COMMENT - This is all very predictable. When the cost of living gets high enough, there are going to bei IMF Riots, using the term of the former World Bank Chief Economist Joseph Stiglitz.
IMF intervention will result in terrible living conditions - Prof Chigunta
By Chambwa Moonga |
Updated: 03 May,2016 ,12:06:27
PROFESSOR Francis Chigunta says there would have been
no need to resort to an IMF intervention that will primarily result in
terrible living conditions for citizens had the
PF government
listened to stakeholders’ alarm over the country’s deteriorating economy.
Prof Chigunta, who served as political advisor to former president Rupiah Banda, said while it was realistic that countries under severe economic challenges sought recourse from the International Monetary Fund (IMF),
Zambia could not have degenerated to that level had the government valued economic expertise from various commentators.
Last Friday, the Zambian government announced that it had accepted an IMF programme to be implemented after the August 11 general elections in the fourth quarter of 2016.
According to Secretary to the Treasury Fredson Yamba, both the IMF and the Zambian government agreed to commence the programme in line with the 2017 national budget.
Yamba also stated that the government would work towards making necessary adjustments in electricity tariffs and fuel pump prices.
“What I’m going to say about the IMF programme is that well, countries seek recourse to the IMF when they begin to face challenges, especially in terms of imbalances in their finances, because that’s the primary purpose of why the IMF was established - to help countries deal with financial problems that they face due to either external or internal shocks. In many cases, those shocks are actually worsened by weak or poor economic management as is currently the case in Zambia. The situation has been compounded by external shocks like the fall in the price of copper and internal shocks like policy inconsistencies, weak revenue collection and so on,” Prof Chigunta said in an interview yesterday.
“We shouldn’t have actually been going to the IMF if government had listened and adhered to the advice that various people, including me, have been offering in the past. Remember, we’ve been there before. All it required really was a strong economic management and that’s prudence in terms of public expenditure. We don’t really have to tell the government how to look after the finances or how to run the economy but because of some weaknesses in economic governance, that’s why we’ve found ourselves in this challenge.”
He lamented the government’s poor fiscal policies and said the IMF economic programme the government has agreed to implement after elections will come with hard-hitting conditionalities on citizens, especially those who are already vulnerable.
“The IMF programme comes with tough conditionalities and because of those tough conditionalities; these programmes are usually shrouded in mystery,” Prof Chigunta warned.
“Conditionalities in the case of Zambia, for example, from what I understand, demand that Zambia has to remove fuel subsidies or to do some [upward] adjustments in the fuel pump price, electricity tariffs and the exchange rate. Now, you understand that when you remove subsidies on those items, immediately the cost of living is going to shoot up.
It’s already high but it’s going to worsen. So, my fear is that the living conditions after elections for the majority of people will be terrible because of those economic recovery efforts that will be necessitated by the IMF austerity programme. So, we need to be very careful and look at how the programme is going to impact on the vulnerable population.”
And on President Edgar Lungu’s statement in Chipata on April 17 that the government had decided to sign a Statutory Instrument (SI) to regulate and reduce the price of mealie-meal which was high in some parts of the country, Prof Chigunta charged that such a move was “very untenable and is totally inconsistent with the IMF economic programme which the government hopes to implement.”
“It (SI) will seriously affect the performance of the agriculture sector in Zambia. When you try to impose price controls, you don’t give incentives to farmers and so, the result is that maize production in the country may be affected and if it is affected, it actually worsens the same problem which the government is trying to cure. So, price controls are not the solution but the solution is to review our agricultural policy,” advised Prof Chigunta.
Labels: AUSTERITY, FRANCIS CHIGUNTA, IMF, IMF RIOTS
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Govt should revise double taxation treaties - Chigunta
By Kabanda Chulu
Wed 18 Dec. 2013, 14:00 CAT
THE government should go beyond renegotiating mining development agreements to revise double taxation treaties that are used by some foreign investors to avoid tax payments, advises Dr Francis Chigunta.
Chigunta, a Development Studies lecturer at the University of Zambia and former special advisor to Rupiah Banda, said Zambians needed to maximise gains from the country's natural resources. He said many companies were using the double taxation treaties to evade taxes in Zambia.
"Government should also look at the whole agreements which were negotiated under duress, there was much pressure from the IMF and World Bank and price of copper was very low that we had no option and no one knew that prices will suddenly rise. This is why we ended up accepting whatever was given because we had no choice, we were beggars, but now that we are in a strong position, it is time we renegotiated these agreements but we should go beyond and revise double taxation treaties, for example with Ireland and Switzerland," Dr Chigunta said.
