Maravi

Sichinga warns of adverse economy

Sichinga warns of adverse economy
By Chiwoyu Sinyangwe, Joan Chirwa and Fridah Zinyama
Tuesday August 19, 2008 [04:00]

IT will be difficult to sustain Zambia’s economic growth in the absence of President Levy Mwanawasa, business consultant Bob Sichinga has observed. And economic experts have explained that the slight depreciation of the kwacha and poor performance of stocks on the Lusaka Stock Exchange (LuSE) could have resulted from investors’ uncertainty over President Mwanawasa’s health.

Meanwhile, World Bank country manager Dr Kapil Kapoor has said political stability is an essential ingredient for economic success. But University of Zambia (UNZA) Development Studies lecturer Tiyaonse Kabwe has disagreed with assumption that President Mwanawasa's illness has or is bound to impact negatively on the national economy.

Evaluating the possible economic impact of President Mwanawasa’s continued illness, Sichinga said continued speculation on the head of state’s health was not only working against investor confidence but also the general self-esteem of the Zambian citizens.

Sichinga said the Head of State can never be separated from government policies, hence the current uncertainty in Zambia’s economy.

“Any situation of uncertainty does not work to the benefit of the country’s economy. You cannot separate political certainty from economic development of the country,” Sichinga said. “You cannot say that since the policies of the country are embedded in the Cabinet, then, all is well. Who draws the policies? Who supervises Cabinet? Who is going to provide routine monitoring of the government polices?

A lot of important policy decisions in the country still depend on the President because of our current Constitution. All decisions to do with allocating resources have to be approved by the substantive President, not even the person acting in his position can do that. So, it is not possible to separate economic growth of the country as well as political stability from the sitting President because he is the chief executive officer of the country and so the continued speculation does not work to the benefit of anyone.”

Sichinga also called on Cabinet to take a “bold decision” and activate the process of deciding whether President Mwanawasa would be able to continue in his position when he returns.

“Going forward, I think that Cabinet should take the bold decision although it wouldn’t be an easy decision. The President is my colleague but I think a decision has to be made,” said Sichinga. “The recent disclosure by Dr Brian Chituwo (health minister) that the President’s illness would take long, in fact, the expected period of the President’s recovery is not even clear.

So, I think Cabinet should use three months which the constitution provides for the country to be under the acting President in case of the President being incapacitated or unable to continue his duties.

“The Constitution however does not clearly state how long the country can wait before invoking Article 36 of the document which allows the chief justice to constitute a medical board of three medical doctors to investigate the President’s ability to discharge his functions as Head of State. So now is the time to trigger that process.

“We need to remove this uncertainty and remove these speculations. We need to sustain the confidence of not only the foreign investors but also the entire citizens in the country.”

And Dr Kapoor said the government should ensure that current decisions result in the country maintaining its growth momentum even in the absence of President Mwanawasa.
“President Mwanawasa's illness has saddened the country and the outpouring of good wishes for him shows how much the people of Zambia care for him and respect him,” Dr Kapoor said in response to a press query.

“The tradition of political stability and peace that Zambia has established makes it stand out in Africa and the political leadership deserves a lot of credit for ensuring that Zambia remains calm during this period of uncertainty. Political stability is an essential ingredient for economic success and my view is that Zambians have handled the President's illness very maturely. Clearly, this is what the President would have wished and I am sure that he will be very gratified that the economy has continued to perform smoothly during his illness.”

Dr Kapoor also said the country needed to accelerate growth and achieve that the current government had outlined in the Vision 2030.

And an economic expert said government should work hard in making decisions that would not compromise the country’s economic position.

“Government appears to have done reasonably well in keeping the decision-making going in the absence of President Mwanawasa. Things have not fallen apart. They are to be complimented,” the consultant said. “At the same time, there is uncertainty about whether and when the PPresident can return to work. Such uncertainty is unavoidable, but government should do everything possible to minimise it because there are signs that the uncertainty is affecting investment and other decisions affecting the economy.”

The expert further said the government should continue with sound economic programmes in the absence of President Mwanawasa, stressing that a time frame needs to be set to ascertain whether the President will resume his duties.

“What can government do? There are three options, the first one will be for government not to do anything, the second option is to start the process envisaged in Article 36 of the Constitution, where the president’s ability to discharge his functions becomes the subject of investigation by a medical board and the third option is to set a definite period, say two months, at the end of which they will review the situation and decide what to do,” the expert said. “In addition, they can and should continue the process of regular reports to Parliament on the President’s medical condition.

