IMF raises alarm over Zambia's low reserves
By Kabanda Chulu
Sat 21 Dec. 2013, 14:00 CAT
ZAMBIA has achieved strong economic growth over the past decade due to improved macroeconomic management and increased copper production but rising fiscal imbalances and lower reserve coverage are posing serious risks, says the IMF.
And the International Monetary Fund has welcomed the government's plans to freeze-wage spending in 2014 and limit the cost of agricultural subsidies.
The IMF has also advised the government to accelerate revenue mobilisation through changes in tax policy and improve mining tax administration and broadening the tax base.
According to a statement released yesterday after the Executive Board of the IMF concluded the Article IV consultation with Zambia, robust output growth continued in 2012 at slightly above seven per cent, driven by agriculture and services, but was slowing in 2013 due to a weaker harvest.
"Expansionary fiscal policies, mainly from spending on subsidies and wages, have raised the projected 2013 deficit to about 8.5 per cent of GDP. Rising imports together with weakened copper prices are expected to move the current account into deficit, and international reserve coverage has fallen to two and half months of next year's imports," reads the statement.
IMF stated that the banking sector had grown steadily and remained profitable and well-capitalised.
"Private sector credit growth has started slowing down in 2013 from a rapid increase in the second half of 2012. Non-performing loans declined to 8.2 per cent of total loans in mid-2013 from 15 per cent in 2010," it stated.
Over the medium term, the IMF stated that economic growth was expected to stay strong, averaging about 7.5 per cent a year.
"However, this is premised on significant policy adjustment to restore fiscal sustainability and preservation of the investment climate. The authorities are targeting a three per cent GDP deficit over the medium term with no more than 1.5 per cent of GDP net domestic financing," it stated.
"In order to help achieve this, the government is planning a wage and net recruitment freeze for 2014 and is aiming to limit the cost of agricultural subsidies. The central bank also aims to build up reserves gradually with the aim to reach four months of imports over the medium term."
The IMF stated that Zambia's strong economic performance over the past decade has been underpinned by prudent macroeconomic management.
"Nevertheless, the outlook is subject to significant risks from the recent widening of fiscal imbalances, reduced external buffers and volatile copper prices. We therefore recommend containing the fiscal deficit, accelerating public financial management reforms, strengthening external buffers, and improving the business environment to help diversify the economy away from mining and accelerate poverty reduction," it stated.
"Zambia should also implement comprehensive policy actions to address the unsustainable fiscal position following the spike in wage and subsidy spending last year. With the rapidly rising public debt and substantial downside risks to the budget, we recommend fiscal consolidation through increased revenue mobilisation and a reorientation away from recurrent spending to create fiscal space for infrastructure investment and control of the public debt."
The IMF advised that raising the tax-free threshold on personal income taxes runs counter to fiscal consolidation efforts and recommended accelerating revenue mobilisation through changes in tax policy, enhanced mining tax administration, and broadening the tax base.
"There is need for strengthening public financial management through improvements in budget planning, fiscal reporting, expenditure controls and debt management combined with stricter oversight and accountability. Strengthening debt management and project assessment capacity is critical, given the planned rise in infrastructure spending and recourse to non-concessional borrowing," stated the IMF.
"Due to inbuilt risks, we advise against issuance of the proposed sub-national Eurobonds in favour of sovereign bonds and all external borrowing should be subject to project appraisal and screened for consistency with macroeconomic stability, debt sustainability and the overall debt management strategy."
The IMF further stated that rising inflationary pressures warrant a tighter monetary stance.
"We support progress in transitioning the monetary framework toward utilising the policy rate and we recommend improving liquidity forecasting and management. Government should also rebuild external buffers through enhanced exchange rate flexibility and further reserve accumulation," it stated.
"Zambia should exercise caution over imposition of lending rate ceilings, restrictions on the use of foreign exchange and rapid increases in minimum wages because they can undermine external competitiveness and erode investor confidence."
Labels: GDP, IMF
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(NEWZIMBABWE, AFP) Biti slashes growth forecast ahead of polls
Economic growth forecast ... Tendai Biti speaks to reporters in Harare on Thursday
25/07/2013 00:00:00
by AFP
COMMENT - More of the same neoliberal, shock doctrine, pablum. The economy has been 'a nightmare' as growth prospects were 'slashed' from 5.0% to 3.4%, and 'we need more production', in other words, the Zimbabwean economy needs to be opened up for exploitation by giant foreign corporations, like Anglo-American De Beers, on whose behalf they want to nationalize the diamond mines, and call that 'growth'. They are a party of traitors. - MrK
WITH less than a week before elections, Finance Minister Tendai Biti slashed the country's growth forecast Thursday, citing the impact of political uncertainty surrounding the vote.
Biti said the first half of the year had been "a nightmare," as he revised 2013 growth down to 3.4 percent from an anticipated 5.0 percent.
"A decline in political situation is leading to a decline in economic situation," he said.
"We are living from hand to mouth. The fundamental challenge facing us is lack of production."
The drop is expected to be most acutely felt in the mining sector.
Growth in the sector was revised down from 17.1 percent to 5.3 percent.
Biti however reported that most of the funding for the July 31 presidential and legislative votes had been found.
The treasury has disbursed $96 million for the vote and $36 million was yet to be disbursed.
"We are ready for elections without help from anyone. We have done this without raping the economy."
The government had sought more funding from the UN, but the request was withdrawn amid a row over UN election monitors.
Zimbabweans go to the polls on July 31 to choose a successor to the shaky power-sharing government formed four years ago by President Robert Mugabe and Prime Minister Morgan Tsvangirai.
But Biti questioned whether the country could afford to fund a run-off election, if there is no clear winner in the first round of voting.
"This will put unbelievable pressure on this economy," he said.
Labels: GDP, TENDAI BITI
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'Growth rates have not resulted in real prosperity'
By Misheck Wangwe in Kitwe
Mon 15 July 2013, 14:00 CAT
NEWLY-formed Green Party president Peter Sinkamba says the good economic growth rates the country has recorded have not translated into national prosperity in real terms.
In a statement released yesterday, Sinkamba stated that the PF government had failed to come up with a comprehensive policy on critical development issues such as subsidies to turn around the situation for the poor majority.
Sinkamba stated that the country needed a leadership that would work towards promoting participatory democracy by way of increasing the voice and spaces for participation of the citizenry in social, political and economic issues.
He stated that the PF government must support legitimate efforts intended to create an open, transparent and merit-based constitution-making process, without regard to party affiliations.
"Unless we allow such a process to take place, achieving constitutional legitimacy, which is very vital for the constitution to stand the test of time, will be a mirage," Sinkamba stated.
Labels: GDP, NEOLIBERALISM, PETER SINKAMBA
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COMMENT - Zambia can and should be collecting more revenues from the mines than they receive in 'donor aid'. Donor Aid is both a scam and misleadingly titled to be confused with charitable giving. Every year, Africa exports $1,000 billion (1 trillion) in raw materials, receives $250 billion in 'donor aid' and $6 billion in 'charitable giving'. Instead of collecting $250 billion in taxes from it's own natural resources or owning them outright, they received virtually nothing in taxes from mining. Instead, they receive taxes paid by ordinary citizens in the West, called 'Donor Aid'. The only people this scam benefits, are the shareholders of the mining and oil companies.
Zambia tired of begging - Sata
By Chiwoyu Sinyangwe in Rio de Janeiro, Brazil
Fri 22 June 2012, 13:25 CAT
PRESIDENT Michael Sata says God will not forgive Zambia for tolerating unemployment in a small population of only 13 million people against the vast natural resources the country is endowed with. And President Sata says Zambia is tired of begging.Meanwhile, the United Nations conference on sustainable development dubbed Rio +20 on Wednesday officially opened in Rio de Janeiro, with global leaders less enthusiastic about the compromised agreement negotiators reached earlier in the week which falls short of aspirations of protecting the environment in the expanding global economy.
President Sata said Zambia was tired of moving with a "begging bowl" from one developed country to another as the country had the capacity to become self-reliant and lift its millions of unemployed youths out of poverty if its vast natural resources were exploited to the benefit of Zambians.
"Zambia is an extremely large country with relatively smaller population," President Sata told a United Nations Development Programme-organised discussion on exploring economic development beyond GDP measurements.
"Some of you, 13 million population of Zambia is what you have in your cities and towns. It is most unfortunate and God will not forgive us that out of a small population of 13 million, you can still find unemployed people. The reason is that we are not utilising our natural resources which we have more than other countries."
President Sata said he admired and was grateful to Brazil which was leading in utilising its natural resources to improve lives of its ordinary people.
"I don't want the syndrome of 'take this'; the reason Africa has not developed is that we have always relied on begging from the super bowl," he said.
"Time has come for us to develop ourselves and let others come to beg from ourselves because we have more resources than the people we are begging from."
President Sata said only technological advancement to ensure sustainable development would lift Africa out of its current economic and developmental doldrums.
"You donors keep your money but we need your technology. All we need from you is good technology," said President Sata amid applause from the audience.
