2013 budget briefs

I will, from time to time, be using my mobile phone to blog as I only seem free on the phone (android phone's blogger app works wonders). My first blog starts with what I consider three best thing to come to the Zambian economy.

Many will talk about what the budget has not addressed for their political needs, but I'll look at what it has and what these mean for the economy.

1. Duty Free for Capital Goods and Equipment
2. Development of Water Ways
3. Revenue Collection of Statutory Bodies

Duty Free for Capital Goods and Equipment
No country can ever talk about development without investing in capital goods and equipment. I believe this is the rationale used to come up with such a move. Therefore, it is expected that the country is aiming at repositioning itself as a manufacturing and industrial nation. There is great belief in investment in manufacturing. I believe this year's budget will address some of the things I have been complaining about all this time. The need to move from a "mall" oriented country to an industrial base ready to produce whatever the country desires and more. So the removal of duty on capital goods and equipment will bring re-energized approach at manufacturing - at least thats what I expect.
 
Truly, thats one thing that has been lacking for some time in Zambia. We need to focus on development ideas that put manufacturing in the fore front. We can't expect job creation from gov, but we can push the private sector in implementing desirable outcomes in job creation.

I strongly believe this is a measure that has come timely for this country to pick up on developmental side of our economy.

Development of Water Ways
How bad is our water ways? Have you ever seen how people using rivers and lakes for transportation purposes?

I think Government's initiative to look at water ways is welcome. I actually want to be able to move in yacht with no worries, not those banana boats that are all over. I actually look at using that in the same way as bunji jumping! Its for dare devils!

Seriously, this is an opportunity for those involved in tourism and live in areas close to lakes and water bodies to invest in boats and yachts so that value addition is brought to our water ways and a livelihood created for people through tourism activities on our water bodies. after all, we have the largest chunk of fresh water bodies in SADC. Its about time we used them to bring money and jobs for our people.

So we can now all go out there and get the gear for some water fun.

Revenue Collection of Statutory Bodies
No one single matter has been on my mind for a long time like this one. I always think its better for a family with four salaries to utilize better use for its income to budget together so they can contribute little from the three. when however, one contributes and the rest choose how to use the money, that is actually far from planning. 

But that's how things were in government. You have people making money and hiking their pay while the rest of Government has to share the little money they had. We ended up with massive buildings for a board, when Ministries don't even have a coat of paint on their walls. What kind of government would allow that?

We should harmonize this situation and allow government to run effectively. You can't expect government officials to operate effectively when they are paid low and an authority under them has officers getting over K70million, more than 10 times more than their principle officers. That is a recipe for not only corruption, but failure of the system.

This measure as far as I'm concerned, will make this government produce better than expected results.

Conclusion
Overall budget proposals so far are great. I think, with proper implementation of this, we expect changes in our economy in years to come. We just need to organize our manufacturing sector and develop water ways to improve people's livelihood and encourage tourism.

Budget Debate Delays

I never thought we would reach a time when a Budget for the following year is actually delayed on the basis of silly issues which cost us time and money.

I have never blogged about Parliament debates, basically because I expect the people debating have an understanding of what they are debating about. But today I was shocked at what delayed debates. One simple issue of mathematically calculations.

The budget is done in ABB and the Yellow Book is produced with rounded off figures as the figures are huge. Now imagine what delayed it. 

Here is a simple example that I have produced.

Now the Yellow Book will seem to have a bad calculation which has produced a fictitious amount. But when the figures are compared with the original inputs, the result stand and is explained. This is what Mathematics does. Now the person claiming to have experience in this field will know this only happens to numbers in decimal of the first digits. But that Maths seems complex.

We delay proceedings on such a matter when all the calculations are mathematically straight. Can we understand issues before we bring them out as errors. Decimal mathematics is not error when you fail to explain it.

I wish Parliament would bring people experienced in issues to clarify when the problem is huge. I think Zambia needs to find a common ground on matters that are technical and need technical input.

Anyway, that's just me thinking out loud as I hate delays on trivial issues which can be sorted with the use of chalk and a black board. Or maybe we should demand some maths to be done before the debates on budget issues is undertaken.