"Under these agreements, citizens of either country choose where to declare their profits, you will find companies like Zambia Sugar preferring to declare profits in Ireland where tax is zero rated. This is why Zambia Sugar has legally not been paying a lot to the Zambian Treasury since they can take advantage of that tax loophole and if you look at copper exports or trade, statistics indicate that copper goes to Switzerland because profits are zero rated but copper actually goes to China. These are the agreements we need to do away with, especially that some were signed before independence. But why are we still keeping them; whose existence is to the detriment of the Zambian economy?"
He also advised on the calls for the implementation of windfall tax, saying the reality on the ground was that the country should not implement the tax.
"Indeed Zambians must maximise gains from the country's natural resources, particularly copper which is a national asset, but at the same time, we have to be very careful in the manner that we handle the issue of windfall tax. My view is that we need to be careful in the sense that we should not kill the goose that lay the golden egg," Dr Chigunta said.
"Right now, the mines are going through a period of difficulty, copper prices have been sluggish... They (the mines) have found themselves in this situation of not making a loss or profit and some of these mines are very old, about 80 years and there are those like deep mining at KCM which are facing high operational costs. Therefore, to survive, they resort to borrowing to meet these costs and even if the prices of copper were to rise suddenly, it will still be not possible to make that kind of payment because they have borrowed massively to sustain operations in the hope that prices of copper will rise. So, imposing windfall taxes will create further problems."
When reminded that windfall tax would be triggered at certain price threshold and the mines would not be affected until the price reached the trigger point, Dr Chigunta insisted that the mines would still have to meet obligations from their financiers.
"US$ 7,000 per tonne is currently the price the mines are break-even and they are still borrowing from banks to sustain operations. Even if the price reaches US$ 8,000 or more, they still have to meet those obligations from their financiers so they might need to use that money to pay off debts they have incurred due to a sluggish price of copper. Definitely it will not help, otherwise we might end up squeezing a dead horse which will not be good for the country," he said.
"We have to take into account the Chinese growth model, which is undergoing serious structural changes. China is moving up the value chain and the result is that demand for copper will not be as strong as it has been in the past years. So, we don't see the possibility of copper prices rising to that level, and what makes it worse is that even with other BRICS countries like Brazil, there is sluggish growth as well, so, demand for copper globally will not rise that much."
Dr Chigunta advised that the government should improve tax administration and management by strengthening ZRA to curb loopholes.
Labels: FRANCIS CHIGUNTA, TAXATION
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Zambia's Credit Rating downgrade a warning to govt - Chigunta
By Gift Chanda
Tue 29 Oct. 2013, 14:00 CAT
DR Francis Chigunta says the government should ensure maximum fiscal discipline following the slashing of Zambia's credit rating outlook by Standard & Poor's.
S&P on Friday revised down its credit outlook for Zambia to negative from stable while leaving the sovereign credit rating at B-plus, four notches below investment grade status.
The rating agency said it considered that Zambia's government had recently adopted an expansionary fiscal stance, which would substantially increase the government debt burden in 2013-2016, despite strong nominal GDP growth.
Dr Chigunta, who was former president Rupiah Banda's political advisor, said the latest rating should be taken as a warning to the government to resist any further deterioration in the economy.
"It's a cautionary statement to the government to be wary... and to enhance economic management," he said in an interview yesterday.
Dr Chigunta said the government should be very careful in the way it handles macroeconomic management of the country given the risks that are arising from the expansionary fiscal policy the government has taken.
Finance minister Alexander Chikwanda recently announced a 33 per cent increase in spending for 2014, saying the budget deficit will grow to 8.5 per cent this year, nearly double what had been planned.
"Unavoidably, it is good to have an expansionary fiscal policy because the money is going to infrastructure which is not only critical for the growth of this country, but we have to be very careful in the manner we handle our fiscal affairs to avoid any further deterioration which may send wrong signals to the international community," Dr Chigunta added.
S&P forecast a budget deficit averaging seven per cent of GDP over 2013-2016, against its previous forecast of 3.5 per cent.
S&P pointed toward rising civil servant salaries starting in 2013 and an expectation the government plans to increase social welfare spending and capital expenditures for the anticipated fiscal deterioration.
But Dr Chigunta said while borrowing to invest in infrastructure was important for economic development, the government should resist borrowing beyond the country's capacity to pay back.
S&P affirmed its 'B+' long-term and 'B' short-term ratings for government debt, but warned of concerns it has that Zambia's external debt profile could weaken "owing to rising capital goods imports and higher profit repatriation."
The government, which has been in office for two years, is trying to speed development by spending heavily on roads, hospitals and schools
Zambia is rated B1 with a stable outlook by Moody's Investors Service and B-plus with a negative outlook by Fitch Ratings.
