Rate of govt borrowing is alarming - Haabazoka
By Misheck Wangwe in Kitwe and Stuart Lisulo in Lusaka
Mon 02 Dec. 2013, 14:00 CAT
THE rate at which the PF government is borrowing and the manner it is managing external debt is very worrying and alarming, says Dr Lubinda Haabazoka.
And Dr Haabazoka says
the introduction of windfall tax is inevitable in Zambia because appropriate mine taxes should be the major source of national financial sustainability. Meanwhile, Professor Oliver Saasa has advised the government to invest more in understanding its capacity to servicing debt.
Commenting on the decision by Parliament to pass a motion to give the finance minister powers to raise Zambia's debt ceiling from K20 billion to K35 billion, Dr Haabazoka, a Copperbelt-based economist who is also a lecturer of business studies at the Copperbelt University, said the government must begin to demonstrate fiscal discipline to avoid external borrowing.
He said the government's rush to get loans and debts being acquired through capital markets was an economic hazard.
"We can borrow as a country but we should not exceed certain limits, otherwise we will be pushing the debt burden to the future generation. Borrowing, even just for consumption when you have an expanded government, a civil service that is also bloated, then monies will just be servicing the existence of the government," Dr Haabazoka said.
"Let us first look at fiscal discipline, let us look at ways of maximising tax collection and then find ways of spending these scarce resources and cut costs in terms of government expenditure. The rate at which we are accumulating debt has doubled, it's very alarming and it is rumoured that in the next five years, the government will borrow US$5 billion dollars and that's very unsustainable."
Dr Haabazoka said developed countries like Japan were also overburdened by debt but the advantage was that their debt was domestically sourced.
He said the biggest problem was that the Zambian government was getting debt externally.
"If we are not careful as a country, we will find ourselves in a situation where the budget allocation to vital sectors will be competing with interests that come with debt repayment. We have to be careful," Dr Haabazoka said.
And Dr Haabazoka said the mines could not in any way suffer because of windfall tax, adding that by definition, the government would only tax excess profits.
He said mineral resources belonged to Zambians and windfall tax must be introduced so that mining investors would not always pocket everything once they get excessive profits.
"Windfall tax is a prerequisite for financial self-sustainability. When you look at the period of the late president Levy Mwanawasa when we had windfall tax, the country was doing well because we had resources and we embarked on large infrastructure development projects. Today, the mines are not paying enough taxes. Look at their contribution to GDP (Gross Domestic Product), it's very low and it does not represent a true picture of how much the mines were getting," said Dr Haabazoka.
He said there was need to enhance transparency in the way mining firms were declaring expenses and profits so that the government could collect appropriate taxes.
And Prof Saasa, who is chancellor of Mulungushi University and a managing consultant, said debt sustainability analysis was not necessarily 'objective'.
"Our debt sustainability analysis does not bring sufficient comfort to feel comfortable that we can continue borrowing. A debt sustainability analysis is required and we are not actually doing this with sufficient comfort, and government was the first to acknowledge that," Prof Saasa said.
He said there was need for the government to circulate the debt sustainability analysis in the public domain to allow for wider consultation.
"When these analyses are prepared, they should be put into the public domain so that people have an opportunity to look at them and guide government and become part and parcel of information sharing. They are subjective documents done by human beings and I am glad government conducted the analysis, but to share that information is equally important because that would have informed government that we can actually still extend it to K35 billion" he said.
"I am not so sure whether our parliamentarians were well versed in terms of the implications; probably, it was more of a vote according to whether one was PF or the opposition. The debt sustainability analysis should have been one of the documents that all parliamentarians should have been exposed to and simplified in a way so that by the time they go and vote in Parliament, they should feel comfortable that this document has indicated that for the next 5 or 10 years, the executive is allowed to go beyond the threshold, then the voting will be based on the facts rather than party affiliation."
Labels: DEBT, LUBINDA HABAAZOKA, OLIVER SAASA, WINDFALL TAX
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Our rail system will surpass that of SA - Chirwa
By Henry Sinyangwe
Fri 18 Jan. 2013, 13:30 CAT
PROFESSOR Clive Chirwa says Zambia's rail system will surpass that of South Africa in the next five years owing to a strong strategy put in place for its resuscitation.
And a board for Zambia Railways has been constituted, with Mark Chona appointed as chairperson.
Professor Chirwa, who has been given a five-year contract to revamp the country's railway system following the failed concession between government and Railway Systems of Zambia, said yesterday during the announcement of the board that his team was determined to bring in new technology in the railway sector that would be better than that of South Africa.
"We will bring in better trains, better passenger coaches and everything else, perhaps even better than South Africa. South Africa has yesterday's technology. We are bringing in new technology which will enable us move this country forward," he said, adding that his desire was to work hard to meet the people's expectations.
"We have a vision which we have already presented to the board and we are presenting it to the nation on the 31st of January at an open forum where people will be able to listen on how we intend to build Zambia Railways.
"I would like to thank his Excellency President Sata for looking up to me, to say that 'okay, he is a son of Zambia who can do something for us' and I accepted that offer and I have come home and its good to come home and I want to do something for Zambia and I will try so hard to make sure that the expectations of the Zambian people are upheld and we will within three years see a railway system which we want to build together with the board."
And transport, communications, works and supply permanent secretary Dr Muyenga Atanga said the government was satisfied with the calibre of the appointed board members for Zambia Railways.
