Rupiah explains his corruption stance
By Chibaula Silwamba
Wed 07 Sep. 2011, 13:59 CAT
UNITED STATES embassy in Lusaka confidential cables released by Wikileaks have revealed why President Rupiah Banda has taken a soft stance on corruption. According to the cables, President Banda told World Bank vice-president that he could not take robust anti-corruption stance because he has multiple constituencies to satisfy.
And the cables revealed that immediate-past World Bank country manager Kapil Kapoor said President Banda's "friendship" with the late Frederick Chiluba could be because the former president had incriminating information on the incumbent or he was funding President Banda's 2011 re-election campaign.
Meanwhile, the cables revealed that the US government regarded Vice-President George Kunda as an obstacle to progress in fighting corruption.
Accoridng to cables prepared by Michael Koplovsky, then US embassy charge d'affaires, dated October 5, 2009, President Banda told the World Bank vice-president that he was committed to fight corruption but he was being "pulled in different directions".
"During a late September meeting on the margins of UNGA United Nations General Assembly in New York, IBRD Africa vice president told the Zambian leader, his trade minister Felix Mutati and State House economic advisor Richard Chembe that Banda needs to deal with the perception that he is soft on corruption," the cables read.
"Banda said it would be easier for him to tackle Zambia's corruption problems and the associated perception when and if he is re-elected to a full five-year term in 2011. Banda insisted that he did not fire Taskforce on Corruption leader Max Nkole; he simply decided not to renew his contract. When pressed for the reasons why, Banda responded that he 'needed people who are loyal' to him."
The cables revealed that Banda said he appreciated the private engagement he had with the donors' troika - the Netherlands, World Bank and United States - heads of mission and wished to keep that channel open. The cables revealed that Kapoor recounted the New York conversation during a well-attended donors' meeting in Lusaka on October 1, 2009 despite leaks of sensitive information, ostensibly from somebody within that group.
"Kapoor noted that Banda usually ultra-sensitive to criticism in the media did not raise recent leaks to the Zambian press. Kapoor speculated on the political pressures to which Banda alluded and concluded that Banda's new 'friendship' with the recently acquitted former president Chiluba is because Chiluba has incriminating information on Banda, has funding for Banda's re-election campaign, can deliver the remote swing Luapula Province in the 2011 elections, or a combination of the three."
In another cable prepared by Koplovsky dated May 28, 2009, the diplomat revealed that Sweden and the Netherlands's freezing of their development assitance to Zambia's health sector reflected mounting donor anxiety, not so much at corruption itself but the Banda-government's seemingly tepid response to it.
Koplovsky stated that seized with the idea that other donors would slash their funding, President Banda summoned numerous heads of diplomatic missions to State House on May 26, 2009 to reassure them of government's on-going commitment to fighting corruption.
Koplovsky stated that during the meeting, the diplomatic and donor community called for decisive government action to improve transparency of public procurement and financial management. He stated that these developments presented an opportunity to the diplomatic community, which had the government's full attention and which may be better poised to secure long-awaited government buy-in on several anti-corruption priorities, including anti-money laundering.
He stated that the Swedish charge d'affares and European Commission representative scolded Banda and his ministers on sector-specific policies and processes related to their development aid.
Koplovsky stated that the head of the UK's Department for International Development (DFiD) and the Dutch ambassador appealed to President Banda to demonstrate his commitment to fight corruption and establish the government's bonafides as a responsible and responsive government.
He said the Dutch ambassador sought to convey that Zambia's attractiveness as a partner and aid recipient was contingent upon its commitment to upholding corruption.
Koplovsky stated that President Banda agreed on the importance of introducing legislative and instutitutional reforms that would strengthen government's ability to prevent and prosecute corruption.
Koplovsky stated that President Banda said he hoped cooperating partners would be satisfied and would resume their aid, adding that "even if cooperating partners do not resume aid flows Zambia would still hold all to account".
"President Banda referred to justice minister and vice-president George Kunda as the coordinator of GRZ's anti-corruption efforts (despite Kunda's reputation as an obstacle to progress in fighting corruption). Kunda noted that the implementation of the newly passed anti-corruption policy is a governmen priority," Koplovsky stated.
"With regard to the Taskforce on Corruption which former president Levy Mwanawasa established to prosecute high-level corruption committed during the Chiluba presidency, Kunda suggested that it has concluded most of its cases (comment: this is not entirely true, given that most cases are in the appeal stage before the High Court) and the GRZ should now build the capacity of the Directorate of Public Prosecutions and ACC Anti Corruption Commission rather than fund the Taskforce in perpetuity."
Koplovsky stated that corruption had weakened public confidence in government but the Banda-administration had made significant progress in its anti-corruption campaign.
He stated that The Post reporters had played an important role in bringing new cases to light and placing pressure on the government for action and guiding the public towards zero tolerance of corruption.
"Although there is much cause for concern, Zambia has made significant strides in its anti-corruption campaign, which today features relatively independent judges, capable prosecutors, vigilant journalists and vocal civil society organisations," Koplovsky wrote.
He stated that numerous developments over the past six months had set government watchdog organisations ablaze with allegations that President Banda was at best not committed to and at worst interfering with the government's fight against corruption.
"They claim he is taking the country 'back to the Chiluba era' renown for the scale of national plunder and depredation of government assets that took place during the presidency of Frederick Chiluba (1991-2001)," Koplovsky wrote.
Among corruption scandals mentioned in the cables include the Dora Siliya-Zamtel-RP Capital saga, single sourced government's US $53 million mobile hospital deal with China, President Banda's friendship with Chiluba and Regina, Henry Kapoko -Ministry of Health saga, former ministry of finance permanent secretary and current ambassador to Japan Wamundila Mbikusita Lewanika's personal interest in a contracted public financial management project. Koplovsky wrote that on May 26, the executive director of the Economics Association of Zambia (EAZ) told embassy officials that these corruption incidents were "but the tip of the iceberg".
