ZAMBIA’S ECONOMIC RECOVERY: A FRANCIS MILAMBO PERSPECTIVE

INTRODUCTION

Zambia’s economy has seen troubled times recently. The troubled times are basically what many would argue as a result of many years of questionable economic decisions. As at December 2020 total debt was estimated around $20.4 billion composed of Foreign debt which was estimated around $14.3 billion with domestic debt estimated around $6.1 billion (Ministry of Finance). Inflation is in the double digits around 24.6% as at June 2021(CSO). Unemployment rate is around 12% with a scarcity of jobs for the youth. What is clear is that the Zambian economy is not in its best state and requires timely intervention to prevent it from getting into ICU. The author details in this article his perspective on what he believes should be done both in the short run and in the long run to improve the Zambian economy.

PROPOSED STEPS TO ECONOMIC RECOVERY AND SUSTAINABILITY

1.???Debt renegotiation and restructuring

In the year 2020, Zambia made a total of $1.7 billion in principal amount payments to external and domestic parties. A further $1 billion was made in interest payments to external and domestic parties. This is a huge amount taken away from service delivery. There is need to renegotiate and restructure our debt for example by asking for a longer repayment period so that we reduce on the repayment amounts. This will free some resources and allow availability of funds to invest in sectors that can grow the economy. This is basically like an individual who gets a K 30 000 loan from the bank and is making repayments of say K5000 monthly over say 12 months. He/she then goes back to the bank and says listen…am a little pressed right now. Can we renegotiate so that instead of paying you K5000 monthly over 12 months, I start paying you K2000 monthly over a period of say 36 months (not literally as easy as that but I guess you get my point). That way the individual has reduced his financial stress and freed K3000 monthly from his repayments which he can now channel to areas of concern. To contextualize, replace the individual in the above analogy with Zambia. Zambia needs to renegotiate its debt to reduce repayment amounts and use the freed resources to stimulate economic growth by investing in key sectors and production. I must hasten to say that it’s not as easy as I make it sound here. Debt renegotiation and restructuring is a robust process that involves a lot of discussion but I am confident with a good negotiating team, Zambia can get its debt renegotiated and restructured.?We need it!!

2.???Financial Conservativeness and Prudency

Someone told me that, “a person with K100 in the pocket has no business around expensive whiskey, they must restrict their focus on opaque beer.” This analogy though funny has some truth to it (Of course opaque beer may be an extreme but yes).?Listen when your funds are limited as is the case with Zambia you tighten your belt and focus your expenditure on priority sectors. When your funds are limited, you don’t go to the bar anymore, you don’t buy fancy phones or go on a shopping spree. Instead you reduce unnecessary expenditure and focus on what you really need (food, health, school fees as an example). This is exactly what Zambia needs to do in order to recover, stabilize and later on grow our economy. We need as a nation to cut down on expenditure that is necessary but not vital and focus our little resources to expenditure on key and important sectors of the economy such as Food security, Health care, Education and Agriculture to name a few. Goes to say, a father who brags about his expensive IPhone to his son/daughter that hasn’t eaten breakfast and lunch is disjoined from reality. To flash pictures of fly over bridges beautiful as they may be is mockery to people coming from hungry homes. Let’s go back to the basics. People must eat, stay healthy and get an education!!That way they can contribute to the development of our country.

Close to financial conservativeness, I use financial prudency to mean combating loss of public resources due to corruption and fraud. Corruption if not faced head on can cause huge losses of funds to an economy. There is need specifically to eliminate fraud and corruption in the procure to pay process. The organisation for economic cooperation and development warns that countries in the developing world pay on average between 20% to 100% more (extra) on their purchases due to procurement fraud and corruption. I am sure by now you get the picture I am trying to present on how bad the corruption situation is. It is the author’s submission that with highly reduced procurement fraud and corruption, Zambia can operate on between 60% to 70% of its budget (make no mistake the corruption business is huge). With public expenditure focused on “real” expenditure, the country is able to save and use its saving on key sectors of the economy so as to foster economic recovery, stability and growth.

3.???Boost Agriculture

Zambia is blessed with abundant arable land which as a nation we must fully utilize. We need as a country to boost investment in the agriculture sector. I must be quick to mention however, that the focus of our agriculture as a nation should be on high value crops such as tobacco, cotton, coffee to mention a few. In Zimbabwe, tobacco accounted for $782 million in the year 2020. It’s actually one of the income streams that has helped Zimbabwe cushion the pain in the hard economic times it faces. I know a farmer in eastern province that farmed tobacco and recently received a payment of K1.3 million for his produce. He mentioned to me that his investment was only K 300 thousand (speaks to my point- HIGH VALUE CROPS). With the current value chain, it is of no use planting 50 hectares of sweet potatoes (kandolo). Focus should be on improving agricultural processes, fostering farming in high value crops and establishing of agricultural processing plants so as to add value to agricultural produce. Beyond that beneficiaries of the Farmer Input Support Programme (FISP) must graduate. You can’t be getting FISP support year after year without anything to show for yourself. After some years the particular beneficiaries must be removed from the FISP programme.