These include economic consultant Professor Oliver Saasa who is the board vice chairperson, commerce permanent secretary Stephen Mwansa, finance permanent secretary Pamela Chibonga, retired Zambia Railways employee Richard Chipanama, mechanical engineer Geoffrey Mulenga, private lawyer Ireen Dzeko Mbewe, business management consultant Jornam Mwansa, Solicitor General Musa Mwenye, and Road Transport and Safety Agency (RTSA) chief executive officer Zindaba Soko.
"Most people are saying that we have been quiet, especially after the announcement by our leaders that Zambia Railways was repossessed to do away with the concession and that government took the initiative to source for somebody who can steer this system to progress. Government first needed to put in place a board which was a very important initiative. There was need to ensure that a properly selected board was put in place and that board is very important…," said Dr Atanga who is part of the board as a representative of the government.
And Chona said those who may have encroached on Zambia Railways land should move to pave way for its rescuscitation.
"Those holding on to ZR assets and those who may have encroached on the land which belongs to the company, this property belongs to the Zambian people and farmers, if you don't produce, it will be a white elephant railway system unless it has something to carry, so you must produce," said Chona.
Prof Saasa observed that most sectors of the economy had lagged behind due to the poor transport infrastructure.
"We have a major challenge in the state of infrastructure and the degree to which that infrastructure compliments and supplements the growth that we have recorded. This is where the railway system and roads come in because without the infrastructure that feeds in and supports the growth we have recorded, you will discover that most of the sectors will not record higher gains in terms of growth. The railway system has hampered this growth in the last 10 years," said Prof Saasa.
Labels: CLIVE CHIRWA, OLIVER SAASA, RAIL, ZAMBIA RAILWAYS
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COMMENT - Glencore International PLC is world renowned for it's tax evasion. Glencore, called the Goldman Sachs of commodities because of it's ruthless business practices, is even
headquartered in Switzerland. How obvious do they need to be? They even have Tony Hayward of BP who is now a senior non-executive director at Glencore (see 4). For more information on Glencore's activities, read:
1)
Mopani pilot audit reveals tax payment irregularities
Thursday, February 10, 2011, 8:48
2)
GLENCORE IN THE DEMOCRATIC REPUBLIC OF CONGO: PROFIT BEFORE HUMAN RIGHTS AND THE ENVIRONMENT
3)
WBAI AfrobeatRadio, 06.09.2012
Glencore International's exploitation of child mining labor in the Democratic Republic of the Congo. Aired on AfrobeatRadio, on WBAI, 99.5 FM, New York City, wbai.org.
3)
Contracts, human rights and taxation: How a company exploits a country
The case of Glencore in the DRC - Study written by Chantal Peyer in collaboration with Yvan Maillard (Bread for All); Fieldwork in the Democratic Republic of Congo led by Freek Cronje, Jean-Didier Losamgo Nzinga, Vidette Bester and David van Wyk (Bench Marks Foundation)
4)
(DAILY MAIL UK) Greed Inc: A special investigation into pollution, dubious tax practices and exploitation of African workers at Glencore
Seal tax loopholes, Saasa urges Govt
December 21, 2012
By KAIKO NAMUSA and MAYA NTANDA -
ECONOMIST Oliver Saasa has said revelations that K40 trillion was siphoned out of Zambia reflects serious lapses in the tax system which the current Government should urgently address.
And the Zambia Congress of Trade of Unions (ZCTU) says the loss of the K40 trillion between 2000 and 2010 was evidence of a failed tax monitoring system under the MMD administration which the Patriotic Front (PF) leadership should immediately address.
Professor Saasa said in Lusaka yesterday that the country had continued to lose huge amounts of money through tax evasion and corruption.
He said the Government should seal all the loopholes, especially in the mining sector.
“This is a wake-up call for the PF Government to institute measures to overhaul our fiscal tax regime. There is no need to lose trillions,” he said in an interview.
Prof Saasa hailed the pronouncement by Finance Minister Alexander Chikwanda that the matter would be probed.
ZCTU leader Leonard Hikaumba echoed similar concerns on the need to curb tax evasion as evidenced through the revelation by the Washington-based Global Financial Integrity in its report.
Meanwhile, Mopani Copper Mines (MCM) has indicated that all taxes, royalties and other dues to the Zambian Government are paid in line with the country’s legislation.
The mining company is audited annually by Deloitte and its accounts have always been given a clean bill of health and kept at the Securities and Exchange Commission.
This is contained in the April 2012 submissions by Glencore International Plc, the major shareholders of MCM and made available to the Times in Kitwe yesterday by MCM head of communications and public relations, Cephas Sinyangwe.
“Mopani is convinced that the taxes, royalties and other dues to the Government have always been calculated and paid in the proper manner in line with the applicable legislation,” read the submissions in part.
Labels: GLENCORE INTERNATIONAL AG, LEONARD HIKAUMBA, MOPANI, OLIVER SAASA, PF, TAX EVASION, WINDFALL TAX
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Sata warns new FIU board over oath of secrecy
By Roy Habaalu
Fri 16 Nov. 2012, 09:20 CAT
PRESIDENT Michael Sata has warned the new Financial Intelligence Unit board members of dismissal if they defy the oath of secrecy. And economist Prof Oliver Saasa says the unit is a body that will allow the President make correct and informed decisions.
Meanwhile President Sata has reiterated government's commitment to deliver development inclusively across the whole country.
Swearing in the five board members of the unit in the Ministry of Finance at State House yesterday, President Sata said he was aware that there would be people who would claim to be more intelligent than them.