The cables stated that President Banda's sons were rumoured to be involved in extremely diverse business deals including the RP Capital sole source contract. Koplovsky stated that, at present, many donors remained skeptical that the Zambian government would follow through its pledges.
"This tension points to a growing distrust between the donor missions and a country that may have grown too complacemnt as a 'donor darling' and recipient of huge amounts of foreign assitance," Koplovsky wrote.
"Although these strains may not break apart European-Zambia partnership, it does not bode well for Zambia's ability to draw in development assistance at the same proportions, let alone foreign investment. At every available opportunity, including during foreign minister Kabinga Pande's June meetings in Washington, it is worth noting that Zambian progress on anti-corruption is essential to the effectiveness of official development assistance and Zambia's own economic prosperity and poverty alleviation objectives."
Koplovsky stated that now that the diplomatic community had the government's attention, it was imperative to send a clear message on what type of specific reforms would best improve government accountability.
"Certainly, some of these reforms should focus on the transparency and efficiency of public procurement and financial management. However, broader legislative and institutional reforms, including whistleblower protection, asset disclosure and asset forfeiture laws and enhanced and well-funded, independent watchdog agencies, as well as robust and independent media are also vital," wrote Koplovsky.
In another cable dated November 30, 2009, then US ambassador to Zambia Donald Booth stated that on November 24, 2009, President Banda met and told him, representatives of the Dutch and World Bank that the donor community would "be sorry" if one of his political rivals wins the presidency in 2011 and would realise what a democrat he Banda was after he is gone.
"He intimated that his political rivals lacked his democratic credentials and cautioned that the donor community 'would be sorry' if they got into power," the envoy wrote. Ambassador Booth said President Banda blamed the lack of progress in many areas on inertia and that it was difficult to get his ministers to embrace "new ideas".
Ambassador Booth said the donor troika chief of missions told President Banda that it was critical that Zambia's 2011 elections be seen as credible and true expression of people's will.
"Banda agreed on the need to prevent violence," the cable reads in part. Ambassador Booth wrote that during the same meeting, President Banda took the opportunity to defend himself against recent allegations of impropriety and his government's perceived backsliding on democratic ideals.
"President Banda seemed very relaxed and engaged throughout the one-hour meeting. He often referred to the difficulty he has had winning Cabinet support for what he considers necessary reforms and shared how minister of home affairs Lameck Mangani and police chiefs had defended restrictive tactics based on outdated national security arguments," Ambassador Booth revealed.
"Banda's inability to rally his Cabinet behind him is telling, as he has never had the full support of the MMD leadership following former president Mwanawasa's death and his by-election win."
In a December 9, 2009 cable, Ambassador Booth stated that President Banda sacked then Attorney General Mumba Malila over the Dora Siliya saga and Dr Rodger Chongwe's US $5.9 million compensation claim. "Comment: President Banda committed a tactical error by doing a favour for a friend but blamed the blunder on his AG after news of Banda's intervention in the Chongwe case leaked to the press," wrote Ambassador Booth.
Labels: CORRUPTION, DONALD BOOTH, DONORS, KAPIL KAPOOR, RUPIAH BANDA, WIKILEAKS
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COMMENT - We can look forward to
$400 million? The mines owe AT LEAST
$1300 million a year, in profit tax to the ZRA and dividends to ZCCM-IH. The World Bank is as punitive of any country that refuses to follow the Washington Consensus, as it is indifferent to the non-payment of taxes by the corporations that their privatisation has put in charge of the nation's resources. My guess is that the owners of the World Bank and IMF are the same owners of the mining companies. People talk about corruption, but this is corruption of the highest order.
World Bank sees $100m growth in mine revenue
By Chiwoyu Sinyangwe
Thu 23 June 2011, 09:00 CAT
THE World Bank says Zambia’s revenue from its vast mining sector will by 2015 increase by an additional US$100 million from the current US$300 million for every overall export earnings of about US$5.3 billion.
Country manager for Zambia Dr Kapil Kapoor in an interview said the World Bank had not yet projected the amount of copper that would be extracted from Zambia to generate revenues of about to US$500 million annually.
“Zambia will get tax revenues in excess of half a billion dollars a year in the next three to four years,” Dr Kapoor said in an interview.
“This year would expect the revenue to increase by about US $100 million.”
Zambia currently collects about 2 per cent of GDP in mining tax revenues.
The share of mining taxes in total tax revenues mobilised by the government is about 10 per cent.
Dr Kapoor said he expected a significant increase in revenues from the mining sector “over the next few years.”
He said although key donor support to boost Zambia Revenue Authority’s capacity to collect appropriate level of taxes from mining firms was expected to continue in the next three to four years, it was important to continue building capacity of the country’s revenue body.
“It is therefore very imperative that policies and institutions are put into place that will allow Zambia to manage those resources in the future,” he said.
Dr Kapoor said there was need to improve competitiveness of Zambia’s manufacturing industries to allow them provide inputs for the mining sector.
“Because the cost of doing business is very high, there are not able to support backward linkages with the mines,” said Dr Kapoor.
“What is imperative is the government to think very carefully at the entire value chain to make sure the resources are managed properly and invested in the development of skills, health and education, infrastructure so that the jobs that Zambia needs can be created.”
Labels: CORRUPTION, KAPIL KAPOOR, World Bank
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COMMENT - A success for whom?
‘FNDP was a success’
By Joseph Mwenda and Mutale Kapekele
Tue 08 Feb. 2011, 04:01 CAT
WORLD Bank Zambia country manager Dr Kapil Kapoor says the Fifth National Development Plan was a success as evidenced by the Gross Domestic Product (GDP) which he said was higher than estimated.
And the Civil Society for Poverty Reduction (CSPR) says the success of the Sixth National Development Plan (SNDP) will be dependent on
sufficient domestic resources and
political will.