These should be as complete as possible, without violating the President’s privacy. They should also brief opposition leaders on the progress of government business on a regular basis. This would provide some reassurance that, even if some matters cannot be made public, they are subject to some independent scrutiny; and that an effort is being made to maintain national unity.

“In addition, the government should continue taking decisions and progressing its programmes. Political uncertainty is always present to a greater or lesser extent. Government should do what it can to minimise uncertainties and show that it is business as usual.”

And some economists have said possible changes in leadership meant a lot for foreign investors who could take away their assets at any time.

“It is all about the risk profile of the country. Policies change with change in leadership and this is true for most of African countries.

Policies now in Zambia are very investor friendly to the extent that investors can take away investments whenever they feel like,” they said. “If investors start feeling like there could be a change in leadership, that brings down investor confidence, leading to reduced investments in the economy, low Foreign Direct Investments (FDIs) and the exchange rate gets affected. Once foreign exchange gets affected, other sectors also get affected.

“For the kwacha, we have seen a bit of stability, but that time when there was a rumour that the President had died, it depreciated sharply and that gave indications of how the economy performs in times of a crisis. It also shows what impact a change in leadership would have on the market. For example, the recent conflict between Russia and Georgia brought about a number of economic changes. Any instability disturbs the economy.”

Apart from the depreciating kwacha, most stocks on LuSE recorded declines, with specific examples of Celtel shares (now Zain Zambia) that tumbled within a month but have now retreated to the trading level at the time of listing.

For example, the kwacha depreciated by five per cent within a few days after rumour went round that President Mwanawasa had died. The LuSE all share index also dropped sharply resulting from the loss in share prices of most listed companies.

“There was an immediate reaction on the financial and stock markets in Zambia over the President’s illness. President Mwanawasa’s illness is an issue for investors as most of them are jittery and they started taking their money out,” they said. “When the incident happened, share prices came down, particularly Celtel. When it got on LuSE, there was demand and the share price went up.

The issue is that people holding those shares started selling them and they were buying dollars on the market, hence the depreciating kwacha.

“There has been some impact, but not so excessive. Investors always become jittery over the poor health of the President, until it’s clear what the status quo is. Most investors are not willing to invest where there is political uncertainty. The President is the custodian of policies and investors from abroad would rather take their money out if the Head of State is not in good health.”


But Kabwe said none of the evidence being given so far is credible enough to sustain the proposition.

“The kwacha may have, during the President's illness, been depreciating in relation to the US dollar, but everybody will agree that this is not the first time our kwacha has ever depreciated. As a matter of fact there have been, under normal times, worse depreciations before,” he pointed out.

Kabwe also added that buyers of shares in Zain Zambia may have been offloading them but there was absolutely no reason why the only explanation should be the President's continued illness.

“Why not ask questions such as why Celtel Suddenly became Zain and if the unsuspecting former Celtel subscribers forced into this strange company are happy with the current services being offered,” he asked. “Is there not a reasonable suspicion that the so-called offloading of shares in Zain may have to do with this abrupt change over and all what it entails?”

Kabwe urged that signs of erosion of investor confidence, even though not evident may indeed not be ruled out, but there was absolutely no reason why the only explanation should be the President's ill health.

“Where do we place key questions of tax evasions and other unscrupulous devises characteristic of liberal economies in underdeveloped nations,” he wondered. “Should investor confidence be eroded by the fact that the President is sick and there is uncertainty in a nation as regards to whether there will be a successor or not?”
Kabwe argued that the sickness or death of a President is a normal expectation the world over.

“It is for this reason that Republican constitutions all over the world have provisions for it,” he said.

Kabwe said a president's illness or death from natural causes or other wise is not a coup d’etat that should worry investors.

“Constitutions, including our very own, provide for a smooth continuity. Whoever takes over ought to be trusted to carry over the same responsibilities of one's predecessor. There is absolutely no cause for concern especially if the successor is emerging from the same party and government of one's successor,” Kabwe said.

He explained that Article 39 of the constitution has clear guidelines of who should perform presidential functions in our present circumstances.

“If investor confidence is indeed falling because President Mwanawasa is sick, the blame shall rest on none other than the shoulders of the men and women in whom the nation has entrusted the responsibility of governance,” said Kabwe.

Despite Kabwe’s arguments, economic experts still believe the health of a Head of State had an enormous role to play in maintaining investor confidence of the country, considering that the President is the custodian of most policies that favour foreign investments.

Labels: MWANAWASA, ROBERT SICHINGA

posted by MrK @ 5:11 AM