"Where you are going, there will be so many critics who will claim to be more intelligent than you are and more especially those who have acquired wealth without working for it. So you have to be very brave and where you are not sure of what to do, consult; you have the permanent secretary, minister and the deputy and Members of Parliament and the most important thing in this job which you have been given is secrecy. What you know keep it to yourself, don't tell your husband or wife because once we know, we will fire you without swearing-in ceremony," President Sata said.
Those sworn in as board members were Caritas Zambia executive director Samuel Mulafulafu, former DEC commissioner Raphael Mungole, Cecilia Banda, John Kasanga, Joseph Chikolwa and North Western Province minister Steven Masumba.
And President Sata has urged Masumba to be a man of the people.
"And you Mr minister (Stephen Masumba), you can go to Kipushi and dance. That's part of politics. You must go and dance with everybody and you must be a man of the people,"
After the swearing-in ceremony, President Sata asked Deputy Secretary to the Cabinet Lesa Kasanda why newly-appointed labour and social security permanent secretary Trevor Kaunda was absent.
"Mr. Kasanda where is Mr. Kaunda, the permanent secretary? You are checking but we have finished swearing in ceremony, what are you checking? Where are you going to check?" President Sata asked after Kasanda said he was checking for a person who was absent.
And commenting on President Sata's swearing in of five board members of the unit, Prof Saasa said it was a body that should consider decisions made at policy and Cabinet levels.
"It's an honourable thing which enables the President to think through the implications of the country. It's long overdue that government opened up to the brains of this country to be able to assist him on how to govern. It's an independent mind that ensures that policies are taken independently and see whether policy choices taken are right or wrong and are workable," said Prof Saasa.
He said the mandate of the body should go beyond economic issues and extend to other fields so that the President is privy to what's going on in the country
"There is no question about the value of that body. It happens everywhere in the world .The Americans are more notorious. By the time you hear the President makes a statement, know it has gone through beyond those that are known state advisers. That's the way to go. It's a body that will check the inefficiency of the civil service that looks beyond individuals," said Prof Saasa.
And President Sata said government had undertaken to construct and complete secondary schools in all the 10 provinces of Zambia in order to enhance access to quality education for all.
In a statement released by his press aide, George Chellah, President Sata said during the period 2011 to 2012, a total of 83 schools had been under construction countrywide.
"Out of the 83 schools; 44 are almost finished and are scheduled for commissioning in January 2013. A further 35 secondary schools have been earmarked for construction countrywide in the period 2012 to 2013. The number of secondary schools earmarked for construction in the period 2012 to 2013 province by province is as follows: Three of the schools are in Central Province, Copperbelt (4), Western Province (3), Lusaka (3) and Luapula Province (5). The rest are Eastern Province (3), Northern Province (4), Muchinga (4) North Western (3) and Southern Province (3)," read the statement in part.
President Sata revealed that for the year 2013, the government had further earmarked the construction of four colleges to specifically train teachers in Mathematics and Sciences. The four colleges will be located in Kabompo, Nchelenge, Senanga and Katete.
"Our aspiration is to put together a well-organised, valuable and reliable public education system through substantial investments in educational infrastructure. As government we have an obligation to structure and shape the future of our general populace, particularly the younger citizens, who constitute a greater part of our population," said President Sata.
"This government will not leave out any part of the country in distributing development and will work towards unifying our people even in the share of resources, and this is but only the beginning of tremendous efforts directed at rebuilding Zambia as a prosperous and inclusive nation, whose people will work hard together in unity across their diverse backgrounds."
Meanwhile, President Sata has transferred Lusaka Province minister Colonel Gerry Chanda to Northern Province in the same capacity.
Col Chanda has swapped with Freedom Sikazwe.
And President Sata has also swapped Eastern Province minister Charles Banda with his Muchinga Province counterpart Malozo Sichone.
Labels: FINANCIAL INTELLIGENCE UNIT (ZM), MICHAEL SATA, OLIVER SAASA
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Live within your means and save
By The Post
Mon 08 Oct. 2012, 13:20 CAT
An increasing number of Zambians are living beyond their means, their earnings.
And today, it has become very easy for one to live beyond their means because credit has increased. There are so many micro-financing companies lending money to individuals. And there are also many business enterprises that are advancing goods and services to individuals on credit. Even normal commercial banks are today lending out money to individuals so easily for them to buy cars, houses, wedding dresses and so on and so forth.
It is very dangerous for one to live beyond one's means because this leads to so many temptations and opens a person to wrongdoing.
Many Zambians are today in debt everywhere. And here we are not talking about corporate debt but personal debt, the debts of an individual.
We have people earning a monthly salary of K1 million but living a life of K2 million plus. We also have people whose earnings are in millions of kwacha but living lives of those whose earnings are in billions per month. How is this possible? This is only possible through debt or unearned income. And unearned income is a prima facie case of corruption.
Debt, if not well managed, can easily get out of control. A person can end up in debt before he even realises it. Getting a credit card, taking out a loan or making a major purchase can put you in debt if you don't have sufficient resources to cover the expenses. Loss of employment can easily put one in debt. You may have a good job and good credit, then suddenly you find yourself out of work and the debt begins to mount. Before you know it, your good credit is dwindling as you struggle to maken your payments. When you fall behind, debt quickly takes hold of your life.
Debt can have many negative effects on a person's life. A person with bad credit may steal from his employers or from other people.
Financial problems can have disastrous effects on relationships. Money problems are one of the main causes of marital disputes. Spouses spend time arguing over money because of lack of proper money management on the part of one or both spouses. In some instances, there isn't enough money coming into the household to cover the expenses. In other situations, the income may be insufficient to cover normal expenses but the spending habits are out of control.