Countries like Liberia and Somalia get as much as 76% and 60% of their Gross Domestic Product (GDP) from agriculture. In Zambia, the contribution of agriculture to GDP is a shameful 2-4%. With all the land we have and all the water bodies we have. This is such an underperformance by any standard. This needs to change.

4.????Industrialization

Zambia also needs to embark on an industrialisation agenda to improve and sustain its economy. Through industrialisation jobs will be created, companies will pay taxes which will be a huge boost to the nation’s treasury. Industrialisation will also help to reduce imports and thus improve the balance of trade in Zambia’s favour. ZAMEFA processes on average about 15000 tons of copper per annum and employs about 300 people. Ten (10) more ZAMEFA equivalents and you would have created 3000 jobs. But we don’t see it that way. We prefer to export raw materials and not the finished products. It’s not rocket science. If we want to create jobs as a country, we must produce and process. The goal should be to industrialize and produce finished products. Through industrialisation the inflow of foreign capital can be greatly encouraged to supplement the shortage of domestic savings. Zambia already has an industrialisation strategy but the problem lies in its lack of implementation. The industrialisation strategy needs to be implemented. This will have an absolute impact of reduced imports, more jobs, more taxes and an improved balance of trade.

5.???Becoming a net exporter –Adopting an Export-Oriented Economic Strategy

Zambia needs to adopt an export oriented economic strategy. Industrialising and becoming a net exporter is of importance for the development of our economy. What we need to realise is that for you to export, you must first produce and more production means more jobs, more taxes to the treasury and beyond that through exports the country would have an improved balance of trade.

Also important to understand is that when you import goods or products you are practically or indirectly exporting jobs as jobs will be created in the country were production is taking place which is in the exporting country and not the importing country. Come to think of it how many jobs are created by Zambian demand for products in South Africa every year? I bet hundreds of thousands (Jobs which could have instead been created in Zambia if we produced locally). Exports are also a good source of the much needed forex. Zambia must adopt and implement a rigorous export oriented economic strategy backed by massive local production. South Korea has done wonders through adopting such a strategy.

Another aspect to this is fostering local trade. Let us produce and buy among ourselves. That way we keep as much money as we can in the economy. I still don’t understand why we as a country import Office furniture (produced in China with Zambian timber), juices, washing powders and pastes. It’s really bad…Imagine we even import onion…Onion sure!!

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It’s the same even for educational courses. We don’t understand that when you study local courses you pay your subscription and exam fees to a local body for example ZICA and keep the money in the economy. But alas… we don’t see it that way. We are busy marketing and employing as first priority those that do UK courses. The money they pay for subscription and exams goes out of the country to the UK. If I had it my way, the ZICA and CA Zambia Accounting qualifications plus those accounting qualifications from local colleges and universities would be the priority for employment in public institutions. I look forward to a day when this pronouncement will be made.

6.????Maintaining a stable currency

Currency stability is important for business. A stable currency fosters planning and reduces risks pertaining to exchange rates. Very important especially for those involved in cross border trade. There is need for logical but also sustainable monetary interventions to maintain a stable currency. Citizens must be able to have confidence in their national currency. We need a stable kwacha not one that moves like the wind!!!

7.???Reduce Interest Rates to lower levels to allow borrowing for business

Reducing interest rates on borrowing is of utmost importance if we have to grow local businesses. The current interest rates offered by banks in Zambia are in all honesty punitive. If a business is borrowing at 26-30% interest from the bank, what margins do they have to factor in all other costs and still make a profit? I can’t even come to the thought that they would make profit especially in a competitive space. Listen….These are businessmen and women. NOT MAGICIANS!!

With these high interest rates citizens are even scared to borrow for business from the bank. We need as a country to put in place measures to reduce interest rates so as to foster borrowing for business and grow our local business as well as local trade.

8.???Professionalism

There is need for professionalism in many work places. People need to work. It’s a shame how people in some public institutions report at 9:30hrs and knock off at 13 or 14hrs. This slows work and humpers production. We need as a country to ensure that man hours are fully utilised.

There is need for professionalism in decision making. Decisions should be made on the basis that they will improve the country and not with the sole purpose of winning elections. Some decisions we have seen in the past made us wonder just in whose interest they were made. A professional public sector is cardinal for strengthened systems and economic development. It is a must!!

9.???Sacrifice

Zambia needs to take sacrifices in order to improve its economy. This may involve going even to an extent of freezing its budget for a while. We at many intervals should adopt a conservative monetary policy and tight fiscal measures so as to curb inflation. Development in any form comes with sacrifices and Zambians must take the mantle of sacrifice and conservative monetary activity at individual level and national level if we have to improve and develop our economy. By austerity and tight fiscal measures, we mean genuine austerity otherwise the fruits of such austerity will not be realised. With the likelihood that an IMF package is coming our way, it may come with conditions. Some may be painful but necessary. Zambians though painful must embrace it for the long term good and prosperity of our economy. Development comes with sacrifice and Zambians must embrace conservative monetary and tight fiscal measures for the good of the country over the long-term.

FOR THE LOVE OF THE NATION!!!

FRANCIS MILAMBO SPEAKS!!!