AFRIKA

ARGUMENTS FOR AND AGAINST AN IMF AUSTERITY PROGRAM IN ZAMBIA

2016-11-10T06:17:00.002-08:00

Arguments for and Against an IMF Austerity Program
By. Dr. Mbita Chitala
I and many Zambians are relieved at the announcement by the Minister of Finance Hon. Felix Mutati that our government “is putting in place an economic program owned by the country and not by the International Monetary Fund.” (Zambia Daily Mail, September 29,2016). As one that participated in seeing Zambia exit the painful HIPC initiate, I feel compelled to make a few observations hoping that they will be useful in the country reaching consensus about our next economic program.
1.Challenges in the Economy
What are Zambia’s economic current challenges? Our copper export prices which have been averaging US$5,000 per metric ton has not been good enough to fund our development. In order to eradicate poverty in the short term, our economy must grow above 8% of GDP annually. However, our real GDP growth has reduced from 5.1% in 2013, 5.0% in 2014 , 3.2% in 2014 and will grow between 4-5% of GDP in the medium term.

The current account balance deficit has been growing from positive US$216.50 million in 2013 to negative US$581.20 million in 2014, US$767.70 million in 2015 and is likely to continue growing in 2016 and beyond because of the low commodity prices and the depreciation of the Kwacha.

Gross international reserves have dropped from US$3,182 million in 2015 to US$1.95 million in 2016 reducing the months of import cover from 4.2 in 2015 months to less than 2 months in 2016-09-25.

The merchandize trade balance deficit has increased to US$316.4 million in 2016 during the first half of 2016 as compared to US$231.7 million during the same time in 2015. The Non-Traditional exports where Zambia earned US$1,849 million in 2015 have dropped by 7.7% in 2016. The impact of this has been a drastic drop of foreign exchange in the country to support investment.

The exchange rate of the Kwacha depreciated by 72% in 2015 but in 2016, it has stabilized between K10-11/$ because of liquidity tightening policies by the Bank of Zambia. This has however resulted in the slow down in economic activities as the interest rates have risen to usurious unsustainable levels where borrowing has been impossible.

The fiscal deficit has been rising from K2,992 billion representing 2.4 % of GDP in 2011 to K4,306 billion in 2012 representing 3.3% of GDP, K8,205 billion representing 5.4 % of GDP in 2013, K8696 billion representing 5.2% of GDP in 2014, and K17,264.19 representing 9.4% of GDP. It is expected that 2016 figures will also be higher. This means that the country has been surviving on debt.

To fund our expansionary fiscal policy, our government relied on massive contracting of public debt. Our external debt has been rising from US$1,956.10 million (10.8% of GDP), to US$ 3,480.66 million (15.8% of GDP) in 2012, US$3,512.93 million (15.1% of GDP in 2013, to US$4,788.80 million (20.7% of GDP) in 2014 to US$6,288.80 million (37.4% of GDP) in 2015. The external debt service has also been rising. It rose from US$34.14 million in 2011, US$296.60 million in 2012, US$160.80 million in 2013, US$185.26 million in 2014 and US$297.26 million in 2015. The external debt service is projected to jump to US$549 million in 2017 and US$727 million in 2019 which will surely become unsustainable.

This year, the government will be running a very high budget deficit estimated to be around 7% of GDP on a cash basis and 13% on accrual basis. Furthermore, the government has unsustainable payment arrears mainly from infrastructural related activities such as road construction, petroleum subsidies, electricity import arrears – all estimated at about K20 billion. Because of non payment, many construction projects are on hold.

To worsen the challenges, the cooperating partners have since 1914 stopped providing to Zambia budget support and they have also drastically reduced on their grant aid and project support. Zambia has essentially been on its own.

Given the above challenges, what can Zambia do to reduce on the pressures of its macro economy? Noting that copper export prices will hover around US$4,000-5,000 range in the medium term meaning that Zambia will not have sufficient earnings from copper exports to fund its budgets; that cooperating partners will still not support Zambia’s budget; that the country will have increased and unsustainable external debt service obligations; how can our country build its reserve position and bring its current account into a surplus?

Is Zambia on its own capable of resolving the over K20 billion arrears in view of the reduced revenues from copper exports and reduced domestic borrowing? Will Zambia be able to pay when they fall due the foreign exchange denominated arrears to foreign contractors, fuel imports, electricity imports, fertilizer imports and other external debt service obligations? Furthermore, can Zambia on its own bring down to sustainable levels the high interest rates in the economy that is making investment for growth impossible?

These appear to be the challenges that our government faces and which the new Minister of Finance Hon Felix Mutati and his economic management team must address without reneging on the promises of the PF party as described in their election manifesto and what the people want from their government.

2. Peoples Demands
What do the people want? The people want a macro-economic policy regime and social spending approach that is targeted at eradicating poverty and underdevelopment in our country. The people want and have supported the PF fiscal policy and spending increases that have supported massive public investment, the building of essential economic and social infrastructure and the promotion of human and economic development.

The people want to continue with the PF expansionary monetary options that will allow the private sector to access affordable credit to expand the production of goods and services, create employment opportunities and in turn contribute to the tax base of our country. The people want that the Bank of Zambia manage lower reserve requirements to ensure that development finance is available and that there is no unnecessary capital flight from our country.

The people want a government that provides safeguards in the public sector wages, that the government continues to subsidize public goods to help the poor and vulnerable of our citizens access basic necessities such as affordable food, water, fuel, electricity and other social services. The people want a government that stops adding to the unsustainable debt burden of the country.

3. Is the IMF Program the Answer to the Challenges?
For the country to move forward, it is evident that Zambia needs new money to stabilize the economy but without compromising the peoples desires as enshrined in the PF manifesto.

The two choices available to Zambia is to continue with the expansionary policy of the PF government or to abandon PF program and adopt an IMF supported program. Let us discuss the issue of the IMF/World Bank program which some people particulary the neo liberals would want to force on Zambia.

For sure, one source of relatively cheap money is the IMF and the World Bank. Our country exited from the IMF/IBRD supported program in 2010 after we graduated out of the HIPC program. Some of our countrymen are advocating that we should seek for another program with the IMF to enable our country access between US$1.2-1.5 billion of balance of payments support. The submit that the receipt of the IMF and World Bank funding will assist in stabilizing the exchange rate, boost confidence in the economy, attract direct foreign investment in the economy and improve the country’s credit rating. These are the positives of an IMF program.

However, there are also disadvantages in a country adopting an IMF program. If a program is negotiated and approved, the IMF and World Bank will impose conditionalities based on what is termed the ‘Washington consensus’ that will demand for austerity and tightening of belts of the Zambians.

The IMF has a very negative reputation among development observers and practitioners and this has led many countries to avoid engagement with the Fund altogether. Our country may recall the food riots that Zambia experienced in 1990 which resulted in our former President Kaunda cancelling the IMF program because it turned out to be too painful and destabizing to our country.

Generally, the IMF/IBRD will demand that Zambia loses its authority to govern its economy as the policies will be predetermined under a package in Washington. The package so negotiated will tend to constrain public spending which in turn tends to impede recovery.

Furthermore, the country will enjoy some relief from its US$1.2 billion balance of payment support but will also be forced to pay its K20 billion arrears by cutting budgetary spending on education, health and other necessary public goods.

The country will be forced to eliminate basic food such as our FISP subsidies and transportation subsidies mainly those related to petroleum products, they will demand that the Kwacha is devalued to make exports cheaper. They will demand the privatization of our remaining strategic assets. They will demand the freezing of wages in the public sector and retrenchment of workers.

The IMF will for sure demand that our 2017 budget is an austerity budget instead of an expansionary developmental budget. They will demand for the introduction of belt tightening measures that will tend to increase the incidence of poverty in our country, reduce Zambia’s ability to develop a strong domestic economy and allow multinational corporations to continue dominating our economy and which will push Zambia into greater debt.

In other words, an IMF/IBRD bailout everywhere particularly in poor countries such as Zambia, tends to deepen rather than solve economic crises. IMF/IBRD policies tend to cause layoffs and undermine development in the long run. The programs may spack recessions by raising interest rates which in turn may lead to bankruptcies, unemployment and increased poverty. To the many critics of IMF programs, they criticize the programs as an immoral system of modern day colonialism.

That is why many of our progressive countrymen who are opposed to the country being humiliated by the IMF’s strict fiscal and austerity requirements, lending procedures and structures of accountability – which it is feared will in fact prevent our country from recovering but will instead push Zambia into greater debt and hinder long-term development of our country.

Such observers are of the view that our government comes up with its own home grown policy anchored on a stimulus providing and expansionary options. The announcement by Hon Felix Mutati, Minister of Finance that the “economic recovery plan that Government is putting in place will be driven and owned by the country and not by the International Monetary Fund” is therefore a welcome relief and assurance that our government will continue with programs that create wealth and seek to end the rampant poverty in our country.

It is recommended that our government continues with its expansionally policies and seek assistance from fraternal friends such as the Peoples Republic of China, the Kingdom of Saudi Arabia and others who may gladly advance us bridging finance to support our balance of payments challenges.
END.

2016-11-10T05:58:00.002-08:00

Arguments for and Against an IMF Austerity Program
By. Dr. Mbita Chitala
I and many Zambians are relieved at the announcement by the Minister of Finance Hon. Felix Mutati that our government “is putting in place an economic program owned by the country and not by the International Monetary Fund.” (Zambia Daily Mail, September 29,2016). As one that participated in seeing Zambia exit the painful HIPC initiate, I feel compelled to make a few observations hoping that they will be useful in the country reaching consensus about our next economic program.
1.Challenges in the Economy
What are Zambia’s economic current challenges? Our copper export prices which have been averaging US$5,000 per metric ton has not been good enough to fund our development. In order to eradicate poverty in the short term, our economy must grow above 8% of GDP annually. However, our real GDP growth has reduced from 5.1% in 2013, 5.0% in 2014 , 3.2% in 2014 and will grow between 4-5% of GDP in the medium term.
The current account balance deficit has been growing from positive US$216.50 million in 2013 to negative US$581.20 million in 2014, US$767.70 million in 2015 and is likely to continue growing in 2016 and beyond because of the low commodity prices and the depreciation of the Kwacha.
Gross international reserves have dropped from US$3,182 million in 2015 to US$1.95 million in 2016 reducing the months of import cover from 4.2 in 2015 months to less than 2 months in 2016-09-25.
The merchandize trade balance deficit has increased to US$316.4 million in 2016 during the first half of 2016 as compared to US$231.7 million during the same time in 2015. The Non-Traditional exports where Zambia earned US$1,849 million in 2015 have dropped by 7.7% in 2016. The impact of this has been a drastic drop of foreign exchange in the country to support investment.
The exchange rate of the Kwacha depreciated by 72% in 2015 but in 2016, it has stabilized between K10-11/$ because of liquidity tightening policies by the Bank of Zambia. This has however resulted in the slow down in economic activities as the interest rates have risen to usurious unsustainable levels where borrowing has been impossible.
The fiscal deficit has been rising from K2,992 billion representing 2.4 % of GDP in 2011 to K4,306 billion in 2012 representing 3.3% of GDP, K8,205 billion representing 5.4 % of GDP in 2013, K8696 billion representing 5.2% of GDP in 2014, and K17,264.19 representing 9.4% of GDP. It is expected that 2016 figures will also be higher. This means that the country has been surviving on debt.
To fund our expansionary fiscal policy, our government relied on massive contracting of public debt. Our external debt has been rising from US$1,956.10 million (10.8% of GDP), to US$ 3,480.66 million (15.8% of GDP) in 2012, US$3,512.93 million (15.1% of GDP in 2013, to US$4,788.80 million (20.7% of GDP) in 2014 to US$6,288.80 million (37.4% of GDP) in 2015. The external debt service has also been rising. It rose from US$34.14 million in 2011, US$296.60 million in 2012, US$160.80 million in 2013, US$185.26 million in 2014 and US$297.26 million in 2015. The external debt service is projected to jump to US$549 million in 2017 and US$727 million in 2019 which will surely become unsustainable.
This year, the government will be running a very high budget deficit estimated to be around 7% of GDP on a cash basis and 13% on accrual basis. Furthermore, the government has unsustainable payment arrears mainly from infrastructural related activities such as road construction, petroleum subsidies, electricity import arrears – all estimated at about K20 billion. Because of non payment, many construction projects are on hold.
To worsen the challenges, the cooperating partners have since 1914 stopped providing to Zambia budget support and they have also drastically reduced on their grant aid and project support. Zambia has essentially been on its own.
Given the above challenges, what can Zambia do to reduce on the pressures of its macro economy? Noting that copper export prices will hover around US$4,000-5,000 range in the medium term meaning that Zambia will not have sufficient earnings from copper exports to fund its budgets; that cooperating partners will still not support Zambia’s budget; that the country will have increased and unsustainable external debt service obligations; how can our country build its reserve position and bring its current account into a surplus?
Is Zambia on its own capable of resolving the over K20 billion arrears in view of the reduced revenues from copper exports and reduced domestic borrowing? Will Zambia be able to pay when they fall due the foreign exchange denominated arrears to foreign contractors, fuel imports, electricity imports, fertilizer imports and other external debt service obligations? Furthermore, can Zambia on its own bring down to sustainable levels the high interest rates in the economy that is making investment for growth impossible?
These appear to be the challenges that our government faces and which the new Minister of Finance Hon Felix Mutati and his economic management team must address without reneging on the promises of the PF party as described in their election manifesto and what the people want from their government.
2. Peoples Demands
What do the people want? The people want a macro-economic policy regime and social spending approach that is targeted at eradicating poverty and underdevelopment in our country. The people want and have supported the PF fiscal policy and spending increases that have supported massive public investment, the building of essential economic and social infrastructure and the promotion of human and economic development.
The people want to continue with the PF expansionary monetary options that will allow the private sector to access affordable credit to expand the production of goods and services, create employment opportunities and in turn contribute to the tax base of our country. The people want that the Bank of Zambia manage lower reserve requirements to ensure that development finance is available and that there is no unnecessary capital flight from our country.
The people want a government that provides safeguards in the public sector wages, that the government continues to subsidize public goods to help the poor and vulnerable of our citizens access basic necessities such as affordable food, water, fuel, electricity and other social services. The people want a government that stops adding to the unsustainable debt burden of the country.
2. Is the IMF Program the Answer to the Challenges?
For the country to move forward, it is evident that Zambia needs new money to stabilize the economy but without compromising the peoples desires as enshrined in the PF manifesto.
The two choices available to Zambia is to continue with the expansionary policy of the PF government or to abandon PF program and adopt an IMF supported program. Let us discuss the issue of the IMF/World Bank program which some people particulary the neo liberals would want to force on Zambia.
For sure, one source of relatively cheap money is the IMF and the World Bank. Our country exited from the IMF/IBRD supported program in 2010 after we graduated out of the HIPC program. Some of our countrymen are advocating that we should seek for another program with the IMF to enable our country access between US$1.2-1.5 billion of balance of payments support. The submit that the receipt of the IMF and World Bank funding will assist in stabilizing the exchange rate, boost confidence in the economy, attract direct foreign investment in the economy and improve the country’s credit rating. These are the positives of an IMF program.
However, there are also disadvantages in a country adopting an IMF program. If a program is negotiated and approved, the IMF and World Bank will impose conditionalities based on what is termed the ‘Washington consensus’ that will demand for austerity and tightening of belts of the Zambians.
The IMF has a very negative reputation among development observers and practitioners and this has led many countries to avoid engagement with the Fund altogether. Our country may recall the food riots that Zambia experienced in 1990 which resulted in our former President Kaunda cancelling the IMF program because it turned out to be too painful and destabizing to our country.
Generally, the IMF/IBRD will demand that Zambia loses its authority to govern its economy as the policies will be predetermined under a package in Washington. The package so negotiated will tend to constrain public spending which in turn tends to impede recovery.
Furthermore, the country will enjoy some relief from its US$1.2 billion balance of payment support but will also be forced to pay its K20 billion arrears by cutting budgetary spending on education, health and other necessary public goods.
The country will be forced to eliminate basic food such as our FISP subsidies and transportation subsidies mainly those related to petroleum products, they will demand that the Kwacha is devalued to make exports cheaper. They will demand the privatization of our remaining strategic assets. They will demand the freezing of wages in the public sector and retrenchment of workers.
The IMF will for sure demand that our 2017 budget is an austerity budget instead of an expansionary developmental budget. They will demand for the introduction of belt tightening measures that will tend to increase the incidence of poverty in our country, reduce Zambia’s ability to develop a strong domestic economy and allow multinational corporations to continue dominating our economy and which will push Zambia into greater debt.
In other words, an IMF/IBRD bailout everywhere particularly in poor countries such as Zambia, tends to deepen rather than solve economic crises. IMF/IBRD policies tend to cause layoffs and undermine development in the long run. The programs may spack recessions by raising interest rates which in turn may lead to bankruptcies, unemployment and increased poverty. To the many critics of IMF programs, they criticize the programs as an immoral system of modern day colonialism.
That is why many of our progressive countrymen who are opposed to the country being humiliated by the IMF’s strict fiscal and austerity requirements, lending procedures and structures of accountability – which it is feared will in fact prevent our country from recovering but will instead push Zambia into greater debt and hinder long-term development of our country.
Such observers are of the view that our government comes up with its own home grown policy anchored on a stimulus providing and expansionary options. The announcement by Hon Felix Mutati, Minister of Finance that the “economic recovery plan that Government is putting in place will be driven and owned by the country and not by the International Monetary Fund” is therefore a welcome relief and assurance that our government will continue with programs that create wealth and seek to end the rampant poverty in our country.
It is recommended that our government continues with its expansionally policies and seek assistance from fraternal friends such as the Peoples Republic of China, the Kingdom of Saudi Arabia and others who may gladly advance us bridging finance to support our balance of payments challenges.
END.

A SUGGESTION TO FORESTALL KWACHA COLLAPSE

2015-10-03T06:50:00.001-07:00

By. Dr. Mbita Chitala – Public Policy Analyst

I have been challenged by many of my colleagues and students to state my opinion and offer advice on what could be done to resolve some of our economic challenges. These are my views.

KWACHA DEPRECIATION

Why is the Kwacha falling like a domino? The answer is not because of the eight months rule of President Lungu as some would like us believe or a creation of any Zambian. These economic problems have their genesis in the global economy. Kazakhstan’s Tenge tumbled more than 20% on Thursday against the dollar when the country said it would adopt a free-floating currency (pretty the same as Zambia). Vietnam devalued its currency for the third time this year. And this phenonomena is evident in all so called free markets.

For the past decade or so years, Zambia has enjoyed positive growth in excess of 8% of GDP spurred by global growth, high copper prices, low interest rates and a weak U.S. dollar. But now, Zambia’s main stay copper and other commodity prices are dropping. There has been an economic slowdown in China and the prospect of the Americans hiking interest rates soon mean our economy will be in deep trouble.

Early in September, 2015, China allowed its currency to devalue, sending the year down about 2^ against the dollar. Currencies in other countries such as South Africa, Brazil, Russia, Turkey and so on have also plunged down this year.

Furthermore, uncertainty surrounding China’s economic growth and the impeding interest rate hike in the US could send our currencies even lower, especially so in the case of Zambia, as our growth estimates of our copper export prices continue to fall.

This global economic debacle has in some cases led to currency wars in which countries compete to devalue their currencies against other countries to boost their exports.

In our country Zambia, we are experiencing a currency crisis – a situation where the value of the Kwacha has depreciated in a very short time and has continued to adversely affect the wider economic woes with long lasting repercussions.

This Kwacha crisis has emerged because many citizens now doubt that the Bank of Zambia has sufficient foreign reserves to maintain our exchange rate. The Bank of Zambia has tried to fend off this Kwacha crisis by satisfying the excess demand using our country’s reserves by releasing foreign currency on the market. But, this is temporary and it has not worked.

There is no widely accepted definition of a currency crisis but it is generally agreed that a currency crisis emerges when a nominal depreciation of a currency of at least 25% but it is also defined at least 10% increase in the rate of depreciation. Our Kwacha has suffered both.

WHY THE KWACHA IS DEPRECIATING

There are at least three things that can bring about a currency collapse:

First, is the speculative attacks in which people perceive that there will be a drop in the value of the Kwacha in the future and they tend to opt to sell their Kwacha to avoid a loss. As they sell their Kwacha, the value of the Kwacha begins to decline and the Bank of Zambia is forced to buy up excess Kwacha to keep the exchange rate stable. As the value of the Kwacha declines, people may begin to panic, selling off more of their reserves and causing the Kwacha to fall even further.

This speculative attack as we are witnessing it now, may be because of the huge public debt that is growing and people may suspect that it is not sustainable. The result of this speculative attacks can be fatal to our economy and if not addressed can cripple our government because, in due course, the government may fail to service its debt, since the Kwacha will have devalued so much that it is impossible to pay the debts when they fall due. It is important that our Minister of Finance must work smart and hard to address this potential challenge.

Secondly, runaway inflation can also lead to a currency collapse. The case of our sister neighbour Zimbabwe is most telling of a country that suffered political turmoil, hyperinflation and the collapse of the ZIMDollar. The Zimdollar was the official currency of Zimbabwe until January 2009 when the government legalized the use of other foreign currencies. This currency substitution is currently happening in Zambia. This measure for Zimbabwe led to the sharp drop in the usage of the Zimdollar and by April 12, 2009, te Zimdollar was abandoned as an official currency.

The Zimbabwean government has undertaken that they will only re-introduce the Zimdollar or some such national currency if industrial output would average 60% more of its current output capacity. In April, 2009, the output was 20%. It is important that Zambia ensures that we do not return to the runaway inflation before 1992 and that we increase our nations output by seriously diversifying our economy.

Thirdly, the government policy moves such as altering interest rates can also lead to Kwacha collapse.

Once a currency collapses, it is difficult for a nation to recover. Citizens will find that their savings are devalued. The cost of goods and services will rise as the nation is forced to pay much more for imported products. This is so for Zambia since our privatization destroyed our then buoyant manufacturing sector and our country has become a profitable market for imports.

On account of the Kwacha devaluation, foreign direct investment will be reluctant to come to Zambia or to invest in our Kwacha. From Germany in the 1920s to Argentina in early 2000 and Zimbabwe in 2009, the scene is the same: prices will sky rocket as personal savings are destroyed. Our government together with all well meaning citizens must combine their efforts to forestall this potential tragedy.

CAPITAL CONTROLS THE ONLY SOLUTION

As for me and many progressives, it appears our country has no option but to introduce some capital controls. It is not helpful for those charged with this responsibility at the Ministry of Finance and the Bank of Zambia to remain mum and think that the challenges will resolve themselves.

Capital controls are measures such as transaction taxes, other limits or outright prohibitions that a government can use to regulate flows from capital markets into and out of a country’s capital account. These measures may be for the whole economy or sector specific (e.g the Banking Sector) or industry specific (e.g. the Mining Industry)

Until the early 1970s, almost all countries had capital controls until the IMF and the World Bank persuaded all of us wrongly that capital controls were harmful.

Presently, particulary after the global financial crisis of 2008, many countries have adopted capital controls alongside macro economic and prudential capital controls to damp the effects of volatile flows in their economies. This has also been accepted by both the IMF and the World Bank as necessary policies directions.

If our Minister of Finance A.B.Chikwanda and his team were now to seek advice from the IMF, they would be advised to consider introducing prudential capital controls to deal with our current economic crisis. Failure to recognize this necessity, is not helpful to Zambia.

During the 2008-2012 Icelandic financial crisis, the IMF proposed that capital controls on outflows should be imposed by Iceland. In 2009, Brazil imposed a tax on the purchase of financial assets by foreigners and Taiwan restricted overseas investors from buying Time Deposits. The Financial Times has reported tightening of controls in Indonesia, South Korea, Russia, Peru and so on. Indonesia implemented a one-month minimum holding period for certain securities. In South Korea, limits have been placed on currency forward positions. Taiwan has restricted foreign investors to certain bank deposits.

PRUDENTIAL CAPITAL CONTROLS

As everyone knows, Zambia has in recent years, experienced huge capital inflows resulting from the expansionary monetary policies of our governments. These capital inflows are both good and potentially bad. Many countries that experienced similar inflows, adopted prudential capital controls to reduce the risk of financial crisis and prevent the associated externalities such as currency collapse. Prudential capital controls is a process where a country regulates its capital account inflows to mitigate systemic risk, reduce business cycle volatility, increase macro stability and enhance social welfare of the people.

Prudential capital controls are necessary for Zambia. The doctrine of free capital movement as demanded by right wing ideologists does not correlate positively with economic growth. That is why Joseph Stigliz and his colleagues have written to President Obama to repeal he law in America the punishes those nations that adopt capital controls.

Capital controls as India and China have shown, are a progressive policy paradigm as for instance, by limiting Zambians to own foreign assets, this would ensure that domestic credit is available more cheaply and Zambian businessmen would have an inexpensive source of loans.

Large uncontrolled capital inflows and unabated outflows mostly as illicit outflows as Zambia has experienced in recent years have damaged our country’s economic development. The inflows have become loans dominated in forex and the repayments will be very expensive as our Kwacha continues to depreciate. This is what is called the “original sin”- a situation where our country will not be able to borrow abroad in our Kwacha or to borrow long-term even domestically. The illicit outflows is known as capital flight where companies instead of exporting only dividends earned also are allowed uncleverly, to export all their gross earnings everyday.

End

Deficit Budgeting in Zambia: A Worrisome Return to Unsustainable Debts?

2013-11-07T04:52:00.000-08:00

Deficit Budgeting In Zambia: A Worrisome Return to Unsustainable Debts?

By: Dr Mbita Chitala ; Executive Director – Zambia Research Foundation

In fiscal 2014, Finance Minister Alexander Bwalya Chikwanda has announced that our national budget of K42,682,030,000 will be partly funded by a huge deficit of K10,516,870,000 in addition to domestic revenue of K29,538,540,000 and hoped for grants from donors of K2,636,630,000.

It should be noted that the projected GDP of Zambia in 2014 will be K135,744,646,000 according to the MTEFF, and our 2014 budget will be K42,682,030,000 which is 30.7% of our GDP

What observers see as worrisome is the impact of the huge deficit financing that represents 24.6% of the budget and 7.2% of GDP on the economy of Zambia. Does this mean a return to unsustainable borrowings where the country joined the HIPC group of counties or it is the beginning of growth of our economy.

The management of the public debt, and its growth is currently a controversial issue in the debate over responsible fiscal policy. There is a continuing controversy as to whether governments should entertain deficit financing. The simple answer is that deficit financing of any national budget can be either good or bad depending on how it is managed.

What is Deficit Financing/spending?

Deficit financing is when a government spends in excess of tax receipts. In order to fill the gap of their deficit budgets, governments usually borrow or print money. In Zambia, the Bank of Zambia on behalf of government will issue Treasury Bills and Bonds which will be bought through open market operations. Furthermore, the government can also borrow from other governments, multilateral institutions as well as from private money market institutions or simply print currency to fill the gap.

Public Debt in Zambia

Deficit financing is part of the problem of public debt management. In the period from 1978 up to 2004, Zambia’s debt burden increased at a rapid rate because of borrowings. The public debt for Zambia has been growing exponentially.

In 1978, external debt stood at US$999.5 million reaching US$3.3 billion in 1980 and further increasing to more than US$7.2 billion in 1990. The external public debt went down during the early 1990s reaching US$3.7 Billion in1992 but climbed back to more than US$7 billion by the end of 1996 and reaching US$7.2 Billion in 2004.

On the other hand, domestic debt stock in 1978 was a mere US$378.5 million. In 2003, it had risen to ZMK3.9 Trillion while in 2004, it stood at Zambian Kwacha 5.5 Trillion. In 2011, Zambia’s internal debt was K13.122 billion while as at September 2013, the internal debt has jumped to an all time high of K17.8 billion and the end year 2013 figures will certainly be higher.

The total external debt alone represented over 120 percent of Zambia’s Gross Domestic Product (GDP) in 2003. The external debt service of US$462 million in 2003 represented about 11 percent of GDP, 15.4 percent of total exports, about three times the national education budget and about four times the health budget. Indeed, the projected debt service without any debt relief agreement with the major creditors in 2004 and 2005 would have been US$470 Million and US$475 Million representing 8.8 percent and 8.3 percent of

Zambia

’s GDP, respectively.

However, because of various debt cancellations and relief, the external debt service was reduced to ZMK229 billion and ZMK152 billion in 2003 and in 2004 respectively.

President Mwanawasa left a legacy of a sustained public debt management after inheriting an unsustainable debt which in 2005 reached $7.2 billion. After successful negotiations with all creditor organizations (multilateral institutions, Paris Club and London Club), Zambia was able to enjoy the debt relief under HIPC which saw our external debt reduce to about $500,000,000 in 2007.

Soon after the demise of Mwanawasa, the administration of President Banda started borrowing. In 2009, the total public debt was K15,620,570,000 which was 24.17% of GDP and comprised of K9,502,060,000 domestic debt and K6,118,510,000 external debt. The public debt continued increasing and in 2011, the total public debt rose to K21, 310, 830,00 (K13,122,410,000 domestic debt and K8,188,430,000 external debt).

Zambia’s public debt has continued to rise after the PF took over government. As at 31 December, 2012, Zambia’s external outstanding debt was $3,068,133,946.13 of which $2,944,687,444.08 was debt outstanding and the arrears comprised $78,540,177.05 of principal and $44,906,325.00 of interest. The consolidated domestic debt for 2012 is not yet available although an additional K1, 324.3 billion had been budgeted for borrowing in 2013. And for the 2014, the government plans to run another budget deficit by borrowing K10, 516,870,000 or 24.6 % of the budget or 7.5% of GDP.

The above policy regime is bound to not only increase our total indebtedness but may start creating another unwarranted debt overhang which will not be sustainable. A time after borrowing comes when the burden of annual repayments of loans and interest as percentage of current receipts will become unpayable when they fall due. In the current situation, the government has been failing to redeem the public debt when it falls due and have tended to accumulate expenditure arrears in both the domestic debt and the external debt.

The challenge the government faces is on expenditure management, to devise a domestic and external debt management strategy that will ensure that the high debt stock and rising debt service burden shall not adversely impact on the country’s economic growth. Unless the government uses the debt so acquired prudently in programs that add to our GDP, the country may get back to the HIPC condition where our country would lose its credit worthiness and become a pariah in the world of civilized nations.

However as already stated, deficit financing by governments can be both good and progressive or bad and retrogressive depending on how the contracted debt is managed.

Arguments against Deficit Financing

Many critics of the PF government have objected to deficit financing arguing that it is bad policy. These fiscal conservatives contend that a government should always run a balanced budget and if need be, it should have a surplus budget to pay down any outstanding debt. This position has its origin from Adam Smith (1723-90) and was further advocated by Milton Friedman (1912-2006) of the Chicago School of Economics. This view is also associated with the gold standard where all currencies were fixed against gold. The idea is that a government must spend what it has.

Some critics have not only faulted state borrowing especially deficit financing for being inflationary, but also contended that it overburdened future generations. David Hume (1771-1776) was one of the first scholars to address the subject and criticized the idea of deficit financing. Adam Smith devoted forty pages of his work “The Wealth of Nations” criticizing the principle of deficit financing. David Ricardo (1951) also condemned public debt creation by governments and noted that this principle tended to destroy capital. This criticism was extended further by J.S. Mill (1915) who viewed the public debt as a double burden which had to be opposed.

Generally, all these classical scholars opposed the idea of public debt creation and ascribed to the need for states to adhere to balanced budgets. These protagonists based their approach on the principle of strictly controlling growth in the money supply and argued that this approach was the one sufficient and essential condition for the control of inflation.

The basic flaw of this monetarism was revealed in practice, not because it was ineffective in bringing down inflation, but because it could only do so by means of strangling the real productive economy, and then could not prevent a recurrence of inflation in the event of a sustained revival of growth.

Other critics contend that deficit financing is inflationary and this is a bad thing. Governments normally print money to pay off debts when they fall due and thereby increase money supply which fuels inflation. This view is criticized by Keynesians who argue that deficit financing may not be the only factor that can be inflationally. There are other factors such as supply side shocks. An example for this is an oil crisis. Inflation therefore depends on monetary policy.

Furthermore, deficit financing is opposed as it is seen as an unnecessary way of creating public debt. In the case of Zambia, the government will borrow by using the Bank of Zambia to sell treasury bills and bonds as well as compel Bank of Zambia to printing money. The government also plans to borrow from foreign governments such as China as well as multilateral institutions such as the World Bank, IMF, ADB and from the Euro bond market. The burden of this debt on Zambia shall be the principal and the interest which shall be paid to holders of treasury bills and bonds and other promissory notes as well as to the external debt to be contracted. This ostensibly will restrict the government from being able to cut taxes or raise its expenditure.

A further argument against deficit financing is that spending today will require increased taxation of citizens in future to pay the debt. It is contended that it is unfair to burden future generations with suffocating debt obligations.

Some political economists also believe that government deficit financing takes away loanable funds from banks and thus push up interest rates. The high interest rates tend to crowd out or discourage private investment cancelling the so called fiscal stimulus and impeding growth of the economy.

Most observers agree that for domestic debt, the borrowing should not create unnecessary and costly distortions in the economy. If the domestic debt affects the economy adversely through high interest rates, it may in turn lead to a slow down on economic growth. The central point is that whereas borrowing domestically is healthy, it must be within limits because excessive borrowing could be distortionary and it would tend to slow capital formation.

Furthermore, a large public debt can create adverse effects on national income. A large government debt can clearly be detrimental to long run economic growth. First, as the debt accumulates, more and more private capital is displaced resulting in lower national output. Secondly, additional taxes are levied to pay interest on rising debt stock resulting in inefficiencies which in turn leads to lower output. Taking the two together, output and consumption will grow slowly than they would had there been no large government debt and deficit.

Arguments for Deficit Financing

The arguments for deficit financing are espoused by those who advocate the administrative control of prices and wages as the most appropriate means of controlling inflation. John Maynard Keynes (1936) in his seminal work “The General Theory of Employment, Interest, and Money” debunked the classical view that low levels of demand in an economy were self-correcting.

Keynes advocated that when an economy was in or likely to go into recession, the central government must engage in deficit spending. This doctrine meant that a government could borrow money to spend on public works and other public goods. In so doing, the government would expand overall demand. Keynes further advocated expansionary monetary and fiscal policies, meaning, the use of expanding money supply and lowering taxes to stimulate economic activity.

Broadly speaking, Keynes advocated the management of demand to maintain full employment in the economy. Said differently, John Maynard Keynes (1883-1946) argued that that deficit financing is desirable and necessary. A country should run deficits when there is recession to compensate for the shortfall in aggregate demand. When an economy has high unemployment, an increase in government purchases creates a market for business output, creating more money in people’s pockets and encouraging increases in consumer spending. This multiplier effect further increases demand for goods and services and raises the GDP and employment opportunities. Deficit financing works as a stimulus in an economy and will encourage companies to invest more capital and in the process they will be assured with reaping high profits.

It is important to note, however, that deficit financing can stimulate demand if the government’s deficit is spent on such things as capital items that will in turn increase potential output in the long run

The Post Keynesians such as the Chartalists even go further and contend that deficit spending money is what is taxed at the end. A government cannot bust its budget as a national budget is simply an account of national spending priorities.

Furthermore, it is argued that deficit financing is necessary for monetary expansion in an expanding economy such as has been the case for Zambia for the last ten years. If the economy grows as it has been at more than 7% of GDP annually, the money supply should also grow. And this can only be accomplished by deficit financing. If this is not done, it may lead to a credit bubble and a financial crisis. Deficit financing is acceptable but it depends on the level of GDP growth.

The Neo- Monetarist Argument

The Keynesian advocacy of deficit financing has however been opposed by the so called neo-monetarists who take the view that the control of inflation in an economy is more important than reducing unemployment. This view is closely identified with the ideas of the Nobel Prize-winning Professor Milton Friedman who also greatly influenced the now failed Structural Adjustment Policies of the World Bank and the IMF.

The neo-monetarists advocate tight monetary and fiscal policies and the balancing of state budgets. They warn of the future consequences of debt accumulation and its burden upon later generations. Neo-monetarists contend that debt finance places an unfair burden on future generations, firstly, by reduced capital formation when resources shift from the private sector to the public as occurs when the state borrows domestically. Secondly, by sadling future generations with an obligation to service the foreign debt.

The weakness of the neo-monetarist conception is that they confuse the tasks at hand. The question is not whether a government can repay the debt, because public debt and the economic management are a continuing undertaking. When a debt issue matures, it is paid off as the necessary funds are obtained by issuing new obligations. The issue rather is how interest service will affect the economy and how outstanding debt enters into the liquidity structure of the economy.

World Experience

The reality on the ground is that all countries incur public debt of one type or another purely on the basis of necessity. For instance, over 80 per cent of Organization of Economic Cooperation and Development (OECD) governments borrowing was in the form of marketable instruments such as government bonds and treasury bills. On average, since the year 2000, OECD countries have been running budget deficits of around 4 per cent of GDP. Even prudent Asian governments, including Japan, have been running budget deficits of an estimated 3 per cent per annum during the decade 1980-90. The OECD predicted that by 2008, its members would be sitting on central government debts totaling 86 per cent of their combined Gross Domestic Product (GDP).

This situation repeats itself in almost all developing countries. For instance, in the United States in the 1950s and 1960s, the country’s debt exceeded its GDP. However, this is the time the USA experienced long prosperity. President Obama’s stimulus program in the USA that has been used to defeat the recession is anchored on huge government deficit spending.

For a country to engage in deficit financing, it means that the private sector is in surplus. In other words, deficit spending will permit the private sector to accumulate net worth. This is why all governments run budget deficits.

Deficit financing: Good or bad

The majority of economists would agree that if a government borrows in order to deal with a recession or spends on public investment on infrastructure, education, public health, on public goods that will advance capital accumulation, then such deficit financing is bearable, beneficial and even necessary. If on the other hand deficit financing is for current consumption such as wages and so on, this would tend to suffocate the economy.

The challenge for Zambia is to ensure that the debts being contracted by the PF government are expended on programs that will allow Zambia accumulate investable surpluses for capital accumulation and expanded reproduction. What is necessary is therefore to ensure that government expenditures are productive in the sense that they should contribute to the growth of national income.

Furthermore, the government may wish to address the need to create a debt management policy and strategy which may include creating a professional debt management office, reform the legal, institutional and administrative framework, and adopt best practices in public debt management.

End

Nuclear Energy and the Fate of Mankind

2013-11-03T09:53:00.001-08:00

NUCLEAR ENERGY AND THE FATE OF MANKIND

By. Dr. Mbita Chitala

Executive Director- Zambia Research Foundation

The study by the Zambia Council of Churches entitled “The Revelation: A Review of Ionizing Radiation Protection Act 2005”, offers a good starting point for our policy makers to reflect and take preventative action and address the dangers posed by uranium mining, milling and transportation in Zambia.

Uranium Mining in Zambia

Presently, Zambia has three companies mining uranium. The first company is the African Energy Resources (AER) which owns the Chirundu Mine in Kariba Valley and has outlined over 11.1 Mlb of U3)8 (5,035t) in resources at Nyame and Gwabe resource.