Being in debt can put a person under enormous pressure. And with one's mind focused on their debt, sleepless nights can become a pattern. You may find that you are not as efficient as you should be at work, and your temperament may change. People who are suffering from stress often become irritable and short-tempered. Debt can seem like a never-ending circle.
We even have situations today where people are borrowing money to pay off another debt, and the cycle continues. The stress of being in debt can lead to frustration and even depression.
Debt can even affect your physical health. The worry and constant stress of debt can take its toll on your body as well as your mind. People often suffer from headaches, stomach upsets, anxiety and other conditions.
Lack of sleep and not eating properly can have adverse effects on one's health. People often avoid dealing with debt because they just don't see any way out of the dilemma, but this just makes the situation worse - causing more worry, more stress and more adverse effects.
It is best to deal with the ill-effects of debt by taking one step at a time to eliminate the debt. Getting out of debt isn't going to happen overnight, but the longer you try to avoid the debt, the more it will continue to mount. There is need to take steps to conserve your resources.
It's not every kwacha that one earns that should be spent. There is need to save. Even with very low earnings, one can still manage to save something. And the benefits of saving are gigantic. One of the fundamental principles of finance is the concept that K1 today is more valuable than K1 a year from now.
The reason for this is two-fold. First, a kwacha will probably buy fewer goods and services in the future due to the destructive force of inflation. Second, if one has a kwacha in his hands today, one can invest it and earn a return in the form of interest, capital gains or dividends. The best money advice one can ever give you is to firmly establish this time value of money concept in your head. The key to financial prosperity is realising the potential value of every kwacha that comes into your hands. In fact, we think of cash as a seed - you can either eat it, that is spend it; or sow it, that is invest it.
Money, like water, expands to fill the container in which it is placed. If you lack an objective set of financial goals for your life, you probably reach the end of each month and find yourself broke. You vow that next month will be different, but it never is. This scenario is certainly one which is familiar to many of our people. Fortunately, it doesn't have to be that way.
If you find that you do not have enough money to cover all your expenses, find a way to raise money and cover the shortfall. If this means you ordering and selling fish at the market, reducing your drinking sprees, do it.
Think it sounds too hard? If so, you must answer this question for yourself: is the pain of reducing your drinking sprees and other luxuries greater than the pain of being in financial bondage? If it is, you need to resign yourself to remaining in the same financial situation for the rest of your life.
In fact, if you are prone to using debt as a means of upgrading your lifestyle, the problem will probably grow worse with time. Taking control of your finances creates a sense of empowerment that will reach into every area of your life.
The freedom that comes from knowing that you and your family will be provided for regardless of what may come up cannot be expressed in words. It is something you will experience for yourself when you make the decision that being financially independent and secure is more important than impressing your neighbours with material goods.
Labels: LENDING RATES, OLIVER SAASA, SAVINGS
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Zambians must adopt a culture of saving, says Saasa
By Mukosha Funga
Mon 08 Oct. 2012, 14:30 CAT
ZAMBIANS must curb their appetite to borrow and learn to live within their means, says Professor Oliver Saasa. In an interview yesterday, Prof Saasa said there was need for people to adopt a culture of saving.
"The average Zambian at the moment is poorly paid or has no income at all because of the high poverty levels. And that is why the average Zambian has no saving culture or the capacity to save; it is a hand-to-mouth kind of disposition," he said.
Prof Saasa said the saving culture was both a function of the earning capacity of the individual where money was worth saving to yield interest but more importantly, it was for those that had the money to save.
He added that it was also a function of the interest rate and the attractiveness of the banking sector for people to save.
"When we go to the bank to borrow, they will charge you more than 20 per cent interest but when you put the same amount of money in the bank, it will yield interest, which of course is the motivator for saving; they will give you about three per cent," Prof Saasa said.
He said there was need to encourage people to open bank accounts as a way of encouraging savings.
"...Less than 20 per cent of Zambians have accounts today. We need to encourage more people to create accounts," Prof Saasa said.
He also urged banks to open branches in the rural areas so that everyone could have a chance to save the little they had in a proper manner.
"It is very important for people to start saving more than they borrow. They should begin to live within their means," he said. "If you do not have the money, ensure that you minimise the capacity and curb your appetite to borrow."
He hoped that as the economy grew, the culture of saving would be strengthened in the country.
"The more the economy grows, the more the likelihood of seeing improvement because there will be more money in the people's pockets but for now, people must live within their means," said Prof Saasa.
Labels: LENDING RATES, OLIVER SAASA, SAVINGS
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COMMENT - It isn't begging when you are being robbed. The fact that Donor Aid is about the same amount as the taxes that the mines aren't paying should be a big clue as to where 'Donor Aid' ultimately comes from. If Zambia collected all the taxes due today, it would not need any Donor Aid.
Begging won't take us far
By The Post
Tue 26 June 2012, 13:25 CAT
FOR more than four decades, we have been dependent on begging from others, on aid from donors. But where has it taken us? Yes, there are some countries who have exploited our resources for many years and one can claim that they have a duty to pay back. But there are other countries that have nothing to do with our colonial past that have for the last four decades been assisting us financially and otherwise. Again, where has that aid left us in terms of development?
It is clear that we need a different approach to our development. But on what basis should our approach rest? It should rest on our own strength, and that means development through our own efforts, relying on what we ourselves are able to organise, mobilise.
We stand for self-reliance. But this does not mean we are opposed to international cooperation. International cooperation will always be important and a necessity because no country in this world can solve all its problems by itself. We therefore should hope for foreign assistance but not be dependent on it; we need to depend on our own efforts, on the creative power of our people.