And the Rio +20 summit opened with global leaders endorsing a 50-page document negotiators agreed in haste with contentious issues like technology transfers from rich to poor nations and new financing for developing countries set aside.
According to sources, diplomats agreed on what everyone called a "mere beginning", a step towards a roadmap on how to embrace sustainable development at the conference which was coming two decades after the landmark 1992 conference - also held in Rio de Janeiro - which put sustainable development on the globe's agenda.
Opening the summit, Brazil President Dilma Rousseff urged "all countries of the world to commit" to reaching an accord that address serious environmental and social woes.
President Rousseff also said measuring the countries' economic growth progress based on Gross Domestic Product was not sufficient and that the world needed a better way of measuring economic growth which prioritised sustainable development and environmental protection.
She regretted that economic woes facing major economic powerhouses had hampered aspirations of developing countries from increasing their access to funding from key donors to help them enhance the use of renewable energy, on protecting forests, on eradicating poverty and hunger.
"Uncertainty in the future of the global economy, it becomes very difficult for key donors to make long-term commitments to mainstream efforts to lift the millions of people out of poverty," said President Rousseff.
"We are producing more wealth which is decreasing the resources for the future. The future we want shall not be built by itself if left to its own apparatus. The future generation's account depends on our decisions today."
UN Secretary General Ban Ki-moon acknowledged the world had made little progress on environmental issues since the first Rio meeting in 1992, but said leaders were working to reverse that at the Rio+20 summit.
Ban, who said the old model for economic growth had broken down and failed to achieve an inclusive model for holistic development, said there was need to build a global movement of change.
"Twenty years ago, the Earth Summit put sustainable development on the global agenda. Yet, let me be frank: our efforts have not lived up to the measure of the challenge," Ban told delegates. "For too long, we have behaved as though we could indefinitely burn and consume our way to prosperity. Today, we recognise that we can no longer do so."
The conference which drew over 50,000 delegates which included 100 heads of government and states is discussing sustainability programmes aim at ensuring that countries grow their economies and lift the marginalised out of poverty without harming the environment.
The UN conference, which marks the 20th anniversary of the Earth Summit that declared the environment a priority, is the largest ever organised, with 50,000 delegates, the United Nations said.
According to UN figures, global food demand will double by 2030 and energy consumption soar by as much as 45 per cent, putting mounting pressure on finite resources amid growing social inequality, water shortages and global warming.
Labels: GDP, MICHAEL SATA, MINING, TAXATION, UNDP, WINDFALL TAX
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‘Africa’s economic potential is limitless’
Thursday, 12 January 2012 00:00
Dr Chinua Akukwe
Africa, the cradle of human civilisation, appears set once again to become a principal bastion of economic prosperity. This may seem far-fetched for a continent that although accounting for 11percent of the global population, it generates only 2 percent of current global economic output and less than 1 percent of global trade.
That Africa with 24 percent of the global burden of disease but only 3 percent of the global health workforce will play a central role in the global economy is bound to raise eyebrows.
However, the potential of Africa is almost limitless in the foreseeable future for multiple reasons. According to recent reports by the African Development Bank, the African Union, the World Bank, the International Monetary Fund, various articles in the African Executive, the Economist magazine, the Forbes magazine, the London Financial Times, the London Guardian newspaper, the McKinsey Global Institute, the Washington, DC Centre for Global Development, the HSBC bank and other publications, the future of Africa is not only incredible but potentially limitless.
I briefly review multiple reasons for the growing optimism about the future of Africa.
Africa's economy is projected to grow at reasonably robust levels during the next five decades.
A steady growth in both GDP and GDP per capita is likely in Africa. Africa's GDP will likely grow from US$1,7 trillion in 2010 to US$15 trillion in 2060. GDP per capita will increase from US$1 667 in 2010 to US$5 600 in 2060. The shorter term scenario also looks promising: Africa's GDP in 2020 will likely grow to US$2,6 trillion.
Most of the economic growth will be due to long-term gains from ongoing political and economic reforms, strong returns from commodities market in a continent that accounts for 30 percent of all global minerals, rise in foreign direct investments, the increase of megacities and the more one billion Africans of working age by 2040.
The middle class in Africa is growing at a fast pace.
Africa's middle class, defined as individuals capable of discretionary spending of US$2,20 per day, tripled in the last 30 years to 313 million individuals. The middle class now constitute 34 percent of the continent's population, the highest ever recorded rate.
By 2060, the middle class may represent 42 percent of the continent's population, more than one billion individuals. Africans earning up to US$3 000 a year in Africa will likely reach 100 million by 2015.
The impact of the growing middle class is evident in Africa, from magnificent private housing estates to multiple posh cars packed in single family residences, to the enrolment of children in expensive private schools and to the increasing rates of "middle class" non-communicable diseases such as diabetes and hypertension. Perhaps, a lasting economic impact of the rising middle class is the explosive growth in consumer spending that has made Africa a major destination of the global retail industry. Africa consumer spending may reach US$1,4 trillion by 2020, a projected growth of more than 50 percent from present levels.
South-South trade and economic co-operation will become dominant in the next coming decades.
In the last decade, Africa's export to BRIC countries (Brazil, Russia, India and China) increased by a scale of four to about US$114 billion.
Between 2005 and 2010, middle-income South countries generated at least 10 percent of foreign direct investments in Africa. In addition, South Africa, the largest economy in Africa, is now an established member of the BRIC.
The proportion of South-South trade by 2050 will account for more than 70 percent of all global trade by China; more than 80 percent by India and Brazil, respectively and; at least 60 percent by Russia. South-South development assistance partnerships will also increase in the next coming decades as demonstrated by the current growing profile of China, Brazil, India and South Korea.
Democracy continues to make steady progress. Dictatorships and autocratic governments are on their last legs in Africa.
In 2011, Africa recorded 28 multi-party elections in 17 countries. Despite well-known problems with electoral politics in many parts of Africa, it is safe to assume that the continent has swung significantly away from anti-democratic patterns evident in the 1970s and 1980s that favoured one-party rule, big man presidency and farcical national elections. An opposition party is now more likely to win elections and peacefully assume power in Africa than at any time in the last 50 years.
Africa may become the biggest beneficiary of rapid advances in technology.
Rapid uptake of advances in technology may ultimately become the most indispensable factor in Africa's renaissance in the 21st century.
The increasingly literate and educated Africa's youthful population is adopting social media and telecommunication technologies as the favoured method of communication.
The use of cellphones in Africa will rise from less than 10 percent current levels to almost 99 percent by 2060. Advances in biotechnology can dramatically jumpstart Africa's immense potential in agricultural
production through better yields with the use of fewer quantities of water and energy.
Advances in nanotechnology can significantly reduce health burdens through smarter, less expensive, streamlined discovery, production and delivery of medicine and other public health goods. Refinements in information technology can rapidly improve output in the extractive industry sector, leading to more cost-effective and environmentally friendly exploration of oil, gas and solid minerals.
Innovations in technology-based management and logistics systems can assist in faster industrialisation of the continent, creating better paying jobs, increasing the rolls of the middle class and creating opportunities for greater African ownership of manufacturing processes and distribution channels.
In particular, the tourism industry, an area of unparalleled growth potential in the coming decades, will benefit maximally from technology-based management and logistics innovations and efficiencies.
The role of Africans in the Diaspora will be significant.
Africa-Africa Diaspora partnership will be a dominant force in the coming decades.
New generation of Africans in the Diaspora will expand the frontiers of partnership with Africa far beyond the critical roles played by their parents and grandparents in the independence movements of various African countries over 50 years ago and in the fight against apartheid in South Africa and colonisation struggle in southern Africa more than 30 years ago.
The next phase of this relationship will focus on economic, technical and policy advocacy partnerships.
Although Africa and its Diaspora are yet to finalise and streamline modalities of the partnership, the future looks very bright as Diaspora communities around the world seek closer ties with native lands and continents.
It is very likely that a well funded public/private Africa Diaspora investment fund or facility will become operational in the next few years to mobilise and facilitate the participation of Africa Diaspora entrepreneurs and professionals in Africa's development.
Africa has now made a stand on aid effectiveness. Africa is home to a dizzying array of bilateral and multilateral aid initiatives, corporate social responsibility programs and foundation supported projects.
Very little co-ordination and harmonisation occur at country and host community levels.
In 2011, at the aid conference in Busan, South Korea, Africa delivered its first consensus position on international aid effectiveness focused on: (a) aligning donor commitments to continental priorities and national policies; (b) requesting African countries to go "beyond aid" by maximising domestic economic output and growth and; (c) redefining the donor and host country dialogue on aid to focus on equity, inclusiveness,
gender equality and effective results on the ground.
The Africa consensus is important since international aid is likely decline in the coming decades as more middle income countries emerge in Africa and donor countries support, decline.
Long-Term Significant Threats Remain
Significant threats to Africa's potential remain.
