Friday, June 15, 2007

MY MANIFESTO FOR ECONOMIC TRANSFORMATION

This is my manifesto for economic transformation in Zambia and Africa. I would love for anyone or any party to pick up some or all of it, so that the country can go from being poor, to being as rich as full of opportunity for each and every citizen, as it deserves to be.

I have the following suggestions to turn Zambia around though. It isn't going to be 'easy', and it isn't going to be quick, but it will be dramatic. This manifesto concists of three simple points:

1) Government Reform
2) Economic Reform
3) Land Reform



1) Government Reform

Decentralize government. Most modern nations funnel half of their revenues into local government. Unlike this government, which seems to think a lot of unfunded mandates, budgets as well as responsibilities should be decentralized. I imagine a government system, where there are:

- 350 local government units, of
- 30,000 people each, receiving
- $1million (or more) per year, to do the following:


a) education
b) healthcare
c) policing/security
d) public amenities
e) administration

This would:

- take basic services out of the hands central government politicians
- create government units small enough to sidestep tribalism or regionalism
- take tribalism out of the national debate by making it irrelevant in the political arena
- boost local economies, as $1 million will be spent on an anual basis
- bring government close to the people, as unlike MPs, all council business is done locally
- make healthcare and education universally available
- sidestep waste of resources at the ministerial level
- make government directly accountable for local decisions
- enable participatory budgeting
- ensure similar services being available nationwide, irrespective of the council in question
- slow down or prevent urbanisation
- help spread economic opportunity equally across the country
- prevent epidemic outbreaks related to trash collection or contaminated water
- leave some money available to solve local issues
- expedite paperwork, so that licenses, etc. can be picked up at the local council
- shorten the time it takes to set up a business

How money would be made available:

1) dismantle central government

Right now, Zambia has about 29 ministries. Most countries have about 10-12. The problem comes in the thinking that central government can solve local problems, when there are huge barriers to that happening. However, it is very easy for the President to, instead of solving the problem, simply be seen to be doing something by creating another ministry. Look how serious I am about women's issues, I have just created a Ministry for Women's Affairs. But look at the same time, how unwilling the President is to make money available at the local level. Further more, every ministry has one minister (usually elevated to Cabinet Minister), 2 deputy ministers, a permanent secretary. Then, there are district commissioners, and a whole host political positions.

2) Combating Corruption

Track the money. The government should at any time know where it's money is. Both income and expenditures should be carefully monitored and should be published on a regular basis. The prices paid for government expenditures should be monitored and made available to the public, as should government contracts. This way, the minsister or council leader can be held accountable.


3) The Mines

The mines must start paying their fair share. What is more, new deposits should no longer be sold to mining companies, but should stay in the hands of the state, to be exploited on behalf of the government, on a cost only basis. That way, the state will benefit maximally from the country's natural resources.

Apart from making sure that 1/2 or more of national revenues ($1.1 billion in 2004) are spent all around the country, and boosting local economies, there are many, many advantages over the current system. The 30,000 people size means that any notion of region or even tribe are done away with. 30,000 people is simply too small to pander to any of Zambia's 72 tribes, 9 provinces or 4 regions.

I would say that money should be collected and disbursed to both local and central government by the ZRA, which should have it's own financial police, and should routinely monitor all local government expenditures.

There should checks and balances in the system, like monitoring of local government expenditures, but also by democratically electing council leaders.

In two words, the Zambian government is top heavy. There are (I have counted) 29 ministries. Every ministry has 1 minister, 2 deputy ministers, a permanent secretary, etc. The Ministry of Local Government receives more state money than all local councils combined. And to what end? Do these 29 ministries make Zambia the bests governed country in the world? Or are 80% of the people living on less than a dollar per day?

The massive concentration on central government and government from the ministries must end, and make place for government through local government. I hope people will bring this up whenever a president creates another ministry to cater to some political hot topic issue.


2) Economic Reform

The state should own all natural resources. The time for the colonial era practice of selling concessions should be over. In fact, it would be best if selling concessions was banned all over Africa. Because this is how neocolonial elites are created and sustained. It doesn't just pander to corruption, it is corruption. Instead, the state should maintain ownership of the mines and in the very least the minerals, while exploitation should be done by private companies, preferrably Zambian, but international if necessary. These companies must run without politial appointments, and should be payed on a cost only basis, with small incentives as benchmark payments.

