(THE POST) Happy New Year TTI readers: economic review, countermeasures

Happy New Year TTI readers: economic review, countermeasures
Written by Professor E. Clive Chirwa
2 Jan 2008, The Post

Happy New Year to all my beloved TTI (Transport, Technology & Innovation) column readers. Thank you very much for your support in 2008 that has injected strength in me to continue writing this column.

The column also extends its festivity greetings to His Excellency Rupiah Banda and may The Lord help him guide us to a better future, to His Honourable PF president Mr Michael Sata and His Honourable UPND president Mr Hakainde Hichilema for their constructive checks and balances that have yielded a developed democracy. Last but not least to my fellow Zambians and friends of Zambia who are experiencing the economic downturn that will continue to degenerate well into 2010 before bottoming out.

I want to dedicate this first article of 2009 to reflect on where we are on transport and technology, inform you my readers of the true picture of the global economic crisis and how that seriously affects us as Zambians, talk of issues at the heart of our disgruntlement such as cost of mealie-meal, transport cost, demise of inward investment, business closures, bankruptcy and unemployment.

At different stages of our enlightenment process, I will suggest countermeasures that need to be taken seriously if we have to survive this storm which is ripping and uprooting everything in its wake even those stable countries with long history of economic prudency.

This is my picture alone not a party political memorandum. I am sharing it with you my readers because I need to inform you of the very bad days ahead of us. This is not scare mongering but common sense and you will remember these words if at all you believe in not protecting yourself. Please be prepared than ever before and remain focused at all times if you want to be the last person standing after the global crisis. Bear in mind that the crisis we are experiencing has not been instigated by us Zambians.

Since we are part of a globalised economy, our umbilical cord is firmly attached to the world events that affect every human being. It is imperative to know that Zambia will never get the same high level of inward investments it attracted just after privatisation as investors who borrowed in low-yielding markets to invest in Zambia are retreating from the risks, while new investors will be difficult to attract due to global lack of liquidity money for investment. This is our chance to change things and become producers. More about that later.

Let us go back to the beginning of year 2008. The car industry was still booming with new models coming out every other week. Even long- term vehicle projects were moving at speed to concept cars. The American, European, Japanese and Korean motor industries were working full blast to meet demands, which as we have now learnt, fuelled by borrowed money. It was not until March-April that weaknesses in the American financial system began to be exposed through the collapse of a few banks, which resulted in the US government drawing up a rescue plan and inject the stimulus funds into these institutions. One of the biggest rescue plans was the US$300 billion given to CITI Group. This was the beginning.

The US domino had fallen and in its wake triggered unprecedented catastrophic events around the globe that saw the demise of the world’s banking system as we know it under capitalism.

Countries around the globe started to rally and save their institutions. In the UK, the Royal Bank of Scotland, the second biggest financial institution after Barclays had just hours before it went into meltdown at a point of no return when the British government extended its olive branch full of stimulus money.

The same happened to banks all over Europe, Asia, America and Africa. Currencies of the countries with poor regulatory systems such as Iceland completely collapsed; those with huge reserves such as rich developed nations were now pumping in rescue funds to maintain these companies afloat.

With respect to Zambia, a country with a small reserve that cannot do much, so far has seen the storm pass-by. It has been lucky not to feel the full brunt of the economic woes since our banks did not engage in deep irresponsible lending practices. But do not be complacent as Zambia has the umbilical cord still attached to outside influences. As predicted by economists, Zambia's domino will fully fall around 2010. Therefore there is still a lot of pain we are going to endure before we start feeling better by the election time in 2011.

For us to reduce the pain to the minimum we have to forget about party political scoring and work together to deliver one of the most ambitious economic programmes Zambia has ever seen. The worst is coming, so let us prepare ourselves. The loss in copper revenue to the nation will start filtering through the Zambian economy soon, tax collection will be far less than originally projected. In short, three things need immediate attention.

The first and what people are worried for is the cost of food especially the mealie-meal prices that are just too high for 85 per cent of Zambians who are at the same time seeing other amenities go up in costs. In the short term, let us use our food reserves to cushion out the escalating prices. In the long term, I want us to revisit the mandate of Food Reserve Agency and make it good for Zambia. I am surprised, perhaps astonished, as to FRA being a buyer rather than a producer. The question we must ask ourselves is why the FRA is not investing in producing food. How can you be a food reserve master if you depend on outside countries to supply you with most basic commodities?

