The Case of Gay-Aid Economics

Poverty and Aid show an interesting aspect of slave and master relationship. The west has always used aid to get what they want from the poor. This is the case in point of what I will call Gay-Aid!

Gay-Aid is western aid tied to homosexuality in the recipient countries. It is fully endorsed by the USA that is, President Obama and David Cameron, the Prime Minister of Britain. 

"Gay rights appear to have become a new frontier in diplomatic relations between Western powers and African governments, with the US and UK warning they would use foreign aid to push for homosexuality to be decriminalised on the socially conservative continent.(Gay rights: Africa, the new frontier)" 

The idea is, countries needing aid, will need to support gay 'rights' to receive that aid. A simple do this to get this. The bate here being aid. To me thats a typical slave-master relationship.

This is clearly an indication that one needs to lose their ability to decide on issues of their 'being' and ask the master for a way forward. And I think this is what we need as Africa. To see that Aid really does nothing for the well-being of our nations. Its an investment from a partner who may never mean well at times. The way out is to look at the issues that affect our poor performance in an economy that rely on aid which maybe Gay-Aid or dead-Aid! Imagine trading off the Gay-Aid for good taxes in the mines! That in place will see nations that can decide their future and can decide on what they think is right or wrong. Though this looks more a political issue that an economic one, the moment you allow someone to dictate what is right or wrong for your nation or economy, you lose your destiny. 

Aid has little contribution to Africa's development. This is a tool used to make Africa states dependent on the West for them to use it any time to impose their values and beliefs. This is the only thing that can make great nations go down on their knees and beg for them to implement what the West want.

Why I hate Aid

There is a saying "A beggar is not a chooser". When you beg, the person giving help will determine what you do and how you do it. Ban Ki Moon went to Africa Summit and told the leaders to respect gay rights.(here). He clearly did not care who was there and what belief they hold on the issue. He is the secretary General. Would he do the same at an Arab summit? No! They have wealth as countries and that black gold - oil. They determine their destiny. Africa had almost all leaders on Aid payroll, they dare not react to such statements, the master was talking. That's why I hate aid - it makes you a slave!

The gay rights issue has problems in the USA, some states are fighting for it. Others are not even thinking about it. Does Obama wake up and say the Federal government will not provide services in those states? Of course not! But when it comes to giving aid to poor nations, it is "Central to the United States’ commitment to promoting human rights".

Be Rich and Control

Central to this Aid issue is not of a helping hand, but control. No wonder every one (except a few of us) hate China. The west has painted such a bad picture on China because they can't control it. It has money and hence power to decide what it wants. If those are transferred to Africa, the west loses grip on everything they have been trying to bring to Africa to continuously step on Africa. That is the big issue.

Africa now needs to work on the issues that continuously disadvantage it (aid included). They need to work on multinationals that steal from Africa through not paying due taxes (they actually declare loses but profits are declared in tax havens). They should demand what is due to them, if need be, nationalizing some of the companies would actually make some countries better off! I know a lot refuse that, but has anyone looked at China? If a country is only getting 10% of the returns on natural resources in foreign hands, it would be good to run it on a state level if that company will bring in 20% after a poor investment from an African government. Besides, all returns will be in the country and not sent to their countries.

You can't have all companies run by multi-nations and their governments say bring gay-rights to receive aid and you think you decide your destiny! That is the tool of control you can only avoid by being rich enough to live without aid or multi-nationals running your economy.

What Democracy on Economy?

There is a cry for democracy in everything that is done. If that democracy means doing away with gay-rights, you are not "democratic", but if you ahve oil and oppress women you are a friend to the west, then what is democracy? I have noticed on matters of economic importance, the west will ignore issues of democracy if it will lead to what they like. Unfortunately, there is no control on this issue as it even affects the UN. It will not protect the people if the returns will not amount to anything for the west. Countries that have stood up to such forces, have grown by following their independent paths. China and Russia are a good example. They don't care what the west does now as they have power to define their destiny.