In an interview following the launch of the SNDP, Dr Kapoor said it was important for the government and the private sector to coordinate their efforts in ensuring that the SNDP was implemented.
“I do not agree that the FNDP failed. I do not think so. I think the plan actually worked well. As the finance minister said, I think Zambia’s economic performance during the Fifth National Development Plan has actually been quite good. The economy has grown by about six per cent every year,” Dr Kapoor said.
“I think the challenge going ahead is making sure that the SNDP plan is actually implemented. I think the challenge also is to try and increase growth to about seven per cent every year and make sure that the people of Zambia benefit in that growth.”
And CSPR executive director Patrick Mucheleka warned that the SNDP would not achieve its goals and aspirations unless the government strengthened its implementing departments and systems.
Mucheleka said the success of the SNDP was dependant on sufficient domestic resources and political will.
“There was a lot of misappropriation of funds as well as irregularities in the systems and structures during the implementation period of the FNDP,” Mucheleka said. “The weakness in the FNDP was inadequate funding to key sectors of the implementation process.”
Mucheleka said unless implementing institutions were strengthened, the country would not be able to achieve the goals and aspirations of the SNDP.
He said although the FNDP was a good plan on paper, it was disappointing that its programs failed to reduce poverty which now stands at 64 per cent.
Mucheleka said for the SNDP to succeed, it should ‘talk’ to the budget expenditure framework and the vision 2030.
The government says the focus of the SNDP, whose theme is ‘Sustained Economic Growth and Poverty Reduction’, would be on deliberate interventions that would promote the creation of decent jobs and skills development particularly for young people.
Labels: CSPR, FNDP, KAPIL KAPOOR, World Bank
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Auditor General conducted a forensic audit on CEP – Kapoor
By Chibaula Silwamba
Thu 03 June 2010, 03:30 CAT
WORLD Bank country manager Kapil Kapoor has said the bank’s audit of the Copperbelt Environment Project (CEP)’s financial management procedures and transactions indicates that the majority of “issues” raised initially by the Office of the Auditor General have been satisfactorily addressed.
And Kapoor said the closing date for the CEP has been extended to March 31, 2011 to allow for completion of ongoing work. Responding to a press query on the revelations of the Auditor General’s report on the financial mismanagement at CEP, Kapoor stated that the World Bank last month received its own audit report on the project.
“To respond to the alleged misappropriation of public funds under the Copperbelt Environment Project, the Office of the Auditor General conducted a forensic audit, following which the OAG asked the relevant government agencies to respond to several issues that resulted from the audit,” Dr Kapoor stated.
“In addition to the audit, the World Bank also recently conducted its own review of the project's financial management procedures and transactions.
The World Bank has received, in May 2010, the final audit report, which indicates that based on the government's response to the audit observations, the majority of issues raised initially by the Office of the Auditor General OAG have been satisfactorily addressed.”
He stated that to address the remaining issues resulting from the OAG audit and the World Bank's review of the project's financial management procedures, an action plan was being agreed with the Zambian government that would focus on the reinstallation of computerised accounting software that had been dysfunctional, updating of the financial procedures manual to enhance internal approval processes and contract management, the maintenance of a register documenting the project’s fixed assets and improvements in the filing of supporting documents.
“Following a request received from government, the closing date for the Copperbelt Environment Project has been extended to March 31, 2011, to allow for completion of ongoing work,” Dr Kapoor stated.
“The World Bank is very pleased to be supporting the implementation of the Copperbelt Environment Project which is reducing the negative environmental and social consequences of decades of mining in the Copperbelt in Zambia.”
He stated that the project was strengthening regulations and institutions responsible for the environmental performance of the mining sector and helping to protect the health and safety of people living near mining sites.
“By cleaning up highly lead-contaminated areas and setting up new water infrastructure in contaminated hot spots, this project has helped reduce exposure to lead for about 50,000 people - particularly children who are most vulnerable to it,” stated Dr Kapoor.
According to an audit report, OAG/101/48/87, submitted to the Secretary to the Treasury on February 1, 2010, there was misappropriation of public funds, distortion of financial administration and failure to follow laid down approval procedures among other irregularities at CEP.
Labels: AUDITOR GENERAL, COPPERBELT ENVIRONMENTAL PROJECT, KAPIL KAPOOR
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Mines should contribute more to govt revenues – Kapoor
By Chiwoyu Sinyangwe
Tue 16 Feb. 2010, 04:00 CAT
THE mining sector can and should be contributing more towards government revenues, World Bank country manager Dr Kapil Kapoor (right) has said.
However, Dr Kapoor said there is need to distinguish between the contribution of the mining sector to the local economy more broadly and to the Treasury more narrowly despite the two being related.
Dr Kapoor was commenting on calls by some key stakeholders for the government to reinstate the windfall tax on copper and cobalt prices abolished last year to help the mining companies deal with collapsed metal prices at the height of the global financial crisis.
In the aftermath of the global economic crisis, copper prices have rebounded from slightly below US $3,000 a tonne in the third quarter of 2008 to over US $7,500 a tonne last month.
Although copper prices have come down to around US $6,500, the lowest levels in more than three months, as growing concerns over the euro zone's fiscal health and tighter monetary policy increased, long-term projections point to a strong red metal prices.
Dr Kapoor said the mining sector is also an important engine of growth for the Zambian economy and a provider of much needed employment.
“In deciding the contribution of mining, it is necessary, I believe, to make a distinction between the contribution of the mining sector to the Zambian economy more broadly and to the Zambian treasury more narrowly, although the two are no doubt related,” Dr Kapoor said in response to a press query.
“Too often in public discourse, the contribution of the mining sector in Zambia is measured only in terms of the contribution to government revenues. It is important to keep in mind that mining accounts for 70 per cent of Zambia's annual foreign exchange earnings without which it would be difficult for Zambia to finance much of its annual import requirements and the kwacha would be much weaker. The mining sector is also an important engine of growth for the Zambian economy and a provider of much needed employment.”
