areas. Just like the greed of colonialists, they also learnt to steal what is not theirs. This is discussed in length here.

The point I want to bring out here is: every time we talk about colonialists robbing our country's wealth and mineral resources we should be honest enough and admit that our very own people aid and guide them on how to do it. In the colonial times, it was chiefs and people around them. They would sign anything as long as it brought something for them in the pocket the deal was done!

Sadly thats the truth.

Second Robbing

We have to know what kind of problems we are facing in the world as Zambia. We still have abundant wealth. We are very rich, sadly we are very very poor.

We have moved to midlle income country - on the few items that have been accounted for. Not accounted for in this country, but whenever some one got wind of what was collected from Zambia. So the wealth and result of that income is economic fiction to you and I. What is sad, is that people who get this wealth will actually declare it somewhere else proudly and share it amongst themselves with pride. Because they declare it there, the taxes are low. We can't see it here and we try to get a little from the stealing by raising taxes, they justify the none declaring of such undertakings as a result of high taxes. Surely there must be honour even among thieves!

Every Zambia in the colonial era knew where and what London was. People even now line up to visit the place. Nowadays, every Zambia should know about Ruschlikon, is a village in Switzerland. Because what this place receives, would change the very face of every Zambia. More so, the pocket of all Zambians. Our taxes would be low if only we got a share of what this village receives. My inspiration is here.

This is interesting as the robbing of our country's wealth is happening at the very time that I am writing this. Again this is aided by our people. Unlike Lewanika, the aiding now is from someone people voted for. I can say it as the London judgement can not be erased. Chiluba facilitated this in many ways. They actually lied about the status of the mines in order to sell it at a lose. But even that, the actual "dirt" from the mines was worth more than the mine was sold for. Least we forget:

"The judge concluded that though Mr. Chiluba had a salary of only about $10,000 a year during his decade in office, he spent more than $500,000 in a single shop, Boutique Basile, in Geneva. The shop owner, Antonio Basile, testified in 2008 that payment for the clothes sometimes arrived in suitcases stuffed with cash.

The goods are now stored in battered metal trunks by Zambia's anticorruption task force. There are piles of designer suits, monogrammed dress shirts and elegant ties, silk pajamas and dressing gowns. But most remarkable are the more than 100 pairs of size 6 shoes, many affixed with Mr. Chiluba's initials in brass. He is just a little over five feet tall, and each pair has heels close to two inches high." Its all here.

Mwanawasa tried to get something out, but died too soon. Conspiracies go here, but I never subscribed to any. Then Rupiah came on the scene and everything died a natural death. Thank God the situation was arrested and he only ruled for 3 years some say. But what happened in those 3 years?

Again, aided by our own people I should repeat.

Case for Nationalisation?

It is always strange to find an economist who subscribes to nationalization. I actually do in this case. We have to realize that mines and mienarl wealth that they bring at such levels call for serious re-thinking. We had the mines in the hands of Government, and now they are in the hands of the private sector. The two bring out one thing I would like all of us to know and think about. The returns from the mines were actually greater when the copper prices were down that when the prices are currently high. If a $10 million return came when the copper prices are low and only $2 million when they are high, it only makes sense as to get them back. After all, at a high copper price, $360 million is paid as taxes in some village in Europe. Thats one fact you have to agree with. But take that with a sharp head, not like the political rhetoric of Julius Malema. You have to get back on a footing that works better for every Zambian.

Regardless of how we do it, there is clear cheating and business conducted with parent company yet a claim of "at arm's length" in Glencore. Did you actually see how our own person laboured to defend a country he works for? I felt ashamed. He was caught unaware.

So if this was to continue, we will get nothing until the mines are declared unfit to mine anything from them. We nationalize, we get enough resources to plough back into the economy and we may actually get more benefits from this resource. America nationalized when the going was tough. We should not adopt economic policies that will not bring anything to the country when we all know how it should be done.

No economics is better than the economics that brings food on the table for all us and not the thieves. 

I believe there is a legitimate call for nationalization in the wake of transfer pricing, hedging and all manner of bad economics at play. Whilst doing that, we should cancel double taxation agreements that favour the west and disadvantage us. Actually, I think double taxation agreements which led to taxes being paid anywhere else apart from Zambia should not only be illegal but never signed and those signed canceled. We should make it a standing order that any shares exchanged on a company in Zambia should be taxed here at the rate applicable. Failure to pay those taxes should automatically trigger Government sanctions.

Moreover, we should setup mechanisms that will monitor and follow all transactions involving Zambia's mineral or other produce.

But nationalization is and will always be the cheaper option as long as we put in place a structure that will run the national resource company prudently and as a full time business.

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.

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...