If oil will be gotten through regime change, it will be supported and even leadership made to pay for refusing change. But if it will come through the current regime, people's deaths will not matter. Economics does! Libya and Syria are cases in point. and the key element was the oil.

Economics Matters, Rights Don't!

Gay-Aid is tied to 'rights' for gays! Regardless of the people's beliefs or stance on the issue (like colonial masters deciding for the village). But women in some Arab countries can't even drive a car. Have you ever heard Ban Ki Moon talk about them? He talks about gay-rights. I have not even heard him address Syria. There is oil there!

Africa's New Fight - Economical

The new fight for Africa should be economical, not political. Africa must unite and fight all aspects of the oppressor. If it means leaving the UN, you may have to. What has it done for the continent economically? It would be easier to make Africa stand economically if the UN supported its cause. Do you think Africa has a chance to fight Gay-Aid being promoted by USA and UK backed by Ban Ki Moon? Which nation will stand and say, we are Africans and don't believe in this. Mugabe did, where is he on the economic map? Malawi's economy is a sorry sight - Mutharika spoke about the displeasure of gay activities and the court sentenced some people.

We need to get rid of this Aid issues in Africa and believe we can do it without the west. We can do it. The problem is that we are constantly blocked in our thinking by the west through schemes like aid, human rights grants, etc.

Like Marcus Garvey said:

We are going to emancipate ourselves from mental slavery because whilst others might free the body, none but ourselves can free the mind. Mind is your only ruler, sovereign. The man who is not able to develop and use his mind is bound to be the slave of the other man who uses his mind ..

I end saying...

Africa, Emancipate yourself from mental slavery, None but ourselves can free our minds

Paying Taxes

Something of interest (tax- wise) happened today.

I had a discussion with a work mate about para-statals and their tax payments. And I think we all need take this seriously and see how we can help our country develop.

Who should pay taxes

All companies and entities in the republic need to pay tax. Be it a Ministry, a government institution, an agency, an NGO, etc. That is the normal way things are supposed to work especially for VAT. For income tax, the situation is different. All institutions that earn an income is supposed to pay income tax. That obviously eliminates government institutions as they never earn an income.

The few exceptions are military personnel or agencies, the presidency and such, through the duty-free goods and drinks. So as to make things cheap. And enable them work without disruptions of chasing refunds or fundings. Ok that's my understanding (limited as it may be).

Now my point of interest, most institutions don't want to pay taxes. They want to be a bottom-less pit which can be funded or use its privileges to get favourable treatment but also don't want to contribute to the revenue generation. I'm not talking about the obvious. Think about it, for example why should ZNBC or ZESCO not pay VAT? VAT is a consumption tax (I will always remind people about that), so anything being consumed should be paid for. Since its being consumed and everyone will pay VAT, it will be easier for administration purposes if all paid it. For anyone producing an intermediate product, they will claim it back and only those consuming the product will have the tax stick on them. I buy a Fanta, I pay VAT, ZNBC or ZESCO does not pay? Will that be fair? After all, drinks are to be consumed. Unless they can prove as being an input, then they claim it. After all, the idea of claiming the VAT if one is not the final consumer is in place to enable businesses handle costs.

And another thing. We as a people should take interest in knowing what taxes are being paid by institutions regarded as "public" or of importance. We should not only be interested in knowing what the mines pay. We should know what the mines and other big institution  How much does tax does ZESCO, ZNBC, Shoprit, Game, etc. I think we should also be given an opportunity to see what incentives are being given and the justification of such a move. I would like to know what items are coming in free of taxes and for which companies. I have a stake in this country and a permanent share holder, so I should know. Such disclosure will ensure officers are doing the right thing.

Right now, there is this belief that officers are bribed in issuing tax incentives or allowing items to be treated favourably. So is this true or mere speculations? It can only be best sorted out by disclosing what company A received. And how much revenue loss has resulted from such a move.

