Sunday, August 7, 2016

Zambia Referendum 2016 Issues

I have been asked on the issues of the Referendum and what issues we should look at. So I took time to look at various websites and the people encouraging the "No" vote. The most important observation is that people have not read it and so have carried what they think into the advise and decision they made. As usual, the problem of people not reading is what leads to many problems in Zambia as people depend on what their "people" advise them. Funny enough, this issue has even people I consider learned enough to read have avoided to read. So here are simple sources of the document in un-edited form. These can be accessed here: 01 (CSPR Zambia), 02 (PDF scanned document), 03 (ECZ Cartoon - Understanding Referendum.

I have avoided picking political party links as they look at the Referendum on the basis of what they want, not exactly what the people should consider.

I also should point out the interest people should take by looking at the old constitution and compare it with the Bill you will be voting for. 

Take note, the National Referendum is on Part III and Article 79. Part III is the famous Bill of Rights. The rights have been enhanced as more have been added compared to what was there. I should point out that "Gay Rights" have not been added as some people have been saying. Please ask them to point to where this is when they tell. Our interest at Kwacha Economics is the addition of the "Economic, Social, Cultural and Environmental Rights". This is a thing that every Zambia should take time to understand and they will be happy with this inclusion. 

The most interesting excuse given to vote "No" is because the constitution has added the "grade 12 clause" which has been promoted by some political parties. I may be incorrect, but I think from the Mvunga commission, there has been a call for this limitation on Members of Parliament (MPs). So I think this has been backed on this need. Our interest on this blog is simple, how do you entrust people to make the law without the basic education? What kind of laws would they make? These are issues we need to address before we look at the Grade 12 requirement. The issue of it being discriminatory is interesting as this is the basic job requirement for MP which we have tried to set for many years.

After reading the Bill I'm sure you will be like me - hoping for a "Yes" vote. After all, a "no" should have something higher than establishing improving on the rights of the people as it will be a rejection of these improvements and going back to the old Bill of Rights. That is the stand. I see no reason anyone would want to vote "No" unless the rights are aimed at being suppressed. 

You are free to engage me on this issue as to why a "no" is promoted.

Friday, August 5, 2016

Zambian Election Issues

It is always interesting to get into an election and evaluate the various issues of importance to voters. Well, if at all there are issues that are being offered. This year's elections have the same things that leave a bad taste in my mouth and I thought I should bring out what I consider to be issues for me to make a good elections for a country among the "longest period of democratic elections in Africa" - Zambia!

There elections come with the bad elements of name calling, ego promoting, terrible coverage of candidates, "busitele" campaign songs (if only our musicians produced such songs for the night clubs - we would groove for sure, and this year something worse was added - violence! We cry for issue based politics, so maybe we have different definitions of issues so I thought I could bring this out as I expect the issues to touch on economy, human development, achievement of national goals, etc. Here are my "issues" which I think would have made me enjoy the campaigns.

Human Rights
This covers all areas of human rights that us as a people should solidify and ensure are protected. They cover not only the rights that are supposed to be given to me through the Bill of Rights in the constitution, but should have all aspects of human development perspective and what the candidates will do to ensure we have these, or not have them. This is more so, with the fact that without knowing who is backing them, and the element of "donors" to impose what they consider should be the rights of Zambians, we need them to spell and commit to what they will do on this angle. It is critical. I don't want to wake up and be given rights that the western world consider rights. We as a people must ensure we decide what these rights are. So what is the stand on this issue is a basis for my vote.

What will be the position on gender based violence, equal employment on basis of gender? What will be the policy for the disabled? What initiatives will be used to achieve equality among citizens of different gender, race or tribe? How can we see you achieve this for us to follow your progress? What policy are you going to employ to achieve this?

This being the case, what is your stand on the referendum - in particular the Bill of Right. What is your message on the referendum vote and why? What rights do you hold as priority and why?