The most fundamental threat is the chronic level of poverty in the continent. The rosiest scenario indicates that at least one-third of Africans will still be living in poverty by 2060. Africa is the only continent in the last three decades that had seen more households become poor.
Famine, man-made or due to natural disasters, still stalks the continent.
Conflicts rage in some parts of the continent with debilitating health and human development consequences.
Lack of infrastructure remains widespread and the annual price tag of US$80 billion a year to meet existing need is prohibitive.
It is still tough to travel by road, air and water in most parts of Africa. It is even tougher in most parts of the continent to drink clean water, have access to basic sanitation or enjoy regular electricity.
Ethnic and tribal sentiments still dominate politics and nation building efforts. Command and control economic policy remain dominant in many parts of the continent. The private sector base is still small and private venture capital support, negligible.
Regional and sub-regional integration efforts are still lagging. Population-based voting remains tenuous in the continent.
The youth and elite of many African countries appear to have little in common.
However, tremendous upsides exist for a major transformation of Africa in the coming decades.
Six of the 10 fastest growing economies in the world in the last decade were in Africa.
More African countries can join that list. It is now the responsibility of Africans to continue taking specific steps towards realising the continent's limitless potentials. - African Executive.
* Chinua Akukwe is the former Chair of the Technical Advisory Board of the Africa Centre for Health and Human Security at the George Washington University, Washington, DC. He has written extensively on health and development issues.
Labels: ECONOMY, GDP
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Economic gains not trickling down to Zambians, observes ZCEA
By Masuzyo Chakwe
Sun 18 Sep. 2011, 13:53 CAT
THE macroeconomic gains the country has achieved so far will not trickle down to Zambians if the education they receive does not prepare them to seize opportunities, says a child rights activist.
Zambia Civic Education Association (ZCEA) executive director Judith Mulenga urged whichever political party that will form the next government to prioritise the improvement of the quality of education as a way of meaningfully reducing poverty in the country.
"The macroeconomic gains that Zambia has achieved or is poised to achieve will not trickle down to the many Zambians currently living in poverty if the education they are receiving does not prepare them to seize opportunities that are presented by such economic development," she said.
Mulenga said although the country had made great strides in achieving the Millennium Development Goal on access to primary school, the quality of education left much to be desired as evidenced by many researches done on the issue.
She said the factors that contribute to the provision of quality education were also well known, well documented and publicised.
Mulenga said what needed to be done was for the next government to emphatically and unwaveringly demonstrate political will to genuinely and holistically strive to improve the quality of education in the country.
She said this entailed, among other things, reducing the pupil/teacher ratio, learning materials/pupil ratio, provide humane and adequate school infrastructure and ensure a safe environment for the learners in and outside school.
Mulenga said the government needed to also seriously stem the high attrition rate of teachers by addressing its root causes.
She said continuous recruitment and retention of teachers in the system should also be prioritised.
"Contact hours between the teachers and pupils should be increased. High schools should ideally revert to the system in the first Republic when lessons ended at 15:30 hours. There should not be shortcuts in the provision of quality education," she said.
Mulenga also said implementing the new education Act No 23 of 2011 would ensure that learners' needs take centre stage rather than the current situation when the teachers and parents in that order take centre stage with the learners featuring in the cracks between the two categories of adults.
She said the Ministry of Education should distribute and publicise the new Act to all stakeholders.
Mulenga said currently, most senior provincial or district officials or heads of schools had no copies of the new Act and were ignorant of its provisions and yet them were supposed to be the key implementers of the Act.
She said the ignorance exhibited by some headteachers on the provisions of the Act was alarming.
Mulenga said surprisingly, headteachers argue and were convinced that they had the right to administer corporal punishment when the law prohibits it.
"They believe that corporal punishment and discipline are one and the same when not. How can a nation have education providers who do not respect the law? No wonder this malaise of ignoring and disrespecting the law manifests itself even in the governance of the country! This type of ignorance on the part of education providers also contributes to the low quality of education currently pertaining in the education sector," said Mulenga.
Labels: EDUCATION, GDP, JUDITH MULENGA, NEOLIBERALISM, ZCEA
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Fundanga predicts continued economic growth
By Chiwoyu Sinyangwe
Thu 28 July 2011, 13:59 CAT
BANK of Zambia governor Dr Caleb Fundanga says the reclassification of Zambia as a lower middle income country and B+ rating will help to prop up the local capital market.
During the launch of the
Central African Stock Exchange case handbook 2011 sponsored by BancABC, Dr Fundanga said Zambia’s performance was expected to remain positive, driven by strong copper output and favourable commodity prices.
The handbook details performances of stock exchanges of 110 companies in Zambia, Malawi and Zimbabwe. This is the first time the bourses in the three countries have been covered in a single publication.
Dr Fundanga said the macroeconomic environment was expected to remain favourable due to the projected strong external sector, the move he said would help to boost the performance of the Lusaka Stock Exchange.
“The recent B+ sovereign rating assigned to the country as well the reclassification of Zambia as a Lower Middle Income country reflects the country’s recent strong economic performance with GDP growth averaged six per cent over the last five years supported by low inflation and there is positive external sector performance,” Dr Fundanga said.
He said the favourable developments put the Zambian business and government in a good position to access finance for sustained economic growth and improved conditions of living for all citizens.
“In the medium to long term, the prospects for Zambia’s economy are bright,” he said.
“The robust GDP growth momentum is expected to be maintained premised on favourable growth performance in mining, agriculture, construction, tourism, manufacturing amongst other sectors. This will be supported by favourable commodity prices on the international market, government’s investments in infrastructure and expected increase in foreign direct investments.”
Dr Fundanga said inflation was expected to reduce owing to the current huge bumper maize harvest.
“The current growth we are enjoying is broad-based. In the past, we had growth which was just mostly concentrated on mining sector but today we see growth particularly strong in agriculture where the majority of our poor people live,” said Dr Fundanga.
“And if this continues, we expect that a lot more people are going to benefit from the growth we are enjoying and we will continue to enjoy.
Further, inflation is expected to remain in single digits owing to prudent macroeconomic policies and the bumper harvest recorded during the 2010/2011 harvest season which is expected to dampen any negative effects on overall inflation through the food component. Accordingly, interest rates are expected to decline further.”Labels: CALEB FUNDANGA, GDP
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COMMENT - Poverty is part and parcel of neoliberal economics. High unemployment is one of the main ways they suppress the cost of labour and increase their bottom lines. And they are open about it too. They even have the gall to claim that low wages are a good way of keeping inflation down.
Where is the development they are bragging about?
By The Post
Wed 25 May 2011, 04:10 CAT
MMD leaders and cadres have been sloganeering about massive development projects, economic growth and general development of the country.
But there have also been endless complaints that the benefits of the economic development the MMD leaders and cadres are bragging about are not trickling down to the masses of our people. The great majority of our people still live in abject poverty and without the necessary services required in an organised society.
Why is this so when the economy is growing and developing in such a “massive” way? The answer to this is that there appears to be serious confusion in what economic growth means and in what constitutes economic development and in how these two issues are different.
It cannot be denied that Zambia has recorded some economic growth. And this is mainly due to increased investments in the extraction industries, that is the mines. This has pushed up our Gross Domestic Product (GDP).
But by the very nature of economic growth that is driven by the extraction industries whose benefits are enjoyed elsewhere, economic development is lagging behind economic growth. While we are recording an increase in GDP due to mining activities, the benefits of this increase in GDP are enjoyed elsewhere where the bulk of the earnings from our mining activities end up.
Clearly, economic development and economic growth are two different concepts of economics. And one of the major differences between these two concepts lies in their definitions. Economic growth describes the increase of an economy on the scale of its products or services. Economic development, on the other hand, describes the development of economic wealth of an economy.
Economic growth is generally measured with the mean of percentage. For example, GDP of a country is an economic growth. The example of economic development can be social, financial, and so on and so forth, development of the country, which can be quite hard to measure. This is why economic growth is part of economic development; it helps to measure some of the whole system.
Another difference between these two concepts is the type of changes. In economic growth, it takes only quantitative changes under considerations to determine the growth of an economy.
For example, the annual income of our country is a quantitative change and can indicate an economic growth if it has increased over time. Economic development, however, takes both quantitative and qualitative changes under consideration to determine the development of an economy.
For example, with annual income of a country, it will also measure the living standard and other social economic factors to determine the status of economic development of a country. Economic growth normally deals with the underutilised resources while economic development deals with the unused resources of a country.
Therefore, at first glance, one might feel that we are talking about one and the same thing when we discuss economic growth and economic development, but in reality, these are related but different concepts used in different contexts. Sometimes people use the terms interchangeably, which is incorrect.
Economic growth of a country is a quantitative measure as there are indicators to tell the economic growth of a country. GDP is an indicator that not only tells us the size of an economy, but also tells us in numbers and percentage how much an economy has progressed compared to the previous year. On the other hand, development is an abstract concept hard to measure.
Yes, you can tell the difference as when there is a perceptible difference in the lifestyles of the people of the country but development is not just confined to income levels but encompasses many more indicators such as life expectancy, education, health and many other factors that go into improving the quality of life.