PS. At least the debate has resumed and will allow consultations so that the rounding off issue can be sorted out.

Zambian Independence Joke

Here is a Zambian joke going around the internet - whatsapp and blackberry.

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Once upon a time in the kingdom of Heaven , the angels did not see God for six days. Eventually, St. Peter Happy independence!Once upon a time in the kingdom of Heaven , the angels did not see God for six days. Eventually, St. Peter came across Michael the archangel on the seventh day.

He inquired of God and Archangel Michael explained to him what God had been upto. He pointed downwards through the clouds, "Look, Peter. Look what God has made!"

Peter puzzled and said, "What is it?" 

"It's a planet," replied angel Michael, "and he has put Life on it. Hez going to call it Earth and it's going to be a great place of balance." 

"Balance?" inquired Peter, still confused. 

Michael explained, pointing to different parts of earth. "For example, northern Europe will be a place of great opportunity and wealth while southern Europe is going to be poor. Over there he has placed a continent of white people and over there is a continent of black people," 

He continued to explain pointing to different countries. "This one will be extremely hot while this one will be very cold and covered in ice." 

Angel Peter, impressed by God's work, then pointed to a land in the southern part of Africa and said, "What's that one?"

"Ah," said Archangel Michael. "That's Zambia the most glorious place on earth. There are beautiful savannas, mountains, streams, hills, and water falls.

The people from Zambia are going to be very handsome/beautiful, peaceful, modest, intelligent and humorous and they are going to be found traveling the world holding good jobs. 

They will be extremely sociable, hardworking and high-achieving, and they will be known throughout the world as diplomats and carriers of peace, they'll play football and win boxing medals." Peter gasped in wonder and admiration but then proclaimed, "What about balance, Michael? You said there would be balance!!!" 

Michael replied wisely, "Wait until you see their kind of politicians."

Happy 48th Birthday, Zed - The Real Africa!!!

::: Happy Independence Day Zambia :::

24th October 1964, marked the birth of a great nation.... Zambia.

Today marks 48years of independence of this beautiful land. Notably, it is at this time that we can look back and say we helped Southern Africa be liberated. And since all parts of this part of Africa are free, we need to look at our own liberation! 

We need that economic independence that will make us move on! I always think the hardest fight from now will be economic path as we have the whole world with selfish aims that will make our fight a great battle.

So lets start by emancipating our selves from mental slavery, believe we can achieve all the greatness that we desire, and over come our problems.

Be blessed Zambia and stand proud and free!!

Zambia National Anthem

Stand and sing of Zambia, proud and free,
Land of work and joy in unity,
Victors in the struggle for the right,
We have won freedom's fight.
All one, strong and free.

Africa is our own motherland,
Fashion'd with and blessed by God's good hand,
Let us all her people join as one,
Brothers under the sun.
All one, strong and free.

One land and one nation is our cry,
Dignity and peace 'neath Zambia's sky,
Like our noble eagle in its flight,
Zambia, praise to thee.
All one, strong and free.

(Chorus)
Praise be to God.
Praise be, praise be, praise be,
Bless our great nation, Zambia, Zambia, Zambia.
Free men we stand Under the flag of our land.
Zambia, praise to thee! All one, strong and free.

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?

Landlocked - Hub Ingredient!

We always view land-locked as an obstacle to technology due to no access to the sea. True, but that's just failing to think out of the box! The opposite can be true - unless you need sea- water to develop.

Zambia has always used that excuse to say we cannot do a lot as we are cut off the sea. But every day I see all these vehicles and unbelievable quality of cars on the road. They are not made here, and maybe they flew in but most of these came in through the sea. So what's the problem? 

We need to think about what we have and use it and not be crying about what we don't have. I worked with computers a lot so examples here may make sense to people in IT better than those completely hidden from the IT age!