Education
What education should be given as compulsory to all children of this country. What is the plan that is setup to ensure this is attainable. Again, I don't want to wake and be told my children who are English speaking at home will have to learn in a language they don't know because someone at the Ministry of education misinterpreted a report on "familiar language" as a base for education or instruction and replaced it with "local language of the area". So imagine what a Child born of two different tribes and leaving in a different area will get when the child brings homework in that area's language! Such policies which did not even attempt to ask parents has to be enforced as policy. Worse still when the world (including China) is aiming at teaching the children English as a critical language for development, we are teaching them local languages and in local languages! What is the use of the child learning a language they will never use at home or in their life? Is this the type of policy that will continue? So what happens to the right for the children to be educated in a universally accepted language or official language? This is an issue I expected to be addressed for early childhood learners - none of the candidates has brought it up. Not a single one!

The introduction of computer and IT education is commendable. We also have had a policy that allows importation of Computers, Phones, Network items, etc without the payment of duty. This is a policy which shows a good planning behind it. We should however expect an improvement and encouraging of IT development skills on a very serious level as it would ensure a great competitive advantage in the world. We can't claim to have a large labour force to compete in the world with the likes of China, but if we educate our children well in IT and ensure competitiveness, we already have an advantage of English to be able to easily enter the world (assuming they this wont be destroyed by the language policy mentioned above). We could have software engineers and software developers which could well do as good and hope it goes into circuit board development - we have the copper! This is the greatest form of employment with the purpose of entering the world. But which candidate or party has such ideas? Who has even taken a leaf on what the world development challenges is the country facing regarding education in IT? We are a small population which can't compete in labour and cheap labour with the likes of Asian countries, however, we can use our highly educated people in IT to take over the bigger portion of the money in IT developement - just research on how much China gets for each iPhone (which is labeled "made in China" compared to the countries that make the software for it). So what is wrong with thinking of sending the hardware to China but developing the software here?

Developing of bursary loans has been on the lips of many for university students. We try to find a way to fund the public institutions and prevent student riots, yet we can't see the importance of such a loan will do. Which student will riot when they know they will be paying very soon for the loan they obtained? Ever wonder why the only ones who complain after a closure of an institution are self-sponsored students? In addition, the loan scheme would also enable the universities meet its obligations of paying lecturers on time and avoid the strikes. It is easy to look in the region of the most successful universities and see what policy has done to ensure they offer the best education and best conditions for its lecturers. We are not an island and we can learn easily.

Media
The time Chanda Chimba and ZNBC went on to create a program on one Micheal Chilufya Sata (MHSRIP), some people where so happy and rejoiced on this. They were happy that they will ensure he won't be voted into power. I don't think this worked, it might have even enhanced his chances of going into being the president of the nation. All the possible "evils" he did were so to speak "exposed", but he got the vote. The problem then, which still is, is that people did not fight to end this. There is no program now (hopefully wont be), but the issues of the "national broadcaster" being a propaganda tool for the government has continued. Now we have people complaining because they are now facing the same thing that Sata faced through Chanda Chimba's program. Should we leave it as that - a tool to be used by any government that comes into power? Has anyone addressed this?

I don't want to address the issue of the Post Newspapers as to me this issue has two wrongs and we can't take one and leave the other. I have said it before in many forums that, if you owe government in any way, you have to make good or something will follow you regardless of how it comes. I have also asked the question, if the Post paid the "owing" would they be in this position today. The law allows one to pay and then seek legal means on the so called "debt". That is an issue for another day.

Apart from hearing the issues of what the law provides for and how one candidate will address the two issues above, I think I have only heard a promise of re-opening the Post - what will be the stand on the debt? Was a law broken in the closure? These are issues we need to hear. I for one would love to hear one look at the issue of protecting government revenue and handling issues of how companies should handle they issues pertaining to government debt and payment of taxes.

Most critical, Zambia was one of the first countries to hand television, we have nothing to show for it. We are constantly being exploited by foreign companies in pay-tv since the death of CASAT. Does any of them even thing of promoting such business? Why for instance should Zambia which pays a lot on football channels not have a local company to provide the football leagues? We can't even watch our own league on our channels. Yet we wonder why we constantly come out losers in competitions? There is need to promote media and Zambia's own content, not only for adults, but children as well. Our children are being exposed to "pornographic" forms of children programs or ones filled with gay themes. We as parents even pay for this. We read "Tona" cartoon some time back or Kalulu what policy is being taken to bring this back? Imagine having a Maliogo's adventures as a series (I know Banja and such are being produced but I'm talking about free programs for our children with Zambian cultures being exposed to them). I don't think Nickelodeon has any Zambian theme for the children, why should I not ask for Zambian content?