Labels: FRANCIS CHIGUNTA
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Ideology and our politics
By Editor
Wed 28 Aug. 2013, 14:00 CAT
DR Francis Chigunta, who was political advisor to Rupiah Banda, says in Zambia, we need to promote a culture of principled politics and to do this, our politicians need ideological orientation, which should define their political principles and stance.
And Dr Chigunta warns that as long as there is no clearly identified ideological orientation, politics of insults will continue to take centre stage in Zambia. He observes that time has come for Zambia to engage in civilised politics, and that politicians should be pre-occupied with one sole aim of serving citizens in a credible manner.
Forget what Dr Chigunta said or did when he was political advisor to Rupiah. If one follows what Dr Chigunta and his boss Rupiah said and did, one would be lost. It's really a question of do as I say not as I do. We should simply pay attention to what Dr Chigunta is saying today because it makes a lot of sense, and it is correct.
It is true that principles, standards, values and common aims are needed if we are to see a reversal of fortunes, economic, social, political and otherwise, in our country. This is so because the individual does best in a strong and decent community of people with principles and standards and common aims and values.
Today's politics is about searching for the wellbeing of our people in a changing world. And we must build the strong and active society which can provide that.
It is important for our politicians and their political parties to change their ways. Change is important and political parties that do not change in a changing world die. This is so because if the world changes, and we don't, then we become of no use to the world. Our principles cease being principles and ossify into dogma.
However, we shouldn't change to forget our principles, but to fulfil them. And we shouldn't change to lose our identity but to keep our relevance. Change is an important part of gaining the nation's trust.
Today, our people are divided into petty political parties that bring no guidance to the nation; political parties that divide the ignorant and mislead people into factions, supporting unscrupulous and greedy politicians, setting one humble section of our people against another.
Ethics are needed in our politics because if you mix ethical values with a rejection of injustice, you begin to appreciate and place a high value on a number of things that other people don't value at all. A sense of personal dignity, honour and duty form the main foundation that enables people to acquire political consciousness, principles and values.
The ability to reason, think, analyse, meditate and develop feelings is what makes it possible to acquire good and progressive political ideas, principles, values.
Political ideas are worthless if they are not inspired by noble, selfless sentiments. Likewise, noble sentiments are worthless if they are not based on correct, fair ideas.
We agree with Dr Chigunta that our politicians need ideological orientation which should define their political principles and stance. But, of course, we today live in a world where 'ideologies' are despised because they are outdated, out of fashion and not useful.
If there is anything that is an affront to human intelligence, it is the pretention that ideologies are on the way out. For some, ideologies - patched up and on the defensive - have been condemned to extinction, and they talk your ear off about de-ideologisation.
This is one of those words that should be thrown out, with a hope that not even a bad poet will include them in one of their works. Without making any great effort, we can imagine de-ideologisation as something amorphous, sticky and lacking content; first cousin to brimstone.
Some people want us to de-ideologise everything: economic discussions, political proposals and international relations. That is, they want to ideologise everything in another way. And, to that end, they invite us with supreme courtesy to pay fealty to the new order.
We already know that de-ideologisation isn't the end of ideologies; rather, it is the illegible sign of the attempted burial of all other ideologies that are opposed to or are in competition with the capitalist ideology, neoliberalism.
So it is interesting when one hears someone advocating a return to ideologies as Dr Chigunta is doing. Of course, in this country, we have a ruling political party that has been courageous enough to identify itself with socialism and apply for the membership of the Socialist International. Others are scared to define themselves ideologically. They would rather continue to be or pretend to be omnibuses.
The world is more ideologised than ever, now, because they are trying to impose the ideology of capitalism, imperialism and neoliberalism and wipe off the political map any ideology that does not coincide with it. We are convinced that it's all a great farce, an enormous lie. And we all know that neoliberalism is the ideology of imperialism in its phase of world hegemony - it seeks to impose its ideas on other countries.
Dr Chigunta is truly right, new ideas to prepare our people for the future are needed and we must start struggling for those ideas right now. We must start building awareness - a new awareness. It is not that our country totally lacks awareness today; but such a new and complex era as this one requires principles more than ever. It requires a lot more awareness, and that awareness will be built, by adding together the awareness of what is happening and the awareness of what is going to happen. It has to be built by adding together more than just one revolutionary thought and the best ethical and humane ideas of more than one religion, of all authentic religions, the sum total of the preaching of many political thinkers, of many schools and of many religions. There has to be an elaborate forethought for this.