And Michael Sata is right; the culture of begging has to come to an end. We have no right to expect others to always do things for us, even the things we can do for ourselves. Every meaningful project of ours has to be undertaken by donors, this is not on. This is not sustainable. This will not bring development to our country and our people.
We shouldn't cheat ourselves that we will develop and live better without much effort, without much sacrifice. No country in the world has ever developed without much effort and sacrifice from its people and without the great vision of its leaders.
The Europeans took great risks to sail to far-off lands to bring the necessary goods to their people. Many perished in those early voyages of discovery. Americans have lost astronauts in their quest to conquer outer space. It's all part of the process of exploration and discovery.
It's all part of taking a chance and expanding their horizons. The future doesn't belong to the faint-hearted; it belongs to the brave. It is dangerous expeditions that have been pulling them into the future.
What makes us think everything will come to us on the cheap, as manna from some benevolent friend in Asia, Europe or America?
We must thoroughly clear away all ideas among our people of winning an easy life, easy development through good luck, without hard and bitter struggle, without sweat and blood.
There are big possibilities for success, but there are also many dangers. We have many challenges. But as a country beginning to develop itself, we must in the first place work, above all, at organisation. And we should learn to approach the practical problems we face using our own heads.
This may seem to be an abstract and rather vague opinion, but it's something very important. We have to learn to pay attention, above all, to particular realities. Yes, our politicians should carry on constant propaganda among the people on the bright future ahead so that they will build their confidence in themselves.
But at the same time, they must learn to tell the people the truth, the things they may not want to hear, that there will be twists and turns before they get to that better life the future is promising them. There are still many obstacles and difficulties on the road to economic development and social progress.
We know that some people do not like to think much about difficulties. But difficulties are facts; we must recognise as many difficulties as they are and should not adopt a policy of non-recognition of difficulties. It doesn't make sense to paint a picture that everything is going to be easy; it will be instant coffee. We must recognise difficulties, analyse them and combat them.
There are no straight roads in this world; we must be prepared to follow a road which has twists and turns and not try to get things on the cheap from donors, friends and other well-wishers. It must not be imagined that one fine morning we will wake up and find all the roads tarred, all the schools and hospitals renovated and stocked with all the medicines and equipment we need.
Things don't happen like that in this world. Even if the leadership of Michael works so hard and in the most honest way, things won't happen that way, that easily. We are not in a dream world; we are in a real world. In a word, while the prospects are bright, the road has twists and turns. There are still many difficulties ahead which we must not overlook.
We should forget about the campaign rhetoric or the demagogic promises of some cheap politicians. To push our people out of poverty and bring prosperity in their lives will require a lot of work and sleepless nights on the part of Michael and his leadership and on the part of all of us as a people, as a nation.
But by uniting with the entire people in a common effort, our leaders can certainly overcome all the difficulties and enable us to live better.
Anyone who sees only the bright side but not the difficulties cannot work effectively for the development that our people are yearning for.
The wealth of a society is created by the workers, peasants and working intellectuals. If they take their destiny into their own hands and follow correct policies and take an active attitude in solving problems instead of evading them, there will be no difficulty in the world which they cannot overcome.
We therefore urge our political leaders, especially those in government, to take all this fully into account and be prepared to overcome difficulties with an indomitable and in a planned way. But in times of difficulty, we must not lose sight of our achievements; we must see the bright future and pluck up our courage. New things always have to experience difficulties as they grow.
It is sheer fantasy to think that in 90 days or in nine months everything can be changed, all our rags can be thrown away and everyone can be in new clothes, eating three square meals a day. It is sheer fantasy to imagine that all will be plain sailing and easy success, without difficulties and setbacks or the exertion of tremendous efforts.
To give our people a good and comfortable life needs intense efforts, which will include, among other things, the effort to practice strict economy and combat waste, that is, the policy of building up our country through diligence and frugality. We must not take a short view of things and indulge in wastefulness and extravagance. We must take resolute measures against anyone wasting public resources and pay special attention to thrift and economy.
Thrift should be the guiding principle in our government expenditure. It should be made clear to all government workers that corruption and waste are very great crimes.
But there is another dangerous tendency that our leadership has developed over the last two decades - an unwillingness to share the joys and hardships of the masses, a concern for personal fame and gain. This is very bad.
No amount of donor aid, international assistance, will make us live better if we ourselves do not take the necessary measures and exert the necessary effort to improve our lives. It is said that it is what we make of what we have, not what we are given, that separates one person from another.
Begging, aid, assistance may take us somewhere but it will certainly not take us far. Assistance from others is simply a ladder to get us on top of things. There is no use whatsoever trying to help people who do not help themselves. You cannot push anyone up a ladder unless he be willing to climb himself.
And moreover, the rung of a ladder was never meant to rest upon, but only to hold a man's foot long enough to enable him to put the other foot somewhat higher. Aid, international assistance, cannot be a permanent way of life for us. Our lives should be permanently anchored on self-reliance.
Labels: DONORS, OLIVER SAASA
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Saasa calls for action to reduce donor dependency
By Mwala Kalaluka
Tue 26 June 2012, 13:25 CAT
ECONOMIST Professor Oliver Saasa says President Michael Sata's statement that Zambia was tired of begging is a loud and clear message that the country should have a conscious effort to reduce donor dependency.
Commenting on President Sata's statement at the just-ended United Nations Summit on sustainable development in Rio de Janeiro, Brazil, that Zambia was tired of moving with a begging bowl, Prof Saasa said in an interview that he had been a donor support expert over the last two decades and therefore was conversant with the issue.