Further, what is the stance on piracy? I know of a song for one party which was "pirated" by another one. I expected this to ignite the debate on what it means to piracy in Zambia. Are our musicians getting their pay for their creation? This is a presidential campaign level that a song is copied and it dies just like that? Really? I serious wanted a stand, we even have musicians standing as MPs, they should be addressing these issues. Every campaign creates an unforgettable song, what happens to the artist after the elections? They will only be remembered when another election comes along? To some, this is a life and only source of living, we need to do something. Why shouldn't Zambian music be exported? We are a small population which can benefit from exporting and making our music "international", we need policy to ensure that. Most importantly I want a party that thinks in that line. 

Foreign Policy
What is the stand on foreign policy (SADC, COMESA, AU and the world)? What is the stand on trade with outside world as a country and not a trading bloc? What are we benefiting from the trade blocs we are in? Are we even gaining anything in SADC apart from being an open market for SADC goods? What is the gain of having the China LDCs PTA for Zambia? What are we doing or plan to do to ensure we benefit from this? What should be our priority? What is the stand on Double taxation agreements or taxation of foreign entities and in that, the expected stand on tax evasion and tax avoidance for foreign companies?

These are issues the presidential candidates are supposed to answer. I see more "South African malls" than local ones. Are we a dumping ground for their "potatoes" for instance? Are they paying the right taxes and declaring profits? We have very little in form of contribution from our own enterprises in consumer goods and media. We seem to be a market for one country than our own companies. It is sad enough we don't own the mines, but what exactly do we own as a country. Even creations made in Zambia are now owned by some Dutch companies who we must pay for use, yet we wonder why we don't make any returns on the companies in this country.

Realistic Perspective
Sadly, following the debates around, I would add "rainfall" under foreign policy as it suits politicians to ignore what is happening and use the opportunity to blame others for low water levels - after months of rejecting and refusing that we had low water in our dams. They still blame the copper and closing of mines on this. I dislike that idea with a passion - it implies they think of me as being so dull that I can't read and analyse the global economy. When issues are so obvious, they say you should have planned for the rainfall and load-shedding! Yes, so should have been all of us when we left the country for 50 years with no improvement on power, mining, roads, rail, infrastructure in general, etc. If you need to blame, pick something within the term of the person. The moment you become unreasonable, I don't think you can help the country much. This is what is leading to what someone calls "over-procurement", there has been nothing, you bring it in the shortest possible time - Kwacha falls and people still want you to bring in other things immediately while this should not affect your current account balance! We should know what will happen when we correct one thing. This will entail a certain reaction in the economy - we need to hear what you would have done differently - that is a basis for a vote. If it was a mistake - explain where/why it was a mistake and what would have been done differently. A mere statement of no planning is what caused this, without an accompanying method of what your plans would be, is bad enough as it indicates you have no idea what you would have done. I don't even know what is worse - knowing the mistake but having no way around it. It may as well mean, you would have done nothing in the first place. Further, if a mistake is made and people point it out to you, you either give us alternative plans you had of which you chose one, or what you would do to ensure this is not repeated through your plans. That way, we know the issues are being addressed with plans you provide to us as voters.

Overall, we need to take stock of what we have, what we don't have and we choose a leader on the basis on what they will bring in. Expecting of miracles should be left for the pulpit. We need people with details of plans of addressing our plight as a people. What I have heard are unrealistic goals which contradict economics which cannot fall in one action - lower taxes, better infrastructure, no borrowing, introduction of incentives. This is not only impossible - its unrealistically not attainable in any economy on this planet. Better infrastructure is only attainable through higher taxes or borrowing. A reduction of expenditure (for infrastructure development) is contraction fiscal policy which would reduce economic activity, but a reduction of taxation is expansionary - so what will be the net result of these activities? How will you bring about better infrastructure development with the combination of lower taxes and no borrowing for example? I have heard of reduction in "unnecessary expenditure", a definition would be good of what is unnecessary and the amounts saved for infrastructure - these are issues, I look for in the statements. What will be my PAYE over your term in net basis?