To start with, a router need not be at every end of the network, but the starting point. So one located in the centre would actually mean greater reach to all end points. Economics of location also has a similar idea in location theory (which covers both economics and geography). Harrod Hotelling's (1929) location model is based on this idea. The model  demonstrates the relationship between location and pricing behavior of a firm. In the crudest possible way, if firms produce an identical product and charge the same price, location of the firm to the customer will matter! You prefer buying from the closest shop than spend extra on transportation or time to reach a far-off shop. Therefore, our location of being in the middle of Southern Africa should be used to our advantage. It would be easier (and cheaper) for someone going to China or Australia to get to Lusaka's KK international airport from Malawi on or Angola than going to Johannesburg's OR Tambo airport. It automatically makes sense for us to think of creating an airport hub in Lusaka. Develop the current one and allow more airlines to land and connect from here than miss this opportunity. That's why we have a lot of airlines establishing presence in Lusaka! We just don't see that!

So my development agenda in the aviation industry in Zambia would be, to start with an idea of development airport infrastructure in Lusaka. This would allow development of the sector which has trickle down effects to industry, employment, technology, engineering, fuel sector, transportation, accommodation, tourism, etc. And looking at the investment - return ratio, this would be a very good approach as it would inject in all sectors from a single investment. Marketing of the country for tourism would be half-done! People would be in the country even for connecting flights! The second phase would then be to develop the local aviation sector by promoting establishing of budget airlines to move people from one part of the country to the next. This would push local private sector to then develop lodges, motels, hotels for tourist centres. This is a better approach than zero-rating accommodation in Livingstone! We benefit from aviation regardless of how far the sea is! No landlocked economics in that area.

The next arena, is technology! We are nicely placed in the centre of activity. We may not have a direct cable to the sea, but we can use our location. A fibre connectivity across the SADC region would gain more with a technological hub in Lusaka! Besides we have plenty of land such that if we setup server farms and have direct connection to two sea cable connections in South Africa and in Kenya, the whole region would be place in our hands for e-commerce and server farms. The only need to be reliable. The one single issue which I complain about Zambian companies. Imagine how productive Zamtel would be with reliable internet service to all parts of the major cities. They have a land-line network. The single investment of lines need to just be converted to ADSL network supply. They need little effort in making people realise how expensive other service providers are. We all know how much we spend on air-time credit on our mobile phones. Zamtel should not be chasing shadows to catch up with other mobile services, they need to use the resources that they have and beat them all. The Zamtel mobile service will simply be an icing on the cake. In other countries, most small service providers simply rent ADSL servers and do the marketing in order to get a share of the "cake" with the likes of Zamtel. Many will realise this when they visit South Africa and are greeted with "ADSL! you only need a Telkom line". So the investment cost is shared.

If ZESCO ran for half a year without a blackout, I think the development of our economy would jump in double digit percentage! We have put up so many measures as we expect the power to be out any time. So there is un-necessary investment in backup power generators, invertors, etc. A development of the electricity supply would put this country on a good path to achieving greater things. Not only would the stability ensure continuous supply of electricity to industry and encourage production, it would lead to good returns and reliable exports of this.  

Those are sample issues that would bring in some perspectives not addressed by people looking at the landlocked status of the country. There is so much we can do with our status and current infrastructure. We need to think out of the box for any progress to come to this country. We don't need a lot of searching around. Most of these issues need a will on the part of decision makers to make head way. 

Point of great interest has always been on the way most Zambia companies rely on rent seeking for their business to move. The worst possible way to develop. This has led to unreliable decisions from political leaders. Why would a company need to meet the minister? What can they possibly present to him which would not make sense to technocrats who deal with issues on a daily basis? Rent-seeking and all forms of corruption need to be kicked out of business environment in Zambia for any meaningful progress. Alstom's bribery on people in political office should not be seen as an isolated act. We need to  seal all holes that lead to bribery and rent-seeking. That is important. The political leaders need to look at their business, not take up the technocrats area of operation. If they don't want to do that, maybe they need to join the civil service and be technocrats.

There is a lot of expectations on the people of Zambia. We need to work on formulas that will ensure the country moves in the direction that will please - regardless of their political standing. Development is the only key that will get us all moving united together. We need to start thinking outside the box. We can do what we want if only we work on it.