Dr Kapoor said the mining sector’s contribution to the government revenues was very important because mining is a wasting asset and revenues from the sector were needed to form the foundation for the diversification of the local economy from mono dependence on the mining sector.
“The key challenge that has confronted Zambia for generations is that copper is an exhaustible resource and therefore how can its proceeds be used to diversify the economy and lay the foundations for long-term sustainable growth,” he said.
“This is where the sector's contribution to the government revenues becomes very important. I believe that the mining sector can and should be contributing more towards the government revenues.”
And Dr Kapoor said although the local mining tax rate of over 40 per cent was competitive relative to other mining countries, Zambia was not getting corresponding revenues because of the incentives given to the local mining companies.
Among the incentives given to the local mining companies by the government include allowing 100 per cent deduction on capital expenditures and the provision to allow losses to be carried forward.
“However, here the issue is whether the low tax collections are due to the prevailing tax rates or are they a result of the investment incentives provided in the past, when the industry was loosing up to US $1 million per day,” Dr Kapoor said.
“Mining companies are presently required to pay a royalty of three per cent, a corporate tax of 30 per cent and a variable profits tax of 15 per cent. This implies a tax rate of over 40 per cent and makes the Zambian mining tax regime comparable with other mineral exporting countries. However, these rates do not result in commensurate revenues on account of the incentives that have been granted by government, such as the 100 per cent deduction on capital expenditures and the provision to allow losses to be carried forward, thus constraining government tax collection from the sector. Once these provisions come to an end, the tax take should increase significantly, even with the existing tax regime.”
Dr Kapoor said any changes to the tax regime in the mining sector needed to be done within the framework of renegotiations between the government and the mining companies to ensure stability in the sector.
[To echo Cho's sentiments - where was this cry for continuity and stability when it was time to abolish the Windfall Tax? - MrK]
“As to what the appropriate level of tax revenue should be is a subject that should be based on a dialogue between the government and the mines,” said Dr Kapoor.
“Stability is very important concern for most industries and frequent changes to the tax regime should be avoided. It is also important to continue the ongoing process of strengthening the capacity of the Zambia Revenue Authority to ensure full compliance with the existing tax laws of the land.”
Labels: KAPIL KAPOOR, MINING, WINDFALL TAX
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World Bank queries RDA on over-procurement
Written by Chiwoyu Sinyangwe and Mwala Kalaluka
Tuesday, June 16, 2009 3:01:59 PM
WORLD Bank country manager Dr Kapil Kapoor has confirmed that the bank has queried the Road Development Agency (RDA)'s significant
over-procurement of road projects in 2008.
But Dr Kapoor said it was not true that the World Bank had withheld its support to the Lusaka-Chirundu road rehabilitation project in view of the clarifications it is seeking on the over-procurement by the RDA.
In response to a press query, Dr Kapoor said the query was part of the regular consultations between the government and the donors to ensure delivery of investment in the country's road sector. However, Dr Kapoor did not indicate the overshot budget that donors to the country's road sector had queried RDA over.
"As you know, the investment requirements for the roads sector are substantial and, going forward, it will be especially important to ensure that significant investment takes place in rural roads to enable rural communities to be connected to markets," Dr Kapoor stated.
"For this reason, the World Bank and other cooperating partners regularly engage government in a dialogue on public expenditures in the roads sector... this is routine part of the Road Sector Investment Programme (ROADSIP) process. During the most recent reviews held a few weeks ago, it was observed that RDA had entered into contracts whose value exceeded its annual budgetary allocations by a significant amount. We therefore sought clarifications regarding this matter."
Dr Kapoor said the RDA over-expenditure might have to do with the fact that expenditures in the roads sector were multi-year in nature.
"Therefore, what we have seen are expenses that go beyond one year," he stated. "We would like to make sure that road sector finances are sustainable and excessive commitments do not result in accumulation of arrears. We have therefore agreed on a collaborative review process going forward and are working closely with the concerned government agencies and ministries to clarify this matter."
Dr Kapoor said the donors were hopeful that the result of the review and the reconciliation of expenditures would help the government increase effectiveness of investment in the roads sector in the future.
RDA chief executive officer Erasmus Chilundika said the over-procurement issue arose from the fact that donors believed that there was a figure of about K1.5 trillion that was outside the 2008 budget, which was about K1.3 trillion.
Ministry of Works and Supply permanent secretary Lieutenant Colonel Bizwayo Nkunika said the situation was not an over-procurement but an issue of advanced procurement, which the RDA should be commended for.
But Dr Kapoor said the World Bank had not withdrawn funding to the Lusaka-Chirundu pending the results of the query.
He announced that the World Bank was in the process of finalising negotiations dates, after which the project would be presented to the Bank's board for approval
"During the past several months, we have been working closely with various government agencies in appraising the Lusaka-Chirundu road and this process is nearing completion," stated Dr Kapoor.
"It was only a few days ago that the environment clearances and the associated disclosures were received from Environmental Council of Zambia...it is therefore not true that the Bank is withholding support for this project, which is important component of the Road Sector Investment Programme."
Labels: KAPIL KAPOOR, RDA, World Bank
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Zambia’s economic outlook dependent on diversity – World Bank
By NANCY MWAPE
ZAMBIA’s economic outlook is dependent on how new sectors of growth are identified says the World Bank.
World Bank country manager for Zambia, Kapil Kapoor said the country’s major problem is that, the economy is so vulnerable to international commodity price fluctuations due to the continued dependence on mining. This exposes the country to volatility.
Dr Kapoor said in an interview in Lusaka that economies that are so much dependent on one sector find it difficult to manage volatility.
“When prices increase for copper on the international market, your exchange rates strengthen and when prices fall, your exchange rate depreciates,” he said.
Dr Kapoor said businesses find it very difficult to operate in unstable environment where the exchange rate is volatile.