Maybe I shold stop here before I get political... seems to be a fine line between politics and economics especially in Zambia.

The More Things Change, The More They Remain The Same!!!

I had a problem with the way the previous government handled issues related to economic well being of the country. They created sacred cows that would be treated differently when it comes to taxes, tax incentives and so on! Tax payers should be protected. Moreover, we should ensure there is a balanced approach to the way people pay taxes! (I'm passionate about taxes - try to understand).

If you are going to let people go without paying taxes, let everyone go! Let us teach people to realize that they need to do things in a proper way! There is no alternative to doing it right. I believe that is the only single lesson you would teach your child. That is the only single think that a government can teach its citizens. Everything else would be dependent on doing it right. You pay the right taxes, you conduct the right business, you engage the right suppliers, you keep the right records for your business and so on.

The Past

We had some businesses which enjoyed "sacredness" under the old regime. I did not like that! Some companies got incentives, while others where taken out of business for the same actions. You needed to know someone up high to get some things done! If you don't rub the right shoulders, your business goes under! That is not a way to run an economic. It looks political, but the whole arrangement affected economics in massive proportions. Rent-seeking was the order of the day. It reached levels that government officials received calls from higher offices to implement certain things (sometimes I'm shocked when I read the papers on what led to some decisions - and always called it political pressure). We have to work at this, economic progress cannot be achieved if politics are involved. I have reminded myself not to be political on this issue as I expect progress and the day we add political aspects, we compromise progress.

The Present

I loved the pronouncements related to corruption and the "hands-off" on the economic that came from the new regime. But I has been disappointed, we have now started promoting street vendors at the expense of shop owners! Some one told me, this is done so as to improve the lives of people by giving them a means to earn a living. They can now afford to buy food, clothes, medicines, etc. This is more so because they have no trading places where they would sell their goods.

It really was a good point. And I looked at it as a right measure. But after reflecting, we need to come back to reality on the ground. The streets are dirty, diseases came spring up any time. There is no order. And there is no taxes being paid by these traders. I have not seen a ZRA officer on the streets! So we have promoted tax evasion and wonder why there are no trading places? What would make the shops in Freedom Way, Cha Cha Cha and Cairo road want to pay taxes? They face competition from the vendors - who don't pay taxes or rent! Its an imbalance in economics with no supporting argument. This is one single disappointment that the present has presented to the economic well being of this nation. I seriously hope it is temporal. We have eroded the tax base even more.

The Real Effect

It looks like the measure is aimed at encouraging entrepreneurship. People can buy and sell without paying taxes. But the real effect is teaching people to look at taxes as optional. An Indian shop owner would see the benefits of trading on the streets than paying rent and taxes!  Mind you, most shops in Freedom Way, Cha Cha Cha and Cairo road are owned by local business men and women. Their businesses are being torn to pieces. Most people avoiding this chaos on the streets stop buying in town and move to malls. They promote foreign shop owners and push their businesses to greater heights. And we wonder why local businesses don't do well? There is no sense in saying "buy Zambian, promote and develop Zambia" when all Zambia is, on the street in chaos yet foreign companies are in nicely ventilated shops, with air-condition and smooth music.

We need to look at this issue and find ways to help people but not by destroying the sanity that town had. We have to do things right. And vendors on the street is not right. They need to feed their families yes, but I think they can feed them better if bigger shops paid taxes which would construct schools for their children and create employment. They can do with selling the same quantity in markets than lose all trade to malls with fresh clean vegetables.

Tax Incentives :(

I have always had problems with tax incentives.... simply because I believe if someone is investing, he is not doing you (as a country) a favour. He is in it for the money, he knows he can make enough profit without incentives before he starts, and the tax incentives simply make him "super-normal" profits! Prove me wrong! No one single person would invest if the profit margin is non-existing or if the profit is only coming in after the tax incentive!!!

