The following opinion column was submitted to us by a financial analyst who wishes to remain anonymous. The views expressed in this article belong solely to the author, and do not represent the views or opinions of the editors of ZambiaReports.com.
Zambia’s has been “blessed” with five presidents so far, with different leadership styles and professions and without doubt their contributions have been related to what they are good at. Most of the 27 years of Kaunda rule rested on the foundations of independence from the colonial rule. FTJ rode on the message of the need for multi-party democracy and liberalization of the economy, this was achieved. MMD, under Mwanawasa championed an aggressive corruption fight and sound economic management whose fruits we saw being carried over to RB’s rule. With the PF rule it is difficult to figure out whether we going a notch up and retrogressing.
The economic development under PF leadership is threatened by poor governance and obsession to gain political power at the expense of prudent management of resources. Any political party will always seek political mileage, but what is sickening is the corrupt manner in which PF are creating opportunities for them to seek this mileage. Three characteristic of the PF government stand out: unprofessional, expensive and directionless.
PF Economic Blunders
Here are some of the mistakes by PF, demonstrating their economic ineptness and their economic implications. We should bear in mind that Government’s role in business is to implement economic policy (industry, fiscal and monetary) that preserves confidence in economy, currency stability, low inflation and believable future prospects. The deterioration of business confidence though invisible to the naked layman’s eye can be attested to by current statistics such as weak exchange rate, high borrowing rates, falling FDI and commodity shortages.
Corruption perception – this is important to any county’s credit rating as well as in restoring donor confidence. The international corruption perception will look out for political will and government policy and actions on corruption. Also being observed is the number of successful prosecutions in corruption cases. Under PF we have seen the president publicly denounce the supposedly independent ACC, for merely doing its job and also a drastic reduction in successful prosecution. One key case is the case involving the misappropriation of the Global Aids Funds, which was closely watched by the Donor community. In this case we witnessed a dramatic turnaround, after the PF victory, in this strong case, the state lost by way of lack of evidence. This was even made more sinister by the connection of the major culprit Kapoko to the funding of the PF campaign.
Private sector confidence – Private independent watchdogs such as Fitch and Moody are key stakeholders in terms of approaching global financial markets. These institutions guide lenders on credit rating and risk profile of the country. This further translates into FDI attractiveness and forex stability. It was disappointing when Finance Minister once snubbed them for down grading Zambia, despite being the same agency influencing Zambia successful Eurobond issue. The point the PF government need to know is that they cannot force the Kwacha to appreciate or people to transact in kwacha but they can create confidence in the kwacha by implementing appropriate economic policy. This should start with refraining from unpredictable rules and consulting the private sector before implementing new rules.
Government’s financial discipline – The financial discipline exhibited by the current PF government leaves a lot to be desired. Two things have become habitual with this inept PF government. Firstly, they have unplanned expenditure such as bye elections, bloated cabinet and a fuel donation to Malawi in 2012. Secondly, we have poor resource allocation or misallocation as evidenced by an unconstitutional first ladies office, imported ballot printing and abrupt infrastructure projects like Mongu stadium. Financial discipline is key to the country credit rating and government should lead by example.
Unclear financing decisions – In the 2013 budget the finance minister presented a one sentence plan for how he is going to use the $750m Eurobond, which so we hear is just in sitting in the banks. We can now understand why MMD was not in a rush to issue this bond, given that feasibility studies and other pre-finance activities are yet to be completed on the targeted projects. ZESCO hasn’t started using their allocation of about $150m and Zambia Railways Limited does not even have a feasibility study for the projects it is dreaming of. This unclear and rushed financing decision is coming at a cost i.e. interest. This is one area the Minister has further neglected to explain how he is going to offset this cost to avoid Zambia going back into debt. This is made tricky by the fact that two thirds of these funds are not going into commercial projects.
Monetary policy – There is strong indication of interference by the executive in the management of monetary policy. Whilst we can’t disconnect fiscal policy from monetary policy, it is vital that the BOZ have independent oversight on monetary policy. Finance Minister appears to have an ancient approach to economics. Business will use a particular currency if they have confidence in it, i.e. its foreign exchange rate is stable and inflation is low. When people transact in other currency Government should relook at their monetary policy. Finance Minister must be disgraced because It has come to light that dollarization was not the cause of the weak kwacha after the dollar recovered within weeks after the Forex ban. We even have so called economists who don’t understand basic economics as evidenced by one Amateur Minister Miles Sampa who at one point attributed that the 10 % appreciation of the Kwacha against the dollar is an indication that the investor community still has confidence in the country’s investment climate under the Patriotic front administration. He said this when kwacha appreciated to K4,600 per dollar after effecting the SI 33. It would be interesting for revisit this claim, given that we are even worse off after the SI 33.