“There is need to find ways of reducing this volatility. Dependence on mining will continue to subject the country to volatility, Am not saying mining is not important, but I think it should be one element in the overall growth strategy of Zambia,” he said
Dr Kapoor hoped that over time, the mining sector will decline as a major part of the economy to allow other sectors to grow in importance.
He said the economic outlook for Zambia is not dependant on money released from donors citing the recent US$ 256.4 million provided by the International Monetary Fund (IMF).
He said the funds released by the IMF will help the Bank of Zambia to better manage its exchange rates and augment reserves.
“The world is in for a protracted economic crisis and it requires concerted action on the part of Government to make sure that the economy can be put on sustained fitting.
This goes beyond any kind of assistance that any donor can provide. US$200 million or US$ 500 million is a very small amount of resources that a country like Zambia needs in order to bridge the infrastructure gap,” he said.
Dr Kapoor said for energy sector alone, Zambia needs about US$ 5 billion of investment of which rural electrification will require about US$ 1 billion.
He said to grow the economy, there is need look at how agriculture, tourism and manufacturing can grow to diversify the economy.
“Zambia needs to exploit hydro potential, reduce the cost of doing business and get the manufacturing sector growing without assistance from the donor community like the World Bank, IMF or the other co-operating partners,” he said.
Labels: ECONOMIC DIVERSIFICATION, KAPIL KAPOOR, World Bank
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Adhere to governance agenda, cooperating partners urge govt
Written by Kabanda Chulu
Tuesday, March 31, 2009 4:44:44 PM
COOPERATING partners yesterday challenged the Zambian government to demonstrate continued political commitment towards the governance agenda and reduce economic dependency on the copper mining sector. And finance minister Dr Situmbeko Musokotwane has said the effectiveness of aid in Zambia must be examined to ensure that it is targeted during the next national development plan.
During a High Level Policy Dialogue in Lusaka, Cooperating Partners Group chairperson and World Bank country manager Dr Kapil Kapoor said there had been a gradual strengthening of oversight institutions and increased transparency in public financial management.
He said despite improved macro economic growth, there had been slow progress in addressing key policy constraints such as reducing the cost of doing business and improving productivity and competitiveness of non-mining sectors.
"While we acknowledge progress being made in several areas, the majority of Zambians continue to live in poverty and only three per cent of rural population has access to energy and some businesses need as many as 50 licences to operate," Dr Kapoor said. "Accelerating growth, reducing poverty and improving service delivery will require implementing reforms across several sectors, especially agriculture, energy, telecommunications and the public service and we are encouraged by the policy intentions expressed in the Presidential address to parliament that was reinforced by commitments made in the 2009 budget but it will be important for government at the highest level to demonstrate continued political commitment towards the unfinished governance agenda."
He observed that diversifying out of copper has been a much stated objective of Zambian leadership for several years.
"The goal of diversifying the economy away from copper has not been achieved and over 70 per cent of foreign exchange earnings still come from copper hence being vulnerable to cyclical price fluctuations," Dr Kapoor said. "The dependency on mining and the limited progress made in developing sectors like tourism and agriculture has also meant that large sections of the Zambian population have not been able to benefit from the commodity boom, resulting in a growing service delivery gap between urban and rural Zambia."
And Dr Musokotwane said the role of aid has been critical in Zambia's national development efforts hence the need to ensure that it is channelled towards development goals.
"As we begin creating the sixth national development plan, the effectiveness of aid must be examined to ensure that it is optimally targeted since a large number of projects continue to be funded outside the budget and this continues to pose difficulties in measuring both the impact if such aid as well as its effectiveness and alignment to national development goals," said Dr Musokotwane.
Labels: ECONOMIC DIVERSIFICATION, KAPIL KAPOOR, SITUMBEKO MUSOKOTWANE
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World Bank opposes proposed $200m loan
Written by Chiwoyu Sinyangwe
Tuesday, March 31, 2009 4:32:23 PM
THE World Bank has sharply opposed Bank of Zambia (BoZ)'s proposed US $200 million loan facility from the International Monetary Fund (IMF) to replenish Zambiaís foreign reserve position, describing the move as unsustainable.
And the World Bank has asked Zambia to analyse its debt situation correctly before making any decision to borrow more funds.
Commenting on recent revelations that the IMF had opened negotiations with the government to lend the country loans of about US$200 million to help boost the diminishing foreign currency reserve position, World Bank country manager Dr Kapil Kapoor described the move as very expensive and a serious threat to the country’s foreign exchange reserves.
Dr Kapoor cited Russia, which had in the last six months spent over US $250 billion with very little success to keep healthy the value of the Russian ruble since the collapse in international prices of oil ñ that country’s chief export earner.
Dr Kapoor who said BoZ’s intervention in the foreign exchange market to protect volatility reduced the country’s import cover however said Central Banks were financiers to the government and that most monetary decisions they made depended on the political pressure as well as influence from other interest groups of society.
He however said it was normal and constituted economic sense for the country to borrow money from IMF to prop up the reserve levels to enable Zambia get back to three months of import cover target which he said was normally the desired target.
“ìMy own view point is it is a very dangerous strategy to start intervening in the foreign exchange market so that you start depleting your foreign exchange reserves,î Dr Kapoor said as he acknowledged that the country had lost US $300 billion in foreign exchange reserves through BoZ market intervention since the beginning of the collapse of the copper prices in the last six months. ìThe lessons to be learnt are that if there is a fundamental imbalance between demand and supply, protecting the exchange rates, and I donít think the Central Bank [BoZ] is protecting the exchange rates but intervening to protect the volatility, but it still can be very expensive and you can quickly deplete your foreign exchange reserves.”
Recently, Bank of Zambia (BoZ) governor Dr Caleb Fundanga revealed that the country’s balance of payments position had deteriorated quite considerably and that the new funding of US$200 million would be used to increase foreign currency reserves and would be concluded by May this year.