A country may be rich as when its GDP is high but if its social fabric is not developed, the country is still not considered developed. However, it is seen that in general, when there is economic development, economic growth is invariably there. One can verify this fact in the list of the countries placed according to their GDP. Even though China and India have fairly large economies with high GDP, they are still not considered developed because of their lowly ranks on other parameters such as health, education and life expectancy.
Socio-economic development automatically leads to economic growth of a country as has been the case with many countries that are included on the list of developed nations today.
And because of all such considerations, an all-together index called Human Development Index has been developed to rank countries according to their economic development and not just according to their GDP, which really is a misnomer.
This simple explanation may help explain why the economic growth recorded by our country in the past few years is said not to have benefited the great majority of our people who still wallow in abject poverty.
You cannot say a country is developed or is developing when its people are not developed or developing. There is no development in a country where poverty levels are rising by the day.
When we talk about economic development, the focus should be on the people – how their lives are affected. Economics and people’s welfare are not abstract questions to be discussed in a remote, academic manner. They are urgent, turbulent questions that impinge upon the daily life of most of our people. And the economic issue overshadows all others, since it controls their present, and will largely determine their future life.
In our discussions about the economy of our country, we should never lose sight of the individual citizen, who has to bear the brunt of economic hardships caused by mismanagement, corruption and exploitation. And since we have declared this country a Christian nation, the Bible should shed light on our approach to economic issues and instruct us on how to treat our fellow men and women; that is, how we should practice justice and fairness at all levels of economic and social interaction.
The story of the Garden of Eden shows God asking Adam and Eve to work on the land and make it productive. We see here an economic outlook. In this Garden of Eden story, which is part of the creation story, we find a model for understanding the world and its economic aspects.
God takes the initiative in creating humankind and placing Adam and Eve in the garden to till it and make it grow. Economic growth, economic management and economic well-being are part of the divine intention for the created world. The harmony of creation cannot be achieved in a state of economic under-production, mismanagement and exploitation.
God is the author and initiator of this economic outlook of reproduction. It follows that God is concerned to see that people have access to the means of production, and an adequate supply of the means of subsistence: food, healthcare and shelter. Our people must be able to find employment and to sell their labour freely in exchange for food, housing and other goods they need.
Another aspect of the creation story is worth of consideration. Adam and Eve were created in God’s image and likeness. This means that we can talk of a permanent connection between God and the people He created. In economic terms, it means that we should care for this people’s welfare. We should not mar the image of God which they bear, by participating, either directly or indirectly, in their abuse and exploitation.
We all know that our politicians have been abusing and exploiting our people in various ways: through the unfair distribution of resources, through unfair systems of employment, or simply by defrauding and stealing public funds.
To abuse and exploit God’s people is to dishonour that image. Any form of economic exploitation violates a fundamental biblical principle – that of honouring, revering and safeguarding God’s creation. Anything that undermines this divine value is an affront to God.
Any economic outlook which upholds an unfair and unequal distribution of the means of existence, and fails to see such a system as sin, can be viewed critically as a form of heresy. It is heresy because it denies the basic biblical conviction that all people are created equal by a single act of God.
Any economic system worth its name must have as its priority a search for equality for all persons in society as it seeks to distribute the national wealth. It is therefore meaningless and useless to go round bragging about economic development without taking practical steps to meaningfully improve the conditions of the less privileged citizens of our country. Appropriate avenues must be created to satisfy the demands of economic fairness and equity.
You cannot claim to be developing a country when you are not paying attention to the development of the people. Increasing GDP does not necessary mean developing the people, especially when that GDP is enjoyed elsewhere or by very few people.
Labels: GDP, MMD, NEOLIBERALISM, POVERTY
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Economic growth must show - Catholic women
By Misheck Wangwe
Thu 28 Apr. 2011, 03:59 CAT
IT is difficult to appreciate the economic growth the government is talking about because it is just in figures and the poor are not feeling it, according to the National Council for Catholic Women.
In a statement, council chairperson Mary Mwale said many families especially in rural areas were struggling to survive because of widespread poverty.
She said the women’s Catholic council would only appreciate the economic growth which was being pronounced if it was translated into sufficient food and good shelter for the majority poor.
“It is still difficult for women and indeed men to feed their children and cloth them, provide shelter and provide the basics needed for human survival. Those in the economic sector have assured us that the economy is growing. We have no reason to doubt them. However, while the economy is growing, this is still only in terms of figures. The inflation is down and so on. We will appreciate more, this economic growth, when it shows on our tables in our homes,” Mwale said.
“Economic growth can only be appreciated the time our families will have enough to eat; when rentals become more affordable; when we have an all inclusive and consensus-based Republican Constitution that would protect the people.”
Mwale said although it was imperative to appreciate the government for building schools, hospitals and other infrastructure for national development, much more needed to be done to alleviate the sufferings of the majority poor.
She said it was surprising that while copper was doing well on the international market, roads used were in such a bad state.
“Everyone knows that copper prices are at an all time high. This will not always be the case. So why can’t the copper mines pay a bit more to the national treasurer? What are we getting as Zambians from our God-given natural resources? If these investors paid a bit more than they are doing now to government, the nation would be in a position to reduce taxes. The Zambian worker is burdened by over-taxation,” Mwale said.
She further said as the country goes to the polls, political parties must adopt more women candidates for Parliament.
Mwale said women across the political dispensation must be encouraged to offer themselves to aspire for different political offices.
She said authorities must also protect women who were aspiring for political office from violence and bad language.
Mwale said all well-meaning Zambians were expected to demand issue-based campaigns, free and fair elections.
Labels: CATHOLIC CHURCH, ECONOMY, GDP
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Zambia exports $1.8bn manufactured goods
TIME PUBLISHED - Tuesday, April 26, 2011, 8:29 am
THE Zambia Development Agency (ZDA) says Zambia exported US$1.842 billion worth of manufactured products to the Common Market for Eastern and Southern Africa (COMESA) and Southern AfricanDevelopment Community(SADC) regions.
Most of the manufactured products exported from Zambia’s manufacturing sector are food and beverages which have a bigger share of 63 percent of the exports.
“There is vast investment potential for food processing in the country, covering both large and small-scale industries, and most of it includes foods and beverages,” it says in a statement made available to the Mail in Lusaka recently.
“However, the processing of grocery products such as cold meats, biscuits, tinned foods, jam and cheese are largely underexploited and crops such as paprika have been gaining prominence as crops with export potential and have a low capital input requirement to process,” it says.
It says huge investment potential also exists in the manufacturing of electrical appliances such as refrigerators, air conditioners, computers, television sets and fans looking at the high demand for imports of electronic goods in Zambia of about US$40 million per annum.
It says Zambia’s domestic demand for manufactured products exceeds US$2 billion per annum.
And according to ZDA agriculture sector officer Paul Siame, exports of agriculture products from Zambia to the COMESA region are between US$ 125-140 million while the export to the SADC region are between US$140 to 170 million per annum.
Mr Siame said given the vast resources in terms of land, labour and water, Zambia has the potential to expand agricultural production.
Some of the potential priority areas for investments in the agricultural sector are in sugar, wheat, maize, cotton, tobacco, cashew nuts, and cassava, Mr Siame said.
Labels: EXPORTS, GDP, MANUFACTURING
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Growth claims amid poverty immoral, says Kumwenda
By Misheck Wangwe
Tue 19 Apr. 2011, 04:00 CAT
IT is immoral for President Banda to continue claiming that the economy is growing when majority Zambians are facing extreme poverty, says Dr Ricky Kumwenda.
In an interview, Dr Kumwenda who is the Civil Society Campaign Against Poverty coordinator said people who were calling on government to take necessary steps to mitigate poverty were not politicking because the poverty situation in the country among the rural population was alarming.
Dr Kumwenda said the government had failed to attend to the plight of the majority poor because there were no tangible efforts in the fight against corruption which had brought misery in the lives of many poor people.
He said Zambians were in need of leaders that would recognise that corruption within the government system was the source of high poverty levels.
“What Zambia needs is a government that would clean up the governance system. The reports that are released by the Auditor General have continued to reflect alarming levels of corruption through misappropriated or unaccounted for funds but nothing is done to stop this rampant abuse of funds. Corruption will always remain a dream without the required intervention,” he said.
Dr Kumwenda said the removal of abuse of office clause from the ACC Act was of evidence enough that the MMD government did not attach great importance to the fight against corruprion.
He said it was distressing to note that President Banda's campaign messages were centered on infrastructure development and job creation while ignoring the demands of the majority poor who simply wanted the government to create an enabling environment for them to live decent lives.
Dr Kumwenda said it was immoral for government to claim that the economy was growing when the majority were living on less than a dollar a day.
He said it was sad to note that reports of people not having enough to eat were now looked at as normal by leaders.
“Unfortunately, today in Zambia, when we talk about poverty, there is no much attention from people holding government power because it has eventually become a song for them. They think when their families have enough that's the situation everywhere; this is dangerous for Zambia.