He said the above statement was more of a challenge to the government and the Zambians than to the donors, because Zambians have continued to depend on donor support despite being endowed with God-given resources.
"It makes a lot of sense when it is considered in that context," Prof Saasa said. "We haven't, as a country, taken advantage of these resources instead we have continued with the calabash begging."
He said President Sata's statement was a challenge to Zambians to take advantage of their natural resources, as this would eventually translate into reduction of donor dependency.
"We must have a conscious effort to reduce donor dependency," Prof Saasa said. "Free money is never free. It comes with conditions. Have you seen? The hand that receives is always below that which gives."
He described President Sata's admission that Zambia was fatigued by donor dependency, as rare, especially that it was made at an international forum.
"Let us start translating what the President is saying through clear policies of how we are going to do it," he said. "For me, that challenge from the President was very important but it is now our lieutenants in government to start translating. The challenge is on the government itself. The challenge really rests squarely on our shoulders."
Prof Saasa said the private sector also needs to be enabled to play its role in translating President Sata's challenge but that this could not be done in an environment like the current one where Zambians are almost like second-class citizens when it comes to incentives for investors.
"We should not always think that when we talk about investment, we think about foreign investment. I think that is where we go wrong," he said.
Prof Saasa said access to finances was difficult for most local investors, who are also excluded from the incentive regime.
He said the people have now heard of the PF's policies, dreams and aspirations but what they wanted to see was a little bit more conscious effort from the government.
Prof Saasa said President Sata's donor support concern was a loud and clear message that all Zambians were fed up with what was happening.
Addressing the Rio Summit on climate change, President Sata said Zambia does not need money but technology from the donors.
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," he 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. 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 amidst applause from the audience.
Labels: DONORS, OLIVER SAASA
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Consider creating informal sector jobs as well - Saasa
By Ernest Chanda
Tue 05 June 2012, 13:25 CAT
PROFESSOR Oliver Saasa says the government should not concentrate so much on creating formal jobs, but consider the informal sector as well.
Commenting on President Michael Sata's statement that he does not believe in creating casual jobs, Prof Saasa, who is an economic consultant, said every job counted in an economy. He said looking at the current situation where the informal sector had more labour force, it was prudent that the government still counted them as jobs.
"For me jobs are important no matter how you classify them. If they are there, it would be better to give them to those who deserve them because at the end of the day they will provide an income to the people. We should not only talk about creating employment in the formal sector where you wear a tie, if you are in the civil service you go to sit in an office and expect government to pay you a salary at the end of the month," Prof Saasa said.
"At the moment the major employer in the formal sector is government. So for me I will not look at certain jobs as casual, I will call them informal sector. The biggest overall employer at the moment accounting for 75 per cent of the labour force is the informal sector. You walk through Katimamulilo Road where they are constructing; those artisans are part of the labour force. So when you hear the President talking about… we need permanent… I would like us to define and redefine permanent."
Prof Saasa said the government should formulate a new employment policy that would also give incentives to employers.
He said that would help define the direction government was taking on employment creation.
"We need this as a matter of urgency. An employment policy is a policy that not only targets in a more focused way by government… the sector, one of which is agriculture, but it also has to be a policy that extends incentives to those that are going to employ labour in that category," he said.
"It must be a policy also that extends incentives, whether it's financial sector support, whether it's training; it's a policy that must give clarity of what government wants to focus their attention on. At the moment everyone is talking about more money in the pockets, but we know that some people don't even have pockets. But we need to move beyond just talking about more money in your pockets. We need to move towards the how aspect; how are we going to do it?"
He said technocrats should move in and interpret the President's statement correctly.
"So when the President makes that statement it now has to be broadened. But it's now the technocrats that must sit and say the President has spoken, but how do we do it? I expect that the technocrats are not only going to look at the formal sector to mean permanent jobs, but go beyond formal sector employment," said Prof Saasa.
"So far I'm not hearing from the Ministry of Labour, I'm not hearing from the Ministry of Agriculture. So far I'm not hearing from the Ministry of Commerce, Trade and Industry what strategies they have put in place; that for me is the music I want to dance to."
During the official opening of the Levy Mwanawasa Stadium in Ndola on Saturday, President Sata called for patience and said the government wanted to create permanent jobs for its people.
Last year, former finance minister Dr Situmbeko Musokotwane said six million people were statistically eligible to formal jobs.
[And 40,000 people work in mining. Which means that mining is not a major provider of jobs, even in the best of times. - MrK]
The PF government has admitted that employment levels remain high and that there is need to find solutions to the problem.
Labels: INFORMAL ECONOMY, MICHAEL SATA, OLIVER SAASA
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Prof Saasa responds to governments reaction on Nationalisation
TIME PUBLISHED - Wednesday, May 23, 2012, 1:52 pm
I have taken note of the Statement authored by Mr. Siame, Special Assistant to the President, on the above subject. I would like to clarify as follows in case some of the media houses that received the Press Statement from State House did not see the Post Newspaper item that Mr. Siame was reacting to:
At no point have I said it is the PF Policy to nationalize private assets. I have, nevertheless, contended that what happened to Zamtel was nationalization however one wants to look at it. The Post Newspaper was also very clear on what I said and, as such, there should not be any misinterpretation what-so-ever. When I received a telephone call to comment on the statement attributed to the President that
Government would “move in on anything which was privatized with corruption like Zanaco,” my reaction, as correctly reported by the Post, was basically as follows:
1. Giving an example of Zanaco as a company that was “privatized with corruption” does send the signal to the market that the Bank is going to face the same fate as what happened to Zamtel. I stated that a presidential statement like that is premature as it comes before the commission of enquiry that was mandated to investigate Zanaco privatization formally submits its report. Through the Post, I appealed that the Government Spokesman clarifies this statement purportedly coming from the President to allay fears and nervousness in the market, which is not good for investment.