The second company is the Denison Mine Zambia Limited (DMZL) which owns the Mutanga and Dibwe deposits in Siavonga District.

The third company is Lumwana Mining Company (LMC) owned by Barrick Gold. The company mines uranium as a by-product of its copper mining at Malundwe and Chimiwungo in North Western Province. It has about 3800 tu indicated resources at 0.079% of u and 2570 tu in inferred resources.

Once mined, the uranium ore in rock form is taken to the uranium mill where the ore is crushed, mixed with water and ground into fine particles. The mixture is then put through a chemical procedure to purify it. This process produces uranium oxide U3O8 – a yellow compound called yellow cake which can be exported. In Zambia, we are still piling the yellow cake as no policy on exporting has yet been formulated.

Nuclear Fission Discovery:

The discovery of nuclear fission by the German Physist Otto Hahn in 1938 and the realization that the energy from fission could be used to produce a nuclear explosion, has become one frightening scientific discovery which if not well managed, can lead to the self annihilation of all mankind and life as we know it. The science behind all this is well understood. Fission occurs when a neutron enters the nucleus of an atom of uranium or plutonium isotopes. When fission occurs, the original nucleus is split (fissioned) into two nuclei called fission products. A self-sustaining fission chain reaction can be produced in this way. The larger the quantity of Uranium 235 or Plutonium 239 (this results when Uranium 238 absorbs some of the neutrons produced in the fission process to become isotope Uranium 239) that is fissioned, the greater the explosive yield of the nuclear explosion.

A fission or atomic bomb has only been used once in Japan at Hiroshima and Nagasaki on 6^th August, 1945 by the United States of America when more than 250,000 people were killed.

Nuclear Fusion

Nuclear fusion on the other hand, occurs when nuclei of hydrogen isotopes fuse together to form nuclei of helium. During fusion, neutrons are produced and energy is released. In a boosted weapon, these fusion neutrons are used to produce more fission in the Plutonium 239 and produce explosive power of up to 50 KT. The fission weapon in this case acts as a trigger in these hydrogen bombs or thermonuclear weapons. In 1962, the then USSR exploded one at its test site at Novaya Zemlya with an explosive yield equivalent to that of 3,000 Nagasaki weapons. These weapons have not yet been used to kill human beings.

Nuclear weapons

There are about 30,000 nuclear weapons in today’s world. The USA and Russia each deploy about 9,000 nuclear weapons. The other countries with nuclear weapons include China (400), France (350), UK (200), Israel (200), India (60), Pakistan (35). The USA and Russia possess aggregate deliverable nuclear arsenal of about 19,000 warheads of almost 10,000 Mt. The total nuclear arsenal, including tactical weapons, warheads in stock comes close to 50,000 warheads and 15,000 Mt.

Furthermore, there are about 30 countries operating 438 nuclear power reactors for generation of electricity. These countries include South Africa, Argentina, Brazil, India, Mexico, Pakistan, Israel, Japan and so on. The dangers of breakdown of these reactors and endangering the life of human beings and life in general are best illustrated by the recent history of Japan at its Fukushima facility and earlier at Chernobyl in the Ukraine where nuclear fallout killed many people.

In addition to the nuclear countries mentioned above, North Korea and Iran have also been involved in active nuclear proliferation. The North Korean facilities at Yongbyon include a processing plant to remove plutonium from spent reactor fuel elements, a plant to make reactor fuel elements and two nuclear power stations.

Iran’s program are carried out in secrecy and has not been allowing inspections from the UN watchdog in Vienna. The UN system has placed Iran under sanctions and isolation. It is hoped the current talks in Vienna can succeed in persuading Iran to subject itself to international inspection to ensure that it abandons the idea of producing nuclear weapons. The claim that its program is for peaceful purposes needs to be tested by subjecting it to verifiable inspection.

For North Korea, it has always said that it retains the right to have nuclear weapons. This is a dangerous argument. The recent events in the Korean Peninsula where North Korea threatened to unleash its nuclear arsenal on South Korea and the United States, poses a challenge to mankind on the dangers of nuclear energy.

North Korea is an extraordinary closed and sensitive country. I last visited North Korea in 2002 when I accompanied the then Vice President Lupando Mwape on a state visit. North Korea has had a nuclear program since 1965 when it began operating a small nuclear research reactor at Yongbyon Nuclear Facility. At that time, Zambia also had a small reactor in Lusaka. Many countries operate these reactors, called , Research and Test Reactors - to produce radio isotopes for medical, industrial and agricultural use and training Physicists and Engineers. Radio isotopes are used in medicine to diagonize and treat diseases; in industry, to radiograph large structures; and in agriculture, to kill pests and sterilize male insects to reduce their numbers. The small reactor at the former Zambia National Council for Scientific Research appears to be inactive or it may have been decommissioned.

Possible Nuclear Armageddon

Our earth is a small spaceship in the universe which cannot survive a nuclear war, even for a limited one of 100Mt. If such is unleashed on the Korean Peninsula in anger for instance, calculations by scientists show that the dust and smoke will spread to engulf the whole earth carrying in its wake, a destruction of life unparalleled and shall imperil the future of humanity. Scientists have estimated that about 100Mt nuclear threshold is the currently defined as critical to produce a “nuclear night” – when air temperature will drop to below freezing leading to “nuclear winter” or the abrupt exceptionally harsh and prolonged cooling of the air over our earth- freezing all living things surviving nuclear fires.

The main consequences of nuclear war leading to ecosystems degradation include the following: Radiation shock which will range between 500-1,000 rads and will kill off all mammals and birds and cause serious damage to all plants; Huge fires would wipe out all forests and farms; Oxides of nitrogen and Sulphur will form into acid rain to devastate soils and waters; Enhanced UV radiation doses will damage the ozone layer which shields the earth from UV radiation from the sun and will suppress photosynthesis which in turn inhibit and damage any survived animal’s immune system and kill all bacteria in the surface layer of the soil.

International Instruments

The key international instrument to prevent proliferation of nuclear weapons is the 1970 Nuclear Non-Proliferation Treaty. As of today, a total of 190 parties have had ratified the NPT including the five nuclear powers. North Korea withdrew from the NPT in 2003. Israel, India and Pakistan are also outside the NPT as they all doubt the effectiveness of the IAEA safeguards to verify compliance with the treaty.

Progressive human beings have consistently argued that nuclear weapons and warfare is a crime against humanity and must be abolished. The report in the Post Newspaper of 18 October, 2013 reporting that that Zambia’s Ambassador to the United Nations Dr. Mwaba Kasese Bota called for the ban and elimination of nuclear weapons is a progressive stand. It is gratifying to note that Zambia is state party to the Treaty on the Non Proliferation of Nuclear Weapons (NPT) and the Comprehensive Nuclear Test Ban Treaty (CTBT).

There are other treaties that attempt to manage nuclear proliferation. The Convention on the Physical Protection of Nuclear Material signed in 1980 by 145 state parties is one such other treaty. In Africa, there is the African Nuclear Weapon Free Zone Treaty or the Treaty of Pelindaba which Zambia has since ratified.

However, Zambia has not yet adopted the “code of Conduct on the Safety and Security of Radioactive Sources” or the “Supplementary Guidance on the Import and Export of Radioactive Sources”. Furthermore, Zambia has as yet to ratify the “Radiation Protection Convention, 1960 Number 115” and the “Occupational Cancer Convention, 1974, Number 139. The ratification of these conventions by Zambia has become necessary now as miners and other citizens at the various mines that are currently mining radioactive substances have become vulnerable to radioactive contamination.

Challenges

The biggest challenge humanity faces is to abolish all nuclear weapons. It is possible to use nuclear energy safely to advance humanity’s civilization. However, this advancement does not include the development of self annihilation instruments such as atomic bombs.

In Zambia, the challenges we face are include the following:

1. We must ratify all the essential treaties as presented above in this essay.

2. With so much uranium, Zambia can start a peaceful and safe nuclear program to enrich Uranium 235 to be used in electricity generation, medicine and agricultural research. This will involve us investing in a conversion plant to separate isotopes of U 238 and U 235 and so on. We could then export this enriched uranium and earn a lot of foreign exchange.

3. Our country needs to come up with a policy on mining of uranium and other radioactive mineral ores. The current vacuum is dangerous as it allows mining companies such as the Lumwana Mine for instance to continue discharging radioactive tailings into the Lumwana river and contaminating the water without any safeguards. Worst still, there is no policy for the compensation of workers or citizens that may suffer contamination.

4. Zambia must streamline the eight pieces of legislation that currently address mining of radioactive substances.

5. The Radio Protection Authority which currently has only 4 employees from an establishment of 44 needs to be revamped.

6. It is important that the Radiation Protection Authority is also re-aligned from mere Hospital Administration to include other functions such as regulation of exploration, mining, milling and transportation of ionizing radiation materials. Currently, we do not have an institution that is tasked to regulate these potential dangerous activities.

End

ZAMBIA'S DEBUT US$750 MILLION: A NOVEL WAY TO DEVELOPING FINANCING ?

2012-09-24T08:36:00.001-07:00

By. Dr. Mbita Chitala; Executive Director: ZAMBIA RESEARCH FOUNDATION

The news that Zambia has managed to secure a US$750 million Euro Bond is both good for Zambia and Africa in general. The Zambians that led the offer must be thanked and lauded.

Two views define Portfolio Investment (PI) such as the Euro Bond that we have raised from international capital markets.

1. The most prominent and popular view raised by many Zambians and Neo Liberals is that PI will for the first time give our government access to this vast pool of capital that is available on the global financial market for development. The money so obtained is competitively priced and efficiently allocated without corrupt tendencies associated with foreign direct investments and bank borrowing. The Euro bond will promote economic growth of Zambia.

It is further argued that the Euro bond in its form is superior to foreign bank borrowing as it has no contitionalities and external control disadvantages like the one Zambia has been subjected to by the IMF and World Bank under Structural Adjustment Programs.

2. However, in reality, Portfolio Investment (PI) such as our Euro Bond can and may serve our development if it is used to finance investment projects. Our government is therefore challenged that this is strictly adhered to. In real life, the Euro Bond will be allocated by global capital markets in accordance with rate of return criteria and not necessarilt to advance economic development of Zambia.

The Deputy Minister has argued that the money so obtained from the bond will be in the Bank of Zambia soon and will be used as part of the national budget. This appears to be one way of utilizing the money. However, this will introduce unnecessary political costs.

In other countries, governments appoint investment bankers and fund managers to invest the money in projects that have high returns. In other words, portfolio investments is advanced to the private sector. And because of this, the investments so made are usually in speculative projects like commercial real estate development rather than in public goods such as roads and railways. Because of this speculative content of Portfolio Investment, such investment may tend to widen inequality between citizens.

It should also be pointed that portfolio investment made through investment bankers has other unacceptable behaviors. For instance, the investment bankers have been known to create derivatives and other instruments which they trade on without the authority of the owners of such bonds. In a financial crisis, this behavior can be very devastating to the holders of the debt as we have experiences in Greece. In other words, the investment bankers tend to create difficulties which may for bond holders where there is insufficient management. This is the case in Milan, Italy where they are a subject of criminal investigation by authorities.

Furthermore, if this high value Euro Bond is not regulated by our government, it has the potential of increasing macro economic instability. A collapse in speculative bubbles in stock markets can lead to a financial crisis and increase in poverty rates and income inequality. Asset volatility can increase uncertainty, induce systemic instability and can therefore create vulnerability to the financial crisis and allow regressive capital flight from Zambia; Kwacha currency depreciation that will adversely affect export performance; debt service unsustainability and a return to pre HIPC syndrome where our country became vulnerable to a devastating debt overhang; and asset price deflation.

Furthermore, Portfolio Investment such as the Euro Bond can introduce constraints on policy autonomy in our country. The investors will usually forbid government from implementing an expansionally monetary policy which is the policy direction that works. They will oppose policies that result in reduction of interest rates as this will be seen to be abating or cohorting with the hated inflation. In other words, our government will not be allowed to enact laws or policies that restrict investor freedom

3. The policy advice one can give is that, in general, the PF government has started well. The government must as soon as possible create a development vision by stating explicitly their industrial strategy, design policies in sectors and design performance targets and incentives. It will become apparent if this is considered, that, the government will need to create strategies that regulate capital inflows and outflows. Our country may consider advancing blunt restrictions on Portfolio Investment as is the case in China, India, Chile and others or introduce temporary controls as occurs in many countries that attempted to use global bonds such as the Euro Bond to develop their infrastructure. We must address our tax system so that it influences the composition, and/or maturity structure of the portfolio investment so that we restrict capital flight and stop continued underdevelopment.

End.

Programs/ Projects Advocated by the Think Tank during the election campaign of the PF in the 2011 General Elections

2012-09-11T08:05:00.001-07:00

Programs/ Projects Advocated by the Think Tank during the election campaign of the PF in the 2011 General Elections Desirous to support the election campaign of the Patriotic Front, a Think Tank outside the PF main stream organization, provided a framework of the campaign after analyzing the PF Manaifesto. Whereas the PF Manifesto was a Letter of Intent, the Think Tank actualized the desires contained in the manifesto into programs on which the public could reasonably evaluate the use value of the PF promises. The group of PF campaigners in the Think Tank comprised among others, Mr. Bob Sichinga, Dr. Mbita Chitala, Mr. Mike Mulongoti, Col. Panji Kaunda, Mr. Pius Mambo, Mr. Simusa and others. Presented below were the undertakings advocated by the Think Tank members on behalf of the PF campaign. Sector Objective Strategy Programs/Project as per PF Manifesto Comments/suggestions Administrative and sovereignty Central administration Capacities building in the public services Public sector restructuring - Provide in budget for fund to Start Constructing Houses for Civil Servants. - Raise salaries/improve conditions of service - Raise pension payments to minimum wage and peg rates to inflation 1. Professionalize Civil Service 2. Implement recommendations of Salaries Commission 3. Retire appointments based on nepotism PS, DC, Diplomats, Parastatals 4. Reintroduce civil service examinations and reintroduce merit appointments 5. Seek advice from other civil services such as India and the UK 6. Annul appointments based on nepotism in Civil Service, Police and other arms of government 7. Create new Ministry of Planning in the Presidents’ Office to coordinate Capital Budget Foreign Representation Improve the country’s image abroad and attract foreign investment Rehabilitating & building or purchasing of permanent chanceries & residences in a number of countries - Reduce/streamline foreign missions - Develop career diplomacy - De-nepotize appointments 1. Recall appointments based on nepotism. 2. Professionalize service Barotse Agreement 1964 Permanently resolve the question 1. Appoint a committee to draft government position within 30 days or appoint a Commission of Enquiry to advise government on the way forward 2. Negotiate with the Litunga and enter into a new agreement within 90 days - on lines of Tanganyika/Zanzib or right to self determination of Barotseland outside Zambia, or annulation of BA 64 and replace it with federalism as is in Mozambique and RSA or provide governance on lines of the Royal Bafokeng Nation in RSA. Anti Corruption 1. Reenact Art 37 of the ACC Act. 2. Zero Tollerance policy against corruption 3. Appoint tribunal to complete all plunder cases within three months 4. Re visit the Chiluba Case and appeal the London Judgement to the Supreme Court 5. Constitute a Task Force to investigate the Banda regime abuses Information Services Collect and disseminate information in the public interest Boost reception in rural areas, and insure availability of high quality and consistent production of print media - Enact Freedom of Information Act - Implement IBA and ZNBC Acts - Professionalize ZNBC on lines of BBC - Autonomy of Times of Zambia and Zambia Daily Mail 1. Repeal Statutory Instrument 111 to allow for liberalization in Telecoms 2. Increase funding to Zambia Information Services to enable them disseminate government information 3. Re Nationalize Zamtel Legal and Constitutional matters1 - Establish Committee of Experts to review all past recommendations and draft new constitution and subject this to referendum within 90 days - Establish office of public defender in each district to replace legal aid - Improve conditions of service - Rehabilitation of police , prisons and military camps 1. Complete drafting new constitution within 90 days 2. Conduct Referendum within 180 days 3. Birth of 3rd Republic within 180 days 4. Redeem judicial system by professionalizing it 5. Annul appointments based on nepotism Electoral Reforms - Enact a new electoral Act to provide for appointment of commissioners by Parliament, political party representation, registration of parties and funding of parties 1. Implement Electoral Reforms as advised by Electoral Advisory Committee and Mung’omba Constitutional Commission Law and Order Promote good governance Creating a society in which all citizens have opportunities to realize their full potential and to exist in dignity and harmony - Establish Constitutional Court, Resident Magistrate Courts at all Districts and Traditional courts. - Parliament to appoint tribunals - Improve conditions of service of the military, Police and other law enforcement agencies 1. Rehabilitate Homes of Army, Airforce, ZNS, Police and Prisons 2. Provide a fund for Home Ownership of officers 3. Revamp Police Service by ending appointments based on nepotism Defence and Security 1. Professionalize the wings Local Government & Regional Administration Improve the quality of life in both rural and urban areas Improving the quality of life in both rural & urban areas - Create new admin system of ward village councils, District Chiefs Councils and Provincial Chiefs Councils. - Resolve Barotse Agreement Question - Subsidize water, - create social housing scheme, - upgrade squatters, public works. - Increase funding to councils - Lusaka and Copperbelt road rehabilitation - Urban tram construction 1. New Agreement with Barotse Royal Establishment 2. Repeal the Local Government Act to provide Establishment of Provincial Governments and Assemblies 3. Capitalize Fire fighting Departments of all local councils 4. Constitution to create devolved on lines of system of government 5. Improve funding of Local Authorities and introduce system of Executive Mayors to be elected by rate payers Economic Sectors Finance and National Planning - Develop a Transitional Development Plan - Promote reduction of interest rates - Control inflation - Lower taxes to promote compliance - Lower PAYE - Exempt or zero rate VAT on food, transport, education/materials, agriculture inputs and medicines - Reduce VAT - Re negotiate with mines on a fair, equitable and enforceable tax regime - Reduce company tax - All loans to be ratified by parliament - Strive to be independent of foreign aid - Introduce Activity Based Budgeting - Dismantle domestic debt - Increase budget to social sector , infrastructure and empowerment funds 1. Abolish discretionary tax holidays 2. Reduce Company Tax and PAYE 3. Abolish nuisance levies such as TV levy, Commodity Levies by Councils 4. Broaden Tax Base by abolishing tax holidays, stop capital flight thru capital controls, abolish transfer pricing introduce progressive VAT, introduce taxes on financial speculation – forex, stock transfers,short term capital flows 5. Reduce rates of presumptive tax, turnover taxes, withholding tax on rentals, taxation of marketeers and small scale traders 6. Reduce and or abolish some charges imposed by central authorities such as ZICTA,ERB, PACRA, ECZ, ZAWA, Road Traffic Authority, Immigration, Zambia Bureau of Standards,, Tourism Licences 7. Reduce taxes on Petroleum and Electricity 8. Policy of joint venture ownership on basis of 70% Zambian and 30% foreign. 9. Ensure all forex earnings are banked and reported in Zambian banks. 10. Kwacha to be convertible on current account transactions only as is in India and China & Taiwan. 11. Transform ZCCM-IH into an active investor. 12. Create a sovereign fund from excess earnings on metals. 13. Re introduce BOZ Management of interest rates 14. Re introduce BOZ management of Exchange rates by way of currency pegs and capital controls 15. Ensure BOZ is imbedded and politically accountable to promote growth, employment and social welfare. 16. Enact a Budget Act 17. Expenditure policy to be expansionary on industry, agriculture, infrastructure and social programs. 18. Introduce Zero Based Budgeting 19. Exit from External Dependency on donors 20. Establish Public Debt Commission 21. Re Nationalize ZANACO as a strategic national asset or create another national bank . Agriculture Promote development of small & large scale commercial Promoting smallholder productivity, improving rural infrastructure, rehabilitating feeder roads, promoting cooperatives - Subsidize agriculture. - Land tenure security in rural areas. - Livestock restocking - Disease control, tsetse fly eradication. - Water provision - Agriculture commercialization 1. Settle more than K1.2 Trillion to Bank s borrowed in2010 2. Purchase 2011 Crop 3. Insure disposal of or Sale of FRA 2010 Reserves 4. Capitalize Lima Bank as a national strategic farmers bank 5. Restock Cattle in all provinces. 6. Develop outgrower scheme. 7. Increase Farmer Support pack by providing 4 and 4 and ensure community accountability Commerce, Trade & Industry Boost the development & competitiveness in the manufacturing industry Amending the customs and excise duty - Establish fund for Small Businesses. - Establish special industrial zones, parks - Establish Industrial Development Commission. On lines of INDECO - Enact legislation to protect Zambian entreprenuers - Re capitalization of NCZ 1. Establish a Small Business Bank 2. subsidize interest rates 3. Steam line Empowerment Commission to be focus for indigenous capital formation 4. Reduce tax on capital items used in manufacturing 5. Enforce Citizen Empowerment Act 6. Foreign Investment via joint venture with Zambians only 7. Stream line Indeco Properties Ltd and ZIMCO properties Ltd and incorporate a new Industrial development parastatal as investment wing of the state Energy Promote optimum supply & utilization of energy with emphasis on indigenous forms while maintaining a safe & healthy environment Rehabilitating the major energy infrastructure promoting rural electrification, and promoting the wider use and dissemination of renewable energy technologies - Scale up hydro power construction. - Promote solar, bio-fuels, wind - Expand rural electrification. - Rehabilitate Indeni, TAZAMA pipeline, - Lower petroleum taxes - Unbundle ZESCO - Promote oil, gas exploration 1. Invest in Hydro Power – complete Kariba expansion, Lower Kafue and Itezhi Tezhi aswell as Kalungwishi etc 2. Unbundle ZESCO 3. Let Local Councils to retail electricity 4. Reduce electricity rates 5. Reduce petroleum rates Environment & Natural Resources Manage & utilize resources in a sustainable manner Improve the quality of life in both rural and urban areas, insuring people’s participation - Control deforestation - Bee keeping Development 1. Set up waste disposal authorities in councils and empower them 2. Recapitalize ZAFFICO to expand plantations 3. No foreign ownership of Land except as joint venture with Zambians Mining Attract investment for the development of both large and small scale mining Producing geo-science maps of the country, privatizing state owned mining companies, providing information on availability & uses of agro, industrial and building minerals - Create fund for Zambian miners. - Establish center for marketing minerals. - Create a plant hire scheme - Equitable and fair taxation of mines – consider windfall taxes 1. Reenact new and fair mining tax to allow for windfall taxes. 2. Enact new Mining Tax code to allow for windfall taxes and other royalties. 3. Abolish Development Agreements 4. Implement policy of joint ownership of all mines with at least majority Zambian interest- 70/30 % 5. Convert at least 40% of annual copper production into finished products in Zambia. 6. Establish Mining Council of Zambia as a Think Tank 7. Establish a Sovereign Fund from excess earnings on metals 8. Transform ZCCM-IH into active investor 9. Mining companies to be required to house workers and invest in social welfare. Tourism Facilitate, co-ordinate & support the country’s tourism development Improving the infrastructure - Employ village scouts - Establish community funds - Infrastructure development - Establish Tourism Development Fund 1. Establish a revolving Tourism Fund for citizens Transport & Communication Improve existing infrastructure& develop new ones Rehabilitating& maintaining existing infrastructure, constructing new facilities - Road construction - Bridge construction to replace pontoons - Create maintenance camps - Ring roads for cities - Re negotiate concession on Zambia Railways and invest in railways on PPP basis - National airline on PPP basis - Construct airports, harbours and canals - Establish District Works Departments - Establish fund for Zambian contractors 1. Repeal SI 111 of 2010 to liberalize telecoms 2. Set up system for Toll roads 3. Construct at least one major road per province within three years 4. Construct railway to North Western Province, spur from Nseluka to Mpulungu, Chipata to Mpika 5. Establish national airline 6. Nationalize Zamtel as a strategic industry Social Sector Education Increase access to and improve quality & relevance of education at all levels Rehabilitating & expanding infrastructure, constructing new ones where necessary - Construct nurseries in all wards. - Free and compulsory education from grade 1 to 12. - Raise education budget from 18% to 23%. - Re introduce apprenticeship system. - Construct institutional houses - Raise salaries of staff to regional levels. - Mortgages and loans for teachers - Construct at least one university per province - Provide bursaries to all students in tertiary tied to future repayment 1. Introduce massive country wide adult literacy campaign to ensure illiteracy is more than halved within three years 2. Employ new teachers including retirees Health and Nutrition Improve access to and quality of health services for all Rehabilitating health institutions, controlling epidemics and chronic diseases, providing drugs and medical equipment/supplies - Raise budget allocation to 15%. - Abolish user fees - Rehabilitate all hospitals - Establish ICU s In all hospitals - Improve conditions of service - Expand training facilities - Ensure medicine availability - Enact new law to fill vacuum left by repeal of NHS Act 2005 - Reduction of HIV/AIDS infections 1. Rehabilitate all hospitals 2. Hire new staff including retirees to man hospitals and clinics 3. Establish a social safety scheme for vulnerable such as lactating mothers, invalids 4. Free anti retrovirals and other essential drugs Community Development & Social Welfare Improve the quality of life of the poor and vulnerable Promote entrepreneurial development and income generation - Increase funding to ZAD - Free govt. services to all disabled - Subsidize and provide grants to vulnerable, welfare centers, libraries - Conduct a nationwide adult literacy campaign 1. Establish a Social Safety Fund for poor people 2. Conduct a National Literacy Campaign to reduce Illiteracy from 60% to 20% in three years Employment & Welfare Institute measures that will mitigate poverty Providing safety nets for the retrenched and youths, improving conditions of service and health schemes for employees - Abolish casualization of labour - Create law on out sourcing services - Reestablish Labour Department to maintain register of skills - Pay all retirees within 24 months - Re adjust pension to inflation - Create employment opportunities (6 million Zambians un/and underemployed as only 500,000 in formal sector). 1. Create Public Works program 2. Implement a Zambia National Service scheme for all school leavers 3. Create 2 million job opportunities in 3 years Housing & Resettlement and Land Facilitate the provision of housing for ownership, establish resettlement schemes in all provinces Supporting institutions which provide low cost housing, developing necessary infrastructure in resettlement schemes - Create National Housing Fund to support councils and central government construct houses. - Establish land audit commission - Establish Ground Rent Tribunal - Regularize ownership of all untitled land - Provide for security of land tenure in rural areas 1. Rezone land to ensure cities and towns access land for housing development 2. Construct more than 2 million houses in five years 3. Land for Zambians Foreign ownership by way of joint venture with Zambians only Science & Technology Improve vocational and technical education Rehabilitating existing infrastructure, providing modern equipment, developing relevant training materials, retaining technical & professional staff - Revamp NSIR - Revamp and re-equip training and research institutes 1. Set up Centres of Excellence 2. Rehabilitate UNZA, CBU and all Colleges 3. Set up a University in each Province Youth, Sport & Child Development Provide the services in the areas of youth, sport and child Providing sporting infrastructure, improving service delivery in the youth training and production centers, improving child welfare - All school leavers to have access to vocational training - Introduce apprenticeship - Construct District Training centers in all districts - Establish a Youth Fund - Gender affirmative action - Establish National Arts and Cultural Centers at District, Provincial and National levels - Provide law for protection of property rights - Allocate in budget funds for construction of sports facilities - Lower tax on sports manufacturers - Introduce sports scholarships 1. Construct sports stadia in all districts 2. Introduce National Service for school leavers and young people Water Supply & Sanitation Improve water supply and sanitation facilities Rehabilitating and maintaining existing water & sanitation facilities - Rehabilitation of water supply and sanitation systems in all districts - Procurement of plant and equipment for dam construction - Development of ground water 1. Reduce water levies charged by corporations 2. Construct public toilets in all districts 3. Provide land for burials and disposals in all districts Church and NGOs - Church and state to be mutually inter dependent - Promote civil dialogue 1. Secularity of the state to be upheld in terms of citizens rights and freedoms

HOW TO CREATE JOBS IN ZAMBIA

2012-07-17T16:16:00.000-07:00

By Dr. Mbita CHITALA – Executive Director- Zambia Research Foundation;
www.mbitachitala.blogspot.com; 0976 030398; mbitachitala@yahoo.co.uk

It appears that it is only now that everybody has realized that the unacceptable unemployment and underemployment in our country Zambia must be addressed before our country is destabilized. The IMF and the ILO on May 21-22, 2012 held a National Conference “Towards a New Growth Strategy for Employment, Decent Work and Development in Zambia” where they continued feeling sorry for Zambia without offering any tangible programmatic advice.

The African Development Bank on 9 July 2012 also hosted a “High Level Policy Dialogue Seminar on Youth Employment“ in Lusaka where many Cabinet Ministers from our country and others from Angola, Madagascar, Malawi, Mozambique and Mauritius attended. Prof. Mthuli Ncube, the Vice President of the African Development Bank (AfDB) warned the participants that “Youth unemployment has become a potential source of social, economic and political instability of nations.

Today’s young people face a real and increasing difficulty in finding decent work. This was evident in the last two years, with youth-led movements from Africa to Europe calling for social justice, freedom and jobs.” Addressing the delegates, the Zambian minister of Finance, Alexander Chikwanda said, “Youth Unemployment is a ticking time bomb for all of us.” He added, “We need to create a healthy workforce with the right skills to meet the challenges of a modern economy, this can be achieved by encouraging productivity and entrepreneurship. This will require the joint efforts and solidarity of both the public and private sectors. As government, we need to provide the necessary governance and accountability, as well as building the credibility of the State.”

The Zambian minister for information, broadcasting and labour, Fackson Shamenda, concurred, “There is a lack of co-ordination in our efforts to address the issue of youth unemployment. We need to find appropriate mechanisms to better co-ordinate our programs if we are to achieve our goals.”

These cries continue to be made by many of our citizens with a hope that someone will come up with a program to address the crisis. Poverty It has been an evident fact for many years that poverty, unemployment and underemployment continue to present major challenges for the Zambia. Our country’s GDP growth rate in 2010 was 7.6 per cent, projected to be 6.8 and 7.7 per cent respectively in 2011 and 2012. With increase in copper prices and hence exports, the current account deficit has narrowed to less than 2 per cent of GDP.

The above notwithstanding, growth has not been translated into meaningful human development. Widespread poverty, unemployment and underemployment still ravage our people. Poverty is particularly widespread in rural areas, where over 80 per cent of the population live below the poverty line, compared to 34 per cent in urban areas. Poverty, especially in rural areas, is characterized by high vulnerability to shocks that often erode development gains or exacerbate existing poverty.

The most recent Living Conditions Measurement Survey indicates that 64 per cent of all Zambians live below the poverty line. Half of these cannot afford the basic minimum food requirement and are, therefore, classified as extremely poor. Life expectancy at birth in Zambia remains low at 47.3 years, Adult Literacy rate of 15 year olds and above is 71.4% and Zambia’s HDI rank for 2011 was 150 out of 169 countries.

Why should there be so much poverty and suffering amidst so much wealth? What should be done is the necessary question for all policy makers to address to eradicate this poverty. And it starts with achieving full employment of our people. Unemployment The formal sector in our country has been steadily diminishing as the main source of employment in Zambia since 1992 when our country conducted a thoughtless privatization. As a percentage of the total labour force, formal sector employment has been declining over the years from 75 percent in 1975 to 10.3 percent in 1999 according to the report by the CSO, (Selected Socio-economic Indicators, 1999).

In addition to the parastatal demise and downsizing of the public service forced on Zambia by the Breton Woods Institutions and the Paris Club creditors, many jobs were destroyed. From a peak of almost 900,000 formal employment in Zambia before privatization, the country’s formal employment went downwards towards 350,000 after privatization. The destruction of jobs in the Mining Industry was particularly symptomatic of the crisis.

A study by ODI in 2009 observed as follows: “There is some homogeneity in the response of the mining companies to the crisis. The mines have closed mining units, laid off workers, reduced the scope of work done by mining contractors and suspended contract labour and recruitment. In addition, mines have suspended overtime work, renegotiated supply contracts so as to reduce supplier prices, deferred payments to suppliers and contractors and deferred exploration and non-essential capital expenditures. Mopani Copper Mines has …reduced the scope of work for contractors by 40% and the use of contractors’ labour by 30%, and has suspended hire contracts and recruitments. The mine expects to lay off 215 workers at Nkana and 467 workers at Mufulira during 2009. Konkola Copper Mines has reduced expatriate staff by 18%. It has laid off workers. Total job losses at Konkola Copper Mines in 2008 could be estimated at 6667 workers. Chambeshi Metals closed down Luanshya copper mines, with 1719 workers laid off. The Chambeshi smelter was closed, and 240 workers and 267 contract workers lost their jobs. First Quantum Minerals has renegotiated its supply contracts. It has deferred other non-essential exploration and capital expenditure programmes and has reduced working hours from 12 hours to eight hours per shift, with 70 workers laid off. (Excerpts from ODI. 2009. Global Financial Crisis Discussion Series Paper 10: Zambia )

Since the end of privatization, getting employed in the formal economy has continued to elude many Zambians. Our streets are full of many educated and skilled Zambians who have chosen to be part of the lumpen working class or reverted to backward subsistence farming. In aggregate terms, according to the Central Statistics Office (CSO) Census of Population and Housing (2000), the number of persons engaged in informal sector activities in 2008 was approximately 3.6 million, which, as a percentage of the total labour force stood at about 79 percent. Figures from the Labour Force Survey of 2008, with the reference period being 2006 indicate that of the 5,410,619 people in the labour force, only about 522,176 were in formal employment, with the rest unemployed or having to eke out a living in the informal economy.

In 2009, the Employment and Earnings Inquiry Report published by the CSO estimated that Zambia had 671,246 workers in the formal sector. Of these, 66% were employed in the private sector (442,378 workers), 21% or 139,234 in Central Government, 5% in Local Government and about 8% in parastatal companies. On average, it would appear that out of the total working population of about 7 million in our country’s total population of 13.5 million, only about 650,000 Zambians are in formal employment and the rest about 6,350,000 in informal operations.

However, using the narrow international definition followed by the ILO, unemployment in Zambia has been established to be at 13% . However, recognizing that many people have been out of work for so long that they have stopped looking for jobs, broad unemployment must be higher. With the decline in formal sector employment, the informal sector has become the principal source of employment and livelihood for most Zambians. This is a sector where people survive under the doctrine “One for oneself and God for us all”. It is a sector in the towns of lumpen elements, crooks, prostitutes, vagabonds, all that mass of humanity hovering between suicide and insanity. In the rural areas, they are essentially subsistence cultivators often dependent on state aid to make them survive just sufficiently.

It is evident that for the rural people to progress from their torturous lives and enter the civilized world, they must transcend their peasant existence and be farmers or workers in the formal economy. Similarly, the lumpen elements in the towns must be facilitated to get formal jobs or be enabled to be small entrepreneurs.

Youth Unemployment

As concerns young people who every policy maker appears to be afraid of, and who comprise the future of Zambia, the Central Statistics Office reported that unemployment is a more serious problem in the young age groups of 12.-14 (19.9 percent); 15-19 (22.6 percent); 20-24 (20.8 percent) and the 25-29 (13.9 percent). The peak is in the age-groups 15- 24. Given that young people (under 25 years) in Zambia comprise about 63 percent (roughly 6 million) of the total population, youth unemployment must be a special concern for Zambian policy makers. In fact, every year, over 240,000 school leavers are entering the labour market without hope of finding a job.

Incidentally, youth unemployment in Zambia highly correlates with poverty since our country has no social (unemployment) benefit system that would otherwise cushion the youth from deprivation due to unemployment. Indeed, crime and other forms of juvenile delinquency can be traced to unemployment-related deprivations.

Youth unemployment should therefore be a matter of special concern to the PF government and all those political parties that want to form government to address. The PF won the 2011 elections on the promise to deal decisively with this youth unemployment and it is important they actualize their program urgently.

Employment analysts have argued that the Zambian economy must generate more than 400,000 new jobs in net terms per year to ensure that the unemployment rate does not rise. To absorb new entrants into the labour market, the economy should generate more than 600,000 net new jobs per annum. This is the challenge that the PF government must address. This is also the challenge of all political entities that want to rule us to provide answers to.

Without doubt, it is only by creating jobs for people that a country can meaningfully eradicate poverty. In developed democracies, this is the litmus taste for an efficient and effective governance system on which political parties contest for power.

The battle of ideas is between neo-liberals who advocate for monetarist programs of austerity and perfect markets and the supply siders who advocate growth and creative state intervention. History is on the side of the later as the current global financial crisis attests.

Existing Policy Framework on Employment The official policy document on employment in Zambia is the National Labour Market and Employment Policy which was developed by the Ministry of Labour and Social Security and some stakeholders many years ago in 2000. The policy document identified policy areas for improving the functioning of the Labour market and promoting employment. The main strength of the policy document was its recognition of the need for a coordinated approach to employment promotion. The policy suggested an institutional framework for coordinating and implementing a national labour market and employment policy. The policy was however a still borne document as it died as soon as it was drafted and no attempt to put it in practice has ever been made. The policy remains unimplemented largely on account lack of political will and financial constraints.

A related policy document that broadly dealt with employment were the Poverty Reduction Strategy Papers (PRSP). However, a major weakness of the PRSPs was that they had in themselves no strong foundation of employment-targeted programs. At best, employment was treated as a sector issue, linked to programs of agriculture, tourism, industry, mining, transport, roads, energy, water, environment, HIV/AIDS, education and health. Employment promotion in the PRSP was not assigned a major role as a means of improving access to income and lowering poverty rates. Rather, it was regarded as a by product of sector policies - which sector policies could not address the challenge of employment by themselves.

Without addressing employment creation the PRSPs were doomed to fail in poverty eradication. They continued the neo liberal structural failures we have witnessed for many years which have prevented our country from making a meaningful take off.

The PRSPs also failed to adequately analyze the dynamics of the informal economy or present a well-orchestrated approach to poverty reduction for working people in informal employment. It is hoped the PF government will soon come up with a more realistic developmental program to address employment creation.

The provision of employment for Zambians is also articulated in a number of policy documents, including the following:- . The Vision 2030 of becoming a prosperous middle-income nation by 2030; Zambia Decent Work Country Programme (Z-DWCP), 2007 – 2011 and 2012-2015; . The Sixth National Development Plan (SNDP, 2011-2015), as well as its predecessor – the Fifth National Development Plan (FNDP, 2007-2010); The Private Sector Development (PSD) Reform Programme; and The Micro and Small Enterprise Development (MSME) Policy. It is not known whether these policies are part of the PF government’s programs as their implementation is yet to take root. It would be useful if the PF government could make a categorical statement on their attitude towards these policy documents, so that, if need be, new documents which are consistent with their manifesto provisions are prepared.

What is consensually agreed by all Zambians is that employment opportunities must be created and this require supporting infrastructure to be established. What Should be Done? As inferred in this article, it appears employment creation has been relegated to the margins of economic policy and yet it is supposed to be the basis on what any progressive macroeconomic policy is anchored on. The thrust of a limited number of employment initiatives has been through the implied benefits of economic growth.

The assumption that high GDP growth has resulted in job creation, has not been so for Zambia. There is growing evidence of jobless growth in Zambia which challenges the wisdom of relegating employment to the margins of economic policy. That is why there is a compelling reason to change our attitude of lassie faire and adopt a more direct and integrated approach to employment promotion is necessary.