As the country goes to the polls, people must begin to identify leaders who have empathy, leaders who will share the pain of poverty with the majority poor and take appropriate steps to address these challenges,” he said.
Labels: GDP, POVERTY
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Who is getting the benefits of economic growth?
By The Post
Wed 19 Jan. 2011, 04:00 CAT
The great majority of our people cannot each day meet the basic needs necessary for a decent human life. But every day, we are being told that our country’s macro and microeconomic prospects seem to be improving.
If this is so, why are so many people in our country each day failing to meet fundamental needs? It is a strict duty of justice and truth not to allow fundamental needs to remain unsatisfied.
Proverbs 30:8 tells us: “Give me neither poverty nor riches; feed me with the food that is needful for me.”
Clearly, there is a danger that government policies, if not combined with clear social concern, will bring socio-economic deprivation.
An improvement in economic prospects should be seen in the improvement of living conditions, especially for the low-income earners.
Economic justice requires that each individual has adequate resources to survive, to develop and thrive, and to give back in service to the community.
Economic growth depends, in the very first place, on social progress. It is meaningless to talk about economic growth when there is no social progress.
We should always bear in mind that our people are not thirsting for the ideas, for the things in one’s head.
They are yearning to win material benefits, to live better and in peace, to see their lives improve, to guarantee the future of their children.
There is nothing which makes people more appreciative of a government and the things it is doing, its policies and practices than that it should be able to deliver services.
If the economic prospects are improving, then what is causing the deepening of poverty in our country?
This clearly demonstrates that poverty is impoverishment caused by the unjust political, economic and social structures.
Every citizen of this country should have the chance to enjoy the wellbeing necessary for their full human development.
One cannot sensibly claim to be developing a country when the living conditions of the great majority of the people are not improving.
This country will not be a good place for any of us to live in unless it is a good place for all of us to live in. Citizens of this country are living in very different conditions.
A trifling minority is enjoying a very high standard of living. They enjoy a nutritional, abundant and balanced diet as well as clean water supplies.
They have access to sophisticated medical care and culture.
The overwhelming majority of our people are living in terrible conditions, in squalor, in abject poverty – suffering hunger, disease and helplessness.
Obviously, our country is carrying too much injustice to remain peaceful and stable.
There is need for us to ensure that all our people live in conditions of solidarity, equity and justice.
Hunger, poverty, disease, ignorance, unemployment, lack of opportunity, insecurity, inequality, hopelessness are the terms that could well define the living conditions of the great majority of our people today.
The economic and social injustice implied by all this when we are every day claiming that our economy is doing well is an affront to our collective conscience.
It is an imperative need of our time to be aware of these realities, because of what this situation entails in terms of human suffering and the squandering of life and intelligence.
This is the expression of the evident inequalities existing in our country, probably not fully reflected in the economic statistical indicators of progress they are talking about.
This is a clear case of uneven income distribution in our country resulting from unjust discriminatory social relations.
This indicates the need for deep essential changes in our political, economic and social structures so that the great majority of our people can have access to the benefits of development policies.
Clearly, the improving economic prospects they are talking about do not take into account the differentials between the various income sectors of our population.
Hunger is a phenomenon intimately associated with poverty, with the marked income imbalances in our country, with the lack of opportunities, with ignorance, inequalities and injustice.
This poverty is first and foremost, a political fact.
A comprehensive approach is required to fight this situation and to struggle for diminishing or eradicating such inequalities.
It is a question of improving the quality of life, not only fighting the serious shortages in every sphere, but acting on them where the development of our society is concerned, which is not necessarily economic growth.
The trends which serve as the basis for the somber immediate outlook for our country are the most obvious expressions of the unbearable situation of injustice and inequality still prevailing in our country today.
But they are not necessarily inexorable.
We can, if we really want, act to change that increasingly unjust future for one that is bright and equitable.
The existence of large numbers of hungry and undernourished people in our country constitutes and affront to all of us.
A stable, permanent solution must be found for this serious problem.
We cannot continue to talk about economic progress or improving economic prospects to people who are seeing nothing of the results of the progress or prosperity we are talking about.
We need to situate our economic progress within the human vocation.
Economic progress should help our people to pass from less human conditions to more human conditions.
These inequalities we see, the growing poverty among the great majority of our people amidst improving micro and macroeconomic prospects is the product of our unjust socio-economic structures.
For this reason, no sector should reserve to itself exclusively the carrying out of political, social and economic matters.
Those who possess the power of decision making must exercise it with the desires and options of the community.
Our daily life as well as our decision in the political and economic fields must be marked by these realities.
We should not forget to give precedence to this phenomenon of growing poverty amidst improving micro and macroeconomic prospects.
Instead of becoming fewer, the poor are becoming more numerous in our country today. It is impossible not to take account of the existence of these realities.
To ignore them would mean becoming like the “rich man” who pretended not to know the beggar Lazarus lying at his gate (Luke 16:19-31).
Labels: GDP, NEOLIBERALISM, POVERTY
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Benefits of economic growth should be visible - Grillo
By Masuzyo Chakwe
Wed 19 Jan. 2011, 04:00 CAT
ZAMBIANS need to see the benefits of economic growth translated into improved social services, says a civic organisation.
NGOCC board chairperson Beatrice Grillo said although Zambia’s micro and macroeconomic prospects seem to be improving, this development was not trickling down to the grassroots.
Grillo said poverty levels still remained unacceptably high and of particular concern was the feminisation of poverty, especially in rural areas.
“We need to see the benefits of this growth translated into three square meals for each family, access to good health facilities (available medicines in the hospitals),” she said.
Grillo said it was also important for politicians to demonstrate tolerance for each other’s views not just among various political parties but also within political party structures. She said intolerance was the root cause of violence and abusive language among politicians.
She appealed to all politicians to campaign on economic and developmental issues.
“We appeal for free, peaceful and fair elections. We should ensure that in all our plans we take into consideration the best interest of women, girls, men and boys. The whole world will be keenly watching all developments as Zambia goes to the polls in 2011,” she said.
Grillo appealed to all political parties to ensure that more women were adopted to stand as members of parliament and councillors during the 2011 tripartite elections.
“As a women’s movement, we shall help in campaigning for these women to win. We look forward to more women in council chambers and National Assembly come 2011,” said Grillo.
And Grillo said the government had failed to broaden the tax base but continued to rely heavily on taxing the already weak formal sector workers through Pay As You Earn.
She also expressed concern that though Zambia recorded a bumper harvest, FRA did not have infrastructure for safe storage of the maize.
Grillo said there was need for more funds to be pumped into the safe storage of the harvest and encourage farmers to diversify to other cash crops such as rice, cassava, millet among others to avoid overdependence on maize.Labels: GDP, MAIZE, NGOCC
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Zambia’s economic growth causing inequality
By Chiwoyu Sinyangwe
Thu 13 Jan. 2011, 04:00 CAT
A key development and economic analyst says
Zambia’s position among the top ten fastest growing economies in the world is only helping to grow inequalities between the rich foreign multinationals and indigenous people.According to International Monetary Fund (IMF)’s forecast for 2011 to 2015 as quoted in The Economist magazine, Zambia is among the list of best performing economies being topped by China. Zambia is lying ninth on the ladder with its economic growth projected to average 6.9 per cent in the next five years beginning this year.
But Dr Fred Mutesa contended that Zambia’s impressive growth forecast is only good on paper as it does little to help the Zambians at the bottom of the ladder who continue to wallow in abject poverty estimated at 78 per cent in rural areas.
He said the variance between inequality of income and wealth of the country was vast and widening, driven largely by the lack of significant local participation in the country’s economy.
“That good standing is nothing to be proud of,” said Dr Mutesa who is also Zambians for Empowerment and Development (ZED) president.
“The growth we are seeing in Zambia is due to more copper being dug out of Zambia because of the current high copper prices. And given this government’s position on the current tax regime, without windfall tax, the people won’t benefit from this growth.”
He said foreign domination of the local economy was also worsened by the quality of jobs among Zambians working for foreign firms, which he said had continued to deteriorate.
“So, at macroeconomic level the economy is growing fast but the question is ‘who is benefiting?’ Things that make good standing of Zambia are nothing to be proud of because it is benefiting the foreigners who own the mining sector and foreign investors coming into the country,” said Dr Mtesa.
Other African countries in the top ten include Ethiopia, Mozambique, Tanzania, Congo, Ghana and Nigeria.
Labels: FDI, FRED MUTESA, GDP, POVERTY
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COMMENT - Remember that GDP is merely a measure of economic activity, even when that economic activity is foreign mining companies dragging Zambian copper out of the country without paying for it, or whether it is the government cleaning up their mess. Finance Minister Musokotwane stated that under the current neoliberal system, there will be no significant dent in poverty for at least 30 years.
Economic indicatorsBy Daaram Simakungwe
Fri 31 Dec. 2010, 04:00 CAT
Editor,
As we end the year, we have a chance to analyse the performance of our government, the economy and the general living standards of the Zambian citizens.