2. I cautioned that state acquisition of private assets should be a decision of last resort as it does have the effect of scaring away investors (both foreign and local) and could affect the country’s investment attractiveness.
I believed that the President’s statement was made off-the-cuff and,hence, needed clarification. This is what I said and, indeed, reported by the Post.
In the light of the above, it is erroneous to deduce from what I said to suggest, as Mr. Siame does, that I have said it is Government policy to nationalize. I am, however, pleased that, following my statement, the clarification has now come from State House to the effect that
(a) nationalization is not PF Government policy; and (b) no decision has been made by Government to nationalize ZANACO.
Both clarifications were essentially what I requested Government to make.It is, therefore, important to understand correctly what transpired.
Oliver Saasa
Managing Consultant
Premier Consult Limited
Labels: NATIONALISATION, OLIVER SAASA, PF, ZAMTEL
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Sata's statement on Zanaco was premature - Saasa
By Chiwoyu Sinyangwe
Mon 21 May 2012, 14:00 CAT
PRESIDENT Michael Sata's statement on Zanaco was premature and sends shivers in the economy that government is going to nationalise the bank, says Professor Oliver Saasa.
And Prof Saasa says the government should not nationalise Zanaco.
President Sata on Friday hinted that government might "move in" on "anything which was privatised with corruption like Zanaco".
"Don't be misled that Zambia is going back to nationalisation; we are not nationalising anything but anything which was privatised with corruption like Zamtel, we will move in. Anything which was privatised with corruption like Zanaco we move in, but that's not nationalisation, we are going to float those publicly."
Last February, President Sata constituted a commission of inquiry chaired by justice minister Sebastian Zulu to probe the manner and process the 49 per cent stake in Zambia National Commercial Bank was sold.
Zanaco was sold to Rabobank in 2007 at US$8.25 million, and according to Zulu, the report was ready and only awaiting permission from the Secretary to the Cabinet for handover to the President.
Commenting on President Sata's statement, Prof Saasa said there was likely to be apprehension in the economy and investor community owing to the President's statement.
"That statement was premature because this Zanaco is a subject of investigations and when a statement like that is made, it's very easy for the international community, investors to immediately believe that the fate that befell the communications company Zamtel is going to fall on Zambia National Commercial Bank," Prof Saasa said.
"If a statement is made before the President receives the report or he has received it before we are made to understand that cabinet is deliberating on it, that becomes a governance issue. When the President makes a statement like that, you can start suspecting that already there are fears the President has already has already received and is making a policy statement even before Cabinet meets. That is what brings about nervousness.
It is not so much about whether they are going to nationalise or not, it is all about 'has the President made a premature statement?' Unfortunately for investors, they have a point of reference. This will not be too far-fetched when someone gets worried."
Prof Saasa who is a Lusaka economic and policy consultant challenged the government to state what President Sata meant.
"To save the President's face, we need a government spokesman to elaborate that he was just giving an example and it does not mean the decision has been made before the President receives those recommendations of the inquiry," he said.
"As far as I recall, I don't recall any announcement to the effect that a report has already been submitted. That is what makes me a little bit more comfortable that it may have been one of those off-the-cuff statements. If the report had already been submitted, this would have been already a verdict that the President has made a decision based on what was submitted."
Prof Saasa said he prayed that President Sata's statement was "off-the-cuff".
"To have included Zambia National Commercial Bank, it was inadvertent and I thought the President should have held a little longer to make that statement because for readers, listeners and investors, that can almost amount to a policy statement because he is the Head of State," Prof Saasa. "If it is Chishimba Kambwili who said it, I was going to rubbish it. The seriousness with which a statement is taken usually is not the message but the messenger. So, he is the Head of State and we cannot start playing politics about…no he didn't mean it. There was need to elaborate."
Prof Saasa said nationalising Zanaco should not be an option.
"As far as the definition of nationalisation is concerned, Zambia has nationalised the telecommunication company Zamtel," said Prof Saasa. "Zambia is going to nationalise Zambia National Commercial Bank if this is the position. But selling it back to the private sector does not mean you didn't nationalise.
Labels: MICHAEL SATA, NATIONALISATION, OLIVER SAASA, ZANACO
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Kwacha depreciation worries economist
TIME PUBLISHED - Wednesday, February 15, 2012, 6:14 pm
Renowned Economist Professor Oliver Saasa has called on government to consider putting in place mitigation measures aimed at strengthening the local currency, the Kwacha, which has been sliding against major foreign currencies.
Prof. Saasa said government, through the Bank of Zambia, should inject resources into the country’s economy from its reserves in order to stabilize the local currency.
He told ZANIS in an interview in Lusaka today that the loss of value which the Kwacha has recorded over the past few months has a negative effect on production and expansion of many sectors of the country’s economy.
He said this development threatens all the economic fundamentals of the currently hence the need to urgently institute measures against the sliding of the local currency.
Prof. Saasa attributed the depreciation of the Kwacha to the scarcity of the foreign exchange currencies such as United States dollar on the market.
He said the nervousness that characterized the investment market before and after the September 20, 2011 tripartite elections would also be a contributing factor.
The Zambian Kwacha has continued losing value against major currencies. The Kwacha has now gone beyond K5,200 against one US dollar.