Our Government is advised to adopt a direct approach to employment promotion by designing and implementing an Employment Strategy that is anchored in a workable National Economic Plan. This strategy shall guide the nation on job creation in the short, medium and long-term and provide for an institutional mechanism for coordinating and linking macro, micro and all sector strategies and programs on employment. It would be patriotic and progressive that the Hon AB Chikwanda, Minister of Finance convinces his colleagues to ensure that in his 2012/13 fiscal budget estimates, employment creation is placed at the center of the macroeconomic framework, and not as a residual of it. In this way, an employment strategy will become one of the most potent tools for fighting poverty.

Policy analysts and observers have shown that in addition to the constitution and good governance, the other urgent challenges of the PF government is to create 600,000 net new jobs per annum; to raise the proportion of the labour force in the formal sector employment to 50% by 2015; to reduce the official unemployment rate from 13% to 7% by 2015 and also raise labour force participation rate. In the literature, countries that faced such difficulties as Zambia currently faces, introduced employment creation programs.

The earliest job creation programs were conducted in the United States and Germany.
United States:
The first large scale job creation programs in the United States were introduced as part of the New Deal during the Great Depression. Departments like the Civil Works Administration, Public Works Administration, Civilian Conservation Corps, , and most prominently the Works Progress Administration created thousands of jobs for the unemployed.

In 2011 President Barak Obama, in an opening bid for re-election discussed using innovation economics as the basis for his jobs creation program.

Germany:
Although Adolf Hitler in the early 1930s saw the construction of autobahns primarily as a military advantage, construction of the Autobahn system provided employment for the masses affected by the crisis of the Weimar Republic The construction of the Autobahn had a side benefit of creating a new tourist industry.

For our country, we certainly must come up with a job creation program that is effectively and efficiently managed. The following programmatic suggestions are made;
1. The Rural Roads Program could be expanded and must involve maintenance of feeder roads along the lines of the PUSH project;
2. The Clean Towns Project which could be introduced and this could involve painting public buildings and city clean-ups and create more than 5,000 net new urban jobs by 2015;
3. Promoting micro and small enterprises in the informal economy consistent with Article 20 of the PF Manifesto which is very clear on this. Alll that is needed is plain implementation. The fact that the informal economy has become such a sizeable place of work should make it a special target for actions to reduce poverty. In this regard, special attention could be paid to the following: . Coordinating efforts that offer assistance to micro and small enterprises. Within this context,
- access of small entrepreneurs to credit and to land resources should be facilitated through cooperation between government and the private sector. There is no justifiable reason to suspend the work of the Citizen Empowerment Commission. To the contrary, if Managers have been found wanting by the PF government, they should allow the normal course of Law to visit the accused. There is no justification to close the institution as the case is now. Zambia suffers opportunity costs. . - Providing financial support for technical training, business development, and credit access programmes institutions involved in Small Scale Enterprise promotion. It is important for the government to create an institution on the lines of the repealed Small Industries Organization which during its heydays was phenonmenal in supporting entrepreneurs .The current system where the ZDA took over the work of SIDO/SEDB and has marginalized SSMEs development and promotion was a disservice to Zambia’s efforts to promote industrialization programs.
- Registor and mentor 1,000 small enterprises and train more than 5,000 entrepreneurs in business and technical skills.
- Building more industrial estates and premises for small enterprise manufacturing and trading. The formation of more industrial estates such as the Chinika complex and Makeni Complex in Lusaka can help realize this in an organized way.
4 Supporting agriculture and rural development strategies to create 20,000 net new jobs for rural people and that more than 500,000 small farmers are organized in out grower schemes by 2015: within this, special attention should be paid to:
. The building of feeder roads, bridges and communication networks using labour-intensive methods. . Construction of residential houses (3 million national deficit) and public buildings- introduce government guaranteed social housing scheme to lacal councils as advocated by Art. 4 of the PF Manifesto.
. Land reform and extension services
. Construction of dams and irrigation facilities using the Rural Investment Fund.
. Supervised agriculture (e.g. out grower schemes) which must be undertaken using labour-intensive methods.
. Setting up community level organizations (or cooperatives) in order to facilitate the supply of inputs and access to finance, marketing, extension and veterinary services.
. Establishing more Integrated Resource Management Projects using village action groups along the lines of the Luangwa Integrated Development Project. .
. Use of village- level processing technologies for various oil seeds such as sunflower, castor and groundnuts and the setting up of agro processing industries in rural areas.
- Ensure that the proportion of workforce employed in non-agricultural industries is raised from 20% in 2009 to 65% in 2015
. Setting up of lapidary facilities in the small-scalegemestone mining areas and create 1,000 job opportunities.
- Tax the Mining companies equitably and fairly by re introducing windfall taxation
- Implement the Zambianization Policy to ensure that unless the skill is not available in Zambia, all employment shall be performed by Zambians.
5. Preserving jobs in the private sector by means of revising the tax regime and maintaining a constant monitoring of trade-offs in policy in order to ensure that no objective is achieved at the significant expense of another. Criminalizing the minimum wage as Statutory Instrument 35 signed by the Hon. Minister would appear to be inconsistent with advancing job creation and should therefore should be cancelled.
6. To strengthen the employability of labour, special attention should be paid to:
- Strengthening the availability of skills by supporting a substantial increase in private sector expenditure on training, augmenting skills and infrastructural development through an Infrastructure and Employment Investment Programme and by improving the interface between labour market needs and the education system.
- Improving the functioning of the labour market by establishing a Labor Market Information System (LMIS). A data base for the labour market must be established.
- Youth employment and skills development; The announcement by Minister Kambwili that the government plans in 2013 to introduce a compulsory six months youth national service skills development program will go a long way in supporting this initiative. The currently underutilized infrastructure in the Zambia National Service (ZNS) provides a ready avenue for both short term mopping up measures as well as long-term skills training initiatives. More than 250,000 School Leavers can be given skills at the Zambia National Service every year.
- Introducing a youth learner ship wage and a youth training subsidy for companies providing youth apprenticeship programmes and on-the -job training. There can be 100,000 young people receiving private sector on- the –job training every year by 2015and have a minimum of 150,000 youth on the TEVETA managed apprenticeships every year. This is consistent with Art. 9 of the PF Manifesto which provides for the government to collaborate with industry to provide learner ship/apprenticeship practical training.

The Challenge The most famous equation in physics is Einsteins’s E = MC squared. The equivalent for macroeconomis is GDP = C + I + G + NX (or X – M) where, C represents personal consumption on goods and services; I denote investment and refers to new business investment in both public and private sectors; G denotes government budget (i.e. revenue less expenditure); and NX denotes net exports.

According to many observers including our own Dambisa Moyo in her book “How the West Was Lost (2011)”, it is the process of managing those indicators that makes a difference in any country. A country must strive to deal with consumption by increasing savings which in turn will impact on increased industrial production and increased exports while at the same time, there is assurance that the government fiscal position ensures that any deficit can be financed.

An industrial policy aimed at providing supportive measures to promote sustainable enterprises is a historical necessity. The fact that in Zambia’s 1998 GDP which has not changed substantially ever since comprised consumption about 88%, investment constituted about 14.4% , government net revenue constituted about negative -6.6% and net exports constitutes negative -9.0% should make policy makers worried that their GDP is skewed towards consumption at the expense of production. There is need to change this so that net exports and investment take a bigger share in the GDP equation. The average United States GDP comprises for instance of about 70% consumption, investment of 15%, net government revenue of 15% and net exports of 5%. This is the norm in many rich and middle income countries.

So far, our country has been failing to address successfully the unemployment crisis. We agree with Daron Acemoglu and James Robinsom (2012) in their recent book “Why Nations Fail” that “nations fail because their extractive institutions do not create the incentives needed for people to save, invest and innovate.” Pp372 It is also true as Greg Mills in his insightful book “Why Africa is Poor” (2010) that Zambia is poor because its leaders make this choice. Zambia is not poor because it has been denied the market and financial means to compete, that it has no technical expertise, that Zambians are lazy, that Zambia lacks natural resources, that Zambia has no private sector, that Zambia’s population density is too low, that the land holding structure impedes entrepreneurship and that Zambia’s governance structures are weak. All these reasons are neither here or there. Our country is poor because those who have had power to rule over us made choices that condemned us to continued poverty.

As Zambia is part of the global village, we can learn a lot from the experience of other countries that have implemented employment creation programs. As noted in this essay, Job Creation Programs are undertaken by a government of a nation to assist unemployed members of the population in securing employment.

A cornerstone of Keynesian economics, job creation programs are especially common during times of high unemployment as is the case in Zambia presently. They may either concentrate on macroeconomic policy in order to increase the supply of jobs, or create more efficient means to pair employment seekers with their prospective employers. In the appendix, we have presented case studies of several countries that have successfully implemented job creation programs.

In 1933, John Maynard Keynes (1883-1946) published “The Means of Prosperity” in which he argued that unemployment could be reduced by counter cyclical public spending when an economy is down. This contradicted the classical treatment of unemployment to let wages go down until the demand for labour caught up with supply and to cut back on spending to compensate for the fall in tax receipts. Keynes believed, as many of policy makers do, that these policies were mistaken. Governments must intervene by spending money in public projects like roads and so on. And this is the theoretical premise on which job creation programs are anchored.

The best advice to our policy makers in Zambia is to adopt growth policies and abandon austerity programs that have not seen us make any meaningful headway against poverty eradication since we adopted structural adjustment programs. END

Appendix: Global Examples of Job Creation Programs

In this last section,we to present as an appendix a summary of studies conducted by other researchers. I am particulary indebted the study by Stephen Devereux and Colette Solomon Employment creation programmes: The international experience, Economic and Labour Market Analysis Department, International Labour Office, Geneva,August 2006. A summary of their cross country survey is presented in the following analysis. Even as the following is discussed and recommended for Zambia to consider adopting, it should be noted that, while the experiences of other countries with employment creation programmes is instructive and informative, each programme is designed and implemented in a particular context, and the impacts of each programme are highly context-specific. There is no guarantee that a programme that was successful (or unsuccessful) in Argentina or South Africa will succeed (or fail) elsewhere. Any lessons (or ‘non-lessons’) that are drawn for employment creation programmes from this cross-country review must therefore be drawn with caution, and carefully adapted to various diverse local circumstances between and even within countries.

One useful ‘lesson on lesson learning’ from South Africa is that successful experiences can be replicated across provinces, but that mechanisms for sharing and learning these lessons should be integrated into programme design. It is equally important to build in mechanisms for learning from mistakes and approaches that fail to achieve the intended objectives: ‘learning from failure’ is as important as ‘learning from success’.
Argentina:
The Government has formulated a Social Emergency Programme, one component of which is the Jefes y Jefas de Hogar workfare programme which started in 2001. The Programa Jefes had reached around 2 million beneficiaries by the end of 2003, providing them with about US $160 per month in exchange for work in community projects or training. The transfer amount was set low enough to target poor people and also not to discourage them from seeking more permanent jobs. The Programa Jefes was intended for unemployed household heads who have children at home. The design and implementation of Jefes builds on the success of its predecessor, the Trabajar programme. Targeted at the poor unemployed, Trabajar provided wages to beneficiaries in return for their work on small infrastructure projects proposed by local governments and NGOs. It was carried out over a period of six years, from 1997 to 2002, across all of Argentina’s 23 provinces.

The Labour Emergency Programme (PEL), started in 2001, provides temporary employment and vocational training to the unemployed, through projects that either create employment or affect employment creation. It contains a sub-programme for Community Development, which aims at creating productive employment for vulnerable women, especially heads of households. Activities specifically include those which are not traditionally performed by women, such as bricklaying, building and carpentry.
Bangladesh:
While the long-standing Food-For-Work (FFW) programme is the main employment creation programme in Bangladesh, the Rural Maintenance Programme (RMP) provides an interesting contrast and raises important considerations. The FFW programme is an umbrella of different projects which is implemented by several ministries with donor assistance. Donor support to the programme has been declining and, of the total foodgrains allocated under the programme in1999/00, about 60 per cent was provided by the Government. Since 1975, the FFW programme has created both food-waged employment to landless and marginal farmers during the slackagricultural season, as well as land infrastructure such as rural road construction and maintenance, irrigation channels, flood control and embankments.

In addition, the FFW Programme has had long-term development impacts such as improved nutrition and increased agricultural production. The RMP is a relatively small cash-based project run jointly by CARE Bangladesh and the Local Government Engineering Department (LGED). Poor women are given year-round work, such as the maintenance of rural earthen roads. Work has been undertaken on 75 per cent of such roads in the country. An average of 60,000 destitute women per year have been supported by the programme.

The RMP is funded with the proceeds of Canadian wheat monetized at the port of entry. While the FFW programme has clearly had demonstrable positive impacts on food security, the RMP programme has a zero leakage rate and is more cost-effective than FFW, because commodity handling costs are greatly reduced.

The RMP has also had important long-term developmental impacts, both economic and social. For one thing, introducing bank accounts for poor women has facilitated their savings behaviour and provided them with access to formal financial institutions, which they would not otherwise have had. Secondly, women have also been given an opportunity to negotiate and self-manage infrastructure maintenance activities. Thirdly, in 1992 RMP began a phased approach which allowed women to stay in the programme for four years, after which they are expected to ‘graduate’ out of RMP into self-supporting income-generating activities.

India:
Employment Guarantee Scheme of Maharashtra (EGS): The EGS was introduced in 1972/73, when the State of Maharashtra faced an acute drought. It was given statutory status in 1979. The EGS Act provides that any adult person in rural Maharashtra has a right to work as an unskilled manual labourer, provided they register at the local level as a person seeking work. The State must provide work within 15 days of being demanded. The permissible works are rural, especially agricultural, infrastructure (which includes minor irrigation works), soil conservation, afforestation, de-silting of tanks, stone-cutting and road construction and maintenance. Wages are paid at piece rates and, while initially lower than market wages, in 1985 a Minimum Wage Act was passed to regulate EGS wages.

Financing for the EGS is raised from additional taxes imposed on citizens of Maharashtra by the State administration, which are paid mainly by the urban professional classes. Jawahar Rojgar Yojana (JRY): Launched in 1989 by merging two operational programmes, the National Rural Employment Programme (NREP) and the Rural Landless Employment Guarantee Programme (RLEGP), JRY was the biggest employment programme ever sponsored by the Government of India. A centrally sponsored scheme, like its predecessors, 80 per cent of JRY funding came from central government. An important and novel innovation is that 80 per cent of the combined central and state budgets for JRY were released directly to the Village Panchayat, to be utilised for village works, with the remaining 20 per cent being spent by the District Rural Development Agency (DRDA). This devolution of power and funds to the village level was considered a bold initiative.The primary objective of JRY was the generation of gainful employment for rural unemployed and under-employed men and women living below the poverty line. The secondary objective was to create a base for sustainable employment by improving rural economic infrastructure, and creating direct community and social assets for the poor, particularly scheduled castes and scheduled tribes. There was a stipulation that 30 per cent of employment opportunities should be given to women. JRY was initially dispersed throughout India, without any specific focus on ‘backward areas’ until late 1993, when it started to concentrate on ‘backward districts’.The JRY has been restructured and renamed, and is no longer an employment creation programme, but a rural infrastructure development programme.

Under the Jawahar Gram Samridhi Yojana (JGSY), as it is now called, each Gram Panchayat has the responsibility of preparing an annual action plan for taking up works, according to the felt needs of the people. The stipulation that 60 per cent of the budget be allocated to wages and no more than 40 per cent to materials is no longer operative. However, the types of works that are taken up at the village-level are inevitably labour-intensive.

The Employment Assurance Scheme (EAS): Broadly modelled on the Maharashtra Employment Guarantee Scheme, the EAS was launched in 1993/94 in 1,772 identified backward blocks located in drought-prone, desert, tribal and hill areas. EAS outlay in 1994/95 was Rs.8.5 million per block.The primary objective of this programme was the creation of additional wage employment in lean seasons. The secondary objective was the creation of durable economic and social assets. There per cent on minor irrigation, 20 per cent on rural roads and 20 per cent on construction of school and pre-school buildings (anganwadis).

EAS was restructured in April 1999. It is a single wageemployment programme and is no longer demand-driven. Fixed annual outlays are made for each state. These are based on the incidence of poverty, with the poorer states receiving relatively more funds. Allocations are based on an ‘index of backwardness’, which gives 50 per cent weight to the inverse of agricultural productivity and 50 per cent to the proportion of scheduled castes and scheduled tribes in the population. While 70 per cent of the funds allocated for each district are further distributed among the blocks, 30 per cent is retained at the district level to be used in areas of distress or those experiencing labour migration.

Another successor scheme to JRY is the intensified JRY (IJRY) programme. Based on criteria like low agricultural productivity, commercial and industrial backwardness and a high concentration of scheduled castes and scheduled tribes (SC/ST), 120 districts have been identified as IJRY districts. In 1994/95, outlay per district on IJRY was Rs.73 million.

Finally, the JRY ‘umbrella’ scheme subsumed special innovative projects, and aimed at addressing specific problems faced by the rural poor in each district. The Ministry of Rural Development earmarked Rs.1,000 million for this scheme in 1994/95. In 2005, under its National Common Minimum Programme, the Government of India made a commitment to enact a National Rural Employment Guarantee Act. This will “provide for the enhancement of livelihood security of the poor households in rural areas of the country by providing at least one hundred days of guaranteed employment in every financial year to every household whose adult members volunteer to do unskilled manual work” (Government of India,2005). Employment shall, as far as possible, be provided within a radius of five kilometres of the household’s village. Each State Government will prepare an Employment Guarantee Programme, which will include the undertaking of productive works that contribute to the creation of “durable assets”. Wages will be paid either wholly in cash or in cash and in kind.

Indonesia:
In response to the financial crisis, was a package of emergency job creation measures, collectively known as Padat Karya, to provide assistance to those who had lost their employment in the formal sector. This initiative was in effect a revival of earlier labour-intensive job creation programmes, also referred to as Padat Karya, which had built infrastructure such as village roads, schools and irrigation channels throughout rural Indonesia during the 1970s and 1980s. As with the earlier interventions, the Social Safety Net was not one single job creation programme, but a variety of disparate projects grouped together.

What these projects had in common was that they theoretically drew on labour-intensive methods, to undertake small-scale village-based infrastructure or public works projects, thus providing opportunities to local unemployed or under-employed labour. Since its re-launch in 1998, Padat Karya has expanded to comprise 13 sub-programmes, involving 8 executing agencies and reaching more than 300 districts. It is mainly funded through reallocated funds from ongoing loans from donor agencies and other redirected resources, as well as from other newly designed initiatives. In response to criticisms that the Social Safety Net schemes were poorly planned and hastily implemented, several new initiatives have been developed, including new employment programmes that emphasise empowerment and use community-based approaches to generate employment and incomes.

South Africa:
Unlike many parts of the world where unemployment is largely cyclical – e.g. seasonal due to slack periods in agricultural production – in South Africa the causes of unemployment are structural and historical, which presents particular challenges. One response has been the Government’s launch of the Expanded Public Works Programme (EPWP) in April 2004. Coordinated by the Department of Public Works, the EPWP is a nationwide initiative aimed at creating temporary employment for hundreds of thousands of unemployed South Africans, developing the skills of the unemployed, and providing essential social services and physical infrastructure to disadvantaged communities. The EPWP covers all spheres of government and state-owned enterprises, and involves reorienting line budget functions and conditional grants, so that government expenditure results in more work opportunities, particularly for unskilled labour. There is agreement that the EPWP must make use of appropriate technology, should substitute machines for labour wherever possible, should not displace existing permanent jobs, and that all opportunities must meet a real demand for services.

Tanzania:
The Dar es Salaam experience: After the serious failure of public-sector solid waste collection in Dar es Salaam, a city consultation identified solid waste management as the key priority within the city. Over the last years, the Dar es Salaam City Council, with support from ILO and others, has made significant progress in tackling the problem. The government has adopted by-laws regulating the waste collection and the three municipalities in Dar es Salaam have formally advertized, tendered and awarded contracts to micro-enterprises for waste collection and street sweeping. The households generating the waste pay directly to the waste collection enterprises.

Much has been achieved in terms of employment creation, income generation, social integration, waste collected and disposed, area covered and environmental cleanliness in general: • More than 2000 jobs have been directly created and 50 micro enterprises are involved in waste collection, some of which are community-based enterprises. These jobs are primarily held by poor women and men. Child labour in waste collection has been eliminated where formal waste collectors are operating effectively. • The cleanliness of the city has been improved and the waste collected and disposed on the official waste dumpsite has dramatically increased since 1995 and now covers 40 % of the total household waste generated in the city: END

DOLARIZATION AND KWACHA REBASING NEED MORE CONSULTATION

2012-07-08T13:45:00.002-07:00

BY: DR MBITA CHITALA - Executive Director – Zambia Research Foundation Following the understandable rejection and criticism of parts and process of the currency reforms that the Hon. Minister of Finance Alexander Bwalya Chikwanda and the Bank of Zambia have initiated, it is important that the rejections are put into context. It is well known that currency reforms are usually carried out by states to normalize monetary circulation and strengthen monetary systems and they take many forms including deflation, nullification, revaluation, devaluation and so on. In Zambia’s case, we have involved two aspects in our currency reform, namely, 1. Finance Minister Chikwanda signing a Statutory Instrument prohibiting the quoting and pricing of goods and services in foreign currency which appeared to criminalize dollarization and; 2. The announcement on 25 January, 2012 by Bank of Zambia in its Press Release that the PF Government had on 23rd January, 2012 approved their recommendation to rebase the Kwacha by dividing the existing banknotes by 1,000 which effect will cause the cancellation of three zeros on the existing banknotes. Dollariztion Currency substitution or dollarization is a phenomenon where a government allows the use of other foreign currencies to operate side by side with other currencies. This is the policy Zambia adopted on 29 January,1994 when it repealed the Exchange Control Act and abolished exchange controls in an effort to quickly stabilize the exchange rate and gain international credibility. This has worked well since then and a reversal to this policy would appear to be reactionary. Though the Law Association of Zambia has commented that Statutory Instrument 33 of 2012 which criminalized quoting and pricing of goods and services in foreign currency and signed by Hon Finance Minister AB Chikwanda was ultra vires the constitution and that it was therefore a nullity ab initio, it is also true that currency substitution or dollarization tends to undermine our government’s fiscal ability. A sober analysis must be made to determine the cost benefit of doing away with exchange controls since 1994. To some people which appears to include the Hon Chikwanda, in the years that our government allowed currency substitution (1994 to date), our country lost the ability to finance expenditure by printing money. The government also assumed the cost of obtaining the foreign currency that replaced the Kwacha. These costs are of course difficult to calculate but they are high. Dollarization, it has been argued, has prevented our policy makers to exercise any policy autonomy whatsoever and has tended to eliminate the Kwacha (which is one powerful symbol of our national identity and independence) as our national currency. On the other hand, many observers see the repeal of exchange controls allowing for partial currency substitution where the Kwacha was allowed to circulate alongside the US Dollar and other convertible currencies, was the best economic policy as it led to the stabilization of the Kwacha and brought about credibility of the Zambian economy. Following on this argument, the Zambia Association of Chambers of Commerce and Industry (ZACCI) represented by their Vice Chairman for the Northern Region Raj Karamuchand has criticized the introduction of Statutory Instrument No, 33 and argued that it must be withdrawn as it has “the potential of sending wrong message to would be investors and may curtail investment and foreign currency flows. This may lead to the depreciation of the Kwacha and increase inflation levels in the country…..The regulations have also the potential to create distortions in the economy which can boost informal activities at the expense of the formal economy, with adverse effects on the official sources of foreign currency sources and government revenue. The anxiety expressed by the ZACCI has been supported differently by other stake holders such as farmers growing wheat, soya beans, cotton and other export cash crops. The Mining companies who control more than 70% of our export earnings appear to be excused since they currently enjoy Development Agreements which allow them to bank all their export earnings overseas and continue to cheat on Zambia by exporting using FOB considerations but claiming CIF when they invoice for tax purposes. It is important that the government unambiguously states its policy. Is the country reverting to exchange controls as is the case in our neighboring countries including South Africa or we should continue as we have been since 1994 but repeal regulations that prevent investable money from coming to Zambia such as the one sided and subjective money laundering regulations. It is advisable that Minister Chikwanda consults a little more before unleashing potentially injurious policy directives such as the ones in the current currency reforms. Rebasing of the Kwacha Rebasing or redenomination of the Kwacha is another policy scheme which Minister Chikwanda together with the Bank of Zambia have decided to implement without much consensual agreement with the broad society. Contracts for this scheme have already been awarded and a campaign to explain the policy is ensuing. Rebasing in simple language refers to the reduction in the par value of the Kwacha.The question to be asked is what is the rationale for Zambia engaging itself in rebasing its currency? There are two views on rebasing the Kwacha. First, that it is justified to rebase the Kwacha since rebasing or redenomination of the Kwacha according to the Bank of Zambia is aimed at addressing the costs associated with the accumulated depreciation of the Kwacha since 1991 which they allege had undermined the basic function of the Kwacha and furthermore created transaction difficulties. It is argued that since inflation has been broken and Zambia now qualifies as a moderately stable economy with high public confidence in the economy, we can now rebase the Kwacha. This reasons advanced by Bank of Zambia is debatable. It is true that inflation in 1993 was 188% but it not so anymore. It has been below 10% for a couple of years. In all countries where reebasing was done, inflation was very high. For instance Angola reebased its currency in 1995 when inflation rate was 2,672 % while Brazil did the same when inflation in 1994 was 2076%. Now, Zambia’s inflation rate has been below 7% lately and very stable. Public confidence in the economy is very high as evidenced by the growth of FDI in the country. Instead of using this stability argument as the reason for rebasing, on the contrary, it is a good argument for not rebasing the Kwacha at all and leave the status quo. Some policy analysts therefore contend that rebasing the Kwacha is not economically justified. It is a costly inconvenience. Furthermore, contrary to the BOZ that there will be no loss of value, the fact is that, there will be a reduction in the par value of the Kwacha. The new unit of the Kwacha shall replace the old unit with a certain ratio. A similar reform occurred in Ghana where Ghana replaced the old 10,000 Cedi with a new 1 Ghana Cedi by removing four zeros from the old currency. When the reform was implemented in Ghana, it resulted in the birth of an entirely new currency with new symbols. Similarly, Argentina in January, 1992 rebased its currency by re-introducing peso to replace the austral at the rate of 1 peso=10,000 australs, and then pegged its international exchange rate at 1 peso=1US$. After rebasing ,inflation dropped from 172% in 1991 to 1% in 1998. However, the fixed exchange rate which was 1 peso= 1 US$ led to constant flight of dollars and led eventually to de industrialization, unemployment and general recession. In 2001, Argentina abandoned the exchange rate peg and the peso depreciated by 240% and inflation rose from negative levels to 25.9% in 2002 and now has stabilized at 9.6% while international exchange hovers around 3 peso = 1 US$. Of course one good reason why rebasing or redenomination of currencies are implemented is to allow governments to reassert their monetary sovereignty. If citizens and residents lose confidence in the national currency, they may start to use foreign currencies, in other words, they may engage in currency substitution . This can be a psychological and economic blow to a government as the economic policy of a country will be at the mercy of foreign capital and foreign central banks. That is why it is considered important that the government symbolically convinces Zambians that the Kwacha is a worthy currency and that hyperinflation is now a thing of the past by rebasing the Kwacha. Rebasing of the Kwacha can further be justified if it is argued that the PF government intends to make the country attractive to Foreign Direct Investment (FDI). In other words, FDI will come to Zambia if the Kwacha is directly and easily linked and monitored by the world reserve currency the US Dollar which effect will increase FDI confidence in the Kwacha. However, this poses onerous challenges on the government and the Bank of Zambia. The monetary authorities must ensure that inflation will be strictly controlled and that the Kwacha value relative to all foreign currencies will be sustained. In other words, this will mean the Bank of Zambia shifting from their current monetary targeting as agreed with the IMF currently to inflation targeting with all its challenges. The Future Currency reforms should never be used or designed to punish people or to expropriate much of peoples savings as occurred in North Korea in 2009 which resulted in so much damage to Korea and where media reports indicated that the alleged responsible official Park Nam-Ki was dismissed and reportedly executed for his failure to lead the currency exchange successfully. The current currency reforms need not be rushed nor should commentators be told that this is a fait accompli. We should learn from the examples of other countries including our neighbor Zimbabwe and North Korea so that we do not repeat the same costly mistakes. The Statutory Instrument Number 33 of 2016 signed by Hon Chikwanda should be momentarily be suspended to allow for further consultations as it may be unlawful and injurious to our economy. The rebasing of our Kwacha, though, from the economic point of view was unnecessary, needs to be managed well so that the monetary authorities continue to effectively manage the general price level – so that Zambia continues to enjoy low inflation. Email:mbitachitala@yahoo.co.uk www.mbitachitala.blogspot.co. Mobile: 0976 030398

2012-05-30T06:34:00.001-07:00

DR MBITA CHITALA – DIRECTOR, THE ZAMBIA RESEARCH FOUNDATION The Draft Constitution prepared by the Technical Committee on Drafting the Zambian Constitution (TCDZC) is a progressive document and provides a forum on which national consensus can be built. It however needs to be strengthened by addressing a few omissions and flaws that are clearly discernible from the draft. It is also important that since His Honour the Vice President Guy Scott on the BBC interview “Hardtalk” announced that we may have a national referendum before the end of this year, the Technical Committee or the Hon. Minister of Justice should be alive to this timing and provide the nation with a schedule that will enable the nation reach consensus and adopt the constitution.The current uncertainty regarding the time-frame the final draft will be available, when the Referendum will be held and when the new constitution will take effect, is not good for public plicy consideration. It is further worsened by the fact that the Technical Committee, by sending teams to all provinces to explain the constitution. is in contravention of their Terms of Reference of their committee as they are not supposed to start influencing public opinion. Rather, they should leave that responsibility to civil society. The tragedy is that the committee is a creation of the Enquiries Act and not on a specific Act as was the case with the NCC and so the committees' work is subject to abuse as it has been with other commissions in the past. As it is not known yet how citizens will usefully impact on the draft constitution, it will be necessary for the TCDZC to consider the following articles before drafting the final draft which will then be subjected to a National Referendum. PREAMBLE: The Paragraph reading “Declare the Republic a Christian Nation ……” appears to be contradictory to Art 27(1) which protects citizens from discrimination on grounds of religion and Art 35 which provides for freedom of religion and conscience. The multi-religious character of our nation can be added in the paragraph that “Recognizes the multi-ethnic, multi-cultural and multi-religious character of our nation”. Freedom of worship should not be used to infringe onto other peoples comforts however few they may be. Zambia should not adopt a State Religion. This is also a clear case where any Constitutional Court would rule the provision as being unconstitutional. PART II – THE REPUBLIC OF ZAMBIA AND ITS SOVEREIGNTY: There is need to add a new clause 5(4): “For purposes of Clause (5), the formation of provinces and districts shall not be treated as establishment of new states. PART V11 – BILL OF RIGHTS: Article 32(2) providing for security of person to include two more sub clauses (c) not to be removed or extradited from Zambia and (b) not to be deprived of life intentionally. This is consistent with civilized international practice. The article on the retention of capital punishment should be deleted as it is an affront to all civilized behavior. Article 53 on older members of society needs to include following clause: (a)to remove the ambiguity,older members of society are all persons above the official retirement age. (b) The state shall provide for their benefits under an Act of Parliament ( Benefits to include such services as free medical attention, half fare on transport costs, lower tax rates etc. In Art 54, there is need to define concept of “Family” as referring to nuclear, extended and any union accepted by customary and international law. Art 37 should be re titled “Right of Access to Information” and Parliament should enact a law to provide for this. Art. 65 should include workers rights to fair compensation, reasonable working conditions, to form and join trade unions, for employers rights to form employer organizations and for the right to collective bargaining. There is need to have a new article on social security, to make social security a mandatory obligation of the state and such services should include shelter and other public goods such as roads and transportation. There is also need for the constitution to indicate the following in this Part: - Right of citizens to shelter and housing; food; water; and sanitation - Right of citizens not to obey unlawful instructions. PART VI – REPRESENTATION OF THE PEOPLE: Art. 80(1) on Independent and unopposed candidates to include the Presidential candidates - Need to provide an article to provide that bye elections will only be limited to independent candidate s Art. 105 (4) should provide that it is two thirds of eligible voters for a motion to impeach the President to pass and not only those attending to vote. Art. 121 on Provincial Ministers. Designation should change to Provincial Governors or Commissioners and the Constitution should provide for their election. - Provincial Governors and Deputy Governors must be elected by voters in Provinces instead of being appointed by the President - Ministers and Governors together with their Deputies must also attend Parliament to explain government policy and work as ex officios. Art. 122 providing for creation of Parliamentary Secretaries should be deleted as it is an unnecessary cost. - Ministers should attend parliament as Ex officios and non voting members. - Parliamentary Secretaries could then deputize for Ministers. Art. 142 should provide that the Vice President shall be the Leader of Government Business in Parliament instead of a Parliamentary Secretary. Alternatively,we should take the Chona Recommendations that provided for the possiblity of a coalition government.If this accepted, thenn there will be no need for running mate for the President.In this scenario, the President would then have the role of asking the majority party or coalition of parties in Parliament to form government.The leader of such a grouping would then be called a Prime Minister. In such a scheme, there would need to make consequential ammends to the draft to reflect this position. PART V11 – EXCUTIVE: Art 97 providing for a minimum age of 35 years to be elected and serve as President should also provide for a maximum age of 75 years as beyond that, most Zambians become senile and need to rest and enjoy their pensions. Art 103 on Tenure of Office of the President, the constitution should also provide that it will be an offence for a person who has lost elections or been removed as provided in the constitution to refuse to vacate office within the period provided in the constitution. PART VII1 – LEGISLATURE: Art. 143 Code of Conduct for MPs. This part should provide for the creation by the constitution of an organ to ascertain information provided and penalties – otherwise it is academic in its present form. An independent Ethics Commission or the Office of Public Protector would suffice. The current system where declarations are lodged with the Chief Justice is inherently wrong as the courts are appellant institutions. Art 143 on code of conduct should also provide for voters to have a right to recall an MP or Counsellor and that Parliament will enact legislation to this effect providing for grounds and the process for recall. PART IX – JUDICIARY: There is need to combine functions of Supreme Court , Constitutional Court and Court of Appeal into one to function as is and when need arises. There is no need to overburden our small economy with too many consumptive institutions. Art. 165 on Financial Independence of the Judiciary is neither here nor there. All government departments can demand the same independence. Our system is based on limited government principles. PART X- GENERAL PRINCIPLES OF DEVOLVED GOVERNANCE: The draft presentation is fine although we were warned by Prof. Patrick Mvunga SC that our constitution should not be too talkative. PART X1 – PROVINCIAL ADMINISTRATION: This part is most important for many patriots as the challenges of our country continuing to be a unitary state is anchored on this. It is important that devolution based on democratic principles is achieved. It is likely that without reaching consensus on this, the constitution making process risks to fail like the RB Banda proposals. Art. 202 on Provincial Minister should change, the designation should change to Provincial Governor of Commissioner. The position must be elective by the Provincial Electorate and not to be appointed by the President as is currently drafted. This robs the demand by the people for devolution. Art. 203 on Provincial Assemblies. Its composition must also be elective. The composition should include the Provincial Governor and his Deputy who will be a running mate, two elected representatives from each constituency. The elected Mayors/Chairmen of councils shall be ex officios. The proposed composition in the draft constitution comprising of unelected people is not only unnecessarily expensive but it is also un democratic. Furthermore, the powers of the Provincial Councils should include revenue raising from programs approved by Parliament. An equalization Fund for the provinces must be established by Parliament. CAPITAL CITY OF LUSAKA: There is need to create the Greater Lusaka Authority as the Capital of Zambia and establish for a Lusaka Authority, a Lusaka Assembly and an elected Mayor on the lines of Washington DC or London. PART XII – LOCAL GOVERNMENT: Art. 211(2) needs to be inserted to provide that Local Government shall (h) ensure equitable sharing of national and local resources. Art. 215 (5) should be inserted to provide for removal of mayors/chairmen , disciplinary matters , creation of boundaries . PART XIII - CHIEFTAINCY AND HOUSE OF CHIEFS: Article 227 should be expanded to provide for the establishment of “Community Development Funds” in each district for the purpose of advancing development in each chieftainship. These funds under colonial rule were called “Native Authority Treasuries” for each “tribe” as the nationalities were known then. Furthermore, since the Chieftainships are corporation sole as provided in Article 226(a) of the draft constitution, and with power to manage land and other natural resources as provided in Article 227(2), it is necessary to protect chiefs from being corrupted by land speculators and all manners of conmen by creating these community funds in which land royalties and other presents can be pooled and managed for the traditional communities. Parliament will then provide the appropriate legislation to manage these funds. PART XIV- PUBLIC SERVICE COMMISSIONS: There should be included in the Constitution a clause establishing and providing for the functions and powers of statutory institutions and parastatal companies. There is need to for the Constitution to create a Regulatory Body to supervise parastals and statutory institutions. In addition to the Commission suggested in the Draft Constitution, there should also be the Financial and Fiscal Commission to replace the ineffective Economic Advisory Council; National Land Commission – to superintend on all land matters and the Public Debt Management Office/Commission. PART XVII – PUBLIC FINANCE AND BUDGET: Article 265 on imposition of taxes should also provide for - Principles that will guide Zambia’s public finance such as accountability, equity, fair taxation and expenditure management as well as prudency and needs of future generations . The constitution should also create an Equalization Fund to support local government Article 283 on management of public debt should provide for the establishment of a Debt Management Office/Commission to centralize the currently haphazard management of finance and fiscal functions which have been abating corruption and abuses. PART XIX – LAND AND PROPERTY: Article 293 on Basis of Land Policy should include as Art 287(i) the objective of “Elimination of gender discrimination”. Article 295 on Classification of Land should delete “customary land” and substitute with “Community Land”. Customary land denotes tribal land which is anathema to Zambia as a unitary state. It is also advisable to replace classification of “State Land” with “Public Land” as the concept state in this context is meaningless. The constitution should also provide for Private Land which shall be held on freehold terms. This is the case in community lands (customary Land). Article 292 on land tenure should include as article 292(5) a clause that land under “customary” classification can only be alienated to non-citizens on the basis of co-ownership with the chieftaincy and on which royalties will be paid to the Chieftaincy. Article 291 on the vesting of land in the President should be deleted and provide that land will be vested in the National Land Commission which will be a corporate sole . There is need to remove the one party practice and democratize land administration. The constitution should also establish a Land Development Fund and Parliament will provide legislation on its management. PART XX – AMENDMENT OF CONSTITUTION: In addition to the clauses in the draft constitution, there is also need to provide the constitution can be amended without a referendum by either parliamentary initiative and/or by popular initiative after collecting one million signatures of citizens. This completes the process and gives citizens avenues that can be less costly but consensual. PART XXI – GENERAL PROVISIONS; The constitution should provide the following additional provisions: a. That all international agreements shall be tabled in Parliament b. That state organs may delegate any power or function to other state organs c. That the state shall abide by the principle of the right of self determination by communities. Dr. Mbita Chitala Executive Director Zambia Research Foundation Mobile: 0976 030398 Email: mbitachitala@yahoo.co.uk www.mbitachitala.blogspot.com