It is a fact that as much as we see Bank Of Zambia (BoZ)’s impressive statistics, the poor in Zambia is getting poorer. The employees have no future as the so-called "investors" have casualised the jobs.
Chinese and Indian plumbers and welders are getting work permits in Zambia and our MMD government sees nothing wrong with it.
President Rupiah Banda keeps spending more money on almost weekly foreign trips and MMD-orchestrated by-elections.
This is costing the poor Zambians hundreds of billions of kwacha, money which could have been used on Development.
Today I see no hope for Zambia until the economy starts benefiting the Zambians. BoZ keeps singing misleading MMD songs about Zambia's economy.
What Dr Fundanga fails to tell us is that all the money made by the big "investors" is deposited in their foreign offices and only expense money comes back to Zambia.
In my opnion, Zambia's gross domestic product performance is just paperwork drama which does not reflect the true living standards of the Zambians.
In reality our economy is in recess.
Look at the social standards in Mufulira and Kitwe towns, the roads and general infrastructure.
Mufulira is now a ghost town with rundown buildings.
Mine companies abuse and damage public infrastructure at no cost.
Until the Zambian in Luapula starts enjoying lower prices, better income, the whole BOZ story about our economy makes no sense.
I have never seen a president from a poor country anywhere flying across the world like our Rupiah Banda does.
He must cut down on his expensive trips for the sake of the poor Zambians.
Happy 2011.
Daaram Simakungwe,
Durban
High copper prices
By Gady Mwamba Museka
Fri 31 Dec. 2010, 04:00 CAT
Editor,
The government needs to improve the living standards of the people, most of who are living on less than a dollar per day.
We have many areas the government needs to attend to, like creation of employment.
For once, the government needs to heed advice on the windfall tax because copper prices keep rising as the latest information shows that on the London Metal Exchange, the price of the commodity has risen to a record high of US$9,437.50 a tonne.
We have to ensure that the mining sector is really part of the national development process through its equitable contribution to the taxation in Zambia.
One wonders why the government has remained adamant on this issue and yet there will be a lot of benefits for the Zambian people if we reintroduced windfall taxes.
I hope the government will listen to many voices over the issue of windfall tax.
Gady Mwamba Museka,
Mazabuka
Regionalism in politics
By Felix Tembo
Fri 31 Dec. 2010, 04:00 CAT
Editor,
Allow me to express my displeasure with the comments alleged to have been passed by Hon Moses Muteteka, a deputy minister in the MMD government.
It is unfortunate that the MP chose to lower himself to campaign against Enoch Kavindele on tribal grounds just to win sympathy from the Republican Vice-President who hails from Lalaland in Serenje.
It’s not so long ago when Muteteka was dropped from government, and he became very critical of this government but now that he is back in the comfortable seat, he has opted to forget about the suffering masses.
You can't defend a position because the one holding that it is a tribesmate.
Those sentiments are very dangerous and should not be entertained in this era and time of democracy.
People should be voted in positions on the condition of what they are capable of doing and not on the shape of their nose or which stream they draw their water from!
The honourable minister should apologise to Kavindele and the people of Central Province for misrepresenting them. Should he fail, let the President discipline him by firing him.
What the minister is promoting is division along the region. In short he is insinuating that even if Mulongoti is capable of being vice-president, he cannot vote for him because he comes from the Lambaland and not the Lalaland.
Those are just political offices. Tomorrow you will not be there and someone else will.
Ba minister learn to love your neighbours!
Felix Tembo,
Lambaland
Labels: CALEB FUNDANGA, ENOCH KAVINDELE, GDP, MOSES MUTETEKA, NEOLIBERALISM, REGIONALISM, TRIBALISM
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COMMENT - " government is still struggling in ensuring that the wealth of the country is distributed to benefit everyone equally " - to say they're 'struggling' implies that they are trying.
Zambia’s economy good on paper – EAZ
Saturday, December 18, 2010, 11:51
Economic Association of Zambia EAZ executive director, Alexander Chileshe says the country’s economic performance only looks good on paper and has no reflective effect on the lives of the poor Zambians.
Mr. Chileshe says the inequality gap in the nation’s economy has continued to widen with the relatively good economic performance Zambia has recorded over the last few years having no impact in people's lives.
He notes that government is still struggling in ensuring that the wealth of the country is distributed to benefit everyone equally.
He also observes that government’s control of the inflation rate and other factors of the economy has not yielded up to anything because the people on the ground are still living in abject poverty.
Second republican president Frederick Chiluba shopping at Pick N Pay suppermarket in Lusaka
Mr. Chileshe says while the economy looks fundamentally good, there is need to make some reviews to how government gets the nation%u2019s wealth distributed across the country.
He has also proposed that government begins o evaluate which sectors are performing well and which ones are not so that the right sectors beneficial to the people receive more support.
Labels: ALEXANDER CHILESHE, EAZ, GDP
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Caritas recommends below 1% of GDP domestic borrowing
By Fridah Zinyama
Tue 02 Nov. 2010, 03:59 CAT
CARITAS Zambia has advised the government to limit domestic borrowing to less than one per cent of Gross Domestic Product (GDP), saying such a move would help to empower citizens. The government wants to reduce domestic borrowing from 1.9 per cent to 1.4 per cent of GDP.
But Caritas Zambia noted that reducing domestic borrowing from 1.9 per cent (2010) to 1.4 per cent (2011) was good although the government needed to have political will to achieve this target.
“From past experience, the government has failed to do this as domestic borrowing has continued to increase,” Caritas Zambia stated.
The civil society organisation further noted that fiscal discipline was going to be necessary if government was to bring down domestic borrowing which increases the burden of domestic debt.
Caritas Zambia further stated that the government needed to reduce their appetite for domestic borrowing as it tended to crowd out private sector investment.
“Private investment is essential for ensuring that there is not only economic growth but also sustainable development and poverty reduction,” the organisation stated.
Caritas Zambia noted that the private sector helps to increase the productive capacity of an economy, creates employment, brings innovation and new technologies, and boosts income growth.
“This can only be achieved if government reduces its domestic borrowing not increasing it or maintaining it at its high levels,” stated Caritas Zambia. “A reduction in domestic borrowing by government may contribute considerably to the reduction in interest rates.”
Labels: CARITAS, DOMESTIC DEBT, GDP
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Caritas recommends below 1% of GDP domestic borrowing
Caritas recommends below 1% of GDP domestic borrowing
By Fridah Zinyama
Tue 02 Nov. 2010, 03:59 CAT
CARITAS Zambia has advised the government to limit domestic borrowing to less than one per cent of Gross Domestic Product (GDP), saying such a move would help to empower citizens. The government wants to reduce domestic borrowing from 1.9 per cent to 1.4 per cent of GDP.
But Caritas Zambia noted that reducing domestic borrowing from 1.9 per cent (2010) to 1.4 per cent (2011) was good although the government needed to have political will to achieve this target.
“From past experience, the government has failed to do this as domestic borrowing has continued to increase,” Caritas Zambia stated.
The civil society organisation further noted that fiscal discipline was going to be necessary if government was to bring down domestic borrowing which increases the burden of domestic debt.
Caritas Zambia further stated that the government needed to reduce their appetite for domestic borrowing as it tended to crowd out private sector investment.
“Private investment is essential for ensuring that there is not only economic growth but also sustainable development and poverty reduction,” the organisation stated.
Caritas Zambia noted that the private sector helps to increase the productive capacity of an economy, creates employment, brings innovation and new technologies, and boosts income growth.
“This can only be achieved if government reduces its domestic borrowing not increasing it or maintaining it at its high levels,” stated Caritas Zambia. “A reduction in domestic borrowing by government may contribute considerably to the reduction in interest rates.”
Labels: CARITAS, DOMESTIC DEBT, GDP
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Debates- Wednesday, 6th October, 2010
Wednesday, 20 October 2010
The Minister of Mines and Minerals Development (Mr M. B. Mwale): Mr Speaker, I thank you for allowing me to contribute to the debate on the President’s Speech which was delivered on the occasion of the Official Opening of the Fifth Session of the Tenth National Assembly. I join all the hon. Members of the House, who have debated the Motion before me, in congratulating the President on the excellent and inspiring speech to this august House and the nation at large.
Sir, as mentioned in the President’s Speech to this House, mining will continue to contribute to the stability of our economy, job security of workers and for all Zambians to enjoy the prosperity this sector brings. In this regard, the mining sector still remains the main driver of the country’s economic development. The sector’s contribution to Gross Domestic Product (GDP) has been on the increase. It stood at 11 per cent in 2009 compared with 8.2 per cent in 2008 and 8.5 per cent in 2007 and contributes about 80 per cent to the country’s foreign exchange earnings. The target is for the mining sector to contribute in excess of 20 per cent to GDP. How will this be achieved?