However, the present situation, where foreign companies own Zambia's wealth, are simply leaving the people and the country poor, and standing on the world's economic sidelines. As we all know and can attest to. This has to change. Selling off the mines was a criminal act, treasonous, and should be reversed immediately. (A massive windfall tax, strict enforcement of labour laws and environmental laws, go-slow actions on companies that will not comply, there are a myriad of legal and non-violent options for getting the mines back.)

I estimate that every year, Zambia is missing out on $1.6 billion in lost copper and cobalt sales. Compare that to the government's income of $1.1 billion in tax revenues (mostly from the huge PAYE sweated out of the workers of the country and massive, stifling taxes on legal businesses), and $600 million in donor money (now there is a humiliating term if ever there was one - Zambia is giving much more to the world than it is receiving, and yet one would never know it looking at the size of donor aid in the national budget; and forgetting the implications for national sovereignty that go with it).

Indigenous business is being stifled by massive taxation, yet foreign companies are given decade long tax hollidays to set up shop in Zambia - which neatly gets back to the original issue of the braindrain, and why this is a symptom, not a cause.


3) Land Reform

- land redistribution
- irrigation
- mechanisation


80% of Zambia's agricultural land is not under cultivation, making it a major potential growth industry, one that should be exploited by ordinary Zambians, not multinational corporations. We should strive for a position where every present day subsistance farmer has access to 100 hectares, instead of the present 2-3 hectares. Less than 90% of Zambia's agricultural land is under irrigation, and yet Zambia has access to 10% of Africa's fresh water resources and is even named after one of Africa's greatest rivers.

One hundred hectares allowes a farmer and his family to earn $10,000 per year or more, from just growing staple crops, using only 50 hectares.

(Good land produces 2 tonnes of maize per hectare, which I think is still sold for $200 per tonne. 2 x 50 x $200 = $20,000, and presuming half of that is spent on operating costs, that would leave a family with $10,000 per year; compare that with the average annual wage of $280 and that would be a huge step up.)

This would have the effect of distributing wealth and wealth creation into the country side; it would eliminate poverty; it would create the need for for semi-professional jobs (doctors, laywers, accountants, mechanics, veterinarians, suppliers of inputs, teachers) in the countryside; it would slow or stop urbanisation; (in combination with a good food storage/distribution network) it would eliminate famine; it would turn Zambia into a food exporting country.

Obviously, these farmers would need some startup help, mainly with access to machinery and some education, but these businesses would be inherently profitable. There would also be more than enough room for expansion into dairy farming, cattle herding, agroforrestry, etc.

Also, only a tiny percentage of arable land is irrigated, with the rest depending on rainfall. There are two sustainable alternatives to rainfed agriculture. One, riverine irrigation - Zambia has 10% of Africa's fresh water resources. Two, rainwater catchment systems. I would suggest something like Keyline, as well as the use of swales (strategically dug shallow ditches), which slow the movement of water across the land. If you compare a rainforrest and a desert, what you are looking at is not good soil versus bad soil, but slow movement of water versus fast movement of water across the land. Plants are great at absorbing water, but the soil (humus) is even better. If land is systematically logged with water, drainage becomes very slow, vegetation can grow and protect the soil even more, and poor soil becomes rich soil.

This could be a huge works project, that would do a lot to alleviate the massive unemployment.

To get back to the land issue - the whole issue at the ministry of lands is I think hugely important, but it is also a minor issue when compared to actual land distribution. Is the situation in Zambia really so different than that in Zimbabwe - or Malawi, Tanzania, Kenya, Botswana, Namibia or South Africa? There has to be a distribution of (unused) land to the poor subsistence farmers, and without pay. This would be a near instant solution to a lot of economic problems. Obviously, there would have to be a continuous monitoring of possible bottlenecks in the agricultural production process (land, machinery, fertilizer, marketing, transportation, etc.) but it would be a huge new beginning.

Lastly, I think that the rest of the state's money should be used to create infrastructure - roads, bridges, large scale irrigation, etc. This would make business in the country much more feasible, and it would create huge mass employment opportunities. And none of these will come from 'foreign investors'. As the MMD, UPND and even PF seem to believe.


Conclusion

The above have cronicled most of the Zambia's economic/governmental inefficiencies. This is where the real opportunities lie. The waiting is only for someone who will put all of the above into action.

NOW, WHO IS GOING TO MAKE POLITICAL CAPITAL OUT OF ALL THESE OPPORTUNITIES??? :)

You have 4 years to set up a party, and run on this simple 3 point platform for the 2011 elections.

For some miraculous reason, none of the political parties are willing to go this far. They are all satisfied with their ascendance to power, without a clue what they are going to do with that power that will make a huge and positive difference to the country. Which is why people cannot make a real distinction between them. And also why there was no policy debate during the last elections.