DRAFT ZAMBIAN CONSTITUTION IS PROGRESSIVE BUT NEEDS STRENGTHENING

2012-05-22T13:59:00.000-07:00

DR MBITA CHITALA – DIRECTOR, THE ZAMBIA RESEARCH FOUNDATION The Draft Constitution prepared by the Technical Committee on Drafting the Zambian Constitution (TCDZC) is a progressive document and provides a forum on which national consensus can be built. It however needs to be strengthened by addressing a few omissions and flaws that are clearly discernible from the draft. It is also important that since His Honour the Vice President Guy Scott on the BBC interview “Hardtalk” announced that we may have a national referendum before the end of this year, the Technical Committee or the Hon. Minister of Justice should be alive to this timing and provide the nation with a schedule that will enable the nation reach consensus and adopt the constitution.The current uncertainty regarding the time-frame the final draft will be available, when the Referendum will be held and when the new constitution will take effect, is not good for public plicy consideration. It is further worsened by the fact that the Technical Committee, by sending teams to all provinces to explain the constitution. is in contravention of their Terms of Reference of their committee as they are not supposed to start influencing public opinion. Rather, they should leave that responsibility to civil society. The tragedy is that the committee is a creation of the Enquiries Act and not on a specific Act as was the case with the NCC and so the committees' work is subject to abuse as it has been with other commissions in the past. As it is not known yet how citizens will usefully impact on the draft constitution, it will be necessary for the TCDZC to consider the following articles before drafting the final draft which will then be subjected to a National Referendum. PREAMBLE: The Paragraph reading “Declare the Republic a Christian Nation ……” appears to be contradictory to Art 27(1) which protects citizens from discrimination on grounds of religion and Art 35 which provides for freedom of religion and conscience. The multi-religious character of our nation can be added in the paragraph that “Recognizes the multi-ethnic, multi-cultural and multi-religious character of our nation”. Freedom of worship should not be used to infringe onto other peoples comforts however few they may be. Zambia should not adopt a State Religion. This is also a clear case where any Constitutional Court would rule the provision as being unconstitutional. PART II – THE REPUBLIC OF ZAMBIA AND ITS SOVEREIGNTY: There is need to add a new clause 5(4): “For purposes of Clause (5), the formation of provinces and districts shall not be treated as establishment of new states. PART V11 – BILL OF RIGHTS: Article 32(2) providing for security of person to include two more sub clauses (c) not to be removed or extradited from Zambia and (b) not to be deprived of life intentionally. This is consistent with civilized international practice. The article on the retention of capital punishment should be deleted as it is an affront to all civilized behavior. Article 53 on older members of society needs to include following clause: (a)to remove the ambiguity,older members of society are all persons above the official retirement age. (b) The state shall provide for their benefits under an Act of Parliament ( Benefits to include such services as free medical attention, half fare on transport costs, lower tax rates etc. In Art 54, there is need to define concept of “Family” as referring to nuclear, extended and any union accepted by customary and international law. Art 37 should be re titled “Right of Access to Information” and Parliament should enact a law to provide for this. Art. 65 should include workers rights to fair compensation, reasonable working conditions, to form and join trade unions, for employers rights to form employer organizations and for the right to collective bargaining. There is need to have a new article on social security, to make social security a mandatory obligation of the state and such services should include shelter and other public goods such as roads and transportation. There is also need for the constitution to indicate the following in this Part: - Right of citizens to shelter and housing; food; water; and sanitation - Right of citizens not to obey unlawful instructions. PART VI – REPRESENTATION OF THE EOPLE: Art. 80(1) on Independent and unopposed candidates to include the Presidential candidates - Need to provide an article to provide that bye elections will only be limited to independent candidate s Art. 105 (4) should provide that it is two thirds of eligible voters for a motion to impeach the President to pass and not only those attending to vote. Art. 121 on Provincial Ministers. Designation should change to Provincial Governors or Commissioners and the Constitution should provide for their election. - Provincial Governors and Deputy Governors must be elected by voters in Provinces instead of being appointed by the President - Ministers and Governors together with their Deputies must also attend Parliament to explain government policy and work as ex officios. Art. 122 providing for creation of Parliamentary Secretaries should be deleted as it is an unnecessary cost. - Ministers should attend parliament as Ex officios and non voting members. - Parliamentary Secretaries could then deputize for Ministers. Art. 142 should provide that the Vice President shall be the Leader of Government Business in Parliament instead of a Parliamentary Secretary. PART V11 – EXCUTIVE: Art 97 providing for a minimum age of 35 years to be elected and serve as President should also provide for a maximum age of 75 years as beyond that, most Zambians become senile and need to rest and enjoy their pensions. Art 103 on Tenure of Office of the President, the constitution should also provide that it will be an offence for a person who has lost elections or been removed as provided in the constitution to refuse to vacate office within the period provided in the constitution. PART VII1 – LEGISLATURE: Art. 143 Code of Conduct for MPs. This part should provide for the creation by the constitution of an organ to ascertain information provided and penalties – otherwise it is academic in its present form. An independent Ethics Commission or the Office of Public Protector would suffice. The current system where declarations are lodged with the Chief Justice is inherently wrong as the courts are appellant institutions. Art 143 on code of conduct should also provide for voters to have a right to recall an MP or Counsellor and that Parliament will enact legislation to this effect providing for grounds and the process for recall. PART IX – JUDICIARY: There is need to combine functions of Supreme Court , Constitutional Court and Court of Appeal into one to function as is and when need arises. There is no need to overburden our small economy with too many consumptive institutions. Art. 165 on Financial Independence of the Judiciary is neither here nor there. All government departments can demand the same independence. Our system is based on limited government principles. PART X- GENERAL PRINCIPLES OF DEVOLVED GOVERNANCE: The draft presentation is fine although we were warned by Prof. Patrick Mvunga SC that our constitution should not be too talkative. PART X1 – PROVINCIAL ADMINISTRATION: This part is most important for many patriots as the challenges of our country continuing to be a unitary state is anchored on this. It is important that devolution based on democratic principles is achieved. It is likely that without reaching consensus on this, the constitution making process risks to fail like the RB Banda proposals. Art. 202 on Provincial Minister should change, the designation should change to Provincial Governor of Commissioner. The position must be elective by the Provincial Electorate and not to be appointed by the President as is currently drafted. This robs the demand by the people for devolution. Art. 203 on Provincial Assemblies. Its composition must also be elective. The composition should include the Provincial Governor and his Deputy who will be a running mate, two elected representatives from each constituency. The elected Mayors/Chairmen of councils shall be ex officios. The proposed composition in the draft constitution comprising of unelected people is not only unnecessarily expensive but it is also un democratic. Furthermore, the powers of the Provincial Councils should include revenue raising from programs approved by Parliament. An equalization Fund for the provinces must be established by Parliament. CAPITAL CITY OF LUSAKA: There is need to create the Greater Lusaka Authority as the Capital of Zambia and establish for a Lusaka Authority, a Lusaka Assembly and an elected Mayor on the lines of Washington DC or London. PART XII – LOCAL GOVERNMENT: Art. 211(2) needs to be inserted to provide that Local Government shall (h) ensure equitable sharing of national and local resources. Art. 215 (5) should be inserted to provide for removal of mayors/chairmen , disciplinary matters , creation of boundaries . PART XIII - CHIEFTAINCY AND HOUSE OF CHIEFS: Article 227 should be expanded to provide for the establishment of “Community Development Funds” in each district for the purpose of advancing development in each chieftainship. These funds under colonial rule were called “Native Authority Treasuries” for each “tribe” as the nationalities were known then. Furthermore, since the Chieftainships are corporation sole as provided in Article 226(a) of the draft constitution, and with power to manage land and other natural resources as provided in Article 227(2), it is necessary to protect chiefs from being corrupted by land speculators and all manners of conmen by creating these community funds in which land royalties and other presents can be pooled and managed for the traditional communities. Parliament will then provide the appropriate legislation to manage these funds. PART XIV- PUBLIC SERVICE COMMISSIONS: There should be included in the Constitution a clause establishing and providing for the functions and powers of statutory institutions and parastatal companies. There is need to for the Constitution to create a Regulatory Body to supervise parastals and statutory institutions. In addition to the Commission suggested in the Draft Constitution, there should also be the Financial and Fiscal Commission to replace the ineffective Economic Advisory Council; National Land Commission – to superintend on all land matters and the Public Debt Management Office/Commission. PART XVII – PUBLIC FINANCE AND BUDGET: Article 265 on imposition of taxes should also provide for - Principles that will guide Zambia’s public finance such as accountability, equity, fair taxation and expenditure management as well as prudency and needs of future generations . The constitution should also create an Equalization Fund to support local government Article 283 on management of public debt should provide for the establishment of a Debt Management Office/Commission to centralize the currently haphazard management of finance and fiscal functions which have been abating corruption and abuses. PART XIX – LAND AND PROPERTY: Article 293 on Basis of Land Policy should include as Art 287(i) the objective of “Elimination of gender discrimination”. Article 295 on Classification of Land should delete “customary land” and substitute with “Community Land”. Customary land denotes tribal land which is anathema to Zambia as a unitary state. It is also advisable to replace classification of “State Land” with “Public Land” as the concept state in this context is meaningless. The constitution should also provide for Private Land which shall be held on freehold terms. This is the case in community lands (customary Land). Article 292 on land tenure should include as article 292(5) a clause that land under “customary” classification can only be alienated to non-citizens on the basis of co-ownership with the chieftaincy and on which royalties will be paid to the Chieftaincy. Article 291 on the vesting of land in the President should be deleted and provide that land will be vested in the National Land Commission which will be a corporate sole . There is need to remove the one party practice and democratize land administration. The constitution should also establish a Land Development Fund and Parliament will provide legislation on its management. PART XX – AMENDMENT OF CONSTITUTION: In addition to the clauses in the draft constitution, there is also need to provide the constitution can be amended without a referendum by either parliamentary initiative and/or by popular initiative after collecting one million signatures of citizens. This completes the process and gives citizens avenues that can be less costly but consensual. PART XXI – GENERAL PROVISIONS; The constitution should provide the following additional provisions: a. That all international agreements shall be tabled in Parliament b. That state organs may delegate any power or function to other state organs c. That the state shall abide by the principle of the right of self determination by communities. Dr. Mbita Chitala Executive Director Zambia Research Foundation Mobile: 0976 030398 Email: mbitachitala@yahoo.co.uk www.mbitachitala.blogspot.com

The Barotse Agreement 1964: Is it a Model for Decentralization in Zambia or is it about Secession

2012-03-30T05:25:00.002-07:00

(A PAPER TO THE ACCOUNTANTS FORUM ORGANIZED BY THE ZICA AT 18.000 HOURS ON FRIDAY 30 MARCH, 2012 AT ACCOUNTANTS PARK, LUSAKA)

BY: Dr. Mbita Chitala, Executive Director, Zambia Research Foundation

Introduction

I was invited to offer my insight into this question which I think is quite topical now. A few weeks ago I caused to be published an article in the Post Newspaper which attracted some review from many people. The Zambian Economist also published it on their website and sent it to many policy makers. I also posted it on my blog www.mbitachitala.blogspot.com . I suspect Mr. Kabeta must have read the article as he inundated me with telephone calls in which I reluctantly agreed to come and give this talk. I truly believe that there are other people more knowledgeable of this topic than me who can really help us understand the BA 1964. I have in mind people like H.E Dr. Kenneth Kaunda who signed the agreement, Mr. Sikota Wina who was a member of cabinet then. Others such as Dr. Mutumba Bull have published extensively on this. I am steeled however by the words of the old philosopher Pericles of Athens who died in 429 BC who said “ we hold as useless , a man who does not participate in public affairs. This, I think, cannot be me.

The organization of my presentation will therefore focus on the following:
1. Introduction
2. Bantu Occupation of Zambia
3. Creation of Barotseland
4. The Barotse Question
5. What should be done? Secession, Status Quo or Devolution
6. Proposal for Devolution of Power in Zambia
7. Conclusion

Bantu Occupation of Zambia

There is generally little debate on the colonial history of Zambia. Between 1600-1800 when Bantu speaking peoples from the citadel of Bantu civilization in the Congo occupied Southern/Central and Eastern Africa displacing pre-historical peoples such as the Bushmen, Twa, and Hottentots. They came to Zambia in three different directions, namely, from Congo and Angola; from Congo through Uganda along lake Tanganyika in the 15th century and from Southern Africa escaping from Shaka’s Mfecane wars. The latter is true for the Ngoni’s who crossed the Zambezi into Zambia in 1838 and the Kololo of Sebetwani who settled in the Barotse plains around the same time. As there was no writing then, the people were scantly scattered and one could not reasonably define the boundaries that different Bantu nationalities occupied. This only became possible with European colonization which was completed during the late 1800s as major European powers claimed territories of influence. This scramble for Africa culminated in the Berlin Conference of 1884-6, when the whole of Africa was formally divided and shared by the colonial powers. The territory we started calling Zambia in 1964, was part of Land in Central Africa ceded to the British on 19th September, 1893 in a Land and Mineral Concession Certificate of claim signed by Henry Hamilton Johnson - the Commissioner and Consul General for the territories under British influence on behalf of British Government and witnessed by James Francis Cunningham - Manager of the African Lakes Company Limited and Lord Monteith Fortherington - the Manager of the African Lakes Company Limited. The whole Region was then known as British Central Africa.

The name Barotseland was formulated by the British to distinguish the land where the Litunga Lubosi Lewanika I, rather than go to war like they did with other Bantu ethnicities/tribes to defend his area of influence, chose to sign an agreement with the British in which he ceded the land rights of his nationality peacefully.

Creation of Barotseland

The creation of the entity which came to be known as Barotseland has its origin with the Lochner Concession of 1887 and later the signing of the treaty in June 1890 when Frank Elliot Lochner as the representative of the British South Africa company (BSA co) signed a treaty with the Litunga of the Barotse people for protection against slave traders and in turn gave mineral exploration and mining rights in the land he claimed to control to the BSA company. These were the rights which the BSA company kept enjoying and extending at their will until they were revoked by the new Zambian government after independence.

The land of the Litunga where the Barotse – the Luyana people had sovereighnty was first defined in 1878 by Litunga Lewanika (who ruled from 1878-1916 with one break in 1884-5). In describing the Barotse Nation, he described true Barotseland as the Land in the Zambezi River Flood plain and about 40km East of Limulunga and Senanga (Gann, Rotberg). The capital of their territory was first at Naliele and later at Lealui.This characterization is historically correct as it agrees with the fact which affirms that from 1864 when the Basotho led by Sebitwane and who spoke kololo and had ruled Baroseland since 1838 were defeated and expelled by the Barotse (who now spoke a lingua franca known as Lozi and in some quarters came to be referred to as the Lozi people), the Boundary of the Lozi Nationality was restricted to the Zambezi valley. It was an enclave on the Barotse plains.

In subsequent years, the boundary of what the British Colonialists named as Barotseland kept shifting and was extended unilaterally by conquest or request for protection as other Bantu tribes were brought and made subject peoples of the Barotse Nationality.

Other references from where the boundary of Barotseland could be infered includes such documentation as the 11 June 1891 Treaty between Britain and Portugal, the Anglo – Portuguese Protocol of 1893, other records made by Major Goold Adams who in 1896 attempted to define the boundaries on behalf of the British,and Major Robert Coryndon who was appointed in 1897 as the first BSA representative in Barotseland.

More profoundly, the boundary of Barotseland is clearly described by the Litunga himself. On 25thJune, 1898 at a meeting held at Victoria Falls, the Litunga Lawenika together with 7 of his Counselors and witnessed by 5 other people on behalf of the Barotse Nationality, signed with R.T Coryndon - representing the British South Africa Company - a concession in which he ceded Land to the BSA Company that included “the whole territory of the Nation or any future extension there of including all subject and dependent territory.” (Rotberg, Gann) . The boundary of Barotseland defined as follows:

a) Northern Boundary – from the Headwaters of the Dongwe along Kabompo Rivers to the junction of the Kabompo and Zambezi rivers.

b) Western Boundary – from the junction of the Kabompo and Zambezi Rivers along the Zambezi River to its Junction with the Majili River.

c) Eastern Boundaries – from the Junction of Zambezi and Majili Rivers along the Majili River to its head water hence Northward along the line of the watershed at the Headwaters of the Dongwe River.

On the basis of the above description of Barotseland, in 1899, the British colonialists through an Order in Council created a new territory with new boundaries and called it “Barotseland-North Western Rhodesia”. At the same time in May, 1900, through the North Eastern Order in Council created a new territory known as North Eastern Rhodesia under the North Chartereland Company made of lands of the Ushi, Ngumbo, Mukulu, Chishinga, Bwile, Tabwa, Eastern Lunda, Bemba, Lungu, Mambwe, Bisa,. Namwanga, Tumbuka, Chewa, Nsenga, and Ngoni. The control of these areas was achieved by forcing Bantu Chiefs to sign concessions or by force of arms as happened to the Ngoni of Mpezeni, the Lunda of Kazambe and the Bembas. This territory was administered from Fort Jameson , now Chipata, up to 1911.

On the other hand, the British North Western Rhodesia comprised of the lands of the lands of the Lunda, Kaonde, Mushukulumbwe, Toka, Lamba, Lenje, Swaka, Lala, Soli. The territory was first administered from Lealui by Robert Coryndon but shifted later to Kalomo in 1902 and to Livingstone in 1907.
In 1900, Lewanika signed a concession with the BSA co. which gave him certain powers over Barotseland. According to Katenekwa, Lewanika “retained Barotseland proper (excluding the Portuguese claim) whose boundaries ran from the junction of the Machili and Zambezi rivers northwards along the Machili river to its headwaters hence north ward along the line of the waterhead at the headwaters of the Dongwe river onwards to the headwaters of the Kabompo river, then along the Kabompo river, then along the Kabompo river to its junction with the Zambezi river river thence along the Zambezi river to its junction with the Machili river – for the exclusive use of the Lozi and to be reserved from prospecting and white settlement.” At the same time according to Katanekwa, Lewanika “ceded the rest which had earlier been claimed as part of Barotseland in the East from the Machili river to the Kafue river in the lands of the Kaonde, Mashukulumbwe, and Toka to the Queen and Her Majesty’s government through the BSA company.” In other words, in 1900, Britain formally annexed Barotseland and governed it as part of North Western Rhodersia. The people of Barotseland enjoyed equal rights as all other peoples of the territory as the British declined to give any special status to Barotseland.

The issue of the exact boundary of Barotseland continued to be controversial and appeared unsettled even after the 1900 claims by Lewanika.In a letter of complaint by Lewanika to Coryndon dated 23 January, 1906 Lewanika reiterated what he had conceded to the BSA Company in the concession of 1900. In defining the territory where he had jurisdiction, that is to say, the boundaries of his Nationality “Baroseland”, he noted that his nationality comprised of “Barotse Valley and round Sesheke”. The letter acknowledging this fact was signed by Lewanika and witnessed by his Ngambela – Masika and Ford Aitkens.

Later in another concession dated 11th Angust, 1909, Lewanika extended his anthority to include

a) The Country on the West lying between the Zambezi River and the Anglo Portuguese Boundary

b) The Boundaries of Barotseland as defined in 1900

c) North Western Rhodesia as defined by the BSA Company particulary the areas of Batoka and Mushukulumbwe countries in which according to Art 3 of the concession , Lewanika retained right to graze Cattle in unoccupied Lands.

It should be noted that Lewanika as ruler of the Luyana people, was the most powerful traditional ruler in what came to be known as Barotseland. Over the years, particulary after the defeat of the Kololo, the Barotse people as the Luyana became known overwhelmed by conquest or domination, many surrounding nationalities/tribes such as the Kuanga, Kuandi, Nkoya, Totela, Shanjo, Subiya, Toka, Leya Lumbu, Mashi, Kwandi, Nkoya, Totela, Subiya, Simaa, Ndundulu, Mbunda Nyengo, Mwenji, Makoma, Mbewe, Lovale, Lukolwe, Lushange. It would be interesting to know whether these tribes or nationalities would today want to revert to the rule of the Luyana Kings whose method of rule was quasi feudal or choose other more modern forms of government such as liberal democracy.

What is historically factual is that Lewanika and the Barotse people in general, having defeated the Kololo and who were now enjoying British protection, were concerned with keeping their original home as described in the 1900 concession inviolate. The Litunga and his people realized that with the advance of colonialism, they would no longer be able to retain any influence outside those initial boundaries. They wanted to protect the Barotse Reserve from European settlement. And this, they succeeded as, unlike the other areas under British rule, no European or Indian settlement was allowed and no private ownership of Land was ever permitted.

Whereas (a) and (b) in Lewanika’s letter is factual, the claim by Lewanika in his letter dated 11th August, 1909 that his authority included North Western Rhodesia , is not borne by historical evidence. At the time Lockner signed a concession with Lewanika in 1900, other Chiefs of other tribes of the British Central African Protectorate also signed concessions with another envoy of the BSA Company named Joseph Tomson. The concessions were so numerous that the British Government decided to issue to the BSA Company “Certificate of claim” for each area where Tomson had signed concessions with chiefs who could not be identified . The areas were identified as A,B,C,D etc and the Company built forts in those areas such as Fort Rosebury and Fort Abercon representing present day Mansa and Mbala respectively.

As for the area covered by certificate of claim ‘’A’’ which included present day Copperbelt, Central and parts of Eastern, Southern Provinces, the BSA Company decided to transfer for administrative reasons, to the “suvereinty of Lewanika as the Land was inaccessible from Fort Jameson. The Administrative move effected on 30th March, 1905 by the BSA Company enabled Lewanika to benefit as he was now entitled to the share of the Tax Money that other Tribes people paid to the BSA Company. Lewanika never claimed ownership of the Copperbelt or any other Lands outside Baroseland.

In 1911, the two territories (Barotseland-North Western Rhodesia and North Eastern Rhodesia) merged into the Protectorate of Northern Rhodesia. The name “Barotseland” was not featured in the new entity. The 1911 Order in Council defined the new amalgamated entity of Northern Rhodesia as land:

“ WHOSE LIMITS WERE DEFINED AS “THE PARTS OF AFRICA BOUNDED BY SOUTHERN RHODESIA(ZIMBABWE),GERMAN SOUTH WEST AFRICA(NAMIBIA),PORTUGUESE WEST AFRICA(ANGOLA),THE CONGO FREE STATE(CONGO DR),GERMAN EAST AFRICA(TANZANIA),NYASALAND(MALAWI) AND PORTUGUESE EAST AFRICA(MOZAMBIQUE). THIS ORDER VESTED POWER IN THE HIGH COMMISSIONER FOR NORTHERN RHODESIA WHO WAS BASED IN SOUTH AFRICA TO MAKE LAWS FOR THE PEACE, ORDER AND GOOD GOVERNMENT OF THE COUNTRY..” Katanekwa.

In 1942, the boundary of Barotseland was further altered when the Luvale and the Lunda to the north were excluded from being part of Barotseland by the colonial government as a settlement of the dispute between the Luvale/Lunda chiefs and the Barotse NativeGovernment.

It should be noted that during colonial rule and up to this day, Barotseland comprised comprised of many tribes/nationalities and was always ruled as part of Northern Rhodesia. Even during the Federation of Rhodesia and Nyasaland (1853 – 1963), Barotseland was governed as a Province within the Protectorate of Northern Rhodesia. Barotseland comprised of five districts, namely, Kalabo, Mongu, Mankoya, Senanga and Sesheke. It excluded Balovale, Kabompo, Kasempa, Mumbwa, Namwala and Kalomo. The Litunga enjoyed the same rights and priveleges that all other chief enjoyed. The Litunga did not have those rights and powers as were expressed in the BA 1964 agreement. All chiefs of the territory were equal. This was the state of affairs up to 1964.

However, during the period of colonial rule, Barotseland had features of a charter colony although the Treaty and the Charter gave the territory protectorate status but not as an official protectorate of the United Kingdom government. Britain granted Barotseland semi autonomous status and made it a Protectorate within a Protectorate of Northern Rhodesia and administered it as part of Northern Rhodesia. Other ethnic groups in the country such as the Bembas, Ngonis or Chewas did not ask for this status from the British. Barotseland was also denied recognition as an independent Kingdom in contrast to Lesotho and Swaziland which were recognized as such. This fate is shared by Zululand and the Baganda . The British refused to recognize the Litunga as a King. The British designated them as simply Paramount Chiefs. The British recognized only one King in their Empire- King George then and later Queen Victoria.

What is evident is that the Barotse Nationality had influences in adjacent areas of its Borders. “From the Tribes which the Barotse subjugated, they exerted tribute in kind but in exchange, their vassals received gifts , loans of Cattle and protection from their enemies and the region remained relatively safe from the Slave Trade. Subject Tribes participated in the system as many had specialized products for exchanges.” ( Ghan ) These Tribes, as was the case with the Barotse, also enjoyed relative autonomy and practiced different Governance systems.

The Barotse Question

As the wind of change which began with the independence from colonialism of Ghana in 1957, it was evident that this wind of change would come to Northern Rhodesia too. The African Welfare Societies first formed by Dauti Yamba in 1920’s at Mwenzo in Nakonde grew in stead and culminated in the formation of the African National Congress (ANC) in 1948 where one Mbikusita Lewanika who was later to become the Litunga of Barotseland was elected as the first President of the nationalist movement.

The Barotseland question, namely, that Barotseland should have relative autonomy as was the case with the British High Commission territories of Bechuanaland, Basutholand and Swaziland has always been the demand of the Litunga and the BREbut was always refused by the British colonialists. They preferred that Barotseland was administered by the Commissioner of North Western Rhodesia at Kalomo and later Livingstone, the Governor of Northern Rhodesia at Lusaka and later the Prime Minister of the Federation of Rhodesia and Nyasaland in Salisbury. This demand by the Litunga/BRE for autonomy was rejected by the British and this had merit. Martin Meredith (2006) has observed that in Africa, there were over 10,000 African polities which the European colonialist amalgamated into 40 European colonies and protectorates. Zambia alone had more than 73 ethno linguistic groups. The British were correct in merging Barotseland into Northern Rhodesia to create a viable modern state.

However, in spite of use value of this unity of the people of Northern Rhodesia, the Litunga and the BRE continued to demand for autonomy of Barotseland. This demand became a side event at the independence talks at Lancaster House in London. Ealier in 1963, the Litunga had hired a lawyer named L.K Wilson to prepare the Barotse case for secession. Three records were prepared.

a. A record of quarantees of Barotseland‘s status as set out in various concessions signed and affirmed by constitutions of 1911, 1924 and 1953 .

b. The Barotse case for secession presented along the lines of the High Commission territories of Swaziland, Basutholand and Lesotholand;

c. Barotseland’s existence as a nation prior to the creation of Northern Rhodesia; failure of the colonial government to develop Barotseland;unsuitability for Western democracy for African conditions; and advantages of becoming an independent state of Barotseland.

The British government rejected the Barotse case. The UNIP delegation also refused to entrench rights, privileges and status that the Barotse demanded in the Zambian Constitution. Instead the three parties (UK, Northern Rhodesia and the Litunga representing Barotseland) opted for a separate agreement as an annex to the Independent Constitution. The three parties signed the agreement on 18th May, 1964. The Cabinet of the new Zambian government reaffirmed the agreement at its 63rd meeting on 30th October, 1964 to formally bind it to the Republic of Zambia.

However, despite there being an agreement which provided among others for the Litunga of Barotseland to continue to have power to make laws for Barotseland in relation to the 19 items, namely, Litungaship, Barotse Native Government, Barotse Native Authority, Barotse Native Courts, the Litunga’s Council, local government, Land, Forests, traditional and customary matters of Barotseland, Fishing, control of hunting, game preservation, Control of bush fires, native treasury, supply of beer, reservation of trees for canoes, local taxation, and Barotse local festivals, the agreement was not implemented by the UNIP government.

The UNIP delegation and later its cabinet did not sign the agreement and affirm it in good faith. As soon as Independence was granted and the new leaders were confident of their power, they quickly moved to abrogate the agreement by introducing the Local Government Act of 1965 which abolished the Barotse Government, the Barotse Native Authorities, the Barotse Native Courts, the Barotse Native Treasury and provided that Barotseland would from then on be administered through a uniform local government system applied in all districts and provinces of the country. Barotseland was renamed Western Province. The Barotse National Council was abolished by statutory instrument and five district councils were established.

The Litunga and the Barotse opposed this unilateral move and showed ttheir disapproval in the elections of 1968 when UNIP lost all seats to the ANC in Western Province. In the Referendum of 1969 which removed all entrenched provisions that gave the Litunga rights on land, the people of Western Province gave a 75% NO verdict to allow the UNIP government to wrestle land from the Litunga. To this day, the Commissioner of Lands of Zambia has been prevented from giving titles to land in Western Province with the resultant lack of investment by the private sector in the province. Furthermore, before the one party state was declared by UNIP in 1973, the Litunga and the BRE continued to promote the Sichaba(National) Party or the Barotse National Party (BNP) whose political aims were to lobby for secession.

In July, 1991, just as the MMD was coming into power, in order to entice the votes of the Barotse, the BRE met President Kaunda and demanded that if he won the multi-party elections and formed government, he would accede to their demands to restore the Barotse Agreement and refund UK Sterling 400,000 which Finance Minister Arthur Wina had taken from the Barotse Native Teasury in 1964. President Kaunda agreed and undertook to meet all the demands. (Sichone and Simutanyi, 1996:188). Unfortunately, President Kaunda lost, but the demands of the Litunga and the BRE did not end.

The new government of President Frederick Chiluba viewed the demands of the BRE as unimportant and irrerevant. The Minister Without Portfolio Brig. General Godfrey Miyanda now leader of the Heritage Party, was appointed to negotiate with the BRE. The effort failed and in 1993, President Chiluba threatened that anyone making demands for the restoration of the Barotseland Agreement 1964 would be charged with the high crime of treason.

In the successive governments of President Levy Mwanawasa and President Banda, the National Constitutional Conference which had been set up unilaterally by President Mwanawasa (it was boycotted by the Catholic Church and the PF among others) ignored the submissions of the BRE. The draft Constitution that was made excluded principles of regional autonomy or devolution of power. President Banda’s government had absolutely no time to consider the BA 1964 question. The NCC contemptuously ignored the BRE demands and chose instead to continue with the divisive doctrine of unitary state.

What Should Be Done? Devolution, status quo or secession.

President Michael Chilufya Sata and the PF government have the opportunity to resolve this question of Barotseland. The demands of the Litunga and the BRE cannot be casually dismissed or ignored or wished away as has happened since 1964. However, in trying to resolve the impulse, the following questions must be addressed.

1. Was the Barotseland Agreement ever repealed or revoked? Could the Parliament of Zambia repeal the BA 1964 annexure to the Independent Constitution? Was its abrogation supported by law? If the agreement is alive as observed by the Chongwe Commission, how can it be implemented without destabilizing the country?

2. Is the Litunga and the BRE justified in demanding for the restoration of the BA 1964? If relative autonomy or secession as demanded is granted, what political institution will be in place – multi party democracy or a return to monarchical hegemony? What will be the response of other nationalities in Western Province such as the Nkoya, Mbunda, Nyengo, Luvale and others who are not Barotse/Luyana? What will be the view of other nationalities like the Chewa, Bemba, Tonga, Ngoni, and so on that constitute the totality of the peoples of the Republic of Zambia?

3. What is the consensual view of the BA 1964 in Western Province? Are present demands of the BRE/ Barotse National Council representational of all the people of Western Province including the Nkoya, Luvale, Mbunda Nyengo , non indigenous peoples who have settled there and so on.

4. Should the dispute be taken up by the High Court of Zambia as provided by Art. 9 of the BA 1964 in resolving any disputes on the agreement? What is the dispute and how does it impact the wider Zambia?

5. To what extent should the Right to Self Determination including secession as provided in the Universal Declaration of Human Rights relevant to the BA 1964? Are the Barotse nationality an oppressed people in Zambia?

For sure, valuable lessons can be learnt from the experience of other countries. Some examples include the case of Serbia and Kosovo which ended up with Kosovo declaring UDI in 2009; Sudan in which South Sudan emerged as an independent state after such a long and terrible civil war; Canada and Quebec in which Quebec has been recognized as a nation within a United Canada; Tanzania and Zanzibar in which Zanzibar is relatively autonomous; the example of South Africa where local government has been integrated within federated structures, and so on.

For many observers and analysts, there are three possibilities in resolving the Barotse Question.

1. To dissolve the state of Zambia and allow Barotseland to secede from the former Northern Rhodesia and divide the Zambian people into two or several balkanized separate entities. To divide the people of Zambia who since 1911 have lived and inter-married and created a unique Zambian national character? This is the demand of some separatist elements in Barotseland. This will require, among others, the determination of the boundaries of Barotseland, the holding of referenda in both Barotseland and other previously subject peoples like the Nkoya, Nyengo, Mbunda, Luvale to determine whether they would want to revert to be ruled by the Litunga again and so on. Such an option is obviously retrogressive and will tend to revise a backward and oppressive governance system of feudalism. This option does not support the development project and is inherently reactionary.

2. To uphold the status quo holding Zambia as a unitary state with power concentrated in Lusaka. To continue giving lip service of support to decentralization and devolution demands of the people. To ignore the demands of the BRE and the Litunga and treat advocates of the restoration of the BA 1964 as treasonous. This option is not only reactionary and divisive, but will make Zambia forever poor. This plays in the hands of Zambia’s enemies who celebrate at our inability to manage our country efficiently and effectively. Only despots who want to continue stealing peoples resources in Lusaka and abusing their powers unfettered support the maintenance of a unitary state.

3. To re-negotiate the Barotse Agreement so as to ensure more regional autonomy of all the regions of Zambia anchored on liberal democratic values and federalism. This will require that the PF government provides for Zambia a new constitution that entrenches federated structures in our governance. The Technical Committee appointed by President Sata can be requested to negotiate with the Litunga and the BRE and other Royal Establishments together with all civil society on the historical necessity of devolution and recommend in the new draft constitution the federated way in which Zambia would be governed. It is a notorious fact that no country has ever developed under the so called unitary state structures. In fact, this is a colonial legacy that suited despots. All serious countries only developed when they federated. This is true for the UK, Germany, Japan, India, RSA, Brazil. USA, France, Russia, India even small countries like South Korea, Switzerland and so on.

For sure, President Sata and the PF government can and should resolve the BA 1964 problem. Option three is not only historically necessary, but is also a historical inevitability as it is borne and steeled by history.

Proposals for Devolution of Power in Zambia

In simple language, devolution of power in our context means the delegation of power by the Central Goovernment to local or regional administration. It is the transfer of some political authority on which it is held accountable. This is different from decentralization where the center still remains in control. For catholics such as our President, they may be happy to know that devolution is characterized by subsidiarity which was a concept first enunciated by Pope Leo XIII but later recalled in a Papal encyclical “Quadragesimo Anno” in 1941. It holds that “it is injustice, a grave evil and a disturbance of right order for a large and higher organization to arrogate to itself functions which can be performed efficiently by smaller and lower bodies.”

The benefits of devolution of power includes among others that the evolution of a community-owned government, the spread of state authority making politics less threatening and encouraging joint problem solving, and prevention of state despotism that may tend to encourage unnecessary tensions, secessions, violence and even corruption.

Devolution of power is also a strategic response to unnecessary conflicts and underdevelopment. Country experiences include those of such counties as Canada/Quebec; UK /Wales/Scotland /Northern Ireland; Australia’s 6 states and two territories; Switzerlands 26 cantons; RSA’s nine provinces; Nigeria’s federalism and so on attest to this need for devolution.

Our proposal is therefore that Zambia should change the out dated system of governance of African Presidentialism. The Technical Committee that has been drafting the Republican Constitution must take advantage of this and recommend to a devolved structure of government.

As a condition for this, it would be advisable that the government first appointed a boundary delimitation commission to determine the cost effective boundaries for both districts and provinces and legalize this process through an Act of Parliament.

Our recommendation is a three-tier governance system with Lusaka as a special case, as follows:

At District Level:

The District should be the basic governance unit with a District Assembly headed by an elected Mayor/Chairman. There should also be established Constituency Councils, and Village Councils/ Suburb councils in urban areas.

Capital City - Lusaka :

Special legislation should be enacted along the lines of London or Washington DC and establish the Capital City council with an elected Mayor.

At Provincial Level

Establish elected Provincial headed by elected Provincial Governor. Election of Provincial Assembly by direct suffrage (2 per constituency). Provincial Assembly to have executive and legislative power. Establish Provincial High Court, Provincial Attorney General, Provincial Ombudsman, Provincial Public Service Commission. Provincial government to be in charge of education, health, land matters and so on that were the main demands in the BA 1964.

At National Level

The Judiciary to comprise the Supreme Court, Court of Appeal, Judicial Service Commission: Parliament to be one chamber Assembly elected by proportional representation; Executive to comprise of a President as Head of State, deputized by a running mate and; the Prime Minister as Head of Government deputized by two deputies.

Conclusion

It is clear from our proposals for devolution of power that Zambia can use the Barotse Agreement 1964 as a framework for advancing good governance. In fact, devolution of power to the provinces of our country should be seen as the only sure way of enhancing our nationhood.

THE BAROTSE QUESTION: WHAT SHOULD BE DONE ( An Improved Version)

2012-03-23T02:59:00.002-07:00

By.Dr.MbitaChitala
Executive Director: Zambia Research Foundation
www.mbitachitala.blogspot.com;mbitachitala@yahoo.co.uk;Mobile+260211976 030398
__________________________________________________________________________
Both the recommendation by the Rodger Chongwe Commission that the Barotseland Agreement be restored and the off the cuff comments by President Michael Chilufya Sata that he would not recommend that view to his cabinet, are both legitimate. The Chongwe Commission’s recommendation is anchored on the Commission’s interpretation of the law, namely, status of the abrogated Barotse Agreement 1964, while President Sata’s view is anchored on the political realism of the present day Zambia as a sovereign united nation. The challenge is to harmonize the two world outlooks and still end up with a united and prosperous Zambia.

There is generally little debate on the colonial history of Zambia. Between 1600-1800 when Bantu speaking peoples from the citadel of Bantu civilization in the Congo occupied Southern/Central and Eastern Africa displacing pre-historical peoples such as the Bushmen, Twa, and Hottentots, one could not reasonably define the boundaries that different Bantu nationalities occupied. This only became possible with European colonization which was effected during the late 1800s when major European powers claimed territories of influence on Africa. This scramble for Africa culminated in the Berlin Conference of 1884-6, when the whole of Africa was formally divided and shared by the colonial powers. The territory we started calling Zambia in 1964, was part of Land in Central Africa ceded to the British on 19th September, 1893 in a Land and Mineral Concession Certificate of claim signed by Henry Hamilton Johnson - the Commissioner and Consul General for the territories under British influence on behalf of British Government and witnessed by James Francis Cunningham - Manager of the African Lakes Company Limited and Lord Monteith Fortherington - the Manager of the African Lakes Company Limited. The whole Region was then known as British Central Africa. The name Barotseland was formulated by the British to distinguish the land where the Litunga Lubosi Lewanika I, rather than go to war like the other tribes to defend his area of influence, chose to sign an agreement with the British colonialists in which he ceded the land rights of his nationality peacefully to the colonialists.