The House may wish to know that currently, there are many companies undertaking mineral exploration in Zambia. Notable among these are First Quantum Minerals that is exploring for copper, uranium and nickel, over the Kalumbila area in the North-Western Province. BHP Billiton are exploring for copper and gold in Mumbwa, Central Province, and Kaoma in the Western Province. Era Power Infrastructure Limited Company is exploring for coal in the Gwembe Valley in the Southern Province.
My ministry is confident that the new mines will come on stream in the near future, following increased investment in exploration. Regarding the on-going development of new mine projects, I wish to report the following:
(i) the Muliashi Mine Development Project in Luanshya is progressing well. The mine is expected to start production by the end of 2011. Once in operation, the mine will create 1,200 jobs. I hope that the hon. Member for Chililabombwe is listening;
(ii) the first phase of the Konkola Deep Mining Project was commissioned in April this year. The project has created 500 new jobs;
(iii) Chambishi Metals which was placed under care and maintenance has been recapitalised and is now operational. It has re-engaged a total of 690 employees out of the 1,040 who were employed before the plant closed in 2008.
The plant is currently treating material from the Democratic Republic of Congo (DRC) and is investigating manganese processing in its smelter with a view to processing ore being produced in Zambia, thus adding value to our manganese, which, I believe, will be to the delight of Hon. Chimbaka of Bahati Constituency. This will result in more people in Chambishi returning to work, notwithstanding the multiplier effect;
(iv) Denison Mine Limited has defined a mineable uranium ore resource at Mutanga and Dimbwe Deposits in Siavonga. It is estimated at 13.7 million pounds. The company was granted a mining licence and mining is expected to commence in 2012. The project will create approximately 300 jobs.
African Energy Resource Limited also owns uranium resources estimated at 9.5 million pounds of uranium oxide at Njame and Gwabe in Chirundu. The company has been granted a mining licence and mining is expected to commence in 2012. Considering that the ore resources are not adequate to sustain individual mine processing plants, the two companies are exploring the possibility of setting up a central processing plant to carter for the two mines; and
(v) the Konkola North Copper Project is being developed as a joint venture by the African Rainbow Minerals of South Africa and Vale of Brazil. The House may wish to know that African Rainbow Minerals is a black economic empowerment company while Vale is the second largest mining house in the world, which cannot be ignored. The mine development has already commenced and this project will create 1,500 jobs, promising vibrancy to the community of Konkola. The hon. Member for Chililabombwe should acknowledge the Government’s efforts.
Mr Speaker, as further alluded to by the President in his speech to this House, the performance of the mining sector has improved, in the past one year, indicating full recovery from the effect of the global economic crisis of 2008. All the mines that were once under care and maintenance during the crisis have resumed operations.
Furthermore, the mines that were threatened with closure such as Nkana and Mufulira continued to operate due to the Government’s strong intervention. This clearly shows that the Government took the right and timely decision in finding investors for the mines that were threatened with closure at the onset of the global economic crisis. Our people are back to work and many more have started work. As clearly stated by the President in his speech to this House, in particular, with reference to Luanshya Copper Mines, production has increased by 3.6 per cent and 2,523 jobs have been created, well above the pre-closure employment levels. In addition, Munali Nickel Mine in Mazabuka has produced 14,434 tonnes of nickel concentrates since resuming operations.
Mr Speaker, I am pleased to report that due to the positive performance of the mining sector, copper production is on the increase. Copper production in 2009 was 667,173 tonnes and production is projected to reach 740,000 tonnes this year. This is due to the conducive investment climate created by this Government of President Rupiah Bwezani Banda, as well as the positive outlook of metal prices on the market.
Mr Speaker, allow me to respond to some issues raised by hon. Members of this House in their debates. From the outset, it should be acknowledged that the ministry will continue to implement measures in line with the provisions of the Mines and Minerals Development Act of 2008 and its subsequent amendments so as to safeguard the interests of Zambians in general, employees in particular and the investors.
The hon. Member for Roan, Hon. Kambwili, and others, in their debates, argued for the re-introduction of the windfall tax. Sir, there are two contradictory positions from the Opposition that emerged on this subject. On one hand, they argue for the re-instatement of windfall tax and on the other, they would like to have the Development Agreements (DAs) re-introduced.
Mr Speaker, under the DA Regime, there is no allowance for introduction of windfall tax and other taxes. Hon. Members should be reminded that under the DAs, mineral royalty tax was pegged at 0.6 per cent, but is currently paid at 3 per cent, which is 500 per cent times more. Corporate tax, under the DA Regime, was at 25 per cent whilst with its abolition, it is at the rate of 30 per cent, a 5 percentage point more. From the foregoing, it is evident that Zambia is currently benefiting more from its mineral wealth than under the DAs that some Opposition Members would like re-introduced.
Hon. Government Members: Hear, hear!
Mr M. B. Mwale: Mr Speaker, I would like to emphasise that windfall tax impacts negatively on mine development and we cannot afford to deter mine development in the country at this stage. We need the jobs to empower and assure the people of their human dignity. Re-instating the 2008 mining tax regime would work against the policy of creating a favourable investment climate for the mining industry. We should always remember that we are part of the global village and are competing for the same foreign direct investment (FDI) with other countries. The Government, under the Business Reform Programme, is reviewing the various pieces of legislation in the mining sector with the view to reducing the cost of doing business in Zambia. This will enhance our competitiveness.
Mr Speaker, on the issue of segregation, this Government has provided an enabling investment climate. Whilst we appreciate that investors are our socio-economic partners, we will not tolerate any form of racial segregation at the mines. It is important that management, at all mines, encourages its employees to work as a team while recognising and respecting each other’s cultural values.
Mr Speaker, it is important to note that jobs have been created and my ministry in conjunction with the Ministry of Labour and Social Services is working to ensure that these jobs are safeguarded and conditions of service for employees are negotiated for by the unions at the mines, on the basis of ability to pay, which arises from the profitability at a particular mine.
Mr Speaker, you cannot compare the wages obtaining at the Luanshya Copper Mines to those obtaining at KCM and Mopani Copper Mine as the latter operations have been continuous and the employees have benefited, over the years, from negotiated annual increments.
As regards the allegations that the people of Luanshya are suffering, the House may wish to know that since the coming on board of CNMC Luanshya Copper Mines, there has been an upswing in the economic activities in Luanshya as is evidenced by the various construction works that are going on, …
Mr Kambwili: Question!
Mr M. B. Mwale: …the increase in the volume of trade in the markets and the number of vehicles on the road.
Hon. Government Members: Hear, hear!
Mr M. B. Mwale: Mr Speaker, on the issue of contractors at Muliashi Mine, the House may wish to know that CNMC Luanshya Copper Mines made an undertaking to commission the mine by 2011. There are two Chinese Contractors who have employed Zambians. In addition, there is also one Zambian contractor.
Mr Kambwili: Question!
Mr M. B. Mwale: I wish to state that Zambians compete for contracts in the mines based on performance just like any other person or company. Strangely, Sir, some hon. Members continue to negatively debate on Chinese investment in Luanshya, and yet they are beneficiaries through supply of Maheu, mine development and production drilling contracts.
Hon. Government Members: Hear, hear!
Mr M. B. Mwale: Mr Speaker, from the foregoing, it is time the hon. Member for Roan started accepting that things are now different and better in Luanshya. We have reported an increase in job creation and business opportunities by supply contracts and trading. There is now a serious investor in Luanshya and the people of Luanshya cannot be told otherwise.
Hon. Malama of Mfuwe Parliamentary Constituency argued that it was not economical to tar the Chipata/Mfuwe Road. He informed the House that the Great North and Great East roads were important to the economy and should be given priority. Yes, I agree with Hon. Malama that the Great North Road is important to the economy. I also agree that the Great East Road is equally significant to the economy. However, I disagree with the assertion that the Chipata/Mfuwe Road is not of any economic significance. This Government has prioritised agriculture and tourism to turn around the economy of this country and the Government is expected to provide basic infrastructure such as roads and power to spur economic activities. Upgrading of the Chipata/Mfuwe Road is expected to result in increased tourism arrivals in the South Luangwa National Park. In case Hon. Malama thinks tourists are only those who come in by air, even overlanders are tourists. We can also drive to the South Luangwa for a weekend.
Sir, Hon. Musenge of Nkana Parliamentary Constituency lamented that the he had not seen change in the livelihoods of the people following the privatisation of the mines as he has not seen construction of new schools, hospitals and roads. I will not belabour the point as the other hon. Members who debated before me adequately itemized, in this House, the various developmental projects being undertaken under His Excellency, President Rupiah Bwezani Banda’ Administration. For those who insinuate that this administration is only claiming the glory, I would like to put it to them that plans are only plans until you put money on the table. Conceived ideas are only plans on the drawing board until you have some budgeted expenditure to implement them.