My looking at tax incentive maybe wrong to some of you. But in the same vein, thats why I have little understanding of the role of Zambia Development Agency (ZDA). I seriously need someone to educate me! If you are doing a course and the school says do all your assignments, tests, etc, but to encourage, we wont mark them as we will give you those marks (about 50%) and you just need to get more than 50% from both the assignments and the final exam to pass the course - who would let such a chance go begging???? That my people is how I see the tax incentive.

I have always said, to an economist, only two things are certain: death and paying of tax! We will all die, and we all should pay tax! So the logic of tax incentive violates my belief - and I can prove it!

Tax Needs

Taxes are paid for infrastructure, security and other public goods which governments put up. So if a real investor asks for tax incentive, ask him if he can do the roads, pay the police, hospital staff and their buildings while he is running his investment. If he refuses, he shouldn't get the tax incentive! No one investor would be willing to not pay taxes if he wont be assured of security through the police, courts of law, access roads, etc. So if he asks for tax incentive, he simply wants someone else to pay for those services! Just on this point, whats the role of ZDA? To unfairly ask people to pay for services used by these wealthy companies?

Incentive Benefits

I have been looking at a report that will show me the benefits of tax incentives in Zambia (as opposed to the benefits the country would have had if taxes were  paid)! I believe that is the single most important reason for continuing with incentives in this country. Without it, we shouldn't even think about it. What benefit would tax incentives bring if they provide no benefits? We would be doing a dis-service to ourselves, our children, and our children's children!

Getting High on Incentives

I think we have reached a point that we get high on incentives, we may even start asking companies to invest through an incentive of not requiring them to register as a company. Seriously when we reach a stage of allowing companies to steal, as an incentive, we can't sink lower than that. This is through what someone called the VAT "incentive". My little education would not understand this, but I believe people think this is possible.

Let me explain my failure to understand the VAT incentive.

VAT is a consumption tax paid by you and me on final goods that we buy for consumption. For example cooking oil, soft drinks, etc. So the company selling you these things will "hold the tax" and submit to the revenue authority. You pay, they take it to government. If you give that company a tax holiday for that kind of tax, you are asking people to pay to the company (for their operations) and not for public services! Is this normal? I think there is no difference in that action with some someone thieves high-jacking an armored vehicle taking taxes to the Bank of Zambia! Money is illegally being pumped into the company by people who don't want to invest in that company and for no benefits. Its like you simply change the one who is supposed to tax from the tax authority (in this case ZRA) to the company. I think the issue would actually make sense to someone people if you explain it better like this:

The action is like asking government to give back the taxes paid by the people to the company to do with it as it wishes. So the government goes and cuts a cheque equivalent to what that company brought in as taxes. 

There is no basis, no logic! The tax burden is born by people, the company has nothing to do with VAT. They don't pay it, they simply collect it for government. So if you give them what you call an "incentive", you simply giving them money or investing in their company as a government! I would add and say, thats theft! 

I think the only logical tax incentive is to allow every single entity to pay the correct amount of tax due, so that in time, they can pay less as the requirements are met. Without this, they actually open up an imbalance in taxes required, and would lead to more taxes paid in future. I always say, paying less taxes, is actually asking to pay more taxes!

If our taxes don't meet today and tomorrow's requirements, we will need to pay more taxes in future! Don't believe me? What taxes do you think people in Greece are paying compared to what they paid some years ago? Any failure to raise money by a government will lead to people paying more to meet those demands. I know a government can borrow, but ultimately, those loans will be repaid from taxes in the end! There is no one single source of revenue for government that can replace taxes. Actually with tax incentives, you may end up paying taxes to make up for the taxes that a company needed to pay. More so if that is a foreign company which would just pack its bags and leave!

We have to one day call for the end of a thinking that one needs to incentivize investment! Investment comes with or without incentives. As long as someone knows that they will make a great incentive, the business environment itself is enough incentive. Zambia has incentives in that area, investments are safe, we just need to get the taxes and build great infrastructure as the last incentive - not giving companies money! 

