Monday, March 31, 2014

(STICKY) Chikwanda on growth, poverty
By Editor
Sat 29 Mar. 2014, 14:00 CAT

COMMENT - If anyone is still impressed by neoliberal economics, I would suggest checking out two books:

Reclaiming Development, by prof. Ha-Joon Chang

23 Things They Don't Tell You About Capitalism, by prof. Ha-Joon Chang
- MrK

Finance minister Alexander Chikwanda says Zambia's current economic growth is not sufficient to reduce poverty. It is indisputable.

And despite what may be said to be "impressive economic growth" over the last decade, poverty levels are still high. Why? There is need to look at where this growth is coming from and where that growth is being consumed. Who is that growth really benefitting?

It is true that Zambia is lagging behind countries such as South Korea in reducing poverty despite the two nations' gross domestic product being at the same level at the time of our independence in 1964. As Chikwanda correctly observes, in 1964, Zambia's GDP stood at US$3 billion, while that of South Korea was US$3.8 billion. And currently, South Korea's GDP is 55 times higher than that of Zambia.

In 1961, eight years after the war with North Korea, South Korea's per capita income stood at US$82, less than half of Ghana's at the time (US$179). An internal USAID report in the 1950s described South Korea as a "bottomless pit". At the time, its main exports were tungsten, fish and other primary commodities. Today, South Korea is an industrial powerhouse, with per capita income in five digits.

It took the United Kingdom over two centuries - between the late 18th century and today - and the United States around one and half centuries (the 1860s to the present day) to achieve the same result. South Korea's progress is as if Malawi has turned into Switzerland.

General Park Chung-Hee, the father of South Korea's miracle, came to power in a military coup in 1961 and then went on to win three successive elections. Not democratic in the true sense of the word, Park propelled the country's success via Five Year Plans for Economic Development, which had a lot of indigenous economic empowerment schemes built into them. South Korea was developed by South Koreans.

Yes, they did everything possible to attract foreign investment but they were not totally dependent on it. They were more dependent on their own initiatives, on the contributions of their own people. The South Korean people were in the driving seat of their country's economic life. We are not. And very few in Africa are.

We are so dependent on the extractive industries in which we play no role. Even our government's role in it is very weak and in most cases, very easy to manipulate in terms of policy choices.

Variable foreign currencies were really the blood and sweat of South Korea's "industrial soldiers" fighting the export war in the country's factories. Those squandering foreign exchange on frivolous things, like illegal foreign cigarettes, were seen as traitors. Foreign travel was banned unless you had explicit government permission to do business or study abroad. The government took absolute control of the scarce foreign exchange, and violation of foreign exchange controls could be punished by death. Here in Zambia today, we are squandering the meagre foreign exchange we are earning in all sorts of ways. We do not have even ways of ensuring that whatever foreign exchange the country earns is accounted for. We have just removed very good statutory instruments - SI 33 and SI 55 - that were designed to maximise the country's use and benefits from its foreign exchange earnings. Pressure was mounted by foreign businesses and their local political agents and other representatives. Today in Zambia, one can export anything and keep the money abroad, bringing in only that which one needs to pay for local inputs. The SIs we have removed tried to mitigate that. But the government was being blackmailed - blackmail that resulted in the kwacha depreciating at a very fast rate.

How does a country like ours expect to develop when its important earnings are kept in other countries and for use by other countries? This is all being done in the name of economic liberalisation. This is not economic liberalisation, it is economic foolishness. Even the South Africans, with more money, a bigger economy than us, are not doing these senseless things we are doing. The rand was depreciating at some point but the South African government did not panic and allow itself to be blackmailed.

We should learn from South Korea. What South Korea actually did during these decades was to nurture certain new industries, selected by the government in consultation with the private sector, through all forms of government support until they "grew up" enough to withstand international competition.

The government owned all the banks, so it could direct the lifeblood of business - credit. Some big projects were undertaken directly by the state-owned enterprises. The government also took foreign investment under its wing, and heavily controlled it with a mixture of measures. In general, it welcomed foreign investment with open arms in certain sectors and shut it out completely in others, in line with the national plan at any one time.

And here comes the rub: the popular impression of South Korea as a free trade economy was created by its export success. But export success does not require free trade, as Japan and China have also shown.