The Barotse Question

The Barotse question has its origin with the Lochner Concession of 1887 and later the signing of the treaty in June 1890 when Frank Elliot Lochner as the representative of the British South Africa company (BSA co) signed a treaty with the Litunga of the Barotse people for protection against slave traders and against war with the British. The Litunga in turn gave mineral exploration and mining rights in the land he claimed to control to the BSA company. These were the rights which the BSA company kept enjoying and extending at their will until they were revoked by the new Zambian government after independence.

The land of the Litunga where the Barotse people had sovereighnty was first defined in 1878 by Litunga Lewanika (who ruled from 1878-1916 with one break in 1884-5) . In describing the Barotse Nation, he described true Barotseland as the Land in the Zambezi River Flood plain and about 40km East of Limulunga and Senanga (Gann, Rotberg). This characterization is historically correct as it agrees with the fact which affirms that from 1864 when the Basotho led by Sebitwane and who spoke kololo and had ruled Baroseland since 1838 were defeated and expelled by the Barotse (who now spoke a lingua franca known as Lozi and in some quarters came to be referred to as the Lozi people), the Boundary of the Lozi Nationality was restricted to the Zambezi valley. It was an enclave on the Barotse plains.

In subsequent years, the boundary of what the British Colonialists named as Barotseland kept shifting and was extended unilaterally by conquest or request for protection as other Bantu tribes were brought and made subject peoples of the Barotse Nationality. Francois Collard of the Paris Missionary Society is quoted by Nicholas Katanekwa in an unpublished manuscript that Coillard described the boundary of Barotseland as being “ON THE SOUTH, THE ZAMBEZI RIVER AND THE CHOBE RIVER;ON THE WEST THE 20TH DEGREE LONGITUDE EAST;ON THE NORTH THE WATERSHED OF THE CONGO AND THE ZAMBEZI RIVERS;ON THE EAST THE KAFUE RIVER.”THE PRINCIPAL TRIBES IN THESE AREAS ACCORDING TO HIM WERE:”THE MAYEEYE(MAYEI),MASHAIYO(MASHANJO),THE MASHI,MAWIKO(NORTH WESTERN MBUNDA)MAKOMA,BA MOENYO(MWENYI),THE BAUBALE(LUVALE),BA RUNDA(LUNDA),BALUKOLOE( LUKOLWE),BA KAONDE,MANKOEA(MANKOYA),LIAMBA(LAMBA),MASHIKULOMBOE(ILA),BAWE OR MATOMOE,MALEA(LEYA),BA SUBIYA,MAKUANGOA(KWANGWA),MATOTELA.” In the same paper, Katanekwa reported that “ACCORDING TO ADOLPHE JALLA , ANOTHER PMS MISSIONARY IN BAROTSELAND “ AT THE SIGNING CEREMONY THERE WERE GATHERED FROM WEST AND EAST THE PRINCIPAL HEADMEN OF THE TRIBES WHO ACKNOWLEDGED LEWANIKA’S POWER.THEY HAD COME FROM THE BANKS OF THE LUNGWEBUNGU,LUWOLOSHI,THE KABOMPOETC.THE BAUBALE AND RUNDA DID NOT ATTEND THE CEREMONY .” JALLA, FURTHER DESCRIBES THE BOUNDARIES OF THE LOZI KINGDOM “AS THE LUVALE AND LUNDA COUNTRIES TO THE SOURCE OF THE ZAMBEZI IN THE NORTH, KWITO RIVER TO THE OKAVANGO IN THE WEST; THE CHOBE TO ITS CONFUELENCE WITH THE ZAMBEZI AND ALONG THE ZAMBEZI TO THE JUNCTION WITH THE KAFUE RIVER IN THE SOUTH.IN THE EAST ALONG THE KAFUE RIVER FROM ITS JUNCTION WITH THE ZAMBEZI TO ACROSS THE HOOK.AFTER THE HOOK FURTHER TO THE WEST OF THE KAFUE RIVER, BUT EAST OF THE LUNGA RIVER).”

Other documents and peoples have given their own spatial differentiation of Barotseland. This includes such documentation and people like the 11 June 1891 Treaty between Britain and Portugal, the Anglo – Portuguese Protocol of 1893, Major Goold Adams who in 1896 attempted to define the boundaries on behalf of the British,and Major Coryndon, Robert who was appointed in 1897 as the first BSA representative in Barotseland. All these interpretations appear to be subjective and had many omissions which Lewanika pointed out.

On 25thJune, 1898 at a meeting held at Victoria Falls, the Litunga Lawenika together with 7 of his Counselors and witnessed by 5 other people on behalf of the Barotse Nationality, signed with R.T Coryndon - representing the British South Africa Company - a concession in which he ceded Land to the BSA Company that included “the whole territory of the Nation or any future extension there of including all subject and dependent territory.”In term of Geographical Boundary, the Barotse Nationality’s Boundaries were defined as:
a) Northern Boundary – from the Headwaters of the Dongwe along Kabompo Rivers to the junction of the Kabompo and Zambezi rivers.
b) Western Boundary – from the junction of the Kabompo and Zambezi Rivers along the Zambezi River to its Junction with the Majili River.
c) Eastern Boundaries – from the Junction of Zambezi and Majili Rivers along the Majili River to its head water hence Northward along the line of the watershed at the Headwaters of the Dongwe River.

In 1899, the British through an Order in Council created a new territory with new boundaries and called it “Barotselant-North Western Rhodesia”. The territory comprised of Barotseland as variously defined and North Western Rhodesia which comprised of the lands of the lands of the Lunda, Kaonde, Mushukulumbwe, Toka, Lamba, Lenje, Swaka, Lala,and Soli. The territory was first administered from Lealui by Robert Coryndon but shifted later to Kalomo in 1902 and to Livingstone in 1907. In 1900, Litunga Lewanika signed a concession with the BSA co. which gave him certain powers according to Katenekwa. Lewanika “ retained – Barotseland proper (excluding the Portuguese claim) whose boundaries ran from the junction of the Machili and Zambezi rivers northwards along the Machili river to its headwaters hence north ward along the line of the waterhead at the headwaters of the Dongwe river onwards to the headwaters of the Kabompo river, then along the Kabompo river, then along the Kabompo river to its junction with the Zambezi river river thence along the Zambezi river to its junction with the Machili river – for the exclusive use of the Lozi and to be reserved from prospecting and white settlement. Lewanika also ceded the rest which had earlier been claimed as part of Barotseland in the East from the Machili river to the Kafue river in the lands of the Kaonde, Mashukulumbwe, and Toka to the Queen and Her Majesty’s government through the BSA company.”(Katenekwa) This became the Eastern Boundary of Barotseland.

In May, 1900, the North Eastern Order in Council created a new territory known as North Eastern Rhodesia under the North Chartereland Company made of lands of the Ushi, Ngumbo, Mukulu, Chishinga, Bwile, Tabwa, Eastern Lunda, Bemba, Lungu, Mambwe, Bisa,. Namwanga, Tumbuka, Chewa, Nsenga, and Ngoni. The control of these areas was achieved by forcing Bantu Chiefs to sign concessions or by force of arms, namely by war. This was what befell the Ngoni of Mpezeni, the Lunda of Kazambe and the Bembas. This territory was administered from Fort Jameson , now Chipata, up to 1911.

In 1900, Britain formally annexed Barotseland and governed it as part of North Western Rhodersia. The people of Barotseland enjoyed equal rights as all other peoples of the territory as the British declined to give any special status to Barotseland. Later, Lewanika appeared to have been troubled by the British claims over what he considered his land.In a letter of complaint by Lewanika to Coryndon dated 23 January, 1906 Lewanika reiterated what he had conceded to the BSA Company in the concession of 1900. In defining the territory where he had jurisdiction, that is to say, the boundaries of his Nationality “Baroseland”, he noted that his nationality comprised of” Barotse Valley and round Sesheke.” The letter acknowledging this fact was signed by Lewanika and witnessed by his Ngambela – Masika and Ford Aitkens.

Later in another concession dated 11th Angust, 1909, Lewanika extended his anthority to include
a) The Country on the West lying between the Zambezi River and the Anglo Portuguese Boundary
b) The Boundaries of Barotseland as defined in 1900
c) North Western Rhodesia as defined by the BSA Company particulary the areas of Batoka and Mushukulumbwe countries in which according to Art 3 of the concession , Lewanika retained right to graze Cattle in unoccupied Lands.

The tribal and linguistic map of Zambia is also very clear on the identification of peoples of the Barotse Nationality. The Barotse nationality did not include Lands of other tribes such as that of the Kuanga, Kuandi, Nkoya, Totela, Shanjo, Subiya, Toka, Leya Lumbu, Mashi, Kwandi, Nkoya, Totela, Shanjo, Subiya, Simaa, Ndundulu, Mbunda Nyengo, Mwenji, Makoma, Mbewe, Lovale, Lukolwe, Lushange. The Litunga and the Barotse people in general, having defeated the Kololo and who were now enjoying British protection, were concerned with keeping their original home as described in the 1900 concession inviolate. The Litunga and his people realized that with the advance of colonialism, they would no longer be able to retain any influence outside those initial boundaries. They wanted to protect the Barotse Reserve from European settlement. And this, they succeeded as, unlike the other areas under British rule, no European or Indian settlement was allowed and no private ownership of Land was ever permitted.

The claim by the Litunga Lewanika in his letter dated 11th August, 1909 that his authority included North Western Rhodesia , is not borne by historical evidence. At the time Lockner signed a concession with Lewanika in 1900, other Chiefs of other tribes of the British Central African Protectorate also signed concessions with another envoy of the BSA Company named Joseph Tomson. The concessions were so numerous that the British Government decided to issue to the BSA Company “Certificate of claim” for each area where Tomson had signed concessions with chiefs who could not be identified . The areas were identified as A,B,C,D etc and the Company built forts in those areas such as Fort Rosebury and Fort Abercon representing present day Mansa and Mbala respectively.

The area covered by certificate of claim ‘’A’’ which included present day Copperbelt, Central and parts of Eastern, Southern Provinces, the BSA Company decided to transfer for administrative reasons, to the “suvereinty of Lewanika as the Land was inaccessible from Fort Jameson. The Administrative move effected on 30th March, 1905 by the BSA Company enabled Lewanika to benefit as he was now entitled to the share of the Tax Money that other Tribes people paid to the BSA Company. Lewanika never claimed ownership of the Copperbelt or any other Lands outside Baroseland.

In 1911, the two territories merged into the Protectorate of Northern Rhodesia. The name “Barotseland” was not featured in the new entity. However, the Almagamation Order contained specific provisions securing the Litunga Lewanika relative authority over Baroseland of which no map to show its extent was provided. The 1911 Order in Council defined the new amalgamated entity of Northern Rhodesia as land “ WHOSE LIMITS WERE DEFINED AS “THE PARTS OF AFRICA BOUNDED BY SOUTHERN RHODESIA(ZIMBABWE),GERMAN SOUTH WEST AFRICA(NAMIBIA),PORTUGUESE WEST AFRICA(ANGOLA),THE CONGO FREE STATE(CONGO DR),GERMAN EAST AFRICA(TANZANIA),NYASALAND(MALAWI) AND PORTUGUESE EAST AFRICA(MOZAMBIQUE).THIS ORDER VESTED POWER IN THE HIGH COMMISSIONER FOR NORTHERN RHODESIA WHO WAS BASED IN SOUTH AFRICA TO MAKE LAWS FOR THE PEACE, ORDER AND GOOD GOVERNMENT OF THE COUNTRY. SECTION 40 0F THE ORDER STATED THAT “ALL THE RIGHTS CONFERRED AND OBLIGATIONS IMPOSED UPON THE COMPANY AND UPON THE CHIEF AND PEOPLE OF THE BAROTSE RESPECTIVELY BY VARIOUS CONCESSIONS AS APPROVED BY THE SECRETARY OF STATE IN THE BRITISH GOVERNMENT SHALL CONTINUE TO HAVE FULL FORCE AND EFFECT.” SECTION 44 STATED IN PARTICULAR THAT ”NOTHING IN THE PROVISION CONFERRING POWER TO REGULATE THE CONDUCT OF THE NATIVES SHALL BE DEEMED TO LIMIT OR AFFECT THE EXERCISE OF THE CHIEF OF THE BAROTSE OF HIS AUTHORITY IN TRIBAL MATTERS.” THIS ORDER CREATED FOR THE FIRST TIME A COUNTRY- NORTHERN RHODESIA, WITH A SEMI-AUTONOMOUS BAROTSELAND THEREIN ENJOYING ITS CONCESSION TIME/1900 TREATY RIGHTS.” Katanekwa.

In 1942, the boundary of Barotseland was further altered when the Luvale and Lunda territories were excluded by the colonial government as a settlement of the dispute between the Luvale/Lunda chiefs and the Barotse Native Government. In 1953 with the creation of the Federation of Rhodesia and Nyasaland, the Litunga caused that Barotseland was recognized as a Protectorate within a Protectorate. The traditioner ruler of Barotseland was by this recognition formally titled the Litunga of Barotseland. Up until the independence of Zambia in 1964, Barotseland comprised of five districts, namely, Kalabo, Mongu, Mankoya, Senanga and Sesheke. It excluded Balovale, Kabompo, Kasempa, Mumbwa, Namwala and Kalomo. This was the state of affairs up to 1964.

During the time of colonial rule, Barotseland had features of a charter colony although the Treaty and the Charter gave the territory protectorate status but not as an official protectorate of the United Kingdom government. Britain granted Barotseland semi autonomous status and made it a Protectorate within a Protectorate of Northern Rhodesia and administered as part of Northern Rhodesia. Other ethnic groups in the country such as the Bembas, Ngonis or Chewas did not ask for this status from the British. Barotseland was also denied recognition as an independent Kingdom in contrast to Lesotho and Swaziland which were recognized as such. This fate is shared by Zululand and the Baganda . The British refused to recognize the Litunga as a King. The British designated them as simply Paramount Chiefs. The British recognized only one King in their Empire- King George then and later Queen Victoria.
There is also a text description of the Boundary of Barotseland as at 1953 during the short lived Federation of Rhodesia and Nyasasand and an accompanying map drawn at the same time. This is probably the same spatial definition of Barotseland which Article 125 of the Zambia Independence order used to define Barotseland as the territory that as at midnight 23rd October, 1964 is comprised in the “Barotseland protectorate”. Documentary evidence of this description of Barotseland protectorate is not readily available anywhere. It certainly does not include Copperbelt, Central, Southern and parts of Western and Northern Provinces. What is evident is that the Barotse Nationality had influences in adjacent areas of its Borders. “From the Tribes which the Barotse subjugated, they exerted tribute in kind but in exchange, their vassals received gifts , loans of Cattle and protection from their enemies and the region remained relatively safe from the Slave Trade. Subject Tribes participated in the system as many had specialized products for exchanges.” ( Ghan ) These Tribes, as was the case with the Barotse, also enjoyed, relative autonomy and practiced different Governance systems.

As the wind of change which began with the independence from colonialism of Ghana in 1957, it was evident that this wind of change would come to Northern Rhodesia too. The African Welfare Societies first formed by Dauti Yamba in 1920’s at Mwenzo in Nakonde grew in stead and culminated in the formation of the African National Congress (ANC) in 1948 where one Mbikusita Lewanika who was later to become the Litunga of Barotseland was elected as the first President of the nationalist movement.

The Barotseland question, namely, that Barotseland should have relative autonomy as was the case with the British High Commission territories of Bechuanaland, Basutholand and Swaziland has always been the demand of the Litunga but was always refused by the British colonialists. They preferred that Barotseland was administered by the Commissioner of North Western Rhodesia at Kalomo and later Livingstone, the Governor of Northern Rhodesia at Lusaka and later the Prime Minister of the Federation of Rhodesia and Nyasaland in Salisbury. This demand by the Litunga for autonomy was rejected by the British had merit. Martin Meredith (2006) has observed that in Africa, there were over 10,000 African polities which the European colonialist amalgamated into 40 European colonies and protectorates. Zambia alone had more than 73 ethno linguistic groups. The British were correct in merging Barotseland into Northern Rhodesia to create a viable modern state.

However, in spite of use value of this unity of the people of Northern Rhodesia, the Litunga and the BRE continued to demand for autonomy of Barotseland. This demand became a side event at the independence talks at Lancaster House in London. Ealier in 1963, the Litunga had hired a lawyer named L.K Wilson to prepare the Barotse case for secession. Three records were prepared.
a. A record of quarantees of Barotseland‘s status as set out in various concessions signed and affirmed by constitutions of 1911, 1924 and 1953 .
b. The Barotse case for secession presented along the lines of the High Commission territories of Swaziland, Basutholand and Lesotholand;
c. Barotseland’s existence as a nation prior to the creation of Northern Rhodesia; failure of the colonial government to develop Barotseland;unsuitability for Western democracy for African conditions; and advantages of becoming an independent state of Barotseland.

The British government rejected the Barotse case. The UNIP delegation also refused to entrench rights, privileges and status that the Barotse demanded in the Zambian Constitution. Instead the three parties (UK, Northern Rhodesia and the Litunga representing Barotseland) opted for a separate agreement as an annex to the Independent Constitution. The three parties signed the agreement on 18th May, 1964. The Cabinet of the new Zambian government reaffirmed the agreement at its 63rd meeting on 30th October, 1964 to formally bind it to the Republic of Zambia.

However, despite there being an agreement which provided among others for the Litunga of Barotseland to continue to have power to make laws for Barotseland in relation to the Litungaship, Barotse Native Government, Barotse Native Authority, Barotse Native Courts, the Litunga’s Council, local government, Land, Forests, traditional and customary matters of Barotseland, Fishing, control of hunting, game preservation. Control of bush fires, native treasury, supply of beer, reservation of trees for canoes, local taxation, and Barotse local festivals, the agreement was not implemented by the UNIP government.

The UNIP delegation and later its cabinet did not sign the agreement and affirm it respectively in good faith. As soon as Independence was granted and the new leaders were confident of their power, they quickly moved to abrogate the agreement by introducing the Local Government Act of 1965 which abolished the Barotse Government, the Barotse Native Authorities, he Barotse Native Courts, the Barotse Native Treasury and provided that Barotseland would from then on be administered through a uniform local government system applied in all districts and provinces of the country. Barotseland was renamed Western Province. The Barotse National Council was abolished by statutory instrument and five district councils were established.

The Litunga and the Barotse opposed this unilateral move and insured that in the elections of 1968, UNIP lost all seats to the ANC. In the Referendum of 1969 which removed all entrenched provisions that gave the Litunga rights on land, the people of Western Province gave a 75% NO verdict to allow the UNIP government to wrestle land from the Litunga. Furthermore, the Litunga and the BRE continued to promote the Sichaba(National) Party or the Barotse National Party (BNP) whose political aims were to lobby for secession.

In July, 1991, just as the MMD was coming into power, in order to entice the votes of the Barotse, the BRE met President Kaunda and demanded that if he won the multi-party elections and formed government, he would accede to their demands to restore the Barotse Agreement and refund UK Sterling 400,000 which Finance Minister Arthur Wina had taken from the Barotse Native Teasury in 1964. President Kaunda agreed and undertook to meet all the demands. (Sichone and Simutanyi, 1996:188). Unfortunately, President Kaunda lost, but the demands of the Litunga and the BRE did not end.

The new government of President Frederick Chiluba viewed the demands of the BRE as unimportant and irrerevant. The Minister Without Portfolio Brig. General Godfrey Miyanda now leader of the Heritage Party, was appointed to negotiate with the BRE. The effort failed and in 1993, President Chiluba threatened that anyone making demands for the restoration of the Barotseland Agreement 1964 would be charged with the high crime of treason.

In the successive governments of President Levy Mwanawasa and President Banda, the National Constitutional Conference which had been set up unilaterally by President Mwanawasa (it was boycotted by the Catholic Church and the PF among others) ignored the submissions of the BRE. The draft Constitution that was made excluded principles of regional autonomy or devolution of power. President Banda’s government had absolutely no time to consider the BA 1964 question. The NCC contemptuously ignored the BRE demands and chose instead to continue with the divisive doctrine of unitary state.

What Should Be Done?

President Michael Chilufya Sata and the PF government have the opportunity to resolve this question of Barotseland. The demands of the Litunga and the BRE cannot be casually dismissed or ignored or wished away as has happened since 1964. As the Barotse National Council meets on 26th March, 2012 at Limulunga, a vocal section among the attendees will probably demand for a radical resolution of the Barotse question. Similarly, there will be voices of reason who may argue for liberal solutions to the question. However one looks at the challenge, in trying to resolve the impulse, the following questions must be addressed.

1. Was the Barotseland Agreement ever repealed or revoked? Could the Parliament of Zambia repeal the BA 1964 which was simply an annexure to the Independent Constitution? Was its abrogation by the Zambian Parliament supported by law? If the agreement is alive as observed by the Chongwe Commission, how can it be implemented without destabilizing the country?

2. Is the Litunga and the BRE justified in demanding for the restoration of the BA 1964 agreement? If relative autonomy as demanded is granted, what political institution will be in place – multi party democracy or a return to monarchical hegemony? What will be the response of other nationalities in Western Province such as the Nkoya, Mbunda, Nyengo, Luvale and others who are not Barotse? What will be the view of other nationalities like the Chewa, Bemba, Tonga, Ngoni, and so on that constitute the totality of the peoples of the Republic of Zambia?

3. What is the consensual view of the BA 1964 in Western Province? Are present demands of the BRE representational of all the people of Western Province including the Nkoya, Luvale, Mbunda Nyengo , non indigenous peoples who have settled there and so on.

4. Should the dispute be taken up by the High Court of Zambia as provided by Art. 9 of the BA 1964 in resolving any disputes on the agreement? What is the dispute and how does it impact the wider Zambia?

5. To what extent should the Right to Self Determination including secession as provided in the Universal Declaration of Human Rights relevant to the BA 1964? Are the Barotse nationality an oppressed people in Zambia? Has Barotseland been treated equitably with respect to development by successive governments?

6. What should be done?

For sure, valuable lessons can be learnt from the experience of other countries. Some examples include the case of Serbia and Kosovo which after a war,ended up with Kosovo declaring UDI in 2009; Sudan in which South Sudan emerged as an independent state after such a long and terrible civil war; Canada and Quebec in which Quebec has been recognized as a nation within a United Canada; Tanzania and Zanzibar in which Zanzibar is relatively autonomous; the example of South Africa where local government has been integrated within federated structures, and so on.

For many observers and analysts, there are three possibilities in resolving the Barotse Question.

1. To re-negotiate the Barotse Agreement so as to ensure more regional autonomy of all the regions of Zambia anchored on liberal democratic values and federalism. This will require that the PF government provides for Zambia a new constitution that entrenches federated structures in our governance. The Technical Committee appointed by President Sata can be requested to negotiate with the Litunga and the BRE and other Royal Establishments together with all civil society on the historical necessity of devolution and recommend in the new draft constitution the federated way in which Zambia would be governed. It is a notorious fact that no country has ever developed under the so called unitary state structures. In fact, this is a colonial legacy that suited despots. All serious countries only developed when they federated. This is true for the UK, Germany, Japan, India, RSA, Brazil. USA, France, Russia, India even small countries like South Korea, Switzerland and so on.

2. To uphold the status quo holding Zambia as a unitary state with power concentrated in Lusaka. To continue giving lip service of support to decentralization and devolution demands of the people. To ignore the demands of the BRE and the Litunga and treat advocates of the restoration of the BA 1964 as treasonous. This option is not only reactionary and divisive, but will make Zambia forever poor. This plays in the hands of Zambia’s enemies who celebrate at our inability to manage our country efficiently and effectively. Only despots who want to continue stealing peoples resources in Lusaka and abusing their powers unfettered support the maintenance of a unitary state.

3. To dissolve the state of Zambia and allow Barotseland to secede from the former Northern Rhodesia and divide the Zambian people into two or several balkanized separate entities. To divide the people of Zambia who since 1911 have lived and inter-married and created a unique Zambian national character? This is the demand of some separatist elements in Barotseland. This will require, among others, the determination of the boundaries of Barotseland, the holding of referenda in both Barotseland and other previously subject peoples like the Nkoya, Nyengo, Mbunda, Luvale to determine whether they would want to revert to be ruled by the Litunga again and so on. Such an option is obviously retrogressive and will tend to revise a backward and oppressive governance system of feudalism. This option does not support the development project and is inherently reactionary.

For sure, President Sata and the PF government can and should resolve the BA 1964 problem. Option one is not only historically necessary, but is also a historical inevitability as it is borne and steeled by history.

END

THE BAROTSE QUESTION: What should be done?

2012-03-01T08:39:00.002-08:00

By. Dr. Mbita Chitala
Executive Director, Zambia Research Foundation
www.mbitachitala.blogspot.com; mbitachitala@yahoo.co.uk; Mobile +260 211 976 030398
______________________________________________________________________________
Both the recommendation by the Rodger Chongwe Commission that the Barotseland Agreement be restored and the off the cuff comments by President Michael Chilufya Sata that he would not recommend that view to his cabinet, are both legitimate. The Chongwe Commission’s recommendation is anchored on the Commission’s interpretation of the law, namely, status of the abrogated Barotse Agreement 1964, while President Sata’s view is anchored on the political realism of the present day Zambia as a sovereign united nation. The challenge is to harmonize the two world outlooks and still end up with a united and prosperous Zambia.
There is generally little debate on the colonial history of Zambia. Following the Berlin Conference of 1884, the territory we started calling Zambia in 1964, was part of Land in Central Africa ceded to the British on 19th September, 1893 in a Land and Mineral Concession Certificate of claim signed by Henry Hamilton Johnson - the Commissioner and Consul General for the territories under British influence on behalf of British Government and witnessed by James Francis Cunningham - Manager of the African Lakes Company Limited and Lord Monteith Fortherington - the Manager of the African Lakes Company Limited. The whole Region was then known as British Central Africa.
The Barotse Question
The Barotse question has its origin with the Lochner Concession of 1887 when Lochner as the representative of the British South Africa company signed a treaty with the Litunga of the Barotse people for protection against slave traders and in turn gave mineral exploration and mining rights in his land to the BSA company. These were the rights which the BSA company kept enjoying and extending at their will until they were revoked by the Zambian government at independence.
The land of the Litunga where the Barotse people had sovereighnty was defined in 1878 by Litunga Lewanika (who ruled from 1878-1916 with one break in 1884-5) . In describing the Barotse Nation, he described true Barotseland as the Land in the Zambezi River Flood plain and about 40km East of Limulunga and Senanga (Gann, Rotberg). This characterization is historically correct as it agrees with the fact which affirms that from 1864 when the Basotho led by Sebitwane and who spoke kololo and had ruled Baroseland since 1838 were defeated and expelled by the Barotse (who now spoke a lingua franca known as Lozi and in some quarters came to be referred to as the Lozi people), the Boundary of the Lozi Nationality was restricted to the Zambezi valley.
In subsequent years, the boundary of what the British Colonialists named as Barotseland kept shifting as other tribes were brought and made subject peoples of the Barotse Nationality.
On 25thJune, 1898 at a meeting held at Victoria Falls, the Litunga Lawenika together with 7 of his Counselors and witnessed by 5 other people on behalf of the Barotse Nationality, signed with R.T Corydon - representing the British South Africa Company - a concession in which he ceded Land to the BSA Company that included “the whole territory of the Nation or any future extension there of including all subject and dependent territory.”In term of Geographical Boundary, the Barotse Nationality’s Boundaries were defined as:
a) Northern Boundary – from the Headwaters of the Dongwe along Kabompo Rivers to the junction of the Kabompo and Zambezi rivers.
b) Western Boundary – from the junction of the Kabompo and Zambezi Rivers along the Zambezi River to its Junction with the Majili River.
c) Eastern Boundaries – from the Junction of Zambezi and Majili Rivers along the Majili River to its head water hence Northward along the line of the watershed at the Headwaters of the Dongwe River.
In 1900, Britain formally annexed Barotseland and governed it as part of North Western Rhodersia. The people of Barotseland enjoyed equal rights as all other peoples of the territory as the British declined to give any special status to Barotseland.
In a letter of complaint by Lewanika to Coryrdon dated 23 January, 1906 Lewanika reiterated what he had conceded to the BSA Company in the concession of 1900. In defining the territory where he had jurisdiction, that is to say, the boundaries of his Nationality “Baroseland”, he noted that his nationality comprised of” Barotse Valley and round Sesheke”The letter acknowledging this fact was signed by Lewanika and witnessed by his Ngambela – Masika and Ford Aitkens.
Later in another concession dated 11th Angust, 1909, Lewanika extended his anthority to include
a) The Country on the West lying between the Zambezi River and the Anglo Portuguese Boundary
b) The Boundaries of Barotseland as defined in 1900
c) North Western Rhodesia as defined by the BSA Company particulary the areas of Batoka and Mushukulumbwe countries in which according to Art 3 of the concession , Lewanika retained right to graze Cattle in unoccupied Lands.
The tribal and linguistic map of Zambia is also very clear on the identification of peoples of the Barotse Nationality. The Barotse nationality did not include Lands of other tribes such as that of the Kuanga, Kuandi, Nkoya, Totela, Shanjo, Subiya, Toka, Leya Lumbu, Mashi, Kwandi, Nkoya, Totela, Shanjo, Subiya, Simaa, Ndundulu, Mbunda Nyengo, Mwenji, Makoma, Mbewe, Lovale, Lukolwe, Lushange. The Litunga and the Barotse people in general, having defeated the Kololo and who were now enjoying British protection, were concerned with keeping their original home as described in the 1900 concession inviolate. The Litunga and his people realized that with the advance of colonialism, they would no longer be able to retain any influence outside those initial boundaries. They wanted to protect the Barotse Reserve from European settlement. And this, they succeeded as, unlike the other areas under British rule, no European or Indian settlement was allowed and no private ownership of Land was ever permitted.
The claim by the Litunga Lewanika in his letter dated 11th August, 1909 that his authority included North Western Rhodesia , is not borne by historical evidence. At the time Lockner signed a concession with Lewanika in 1900, other Chiefs of other tribes of the British Central African Protectorate also signed concessions with another envoy of the BSA Company named Joseph Tomson. The concessions were so numerous that the British Government decided to issue to the BSA Company “Certificate of claim” for each area where Tomson had signed concessions with chiefs who could not be identified . The areas were identified as A,B,C,D etc and the Company built forts in those areas such as Fort Rosebury and Fort Abercon representing present day Mansa and Mbala respectively.
The area covered by certificate of claim ‘’A’’ which included present day Copperbelt, Central and parts of Eastern, Southern Provinces, the BSA Company decided to transfer for administrative reasons, to the “suvereinty of Lewanika as the Land was inaccessible from Fort Jameson. The Administrative move effected on 30th March, 1905 by the BSA Company enabled Lewanika to benefit as he was now entitled to the share of the Tax Money that other Tribes people paid to the BSA Company. Lewanika never claimed ownership of the Copperbelt or any other Lands outside Baroseland.
These administrative changes that gave Lewanika “care taker” status resulted in the creation by the BSA company of an entity known as “ Baroseland - North Western Rhodesia” and was initially headquartered at Kalomo. The other area known as North Eastern Rhodesia was Headquatered at Fort Jameson , now Chipata. In 1911, the two territories merged into the Protectorate of Northern Rhodesia. The name “Barotseland” was not featured in the new entity. However, the Almagamation Order contained specific provisions securing the Litunga Lewanika relative authority over Baroseland alone without North Western Rhodesia.
During the time of colonial rule, Barotseland had features of a charter colony although the Treaty and the Charter gave the territory protectorate status but not as an official protectorate of the United Kingdom government. Britain granted Barotseland semi autonomous status and made it a Protectorate within a Protectorate of Northern Rhodesia and administered as part of Northern Rhodesia. Other ethnic groups in the country such as the Bembas, Ngonis or Chewas did not ask for this status from the British. Barotseland was also denied recognition as an independent Kingdom in contrast to Lesotho and Swaziland which were recognized as such. This fate is shared by Zululand and the Baganda . The British refused to recognize the Litunga as a King. The British designated them as simply Paramount Chiefs. The British recognized only one King in their Empire- King George then and later Queen Victoria.
There is also a text description of the Boundary of Barotseland as at 1953 during the short lived Federation of Rhodesia and Nyasasand and an accompanying map drawn at the same time. This is probably the same spatial definition of Barotseland which Article 125 of the Zambia Independence order used to define Barotseland as the territory that as at midnight 23rd October, 1964 is comprised in the “Barotseland protectorate”. Documentary evidence of this description of Barotseland protectorate is not readily available anywhere. It certainly does not include Copperbelt, Central, Southern and parts of Western and Northern Provinces. What is evident is that the Barotse Nationality had influences in adjacent areas of its Borders. “From the Tribes which the Barotse subjugated, they exerted tribute in kind but in exchange, their vassals received gifts , loans of Cattle and protection from their enemies and the region remained relatively safe from the Slave Trade. Subject Tribes participated in the system as many had specialized products for exchanges.” ( Ghan ) These Tribes, as was the case with the Barotse, also enjoyed, relative autonomy and practiced different Governance systems.
As the wind of change which began with the independence from colonialism of Ghana in 1957, it was evident that this wind of change would come to Northern Rhodesia too. The African Welfare Societies first formed by Dauti Yamba in 1920’s at Mwenzo in Nakonde grew in stead and culminated in the formation of the African National Congress (ANC) in 1948 where one Mbikusita Lewanika who was later to become the Litunga of Barotseland was elected as the first President of the nationalist movement. The Barotseland question, namely, that Barotseland should have relative autonomy as was the case with the British High Commission territories of Bechuanaland, Basutholand and Swaziland has always been the demand of the Litunga but was always refused by the British colonialists. They preferred that Barotseland was administered by the Commissioner of North Western Rhodesia at Kalomo and later Livingstone, the Governor of Northern Rhodesia at Lusaka and later the Prime Minister of the Federation of Rhodesia and Nyasaland in Salisbury. This rejected by the British had merit. Martin Meredith (2006) has observed that in Africa, there were over 10,000 African polities which the European colonialist amalgamated into 40 European colonies and protectorates. Zambia alone had more than 73 ethno linguistic groups. The British were correct in merging Barotseland into Northern Rhodesia to create a viable modern state.