Mr Speaker, as regards incentives offered to investors at the privatisation of the mining industry, it was a necessary surgery to save the industry. The House may wish to be reminded that metal production had dropped from 750,000 metric tonnes in 1973 to 257,000 metric tonnes in 2000. Similarly, copper prices were on the downward trend. Consequently, the mining assets deteriorated and required massive capitalisation. With privatisation, new jobs have been created and there has been technology transfer. Mineral resources such as the Lumwana deposits that were considered uneconomical in the days of the Zambia Consolidated Copper Mines (ZCCM) have now been developed for the benefit of the people.
Mr Speaker, finally, I do not want to say much on health because we have delivered in that regard. Some persons living in Rhodes Park and those in Kabulonga can now go to Chawama Clinic for Under-Five Clinic.
Mr Speaker, I thank you.
Hon. Government Members: Hear, hear!
The Minister of Community Development and Social Services (Mr Kaingu): Mr Speaker, I would like to thank you for allowing me to contribute to the debate on the speech delivered by His Excellency the President of the Republic of Zambia, Mr Rupiah Bwezani Banda, at the Official Opening of the Fifth Session of the Tenth National Assembly. The speech was full of wisdom, visionary and focussed on both the economic and social issues that are cardinal to both national development and poverty reduction.
Sir, I must add that other than that, the President delivered the speech in a friendly, wise, loving and caring manner. In short, the emotions and intelligence that was in that speech was very exceptional.
Hon. Government Members: Hear, hear!
Mr Kaingu: Mr Speaker, it is clear from the speech that Zambia’s …
Mr Speaker: Order!
Business was suspended from 1615 hours to 1630 hours.
[THE DEPUTY CHAIRPERSON OF COMMITTEES in the Chair]
Mr Kaingu: Mr Speaker, when business was suspended, I was saying that it was clear from the speech that Zambia’s economy has been growing steadily at an average growth rate of 6 per cent. This can also be attributed to the wise and democratic leadership of His Excellency, Mr Rupiah Bwezani Banda.
Mr Speaker, to grow the economy at this rate requires dedication from His Excellency the President, His Honour the Vice-President, hon. Ministers and indeed, the Government in general.
Hon. Government Members: Hear, hear!
Mr Kaingu: Mr Speaker, we have been told by the IMF and the World Bank that our economy is doing very well and everybody is seeing that except the people on you left.
Hon. Government Members: Hear, hear!
Mr Kaingu: Mr Speaker, we have been told that there is a saying in Tonga that utalumbi, mubwa. I would like to say that in the contemporary world, even dogs say thank you.
Hon. Government Members: Hear, hear!
Mr Kaingu: Therefore, I would not want to say anything beyond that.
Labels: GDP, JOBS, MINING, NEOLIBERALISM, PARLIAMENT, TAXATION, WINDFALL TAX
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COMMENT - See here, neoliberal economics in action. I wonder what Zambia's difference between GDP and GNP is. (Is anyone even keeping score of Zambia's GNP?) This is so characteristic of the new, globalized economy, where foreign investment means that there is no necessary connect between economic activity by foreign corporations in the country, and the the actual economy of the country itself.
How Ireland became a giant Ponzi scheme
Rob Lyons
Wednesday 6 October 2010
The fall of the Irish economy throws some much-needed light on what lies behind the current economic recession.
‘I don’t expect that hospitals will have to close or schools will have to close… but I do expect a fundamental reappraisal of the public sector will have to take place in which we secure absolute value for money in the delivery of services.’
That was the cheery upshot of the announcement by Ireland’s finance minister, Brian Lenihan, that the eye-watering cost of Ireland’s bank bailout was still rising. Lenihan’s latest declaration, made on 30 September, is that Allied Irish Bank, one of four big Irish institutions that have received enormous government support, will need another €3 billion of recapitalisation. While the bank will try to get that money from the markets, the government is essentially nationalising it. The Irish government has now coughed up over €32 billion to cover banking losses at Allied Irish, Bank of Ireland, Irish Nationwide Building Society and Anglo Irish Bank.
As a result of all these bailouts, Ireland has to pay roughly double the interest on its bonds compared with a country like Germany. The Economist now predicts that Irish debt will eventually rise to well over 100 per cent of GDP, despite the fact that Ireland has been more willing than any other country in Europe to do the markets’ bidding, slashing public spending in an effort to bring the deficit under control.
In 2009, the Irish government introduced a seven per cent pension levy – effectively a pay cut – for most public-sector workers, and then enforced further pay cuts. The result has been a very sharp rise in unemployment, which has rocketed from 4.6 per cent in 2008 to 13.7 per cent last month.
This is all a far cry from the ‘Celtic Tiger’. During the 1990s, Irish GDP rose at a remarkable average annual rate of 6.9 per cent, turning Ireland into one of the wealthiest countries in Europe by head of population. European Union subsidies are often lazily put forward as an explanation for the Celtic Tiger phenomenon, but actually they had a relatively small impact.
More relevantly, the fact that Ireland was a member of an open EU market was a major attraction for foreign direct investment, particularly from the US, alongside the fact that Ireland had an educated, English-speaking workforce and government policies that were very friendly to outside investors.
Ireland didn’t just take off in the 1990s – it did so in sexy, hi-tech, modern industries, making other nations green with envy. As an Economist article from 2004 noted, Ireland was taking roughly one quarter of all US foreign direct investment (FDI) into Europe and a third of all FDI in pharmaceuticals and healthcare (producing most of Europe’s supplies of Viagra and Botox in the process). Intel built its biggest semiconductor plant outside of America in Leixlip in the west of Dublin, while Dell’s PC plant at Limerick was one of its most productive plants in the world. No wonder officials from the EU’s newest members in Eastern Europe were forming an orderly queue in Dublin to find out how it was done.
However, by the Noughties, that economic boom had started to falter. Many of the conditions that made the boom possible – like Ireland’s low-cost, low-tax economy – had been undermined by rising wages and property prices and changing EU rules on taxation. The interest rates that prevailed as Ireland joined the Euro in 1999, determined by bigger but less dynamic economies elsewhere in Europe, were relatively cheap given the state of the Irish economy, and this helped to encourage a credit boom. Ireland got used to rapid GDP growth – with GDP rising from 1.9 per cent in 1991 to China-like rates of 11.5 per cent in 1997 and 10.7 per cent in 1999 – but then rates fell back to 4.5 per cent in 2003 and 4.7 per cent in 2004.
Challenging the idea that the recession is entirely the fault of risk-taking bankers, the actions of the Irish government were key in building up these economic woes. Having justified its existence on the back of such startling rises in GDP, the Irish government was unwilling to choke off growth in order to hold back this credit binge. A massive property bubble was being created, greatly assisted by the mania of institutions like the Anglo Irish Bank (though, unlike in the UK, this bubble did at least lead to some actual houses being built).
But the opportunity to build a substantial indigenous industry off the back of all that FDI was largely missed. Foreign companies were repatriating the profits back home, leading to some weird economic quirks.
In most countries, there is relatively little difference between gross domestic product (the amount of wealth produced within the economy) and gross national product (which is GDP plus inflows and outflows of money). In Ireland, however, GDP was 25 per cent bigger than GNP, revealing just how much of the country’s wealth was being exported.
The policy choices that were made in Ireland in the early to mid-Noughties were pretty important. Given that membership of the Euro meant Ireland had no control over interest or exchange rates, which a country like Britain can use to regulate the economy, firm action needed to be taken to make sure that capital didn’t simply go into stoking the property bubble. But instead, Ireland effectively became a gigantic Ponzi scheme, with property prices pushed ever higher, followed by the inevitable traumatic fall at the first loss of confidence. Of course a small country like Ireland could never remain immune to global recession, but its fall was all the harder because nothing was done to rein in the likes of Anglo Irish, despite clear warnings that disaster beckoned. The people of Ireland are now footing the bill.
The recent reaction of the Irish government has only made things worse. Other countries have tried to negotiate their way through the current mess by using stimulus measures to keep economic activity ticking along until the private sector is in a fit state to take up the slack. In Ireland, austerity was imposed immediately and aggressively. Yet while government spending has been slashed, the devastated economy has delivered smaller tax revenues. The result? Public-sector debt as a percentage of GDP is exactly where it was before austerity was introduced. While Keynesian ‘pump priming’ is a much overrated solution to recession, the emphasis on austerity over economic growth has backfired.
One thing that the Irish authorities have been able to rely on, however, is the uselessness of the trade union movement in defending pay and jobs. After more than a decade of ‘social partnership’ between government and the labour movement, there is little capacity for opposition to the current spending cuts being made by Dublin. Other European leaders have looked on with envy at the lack of political response to Ireland’s draconian cuts.
Ireland’s travails should be an object lesson in the dangers of sustaining growth on the basis of cheap credit rather than productive investment. They should also be noted by those in Britain’s coalition government who want to slash-and-burn public spending. We do, it is true, need to find a way of creating a more productive and dynamic economy, and there are undoubtedly examples where state spending is wasteful and does not meet society’s needs. But simply cutting back without investing in the education, infrastructure, research and innovation required to remake the economy is short-termist in the extreme.
Rob Lyons is deputy editor of spiked.
Labels: GDP, GNP, NEOLIBERALISM
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