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18 Comments:

At 9:16 PM , Blogger MrK said...

Thanks to Cho for bringing my attention to the issue of participatory budgeting. This would further improve the people's involvement with their own governance.

 
At 7:37 PM , Blogger Cho said...

Henry Kyambalesa's position is slightly different from yours. He e-amiled me his speech and he is proposing that an incoming Government honours all existing contracts.

What are your thoughts on that?

What I am hoping to do in July we should start an "economic" review of the manifestos of each of the parties. Hopefully to expose certain areas.

PF, MMD [FNDP proposals], UDA, and AfC.

 
At 10:38 PM , Blogger MrK said...

What are your thoughts on that?

Well obviously we disagree and of course he is a little more conservative than I am.

The mining contracts should _at least_ be rigorously renegotiated. This has nothing to do with not 'honouring' them. Contracts are renegotiated all the time.

Also, I don't understand this need to be thought of as 'a decent chap' when the future of the nation is concerned.

The way I see it, is that contracts are upheld as long as they are in both parties interest.

Certainly, the mining companies have not been forthcoming at all. They find huge extra deposits, then they find uranium, as well as copper, then they they are highly unlikely to have reported all their earnings, etc., etc.

So I don't see any need to honour existing agreements at all. How that is done is something else.

However, there are many options short of sending in the army and nationalising the mines. And no politician who is a true representative of the people will stand by and let the mining companies pillage Zambia.

 
At 10:43 PM , Blogger MrK said...

And again, I would urge you to read George H. Ross book on negotiations, just as a comparison of what a real, tough, negotiations look like. And how our politicians are falling short.

 
At 2:31 PM , Blogger Cho said...

Yes I plan to pass by the book store today to pick up a new suite of reading the Ross and the new Collier book on "benign imperialism" are top of my agenda.

 
At 6:53 PM , Blogger MrK said...

Ok, so Solwezi Council has an income of K2.1 billion, which at K4,000 to the US dollar, is (USD) $525,000.

Solwezi has a population of 23,435 people, which would mean it would receive $781,000 just from the state alone. ($1 million x [23,425/30,000])

They could do away with all taxes and charges, and still have 33% higher income than today.


1 Lusaka 1,084,703
2 Ndola 374,757
3 Kitwe 363,734
4 Kabwe 176,758
5 Chingola 147,448
6 Mufulira 122,336
7 Luanshya 115,579
8 Livingstone 97,488
9 Kasama 74,243
10 Chipata 73,110
11 Chililabombwe 54,504
12 Kalulushi 52,770

Accordingly, their income from the central state would be:

1 Lusaka $36,000,000
2 Ndola $12,491,000
3 Kitwe $12,124,000
4 Kabwe $ 5,891,000
5 Chingola $ 4,914,000
6 Mufulira $ 4,077,000
7 Luanshya $ 3,852,000
8 Livingstone$ 3,249,000
9 Kasama $ 2,474,000
10 Chipata $ 2,437,000
11 Chililab. $ 1,816,000
12 Kalulushi $ 1,759,000

 
At 10:31 PM , Blogger MrK said...

PS,

Solwezi Council had a 23,000 population in 1990. In 2000, it was 38,000.

In my scheme, they would receive (38,000/30,000 x 1.5 million = ) $1.9 million.

 
At 1:46 PM , Blogger Cho said...

http://www.lusakatimes.com/?p=1361

carries an article on the need to establish a transparent procurement system..I guess that would help stem the flow of lost money.

 
At 6:36 PM , Blogger MrK said...

Cho,

Thanks a lot. I have linked to it here:

http://maravi.blogspot.com/2007/09/lusaka-times-sikaneta-calls-well.html

This is an extremely important subject - I remember once reading that the government loses between $100 million and $200 million per year in procurement inefficiencies and fraud.

 
At 4:33 PM , Blogger MrK said...

On neoliberalism: I think we must distinguish between free markets and free competition. A free market, one that is unrestrained by government interventionn, sooner or later becomes a monopoly, where one corporation can stifle any kind of competition.

Free competition on the other hand, can only take place in controlled markets. It takes an outside agency to break up monopolies and cartels.

Therefore, if we want to see free competition, and I do, there is a strong need for the government to intervene and ensure equal access to market places by new companies and startups, and prevent monopolisation of a market by one or a few major corporations.

 
At 6:35 PM , Anonymous node-net said...