However, in spite of use value of this unity of the people of Northern Rhodesia, the Litunga and the BRE continued to demand for autonomy of Barotseland. This demand became a side event at the independence talks at Lancaster House in London. Ealier in 1963, the Litunga had hired a lawyer named L.K Wilson to prepare the Barotse case for secession. Three records were prepared.
a. A record of quarantees of Barotseland‘s status as set out in various concessions signed and affirmed by constitutions of 1911, 1924 and 1953 .
b. The Barotse case for secession presented along the lines of the High Commission territories of Swaziland, Basutholand and Lesotholand;
c. Barotseland’s existence as a nation prior to the creation of Northern Rhodesia; failure of the colonial government to develop Barotseland;unsuitability for Western democracy for African conditions; and advantages of becoming an independent state of Barotseland.
The British government rejected the Barotse case. The UNIP delegation also refused to entrench rights, privileges and status that the Barotse demanded in the Zambian Constitution. Instead the three parties (UK, Northern Rhodesia and the Litunga representing Barotseland) opted for a separate agreement as an annex to the Independent Constitution. The three parties signed the agreement on 18th May, 1964. The Cabinet of the new Zambian government reaffirmed the agreement at its 63rd meeting on 30th October, 1964 to formally bind it to the Republic of Zambia.
However, despite there being an agreement which provided among others for the Litunga of Barotseland to continue to have power to make laws for Barotseland in relation to the Litungaship, Barotse Native Government, Barotse Native Authority, Barotse Native Courts, the Litunga’s Council, local government, Land, Forests, traditional and customary matters of Barotseland, Fishing, control of hunting, game preservation. Control of bush fires, native treasury, supply of beer, reservation of trees for canoes, local taxation, and Barotse local festivals, the agreement was not implemented by the UNIP government.
The UNIP delegation and later its cabinet did not sign the agreement and affirm it respectively in good faith. As soon as Independence was granted and the new leaders were confident of their power, they quickly moved to abrogate the agreement by introducing the Local Government Act of 1965 which abolished the Barotse Government, the Barotse Native Authorities, he Barotse Native Courts, the Barotse Native Treasury and provided that Barotseland would from then on be administered through a uniform local government system applied in all districts and provinces of the country. Barotseland was renamed Western Province. The Barotse National Council was abolished by statutory instrument and five district councils were established.
The Litunga and the Barotse opposed this unilateral move and insured that in the elections of 1968, UNIP lost all seats to the ANC. In the Referendum of 1969 which removed all entrenched provisions that gave the Litunga rights on land, the people of Western Province gave a 75% NO verdict to allow the UNIP government to wrestle land from the Litunga. Furthermore, the Litunga and the BRE continued to promote the Sichaba(National) Party or the Barotse National Party (BNP) whose political aims were to lobby for secession.
In July, 1991, just as the MMD was coming into power, in order to entice the votes of the Barotse, the BRE met President Kaunda and demanded that if he won the multi-party elections and formed government, he would accede to their demands to restore the Barotse Agreement and refund UK Sterling 400,000 which Finance Minister Arthur Wina had taken from the Barotse Native Teasury in 1964. President Kaunda agreed and undertook to meet all the demands. (Sichone and Simutanyi, 1996:188). Unfortunately, President Kaunda lost, but the demands of the Litunga and the BRE did not end.
The new government of President Frederick Chiluba viewed the demands of the BRE as unimportant and irrerevant. The Minister Without Portfolio Brig. General Godfrey Miyanda now leader of the Heritage Party, was appointed to negotiate with the BRE. The effort failed and in 1993, President Chiluba threatened that anyone making demands for the restoration of the Barotseland Agreement 1964 would be charged with the high crime of treason.
In the successive governments of President Levy Mwanawasa and President Banda, the National Constitutional Conference which had been set up unilaterally by President Mwanawasa (it was boycotted by the Catholic Church and the PF among others) ignored the submissions of the BRE. The draft Constitution that was made excluded principles of regional autonomy or devolution of power. President Banda’s government had absolutely no time to consider the BA 1964 question. The NCC contemptuously ignored the BRE demands and chose instead to continue with the divisive doctrine of unitary state.
What Should Be Done?
President Michael Chilufya Sata and the PF government have the opportunity to resolve this question of Barotseland. The demands of the Litunga and the BRE cannot be casually dismissed or ignored or wished away as has happened since 1964. However, in trying to resolve the impulse, the following questions must be addressed.
1. Was the Barotseland Agreement ever repealed or revoked? Could the Parliament of Zambia repeal the BA 1964 annexure to the Independent Constitution? Was its abrogation supported by law? If the agreement is alive as observed by the Chongwe Commission, how can it be implemented without destabilizing the country?
2. Is the Litunga and the BRE justified in demanding for the restoration of the BA 1964? If relative autonomy as demanded is granted, what political institution will be in place – multi party democracy or a return to monarchical hegemony? What will be the response of other nationalities in Western Province such as the Nkoya, Mbunda, Nyengo, Luvale and others who are not Barotse? What will be the view of other nationalities like the Chewa, Bemba, Tonga, Ngoni, and so on that constitute the totality of the peoples of the Republic of Zambia?
3. What is the consensual view of the BA 1964 in Western Province? Are present demands of the BRE representational of all the people of Western Province including the Nkoya, Luvale, Mbunda Nyengo , non indigenous peoples who have settled there and so on.
4. Should the dispute be taken up by the High Court of Zambia as provided by Art. 9 of the BA 1964 in resolving any disputes on the agreement? What is the dispute and how does it impact the wider Zambia?
5. To what extent should the Right to Self Determination including secession as provided in the Universal Declaration of Human Rights relevant to the BA 1964? Are the Barotse nationality an oppressed people in Zambia?
For sure, valuable lessons can be learnt from the experience of other countries. Some examples include the case of Serbia and Kosovo which ended up with Kosovo declaring UDI in 2009; Sudan in which South Sudan emerged as an independent state after such a long and terrible civil war; Canada and Quebec in which Quebec has been recognized as a nation within a United Canada; Tanzania and Zanzibar in which Zanzibar is relatively autonomous; the example of South Africa where local government has been integrated within federated structures, and so on.
For many observers and analysts, there are three possibilities in resolving the Barotse Question.
1. To re-negotiate the Barotse Agreement so as to ensure more regional autonomy of all the regions of Zambia anchored on liberal democratic values and federalism. This will require that the PF government provides for Zambia a new constitution that entrenches federated structures in our governance. The Technical Committee appointed by President Sata can be requested to negotiate with the Litunga and the BRE and other Royal Establishments together with all civil society on the historical necessity of devolution and recommend in the new draft constitution the federated way in which Zambia would be governed. It is a notorious fact that no country has ever developed under the so called unitary state structures. In fact, this is a colonial legacy that suited despots. All serious countries only developed when they federated. This is true for the UK, Germany, Japan, India, RSA, Brazil. USA, France, Russia, India even small countries like South Korea, Switzerland and so on.
2. To uphold the status quo holding Zambia as a unitary state with power concentrated in Lusaka. To continue giving lip service of support to decentralization and devolution demands of the people. To ignore the demands of the BRE and the Litunga and treat advocates of the restoration of the BA 1964 as treasonous. This option is not only reactionary and divisive, but will make Zambia forever poor. This plays in the hands of Zambia’s enemies who celebrate at our inability to manage our country efficiently and effectively. Only despots who want to continue stealing peoples resources in Lusaka and abusing their powers unfettered support the maintenance of a unitary state.
3. To dissolve the state of Zambia and allow Barotseland to secede from the former Northern Rhodesia and divide the Zambian people into two or several balkanized separate entities. To divide the people of Zambia who since 1911 have lived and inter-married and created a unique Zambian national character? This is the demand of some separatist elements in Barotseland. This will require, among others, the determination of the boundaries of Barotseland, the holding of referenda in both Barotseland and other previously subject peoples like the Nkoya, Nyengo, Mbunda, Luvale to determine whether they would want to revert to be ruled by the Litunga again and so on. Such an option is obviously retrogressive and will tend to revise a backward and oppressive governance system of feudalism. This option does not support the development project and is inherently reactionary.
For sure, President Sata and the PF government can and should resolve the BA 1964 problem. Option one is not only historically necessary, but is also a historical inevitability as it is borne and steeled by history.
END

THE CARNAGE OF PRESIDENT BANDA AND THE MMD GOVERNMENT MUST BE STOPPED

2011-06-11T08:53:00.000-07:00

By: Mbita Chitala PhD
Other than the few misguided colleagues in the MMD led by a UNIP clique that have taken over the party and a few nuisance one- man NGOs created by the MMD to fern trouble and led by such obnoxious characters as Edwin Lifwekelo, Gregory Cifire, Moses Kalonde, Chanda Chimba, Mulenga and whose despicable mouthings are the in trade of the MMD government controlled Times of Zambia, Zambia Daily Mail and the ZNBC television and Radio networks, all peace loving Zambians organized in all church organizations, women’s movement, workers organizations, young people and student organizations, professional organizations and all those underemployed village farmers and unemployed citizens in the informal sector – are agreed that change in our country is an inevitable historical necessity, that the bad governance of President R B Banda must come to an end as the country goes to the polls. Our country has a historical duty to re dedicate itself to ideals that advance our nation to peace, prosperity and happiness for all.
The demands of the people of Zambia are simple and uncomplicated. In addition to several democratic demands anchored on the Bill of Rights, the next elections will be contested on three broadly defined people’s demands.
1. To provide for Zambia, a multi-party constitution consensually arrived at by the majority of Zambians. The MMD regime in twenty years in power has failed in spite of wasting more than K500 billion of tax payer’s money in its last attempt to give Zambia a compromised constitution in which President Banda must take the sole responsibility and be held accountable to the disaster. Zambians know that the continued reign of President Banda means that there will never be in our country a peoples constitution. This one reason alone is sufficient to indict the MMD as a blatant failure which must be removed from public office quickly. Senior Statesmen like Willa Mung’omba, Simon Zukas and others have observed that the failure of the MMD to enact the constitution symbolized a Vote of no Confidence on the MMD regime and called for their resignation. The MMD government has unashamedly refused to resign or even apologise to the people for this man made disaster. The people have a chance to send them to the dust bin of history in the coming elections and ensure that they account for their bad governance.
It is immensely gratifying that the people have a choice. While the people do not yet know the programs of other political parties, one good choice is to support the Patriotic Front and President Michael Sata whose manifesto has been published and has undertaken to establish a committee of experts to review the recommendations of all previous Constitutional Review Commissions and draft a constitution that will be submitted to a referendum and if accepted by the people, to be enacted as our fundamental law within 90 days of taking office. This is a patriotic undertaking and that is why all former pact sympathisers such as Col. Panji Kaunda , consultants such as Bob Sichinga , MMD members such as Hon George Mpombo have endorsed Mr. Michael Sata and the Patriotic Front. This is the best chance to have a progressive party that has committed itself to providing us with a multi-party constitution that will address such issues as devolution of power which is the main grievance of the Barotse question and the need to do away with the one party state infrastructure that has prevented our democracy from blooming and blossoming into a real democracy.
2. To reduce the more than 73 percent poverty incidence in our country. Granted, our country has benefited from the cancellation of our external debt which allowed us to put money in infrastructure as part of the MDGs initiative and allowed us to have over 7% GDP statiscal growth in the last few years, poverty, however, still remains widespread and continues to stunt the growth of our people. In many areas such as Shangombo, Lukulu, Petauke, Chilubi, Chavuma, Luangwa, Samfya, Gwembe, and many other districts, 90% of households live in poverty. Others overcrowd our towns in despicable shanties. On the formal economy, out of a possible six million employable labour force, only about 500,000 are in employment leaving the rest to hover between suicide and madness, to swell the mountains of angry unemployed and underemployed – the majority of whom are young people and women. Housing continues to be a nightmare with more than two million houses that need to be constructed to fill the housing deficit, a distant dream ,as the MMD have no plans to house our people.
The MMD government under President Banda have refused to tax the mining companies equitably and fairly because of a possible collusion that has continued to disadvantage Zambia. This gross abuse of power has meant the country losing on an opportunity to earn billions of dollars that could have facilitated government to create employment opportunities for our people, ensure that taxes are lowered to enable people have sufficient disposable income and hence fight poverty more meaningfully. Unless the MMD and President Banda are defeated in the next elections, poverty of our people will worsen as they have no plan for poverty eradication at all. No quality jobs will be created as has been admitted by the IMF Representative Dr. Kapur and confirmed by Minister of Commerce Felix Mutati. Poverty will increase despite statiscal GDP growth rates that benefits foreigners at the expense of Zambians. As all Zambians know, retrenching workers as happened during the privatization fiasco and lately at ZAMTEL is the trade mark of the MMD. Even in the next five years, they have promised in their manifesto to create only 50,000 employment opportunities.
Of the political party manifestos that have been published, only the Patriotic Front manifesto addresses the issue of poverty eradication meaningfully. President Sata and the PF have undertaken to invest massively in the social sector as well as in public works, agriculture, housing development, mineral development, industry and so on. The manifesto promises to review the mining policy so that Zambians benefit from their God-given wasting asset of copper, cobalt and gemstones. It is clear our country must revert to the Mwanawasa mining tax regime that provided for fair windfall taxes, a public works program to create jobs for our young people, active small business promotion and empowerment of Zambians to create a middle class, selective subsidies to agriculture and industry and massive investment in education and health.
The manifesto promises the lowering of taxes- PAYE and zero rating for VAT purposes of essential commodities such as transport, food, medicines, education, agricultural inputs, the increasing of salaries to public servants, the prompt payment of all pensioners, the construction of more than two million houses, the development of one major project per province to create more than one million employment opportunities in the first three years, abolish nuisance taxes such as user fees in hospitals and levies in schools, commit itself to affirmative action, institute media reforms to be in line with democratic needs and so on. The annual GDP growth rates are expected to exceed 10% and our country’ GDP will more than treble. These yearnings are attainable and they will be achieved by the PF supported by the people’s coalition.
3. To conduct a program of zero-tolerance against corruption and abuse of office. Mwanawasa’s legacy has been betrayed by President RB Banda and the new MMD regime. Grand corruption has become the norm. The repeal of the mining tax code and policy was an exercise in grand executive mischief which will need to be investigated. The privatization of both Zambtel and ZANACO,both opposed by the majority of people in Zambia, lacked transparency. The award of contracts to supply government with fertiliser, military equipment, build schools and clinics, construct roads, and other properties as occurred at NAPSA had executive collusion imbedded under so called “single sourcing” which is an acronym for grand corruption and fraud, has made some people hitherto poor into dollar millionaires. All this will need to be investigated and the culprits who have been cheating the people shall be brought to book. It is gratifying that the PF has promised to implement this zero tolerance against corruption and has promised to re-enact the abuse of office clause in the Anti Corruption Act that President Banda and the MMD removed to hide public abuse and thefts in the public service.
4. We founders of the MMD together with many patriotic and progressive citizens, the ideals that the PF manifesto have undertaken to accomplish, are the same ideals and vision we have always stood for until President RB Banda and a clique of his UNIP zealots conducted a coup against the true blue MMD members and crowned it with the farce at Mulungushi where intimidation, violence, bribery, provincialism and dictatorship were introduced as the new MMD party policy. We hold President Banda responsible for reversing all the democratic gains of the MMD. It is therefore necessary to implore all the people, the people in Mbala, Mpulungu, Senga Hill, Isoka, Nakonde , to the people of Western province and other provinces that clamour for devolution and desire to settle the Barotse question, to the progressives in the MMD, UPND, ADD, NAREP, FDD and all other political parties that want change from this corrupt disaster, to students that want free education and guaranteed job opportunities, to the sick people that desire not to be denied assistance for lack of money, to the pensioners that want to be paid their pensions promptly, to all workers and peasants that want to improve their conditions, to the intellectuals that desire excellence instead of patronage and nepotism, to all citizens that want a united and peaceful Zambia, the Hour for Change has come again. Examining political work already accomplished, together with the vision as reflected in a manifesto, the PF and President Michael Sata have provided us with a sure way of our country starting afresh and getting rid for good this manmade disaster.
End

SUBMISSION TO THE NATIONAL CONSTITUTIONAL CONFERENCE (NCC) ON THE DRAFT CONSTITUTION OF ZAMBIA

2010-07-21T08:57:00.000-07:00

ZAMBIA RESEARCH FOUNDATION (ZRF)
(Registered with the Registrar of Societies – Registration Number ORS/102/35/403)

SUBMISSIONS TO THE NATIONAL CONSTITUTIONAL CONFERENCE (NCC)
ON THE DRAFT CONSTITUTION OF THE REPUBLIC OF ZAMBIA
PUBLISHED ON 18TH JUNE 2010

SUBMITTED BY:

Dr. Mbita Chitala Chairman
ZAMBIA RESEARCH FOUNDATION, P.O. BOX 35443, LUSAKA , ZAMBIA
Tel +260 211 214777, Mobile: 0976 030398 Email: mbitachitala@yahoo.co.uk
___________________________________________________________________________

Dear Hon.Mr. Chifumu Banda SC
Chairman of the NCC
LUSAKA.

Since the NCC has finally produced a draft constitution, we as a civil society research organization with to present and recommend these submissions for the NCC’s considerations before you submit your recommendations to the Minister of Justice as provided in the NCC Act.
1. PREAMBLE
The Paragraph reading “Declare the Republic a Christian Nation ……” should be deleted as it is controversial, contradictory to Art 48(i) which protects citizens from discrimination on grounds of religion etc and Art 57(3) which provides for freedom of conscience. The multi-religious character of our nation can be added in the paragraph that “Recognizes the multi-ethnic, multi-cultural and multi-religious character of our nation”. Freedom of worship should not be used to infringe onto other peoples comforts however few they may be. Zambia should not adopt a State Religion.

2. PART II – THE REPUBLIC OF ZAMBIA AND ITS SOVEREIGNTY
a. Need to add a new clause: “For purposes of Clause (5), the formation of provinces and districts shall not be treated as establishment of new states
b. Need to add a new clause on culture to provide for promotion of Zambian culture, recognition of indigenous technologies, promotion of intellectual property rights and enacting legislation for communities to be compensated via royalties.
c. Need to provide that Presidential Flag, National Assembly Flag and the motto One Zambia One Nation shall be national symbols in Clause (6).
d. Need to include as Official National Languages Bemba, Kaonde, Lunsa, Luvale, Nyanja, Silozi and Tonga in addition to English in Clause 7(1).
e. Need to provide for a new clause on Decentralization and Access to Services to provide that “Zambia is divided into Provinces and Districts as specified in Schedule………..”
f. Need to provide a clause on State and Religion “That there shall be no State Religion”.

3. PART III - NATIONAL VALUES, PRINCIPLES, OBJECTIVES AND DIRECTIVE PRINCIPLES OF NATIONAL POLICY
a. Need to include in Clause 13(L) provision for “the state to provide education and other public goods such as roads”.
4. PART IV- LAWS OF ZAMBIA
a. Need to delete reference to “British Laws” in Clause 20(d)(f) and be replaced with “Foreign Laws” to allow Zambia to adopt good laws from any other country.

5. PART VI - BILL OF RIGHTS
a. Article 40(2) providing for capital punishment should be deleted and be replaced with a clause reading as follows:“A person shall not be deprived of life intentionally.” This is consistent with civilized international practice.
b. Art 47(5), should be edited to include civil cases in addition to criminal cases to allow persons to appeal for a retrial if new and compelling evidence has become available.
c. Art 49 should provide for the establishment of a Gender Commission whose objective will among others to provide for affirmative action for purposes of redressing imbalances created by history, tradition or custom.
d. Need to delete Art 50(2)© as it contradicts Art 51(1).
e. Need to delete the derogation in Art 51(1) starting at “ except that an Act of Parliament……” as this derogation would allow for the abuse of children.
f. In Art 52, there is need to define concept of “Family” as referring to nuclear, extended and polygamous marriages and not heterosexual unions or same sex unions or sorolate unions.
g. Art 52(5) outlawing same sex marriages need not be in the Constitution as it is controversial and may adversely impact Zambia’s international relations. Need to delete the clause.
h. Art 53 should include in persons with disabilities older members of society, refugees and displaced persons. Should include in the title these categories of persons.
i. Art 58)f) should be re- worded to delete the word “registration” as registration conflicts with freedom of expression. Rather, the word regulation suffices to prevent anarchy.
j. Art 59 be re titled “Right of Access to Information” and the constitution should provide for the right to access to information held by the state or any other person if required for protection of fundamental freedoms. Parliament should enact a law to provide for this.
k. In Art 60(3)(f), the word “registration” should be deleted as the idea is to regulate and not to subvert the freedom of the media.
l. Art. 66 should be more specific to provide workers rights to fair compensation, reasonable working conditions, to form and join trade unions, for employers rights to form employer organizations and for the right to collective bargaining.
m. Art 67 must be rephrased to make social security a mandatory obligation of the state and should include shelter and other public goods such as roads and transportation.
n. There is also need for the constitution to indicate the following in this Part:
- Right of citizens to shelter and housing; food; water; and sanitation
- Right of citizens not to obey unlawful instructions
- An article on consumer rights to provide for right to reasonable quality goods and services, information and protection of their health and safety as well as compensation for loss or injury.
- Need in Art 74 on enforcement of Bill of Rights to, for the constitution to establish the Human Rights Commission and define its powers in an enabling law of Parliament otherwise the enforcement provided currently would become an academic exercise.

6. PART VII - CODE OF CONDUCT OF PUBLIC OFFICES
This part should provide for the creation by the constitution an organ to ascertain information provided and penalties – otherwise it is academic in its present form. An independent Ethics Commission would suffice. The current system where declarations are lodged with the Chief Justice is inherently wrong as the courts are appellant institutions.

7. PART VIII – REPRESENTATION OF THE PEOPLE
a. Art 84(1) should be re-phrased to avoid wastage of public resources. By elections for MPs and Counsellors should be limited to seats falling vacant held by independent MPs or Counsellors. In all other cases where a vacancy occurs, a political party holding that seat should be able to nominate a replacement from their lists.
b. Art 87(2)(a) should not limit the chairmanship of the Electoral Commission to Judges only as this is discriminatory and unnecessary. Other citizens suitably qualified can also serve as Chairmen and as members.
c. Art 86 on the Selection Committee to peruse and recommend membership to be vetted by Parliament and then be appointed by the President as members of the Electoral Commission should be deleted as it is an unnecessary cost. The position where Parliament vets Presidential nominations is adequate.
d. Art 100(1) providing that only parties with representation in Parliament will be funded should be deleted and substitute with an article that provides for any political party participating in national as well as local government elections shall be funded on an equitable and proportional basis. The idea of funding only those with seats in Parliament is not only discriminatory but not fair to investing in democracy.
e. An additional article should be added to provide that “no civil servant shall hold office in a political party”. This is standard practice in all democracies.

8. PART IX – EXCUTIVE
a. Art 108(d) providing for a minimum age of 35 years to be elected and serve as President should also provide for a maximum age of 75 years as beyond that, most Zambians become senile and need to rest and enjoy their pensions.
b. Art 108(e) providing for a minimum qualification of First Degree to be candidate to the Presidency of Zambia should be deleted as it is controversial, divisive discriminatory and can lead to unnecessary judicial action.
c. Art 113 on Tenure of Office of the President, the constitution should also provide that it will be treasonable offence for a person who has lost elections or been removed as provided in the constitution to refuse to vacate office within the period provided in the constitution.
d. Art 128 on the appointment of the Vice President. The constitution should provide that the VP shall be a running mate so that the VP also has a national mandate when he acts as President. The costly idea of going for by elections when the office of President falls vacant will also be addressed since the VP would immediately be sworn in to complete the term of office.
- The constitution should also provide for both emolument and retirement benefits for the VP
- A by election should only occur if the office of VP is also vacant as that of the President.
e. Art 130(i) 131(1) , 132(1) as well as 128(2) allowing the President to appoint ministers from Opposition Parties should be deleted as this weakens our democracy and may enable the executive to rule without checks and balances. The commitment to multi-partism should limit a President to appoint ministers from the party that sponsored him or her and to citizens who are neither opposition MPs or Counsellors.

9. PART X - THE LEGISLATRE
a. Art 143(a) providing for 240 MPS to be directly elected is unjustifiable. This should be left to an enabling legislation which will be based on scientific study of demographic patterns, geography etc. The constitution should so direct.
b. Art 144(5) providing that Chiefs are not qualified to seek elective office must provide for a derogation that they can if they resign as chiefs.
c. The constitution should also provide for voters to have a right to recall an MP or Counsellor and state that Parliament will enact legislation to this effect providing for grounds and the process for recall.

10. PART XII – LOCAL GOVERNMENT
a. Article 212(2) on objectives of Local Government should include the following objectives:
- Ensure equitable sharing of national and local resources
- Facilitate decentralization/devolution of State organs, functions, and services from Lusaka to the Provinces and Districts
- Recognize the right of communities to manage their affairs.
b. Article 216(2)(3) on composition and functions/duties of District Council should provide in the constitution as a directive principles to any other legislation the following:
- That the Mayor and Deputy Mayor or Chairman and Vice Chairman shall be elected directly by the electorate from voters in the district who are not members of the council but pay ground rent to the council for their properties. And that the Mayor/Chairman and their Deputies will be ex-officicial members of the council.
- The Mayor/Chairman shall constitute the executive authority of the council and appoint other officers of the council with the approval of the Council
- That Parliament shall enact legislation to provide for the elections, removal of mayors, vacancy, functions and powers, boundaries of councils, relationships with central government, support of districts, conflict of laws, suspension of district councils etc.
c. Article 224(3) on consequential amendments. Need to delete reference of Provincial Minister as being a Deputy Minister as this conflicts with Article 133 that include Provincial Ministers as members of Cabinet.

11. PART XIII - CHIEFTAINCY AND HOUSE OF CHIEFS
a. Article 227 should be expanded to provide for the establishment of “Community Development Funds” in each district for the purpose of advancing development in each chieftainship. These funds under colonial rule were called “Native Authority Treasuries” for each “tribe” as the nationalities were known then. Since the Chieftaincies are corporation sole as provided in Article 226(a) and with power to manage land and other natural resources as provided in Article 227(2), it is necessary to protect chiefs from being corrupted by land speculators etc by creating these community funds in which land royalties and other presents can be pooled and managed. Parliament will then provide the appropriate legislation to manage these funds.

12. PART XIV PUBLIC SERVICE COMMISSIONS
a. There should be included in the Constitution a clause establishing and providing for the functions and powers of statutory institutions and parastatal companies.
b. The constitution should in addition to establishing the Public Service Commission, should also create all other commissions and provide for their functions etc. These commissions include the following:
- Teachers Service Commission
- Local Government Service Commission
- Salaries and Remuneration Commission – a new commission to standardize salaries in the Public Service etc
- Financial and Fiscal Commission to replace the ineffective Economic Advisory Council
- National Land Commission – to superintend on all land matters
- Public Debt Management Commission

13. PART XVII – PUBLIC FINANCE AND BUDGET
a. Article 265 on imposition of taxes should also provide for
- Principles that will guide Zambia’s public finance such as accountability, equitable, fair taxation and expenditure management as well as prudency and needs of future generations etc
b. The constitution should also create an Equalization Fund to support local government
c. Article 274 on management of public debt should provide for the establishment of a Debt Management Office to centralize the currently haphazard management of finance and fiscal functions which have been abating corruption and abuses.

14. PART XIX – LAND AND PROPERTY
a. Article 287 on Basis of Land Policy should include as Art 287(i) the objective of “Elimination of gender discrimination”
b. Article 288 on Classification of Land should be re- phrased to
- Delete “customary land” and substitute “Community Land”. Customary land denotes tribal land which is anathema to Zambia as a unitary state.
- Replace classification of “State Land” with “Public Land” as the concept state in this context is meaningless
- The constitution should also provide for Private Land which shall be held on freehold terms. This should be the case in community lands.
c. Article 292 on land tenure should include as article 292(5) a clause that land under “customary” classification can only be alienated to non-citizens on the basis of co-ownership with the chieftaincy and on which royalties will be paid.
d. Article 291 on the vesting of land in the President should be deleted and provide that land will be vested in the National Land Commission which will be a corporate sole etc. There is need to remove the one party practice and democratize land administration.
e. The constitution should also establish a Land Development Fund and Parliament will provide legislation on its management.

15. PART XXI – REVIEW, ADOPTION, AND AMENDMENT OF CONSTITUTION
a. In Article 303(4), the word “all” should be deleted as it is meaningless.
b. The constitution should also provide that the constitution can be amended without referendum by either
- parliamentary initiative and/or
- by popular initiative after collecting one million signatures of citizens
This completes the process and gives citizens avenues that can be less costly but consensual.

16. PART XXII – GENERAL PROVISIONS
The constitution should provide the following additional provisions:
a. That all international agreements shall be tabled in Parliament
b. That state organs may delegate any power or function to other state organs
c. Ascribe to the right of self determination by communities

Yours in National Service

Mbita Chitala PhD
CHAIRMAN -ZAMBIA RESEARCH FOUNDATION

SHOULD ZAMBIA RE-INTRODUCE WINDFALL PROFIT TAX

2009-11-23T02:58:00.000-08:00

INTRODUCTION
The lamentation of Dr. Mathias Mpande in his article “Explaining Windfall Tax” which appeared in the October Issue of the Zambian Economist is a clever explanation as to why Zambia must address the issue of mining taxation. The fact that the mining industry which provides over 80% of Zambia’s export earnings but contributes less than 2% to government revenue, is a clear misnomer and according to Dr. Mpande, “this is what is paralyzing our state, causing corruption, extreme poverty and suffering of 99% of our Zambians”. While agreeing with the main thrust of Dr. Mpande’s argument, this article attempts to put the issue of windfall tax into a historical context and argues that Mwanawasa’s bold attempt at resolving a historical injustice against Zambia has been betrayed by the recent revisionism as espoused by the new Minister of Finance Musokotwane who not long ago was Mwanawasa’s economic adviser.

ZAMBIA’SCOPPER/COBALT PRODUCTION AND SALES
Zambia has continued to be one of the global leaders in both Copper and Cobalt production /sales. After the privatization of ZCCM, production and sales figures for both copper and cobalt have varied. Observers have noted that definitive production/sales figures are not available as the Ministry of Mines has not been capable of auditing the industry effectively. The IMF have estimated the following production figures and value of the metals from information allegedly supplied by the Ministry of Mines. In 2002, copper productio was 337.7 MT and sales were US$ 510 million while cobalt production was 3.9 MT and sales was US$ 50 million. In 2006, copper production was 498.3 MT and sales of US$ 2,938 million while for cobalt, production was 4.7 MT and reported sales of US$ 146 million. From 2007 to date, there has been no cooper and cobalt production figures reported. However the IMF estimated that Zambia's projected earnings from copper alone would be US$ 3,407 million in 2007, US$ 3,785 million in 2008 and US$ 3,658 million in 2009.

It is obvious that during this period of copper boom, Zambia does not know or has been prevented to know with exactitude the quantity of metals it produces and sales. The privatization process has made this fact worse as mining companies now are at liberty to export unrefined copper/cobalt metals and in this way circumvent honest statistical reporting. Zambia now un acceptably loses a lot of Gold, Silver and other minerals in this way. It is in this environment that the Late President Mwanawasa and his government attempted to institute fiscal policy reform to enable Zambia to benefit from the God given mineral resources which will waste away within twenty years of our life time living the next generation with hazardous gaping holes with nothing to show for. In the current debate on this, two viewpoints can be discerned, namely, the Mwanawasa Doctrine and the post Mwanawasa Revisionism.

THE MWANAWASA MINING TAX DOCTRINE
After being hesitant for almost six years, Mwanawasa was finely convinced that Zambia was getting a raw deal from its minerals. On 1st April, 2008, his Government finally gave effect to the Mines and Minerals developed Act 2008 and also passed the Income tax (amendment) Act 2008. Hitherto, Company Tax rate for Mining was charged at 25% of Company profits In reality however, the Copper Mining Companies since they were privatized have hardly declared any profits as they claimed that they were still carrying forward their losses and claiming depreciation on large capital investment. The Zambian Government had, under duress, agreed not to alter the 25% Tax rate on profits for a stability period of 20 years. Because of this, Zambia hardly received anything from the Mining Company who for instance in 2001 only paid a paltry K 4 Million as Company Tax. Mwanawasa wanted to change this historical injustice and the starting position was by way of addressing the mining tax regime of Zambia. Among other changes, the MMD government addressed the following:

Firstly, Section 2 of the Mining Minerals Development Act introduced the definitions of energy minerals industrial Minerals Mineral royalty and Mining operations. This was to avoid deliberate misinterpretation of the intention of the changes.

Secondly, Section 133 amended the Mineral Royalty rates and introduced the definition of norm value and gross value. The norm value was defined as the average LME or Metal Bulleting or any approved money exchange market cash price per metric tonne multiplied by the quantity of the metal sold or produced. The gross value was defined as the realized price for a sale free – on – board at the point of export from Zambia or point of delivery within Zambia.

The Mineral Royalty rates were increased from 0.6 % to 3% of norm value of base metals produced or recoverable under the license; 3% of gross value of Industrial and Energy Minerals; and 5% of norm value of the precious stones and 5% of the gross value of the gemstones produced under the license.

Furthermore, to ensure that Tax was collected, the ZRA Commissioner General was empowered, if he felt the realized value had been under declared, to charge royalties in accordance with the mechanism of section 97A to 97 D of the income TAX.

To ensure compliance of the law, section 142 of the Act also prohibited the disposal of Minerals and provided penalties for contravention.

To stop the continued pillage of Zambia’s resources, Section 160 provided that existing development agreements would henceforth cease to be binding on the Republic of Zambia and also removed the proviso on paragraph 3(1) (e) of the charging schedule which made all Mining Companies including those with Development Agreements unfairly or crookedly signed with the Government to start paying Income Tax at the rate of 30% instead of 25%.
Many Patriotic Zambians heralded the Mines and Mineral Development Act 2008 as the best of the Mwanawasa heritage, which had the potential of making Zambia benefit from its Minerals fairly. Previously, Zambia had been a victim of transfer pricing where Mining Companies directly or indirectly sold Zambia’s metals to associated parties at under valued cash prices. For Tax purposes, the Commissioners general was now empowered to use the reference prices to determine Tax obligations.

INCOME TAX AMENDMENTS
Further more, the Manawasa Government effected changes in the Income Tax Law by passing the Income Tax (Amendment) Act, 2008 and amended the Tenth schedule on windfall Tax. The amendment introduced a schedule for the Computation of Windfall Tax. This applied to any person carrying on Mining operations of base metals or precious stores its computation started at two times the average cost of the Mineral. In other words, a breakeven point was first established and the trigger point was at a double cost to this. Although this was unfair for Zambia, it was still a progressive beginning.

For Copper, the First Trigger Price (FTP) was US$ 5,512 meaning that the agreed break even point cost was US$ 2,756. And yet in the mining circles, the real breakeven point for copper production in Zambia is between US$1,000 and US$!,500 per tonne. The Second Trigger Price (STP) was US$ 6, 614 and Third Trigger Price (TTP) was US$ 7,716. Windfall Tax was then paid as follows: If the monthly average price (MAP) (i.e weighted average LME price for the month) did not exceed the FTP, Windfall Tax would not be paid . If MAP was between FTP and STP the Windfall Tax to be introduced was 25% or US$ 2.50 per pound . If MAP was between STP and TTP, the Wind fall rate for this would be 50% or US$ 3.00 per pound and if it exceeded TTP Windfall profit would be 75% or US$3.50 per pound. The measure was intended that whenever prices of the metals increased beyond 2 times the cost of production, Zambia would also gain.

For cobalt, the First Trigger Price (FTP) was US$55,116, the Second Trigger Price (STP) was US$77,162 and the Third Trigger Price (TTP) was US$88,185. As with the copper costing, the provision for windfall taxation were 25%, 50% and 75%.
VARIABLE TAX
The Mwanawasa tax regime also provided for Variable Tax which was charged where assessable income from mining activities exceeded 8% of the total sales. As is normal in many countries, all companies including mining companies pay a normal company tax. In Zambia, it has been 30% of the profits. However for Zambia, there was an additional proviso that the assessable income from the mining operations did not exceed 8% of the total sales value of the year. Where assessable income exceeded 8%, variable tax rates became applicable. This was 15% for profits above 8%. In other words, income tax on profits up to 8% was 30% while any profits above 8% would be charged at 45%. Variable Tax is a net-profit based tax that was specifically to work under all price and cost scenarios. And this is the tax that shortly after the demise of President Mwanawasa, the new government of President Banda opted to adopt and caused Parliament to abolish the windfall profit tax regime in 2009.

THE CONTROVERSY
Two positions have emerged, namely, to sustain the current tax regime or revert to the windfall tax regime. The Minister of Finance and National Planning Situmbeko Musokotwane who earlier had been Mwanawasa’s principle economic adviser and who had been nominated by the new President to be Minister, has been the greatest proponent of the new tax regime of the mines. In his 2009 National Budget Address, Musokotwane defended the abolishment of windfall taxes. “Mr. Speaker, the current mining tax regime was introduced last year aimed at providing a stable and robust tax system that works during periods of both high and low prices and cost. This regime was intended to ensure that the nation received a fair return from its resources, while mainting a globally competitive mining industry.” Having said this clearly progressive statement, Musokotwane then contradicted himself and said “Sir, having consulted with the industry and other stakeholders, and in light of the impact of the global crisis on the mining sector, I propose the following refinements:…(a) remove the windfall tax and retain the variable profit tax, which will still capture any windfall gains that may arise in the sector…”

Many observers have defined this position as a very unpatriotic apology. Musokotwane completely discounted the view that the two tax systems were not applied concurrently nor did he reflect on the loss of income to Zambia. In 2008, it was estimated that Zambia would earn not less than US$415 million from windfall taxes. With the new variable tax, the country is unable to even estimate what Zambia would get. What is factual is that Zambia is the loser. Silvia Masebo, the Chongwe MMD Member of Parliament pleaded with her own MMD government to re introduce windfall tax in a passionate speech in Parliament quoted in the Sunday Post, October 25,2009 at page 3 as follows: ”We continuously sound apologetic to those wanting to invest in the mining sector. We have been complaining about little resources, but it is in the mines where the money we need is. We have heard our colleagues on the left (opposition) say they objected the removal of windfall tax. I want to make it clear that even those of us on the right (Ruling Party MMD) are for the re-introduction of windfall tax because that is where money for development is.” Masebo continued her speech by recalling the bravery MMD exhibited when they introduced the regime. “II recall how we suffered as MMD last year to introduce this tax. Our late President Mwanawasa had to take a break and drink water when he was opening the National Assembly because he had to make an important announcement. We introduced the windfall tax, and it is sad that a few months later, we have shifted. May I appeal that this government re-introduces the windfall tax on mining…”

FUTURE PERSPECTIVES
It is apparent that the abolishment of windfall tax was not well thought out. The irony that Musokotwane continues to defend the revisionism even as he was the principal adviser to its introduction in 2008, begs the question. The Mwanawasa government fiscal regime introduced on April,1,2008 aimed at making Zambia receive fair shre of mining profits and rents through the introduction of windfall profit tax, variable tax and increased mineral royalties. In implementing, the windfall tax and the variable tax did not apply at the same time. In 2008 when this was implemented, Zambia found itself with a surplus budget and in a letter of Intent to the IMF dated 7th May,2008, the then Minister of Finance Peter Magande committed government to save K722 billion in a separate Mining Resource Account (MRA) at the Bank of Zambia (BOZ) to be used a stabilization fund to smoothen expenditures over time. It was estimated that the country would earn more than US$415 million that year. The windfall tax regime was supported by all donors notably the Bretton Woods Institutions, the Scandinavian countries, the EU, and DFID. Other organizations such as Oxyfam heralded this as a new beginning to mineral rich countries. The Musokotwane revisionism has worked against the new resource nationalism being practiced by all progressive countries that want to eradicate poverty and underdevelopment in their countries. The choice is whether Zambia should benefit fairly now by way of fair taxation or leave a situation where in twenty years time, our generation will leave a heritage for our children, hazardous gaping holes with nothing to show for.
Dr. Mbita CHITALA

Does Zambia's Electoral System Need Reform?

2009-08-04T04:20:00.000-07:00

DOES ZAMBIA’S ELECTORAL SYSTEM NEED REFORM?
(Published in Zambian Economist, June, 2009, Volume 1 Lusaka, Zambia)

1. Introduction

Zambia faces many challenges in attempting to improve its electoral system so that the system becomes and is seen to be fair and efficient.

These challenges include improving voter registration (by revising the voters roll, computerizing the system and adopting a system that does not need using an NRC); Improving electoral participation ( motivating individual voters, doing away with institutional bottlenecks such as creating possibility to cast a vote in any constituency/ district/ province other than where you registered, allowing advance voting and voting by mail etc; provision of sate subsides to political parties and son on).

The purpose of this article is not to discuss these challenges but to contribute on the currently raging debate on the need for Zambia to have a Parliament that is representative of the votes cast and a President who is elected by the majority of voters to ensure that there is legitimacy be in leadership.

2. Parliamentary Elections

In the Zambian Electoral system, the country is divided into 150 single-member constituencies. Representatives are elected to Parliament by the first-part- the post (FPTP) (single majority) method which awards seats inn the National Assembly to the candidates with largest number of votes in each constituency. Under this system, the strongest party in the National Assembly may have an absolute majority of seats with less than an absolute majority of votes cast. This has been true in Zambia since 2001 where the combined votes of opposition parties were more than those of the ruling MMD. However, considered on its own, the MMD in all the past three general elections had both absolute majorities in terms of votes cast as well as seats awarded when compared to other individual parties. In the 2008 general elections for instance, using presidential votes cast, a total of 1,791,806 votes were cast and the MMD candidate Rupiah Banda obtained 718,359 ( 40.90%) votes, PF candidate Michael Sata had 683,150 (38.13%) votes, UPND candidate Hakainde Hichilema had 353,018 (19.70%) votes and the Heritage Party candidate Godfrey Miyanda had 13,683(0.76%) votes.

Generally, the current Electoral system favors parties whose support is concentrated ethnically (geographically) and tends to discriminate against parties with support spread across the constituencies. In the 2008 Elections for instance, support for MMD was greatest in all rural areas other than in Southern, Luapula and half of Northern Province. The PF support was on the copper belt, Lusaka Urban, Kabwe Urban, Luapula and half of Northern Province. The UPND: support was in Southern Province and two constituencies in North Western Province. The Heritage party was neither here nor there as they were largely considered as spoilers.

3. Proportional Representative
On account of the tendency towards sectarianism and other difficulties of First Past The Post in Parliamentary Elections, many people including the Mungo’mba Constitutional Review Commission recommended the adoption of the Proportional Representation system which in various forms is used in most Western Countries in electing their National Legislatures.

An example of how the Proportional Representative system works may suffice to explain this voting approach. Presently, Zambia constitutes 150 constituencies for which 150 members to Parliament are elected. In the 2006 presidential elections, there were seven (7) parties that contested. The total presidential votes cast which were closely related to parliamentary votes cast were 2,740, 178. If this figure was divided by 150 seats, a seat in Parliament would be awarded to a party with 18,268 votes. In this case, the MMD should have been given 64 seats instead of 43. UPND should have been given 38 seats instead of 26. The HP should have been given 2 seats and APC 1 (one) seat. Similarly in the 2008 elections using presidential elections result, the total votes cast were 1,791,806 which could have meant 11,945 votes per constituencies. In this case, MMD should have been awarded 60 seats instead of 74, the PF 57 instead of 39, the UPND 30 instead of 21 and the Heritage Party at least one seat.

4. Advantages of Proportional Representation
The country has been advised to adopt a form of Proportional Representation electoral method for the following reasons.