Augmented Tax Incentive Economics

I'm always amazed at how people in this country take taxes as an unnecessary evil which should be avoided at all times. Any chance that is presented to someone to avoid being taxed, they jump for it. So maybe the issue of taxes has not been presented to everyone in their complete sense. I know I may have touched about it from time to time, but I don't think I have aimed at hitting the 'nail on the head' as they always say! So here is my blog-ness attempt.

What is tax?

A compulsory contribution to state revenue, levied by the government on workers' income and business profits. (That's as simple a definition as I can find).

What is tax revenue used for?

Do we need to look at that? Ok maybe we should as missing one element of this can spell disaster. The most comprehensive use for tax that fits this discussion is on wikipedia:

Money provided by taxation has been used by states and their functional equivalents throughout history to carry out many functions. Some of these include expenditures on war, the enforcement of law and public order, protection of property, economic infrastructure (roads, legal tender, enforcement of contracts, etc.), public works, social engineering, and the operation of government itself. Governments also use taxes to fund welfare and public services. A portion of taxes also go to pay off the state's debt and the interest this debt accumulates.

So why pay tax again?

As outlined above, all services you require from government are provided for through taxes and borrowing (loans, grants, etc) both from internal sources and external sources. So failure to pay tax implies a vote to have little government provided goods and services. This actually is the real "If you wont pay, it will never show!". Your taxes determine what you will receive from government. In Zambia we have to be quick and say all things equal as we are used to seeing our money being used to enrich some leaders! Someone told me its the only way we know how taxes are used in Zambia is wrong ways.

So I believe its about time we started believing in the usefulness of the taxes we pay. But most importantly, leaders need to show us where the taxes we pay go to. That is the remedy. It does not go well when billions are being buried, with no sign of what was put up from the taxes paid!

So can we embark on this trip of Augmented Tax Incentive Economics!

Rebirth of Economic Reason ...

I have been been delighted with the sudden introduction of reasoning in our approach to economic matters of the country. For once we look at issues in the media and hear people talk using the best possible aspect of reason and economic understanding as possible. Talk is now based on issues and not tissues!

Look at how the issues of Zamtel, Debasing or the Kwacha, Corruption fight. We have as a country looked at these issues professionally and people who didn't know about them, have been educated. That's how we should handle matters that we face each day.

I hate the political talk that was all over Facebook with no logic on the matters at hand but behaving like total cadres. I think we could have done better with economic issues. We could have addressed the issues of weak tax revenues. Lack of employment and what can be done by those in authority to bring down the unemployment rate. Inflation rate (or has that now been pushed to the day we change to the debased currency?).

Infrastructure Development

What do we need to work on? I hate going to the airport which looks like its not the biggest airport in the country. Shouldn't we be thinking about building or upgrading our airports? Why not 3 terminals - at the least!

We badly need roads and this will boast our production and exports. Which roads should be first and why? We all know its expensive to maintain roads, so why not introduce toll-gates on roads to be constructed. Would actually encourage private sector to be involved in infrastructure development, especially when we eliminate the "public-ness" of some infrastructure like roads through introduction of toll chargers which will handle the issue of excludability even if there is still a non-rivalry element - all things equal of course :)!

Budgeting??

How come we have supplementary budgets all the time? Is it a failure to plan the budget? Are things being included with no budget line all the time? What has the constitution said about all this? Where are the laws and rules related to budgeting? I have not heard a soul talk about that. And I believe even the parliament over-sight on monies of the country should be strengthened further! Have we forgotten how money was used to construct and maintain roads which parliament was not told about? Is it such a short time that these issues have disappeared? We need a check on political hand in cash of the country, let them be involved in political direction. I really need to hear this as it will help our Kwacha economics in its movement and being!