And Dr Kapoor said in as much the government borrowing was expected to increase this year in view of the current drop in economic activities, it was important that government analysed the advantages of borrowing locally or from international markets.
He also said it was important for the country to have a good strategy in place to guide its borrowing of funds.
“It is extremely important for a country like Zambia to analye its debt situation correctly before making any decision to contract debt. So having a good strategy in place is critical,” said Dr Kapoor. “As part of that strategy, it is important to have accurate information but at the moment, there is poor information. I am no big fun of debt of but there is a place for debt in development.”
Labels: DEBT, IMF, KAPIL KAPOOR, World Bank
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Donors challenge govt over economic dependency
Written by Kabanda Chulu
Monday, March 30, 2009 3:39:31 PM
COOPERATING partners yesterday challenged the Zambian government to demonstrate continued political commitment towards the governance agenda and reduce economic dependency on the copper mining sector.
And finance minister Dr Situmbeko Musokotwane has said the effectiveness of aid in Zambia must be examined to ensure that it is targeted during the next national development plan.
During a High Level Policy Dialogue in Lusaka, Cooperating Partners Group chairperson and World Bank country manager Dr Kapil Kapoor said there had been a gradual strengthening of oversight institutions and increased transparency in public financial management.
He said despite improved macro economic growth, there had been slow progress in addressing key policy constraints such as reducing the cost of doing business and improving productivity and competitiveness of non-mining sectors.
"While we acknowledge progress being made in several areas, the majority of Zambians continue to live in poverty and only three per cent of rural population has access to energy and some businesses need as many as 50 licences to operate," Dr Kapoor said.
"Accelerating growth, reducing poverty and improving service delivery will require implementing reforms across several sectors, especially agriculture, energy, telecommunications and the public service and we are encouraged by the policy intentions expressed in the Presidential address to parliament that was reinforced by commitments made in the 2009 budget but it will be important for government at the highest level to demonstrate continued political commitment towards the unfinished governance agenda."
He observed that diversifying out of copper has been a much stated objective of Zambian leadership for several years.
"The goal of diversifying the economy away from copper has not been achieved and over 70 per cent of foreign exchange earnings still come from copper hence being vulnerable to cyclical price fluctuations," Dr Kapoor said.
"The dependency on mining and the limited progress made in developing sectors like tourism and agriculture has also meant that large sections of the Zambian population have not been able to benefit from the commodity boom, resulting in a growing service delivery gap between urban and rural Zambia."
And Dr Musokotwane said the role of aid has been critical in Zambia's national development efforts hence the need to ensure that it is channelled towards development goals.
"As we begin creating the sixth national development plan, the effectiveness of aid must be examined to ensure that it is optimally targeted since a large number of projects continue to be funded outside the budget and this continues to pose difficulties in measuring both the impact if such aid as well as its effectiveness and alignment to national development goals," said Dr Musokotwane.
Labels: DONORS, KAPIL KAPOOR, SITUMBEKO MUSOKOTWANE
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World Bank opposes proposed $200m loan
Written by Chiwoyu Sinyangwe
Wednesday, March 25, 2009 3:15:20 PM
THE World Bank has sharply opposed Bank of Zambia (BoZ)'s proposed US $200 million loan facility from the International Monetary Fund (IMF) to
replenish Zambiaís foreign reserve position, describing the move as unsustainable.
And the World Bank has asked Zambia to analyse its debt situation correctly before making any decision to borrow more funds.
Commenting on recent revelations that the IMF had opened negotiations with the government to lend the country loans of about US$200 million to help boost the diminishing foreign currency reserve position, World Bank country manager Dr Kapil Kapoor described the move as very expensive and a serious threat to the country’s foreign exchange reserves.
Dr Kapoor cited Russia, which had in the last six months spent over US $250 billion with very little success to keep healthy the value of the Russian ruble since the collapse in international prices of oil ñ that country’s chief export earner.
Dr Kapoor who said BoZ’s intervention in the foreign exchange market to protect volatility reduced the country’s import cover however said Central Banks were financiers to the government and that most monetary decisions they made depended on the political pressure as well as influence from other interest groups of society.
He however said it was normal and constituted economic sense for the country to borrow money from IMF to prop up the reserve levels to enable Zambia get back to three months of import cover target which he said was normally the desired target.
“ìMy own view point is it is a very dangerous strategy to start intervening in the foreign exchange market so that you start depleting your foreign exchange reserves,î Dr Kapoor said as he acknowledged that the country had lost US $300 billion in foreign exchange reserves through BoZ market intervention since the beginning of the collapse of the copper prices in the last six months. ìThe lessons to be learnt are that if there is a fundamental imbalance between demand and supply, protecting the exchange rates, and I donít think the Central Bank [BoZ] is protecting the exchange rates but intervening to protect the volatility, but it still can be very expensive and you can quickly deplete your foreign exchange reserves.”
Recently, Bank of Zambia (BoZ) governor Dr Caleb Fundanga revealed that the country’s balance of payments position had deteriorated quite considerably and that the new funding of US$200 million would be used to increase foreign currency reserves and would be concluded by May this year.
And Dr Kapoor said in as much the government borrowing was expected to increase this year in view of the current drop in economic activities, it was important that government analysed the advantages of borrowing locally or from international markets.
He also said it was important for the country to have a good strategy in place to guide its borrowing of funds.
“It is extremely important for a country like Zambia to analye its debt situation correctly before making any decision to contract debt. So having a good strategy in place is critical,” said Dr Kapoor. “As part of that strategy, it is important to have accurate information but at the moment, there is poor information. I am no big fun of debt of but there is a place for debt in development.”
Labels: BOZ, DEBT, IMF, KAPIL KAPOOR, World Bank
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Kapoor urges pro-growth policies
Written by Chiwoyu Sinyangwe
Thursday, November 06, 2008 6:45:32 AM
WORLD Bank Zambia country manager Dr Kapil Kapoor has advised the government to come up with pro-growth and pro-poor policies to cushion the country from external shocks.