What Dr Chigunta is saying is for us a matter of profound interest, a source of reflection, encouragement and reaffirmation of convictions. We have lived through the day of uncertainty and witnessed the loss of faith of many progressive men and women. Now, we can see that the truth is gaining ground and some people are now beginning to think more profoundly. And those who claimed the end of history and the final victory of their anachronistic and selfish concepts are now in decline and undoubtedly demoralised. Those who thought they had created a system that would last centuries are beginning to realise that the bases of that system are falling apart.
The experiences of the last two decades have taught us something very valuable: never to exchange principles for interest or convenience.
Labels: FRANCIS CHIGUNTA
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Chigunta urges principled, ideology-oriented politics
By Abel Mboozi
Wed 28 Aug. 2013, 14:00 CAT
POLITICIANS in Zambia need ideological orientation to define their political principles and stance, says Dr Francis Chigunta.
Dr Chigunta, a development studies lecturer at the University of Zambia, said in an interview in Lusaka yesterday that politics of the belly should come to an end for development to take root in Zambia.
"Politicians tend to jump from one party to another just to satisfy their bellies, which is unacceptable. In Zambia, we need to promote a culture of principled politics and to do this, our politicians need ideological orientation, which should define their political principles and stance," he said.
Dr Chigunta said politicians should remain steadfast in standing up for what is correct in society, and not the other way round.
"Politicians should promote principled ideas that will help foster development for citizens," he said.
Dr Chigunta said as long as there was no clearly defined ideological orientation, politics of insults would continue to take centre stage in Zambia.
He noted that politics of insults was a departure from the ideals that Dr Kenneth Kaunda and his Tanzanian counterpart Julius Nyerere championed through humanism and Ujamaa, respectively.
"Dr Kaunda, Nyerere and their peers across Africa were principled politicians with guiding principles, and this is the trend that we need to follow right away in Zambia," said Dr Chigunta, who is also former president Rupiah Banda's political advisor.
He said politicians in Zambia had a unique opportunity to create a new framework for national building and prosperity by promoting rationality in politics.
Dr Chigunta said time had come for Zambia to engage in civilised politics and that politicians should be preoccupied with one sole aim of serving citizens in a credible manner.
Labels: FRANCIS CHIGUNTA
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Subsidies costly, says Chigunta
By Gift Chanda
Sun 19 May 2013, 14:00 CAT
DR Francis Chigunta says it is important for the government to show Zambians alternative social protection measures being put in place after removing subsidies on fuel and maize consumption.
And Dr Chigunta, who was former president Rupiah Banda's political advisor, says there must be a strong basis for the government to maintain consumption subsidies because they tend to be very costly anywhere in the world.
Commenting on the government's decision to scrap the miller-consumer subsidy on maize barely a month after the fuel subsidy that had kept fuel pump prices stable for over a year was removed, Dr Chigunta, a Development Studies lecturer at UNZA, said a lot of money would be saved.
He said consumption subsidies anywhere in the world tend to be costly.
"However, it is important to take into account the plight of the poor. The majority of Zambians are poor, therefore, as government removes this subsidy, it also needs to show the public the alternative measures that they have come up with in order to cushion the impact of this removal of the consumer-miller subsidy," Dr Chigunta said in an interview.
"We are appreciate and understand the government's position that the consumer subsidy is costly. Indeed it is costly and in the long term it will be beneficial to the Zambian treasury because it is a move that will help save money and that money will be used for other productive activities."
He explained that people may experience the negative impact of removing the subsidy and this was why it was important for the government to show the people what alternative social protection measures they were putting in place.
Dr Chigunta explained that the negativity around the removal of the miller-consumer subsidy was because the decision was made when people had not completely adjusted to earlier policy change on fuel and the proposed electricity tariff hikes.
"When you combine all these, the impact on the poor will be quite adverse. So government must engage in an exercise that will cushion this impact," said Dr Chigunta.
"But subsidies anywhere in the world tend to be costly and there must be a good reason for maintaining them. As a country, we need to look more on subsidies that promote production and not consumption because that is where we can have a competitive advantage as a country. Countries that have succeeded elsewhere in the world have tended to subsidise production and not consumption."
And Evelyn Hone College Students Union president general Inambao Sitwala said the removal of consumption subsidy on maize would create a sense of responsibility.
He said the move was welcome and would enable the government speed up infrastructure development in all parts of the country that had been neglected for many years.
"Statistically speaking, the country has been losing about K300 billion on subsidies and its removal means the money will be used to other important areas and this will help reduce the gap between the poor and the rich as the money will be used to uplift the living standards of our people as there will be a trickledown effect," said Sitwala.
Meanwhile, Zambia Youth Networks secretary general Mathew Mushikiti said those opposing the removal of the maize subsidy were going through an orientation process.
He said maintaining subsidies would not help the country develop economically.
"Subsidies kill the spirit of innovation, saving and sense of innovation and service and as long as government maintains this we should forget about economic development," said Mushikiti.