The problem is that none of these is provided which lead me to believe we are in the same situation of having the exactly the same methods with different people leading the methods - at their benefits. So should we vote on the basis on having different people benefiting with no clear idea of what they will do or how they will do it?

Each candidate should give us the realistic plan and how it will be achieved. This would be a better place to gauge the outcome of who we pick. A realistic perspective is critical to assessment on my part.

Agriculture
The iron law of development says as the economy develops, people involved in agriculture reduces as they enter the secondary and tertiary sectors. So what is the stance on agriculture as it will spell the position of secondary and/or tertiary sectors. 

Africa has been said to have missed the green revolution. What is your stance to ensure Zambia passed it and got the benefits? Are we utilizing the land to the fullest possible gain for output? What is the stand on GMO - in so doing, what is the stand on organic farming we have. Have we taken advantage of this? Do we know the demand for organic agricultural output? Can we gain from exporting and promoting of organic output to the world. Stopping GMO but not fully gaining from such a move is a loss on our part as we can gain from this. What are we doing?

Marijuana has been legalized in some countries and one presidential candidate has clearly indicated out advantage in growing it. So what is your stand? Will you address the issue and aim at legalizing it, or exporting it while it is still banned in the country? Will you just continue with current policy?

These are issues that stand to be addressed in agriculture. They need to be spelled out and explained to the voters so we know what to expect from you and judge you on that basis for the vote.

Industry
What is the stand on industry. Are we aiming at still being an agriculture focused country? Are we aiming at looking at the secondary or tertiary sectors? What will be priority on each of these sectors and where do you see Zambia after your term? 

What is your stand on tax incentive and role of ZDA in industrialization. What will be of the State companies through industrial cooperation? Especially that this institution is under the presidency. We need to know what you will do. Should we expect an economy pushed and directed through state companies? What role will state companies if any, would plan in knowledge acquisition and meeting social obligations?

Employment
How will you ensure employment for the youths? What policies do you have which will bring about employment?

Which areas are more related to employing youths in Zambia. How will you help the youths in employment. Is there any promotion of self-employment? Are they tax incentives for companies or individuals who bring about employment? What are the thresholds for these incentives if they are part of your plans? Is there a direct policy of employing youths by government? What of social security system if any? 

What is your policy on statistical data for such plans on employment? How will you track the unemployed and employed? What is the policy on street vending and revenue for government considering that shops that pay taxes have to compete with street vendors both for space and customers. In this line, what of cleanness of the cities with street vendors. What plans have been put in place?

Taxation
Much as it has been mentioned above, what is the overall direction of the taxation policy in the country. Local or international taxation. What will be tax incentive and what will motivate that "incentive". What gains should we expect from compliance or the penalties from non-compliance? How will non-profit organisation be treated for tax purposes? What of those organisation that are under non-profit but are merely abusing the system?

What will be my PAYE before, during and after your term. Are you realistically implying a reduction in your promise?

Social
What is your plan on social security, Health, and all issues that relate to social elements? What are your plans on citizen empower programs? How will you ensure you will avoid policy that promotes tribalism, nepotism, etc?

What is your plan for political cadres and violence that is related to it? What will you do on the existence of political party cadres? How can we track your progress on this?

Overall, how will you unit all these policies to ensure there is a linkage and no contraction of policy? How will they work together to achieve your objectives as a political direction of the country.

As you ask for my vote as an employee, you need to prove your worthy to that office and how you will deliver what you have promised. If I feel you fail to achieve some of these or I see your plans failing short of proving you can do it, why should I vote for that particular candidate? 

