Maravi

Economic growth without jobs

COMMENT - The PF needs to start a public debate about why they are not taxing the mines. That is the only respectable thing to do. These high copper prices will not last forever, and when they collapse, the Windfall Tax becomes irrelevant, which is what the mines are counting on. At the same time, the government is not collecting the taxes that are due right now. Or the dividends due to ZCCM-IH. So let's have a public debate about what the real state of affairs is, because the non-taxation of the mines affects everyone in the country, and every government program or objective. Tax collection is the most basic duty of the State, and it isn't happening where it concerns the economy's biggest industrial sector.

Economic growth without jobs
By The Post
Tue 20 Mar. 2012, 12:00 CAT

IT is true that Zambians are still expectant to see what policies their new government will put in place to stimulate meaningful economic growth for employment creation.

It is equally true that although Zambia has recorded positive economic growth in the past five years, the growth has not translated into meaningful employment creation and poverty reduction as most Zambians still remain unemployed.

There are many explanations for this disparity. Alfred Masupha, president of the Zambia Federation of Employers, says "economic growth is expected to provide a sustainable base for job creation and poverty reduction, but this has not been the case probably because as a nation, we have not worked towards identifying key growth-oriented sectors where jobs can be created.

The issue of lack of relevant skills in some cases is another factor that has contributed greatly to most people, including the youth, being unemployed". And accordingly, Alfred has urged the Tripartite Consultative Labour Council to start engaging in matters of skills development and manpower development as opposed to simply engaging in labour law reviews.

If the economy has been growing but the benefits are not reaching the people who most need them, then who is getting the benefits? Where is our economic growth going? The truth is if the fruits of economic growth in our country are not getting to the majority of our people or cannot be seen to be improving the lives of our people, it is either these benefits are going somewhere else, to other countries, or a few citizens are getting all the benefits at the exclusion of the majority.

Our key growth sectors, without overlooking agriculture, have been mining and the financial services sector. But we all know that very little of the money that the mines generate remains here to improve the living standards of our people. Most of that money leaves the country like the way copper and other minerals leave the country.

The Gross Domestic Product that is recorded from growth in mining activities is not consumed here, it is consumed somewhere else where the mining companies come from.

There is economic growth that is recorded from the activities of trading transnational corporations such as Shoprite, Game Stores, Spar, Pick N Pay and so on and so forth. But where does the bulk of the growth generated by these transnational corporations end up being consumed? It is not here.

Very little is consumed here. The bulk of it goes to other countries like South Africa and that's where it is consumed, that's where the real jobs are created. These transnational corporations are acting like suction pumps with some small leakages here and there. What they suck from this economy goes to develop other economies and create jobs there. It's only the little that drops from the leakages that is consumed here.

As for the financial sector, they used to pay 45 per cent taxes on their profit. This government has reduced that to 35 per cent in the understanding that interest rates will accordingly be lowered. Our government has translated its part of the deal into law but the financial institutions have not done the same. There is nothing that binds them to reduce the interest rates to what the government expects. This is a one-sided deal.

This is one of the most highly profitable sectors of our economy and which is very poorly taxed in terms of other services they provide. But they are being made to pay lower taxes under some very weak deals of lowering interest rates. The taxes the government has foregone from banks will not be adequately compensated by the benefits expected from low interest rates which may not be lowered that low.

As for the mining industry, many things have changed. Mining companies are no longer employing as many people as they used to employ in the 1960s, 1970s or even 1980s. New technologies have emerged resulting in fewer and fewer people being employed. The wage bills of the mining companies are very low - some of them are even lower than those of our small local companies.

This means that what the government earns from the taxes of those working for the mines is not that high. And the taxes from the mines themselves are not that high. Even the increase in the rate of royalties will not remedy anything because at the end of the day, that is deducted from the overall taxes of the mining transnational corporations.

Therefore, economic growth that is totally dependent on the mining industry, the financial sector and the trading activities of transnational corporations will not address the issues of unemployment in our country meaningfully. As Alfred has suggested, there is need to work towards identifying key growth oriented sectors where jobs can be created.

If not, we have to do a lot in restructuring the operations of the mining transnational corporations. And this won't be easy because of their strong lobbying capacity. The owners and managers of these mines have unlimited access to those who govern this country.

[Question: why do the mines have access to the government, but we do not? Why isn't the government actively engaging both the grassroots and the diaspora over economic questions? This makes if feel that secret deals are being done behind our backs - which is very undemocratic. And unacceptable where it concerns natural resources, which are public property. - MrK]

And they have employed very powerful and well-connected individuals as consultants - consultants who do nothing but lobby government to bend backwards and accommodate the wishes of these mine owners and managers. But we comforted by the fact that some of our people are starting to see through all these schemes.

The Zambia Federation of Employers seem to have a progressive view of what needs to be done and they are today speaking like they are representatives of workers. This is good.

We say this because the roles of business owners and management have a central importance from the viewpoint of society. This is so because they are at the heart of that network of technical, commercial, financial and cultural bonds that characterise the modern business reality.

For this reason, the exercise of responsibility by business owners and management requires constant reflection on the moral motivations that should guide the personal choices of those to whom these tasks fall. The motive of business should be not only to make profit but even more to contribute to the common good of society. Businesses should be characterised by their capacity to serve the common good of society.

The sense of responsibility in economic initiative should demonstrate the individual and social virtues necessary for development. A business enterprise must be a community of solidarity.

People can see that up to now, the state of affairs in the social and political fields has been designed and framed by a few and chiefly for the benefit of a privileged minority. This is not a recipe for peace and development.

It is also clear that we cannot continue to excessively depend on transnational corporations for the creation of meaningful jobs in this country. We have a history with transnational corporations that is not so pleasant. The first coloniser of this territory we today call Zambia was not a country but a transnational corporation - British South African Company.

This corporate body governed this territory from 1891 to 1924. What did they leave behind? For most of our history, our mines were under the control of transnational corporations. What did they do for our people?

Good leaders must be interested in the welfare of those in distress. We expect them to feel the distress of many of our people who have no jobs. But this is not an easy problem for any government to deal with. All these are difficult problems for any government to face.

But to solve them, we need hardworking and public-spirited people in government, we need people of courage who will defend the truth and demand justice for the poor, for the ordinary people.

The public spirit and courage that Alfred and his colleagues are showing in the Zambia Federation of Employers deserve recognition, respect and encouragement.

As Robert Kennedy once observed, "each time a man stands up for an ideal, or acts to improve the lot of others or strikes out against injustice, he sends forth a tiny ripple of hope, and crossing each other from a million different centres of energy and daring, those ripples build a current that can sweep down the mightiest walls of oppression and resistance".

Labels: ROBERT SICHINGA, VALUE ADDITION

posted by MrK @ 4:27 PM