1. Political parties will gain representation in Parliament in proportion to their share of votes cast. In real terms, there will be one entity Zambia. Voters will cast votes for parties who in turn will allocate from their lists designated representative per constituency won. On account of this , costly bye-elections will also be done with as parties will simply replace candidates from their lists whenever a vacancy occurred.
2. More parties are likely to gain representation as this electoral method will stimulate voters to take part in elections which will lead to higher voter turnouts. In the 2006 presidential elections, the Heritage Party should have been awarded at least 2 seats and that of APC at least one seat. For argument sake, this could have enabled Gen. Godfrey Miyanda and Mr. Winwright Ngndo to be Members of Parliament and usefully participates in our country’s governance rather than be relegated to history.

3. Bye-elections shall be avoided in both Parliamentary and Presidential elections since there will be only one elect ion and the President will have a running mate in his/her party.

4. The Proportional Representational system will strengthen political parties as organizations and enhance their role in the Zambia political process
5. Presidential Elections (50 + 1)

It was only in the 1995 Constitutional Amendment which in spite of being challenged by many Zambians, President Frederick Chiluba’s administration forced the amendment that provided for the election of the Republican President by a simple majority rather than the absolute majority that was previously provided in the Constitution since 1964. Because of this change, all subsequent victories by Presidential candidates have been on a basis of minority votes. It appears Zambia’s public opinion is strongly of the view to change this and adopt the marjoritarian approach

In 2001, President Levy Mwanawasa won the Presidential elections with a mere 28.69% of the total votes Cast. In the 2006 elections, President Mwanawasa again won by 42.98% of the votes cast. In the elections of 2008 following the demise of President Mwanawasa, Vice President Rupiah Banda won by 40.09% of the votes cast. Because this electoral process creates a President voted by less than the majority who cast votes, many countries have adopted systems where the last two of the candidates re-contest in a re-run of the elections to determine the real winner. Many Zambians are advocating a return to this electoral process of the 50 + 1 method.

The return to marjoritarian doctrines of electing a President is opposed by a section of our society who has advanced cost considerations and the danger of destabilizing the country on sectarian/tribal lines. It is also possible that these opposers are afraid of allowing the opposition to gang up in the re-run to win a majority vote. If such a thing happened, it is possible to have a President from one party who may have no majority members in parliament. This may lead to the formation of a minority government where the government may fail to pass critical legislation which may be opposed by the largest party in the house. This may lead into a costly constitutional crisis that may require parliament to be dissolved and for another costly general election to be held.

6. Recommendations
It is recommended that, as the National Constitutional Conference completes its work on our new constitution, they must be alive to the public demand for the 50 + 1 marjoritaanism doctrine as well as the merits of Proportional Representation. Adoption of proportional representation is the most democratic method of electioneering and is recommended to be adopted in respect of parliamentary elections. With respect to Presidential elections, whereas, it would be cost effective to emulate the South African method where a President is first elected by his/her party and confirmed by parliament, the public opinion in Zambia seems to be the demand to elect a President and his/her running mate by the whole country as is the case in the United States of America on the basis of 50 + 1 marjoritaanism. Both approaches have been tested and provide enormous challenges for Zambia.

Capital Flows and Zambia's Domestic Economy

2009-08-04T03:52:00.000-07:00

CAPITAL FLOWS AND ZAMBIA’S DOMESITIC ECONOMY

By Dr Mabita Chitala

The question to be answered is weather there is need for Zambia to regulate its International Trade and regulate the movements of foreign exchange (forex) with the aim of reducing its exposure to financial speculators and the growing global financial turmoil. Should Zambia continue linking up to international financial markets or should it selectively de-link? What strategic choices are open to Zambia.

THE 100% FOREX RETENTION

David Punabantu writing in the Zambia Economist Magazine of June, 2009 Vol. 1 pp5-7 wondered why the Bank of Zambia has continued unlawfully the policy of 100% forex retention by mining companies other than Mopani and other exporters which measure has tended to be discriminatory, stiffed the spirit of competition and allowed the continued plunder of Zambia’s resources. Punabantu lamented that this Policy which was initially introduced as short term measure by the late Minister of Finance Emmanuel Kasonde in the early 1990’s has now become a permanent policy of Government with all its draw backs such as abating capital flight, making commodities in Zambia unnecessarily expensive and negatively affecting the level of domestic investment in Zambia. Punabantu correctly argued for a change of this disastrous policy to one which is common in all other countries where ownership of forex is only possible through local currency (Kwacha) purchase for Goods and Services originating from a country such as Zambia. In other words, forex must first come to Zambia and be changed into Kwacha as used to happen when Zambia experienced the highest growth rates before 1990s. Exporters could then use their Kwacha to purchase Copper and other Exports from Zambia in the same way a Euro wishing to buy any product from the United States must first be converted into United States Dollar and vice versa if it is in Europe. Punabantu correctly concludes that Zambia’s 100% forex retention policy is not only against national development, but not market driven and tends to abate the pillage of Zambia’s Resources. Zambian policy makers are advised to take a leaf and learn from the experiences of countries such as Chile which abandoned this policy and required all exporters to bank their forex earnings in a local bank for a period not less than three months. In fact, Zambia appears to be the only country in the world with such a policy.

STATE CONTROLS

The present government policy buttered by IMF conditionalities has been to compel Zambia to make its currency freely convertible for all Current as well Capital Account transactions. Capital Account convertibility (CAC) of the Balance of Payments (BOP) or the freedom to convert Kwacha to forex assets and vice versa at market determined exchange rate or as the IMF has defined it, “the freedom from exchange controls on capital transactions on balance of payments”, continues to be a subject of controversy amount policy makers.

As it is well, the Current Account of the BOP (statement of transitions between Zambia and the world) comprises of visible trade {Exports and Exports},invisible trade {Exchange of Services} and unrequited transfers such as gifts. The Capital Account on the other hands refers to the exchange of capital in form of Loans, Portfolio Investment FDI and changes is official reserves. Transactions in the Capital Account can therefore impact on the composition of national capital of a country, that is, make a country lose control of its economy to foreigners and adversely affect its national sovereignty.

Zambia’s Policy has been to follow the no-liberal view which considers as bad policy state controls that restrict transactions on both the current and Capital Accounts. Therefore normal Current Account Controls such as restriction on imports such as providing quotas and tariffs or requirements to deposit export proceeds in Zambian Banks; and Capital Account measures such as restrictions on various harmful kinds of capital flows by licensing outflows or restricting use of forex including use of multiple exchange rates - all these are considered by neo liberal practitioners as undesirable as they allegedly distort markets and result in allocative inefficiencies, waste, black markets and are costly to maintain.

Neo liberals see many advantages in free flows of capital such that a Country like Zambia would have the chance and potential to access global savings in a variety of non- debt-creating forms, possibility of Zambians holding international diversified portfolio and the country being able to access greater liquidity sources and deeper markets. This thinking is anchored on the Efficient Market Hypothesis {EMH}which holds that “capital markets generate asset prices that, given available information, are best estimates of the present value of future income streams from capital assets.”

The above thinking when measured with the reality on the ground is of course flawed. Financial markets do not behave in the perfect manner but are grossly influenced by speculative behaviors.

The neo-liberals however still maintain that Zambia’s Financial System is still weak characterized by all vices such as insider trading, corruption and weak Corporate Governance and has not sufficiently liberalized financially. The standard recommendation of the IMF has been to compel Zambia to reduce its Capital Account deficit by borrowing. (Current Account Deficit = Capital Account Surplus + Drawing down on reserves). Within the confines of the so called Letter of Intent signed with the IMF are conditions such as compelling Zambia to keep interest rates high in order to allegedly attract capital inflows and improve investor confidence. Other policy measures Zambia has been forced to implement include fiscal prudence and consolidation, bringing inflation to single digit levels, maintain sustainable current account deficits and reserves, complete trade liberalization, strengthen prudential regulation and supervision and liberalization of the Capital Account.

The above prescription by the IMF and their neo-liberal friends in Zambia are wrong. The truth is that the Globalization of Finance Capital and the spread of footloose capital via FDI, Portfolio management, Debt contracting and so on, is a culmination of the process of unequal Capitalist Development in the world. Current Globalization has been shifting control of national markets of multinational corporations and financial intermediaries. Zambia’s domestic market is restrained. Interest rates are kept high to discourage Zambia’s domestic private investment. There is need for Zambia to adopt policies that promote full employment and growth. There is need to selectively de-link from Global Capital that threaten the achievement of the above. Evidence every where shows that free capital mobility has not been associated with high rates of growth. Neither trade openness nor outward orientation been associated with higher growth rates or reduced vulnerability.

CAPITAL CONTROLS

The current Global Financial Crisis offers further debate about Zambia’s Economic and Financial Policies, the effects of Financial liberalization and the power of International Finance. The key features of the Global Finance architecture comprise of several features. First, the dominance of Investment Banks, mutual funds, pension funds and hedge funds; Second, securitization or transfer of capital via the sale of stocks and bonds; Thirdly the expansion of new instruments such as arbitrage (taking advantage of forex or interest rate differentials to turn a profit) and derivative trading (buying and selling all the risk without trading the asset itself). Such is the case in instruments such as futures, forward contracts, swaps and options; and hard to monitor transactions made over the counter by telephone or computer and not via exchanges and are mostly off balance sheet transactions, namely, not reflected in assets and liability statements.

The growth of this form of global finance capital has seen the dominance of finance over industry and the system of leveraged buyouts which further confirms that volatility will continue to be central to the world capitalist system.

In terms of economic Governance Policy, Zambia was forced by the Breton Woods institutions and the Paris Club to adopt structural adjustment policies (SAPS) which made Zambia more open to Capital inflows. Tight fiscal and monetary policies including lifting exchange controls and liberalizing the Capital Account were imposed on Zambia. The arguments for unfettered Capital flows or complete capital account liberalization through Portfolio Investment{PI}and FDI as championed by neo-liberals is meant to enable Zambia acquire Capital and Technology. Further, it is assumed that because the resources will be allocated by markets, there will be both enhanced efficiency and Policy discipline. The experience of Zambia is that under its floating exchange rate regime, sudden inflows of capital tends to put pressure on the Kwacha to appreciate and under mine its balance of payments position by causing imports to rise and exports to fall. The conditionalities that are attached to these Capital inflows also tend to exhibit undue influence over domestic policy making where policy space is reduced. Furthermore, the Capital outflows or flight that inscrutably result, has tended to put pressure on Zambia as the Kwacha always depreciates, the country faces debt service difficulties, stock values reduce. the Current Account deficit increase, and generally Zambia’s macro economic vulnerability and Financial instability is aggravated. In other words, such policy regime of unfettered financial liberalization has tended to increase poverty and inequality amount Zambians. As is well recognized, opening up to global port folio flows can result in stagnation of an economy.

STRATEGIC CHOICES

The history of economic evolution of all developed countries shows that complete Capital Account convertibility and freedom of capital movements is that the last stage of opening up the economy. Until this stage is reached, various forms of capital control are necessary and inevitable until a certain level of development is reached. It has been extremely unclever for Zambia to completely liberalize before reaching that level necessary for this. Even today, Capital Controls (measures that manage the volume, composition, or allocation of capital flows and/or maintenance of restrictions on investor entrance or exit possibilities) are necessary. All industrialized countries utilized Capital Controls until they reached developed levels in the 1970s. Currently, China and India - the most successful emerging economies use extensive capital controls. Other Counties include Brazil in 1960’s, Chile and Colombia in 1990’s Malaysia in 1994/1998 and even South Africa.

It is acknowledged globally that Capital Controls tend to promote financial stability, promote desirable types of investment that create jobs and enhance democracy and national autonomy by reducing the power of global speculators from exercising undue influence ever domestic policy and exploitation of national resources.

Zambia’s Policy of excessive preoccupation with inflation is misplaced. Issues of growth and employment should take priority. Monetary policy must be one that responds to needs of the Middle Class and Ordinary household in the real domestic economy rather than to the foreign Investors, hedge Funds, Banks and speculators who currently dominate Zambia’s financial “bubble” economy. Fiscal policy frame work must be one based on a progressive taxation system instead of the regressive regime that currently holds sway. The continued reliance on foreign financial flows as an option for progressive domestic taxation is neither desirable nor a sustainable development strategy. Zambia needs an economic policy rooted in domestic savings and a domestic market by enhancing and expanding the purchasing power if its people and not by being dependent on external aid, grants or loans as agents of growth. Zambia needs to adopt a discriminatory approach to Foreign Financial flows. The FDI that has come most of it by way of mergers and acquisitions, has had limited effect on employment creation. It has negatively impacted on Zambia’s balance of payments and there hardly has been any technological transfer.

National capital controls for Zambia is therefore an essential element to make sure that Zambia is able to ensure that its forex outflows are not exceeded by or grossly mismatched with its forex earnings and, overall, to allow Zambia a measure of economic and political sovereignty in this era of borderless globalization. The current global consensus is that Capital controls are essential in today’s world of integrated Financial Markets. All Asian Governments have cleverly imposed Capital Controls and cut interest rates and have continued to promote fiscal expansion. Free Capital mobility as argued by the IMF and their neo liberal friends through their agenda of Capital Account liberalization, has not been associated with high rates of growth and poverty reduction. Free flow of capital endangers the autonomy of countries such as Zambia.

end

IMPLICATIONS ON ZAMBIA’S PARTICIPATION IN THE AFRICAN UNION GOVERNMENT –THE UNITED STATES OF AFRICA

2009-05-29T05:14:00.000-07:00

IMPLICATIONS ON ZAMBIA’S PARTICIPATION IN THE AFRICAN UNION GOVERNMENT –THE UNITED STATES OF AFRICA

MEMORANDA REQUESTED BY THE COMMITTEE ON NATIONAL SECURITY AND FOREIGN AFFAIRS OF THE NATIONAL ASSEMBLYIN THEIR LETTER DATED 15TH APRIL, 2009: By Amb. Mbita CHITALA PhD

INTRODUCTION
I feel greatly elated at the same time humbled to appear before the Committee on National Security and Foreign Affairs which has set itself the task to study Zambia’s membership to the United States of Africa. I have been assigned the task of dealing with the following question: “what are the security, economic, political and other benefits of Zambia’s participation in the United States of Africa and what are my recommendations for the way forward regarding Zambia’s membership?” This question requires the response to questions such as: Why do Africans since the days of slavery and colonialism been yearning for a United Africa? What are the benefits and what constrained the realization of this dream?
I must admit from the very outset that this is the first time in my non-public life to address a committee of our National Assembly. It gives me a curious sensation to do so, since great clarity of the issues is required and furthermore, this is a subject of current passionate debates by Africans both at the African Union Summits and the press. At a personal level, I was recalled as Ambassador to Libya in 2008 for having inadvertently commented on the historical necessity and inevitability of the Federated United States of Africa.
I would like to submit that in the case of our country, our policy position on the United States of Africa question has always been ambivalent. Our first government in 1964 supported Mwalimu Nyerere’s gradual approach on African Unity as opposed to Kwame Nkrumah’s push for a revolutionary approach. This world outlook has continued in all our governments of UNIP and MMD where it is contended that the formation of an African Union Government must be “ based on a Multi- Layered approach” whereby after basic contradictions at the national level are resolved- i.e. national consensus reached - the next step shall be to identify and clearly assign specific roles to states, sub-regional entities and the continental framework. This approach is based on the principal of “gradual incrementalism” in which the Regional Economic Communities ( REC’s) shall be used as the building blocks for the continental framework. This approach is of course reactionary and non sustainable as we have argued elsewhere in the appendix to this presentation.

This paper is prepared as a contribution to the committee on National Security and Foreign Affairs of the National Assembly of Zambia who in their letter dated 15th April,2009 requested me to provide the following information.
(i) The security benefits of Zambia’s involvement in the United States of Africa;
(ii) The economic and political benefits of Zambia’s involvement in the United States of Africa
(iii) Any other benefits of Zambia’s involvement in the United States of Africa
(iv) Disadvantages of Zambia’s involvement in the United states of Africa ; and
(v) Recommend the way forward regarding Zambia’s membership to the United States of Africa
I am unable present the “disadvantages of Zambia’s involvement in the United States of Africa” as requested in (iv) above as, in my view, there are absolutely no disadvantages to the Scheme. I am alive to the arguments raised by thousands of people on the internet and general press following my article I published in the Tripoli Post on 26 January, 2008. The arguments included such outlandish assertions like: Africa cannot unite because of its diverse cultures, languages, ethnicity, racial composition between Arabic North, Nilotic North East, Negroid Western and Bantu South; that Africans are cursed by God to be inherently quarrelsome and stupid; that globalization will make it impossible for Africans to unite; and that Africans fear the loss of their sovereignties and therefore never subscribe to the African Union Government. These and many other opinions are simply detractions to a progressive initiative that has the capacity to finally address Africa’s poverty and underdevelopment. The arguments should therefore be contemptuously ignored.

BACKGROUND
1. It is a recognized fact that the African Continent (without distinction to race, language or religion) has been central to the development of the world in terms of epistemology (development of knowledge), the arts and spirituality. Africans have also suffered systematic degradation through slavery, colonialism and now neo-colonialism Slavery and the colonial system were hated by Africans and hence since the late 19th and early 20th centuries, there evolved Pan Africanism, initially as a reaction to many centuries of slavery and later against European Colonialism in Africa.

2. The drive for Africans to regain their dignity began with the development of formal Pan Africanism after the 1900 London conference organized by Henry Sylvester Williams. Other notable organizers of Pan Africanism included W.E.B Dubois-co-founder of the NAACP-convened the first Pan Africa Congress in 1919. Other meetings took place in 1921 (in London, Paris and Brussels), 1923 ( in London and Lisbon) and 1927 ( in New York).

3. In the early 1940’s , Kwame Nkrumah together with George Padmore, Jomo Kenyatta and Hastings Kamuza Banda sponsored the 5th Pan-Africa Congress in Manchester, England and fostered African Leadership of the Pan -African movement and the struggle for independence of African colonies then.

4. In 1957, Ghana became the first sub-Sahara African State to gain independence with Nkrumah as Prime Minister and Nkrumah created a Pan- African secretariat to organize for
- Total African Independence and
- Continental Political Union
The Pan- African movement was based on three pillars:-
- Shared historical and cultural values
- Political freedom
- Collective self sufficiency

5. In May 25, 1963, representatives from 32 African Nations met in Addis Ababa, Ethiopian and founded the OAU, now the African Union as a loose federation of independent African States. Political differences among the independent African Nations and their poverty kept political Union from becoming a reality.

6. In 1965, Nkrumah clashed with Mwalimu Nyerere over Nkrumah’s call to establish a Union Government in Africa. The OAU embraced Mwalimu Nyereer’s approach that assumed regional federations would step by step metamorphose into a united Africa as opposed to Kwame Nkrumah’s push for a revolutionary approach. This reactionary position ushered in the stage in Africa of destructive coups and costly secessions.

7. Since becoming politicaly independent, the small balkanized states of Africa have attempted to address their poverty and underdevelopment including national security but have been unsuccessful and there is now a realization that they must act collectively.

8. The continent now comprises of 53 countries and since the founding of the OAU, the African states have been following Nyerere’s line of graduality on Africa Unity. Some successes were achieved following this line. Some of the important milestones of the OAU included the work of the Liberation Committee and the freedom fight in countries still under colonial rule and the struggle against apartheid in South Africa and minority rule in Rhodesia.

9. Africa’s search for collective self reliance and development have included advancing several programs such as the Lagos Plan of Action ( LPA), The Final Act Lagos ( FAL), the Abuja Treaty establishing an African Economic Community ( AEC). All these were attempts to unite Africa economically ever a period of 34 years. The AEC treaty also called for the creation of a PAN African Parliament (PAP), an Economic, Social and Cultural Council ( ECOSOCC) and an African Central Bank ( ACB). Progress towards the creation of these institutions has been, anything, but successful on account of political indecisiveness by Africans and their misguided love of the so called national sovereignty, which in reality has been the continuation of the hegemony of comprador and despotic neo colonial forces in service of global capitalism.

10. As regards Africa‘s integration, the Conference on Security ,Stability, Development and Co-operation in Africa ( CSSDCA) which was established in May , 1991 stressed the integration of all governance matters including popular participation by African peoples. Again, these were lofty unrealizable ambitious as history has testified.

The most advance has been in the creation of divergent and irrational Regional Economic Communities (REC’s). As at 2009, there were 14 overlapping RECs with duplication of programmes, cross-cutting membership and corresponding inefficiencies as follows:

SACU (Swaziland, Botswana, Lesotho, Namibia, South Africa);
SADC(SACUCounries, Mozambique, Tanzania, Malawi, Zambia, Zimbabwe, Mauritius, Seycheles, Congo DR, Angola)
IOC(Reunion,Madagascar,Comoros,Seycheles,Mauritius)
EAC(Kenya,Uganda,Tanzania,Rwanda,Burundi)
COMESA(Comoros,Madagascar,Seycheles,Mauritius,Swaziland,Angola,Rwanda,DRC,BurundiMalawi, Zambia, Zimbabwe,Ethiopia,Kenya,Uganda,Djibouti,Eritrea,Sudan,Egypt,Libya)
IGAD(Somalia,Djibouti,Eritrea,Sudan,Ethiopia,Kenya,Uganda)
CEPGL(Burundi,Rwanda,DRC)
UMA(Algeria,Mauritania,Libya,Morocco,Tunisia)
CEN-SAD(Libya,Morocco,Tunisia,Somalia,Djibouti,Eritrea,Sudan,Egypt,CAR,Chad,Gambia, Nigeria,Liberia,GuineaBissau,BurkinaFaso,Benin,Mali,Niger,Senega,Togo,Coed’Ivoire,Uganda)
CEMAC(Cameroon,CongoRep,Eq.Guinea,Gabon,CAR,Chad)
ECCAS(SaoTomeandPrincipe,CEMACcountriesandCEPGLcounties)
ECOWAS(Cape Verde, Ghana,Nigeria,Gambia,Liberia ,Guinea, and UEMOAcountries)
UEMOA(Burkina,Benin,Mali,Niger,Senegal,Togo,Coted’Ivoire,GueneaBissau)
MRU(Liberia,Guinea)
This multiplicity of overlapping membership of RECs coupled with institutional weaknesses of the RECs,the political problems arising from fears of by some members of domination, is a real danger to peace and stability as these SECs will continue to competefor the same economic space and engaged in wasteful duplication of effort. The danger for armed conflict is ever present as occurred in balkanized Europe.

11. Against this background, African countries at the Lusaka summit in 2002 agreed to move towards Political Union and, as a first step, established the African Union (AU) which was launched in July, 2002 in Durban, South Africa to replace the OAU. In theory, political union is the highest form of the integration process. The African Countries also launched the NEPAD as an economic program to support African infrastructure development. In both cases, progress has been very slow.

12. The African Heads of states have since concluded that the “necessity for eventual Union Government is not in doubt.” However, two viewpoints in arriving at Union government still persists. One view is that the Union government should be based on the principle of “gradual incrementatlism” and that the RECS should be used as the building blocks for the continental frame work. The other view argues for the establishment of a Union Government as a political transitory arrangement towards the United States of Africa. Such a union should possess Executive Authority on matters delegated by union members as is the case in the European Union In the current scenario, the functions of the Executive Council of the AU are supposed to include the following:
- Foreign Trade,
- Energy, industry and mineral resources
- Food, agriculture, animal resources and livestock production
- Forestry, water resources and irrigation
- Environmental protection
- Humanitarian actions and disaster response and relief
- Transport and communications
- Education, culture, health and human resource development
- Science and technology
- Nationality, residency and immigration matters
- Social security
- African awards, medals and prizes
Even on these common sense objectives, there are still some African countries that are still dragging the integration process backwards.

13. The need and rationale for African integration is well known. The elements that should necessitate this historical inevitability include the following:

a) Pooled efforts and joint approaches is the only road that will allow African Countries to be really in charge.
b) The small size of National markets in African countries is a major handicap in attracting private investors. A common market can reduce this disadvantage
c) The emergence of regional trading blocks such as the EU, NAFTA, and elsewhere gives added impetus to African integration.
d) Most African Countries have porous and artificial borders that make it difficult to implement economic reforms which are not synchronized with policies in neighboring countries. African Integration will resolve this negativity.
e) The idea of one African Economic policy will be a great unifying idea.
f) Engaging all African Countries in Co-operative ventures will build African solidarity so necessary in reducing the incidence of conflict.

14. The constraints that adversely have been affecting the drive towards African integration and co-operation can be summarized as follows:

I) National Level
a) Lack of political commitment to actually implement agreed measures. This arises from actual or perceived conflict between national and African objectives.
b) Inappropriate economic and political polices which have tended to constrain the development of consensus in governance matters and economic policy.
c) Limited administrative and managerial capabilities and capacities to plan and manage continental projects and programmes and ensure consistency between national and continental programmes.
d) Donor conditionalities which rob African countries of policy space but rather aggravates or deepens ties and subserviency to donors
e) Inability to convince civil society of the long-term benefits of continental projects and programmes which h may cause discomfort in the short term.
f) In ward- looking development strategies such as import –substitution strategies that encourages protectionism rather than trade creation.
(ii) Continental level
(g) Over –ambitious objectives
(h) Low level of development in most countries
(i) Weak transport and communication links
(j) Over lapping and inadequacy institutional arrangements. Institutions virtually lack resources.
(k) Differences in levels of development of the countries and lack of means to implement compensatory policies.
(l) Uncoordinated structural adjustment programmes.
(iii) International level

(m) Conflicting actions of donors in their drive to dominate African countries.
(n) Lack if support or outright hostility to projects and programmes that advance Africa’s integration. Donors fear that Africa’s integration may become a hindrance to multilateralism and neo – colonial control.

15. Security Benefits of Zambia’s involvement in the United States of Africa Initiative

In roughly 60 years, Africa has experienced some eighty coups d’ etats and countless number of coup attempts. Zambia alone has been a subject of at least five coup attempts. Civil wars have erupted in more than twenty countries and are still ranging on a large scale in Somalia, Sudan, Ethiopia, Mauritius, Congo, Burundi, Niger, Britrea and so on. Zambia also suffered after 1973 the Mushala insurgency which led to widespread internal dislocations in North Western Zambia. Ten African countries have been subjected to external military interventions. The continent remains a fertile ground for mercenaries and an object of external security manipulation. Almost all African countries lack the capacity to curb the flow of arms into their countries and many of them lack capacity to deal with any large scale security crisis whether domestic or external. As examples attest in many of these countries, internal conflicts will soon end up in a state of anarchy that will further compromise the security of Africa in general.

The major causes of Africa’s security problems in addition to governance issues are essentially two.
a) Africa’s fragmentation into small unviable states without capacity for effective security management and
b) Africa’s balkanization which has been compounded by artificial borders tends to perpetuate a tenuous sense of nationhood.
Generally, the outcomes of Africa’s security problems have resulted in four dimensions:
a) The loss of human life and widespread suffering of the people.
b) The destruction of Africa’s resources
c) The unnecessary high budget expenditure levels for the military infrastructure and
d) The dominance in Africa of foreign powers.
The combined effects of these two limitations on the security of Africa has been border disputed leading to cross boarder armed conflicts and tribal or ethnic rivalries.

What Africa requires is an environment within which a harmonious evolution of society takes place. Peace and stability in Africa can only be further enhanced if a federated union of Africa’s states is established. The effects of peace and stability on the process of integration are best demonstrated by the European integration process. The launching of the process took place in a context of restored stability after two world wars caused by national rivalries. The council of Europe – founded in 1944 led to a situation where European countries sought to bury their differences in order to integrate their economies so that they could have bigger markets and be more competitive as well as provide assurance for security. With the treaty of Rome signed, first by six members, the European Union has expanded to nine, then to 12, then to 15 and now to 28 countries. And this Union is now the Central factor of maintaining peace and stability in Europe. In North America, thiere is the NAFTA and in Asia, there is the ASEAN.

16. Economic and Political benefits.

As is well known, most of the national economies in Africa are classified as micro-economies: Individually, in the context of globalization, they can not rid their populations of poverty and underdevelopment, because of their small markets, and inability to generate national development. This is most true for Zambia as well. In general, 15 African countries are landlocked and transport and communication on the continent is still rudimentary. Only 5 countries have a population of more than 30 million. 8 countries have a population of less than 1 million each .14 countries have a population of between 1 and 4 million. It shows that the national markets of Africa’s 53 states are not only too small to attract FDI flows but are also too Balkanized to generate meaningful economies of scale in diversification efforts. It is really possible for Zambia alone to bargain with China or India or the EU on any thing meaningfully?

On the other hand, considered as a union, Africa has a potential market of over 700 million people, a natural resource base of huge dimensions and a diversity unsurpassed by any other continent. Africa’s integration is an essential and indispensable part of the strategic policy approach to eradicating poverty and underdevelopment. The unionization of Africa into the USA will enable national economies of such countries like Zambia to build capacities in all critical areas. The present status quo of policy reforms without strategic direction are inadequate if Zambia wants to meet the challenges of the global economy of the 21st century.

17. The Future Perspectives

As is well appreciated, all continents on earth are moving towards integration. In all cases, there is agreement on limited surrender of national sovereignty to super national organs. Let there be no mistake. Whereas Europe, the Americans and Asia need economic integration for strength and prosperity, Africa needs it as matter for survival. Many African states are simply too small to form viable economic investment markets or trading partners. Africa needs a federated union government as argued in the appendix to this text.

For a country like Zambia, in a accepting and reaffirming the Constitutive Act of the African Union, the country committed itself to accelerate the integration process. At the national level, it must be seen to creating structures for this. There is need to build the necessary constituency for advancing political integration. It would for instance be progressive to set up a Ministry in charge of integration as an important conduit to harmonize instruments, institutions and programmes of the Union Government. A national Association or Commission for the union government could be set up as a way of building the national constituency and popularizing the idea. It is advisable for Zambia to play the lead in this as it is a historical necessity and inevitability.

END

APPENDIX
Opinion: The Federal Union of African States Must be Established NowBy Ambassador Mbita Chitala26/01/2008 16:29:00 Available on Internet

Introduction
This presentation addresses the subject of the historical necessity and inevitability of the federated African state. The central argument of the article is that continental integration and empowerment can only succeed if the coordination of efforts is at a continental level through first, the formation of one all African State, that is, by way of a political decision and that economic integration shall only be complementary.
This article does not discuss the benefits that will be derived from Africa’s political integration (insure peace keeping, combat disease, environmental concerns, poverty, corruption, oversee good governance, equi-distribute Africa’s wealth) as this is already a settled argument nor does it discuss the method and road map for achieving this historical inevitability as this is a detail to be designed by professional managers.
This write up is aimed at imploring African leaders to make the political decision and establish the united one African state as they meet at Addis Ababa, Ethiopia on 31 January, 2008.
Status of Africa’s Unity
Post independence Africa presents a divided and balkanized states, weak, and for more than four decades has continued to be a play ground for unabated abuse, exploitation and oppression of its peoples by other more organized political regions as exemplified by the hegemonic control the Europeans and Americans still hold on Africa.
Africa’s age old yearnings for political and economic integration have been thwarted, of course variously explained by many factors and interest opinions. These factors include the influence of self-seeking, narrow-minded nationalist African leaders who have continued to opt for personal glory and fame at the expense of the larger Africa using the legalistic excuse of sovereignty, the influence of the vestiges of colonial aberrations and neo-colonial psyches and dominion where Africa in the international division of labour has continued to play the role as a supplier of raw materials and net importer of manufactured commodities which in the process condemns Africa to continue being exploited by way of unequal exchange.
In the area of consciousness, cultural imperialism has been ensuring that Africa is divided between two blocs – Anglophone and Francophone – and this division has been sustained by the former colonial powers variously such as establishing institutions like the British Commonwealth with their British Council, and the French Francophone with their Alliance Francais.
These have continued to sew divisions among Africans by false ideologies such as the Christian-Moslem dichotomy, the Arab-African dichotomy and the ethnicity or tribal ideologies that are used to divide and weaken Africans. With globalization, Africa has further deepened its integration to the global finance capital from a weak stand point where it cannot get an equal share of the benefits of globalization.
African countries have attempted to unite the many small post colonial social formations to address this issue of poverty, underdevelopment and insecurity of Africa but often have fallen short because of the above reasons or because they used unsustainable unworkable methods such as desiring to have economic integration before political unity.
The most notable attempt was the Abuja Treaty – Regulation CM/464 of the 26th OAU Council of Ministers who wanted to create five regional communities who would play the role of the future continental common market. The recommendation was based on the realization that integrating 53 differently ruled African States would be unsustainable because of the unripe consciousness, the influence of geography, ecosystems and operational precedence. This attempt failed and more regional communities continued being formed.
In pre-Abuja Treaty, there were 8 Regional Economic Communities (RECs) including SACU, MRU, ECOWAS, CEPAL, ECCAS, IOC, IGAD and UMA. In post Abuja Treaty, more RECs have been established. These include SADC, UEMOA, CEMAC, COMESA, CEN-SAD, EAC.
All these have been set up in spite of duplication of programmes and their multiplicity, cross cutting membership and inefficiencies have compromised African integration. An attempt towards rationalizing them has failed because of lack of political will and resentment and opposition by the established public service supported by entrenched rules and contracts.
It is unacceptable for African leaders to continue procrastinating or making lame selfish excuses of going to consult their peoples and so on such as has been the case in the last ten years. There is no need for these countries to hold referendums as Muammar Gaddaffi challenged his colleagues at the Accra Summit.
The opposition to integration that was exhibited by Kenya, Nigeria and South Africa in Accra is regrettable as it was based on the false assumption that these three countries would on their own develop to be sub imperialist powers.
It is gratifying that Liberia, Senegal, Ethiopia, Chad and Libya came strongly for immediate political unity. The rest remained look warm. It is no wonder the Africans in South Africa and Kenya have already shown their leaders what they think of their acts in Accra. What is required as the first act is to agree on political integration by establishing the Federated Union of African States.
This was the consensus that was reached after the transformation of the OAU into the AU on 9th September, 1999 at Sirte in Libya where all African Leaders committed themselves to the establishment of the United States of Africa.
“Those who want to move on a snails pace or are opposed to Africa’s political integration should be left out for now. Their own nationals will deal with them in due course and compel them to join the bigger good – the Federated United States of Africa.”
It was therefore amazing at the meeting in Accra, Ghana in July, 2007 that about 50% of African countries continued to give lame excuses at delaying this historical necessity which has as a result continued the tendency of the marginalization of the continent in global affairs as well as deepened the underdevelopment of its people.
As the leaders go to meet again in Addis Ababa on January, 31st, 2008, all progressive Africans are hoping that the final solution to African Unity and integration will be found. Now, Africa has entered the globalization process from a point of weakness.
New constraints have emerged, particularly with timeframes imposed by initiatives such as the EU, the WTO, China and so on. It is therefore imperative that a new momentum and initiative within a better structured continental framework with improved follow up on both the political leadership and rationalization and implementation of one African economic set up be launched.
Political Integration First, then Economic Integration
Former Zambian President Dr Kenneth Kaunda and former Algerian President Ben Bela are the only two Africans still living who can attest from first hand account the ideals yearned by Africa’s founding fathers of a strong and independent one African State that was championed by African heroes such as Kwame Nkrumah, Patrice Lumumba, Toure, Gamal Abdul Nasser, Emperor Haile Sellassie, Jomo Kenyatta and other African patriots.
These ideals have been taken up by a few progressive African leaders notably Muammar Gaddafi of Libya, and the Senegalese President Wade who have been trying to persuade fellow African leaders to move forward on this African integration process. In the last ten years, Libya has had to spend a lot of money and effort trying to have the project realized.
Muammar Gaddafi and the leaders of this progressive tendency have been opposed by a conservative fringe whose chief response has been that they are not ready or they must first consult their people or that they are afraid of losing their sovereignty or simply remain non committal. This bloc has been lukewarm and has chosen the road towards Africa’s integration by first strengthening regional economic groupings and assumed that the integration process will ripen on its own. The logic of this route is to further divide Africa. This is the route championed by African colonial masters now united as the European Union.
It has been argued by some African leaders and supported by neo colonial think tanks at the secretariats of the Economic Commission for Africa, the African Union and the United Nations that the challenges Africa faces is for the Regional Economic Communities ( RECs) to harmonize their programmes so as to attain convergence and ultimately the African Economic Community.
Even though the REC’s are not among the organs of the African Union (AU), it has been argued by these think tanks that they can still be used as building blocks of the African Union government as they were anticipated to be for the African Economic Community under the Abuja Treaty.
It has been obvious from all and sundry that such an approach would forever thwart the advancement of the African confederation and would play in the hands of Africa’s enemies who want to continue subjecting the continent to age old disadvantages such as imperialist exploitation and marginalization of the Africans in global affairs.
To the progressive Africans, it must be obvious that this incremental approach is not only unsustainable but must be overthrown and be replaced by a Nkrumah/Nasser and currently Gaddafi/Wade approach that argues for “seek ye the political kingdom first, and all would follow”.
The argument that Africa should first rationalize and harmonize the more than fourteen (14) regional economic cooperation groupings and use them as the basis for advancing to Federal Africa is a view point that is against historical experience.
In practice, it is utter mechanistic nonsense and is a road to continued balkanization of the continent, weakening Africa and ensuring that it continues to be a market for imperialist capital. Only political unity can advance the economic integration agenda and break the suffocating tentacles of imperialism which have for the last 200 years constrained Africa’s advancement.
The only Question at Addis Ababa and Africa’s Prayer
It is important that Africans, as they meet at Addis Ababa on 31st January, 2008 realize that unless they create political space in the sense of an all Africa Federal State, all what Africa has always aspired for will be in vain. We will have to wait for another generation to attempt at unity again. What a waste of ten years investment of our time and resources!
At the Accra Summit of the African Union in July, 2007, the decision to establish the federated State of Africa was postponed for six months to allow for further national consultations. About 50% of African States mainly in the CEN-SAD group were for the immediate establishment of the United States of Africa. Another group mainly from the SADC area was lukewarm to the ideal and politely opposed the immediate creation of the African Union State.
They regressed to the outdated Abuja Treaty argument of basing unity on the gradual development of regional groupings.
Today, Africa faces the challenges that Nkrumah and his colleagues faced at the beginning of this argument which resulted in the creation of two blocs – the Casablanca and Monrovia blocs among African leaders. The question then was principally how to advance the decolonization of Africa.
The bloc led by Nkrumah, Nasser, Nyerere, Haile Sellasie, Ben Bella, Kaunda, Toure, Lumumba and others won the day against the African reactionaries who advocated for some regulated independence. Today, there are about 53 politically independent African States – most of them are weak and are simply outposts of imperialist exploitation and subjugation.
It is necessary, nay, a historical inevitability that Africa must first address and achieve political unity under one State for any meaningful progress to be made towards playing any equal role in the global community. The harmonization and rationalization of the REC’s will also follow naturally as politics will lead.
The argument which has been advanced by some of our leaders that political unity will only be reached if and when all African States accede to the ideal by way of consensus is obviously, not a useful position. For practical reasons, this 100% unanimity is utopian as some African States are under the hegemony of imperialism or are simply reactionary and/or will never be allowed by their imperialist masters to accede to Africa’s political integration. These countries should not be allowed to hold progress of other Africans. They should no longer delay this movement towards Africa’s emancipation and unity.
Those who want to move on a snails pace or are opposed to Africa’s political integration should be left out for now. Their own nationals will deal with them in due course and compel them to join the bigger good – the Federated United States of Africa.