These are issues I expected to hear and read about. Not words which mean nothing on how one will govern. I need to be convinced, not entertained on the basis on what happens on the street today and you change your mind on it tomorrow. Or worse, giving me a list of what this one promised without your list of promises and how you will ensure they are delivered. 

My interest is economics - your plan should make economic sense and practically achievable. 

Saturday, November 21, 2015

African Development Perspective: Need for Development Institutions

I have found interesting points in the writings of  Darron Acemoglu et. al., on "institutions". Something that I think needs to be addressed by African and Caribbean countries/ people.

Every country in problems will always blame its leaders and them lacking "responsible leadership". I have plainly stated that leaders should not be blamed for everything that happens. Even Mandela ruled South Africa under ANC - the same party some are condemning is messing the country. Now, the issue is not a party, and surely not a person all the time (I know in most cases in seem to be). If you take the qualities that fit a person for such a position like being a rational being, making rational decisions for the betterment of all - all which are subjective, and because of that, no one would point them out as being wrong when they fit in their original justification of "rational decision" under the "circumstances". Another word in there that I feel is very subjective  -circumstances. Anyway, lets put these things in order so we move to some politically correct way of putting things; positions, regardless of who occupies them, bring with them certain trends which are so common and expected in most African countries (Caribbean omission is intended to be merged in the context of "African" - personal preference). So no matter who you put there, unless they are willing to change what is there, expect no miracles! Even if they stay there and follow their "right" path which may coincide with most people's expectations or wishes, the person that follows can/ may be his own man. 

You will, in most cases, know how they intend to change the status quo as they speak about it before they are elected into office - including what they will do! What it is they will do, how they are qualified to be placed there and deploy the change, etc! Remember the seat has inherit problems, so if you are the best qualified person to be in that seat, you are defectively perfect to continue with defective outcomes - meaning a no change for the better but maybe for worse. So the person has to understand the problem and present a solution to the identified problem. Unfortunately in most African countries the politician merely plays to the sound of the masses and just needs to link their masses' misery to some needed comfort and he will win their vote. The problem remains unresolved and pending. Decades may past with no solution. 

Acemoglu et al, have put together a clear demonstration of the effect of institutions which led to the 'reverse of fortunes'. Regions/ places which were rich in 1500 are no longer the rich ones, the fortunes have gone to regions/ places which were poor. Effectively, the fortunes have reversed. Can you imagine Australia is richer than India or Egypt - yet in 1500, it did not even have a sizable number of people! As observed, good institutions where created in "settler" colonies (New Zealand, Australia, USA, etc) while bad institutions where in extract colonies (African, Caribbean, etc). With simple intentions: 
  • settler colonies - to ensure the institutions protect the settlers and ensure their will prosper. Provide all possible ways that the settlers can own property and be protected in that ownership; while
  • Extraction colonies - extract resources (minerals, rents, people - slaves, etc)


So this whole colonialism had two outcomes - winners (colonialist countries and their settler colonies) and losers (colonized regions). A simple understanding there is that people who came out losers should actually free themselves and get independently and then create institutions that would make them benefit from their resources. The problem I'm now bringing to the fore is that we got right with the first condition, but have never even attempted at the second!

Independence came for Africa and now all countries can be said to be "independent". No one bothers to add "Political Independence"! It is assumed all forms of independence falls within that circle. Independent it maybe. However, the institutions that were created for extractive nature of colonialism and purposes have not changed. So regardless of the person you put in the driving seat, unless you change the train tracks, the train will be moving in the same direction. The driver can slow down and speed up. The whole situation will remain the same! These are the things people called "neocolonialism" and a call for economic independence for Africa. 

What is interesting about this fight for independence is the way it is being fought. No one in the old days stood up to call for political independence, they just got together and started doing something about it. From that experience, you expect people to do the same for the new need for independence, but people now are calling for "something"? No one would give up what they enjoy or benefit from. So the only way out is to get up and work your way to eradicate the nonsense. 