And UPND leader Hakainde Hichilema said the removal of the fuel subsidies was a wrong decision.
And NAREP president Elias Chipimo said Zambia needed a political consensus that was built on values and a compelling vision for development that placed people at its very centre.
He said the decision to remove the subsidies would hurt many poor Zambians.
Labels: AGRICULTURE, FISP, FRANCIS CHIGUNTA, NEOLIBERALISM
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Zambians celebrate corrupt people as heroes – Chigunta
By Chibaula Silwamba
Thu 19 Nov. 2009, 04:00 CAT
ZAMBIANS today celebrate corrupt people as heroes, President Rupiah Banda’s chief policy analyst Dr Francis Chigunta has said.
During the launch of Transparency International’s Corruption Perception Index (CPI) 2009 at Chrismar Hotel in Lusaka on Tuesday, Dr Chinguta expressed displeasure that the anti-graft body had attributed Zambia’s slight improvement in the CPI ranking to the late president Levy Mwanawasa ignoring the efforts that President Rupiah Banda had put in place to fight corruption since he came to office.
“As Mr Emmanuel Mwamba said, you are quoting documents which were produced in the year 2008 and you attribute all that to the late president. Please! Let’s appreciate that much has been done during the short period that President Banda has been office,” Dr Chigunta said. “In any case, the fight against corruption should not only be attributed to one individual or government. It’s about the whole society. It’s about re-examining our values as Zambians. Zambians today celebrate corrupt people as heroes. But we should discourage that type of practice and attitude which defeats the whole purpose of fighting corruption.”
Dr Chigunta, who was visibly annoyed, accused TI of deliberately portraying a picture that President Banda was doing nothing to fight corruption.
“I am disturbed, first of all by the narrative in TIZ board treasurer Mr Sampa Kabungu’s address which is contradictory, misleading and deliberately biased to create the impression that under the current President nothing has been done. Indeed all the praise, the gains should be attributed to the late president Levy Mwanawasa,” Dr Chigunta said.
“Just as you are trying to show that these gains can be attributed to the late president, you should also make a serious attempt to show that the current major corruption scandals also emerged or were perpetuated under the late president.”
He said most of the corruption people were talking about happened during the Mwanawasa administration, not now.
“There is a history to all these scandals,” Dr Chigunta said. “Indeed you need to celebrate in a narrative, in your language the achievements that President Banda has achieved in terms of institutionalising the fight against corruption. It’s only under Banda that we have had this serious attempt to institutionalise the fight against corruption. We have ratified international standards and codes on the fight against corruption. We have introduced the policy against corruption.
“President Banda has made major reforms including in the area of procurement but that is not celebrated. A serious attempt, deliberate, manipulative is being made to attribute everything to the past.”
He dismissed the findings of CPI.
“The CPI is narrowly based on the minds of business people or some so-called analysts who may themselves be highly subjective. If you approach a businessman who could not get a contract from government, do you expect that businessman to praise government? Certainly not!” Dr Chigunta said.
“You have also to take into account the levels of polarisation in the country. For example in Zambia today, some people may hold views that are absolutely anti-government and you may interview these people including foreigners that are resident here. They may not hold good views but you are going to collect their views and produce them in the form of this CPI. I don’t know what your organisation is doing to try and counter this inherent biasness in your methodology.”
Dr Chigunta said the CPI was not reflective of what was obtaining because it was based on perception that could be subjective.
“… As you have tried to portray as based on valid scientific findings, I have some problems with that as a social scientist. A pig is a pig no matter whether you apply lipstick on it. A perception is a perception no matter what you attempt to do,” said Dr Chigunta.
But TIZ executive director Goodwell Lungu justified the findings of the CPI and advised Dr Chigunta not to be emotional.
Lungu explained that the CPI included data for the last two years of the late Mwanawasa but did not cover the period in which President Banda has been in office.
Lungu expressed surprised that Chigunta was upset over the report which acknowledged president Mwanawasa’s efforts in the fight against corruption and yet President Banda was part of that administration as vice-president at the time.
Labels: CORRUPTION, CPI, FRANCIS CHIGUNTA, GOODWELL LUNGU, TIZ
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Knocking off zeroes from kwacha needs strong economy – Chigunta
Written by Fridah Zinyama
Tuesday, March 03, 2009 12:20:35 PM
UNIVERSITY of Zambia (UNZA) Development Studies lecturer Dr Francis Chigunta has observed that knocking off zeroes from the local currency will require a strong and growing economy.
Commenting on Bank of Zambia (BoZ)'s intentions to drop off the three zeroes on the kwacha, Dr Chigunta said the country's economic fundamentals such as inflation and production costs needed to be at a lower level.