END

THE FINANCIAL CRISIS AND A CALL FOR THE RETURN TO THE MIXED ECONOMY

2009-05-29T05:09:00.000-07:00

THE IMPACT OF THE GLOBAL ECONOMIC CRISIS ON ZAMBIA’S ECONMY AND THE OPERATIONS AND STABILITY OF THE FINANCIAL MARKETS IN ZAMBIA OR THE FINANCIAL CRISIS AND A CALL FOR THE RETURN TO THE MIXED ECONOMY

MEMORANDA REQUESTED BY THE COMMITTEE ON ECONOMIC AFFAIRS AND LABOUR OF THE NATIONAL ASSEMBLY IN RHEIR LETTER DATED 19TH MAY, 2009: BY Amb. MBITA CHITALA PhD, Chairman, Zambia Research Foundation, P.O. Box 35443, Lusaka, Zambia. Cell: 0976 030398, Email: mbitachitala@yahoo.co.uk

1.0 Introduction

The causes of the current systemic crisis of capitalism and the way forward for countries such as ours are a matter of great debate and any meeting by citizens organized to discuss and seek solutions is always useful. I feel greatly honored to appear before the Committee on Economic Affairs and Labor to orally brief you on the issues of the impact of the global economic crisis on our country and the challenges that our country faces. I am not surprised to notice that many Zambians are currently yearning for change in the way we have been conducting our economic policies. In this recession where economic activity has slowed, there is a slowdown in our GDP growth rate, slowdown in investment, low capacity utilization in our industries, and there are low real incomes of households and lower profits for companies, governments usually respond by adopting expansionary macro economic policies, such as increasing money supply (monetarists) increasing government spending (Keynesians), decreasing taxation (supply side economists) while laissez faire economists recommend that governments should not interfere with the so called market forces. What should be apparent in our country is the fact that the current international financial crisis points to the collapse of laissez faire economics and discredits market fundamentalism. This collapse of the Chicago School of Milton Friedman further implies the fact that Zambia, as is the case in many African countries, must break free from these failed neo-liberal policies and their institutions that have promoted them and define its own path of growth and development.

2.0 Causes of the crisis

The US sub prime mortgage crisis and the bursting of other real estate bubbles around the world were symptoms that helped create the global financial crisis. The real cause was however imbedded in the vagaries of the international capitalist system. The so called globalization simply refers to a phenomenon where the world is controlled by the financial oligarchy or what my good Egyptian friend Professor Samir Amin described as the “financiarized” groups – the oligopolies who do not produce profit, but rather, they just swipe the monopolies rent through financial investments. My other Ugandan friend Professor Dani Wadada Nabuere, in agreeing with Amin correctly argued that the core of the crisis is over-extension of credit on a narrow base resulting in a phenomenon where money has become detached from the material base of a money commodity that can measure its value such as gold or silver.

What do these observations by these eminent African scholars mean in reality? To understand this, we must go back in history. After the Second World War, the expansion of the world economy was based on the United States Dollar which provided the link between money and the gold standard. This link collapsed in the 1970s under the reign of President Nixon and the US Dollar became the global currency, but without a backing to this currency from a money commodity like gold as was the case previously.

Since the collapse of the gold standard, there has been unmatched expansion of global credit – growth of paper money and monetary instruments such as derivatives, future options and hedge funds at a faster rate while the productive base grew at a slower rate. Consequently, the “financial bubble” which the world has been experiencing lately became the logic of this imbalance. Samir Amin estimated that “the gross amount of financial instruments in 2008 amounted to Two Thousand Trillion Dollars while the world Gross Domestic Product (GDP) was Forty Four Thousand Trillion Dollars. This phenomenon was what precipitated the crisis. The growth of “speculative capital” has over-run the growth of “productive capital”. In other words, there are currently large amounts of credit circulating without the backing of any production at all. This “loose money” has completely run wild and is in a wild search to be given value. In other words, the owners of this “fake” money, those holding United States Treasury Bills and bonds, want to preserve their wealth and prevent themselves from financial collapse.

3.0 Results of the Global crisis

Capitalism or more appropriately, this aging capitalism cannot re-invent itself. It is doomed by its greed to wither away. Its logic has resulted in or engendered global stagnation of production with its side effects of recession in the north and economic depressions in the south. The shrinking wages, the increasing levels of unemployment, the worsening of poverty and disease of many nations of the South – all this is symptomatic of aging capitalism gone senile.

For the Northern countries, the only way their aging capitalism can stay afloat, is by these states nationalizing many of their key banks and corporations which can no longer survive because of the shortage of liquid cash. The world is now witnessing a situation where these capitalist countries are being forced to move back in the direction of central planning and management of economies - a phenomenon they hated so much not long ago.

Furthermore, this systemic crisis of capitalism is leading to a rapacious struggle for the earths resources. The 15% of the planets population who currently consume 85% of world resources want to continue with their opulent life styles at the expense of the rest. That is why the United States under President Bush wanted to continue with its global military control of the world by establishing Coricom on the African continent to secure the exclusive access to Africa’s resources against impediments that India and China may wish to introduce. Similar clouds of war as occurred in pre 1914 and 1938 are building up and the world should be preparing for self destructive acolyptic wars.

With respect to Zambia, the Hon Minister of Finance and National Planning Dr. Situmbeko Musokotwane informed the Indaba on Global Economic Crisis on 4th April, 2009 that “our banking system has not been severely affected by the crisis”. At the same time, Musokotwane informed the meeting that “the initial impact of the global crisis on the Zambian economy was felt in the foreign exchange market. Quite a contradiction. The Minister could have been more candid. He further informed that the government has earmarked 1.8% of GDP or about K750 billion as domestic borrowing and defined it as a stimulus. He also called the K101 billion that the government would fore go on PAYE tax cuts and VAT revenue on agricultural implements as part of the stimulus. This, of course is not adequate. In the financial sector,the truth is that , Zambia’s banking and financial sector , as has been the whole economy, continued to suffer severe shocks and need stong government intervention. A few areas could include the following areas;
a. As a result of capital flight combined with reduced forex inflows from copper exports,the Kwacha has been depreciating. Between July and end December, 2008, it depreciated by over 60 percent. The effect of this meant that imports became expensive, which in turn led to depressed production and loss of income from small traders who simply collapsed. It is strange that the Minister appeared elated at this outcome when he informed the Indaba that “it was important (necessary) that depreciation did take place so as to re-establish a new equilibrium between reduced supply of foreign exchange and the demand for it.” This mechanistic approach to the welfare of our people is not consistent with the duty of maximizing the benefits to people as is required of all governments.
b. The financial houses, particulary the indigenous institutions that depend on debentures from the commercial banks and other asset managers have all become insolvent as these big largely foreign banks and houses have continued to recall their debentures. There is need to rescue the indigenous financial institutions by converting their provisions into debt by way of bond sales and other uninflationary ways.
c. Large job losses in the financial sector and in companies that borrowed, as they too, are becoming insolvent following the recall of loans on account of defaults explained or induced by this credit crunch, is the result of this crisis. It is of course worse in the Mining Sector where government could provide a stabilization trust fund to, among other functions, insure that all miners losing their jobs are guaranteed some living income.
d. To stabilize the exchange rate, there is need to stabilize the capital account in order to reduce the country’s vulnerability to global markets which has been worsened by denationalization of the banking system and dollarization of the economy. There is need to control capital flows without restricting outflows or restrict For instance, a compulsory interest free deposit before repatriation can be introduced as is the case in countries such as Chile. It is also possible to introduce a forex register to minimize tax evasion and capital flight.

4.0 Collapse of market fundamentals

It has now dawned even to our most zealous market fundamentalists that markets are not impersonal beings. They are man-made forces influenced by greed and selfishness. Markets do not have self-correcting mechanisms. To most honest people, this neo-liberal dogma has collapsed. The devastation caused by the current international financial crisis where tax payers have been forced to spend Trillion of Dollars to clean the toxic mess left by this collapse is a clear attestation to the collapse of market fundamentalism. Now, the ghosts of John Maynard Keynes and Karl Marx are coming back to haunt the neo-liberals. Now, policies such as nationalizations of Banks and Financial Institutions, rescue plans for companies, the need for state intervention and attacks against unbridled capitalism – are now the real thing in global practice. The economist magazine of 2nd February, 2009 eulogized Karl Marx and put him on their cover page with the question “what would Marx think?”

The lesson for our country is that we must strive to free ourselves from the shackles of neo-liberal capitalism and explore new paths of development. In all religions of the world, countries are moving away from this discredited neo-liberal paradigm. Gordon Brown correctly characterized it as the collapse of the Washington Consensus. Of course, this change will require the political will of our leaders who must be willing and able to explore alternative development policies and programs. Our own Guy Scott prescription (The Post of 14 April,2009) that we must continue with the failed paradigms of the Washington Consensus is obviously a misreading of our history and a road to continued disaster.

5.0 SAPs are discredited

The G20 group of nations who met recently in London realized that the priority of all nations must no longer be inflation but jobs and economic recovery. The IMF and the World Bank who forced our countries to adopt Structural Adjustment Policies (SAP) have now changed their views and they are now supporting fiscal stimulus – that is, expansionary fiscal policies, rescue plans and nationalization. These policies have since 1980s been denied to Zambia and all developing countries as these policies could impede the interests of global capitalism.

We must challenge and reject all the failed SAP policies. This is the same conclusion arrived by the Prof. Joseph Stiglitz Commission appointed by the UN General Assembly. We must use both fiscal and monetary measures to mitigate the impact of this financial turmoil. We must restore capital controls and reverse liberalization of the capital account which, since 1993 in Zambia, simply opened doors to speculative capital flows, tax evasion and capital flight and has contributed to lowering of Zambia’s domestic savings while increasing our dependence on foreign aid.

We must do away with fiscal and monetary austerity as prescribed by the Breton Woods Institutions as this has been choking our economic expansion and limiting our public investment and social spending. We should learn from President Obama’s USA that stimulus policies in times of crisis are a historical necessity; while fiscal restraint has no economic logic.

We must reject trade liberalization and restore protection of our domestic market. Trade liberalization has simply increased Zambia’s external dependence, destroyed our domestic industries, accelerated our de-industrialization and led to the deterioration of our terms of trade. Our ability to feed ourselves has been compromised by the foolish conditionality that we must invest in cash crops at the expense of food production. The forced privatization translated into massive job losses and social exclusion of our people. We must learn from what is happening in the USA, Latin America and Asia where governments are taking back what was sold off to foreign interests in order to restore their people’s sovereignty over their nations’ resources.

6.0 The need for a Developmental State

President Ronald Reagan in the 1980s wrongfully stated that the state was a “part of the problem and not of the solution”. As a result of this policy prescription, there was massive de-regulation and assault on the state, public service and ownership. Zambia and many African countries were subjected to devastating Structural Adjustment Programs (SAPs). Our countries were characterized by the so called Washington Consensus, as being “predatory, wasteful, rent seeking, corrupt and inept”(Thandika Mkandawire 2001 o.p.cit). They tried to weaken our states and forced us into imposed fiscal austerity programs, downsizing of our public service, dismantling our public sector and privatizing all state enterprises. These were policies to nowhere. It is now apparent that a strong developmental state is an indispensable and indisputable agent of development. It is now clear in all observations of countries’ experiences, that deregulation and market fundamentalism are part of our problems. We must restore the role of a strong and active interventionist state.

7.0 Financing Development

Since it is foolhardy to expect external sources of finance to develop our country, we must raise resources internally. This policy prospective is also the view of the AFDB who have recommended that our countries must boost domestic resource mobilization, increasing domestic savings. The ecumenical organization Christian Aid (2008) in their publication “Death and Taxes: the true toll of tax dodging”, noted that our country has been losing billions of tax revenue due to lack of enforcing agreements with foreign mining companies who have been resorting to various means to avoid paying taxes. Our country has a large enough tax base to fund our own development. Judicious use of our pension funds as well as prudent use of our annual budgets can meet all our developmental needs. The argument as advanced by some right wing scholars that we must attract Foreign Direct Investment (FDI) is not sustainable as none will come however much we try.

8.0 Restoration of our self-confidence

How does Zambia get out of the mess? The conditions for a genuine positive answer to this question must be a return to the mixed economy where state capitalism co-exists with strong social democratic policies. We must return to democratic socialism (not totalitarian communism which is easy to vilify). The dream for democracy and socialism has been the dream of the pioneers of the Democracy Movement (MMD) in their draft program which was substituted later by the doctrines of Milton Friedman and the Chicago school of economics – privatization, deregulation and cuts on government services. We must address our budget expenditure policy to reduce wastage by re-introducing Government Stores and eliminate unnecessary costs. It is unbelievable that a rim of paper that costs K18,000 in normal shops is bought by government departments at anywhere above K70,000. Tarring a kilometer of road which averaged $200,000 in the sub region is anywhere above $1 million in our country. Since the current foreign banks that dominate our financial sector has failed to channel their money to productive priority and welfare-enhancing economic sector, we must set up state-owned banks to address this limitation

We must restore our self-confidence and trust in our own people and aggressively accelerate regional and continental integration of Africa. We must institute a public works program to address the employment needs of the more than five million Zambians that are currently unemployed or underemployed and many who hover between suicide and madness. We must nationalize those mining companies that want to stop mining and place their mines on care and maintenance, as well as increase our stake in all the other mines which must be declared strategic to our nation. Our government must raise capital and invest in power generation and restructure ZESCO, re-introduce an agricultural marketing board, re-capitalize NCZ, re-establish an agricultural bank, empower our own middle class, and invest in the social sector. The truth is that we are our own makers of our history and foreign aid as we have known it so far tends to make us complacent and non creative.

END

Everything Must Change

2008-08-15T06:00:00.000-07:00

Everything Must Change

By Amb. Mbita Chitala PhD
mbitachitala@yahoo.co.uk

What should be done, to, in all seriousness begin tackling the challenge of eradicating poverty, underdevelopment and backwardness in our country? This article is addressed to citizens who want to offer leadership to our nation as the second term of the New Deal administration comes to an end in 2011.

The Challenge
The goal of any macro-economic strategy of any serious country particularly those such as ours is to improve the standard of living of its people. These goals include reducing poverty, preventing excessive inequality and generating adequate employment opportunities. These should be the goals of all patriots, more so, our political leaders.

Our country continues to suffer unacceptable underdevelopment levels. Over 67% of our people live below an adult poverty datum line of about K92,186 per month according to the CSO study LCMS published in 2004. 74% of our rural people live below the extreme poverty line as is 52% in urban areas. The result is that many of our people live in destitution. Poverty is so severe that many families are forced to hardly eat any food, keep their children out of school, get involved in casual labour where they are inhumanly exploited or get involved in such vices as robberies, extortion, prostitution – all things and anything to make them survive. Many of them live lives where they hover between suicide and insanity. These countrymen are the target of any good macro economic strategy, to be lifted to a state of humanity.

Investment and inflation
The starting point for a sustainable development project is the ability to raise investment income and smartly expend the resource in such a way that there is growth in the country. Of course there is need for a country to ensure that there is fiscal sustainability and macro economic stability, but these objectives cannot be the only objectives as the Breton institutions with their neo liberal ideology have forced Minister Magande and his group to believe. The view held by the IMF/IBRD and regurgitated by our own neo liberals together with our bureaucrats at Bank of Zambia that our economic policies must be solely anchored on fighting inflation, is an attempt to thwart any of our development efforts.

The economic effort at high cost being exerted by the BOZ and the Ministry of Finance to reduce inflation to single digit levels is totally unnecessary and must be reconsidered. The literature shows that moderate inflation in the 10-40% range hardly generates any economic costs. In fact, moderate inflation helps sustain economic growth. The idea of using the inflation targeting regime (ITR) in our country is misplaced for many reasons which were adequately highlighted by one Munachinga’s (2004) and UNDP (2006). The solution is for Zambia to adopt a strategy that address the cause of inflation, to address key supply constraints such as electicity, roads, bridges, agricultural development, food storage and marketing, and other infrastructure instead of the harsh and misguided single digit inflation targeting (disinflation program).

Independence of BOZ
Then there is this misguided notion that the Bank of Zambia must be made independent. Independence from what? The literature all over the world has not demonstrated that independence brings benefits in terms of inflation performance, growth, volatility and so on. The BOZ, like all other social institutions, needs to accommodate many different social interests rather than to be a state within a state. At any rate, this drive to make all institutions independent from politicians is an attempt to weaken our young states so that imperialism can continue to control our countries. If this independence is good, why is it not so in their own countries, these so called donors? It is unacceptable in a democracy to cede power to those who are not elected. This is why our BOZ has failed to address the issue of interest rates. The country has cried that while the Bank rate has dropped from 51.5% in 1995 to 10.7% in 2006, the lending rate has marginally dropped from 66.7% to 37.1% while the savings deposit rates have scandalously dropped from 30.6% in 1995 to a meager 5.6% in 2006. This has largely been because of the absence of political leadership. Our capacity to save and invest has adversely suffered because of this unworkable belief in market forces and moralsuasion. The foreign banks that constitute a cartel will never accede to peoples demands unless there is political intervention. Section 5, part 11 of the Bank of Zambia Act (1996) as well as part 111 and VII which subordinate the BOZ to the elected government of the day is as it should be.

Financial System
Our country’s financial sector continues to play a limited role in our economy and yet it is supposed to be the driving force. The problem of the sector include lack of financial intermediation, low market liquidity, high interest rates, high bank costs, absence of long-term lending, undeveloped secondary market and low public confidence and low access to financial services where only about 18% of Zambians have access to banks.

Currently, the financial system continues to drain public funds but has failed to channel these resources to development projects other than to speculation and government instruments. The view that many Zambians have no security to support loans is insufficient because the view ignores our environment. This setback appears to be uniresolvable as the Banks have remained adamant on this since 1991. It requires smart strategies by the government to ensure that investment capital is provided to the productive sector especially agriculture, manufacturing, housing and infrastructure. Credit flows can be fostered through the usual tax rebates, loan insurance by the state, reduction of compulsory reserve requirements and directing them to investment compulsorily.

A Grave Mistake
One grave limitation to the achievement of insuring that credit gets to the productive sector of our country is that Zambia does not have competitive state owned banks which can be used to address these limitations as is the case in all serious countries that seriously addressed underdevelopment. Our government naively sold our last state bank ZANACO to foreign interests and closed the door which the state could have used to not only break the cartel of foreign banks but also provide a mechanism for subsidized lending to the productive sector if need be. The country is now dominated by foreign banks. We all know the object of international finance capital. Because of cartelization, our interest rates will be forever unaffordable by Zambian entrepreneurs. Zambia has no tool, no bank to compete with these multinationals in pricing money as was the case when ZANACO could be used then. So, we are unable to limit the bias of these foreign banks to satisfy the needs of our people. It is important that a new state bank is founded or ZANACO re-purchased.

There is also need to strengthen the secondary market by instituting measures that could allow rediscounting of bonds, create venture capital funds, insure that all mining companies list at least 25% of their shares on LUSE as opposed to merely quoting as is the case now. This error of commission dubiously committed by our negotiators with the mining companies in the so called development agreements has meant a continued non benefiting/participation of our people in the mines. Those in leadership should insist that this changes and the mining companies must be required immediately to list on LUSE a minimum of 25% of their stock to be acquired by Zambians as was the initial intention of privatization.

Public Expenditure
The manner and composition of our public expenditure needs to be changed. Some people want our country to be condemned to balanced budgets. Since 1978 when the IMF signed the first standby agreement with us and the World Bank advanced us a programme loan in response to the fall in copper prices, Zambia stopped investing in infrastructure. We became over-dependent on these institutions to the extent they forced us to cut on productive investments. Their conditionalities manifested as SAP programs ending with the current PRGF has resulted in Zambia denationalizing itself. Instead of using the parastals to create our own middle class, we sold them to foreign capital reversing all the gains that independence had given us. This tragedy must be reversed.

Starting with our public expenditure, the situation where we use more than 60% of tax revenues to pay salaries for about 190,000 public sector employees and state administration and another 20% of the budget for public debt service and constitutional expenditure and where only about 20% is available for capital investment must be changed. This composition of public expenditure where more than 80% of the budget is spent on consumption does not allow us to accumulate investable surpluses for expanded reproduction and poverty eradication. It is important that this pattern of expenditure is revisited. Our budget must be used to generate demand, expand capacity and finance development even if the public deficit increases in the short term.

The IMF conditionality that we should limit our fiscal deficit to 0.6% of our discretionary budget is wrong. No country that is developed ever did this. We must change our expenditure composition and increase the share budget to growth sectors. We must increase the efficiency and criminise failure to expend as budgeted. We must improve public finance management, eliminate ghost workers and ensure that budget planning is harmonized with its execution.

Need for a Developmental State
Because we know that, and Dr Kaunda used to emphasize, copper is a wasting asset, we must diversify our trading pattern. This will require investment in manufacturing- mineral processing, spare parts manufacturing, maintenance, housing, transport, communications, consumables, energy and so on. How can we fund these investments? In different ways including diversification by the exporters, transfers through the financial system, state investment, receipts from copper and cobalt as well as smart use of our pension funds. It is not clever to keep hoping that the private capitalists from abroad will invest in our infrastructure when they have not done so in their home countries. This responsibility is for the state, particularly so in our case who want to catch up. We should learn from China and the tigers of the east. There is no substitute to ending our underdevelopment than engaging in an extensive public works program. This is what the New Deal in America was all about. This is what happened in Europe after the war in 1945 and to the Asian Tigers. Our state must be transformed from being a consumptionist state to a developmental state.

Suffocating Development Agreements
For Zambia, it is advisable to review the whole copper/cobalt and gemstone mining policies that unfairly allow for unfettered pillage by foreigners at our expense. This kindness where you let your resources to be taken away with little benefit to Zambia is not only unfair but tells a lot about what type of people we are. This resource nationalism must come back. For instance, in 2006, total exports of copper from Zambia was about 500,000 MT. Copper sold at an average price of US$8,000 per tone that year which should have given us a gross revenue of about US$4 billion. If we take the break-even point of copper production in Zambia at US$1,000 per tone, the cost of production would be about US$1 billion living a cool profit of US$3 billion on which Zambia could have taxed the producers at the normal 35% and earn the country US$1.4 billion in terms of corporate tax. Instead, IMF records show that only 462,100 MT of copper was sold at unit value of 6.2 cents per pound which earned the mining companies US$ 2,938 million and Zambia got zero from this in terms of corporate tax as the mining companies were allowed to carry over losses, however fictitious. The suffocating development agreement for instance gave several unnecessary incentives to mining companies that bought our ZCCM for almost nothing. KCM and MOPANI were in 2000 allowed to pay a paltry 0.6 per cent as royalties, 25% corporate tax, 100% provision for capital investment deductions, 0% excise duty on power, refund of net input VAT, allowed to retain 100% of foreign exchange in their offshore accounts, 0% withholding tax on dividends, and allowed a stabilization period of 20 years at which the mining companies assumed our copper would be exhausted. What clever charity! For NFC Africa limited and Chambishi Metals, almost similar conditions were given except corporate tax was raised to the normal 35%, and the stability period reduced to 15 years.

It is obvious that we should re negotiate these oppressive agreements with a view of Zambia getting a fair share from our God given resource. The resource nationalism coming out of Venezuela offers a good lesson to poor countries like ourselves. We should encourage our ZCCM(IH) to be more assertive in the mines where they are shareholders and drive to become the principle shareholders. It is embarrassing that our company has never demanded for dividends in the mining companies they hold stock.

We should level the tax take to enable our own entrepreneurs to compete for business. We should end the culture of secrecy

As of 1st April, 2008, there have been some improvements but Zambia still continues not to benefit from its strategic resource as it should. The corporate tax rate was raised from 25% to 30% while for all other companies it is 35% - mining companies still continue to enjoy several wear and tear allowances and tax holidays under the ZDA terms of 0%. Mineral royalty has been raised to 3% for base metals, 5% for precious stones, 2% for industrial minerals and 2% for gemstones. These rates if compared to a country like Ghana where the royalty on Gold is 10% makes us look like jokers. Furthermore, the mining companies continue to enjoy VAT concessions under the deferment scheme on capital goods. With respect to mineral royalty, the minister of finance has power to exempt companies from paying any royalty. This discretionary power is of course unnecessary as it can easily be abused and should therefore be scraped off.

Cobalt
With respect to cobalt, Zambia continues to be cheated by foreign companies. There are no longer available published production statistics which can be believed. In 1978/9, we produced 4,480 metric tonnes of cobalt or US$ 498 million at today’s cobalt prices. This year 2008, cobalt production was reported to be at 1,895 tonnes which allegedly yielded US$210 million. At the same time, there was a production of 64,000 tonnes of copper (US$ 480 million) not accounted for a production of 216,000 tonnes (US$1.62 billion) to May, 2008. This was most likely exported as copper concentrates containing a vas amount of cobalt. Observers noted that if the 64,000 tonnnes of copper concentrate contained 10% cobalt concentrate mass at 35% cobalt, you would have 2,240 tonnes (US$249 million) of cobalt cash exported as low value copper. These blatant pillage of our natural resources continues to plague Zambia. This was as a result of our badly thought idea of selling our mines for a song – KCM sold at about US$25 million to an Indian multinational when the stock was valued at more than US$2.5 billion per mine when our ZCCM was charge. History will certainly judge us harshly.

It is important that Zambia redresses this plunder of our natural resources if we are serious in attempting to end our poverty and underdevelopment. The good lord was kind to give us this copper and cobalt as he was kind to give the Arabs petroleum. The challenge is not to work hard, but to be smart and ensure that the metals benefit us.

It would be advisable to declare copper, cobalt and emeralds strategic metals for Zambia and provide a protective environment in the same way Botswana, Namibia and South Africa have done for their diamonds and Gold. We must ban completely not through token taxation as is now the case, the export of copper concentrates. We must work towards establishing our own metal marketing state company – our MEMACO – to co-ordinate all metal sales. We must force the mining companies to list on LUSE to enable Zambians to participate in the benefits from their minerals consistent with the development agreement. We must insure that all sales proceeds of all minerals are first credited in Bank of Zambia accounts as is the case in most countries and the companies are paid what is really their earnings. It is advisable that our country introduces a Resource Rent tax or variable income tax to secure additional mineral rents.

Current tax regime
In the letter of intent signed by Mr. Peter Ngandu Magande and dated May, 7, 2008, Mr Magande promised the IMF that “ a windfall and variable profit tax will not apply at the same time, and that all mining revenue above K722 billion will be saved in a Mining Resource Account at BOZ to be used as a stabilization fund to smoothen expenditure over time.” This advice by the IMF is of course faulty. It is designed to prevent our country from investing its earnings in growth which will make us free from their control. This conspiracy must be stopped. National states are not like private companies whose sole aim is to make profits for their shareholders. The states role is to provide public goods to its citizens. Mr. Magande and the IMF want to keep our investable funds sterilized in a Bank account and wait for a day when their will problems in the copper industry to use the money. This is wrong. A more desirable policy may be to create a copper Stabilization and Development Trust financed by these surpluses and a permanent export levy. Such a Trust could be a new superintended by our parliament or a professional company such as our ZCCM (IH) which can be delegated with the task of working towards long –term stabilization of the mining industry including the promotion of development diversification in the whole country. The Magande proposal of sterilizing the extra earnings from our copper revenue at BOZ is a retrogressive policy which is anti Zambia.

Growth strategy for Zambia
It is common knowledge that no country can or has ever developed based on donor aid. In fact, Africa’s experience is that Structural adjustment policies (SAPs) have tended de-industrialize our countries, weaken our institutions and destroyed heir capacities to serve the people efficiently and effectively. SAPS also failed to enable us diversify our exports. Our experience with import substitution industrialization policies and export led growth taught us that we need to bring industrial policy back and ensure that our governments are developmental.

If Zambia wants to reduce poverty over the short term, we must devise a purposeful integrated growth strategy that fosters an efficient manufacturing sector. Since we do not have a private sector worth talking about, Public investment by the state must be the key instrument in such a strategy.

The current government policies advanced Fifth National Development Plan (2006-10) which is seen as Zambia’s PRSP places agriculture, tourism and mining as priority sectors. Yes, rejuvenating the mining sector as a source of foreign exchange and public revenue as well as the advancement of policies to foster an internationally competitive agricultural sector are major policies but not the central policies. The same is true for tourism. If Zambia used agriculture as the basis of development, we would fail to eradicate poverty. There is no country on earth with a successful growth strategy based on agriculture, why? Because, peasant agriculture is inherently inefficient and can never be competitive. An agriculture-led growth would imply rising unemployment as productivity grew. Similarly, copper is a wasting asset and it will soon be exhausted. As for Tourism, it is really neither here nor there as it is a service industry and competition will always be high globally.

The appropriate strategy to eradicate poverty and backwardness is to rejuvenate the manufacturing sector – that is the only sector where value is created. If Zambia continues to follow as suggested by SAP ideologists, a non-interventionist approach, ignoring industrial policy aimed at processing competitive goods and services in Zambia, our country will forever be a hostage to global price shocks and the uncertainty of the climate.

It is obvious that Zambia will not be able to finance all aspects and achieve the MDGs. At the level of per capital growth of about 7% per annum, the MDG deficit is about negative 14.6% of GDP. To cover this, many ideas are available which our government can utilize including the idea of citizen economic empowerment and the intensive use of our locally available resources and Funds without even subjecting ourselves to embarrassing begging or contracting external debt.

Citizen Empowerment
The idea of citizen empowerment which the initial promoters who included myself appears to have been changed by the citizens currently managing the process. The initial idea by the framers of the law was to fill the void which had been created by the thoughtless privatization that had destroyed our national bourgeoisie represented by our parastatal corporations like ZIMCO, INDECO and ZCCM, ZANACO among othersr. The privatization fiasco not only killed our nascent middle class, the whole spirit of nationalism and patriotism was relegated to something embarrassing as neo-liberal ideas took over our consciousness. It was because of this tragedy that some Zambian patriots realized the historical inevitability to re-establishing an indigenous Zambian middle class on which our capitalism /development would be anchored. This dream required our government facilitating the creation of Zambian capitalists who would in due time grow to creatively begin to compete in the international division of labour.

After creating the empowerment commision, the managers who were appointed to manage the institution introduced a naïve ideology of broad-based empowerment driven by some egalitarian notion of equity on which they want to make every Zambian have access to these empowerment funds and join the middle class. In 2008, out of the K130 billion given to them by parliament, they have allocated K10 billion to each of the provinces of Zambia and are in the process of establishing a bureaucracy countrywide. They have become our new utopian socialists who wants to spread this investment resource to every Zambian. They do not realize that doing so will result in spreading the resource so thinly that there will be nothing to show for. Our country has been through this route particularly with the Credit Organization of Zambia which died as the people refused to pay back the loans because of the unfeasibility of the program. This scandalous wastage must be stopped and be replaced by a program stopping the creation of another monstrous bureaucracy by using professional fund managers and also insuring that the funds are not spread too thinly.

PENSION FUNDS
In addition to taxes/levies from our minerals, Zambia has to devise a smart way of utilizing its pension funds. Pension and insurance funds hold about 25% of the assets of the financial system. The National Pension Scheme Authority (NAPSA) alone holds about 22% or about 10% of GDP. In real money, NAPSA in 20096 made K465 billion total income. Out of this, they spent K96.1 billion mostly on recurrent expenses and only K4 billion was invested as capital expenditure. In the year they accumulated funds of K1,494 billion. This was money belonging to the 449,167 contributors. The tragedy is that our government has never considered this resource as potential investment finance and has never provided policy direction on how to utilize this resource. Because of this, NAPSA and the other pension schemes hold investable resources in their current accounts or investe them in government securities. In the letter of intent signed by Mr. Magande to the IMF, Magande did not mention or promise to provide a regulatory arrangement for NAPSA. And yet, pension funds and insurance companies are the major contractual savings institutions and the main source of long-term finance which Zambia can use to finance almost all our development needs.

ZESCO AND ELECTRICITY
One sector which our objective of eradication of poverty and underdevelopment is bound to fail if not urgently addressed is the generation, transmission and supply of electricity to Zambia. We cannot use our surplus earnings from our mineral exports and pension funds to develop manufacturing or new greenhouse projects without power. This error of commission by our government will haunt us for a long time. True, the IMF and World Bank are largely responsible for our failure to invest in the energy sector after 1978 because of their conditionalities, we are however our own enemies because we gave up on our nationalism.

Currently, our country has installed capacity for electricity power generation of 1,700 MW. However,there is only about 1,200 – 1,300 MW available which is largely because of prolonged neglect of maintenance. Kariba North bank which was a separate company was despite advice, swallowed by the insolvent ZESCO and the inefficiencies of ZESCO undermined the capacity of this once efficient power generating station. The current peak demand is about 1,400 – 1,500 MW. The country continues to suffer load shedding with very little hope that things will improve to take care of additional demand .

Presently, ZESCO has exclusive rights to electricity generation (accounting for over 90% of generating capacity) transmission and distribution serve the CEC which provides power to the copper mines. ZESCO’s transmission and distribution losses are colossal due to aging infrastructure and vandalism. In 2006, it lost more than 322 thousand megawatt-hour which was a rise from the 2005 figure of 264 megawatt-hours. The company is also beset by inefficiencies and high costs. Its net operating income has been in the negative for many years. In 2004, about 94.1% of operating income according to Mwenechanya (2005) were operating expenses. Its trade receivables average 80 – 90% of turnover. Its stuffing costs were extremely high at more than 60% of total operating expenses which showed that there was gross inefficiency of the entity. It has continued to accumulate tax arrears to ZRA as well as pension arrears for its workers which makes the company liable as a violator of basic social rights. Its commercialization has not helped the company in any way, apart from the fact that it has deepened its difficulties by involving itself in investing in projects totally alien to its line of activities. For instance, it has invested more than US$60 million in a fiber optics projects even though it could have cooperated with Zamtel inworking jointly to use the Zamtel fiber optics infrastructure. This duplication of effort was not only unnecessary but was probably a subject of abuse of office.

Furthermore, ZESCO has gone to implement a joint venture to assemble meters and transformers with an Egyptian company where it will itself guarantee the market. This naturally raises probity issues as Zesco is tying itself to a technology where it may not be able to extradict itself if the technology proved wanting. The reasonable stance should persuade ZESCO to exit from this compromising association and reclaim the position where it could buy meters and transformers from the market on tender.

Our country has generally a huge hydropower potential not to mention the possibilities of thermal power stations to use coal from Maamba colliery as well as venturing to make a nuclear power station as South Africa is doing. For both of these, the technogy is available and relatively cheap. Furthermore,it is possible to generate over 6,000 MW within three years from Itezhi Tezhi (120 MW) Kariba North Expansion (360 MW) and others. For these three projects, it is estimated that we would need funding of about US$1.5 billion. The Tata of India have shown interest to develop Itezhi Tezhi while Sino Hydro Electric of China showed interest in Kariba North Bank. For the last several years we are still disadvantaged by conditionalities of the World Bank who have been demanding environmental impact assessment studies of one kind or another to access their funding. This may never materialize as they always change goalpsts any time a study is done.

Our government’s policy is rather misplaced. The 1994 National Energy Policy was based on two objectives, namely; affordability of tariffs and provide minimum level of service to persons who are unable to afford the full cost, and; expansion of power generation and distribution by encouraging the private sector, privatizing the distribution function of ZESCO and commercializing ZESCO.

In terms of affordability of tariffs, the government has been rightly sensitive to tariff increases. The promise by Minister Magande in his letter of intent to the IMF that he will review tariffs upward is not only impolitic but insensitive to the political stability of the country. The managers of ZESCO have argued that for full cost recovery, ZESCO requires to increase its tariffs by not less than 48%. It is argued that, countries such as Mozambique, Namibia and Uganda pay 3 to 5 times more than their Zambian counterparts of course such a comparison is not clever as it is not situation specific. What is obvious is that Zambia is currently suffering from the long legal of abundance supply of electricity without re-inverting in the sector. We were prevented to do so by the conditionalities of the Britton Countries. After the demise of the UNIP autocracy, the country has been dominated by right wing policy makers who neglected the developmental role of the state and opted for market forces in spite of obvious market failure.

The mining companies who consume about 50% of total electricity are not subject to regulatory oversight. The CEC in 2004 charged mining companies them 3.0 US cents per Kwh while ZESCO charged CEC 2.1 US cents. At this level, CEC was highly profitable while ZESCO was not. The reasons for this can therefore not be in the tariff structure but must be found elsewhere.

With respect to the other 50%, the rural people get about 2% at a tariff of 2/10 of a percent and rely largely on diesel generators. In 2004, the residential consumers were charged about 1.01 US cents per Kwh while commercial consumers were charges a tariff of 2.6 cents Kwh and non-mining activities were levied and valorem starting at a 3 cent per Kwh to lower tariff if use less than 700 or is unmetered. In all cases, the tariff have been argued to be below cost recovery level. ZESCO has since increased tariffs, but still argues that the tariffs are still low to cover their costs.

The need to generally increase tariffs appear to have economic justification. However, in the set up of Zambia where there is so much poverty and abuses, it is advisable to phase the increase over a long period to lessen the adverse impact on the people, particularly the residential consumers who consume about 70% of electricity outside mining and contribute to 40% of ZESCO income. In fact, the mining companies can easily pay for the deficit or alternatively, the government must continue to subsidize tariffs as electricity is a public good all over the world. It is important that ZESCO re-negotiates its bulk sales agreement to the mining companies with a view of charging them economic tariffs.

It is also of historical necessity that Zambia expands its electricity grid, increase public investment in generation, transmission and distribution. Firstly, the idea that the private sector will invest in power generation is not only being unrealistic but a figment of imagination by some policy makers. Even through the legal framework has been modernized with very generous incentives no serious private sector can invest in Zambia electricity sector, partly because of the low electricity tariffs determined by the ERB rendering the payback period too long and possibility neither here nor there. And partly because ZESCO is still a monopoly and unless it guarantees access to its transmission and distribution network, any private investment would be unviable.

Secondly, ZESCO itself is financially unviable and is incapable of mobilizing resources to expand its operations. ZESCO needs to be restructured and improve its efficiency. The energy Regulations Board in April, 2002 proposed to government the cost-effective restructuring of the electricity market in Zambia.

Out of the four models, vertical integration with independent power producers, partial unbundling of existing utility, wholesale competition model and full retail competition model; they recommended the wholesale competition model which would involve vertical separation of generation, transmission and distribution/supply. The government should look at this again and determine the best cause of action urgently.

What is clear as day is that the government can use some of the excess funds in Mr. Magande’s Mining Resource Account at Bank of Zambia and the more than K2 Trillion held by Pension Funds to start investing in the US$ 1 billion required at the three stations at Kariba, itezhi and Kafue lower.

In three to six year, we should be able to develop those power stations as we encourage others like a revitalized NCZ ( if it will ever be) to develop a thermal power station at Maamba and ask China or Russia or France to assist us build a nuclear power stations using our abundant uranium.

The challenge is leadership which Dr. Kaunda showed at the beginning of our Republic when the government invested in several public goods that made Zambia rank among the richest in Africa.

End