"economic institutions in various colonies were shaped by Europeans to benefit themselves.... Europeans consciously created different economic institutions, which persisted and continue to shape economic performance" (Acemoglu et al: 2005)

We need to build institutions that will benefit this continent and clean up the residual mess from colonialism that makes the "extractive regions" remain in the extractive position. Can you imagine a country which has been politically independent can not even create a circuit board from copper that is mined in its own country? It can not even sell copper to the factory down the road of the mine. The copper has to be priced as if it came from London having left a few weeks ago?

These are the structures which are building blocks of bad institutions which are residual from colonialism. There should be deliberate policies to eliminate and work on improving the institutions that will make Africa and other extractive colonies regions which are not only worth their raw materials. China did not grow that fast by doing better what the west left in it. It had to eliminate the residuals and build its own comparative advantage and use its greatest resource (people) to become an export of manufactured goods. You may think of them as fake - but the whole world works on these products. Even when hope is low for Africa, imagine if all precious mineral companies and sells are done by African companies around the world? Every gold, diamond, oil, copper, emerald, etc will be sold by an Africa company for African profit and revenue. What can beat that? We can even reach more than China as every marriage with a gold, silver or diamond ring "will be made in Africa" or from "Africa product", every currency's value will dependent on how well rooted it will be to the gold bullion source in Africa (or the currency that Africa country uses). Every electronic component will have to be sourced cheaply from Africa.

The possibilities are endless! But all these can only be attained by the African reality of being a free region from any form of extractive nature or colonialism. It starts with a mindset followed by action. Not the everyday hunt for "responsible leaders", they will never be found as the institution you give them is defective from the start. Lets build the right Africa for us to get the right way!


References 
(just in case you want to follow up on some of the issues and my thinking)

Acemoglu, D., Johnson, S., Robinson, J.A., 2005. Chapter 6 Institutions as a Fundamental Cause of Long-Run Growth, in: Durlauf, P.A. and S.N. (Ed.), Handbook of Economic Growth. Elsevier, pp. 385–472.

Acemoglu, D.  and Robinson, J. (2012). Why Nations Fail: The Origins of Power, Prosperity and Poverty.

Kwacha depreciation???

The kwacha has seen a fairly good beating against major currencies in the past months. Reasons of this beating unfortunately are hard to get a hold of. Therefore it is an interesting field to get in and see what had made this beating.

A look at the trend of related currencies tell a story that need great attention. We see the dollar rising faster than had ever done in the last 40 years. This therefore will obviously mean that the kwacha is expected to perform badly against the dollar. We see the Chinese economy slowing down, China being a major importer of copper will again result in an interesting beating on the Kwacha. But will all these stories add up to produce one of the worst falls of the kwacha in over 8 years?

That is a story worth looking at it. Unfortunately I have not been writing on this blog for sometime now due to a lot of personal issues that have literally killed my blog time. So I would want to look into all the issues that has brought in an interesting kwacha economy and issues that we need to be looking at in future to strengthen our kwacha. So I will let this be and prepare a full analysis in the time that I have. 

Further, to ensure I devote the little time that I have on a single blog, I have decided to merge my Africa perspective into kwacha economics to ensure the material does not make me stay on one blog and lose focus on the other. So you will see topics of African and specifically Zambia development perspective show up here. As usual, the political aspect is a lot more in development perspective than the kwacha economics. To ensure I stick to my direction, only general polity related issues will be embarked on. I hope people would stick to that too!

Lets see how this will work out!

Monday, December 8, 2014

Zambia - The Windfall Tax Story

The issue of windfall tax in Zambia has always been a hot one. Many political ideas have revolved on windfall taxes from the government to the opposition. It is strange that this simple perspective of taxing has been such a hot topic in this country. More so, having implemented it for some time.

So Why the Fights?
Windfall tax is expected to generate a lot of financial rewards for the country in the light of higher copper prices that were witnessed. It is expected to bring in a lot of money to drive the economy. On the other hand, the politicians in the control say it is not possible to introduce a windfall tax. 

The fight got so heated up that some headlines would summarize it. For example it is quoted that those who were calling for windfall tax are lunatics. Check here and here.

Windfall Tax
So what is a windfall tax? The few definitions I came across will sum up as:

"A tax levied by governments against certain industries when economic conditions allow those industries to experience above-average profits." 