“In the absence of such, the zeroes quickly climb back,” he said.
Dr Chigunta cited examples of countries like Zimbabwe which had persistently knocked off zeroes from its currency but had experienced no change in the value of its currency because the process lacked a strong economic background.
“The economy is in free fall and inflation is wild and raging. In this case, knocking off zeroes is a non-starter,” he noted.
Chigunta, however, observed that the situation was not the same as Mozambique which had successfully knocked off zeroes from the metical.
“They knocked the zeroes off the metical two years ago and it seems to have worked for them,” he said.
He explained that redenomination had worked in Mozambique because of the country's strong economic fundamentals.
Dr Chigunta said dropping the three zeroes off the kwacha would equally work in Zambia but added that the central bank would have to be cautious bearing in mind the current depreciation of the local currency.
Labels: CURRENCY, FRANCIS CHIGUNTA, KWACHA
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‘Rupiah will face serious economic challenges’
Written by Masuzyo Chakwe
Monday, November 03, 2008 7:13:03 AM
UNIVERSITY of Zambia (UNZA) Development Studies lecturer Dr Francis Chigunta has said President Rupiah Banda will face serious challenges regarding Zambia’s economy in view of the global financial crisis.
In an interview yesterday, Dr Chigunta said the price of copper was falling, the inflation rate was going up and the kwacha had lost a lot of value in the recent past.
He said there were also serious challenges of poverty in the country.
Dr Chigunta said the majority of Zambians were still living in poverty and that this was the country’s biggest challenge.
“So, I expect President Banda to seriously address these problems. He needs to deepen the reform process but he should actually begin by reassuring everybody. We need certainty, predictability in terms of policy regime, right now a lot of investors, including Zambians, are worried about what will happen beyond October 30,” Dr Chigunta said.
“So, the first thing the President must do is to reassure everybody more especially investors. Moreover the current financial crisis in the USA made foreign investment highly contested and Zambia has to compete very seriously with other countries and the incoming President must deepen the reform process.”
He said Zambia needed strong institutions that were capable of implementing these reforms.
“We also have to see a transparent policy-making process and I always refer to institutions. That means the President should continue with the legacy of the late president Mwanawasa of according the rule of law and promoting constitutionalism, to be sure that this country has credible, transparent and legitimate institutions,” he said
Dr Chigunta said this was very important because with credible institutions, the country would now be able to formulate and implement good policies that may deepen the reform process and promote growth in the country.
“Zambia needs a minimum growth rate of eight per cent if it has to have a serious dent of poverty reduction. Yes, and whilst these things are done hopefully we will see an appreciation of the kwacha, a reduction in the inflation rate and ultimately reduction in poverty,” said Dr Chigunta.
Labels: ECONOMY, FRANCIS CHIGUNTA, RUPIAH BANDA
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Dr Chigunta warns of adverse effects from US financial crisis
By Kabanda Chulu
Monday September 22, 2008 [04:00]
UNIVERSITY of Zambia (UNZA) development studies lecturer Dr Francis Chigunta has said Zambia might feel the financial crisis of the USA through trade, investment and donor linkages.
And Dr Chigunta expressed optimism that the Bank of Zambia (BoZ) is prepared to handle any possible fallout from the current financial crisis in terms of regulation given the smallness of the financial markets in Zambia.
Commenting on the financial crisis that has rocked the United States and is now spreading to Europe and the Asian markets yesterday, Dr Chigunta said the direct impact from the financial market losses will be minimal.
"Holdings of mortgage-related structured credits by Zambian banks and government in the West are negligible but a channel for any potential financial impact on Zambia will be through trade, investment and donor linkages," Dr Chigunta said. "There is consensus that, as a result of these linkages, the financial crisis in the United States is expected to adversely affect most African countries, including Zambia and the impact of the US financial crisis will be particularly hard on Africa's emerging markets."
Recently, the IMF named eight African countries, including Zambia, as constituting the next frontier of emerging markets and Zambia, like other African countries, is highly dependent on Western markets for its exports.
"This dependence is basically in two forms, first, Zambia exports some commodities directly to the Western market and secondly, Zambia is increasingly becoming dependent on China whose growth is dependent on demand in the West, especially in the USA," Dr Chigunta said. "China's growth is an opportunity for commodity producers in emerging markets like Zambia but should demand in the USA decline as a result of the current financial crisis, this is likely to affect production in China. In turn, this may have an impact on Chinese demand for copper, which may adversely affect countries like Zambia."
He observed that the crisis is likely to negatively affect the inflow of investment into Zambia.
"Already, there is a flight to safety among investors in the West. Investors in Europe and the United States are currently retrenching capital and this will not help countries like Zambia. But this will largely be dependent on what happens to China as a result of the financial crisis," he said.