Judicial Independence – On Judicial independence I would like to highlight three cases which can potentially result in distrust of the Zambian Judicial system as far as businesses are concerned. The Zamtel case, DBZ case and ZPC case definitely ring the bell. The Zamtel reversal was a pure case of nationalization facilitated by a biased commission of inquiry and lack of the due process of the law. In the shadows of this takeover was an attempted Zanaco takeover. It should be made clear that Lap Green is not answerable to the corruption charges that the President alleged. It should be noted as well that nowhere in the commissioner’s report did they site corruption. The report basically purported that Zamtel was undervalued without coming up with an alternative value. Lap Green definitely has a strong case in as far as getting their $500m compensation. The DBZ case with JCN Holdings, The Post Newspapers and Mutembo Nchito, whichever way it goes has created a dent in the Judiciary – Business relations. The political influence over the current judicial system has been exposed. In other terms we can foresee private lenders hesitation in financing politically exposed projects and public lenders bending rules for politically exposed businesses or individuals. This is bad for the integrity of the justice system. The Zambezi Portland attempted takeover by Mathani who is politically connected is another case casting a dark shadow on the fairness of our justice system. This lack of reliability in our judicial system may affect businesses access to financing and ability to close deals under Zambian laws.
The PF have been hasty in enacting law and statutory instruments before consultations with private sector. In fact they have more consultations after implementation than before as it was the case with the SI 31 and SI 33. This behavior is an indication of poor economic oversight and proof of this deficiency is evident in our president. Even the explanation of things like mealie meal shortage, fuel shortages and weak kwacha have been insincere, conflicting and divergent amongst ministers, who surprisingly come from the same cabinet, chaired by the same President.
HH is an entrepreneur with requisite success and exposure in farming, financial services, privatization, business negotiations, accounting, insurance, mining and hospitality industry. I don’t know how a cabinet meeting plays out, but to have a leader with such a broad exposure to business and economics, heading our cabinet, we can have confidence in the economic quality of decisions made. We are talking about a leader who can refute overpriced tenders, a leader who can question the adequacy of financial controls, a leader who understands which sectors will improve our economy, a leader who can puzzle out laws or statutory instrument which would be detrimental to business or trade, and the list is endless. These qualities in HH are needed simply because they directly relate to people needs for jobs and business’s need for growth. Let us ask ourselves what we can really gain from somebody without the kind of attributes HH has. So what if you have been councilor before? So what if you have spent all your working life in politics? How does political experience, especially the Zambian politics of deceit as pioneered by PF, translate to jobs and development?
HH’s tribe or purported unpopularity in certain parts of the country cannot out-weight his quality and ability to drive a genuine economic revolution for this country. Zambians need to objectively analyze the critique of liars like Fred Mmembe and Michael Sata, and establish if it is credible or important. They spend sleepless nights thinking about HH’s wealth and refuse to get inspired by it, yet the eat his beef, sleep in his hotels and are insured by his companies. The President and Fred Mmembe don’t even have an iota of evidence of theft against HH, and that’s why they rely on the vuvuzela behavior and useful idiots – to repeat lies over and over with the hope that people will believe. Sadly Fred Mmembe and Sata, today are Zambia’s leading blatant liars and hate mongers. Fred Mmembe wants to the nation to believe that HH is egoistic, selfish, greedy and unreliable. The same man who has offered to serve the country at the cost of growing his business. It is clear to see the big ego between the indebted Mmembe and HH, one believed he has the right to be forgiven of his debt and the other pays his taxes. For how long should the people of Zambia continue buying these cheap arguments for Fred Mmembe which are clearly motivated by envy and hatred?
Garbage in, garbage out. Today it is clear what our president’s priority is – political mileage. We have a president who rarely addresses economic policy issues and constantly demonstrates a very basic level of comprehending issues. Economic policy is not rocket science but is simply government helping business grow, trade and employ people. Economic issues have everything to do with efficient and smart allocation of national resources. Alas, the president’s economic policy is hunting HH’s wealth using noise and deception. We can liken this to how hyenas steal a carcass from a lion, using noise and deception. Another example of lack of economic focus by Sata, is how he chooses to ignore the weakening currency and food shortages but vocally addresses the opposition parties’ internal affairs. Our president’s incompetence in economic policy is unbelievable. We can recall his open price control directive to millers, ignoring other rational issues addressing supply limitations and logistics. One wonders if he even seeks economic advice in the course of performing his duties as president, let alone legal advice.
The rationale presented by the HH is simple, economic challenges require economic or business competent people. Under HH we can expect to have more focus on the economy than politics, we can further have better confidence on economic judgment by our government unlike the current PF government. With Sata, a former oppressive police officer under colonial rule, as president we can be rest assured of aggressive policing instead of implementing sound economic policy. Just the Character of Sata is a high risk to our economy. HH has clearly demonstrated how a business can thrive in the Zambian economy. He definitely knows how the economy can help businesses grow and thrive.