Commenting on the recent political transition in the country amidst the current global economic crisis, Dr Kapoor cited energy and agriculture as the sectors that needed urgent attention as they had proved to be emerging obstacles to development.
“The Fifth National Development Plan (FNDP) targets a rate of economic growth of about seven per cent if Zambia is to achieve its goals of becoming a middle income economy by 2030,” Dr Kapoor said. “With recent external developments, it is even more important now for the government to critically examine its policy environment and ensure that its policies are pro-growth and pro-poor. In particular, from my vantage point, two sectors need urgent attention and these are energy and agriculture. As is widely acknowledged, the energy sector is emerging as a significant constraint to growth.”
And Dr Kapoor observed that the current policies being pursued by the government were a constraint as they were preventing the agriculture sector from becoming a potential engine for Zambia’s economic growth.
“With its abundance of land and water, Zambia should be a bread basket for the region, especially since food prices remain high and this provides an excellent opportunity to take advantage of the terms of trade that have shifted in favour of the agriculture sector,” said Dr Kapoor. “While the provision of fertiliser is important, it is not sufficient to put agriculture on a sustainable footing. There are several other issues that need to be addressed, including instituting a predictable and transparent export policy for food grains; pass the agricultural marketing Act; invest in irrigation, research and extension; better target the Fertiliser Support Programme; and urgently address the numerous issues afflicting the livestock sector.”
Labels: KAPIL KAPOOR, World Bank
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Dr Kapoor advises govt to refocus Zesco operations
By Joan Chirwa
Thursday August 14, 2008 [04:00]
GOVERNMENT should take a critical look at operations of Zesco Limited rather than focusing on the revision of electricity tariffs, World Bank country manager Dr Kapil Kapoor (left) has advised. Dr Kapoor said effecting an upward adjustment to electricity tariffs was not the solution to the current crisis in the sector.
He said the World Bank believes the energy sector presents a great opportunity for Zambia to develop its economy through exports of power, considering the tremendous potential for hydro-power generation.
"The issue is not just about having high electricity tariffs but also looking at operations of the power utility. As much as electricity tariffs need to be revised, the government should find out whether this utility is operating efficiently or not, and if not, then solutions can be found on how to make the company operate more efficiently," said Dr Kapoor in an interview.
"Zambia has tremendous potential for hydro-power generation because it has abundant water resources. Despite the potential the country has in terms of hydro-power generation, the question we are asking is why only two per cent of rural people have access to electricity?"
Dr Kapoor said the government should come up with right policies for the energy sector to ease electricity problems the country is currently facing.
"If the policies are right, then Zambia can become a net exporter of electricity," said Dr Kapoor.
"But because Zambia cannot export power even with the potential that is there for hydro power generation, then something is not going right. It is in this context that institutions such as the World Bank and the International Monetary Fund (IMF) have been advising the government on what best can be done in order to revive the power sector in the country. But if government is not comfortable with our analysis, then it can do its own studies on the sector and make recommendations."
Labels: ENERGY, INFRASTRUCTURE, KAPIL KAPOOR, ZESCO
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Dr Kapoor urges govt to broaden PPP concept
By Kabanda Chulu
Saturday July 12, 2008 [04:00]
WORLD Bank Zambia manager Dr Kapil Kapoor has urged the government to broaden the public-private-partnership (PPP) concept away from the mines to involve other sectors of the economy. Commenting on the slow implementation of various projects that the government has planned to carry out under PPP, Dr Kapoor said the Zambian government must ensure that there was a conducive and enabling environment for the concept to work. He said the government was serious and committed to PPP and notable progress had been seen in the health and education sectors.
"But most of the PPP concept is with the mining industry and as much as we understand the government's commitment, the environment should be enabling because even with seriousness, you cannot attract any investment," Dr Kapoor said.
"Hence government should do more and broaden the PPP concept to involve other viable sectors of the economy, especially those with potential to alleviate poverty."
Dr Kapoor said there was need to continually address the cost of doing business because Zambia would not attract huge investment if the environment was not conducive.
Recently, the government made several pronouncements relating to PPP but many Greenfield (new) projects have failed to take place and the PPP concept is only working well with the mining sector, partly because the entities were already established when the private sector were invited to participate.
Also, through the defunct ZCCM conglomerate, the government lacked capacity to inject millions of dollars needed to recapitalise the mines.
Some notable projects under the PPP that have failed to take off or have completely stalled include the Zambia-China Mulungushi Textiles with Chinese investors and the much talked about Itezhi-Tezhi hydro power project with the Tata Group of India.
Also through the ministry of energy, the government is showing indications of developing the proposed Kafue Gorge Lower power project alone despite making pronouncements that the private sector should be involved.
Labels: KAPIL KAPOOR, PPPs
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World Bank endorses 4-year CAS programme
By Kabanda Chulu
Thursday May 29, 2008 [04:00]
THE World Bank’s Board of Directors has endorsed a four-year Country Assistance Strategy (CAS) programme that will enable Zambia to receive between US $80 million and US $100 million annually. The World Bank has also approved a 40-year US $33 million International Development Assistance (IDA) projects that will result in increased access to electricity services and improve efficiency and quality of electricity distribution system in targeted areas.
According to World Bank country manager for Zambia, Dr Kapil Kapoor, the new CAS would position the bank to support the government’s objective to further accelerate growth by improving competitiveness and to ensure that more local people participate in the economic growth process.
“The Board of Executive Directors has endorsed Zambia’s Country Assistance Strategy (CAS) for the period 2008-2011 and this CAS is consistent with the framework agreed with the cooperating partners under the Joint Assistance Strategy of Zambia (JASZ) and this CAS is premised on the assumption that the Bank will provide between US $80 to US $100 million annually to Zambia,” Dr Kapoor stated.
He stated that the CAS was aligned with the Fifth National Development Plan (FNDP) and was designed to help the government achieve its objectives.