Cooperative farm organisations should be encouraged to take advantage of combined purchasing and selling opertunities. and indeed spreading best practice information and training for young farmers. They will make enough money to buy the local land which they know. The foreign investor is at a serious disadvantage in this regard.
The solutions for zambia are in zambian hands.
Monopolies are already in control of zambians ecomomy. Mostly state monopolies.
Monopolies are hard to create and easy to dismantle. In the age of internet information it is easy to see if we are being ripped off.
Dont worry to much about monopolies.
Breaking up monopolies that parasite the people is a VERY popular polictical move.

 
At 11:48 PM , Blogger MrK said...

I think cooperatives are a good idea, not only in farming, but in business as well. It liberates a lot of potential, when

Monopolies are already in control of zambians ecomomy. Mostly state monopolies.

So why replace them with corporate monopolies? Which is what we have seen. Let alone Western corporations, as there are no African corporations (outside of South Africa, sort of).

Corporations in a country so poor, have all the power and access to the judiciary, to lawmakers that we are so cautious of in the West - and still we can't stop all of it.

Monopolies are hard to create and easy to dismantle.

Bill Gates will disagree. He has a defacto monopoly on 90% of the world's computers, and will remain having that, until the technology changes radically.

That may be a 'free market', but that is not free competition.

Breaking up monopolies that parasite the people is a VERY popular polictical move.

But what are they replaced with. In other words, who has the moey to buy the shares in these parastatals?

Neoliberalism is a dying philosophy. It is being rejected slowly in Africa, and radically in South and Central America.

Let's start with having free competition among SMEs, and then we can build up the parastatals into African corporations - African owned and managed.

Meanwhile, the parastatals and the civil service should be de-politicized. Let's start hiring on the basis of merit, without the relatives of prominent politicians in leading positions.

No need to hand over the country's parastatals or natural resources to Australian, Canadian, American and South African corporations, which is what privatisation would mean. And has meant.

 
At 9:23 PM , Blogger cnc said...

MrK, have you heard of a party called the Citizens Democratic Party? The CDP believes in a decentralized government system. I think your views and ideas would be very valuable to them. They are in the process of developing a detailed manifesto and I believe would appreciate your input. Visit their website and contact them when you have the chance. I found your suggested manifest very enlightening.

 
At 3:12 PM , Anonymous kaela said...

MrK
I have been a silent follower of the exchanges between you and Cho. Quite interesting. Cho has done a good job to make you see other points of view - even suggesting other readings. But from the Zambian well-being point of view, your position is quite superior. And quite frankly it is a pity we do not have anyone in government with those strong views. We should.

The biggest problem with the Zambian system as it is now - is that, it operates without thinking. It is something on auto pilot. This is regretable. Our leaders have no clue of what is happening. They leave everything to a good samaritan - be that good ol-Britain or the fatherly America. While everybody else I read about thinks differently. We've lots of Zambians out there with good and fresh ideas. But those have no chance because the "old" nannies are sitting on the keys. As a consequency the system may crash even if in the midist you had people with solutions. The possibility of renewal is choked off.

Look at the open letter to R Banda by Cho? Soon after reading it president Banda came up with a Cabinet fitting 1920s. This is the problem.

When you discuss about harnessing of resources be it from minerals or human resources - a lot of those ideas had been given before. Zambian bureaucrats find these things/ideas too complicated and technocratic when they are not.

In one of early articles I (Mulenga) published on UKZAMBIANS, I had warned about the eventual drop in commodity prices including copper. I reproduced a chart from World Bank which very accurately predicted the trends. Hence, I recommended agressive savings and maximum use of copper prices while they were good. Nobody listened.

So by the same token, when you advance good ideas, people who should take note of them don't. It is frustrating. But I do encourage you and others to keep on hammering. In Bemba they say UMUPAMA PAMO UTULE INGOMA. (Hiting the same spot on the drum eventually makes a crack). Keep pushing!

 
At 8:42 PM , Blogger MrK said...

CNC,

I think the Citizens Democratic Forum is great and their treatment of decentralization is very detailed.

http://www.thecitizensdemocraticparty.com/

What I think would be great, is everyone, Professor Kyambalesa, Robert Mwanza of the Citizens Democratic Forum, etc. came together and aided the government into putting together a real comprehensive national development policy. Especially now, because of the international crises and conventional logic has been thrown out of the window, there is a chance to make a real difference. And Rupiah Banda came up through UNIP, which happed to have been the last government that believed in national planning. So there's hope.

 
At 9:32 PM , Blogger MrK said...