Clearly, the South Korean economic miracle was a result of clever and pragmatic mixture of market incentives and state direction. We are where we are today because of our failure to come up with clever and pragmatic initiatives. We have allowed other people to see things for us, decide things for us, do things for us. If we think we can make progress this way, we are deceiving ourselves.

We are one of the easiest countries to manipulate. We get so excited with any little praise from foreign investors, the World Bank, the International Monetary Fund and other donors. We are more interested in what these people say about us than anything else. But look at what South Korea did! Does it fit in the paradigms that are being bandied around by the agents of neoliberalism whom we seem to respect and listen to so much?

The example of South Korea Chikwanda is giving is a very good one. But it is important not to just throw around figures or statistics but to truly understand the substance, and not just form, of what really went on there to give them the development they are enjoying today and they so much deserve.

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At 1:16 AM , Blogger MrK said...

Growth not sufficient to reduce poverty - Chikwanda
By Tobias Phiri in Mongu
Sat 29 Mar. 2014, 14:00 CAT

FINANCE minister Alexander Chikwanda says the country's current economic growth is not sufficient to reduce poverty. Speaking when he officially opened the Zambia Federation of Employers 48th annual general meeting at Radisson Blu Hotel in Lusaka yesterday, Chikwanda said poverty levels in the country were still high despite impressive economic growth seen in the last decade.

"Although economic growth has been impressive in the past decade, overall growth since independence has not been sufficient to effectively spur economic growth and reduce pervasive levels of poverty the country continues to endure," he said.

Chikwanda said Zambia had lagged behind countries such as South Korea in reducing poverty despite the two nations' gross domestic product (GDP) being at the same level at the time of the former's independence.

"At independence, Zambia's GDP stood at US $3 billion and was comparable to that of South Korea which at that time had a GDP of US $3.58 billion," said Chikwanda. "Currently, South Korea's GDP is 55 times higher than the current Zambian GDP."

And ZFE president, Alfred Masupha, asked the government to provide an environment for private sector growth.

Masupha also commended the government for revoking Statutory Instruments 33 and 55 in an effort to stabilise the depreciating kwacha.

Chikwanda has suspended SI 55 which empowered Bank of Zambia to monitor international money transfers by foreign multinational companies for tax purposes and also cancelled SI 33 effected in 2012 to ban the use of foreign currency in domestic transactions.

At 2:26 PM , Blogger MrK said...


Fraud, tricks in mining sector
By Editor
Tue 01 Apr. 2014, 14:00 CAT

COMMENT - There is not going to be a change of attitude from the mining houses, even with the support of the CEO of Anglo-American Corporation (see below). The mines are still owned by the banks, and the banks will still demand profit maximisation, no matter what - or fire their CEO. A change in ownership is the only way forward. We need to move colletively through SADC and the EU. Benefiting from the mines is the only way to develop other industries, because it is the onlysource of income that even comes close to the amount of money needed, and income from the mines is free of tax payments to the IMF/World Bank/etc. - MrK

Finance minister Alexander Chikwanda says there are a lot of fraudulent practices and all kinds of tricks in the mining sector in Zambia. Chikwanda has accordingly advised the nation to accelerate diversification in agriculture.

"If we worked to try and develop our agriculture, we could even close the mines and put an end to fraudulence and all kinds of tricks," says Chikwanda.

But how possible is it that we can have such a lot of fraudulent practices and all kinds of tricks in our mining sector without anyone being brought to book? We have so many institutions that can easily detect some of this fraud and tricks. We have the Zambia Revenue Authority that taxes the mines and is in a position to know a lot about what they are doing or are not doing right.

These mining corporations have auditors, who have a duty to raise the alarm when there's fraud and tricks, especially to the level that Chikwanda is talking about.

We also have the permanent secretary in the Ministry of Mines, who has been sitting on the boards of these mining corporations to protect or represent the interests of the Zambian government and its people. What has this permanent secretary been doing for this type of fraud and tricks to go unnoticed?

It will be interesting to know what the Police, the Anti Corruption Commission and Drug Enforcement Commission are going to do now that they know that there's a lot of fraud and tricks in our mining sector! We wait to see who will be prosecuted for this fraud.

The nation can't wait for fairness and justice to prevail in the mining sector. The mining sector is of such critical importance both in our country and the rest of our continent that we cannot allow fraud and all sorts of tricks to take it over.

At 2:27 PM , Blogger MrK said...

Continued 1...