“It proposes a selective and strategic programme of interventions aimed at supporting better management of government's fiscal resources and investments in infrastructure in order to improve integration and connectivity,” Dr Kapoor stated.
And Dr Kapoor stated that the objective of the Increased Access to Electricity Services Project of Zambia was to increase access to electricity services and improve the efficiency and quality of the electricity distribution system in targeted areas.
“The project has three components, firstly, to improve Zesco’s efficiency including reinforcement of existing distribution networks, intensification within existing grids in peri-urban areas, and energy efficiency and demand side management,” stated Dr Kapoor.
“Secondly, the project will enhance access expansion including grid extension to rural areas, isolated grids such as mini-hydro, and solar technology for schools, clinics, commercial establishments, and lastly to enhance household market and provision of technical assistance for both Zesco and the Rural Electrification Authority (REA) and the total project will be US $ 33 million for 40 years.”
Labels: COUNTRY ASSISTANCE PROGRAM, KAPIL KAPOOR, World Bank
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Dr Kapoor urges alternative power generating ways
By Fridah Zinyama
Wednesday May 21, 2008 [04:00]
WORLD Bank country manager Dr Kapil Kapoor has said the energy shortage currently being experienced is not peculiar to Zambia alone. In an interview, Dr. Kapoor said there are many ways in which Zambia could deal with the energy problems it is experiencing. "The need to diverse the sector is becoming inevitable even as the country's economy continues to grow," he said.
Dr Kapoor said even countries like India, which are considered as developing economies, are experiencing power shortages of up to three to four hours a day.
He said there was, therefore, urgent need to find alternative ways of generating power in the country.
"Solar, windmill and renewable energy should be considered as ways in which the country can generate energy," he said.
Dr Kapoor said Zambians also need to cooperate with the government and the power utility firm by efficiently using the available power in the country.
He added that even as the country's economy was growing, long-term measures should be put in place to secure the future.
"I believe that Zambia can grow its economy in the order of seven to eight per cent, all things being equal," he said.
Dr Kapoor added that the World Bank would meet this week in order to come up with ways in which it could help Zambia to develop its much needed infrastructure.
"We want to help Zambia catch up on infrastructure development," said Dr Kapoor. "We are anxious to help Zambia develop economically and even become the bread basket of the region."
Labels: BIOFUELS, ENERGY, KAPIL KAPOOR, SOLAR ENERGY, World Bank
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Zambia's key challenge is to reduce poverty, says Kapoo
By Chibaula Silwamba
Thursday January 31, 2008 [03:00]
WORLD Bank country manager Kapil Kapoo has said
there should be an agenda to include the rural population in economic activities to reduce rural poverty. In an interview in Lusaka on Tuesday, Kapoo said the key challenge for Zambia was to reduce rural poverty.
"I think there are several things that need to be addressed to reduce rural poverty. One, you have to ask yourself, how do we get the rural population to participate in economic growth? I strongly believe that lack of infrastructure, is an important constraint," he observed.
"If the rural population does not have access to electricity, if the condition of the rural road network is such that they (people) cannot get their produce to the market, if they don't have access to sanitation facilities, if they have limited access to drinking water - these are constraints that most people will find very difficult to surmount."
Kapoo said it was very important to improve infrastructure in rural areas.
"But infrastructure is one part of the solution and the other part of solution is to look at the overall investment plan," he said. "How favourable is the investment climate? About 60 per cent of the population of Zambia is not serviced by financial institutions.
How do you provide them with access to finance? How do you bring interest rates lower? How do you reduce the cost of doing business? I think there should be an agenda to include the rural population in economic activities."
Kapoo said the economic environment in Zambia was very favourable to reduce rural poverty.
"I am very encouraged by the recent developments that have taken place over the last five-six years. Your economic rates have picked up and investment levels have picked up, government's foreign exchange earnings are going up," said Kapoo.
Labels: KAPIL KAPOOR, POVERTY, World Bank
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World Bank endorses revision of mining agreements
By Florence Bupe
Friday November 02, 2007 [03:00]
THE World Bank fully supports the government’s efforts to renegotiate development agreements with the mines, country manager Kapil Kapoor has said. And Kapoor has observed that there is need for Zambia to accelerate its economic growth in order to realise the vision to turn the country into a middle-income zone.
Speaking at a media breakfast yesterday, Kapoor said the Zambian government had made the right decision to renegotiate development agreements because this would ensure that the country benefits more from the industry.
“We fully support government’s efforts to revise mining agreements. Zambia should be able to benefit more from high commodity prices and use the earnings to improve other sectors of the economy,” Kapoor said. “This country should take a leaf from Botswana, which has over the last few years utilised its diamond revenues to improve other economic sectors.”
Government is in the process of renegotiating development agreements with the mines following increased copper prices on the international market, and is targeted at raising mineral royalties and corporate tax, among others.
And Kapoor has challenged the government to enhance citizen participation in the country’s economic activities if the vision to turn the country into a middle-income area is to be attained.
“There should be increased emphasis on broader economic participation by average Zambians if this country is to increase its income levels. We are also working out a strategy to increase sustainable competition on the economic platform,” he said.
Kapoor said Zambia needed to raise its Gross Domestic Product (GDP) status from the present average of five per cent to eight per cent or above.
“As a bank, we have a dual challenge to get Zambia to accelerate its GDP growth, and also to get more Zambians further involved in economic activities,” Kapoor said. “The bank wants to be responsive to Zambia’s needs through increased entrepreneurship capacity and sustainable job creation.”
Meanwhile, Kapoor has expressed confidence that Zambia is a credit worthy country, but cautioned the country against falling into a debt trap.
He said the government should utilise borrowed money prudently by investing in key economic sectors that would yield higher returns to avoid being unnecessarily indebted.
Labels: DEVELOPMENT AGREEMENTS, KAPIL KAPOOR, World Bank
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