He said the Bank of Zambia was prepared to handle any possible fallout from the current financial crisis in terms of regulation given the smallness of the financial markets in Zambia.
"The financial market and the stock market in Zambia are small and the supervision by BoZ, and the Securities Commission, is quite robust, however, BoZ will be powerless to address the adverse consequences of reduced investment and foreign currency inflows," said Dr Chigunta.
Labels: BOZ, FRANCIS CHIGUNTA, RECESSION
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Zambia Sugar is a dormant player, charges Dr Chigunta
By Joan Chirwa
Wednesday June 04, 2008 [04:00]
IT is sad that Zambia Sugar exported sugar to the Great Lakes region when local markets have an artificial shortage of the commodity, UNZA Development Studies lecturer Dr Francis Chigunta has said. And sources have questioned the reduction in export price for sugar from around K1,400 in March to about K1,200 in May at a time when the country was experiencing the shortages. Commenting on revelations that Zambia Sugar had exported around 3,000 tonnes of sugar to the Great Lakes region between March and May this year, Dr Chigunta said the dominance of the latter on the market had necessitated the current problems.
“It is a sad development that Zambia Sugar actually exported sugar when it had been refusing all this time and this is the more reason why we had a shortage,” Dr Chigunta said. “Zambia Sugar is a dominant player in the sugar industry. And with the Vitamin A fortification requirement for sugar sold on the Zambian market, this has made Zambia Sugar to exploit the consumers even more.”
According to documentation obtained by The Post, Zambia Sugar exported a total of 2,982.20 metric tonnes of sugar between March and May this year, against the company’s earlier denials that it had not done so in the recent past.
In March, the company exported 1,330.95 tonnes; 1,106.95 tones in April and 544.30 tonnes in May. However, Zambia Sugar on Monday only admitted to exporting 30 tonnes of sugar to Burundi on May 23, 2008, saying this was due to a system breakdown.
On March 25, 2008, Zambia Sugar exported 32 tonnes of sugar to Bujumbura, Burundi at US $440 per unit, higher than the US $365 per unit of sugar sold on May 23. Rough estimates indicate that in March, the sugar was exported at around K1,400 per kilogramme while the price was reduced in May to around K1,200 for the same quantity.
“The question is why Zambia Sugar exported at a much lower price in May when that is the time the country started experiencing shortages of sugar,” the source said. “From the figures, it is clear that the company is trying to make more money from local consumers than the export market, which is not fair at all.”
And Dr Chigunta has advised the government not to completely rely on market forces to determine the cost of commodities in the country to avoid exploitation of consumers.
“There is need to revisit the competition law so that we don’t have a reoccurrence of such situations where prices of commodities rise beyond consumers’ reach,” Dr Chigunta said. “Zambia sugar just wants to maximise its profits by creating an artificial shortage.
First of all, Zambia Sugar knew it would have less production, and should have notified relevant authorities so that we find a way of mitigating the shortage.
The company has been forced to supply to the local market after government announced that it would allow imports.”
Commerce permanent secretary Davidson Chilipamushi was not readily available for comment by press time.
Labels: FRANCIS CHIGUNTA, ZAMBIA SUGAR
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Chigunta attributes poor road network to budget cycle
By Joan Chirwa
Friday May 30, 2008 [04:00]
FAILURE to improve Zambia's road network largely stems from the nature of the budget cycle, University of Zambia (UNZA) Development Studies lecturer Dr Francis Chigunta has observed. Dr Chigunta said the solution to country’s poor road network was revisiting the
budget cycle while
reducing on tendering procedures for road works. He was commenting on the 2008 Africa Economic Outlook (AEO) which indicated that Zambia currently faces numerous challenges such as the improvement of its weak infrastructure.
“The road network in Zambia is horrible both in rural and urban areas. The problem is not lack of money,” Dr Chigunta said. “Last year, the Minister of Finance Mr Magande announced that the government could not spend over K900 billion. This is a lot of money for a country like Zambia with serious socio-economic problems.”
The 2008 AEO report stated that inadequate infrastructure is one of the main obstacles to increasing economic growth and development in Zambia.
The report, released last week, noted that the lack of infrastructure applies to almost all critical economic areas such as transport, energy, water and sanitation, adding that the road density was still very low while the main export corridors suffered from overloaded trucks and heavy traffic.
Dr Chigunta further said the bureaucratic tendering processes also contributed to delays in the implementation of infrastructure projects.
“Related to the issue of not having the money released early is the complex and bureaucratic tendering processes and procedures. The budget cycle is too short such that by the time the money is released to contracting firms, time is gone,” Dr Chigunta said. “This has not been helped by the lengthy tendering process. The solution here is to revisit the budget cycle and to simplify the tendering procedures.”