It is within our means to stop the fraud and tricks going on in our mining sector. We can change the value system that should govern the conduct of mining companies in our country. And with commitment on the part of our leaders, our people and other stakeholders of goodwill, we can make the mining corporations recognise the reality that they are a vital player in the progressive social transformation of the parts of our country in which they operate and make them go beyond exclusive dedication to corporate profit maximisation.

Mark Cutifani, the chief executive officer of Anglo American Plc said something very vital about mining when he was chief executive officer of AngloGold Ashanti:

" When we talk about mining, we need to be clear - we are talking about the most important industrial activity on the face of the planet…. Correspondingly, it is my contention that mining drives more than 45 per cent of the world's economic activity. The things we do as the mining industry are so important to global society, but the communities where we do business get the rough end of the stick. It is critical to understand how to really engage with communities. We must listen to what communities want to be, not tell them who to be. We have to make changes to transform the countries we work in. A hole in the ground, a waste dump that intrudes the visual landscape or a tailings dam that covers a children's playground are more manifestations of local impact. The perennial challenge we face as an industry - how do we reconcile the greater good we create with the inevitable local interruptions we create? The challenge we face and the opportunities we can create for communities revolve around dealing constructively with this inherent conflict.

"We the mining industry have to think beyond our historical characterisation and eliminate a conversation that talks to us as being an 'extractive industry'. While we may extract products from the rocks - we are overwhelmingly a 'development industry' that creates new social possibilities. We should be the 'development partner' that supports and catalyses the creation of wealth for all.

At 2:27 PM , Blogger MrK said...

"A dialogue around reducing energy consumption, sharing our resources more equitably and cooperating on major global initiatives is where we must focus our transformational dialogues. We need the resources generated by mining to alleviate poverty and human desperation. The issue of poverty alleviation at the local level must be a prime focus of both mining companies and governments. An appropriate dispute resolution process must be aligned by all key participants. The definition of partnership has to be about how each participant imagines what a successful future looks like and what compromises can be made to ensure all parties can be accommodated in defining a pathway to a new reality…The simple fact is we need each other if we are going to realise our great potential.

"In the same context, we take our leadership obligations seriously - that is, to be an informed, an honest and sensitive participant…
"We each have a responsibility to be a leader - to seek a new future and to be the first to extend a hand in partnership to those that will develop this brave new world we all want to be part of… The job of those who have stewardship of capital is to support society."

A lot is expected from the mines by our people. The mines have great capacity to contribute to the efforts of raising the living standards of our people. The mining corporations in this country should therefore understand and accept that they have a strategic responsibility to co-operate with government and others and do their part to improve the lives of our people. It is important for the mining corporations to realise and accept the fact that we all have legitimate aspirations which must be met within the context of seeking a win-win outcome to the benefit of all. If there is no win-win outcome, we may have no choice but to close all the mines and concentrate on something else.

Chikwanda has been a great supporter and defender of the mining industry. For him to be saying the things he is saying today, it must mean that he, too, has been stretched to the utmost and can no longer play down that level of fraud and tricks. Today, Chikwanda is saying that "if we worked to try and develop our agriculture, we could even close the mines and put an end to fraudulence and all kinds of tricks". This frustration is not small or something that the mining corporations can gloss over or take lightly. There has to be a change of attitude, of the value system that should govern their conduct. The choice is theirs.

At 1:03 PM , Blogger MrK said...

(THE POST - LETTER) Chikwanda, agriculture sector
By Moses Twabo
Fri 04 Apr. 2014, 14:01 CAT

Our finance minister Alexander Chikwanda is correct in saying, "If we worked hard as a country and developed our agriculture sector, we can even close the mines."

However, the question is, how long are we going to work hard? Since the privatisation of the mines in the 1990s we have been fed on political rhetoric regarding diversification of our economy. Are we going to wait another 50 years to develop the agriculture sector? It is my considered view that if we had been 'walking the talk' in the last two decades as regards diversification, by now the agriculture sector would have been developed to a level of contributing more than PAYE to the national treasury. We have good agriculture policies in place and what is needed at the moment is to double our efforts regarding diversification of our economic programmes.

Without doubt, there is need to enhance diversification of our economic programmes in line with a realistic time frame. If this sector is well developed, we will be able to stand on our own and begin to drive our economy with little or no foreign political and economic manipulation.

At 1:04 PM , Blogger MrK said...