"A windfall profits tax is a higher tax rate on profits that ensue from a sudden windfall gain to a particular company or industry."

My favourite for simplistic issues is the last one from Wikipedia because it sums up all elements of the windfall tax and will have all you need for parameters of this discussion. 

Zambia and Windfall Tax
The mining sector in Zambia has an interesting tale. It is booming when the prices are high. However, most if not all mines are in loss making position. So the Corporate Income Tax (CIT) is never paid. On the other hand, mineral royalty (which is deductible) is paid and claimed back.

So the mineral royalty does actually hit the collection point for the nation, but it merely comes as a deposit and is later taken away when one address the issues of their tax position.

Therefore a windfall tax in this position has one element which many have missed - if you are not profitable, you can't pay it! Even when you are profitable, you need to be facing 'windfall profits' or higher than normal profits for the windfall tax to apply! So for a country with a sector that is 90% in loss making position, how then will you apply a windfall tax?

Any economist with the information on the profitability of the mines will find it interesting to call for a windfall tax. Why? How do you get "abnormal profit tax" when the mines have no "profit" in the first place.

The people needed to be told the truth about this. The assumption that everyone talking about windfall tax knew what they were talking about is wrong. people merely voice out what they want regardless of what the situation is on the ground. You need critical issues on the ground for any windfall tax to be implemented. Those parameters are what is missing. 

Where is the Profit?
If the mines had the so called profit position, they would pay taxes. If they made abnormal profits, they would then be a reason to introduce the windfall tax. The lack if profits makes it impossible to have a windfall tax.

Whey mines have no profit is a bigger issue to address and one that will make a good reading and analysis for the future of this country. Many have declared that mines cheat and use tax avoidance schemes to dodge any form of taxation. This has created a bad relationship with government leading to lack of trust between the two. This has led to push and pull issues being done in a way to be better than the other.

If it is true that a lot of cheating has been happening, then the mines will be responsible for this sour relationship and the misery that many people have been exposed to due to lack of resources. On the other hand, we need to ask ourselves as to why mines would go on for decades in a loss-making position. What did we do wrong in the sector? Was the privatization the greatest mistake we made? Can it be corrected?

Where are the profits for a sector that is doing so well in terms of the prices? Calling for a windfall tax without addressing any of this issues is doing the same thing we have been doing all these years and expecting a different result. Albert Einstein once quoted:  ” The definition of insanity is repetitively doing the same thing over and over and expecting different results”. (I have no idea where he was quoted, but that may link well with the lunatic link above). So instead of doing the same thing over and over, we need to do things differently.

One way of doing this differently is to over-look the issue of us sharing in the profits that will never come from the mines. Instead, lets charge them rent on our minerals. What they do with them is not our problem, but pay us for the minerals anyway. This rent is the simplest thing one can use. When you get into a house and rent, the landlord does not care when and how much you are paid, you just pay for the house at the end of the month or at the beginning of the month. If you earn no income in that month, it is not the landlord's fault. This is what is attempted in the 2015 Budget where a royalty will be charged but no CIT. 

The method avoids the chasing of profits on the mines, the transfer pricing issues, etc. It merely requires you to make a payment when the minerals are extracted from the ground. You dig, you pay principle.

Of the two methods, the issue is that both parties (govt andd mines) want to benefit. One method can benefit both, but the lack of trust makes that impossible to carry on. So all these are no alternatives to the issue of sharing the benefits.

Sadly, windfall tax has no effect in the Zambian context at this current situation when there is no profit. So extra or abnormal profits cannot be applied.

Monday, November 10, 2014

Zambia 50 Year Anniversary Note

Zambia turned 50 years of independence from the British rule. The occasion was marked with great celebration in Lusaka and many different locations across the country.

The Bank of Zambia released a Fifty Kwacha (K50.00) anniversary for the occasion. At Kwacha Economics, we loved it and would have loved to share it sooner. However, the passing of our President Mr. Micheal Chilufya Sata presented some logistical problems.

All the same, this is being shared now. The many feature is the faces of our presidents from independence to now.