If Zambia was Hong Kong or Singapore, I would understand. But we have so much land that is lying idle without being utilised and labour is in abundance. FRA should be a think tank to help the government formulate proper policies on food reserve. I therefore expect the agency to have started farming or sponsoring farming as a strategic move. Why should the Lutheran World Federation (LWF) embark on a four-year food security project in Chama and not FRA? There are just too many unanswered questions on the shoulders of FRA.

Time has come to really assess its books. Based on this analysis and numerous calls by Zambians and institutions in food production, FRA has failed and has let the people of Zambia down. Perhaps it is better to get rid of it and channel the effort through The National Service who are best suited to run this type of agency with utmost discipline.

The second, and what Zambia as a nation should really be worried about, are the falling prices of copper. This is extremely alarming since we are a mono-economy that ‘fully’ depends on copper.

To lose this enormous national revenue-generating machine is the same as sending Zambia to the grave. For over four years, I been talking of moving Zambia from its dependency on copper to establishing new industries such as manufacturing, agriculture and tourism. Manufacturing is at the heart of our future in the 21st Century. If you do not manufacture you are a dead duck on the shore of a muddy pond.

The whole project in developing new industries should be driven by the government not only through policy but by investing in these companies of strategic importance. If we need a nuclear power station, a new refinery, a new fertiliser plant, new roads and new railway, etc, we should not wait until an investor from outside drops from the sky to build things for us. This will never happen.

Not everything we are doing in Zambia must be through direct investment from overseas. We are a developing country and we must do it ourselves with our resources or borrow to invest. Otherwise nobody will come to our rescue. Look at Luanshya Copper Mine (LCM), it has abandoned us when we really need it. This is despite the fact that it acquired the mines virtually for free.

The productivity cost of copper at LCM was about $2.75 per pound weight and it is still being sold at higher value than that despite the drop in copper price. So why has LCM abandoned us? The answer is simple. This was a speculative enterprise which was not meant for the long term.

They came in with a plan to make a fixed amount of money as all investors do. Once that money has been made they can pack up and go. In the early years China suffered the same by Americans coming in obtain subsidies and as things became tough declared bankruptcy. We need the government to get the grip of this and make sure this is not the beginning of the end on copper mine investment.

If not sure, I will urge the government to even partially nationalise LCM. Who would have thought US government will nationalise the banks and car companies. This was thought to be socialism. But capitalist and market-oriented governments around the world are nationalising institutions. We must be thinking of that very deeply if we will salvage some jobs.

Tourism is another good money-earning venture. I was pleased to hear His Excellency point to developing Tourism. That is in the long term. In the short term we must see how we can capitalise on the 2010 World Cup to be staged in South Africa in 2010.

Why is Zambia not advertising on international media? People who will come to the football will 100 per cent like to visit Zambia and see Victoria Falls. Everybody I have spoken to keep on asking me of how to get to the Falls? Zambia, at the level of government, should put this as a priority item to boost tourism around Victoria Falls. Many are scared to go to Zimbabwe, therefore I can assure you that the great majority will see Victoria Falls from the Zambian side.

If we play our cards right, we may generate up to $0.5 billion if not more for those few days. Countries like Kenya, Tanzania, Mozambique and Namibia are advertising heavily and I know of some people who will be going to South Africa before and after the World Cup. Let us not lose this chance.

The truth is that doing business in Zambia is a very costly affair. Vehicles deteriorate quickly due to bad roads and therefore the maintenance cost of cars has escalated. That is why we see public transport fares also going up.

This trend will persist regardless of fuel prices so it must not be confused with the cost of oil. Spare parts have become dearer because the Japanese and other car manufacturers have cut down production. If we really wanted to help the public transporter let us build new good roads. I am pleased to say that the Minister of Communications & Transport Her Honourable Dora Siliya has just initiated the work on a Transport Master Plan. I went to her office when she was on her annual leave to show my appreciation and to see how I could contribute to the formulation of the plan using my EU experience.

However, I met one of directors and we had a good discussion. I want Zambia to put transport at the top of development. This will enable us to tap into some money from overseas that will see us building buses in Zambia. Since the year has began, I will look forward to have an audience with Her Honourable Dora Siliya so that I can present my plans and show her how we can solve one of the mobility problems, namely public transport.

From this end I am optimistic that Zambia will go through this storm. Do not be alarmed but be prepared. Have a happy and prosperous New Year.