By Editor
Fri 04 Apr. 2014, 14:00 CAT

There is so much rhetoric about the importance of agriculture to the development of our country. But very little is being done to ensure that we get the maximum from our country's agricultural potential. Investment in agriculture is very low. We also seem to be waiting for foreign investors in agriculture, who may not come.

This is one area where it will not be possible to move forward without involving our people. Our people already have meaningful traditional access to land. So land is really not an issue for most Zambians. The challenge is capital and agricultural skills.

The amounts we are investing in agriculture are too low. One cannot do much with one's salary as the only source of capital for his or her agricultural activities. Meaningful credit is needed. To buy the necessary agricultural equipment is, in most cases, far beyond what an individual can save from his or her salary.

It can also not be denied that agriculture, as it stands today in our country, is too risky a business to lend money to. In some cases, it means lending money to an individual with no experience in what they are trying to do. Some of them are even part-time farmers with no knowledge of what farming requires. But simply because they have access to land, they want to borrow money for equipment, fertiliser and seed.

There are many examples of such people borrowing money and failing to produce a good crop and repay the loan. They have just ended up losing their collateral and becoming poorer than they were before. We have also seen retirees who have never spent any time on the land investing their retirement benefits in agriculture and losing everything due to inexperience. Agriculture is not something one retires into. It is something one has to be involved in when one still has a lot of energy.
In short, agriculture is not an easy thing - something for retirees.
We need to rethink our approach to agriculture as a country. And the first thing we should do is to look at how we can meaningfully support those who are already on the land, those whose lives are totally dependent on agriculture - the poor peasant farmers.

The current approaches don't seem to be yielding much positive result. The Farmer Input Support Programme cannot be said to be a success. It is actually an unsustainable scheme and, as such, a flop. We need to have the courage and accept this reality and come up with new initiatives.

Agriculture is the mainstay of our country and an activity which the great majority of our people are involved in and are largely dependent on for their livelihoods. Therefore, our economy, and the fruits of our independence, depend almost entirely on the full and wise utilisation of the potential of our land.

But we are concentrating our resources, energies and the best of our brainpower on areas far away from agriculture. If we are to make progress, we need to ensure that whatever the potential exists, agriculture is developed.

At 1:05 PM , Blogger MrK said...


Agriculture requires a lot of investment in research and education. We are spending very little on agricultural research and extension services. The Asian countries are doing far much better than us in agriculture simply because of their huge investment in agriculture.

They have universities with huge faculties devoted to single crops like rice. They are every day researching on their rice varieties. Some of them also have faculties totally devoted to fisheries and fish farming.

It seems we want to reap so much from agriculture without investing much in it. Modern agriculture requires research and very high investment in the education of experts and the farmer. Much of this investment has to be borne by the state.

It is our view that the government's current investment in agriculture needs rationalisation. We don't think we are getting much as a nation from the government's annual investment in fertiliser. We can do much better with that money.

The high investment in maize production and marketing subsidies deserve critical evaluation. We think a great part of that money can be beneficially redeployed to other agricultural activities.

Our approach as a nation to the growing or production of maize - from seed to fertiliser supply - also needs urgent review.

We may have the determination to produce more maize but the issue is at what cost, what profit? Let's approach the issue of maize production and the subsidies that accompany it in a more prudent way. And let's make decisions that are backed by research.

We cannot continue with an agricultural policy where maize production and marketing take almost the entire allocation to agriculture in the national budget. There are other crops as well that can give us better food security and enable our farmers to make higher profits and ensure the sustainability of our agriculture. They too need to be supported by the national budget. But in Zambia today, when one talks about agriculture, one is talking about maize production and marketing. This needs to change.

Our politicians, in all our successive governments, have failed to deal with the issue of maize prudently because of political considerations. Maize and mealie-meal is such a sensitive political issue. And the response of our politicians has always been to provide sufficient mealie-meal at the lowest prices possible. Moving agricultural subsidies from maize to other crops is not an option that has seriously been considered. If maize is too political to touch, then let's find cheaper ways to produce and market it. The maize status quo cannot be allowed to prevail forever. It is distorting our agriculture policies and is not leading to progress. We can do better with the abundant agricultural potential our country has by taking bold decisions and putting our money and effort where it's most beneficial or profitable.

If we do that, it will be possible for us to achieve what our finance minister Alexander Chikwanda said the other week: "If we worked to try and develop our agriculture, we could even close the mines and put an end to fraudulence and all kinds of tricks."


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