The former presidents of Zambia: (Clock-wise) Dr. Kenneth D. Kaunda, 
Mr. Levy P. Mwanawasa, Mr. Michael C. Sata, Mr. Rupiah Banda and
Dr. Frederick T. J. Chiluba  


The five former presidents are:
1. Dr. Kenneth David Kaunda (24-October, 1964 to 2-November, 1991),
2. Dr. Frederick Jacob Titus Chiluba (2-November, 1991 to 2-January, 2002),
3. Mr. Levy Patrick Mwanawasa (2-January, 2002 to 19-August, 2008),
4. Mr. Rupiah Bwezani Banda (2-November, 2008 to 23-September, 2011), and
5. Mr. Michael Chilufya Sata (23-September, 2011 to 28-October, 2014).

May their soul rest in peace.

We hope for the peace, joy and unity in this great nation as our national anthem proudly declares. A new president will be elected within 90 days of the death of Mr. Michael Chilufya Sata. Dr. Guy Scott, the Vice President will be interim president during this period.


Special mention from Kwacha Economics.
May the soul of Elizabeth (Lizzy) Munjunga who died on 13th September, 2014 rest in peace. We miss you dearly.

Wednesday, October 29, 2014

As Zambia - We are Better Than That!

Zambia's president, Michael Chilufya Sata has died. He is the second Zambian president to die in office.

The vice president of the country is Guy Scott. He has since taken over to act as President for 90 days within which an election will be held.

That is the simplest way an ordinary Zambian will look at the issue. However, barely 5 hours of the news of his death, the second paragraph in Africa would be filled with hatred and racism and would read as follows: -

The vice president of the country is Guy Scott, a white man in the southern African country. He has since taken over to act as President for 90 days within which an election will be held as the country reverts to white rule! 

Seriously, Zambians are far better than that. While others see a white man, we see a Zambian. That Zambian can assume his call for the nation when called upon. African countries would rise up and fight each other when they have a constitution that spells out what they can and cannot do. This is the backwardness that has forced Africa into poverty and violence. 

Some headlines are so shocking for a Zambian. I wonder if these same "credible" news providers had headlines such as "America under black rule". Or is it that it is racist if it relates to America but not Zambia. I am so shocked and disappointed that this is coming from fellow Africans.

Zambia is better than that. We are more civilized that most countries and race to us has little obstacles. Not even some European countries can handle such a mature transition. We are a beacon for many, sadly out brothers in Africa are way behind. 

We shall rise above these problems and show the world how love for fellow human beings regardless of their skin colour and the following of the rule of law can transform a nation. Not the double standards that the world has on issues. Racism is big and wide - not even the FIFA carrying of campigns against racism has helped. Media houses are promoting it to unbelievable levels. Zambia is better than that!

Can Zambians tolerate such pure racist headlines! Please refer

- nyasatimes.com (Malawi): Zambia Returns to White Rule: Guy Scot Acting-President (http://www.nyasatimes.com/2014/10/29/zambia-returns-to-white-rule-guy-scot-acting-president/)

- The Maravi Post (Malawi): Whiteman Guy Scott ascends to the Zambian Presidency after the death of Sata (http://www.maravipost.com/201410297419/Politics/whiteman-guy-scott-ascends-to-the-zambian-presidency-after-the-death-of-sata.html)


- Telegraph (UK): How Guy Scott became Africa's only white president (http://www.telegraph.co.uk/news/worldnews/africaandindianocean/zambia/11196185/How-Guy-Scott-became-Africas-only-white-president.html)

-  Business Recorder (Pakistan): Zambia 'King Cobra' dies; White Vice President Takes Reins (http://www.brecorder.com/general-news/172/1237532/)

To Zambians, this is not an issue and people have gone to social media to even comment "on a light note" as follows:

@decolanga  "Fare thee well Michael Sata. Africa may now have a white head of state"

@martobono "Once the VP takes over as #ZambianPresident then equation will be balanced. Black president in America and white president in #Zambia," 

That's the Zambia spirit, embracing each Zambian with love. As CNN reporter summed it up, race in Zambia is not an issue.