Kwacha Backed

I know this issue is a thorn to some people but we need to address the kwacha. Not the political aspects as I never wish to divert to politics on this blog! But the economics of the kwacha. I believe this is the only thing that is important - to me anyway! If we work on making our Kwacha economics better, we will focus our attention on demand stimulating of kwacha backed goods (my attempt at making Zambian production a kwacha issue). The country will aim at being better in production, consumption of kwacha backed goods, getting a fair share of the mineral worth, etc. This is a way of addressing the weaknesses in our approach to economic issues and will make sure we put in place policies, infrastructure, rules and ideas to work for and produce kwacha backed goods! Proudly Zambia - that's Kwacha backing!

We need this rebirth of reason to be channelled to and focus on kwacha backed ideas, goods, services, policies, etc

Debasing the Kwacha ...

Kwacha Economics has really taken an interesting twist this week. We are now thinking about debasing and the merits or demerits associated with it.

So let me add my voice to the debate. Clearly to correct what I have read and is out of line.

I feel good when i read about people talk about economic issues which make my daily life these days (can't believe I felt the same joy about Computers and IT a couple of years back!).

Rebasing on the Zambian kwacha should be viewed from an Economist point of view! I have been shocked by mis-leading statements about this and people will in the end be lost totally. We need to understand the fundamentals that control this in straight line and not assume the economics that is being dreamt about.

Rebasing the currency is redenomination which is different from devaluation. Wikipedia would simplify it better:

"Revaluation means a rise of a price of goods or products. This term is specially used as revaluation of a currency, where it means a rise of currency to the relation with a foreign currency in a fixed exchange rate. In floating exchange rate correct term would be appreciation. The antonym of revaluation is devaluation. Altering the face value of a currency without changing its foreign exchange rate is a redenomination, not a revaluation."

(I have read sites which have confused the two! Here)

On our case, only the face has been changed by deleting the extra three (3) zeros such that K5,000.00 will become K5.00 - simple! If you look at our currency now, K5000 is written as 5ooo (small zeros). Could be design or not, but assume the zeros are eliminated. So the new currency which will be printed will trade at the different rates. Such that, your K50,000.00 will be equal to K50.00. Hard to understand? Think of it this way, K5,000.00 is equal to $1.00, right? Assume now Kwacha2 is such that K5.00 is equal to $1.00. It simply means Kwacha2 K5.00 will be equal to K5,000.00 of the old kwacha (which we are using now). Put even simpler, its like changing kwacha to MaKwacha which is 1000 times more than the old kwacha.

There is no change in value. Just change in the face of the currency. if you go get a bag of mealie meal for K25,000.00 and you have K50,000.00, the store man will either give you K25,000.00 of the old currency or K25.00 of the new currency!

Bacause of the value being the same, it has no effect on imports or exports (all things equal as we love to say!). This is a redenomination and not a devaluation. It should be easier for people who transact across borders. You can either go buy a car in dollars or rands in durban! The vehicle worth K25 million will be the same if you buy it in Rands or Dollars. Your money simply changes faces (I know the differences in exchange rates will lead to some profit or loss, that's the exchange rate issue). All in all if you carry a stable currency like Euro and Pound, that element of loss or gain in exchanging them will be no more!

So why do countries redenomination? Simple, take our case in point. We have over the years been around the exchange rate of K5,000.00 to $1.00 if may fluctuate to K5,200.00 or K4,700.00 once in a while but we are stable in that region! So a redenomination will simplify our currency (like someone said, reduce the wheelbarrow to carry the money to pay for a car!). Will now only need K5.00 for $1.00! And can even bring back coins which are irreplaceable in some transactions like parking or toll-gates! Ever wonder why we have to buy tokens to play pool? In other countries you use your money in coins! So coinage will be part of the transaction!

There is also the issue of the buried K2.1 billions! People with buried money will either dig it up (so they exchange it for the new "currency" or lose the loot as it will only be worth to light the fire with! So it will rejuvenate transactions as there will be money which has been buried being dug up. And I hope some more people will be arrested for hiding the loot!

That is a simple explanation of what we will expect with this redenomination!!!