And works and supply permanent secretary Colonel Bizwayo Nkunika on Tuesday said lack of adequate capacity in procurement systems constrained the implementation of road works despite money being allocated in the budget or sometimes released to the ministry.
Labels: BUDGET, CONTRACTORS, FRANCIS CHIGUNTA, PROCUREMENT SYSTEMS, ROADS
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Chigunta accuses IMF of being unhappy at Zesco's non-privatisation
By Joan Chirwa
Friday May 16, 2008 [04:00]
ZESCO Limited only needs organisational restructuring and streamlining as it is a very viable company, University of Zambia (UNZA) development studies lecturer Dr Francis Chigunta has said.
Dr Chigunta said the recent assessment of Zesco’s commercial viability by the International Monetary Fund (IMF) resulted from government’s refusal to privatise the entity.
He was commenting on IMF’s recent summary paper on Zambia’s electricity sector, which described Zesco as a financially unviable company that was incapable of mobilising resources for the necessary expansion of power generation and the electricity grid.
“It is apparent that the IMF is not happy with the government over its refusal to privatise Zesco. Zesco is this large octopus which combines the functions of power generation, transmission and distribution in one. The IMF would have wanted to see this octopus cut to size.
That is, unbundling it, to use their term,” Dr Chigunta said. “In my opinion, we need to establish whether Zesco is supposed to be a profit-making firm or not. Obviously, the IMF assumes that Zesco should be making a profit. Failure to do so renders the corporation ‘bankrupt’ in order to pave way for its unbundling.”
Dr Chigunta said although Zesco Limited was established to serve a social function, the utility should be allowed to operate commercially and viably in order to give a reliable power service to Zambians.
“As far as I am concerned, Zesco was established to serve a social function. The shareholders are the Zambian people through the State. Zambia is not supposed to be making profits; rather Zesco is supposed to be delivering a reliable service to the Zambian people,” Dr Chigunta said. “This, however, does not mean that Zesco should not operate commercially and viably. Zesco should operate commercially and viably in order to give the Zambian people a reliable power supply and the issue of bankruptcy does not arise here.”
The IMF stated that Zesco was a troubled company, beset by well-known inefficiencies and high costs, contributing to the strong resistance to increases in electricity tariffs.
But Zesco Limited managing director Rhodnie Sisala last Friday refuted IMF’s assessment, saying the comments were not made in a sincere manner as the IMF had always worked closely with government in mapping out the growth strategy for Zesco Limited.
Labels: FRANCIS CHIGUNTA, IMF, PRIVATISATION, UNZA, ZESCO
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Dr Chigunta questions govt on investment plans
By Kabanda Chulu
Monday October 22, 2007 [04:00]
University of Zambia Development Studies lecturer Dr Francis Chigunta has observed that it is difficult to believe the government’s statement about the US $1.4 billion expected investments by December 2007. Commenting on the announcement by commerce minister Felix Mutati that Zambia would receive investment in excess of US $1.4 billion by the end of this year, Dr Chigunta said high levels of social compliance in the country without questioning government’s statement was wrong.
“Government deserves to be congratulated if at all the country will receive investments worth US $1.4 billion by December 2007, however, this position has raised serious doubts when you look at the recent World Bank report, which placed Zambia 117 out of 178 countries in terms of doing business, trade competitiveness and attraction of investments, so why should Zambia perform better than countries that have a good ranking?”
Dr Chigunta asked. “Mutati’s statement has raised issues about legitimacy because it is difficult to validate his comments and also will this perceived investment benefit the country in terms of net gains on its economic growth.”
Dr Chigunta said the intended investment also lacks clarity because there was no breakdown by sector, industry or country of origin.
“We do not even know if the perceived investments will cater for Greenfield or Brownfield categories or if it is portfolio investments, and we also do not know how much is actually coming in terms of trade inflows,” he said.
He said the assumption by Mutati that these investments were coming from outside the country was difficult to believe.
“For instance, the funding for the expansion projects at Zambia Sugar is not coming from outside the country but from within Zambia since local consumers of sugar are subsidising that project through the high sugar prices in Zambia,” said Dr Chigunta. “So it is difficult to believe Mutati’s assumption since most of the investment project’s funding is locally generated and not sourced abroad.”
Last week during the launch of the strategic plan for the Ministry of Commerce, Mutati said Zambia would receive by December 2007 investments in excess of US $ 1.4 billion, the highest in the region after South Africa.
Mutati said the government would ensure that benefits of investments trickle down to the people.
Labels: FRANCIS CHIGUNTA, INVESTMENT
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