KAELA,

The biggest problem with the Zambian system as it is now - is that, it operates without thinking. It is something on auto pilot. This is regretable.

That would also be a function of the neoliberal philosophy, which wants to get government out of everything and depends on 'the private sector' to do everything. Thanks to Milton Friedman and Ayn Rand.

And they could have used a percentage of the money from the windfall tax to lock in those high prices using futures and options, to cushion the shock for one or two years to come.

Maybe the Zambian government should start exploiting some new mines on a cost-only basis, and build up copper reserves to stabilize the currency - the way once gold stabilized the US currency.

There are so many ways to make Zambia prosperous.

In one of early articles I (Mulenga) published on UKZAMBIANS, I had warned about the eventual drop in commodity prices including copper. I reproduced a chart from World Bank which very accurately predicted the trends. Hence, I recommended agressive savings and maximum use of copper prices while they were good. Nobody listened.

The times they are a-changing. :) Neoliberalism is being swept aside. Government intervention has become the norm among governments that have not been destroyed by 'privatisation'.

I don't see the IMF telling the GRZ not to spend money on works projects, when the US, UK, etc. are bailing out banks with taxpayer money and redirecting their car industries to start making their vehicles run on biofuels.

The GRZ needs to secure the food supply, or they'll have riots in the streets. So increasing land under cultivation, getting more people to farm, re-inventing the old farm cooperatives would be the way forward.

 
At 10:10 PM , Blogger MrK said...

This is not a repudiation of the CDP, because I agree with 90% or more of what they're saying. :)

From the CDP website:

Seven Point Agenda

•Putting people first in tax relief by broadening the tax burden

Since independence, the government has maintained high income and payroll taxes for citizens employed in the so-called "formal sector". This has resulted in high taxation imposed on this segment of our population, who are in effect carrying the tax burden of the so called "informal sector". The only way to provide relief to the highly taxed employees and businesses would be to share the "tax-burden", which is simply broadening the tax base.

Broadening the tax base requires that we formalize the so called "informal sector", where billions of tax revenue is lost every year, due to the numerous UNTRACKED cash transactions in this "UNDERGROUND" economy, and in part due to lack of enforcement of current existing Zambian laws regarding business practices. In order to have tax revenue collected from the informal sector, we need to INCREASE and redefine business licenses, according to the nature and size of the business itself.

We encourage people to be entrepreneurs, whether from home, a roadside or an actual office, but in order for them to operate, they need a LICENSE which will require them to pay tax on income received. For the CITIZENS DEMOCRATIC PARTY, this is simple party policy, and the actual finer details on how we determine who pays what amount, will be left to the specialized technocrats whom CDP will utilize. We already have the Zambia Revenue Authority, which will take on the task of checking that licenses are produced on any would-be business. A successful implementation of this program, will then take away the tax burden on the current "formal" sector, as we will then be able to reduce taxation on this segment, supplemented by the new contributors to our tax base.


Now intellectually, I understand that at one point SMEs will have to be taxed, and that the informal sector must be formalized. Fine.

However, the first thing that comes to my mind when I hear the phrase 'broadening the tax base', is extending taxation to the mines. They are the ones who are exporting over $4 billion per year, but (in 2004) paid only 6 million in taxes, and are bending over backwards to avoid paying the windfall tax. The informal sector is not the first that comes to mind. I think collectively the mines made $2.4 billion per year in profits. If those were taxed at (at least) 50%, the GRZ would have another $1.2 billion in revenues. That in my opinion is really where billions are being lost.

Secondly, the informal sector is informal to a great extent, because they want to avoid paying these high tax rates, for which they seen nothing in return (bad roads, no universal education for their employees, etc.), just a bunch of fat cat politicians taking and taking more if they could.

Thirdly, taxes should be paid to a deserving government. Instead, we have a bloated, top heavy government where money disappears into. Unless the government stops running 29 ministries, while spending more on the ministry of local government, than all local governments combined, and unless ministers start flaunting their conspicuous consumption and treating their elevation to government as if they had won the lottery, they could actually inspire Small and Medium-sized Enterprises to pay their taxes.

It is my experience that people really don't mind paying taxes, if what they get in return for it is real and tangible - good roads, universal healthcare and education, a smoothly running economy.

Until the mines start paying their share, I am not looking for any kind of boon from taxing the informal sector. People are already poor enough, without an inefficient government getting better at taking their money and not offering much in return.

 
At 1:21 PM , Blogger Gacu Malcon said...

Some plaguerism!Some plaguerism!Some plaguerism!Some plaguerism!

 

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