According to the latest statistics released by the Bank of Zambia yesterday, February 14, one US dollar was now fetching between K5,245 and K5,265 while a Euro is now was selling at between K6, 904 and K6,932.
The Central bank figures showed that one British Pound was between K8, 244 and K8, 277 while the South African Rand was selling between K676 and K683.
According to the Central bank, one US Dollar was costing between K5, 136.89 and K5, 156.89; one British Pound was trading between K7, 947.28 and k7, 979.77 while the South African Rand was getting between K644.81and K647.73 about three weeks ago. The Euro was trading between K6, 633.78 and K6, 661.15.
ZANIS
Labels: KWACHA, OLIVER SAASA
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Sata tells ministers to Stick to procedure
By Joan Chirwa-Ngoma
Tue 31 Jan. 2012, 13:00 CAT
PRESIDENT Michael Sata has warned his ministers against making pronouncements that are not in line with government policy.
But economic consultant Professor Oliver Saasa says President Sata's statement signals the lack of coordination in the government, cautioning that there must be careful consultation among stakeholders before salary hikes are effected for public workers to avoid overstressing the economy.
In apparent reference to recent announcements of salary increments by government officials, President Sata cautioned ministers and other government officials against taking approaches that were away from established procedure.
"Ministers and government officers should not resort to arbitrary positions which can only induce loss of confidence in the country and in the process undermine progress which is essential and crucial to achieving poverty alleviation and reduction within the shortest time possible," President Sata said in a press release issued by State House deputy Press Secretary Amos Chanda.
"Government style and policy is to discuss with employers and workers, matters of mutual interest following the statutory channels and procedures. To this effect, some of the approaches pursued by individuals in government are adrift with established procedure. Labour unions are free to bargain with employers on salary or wage settlements as by law established."
President Sata said employers must guard against inflationary pressures when adjusting salaries for their workers.
"In the interest of the economy, the President's guidance, save for the special case of workers in the medical sector, is that the salary adjustments stay as close to inflation as possible. This is necessary to avoid triggering inflationary spirals which would then render salary increases futile," said President Sata.
Last week, labour minister Chishimba Kambwili announced in Ndola that the government had increased salaries for all health workers by 100 per cent, a decision that has the potential of triggering inflationary pressures on the local economy.
Kambwili said the pay rise would boost morale among health workers across the country.
But Prof Saasa, in an interview, said the principle behind salary increments for health workers was not bad except that the decision may pose serious fiscal challenges on the government.
"Is he President Sata thinking twice about it? It is government's duty to ensure they health workers are properly remunerated. The principle is not bad. But how much salaries go up should go with how much the government is able to pay. If you don't work this out, it will be a serious fiscal challenge. If you are passing too much money suddenly, all people will do is to peg their prices a little bit higher because people's purchases power has increased," he warned.
"The capacity of the government needs to be weighed to be able to handle the up-scaled salaries…Government shouldn't overstress the economy to a level where it might get depressed. Consultation is essential in the government."
Prof Saasa said President Sata's statement signals that there is little or no coordination in the government to a point where some ministers could make pronouncements that have far-reaching consequences on the economy.
"Is what these ministers are doing in line with what the president wants done? There must be guidance from State House," said Prof Saasa.
Last week, Judiciary officials also pressed the government for a salary increase by staging a one-day work stoppage as they demanded a K2 million rise across the board.
Investors have also promised to adjust salaries for their employees, with Konkola Copper Mines granting a 17 per cent pay rise to its employees effective January 1.
Labels: AMOS CHANDA, CHISHIMBA KAMBWILI, MICHAEL SATA, OLIVER SAASA
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COMMENT - So much for free markets. If they want to strengthen the Kwacha, do it in a constructive way, tax the mines for a billion a year or more, and build a couple of billion in reserves. Don't throw away currency reserves trying to prop up the currency by having the state buy them up.
BoZ needs to intervene in kwacha fall - Saasa
By Chiwoyu Sinyangwe
Mon 02 Jan. 2012, 13:56 CAT
THE Bank of Zambia needs to reflect and intervene in the current collapse of the kwacha on the backdrop of a strengthening US dollar, says Professor Oliver Saasa. Swearing in the new Bank of Zambia governor Dr Michael Gondwe, President Sata urged the new central bank chief to work at strengthening the kwacha.
The kwacha has come under pressure since the beginning of the last quarter of 2011, closing the year trading for K5, 110 and K5, 130 for bid and offer, a 11 per cent decline.
The weakening kwacha has raised concern among domestic traders who contend the under-pressure currency was hurting local businesses in a net-importing country and could also have a bearing on the country's annual inflation rate which closed last year at 7.2 per cent.
Prof Saasa, a prominent business and policy consultant said the current fallout of the kwacha was a matter of concern to the country's macroeconomic stability and also the need of the industry and commerce.
He said there was need to use some of the foreign exchange reserves estimated at over US $2.3 billion to calm some turbulence in the domestic foreign exchange market.
"You cannot allow a runaway depression of the currency when you have quite significant amount of reserves," Prof Saasa said.
"Right now, our foreign exchange reserves are somewhere over US $2 billion. What the central bank does is that if there is a capital flight in terms of the dollar, because investors are running away to safe havens, you inject a bit of that reserve into the market so that the supply of dollars is sufficient not to upset the value of the kwacha too significantly. Definitely, anything that is way above K5, 200 it calls for reflection on the part of the central bank." Prof Saasa explained that the kwacha has come under pressure and the under pressure euro has resulted in an increased demand for dollar by global currency traders and investors.
"One of the reasons that has stressed the kwacha is because major convertible currencies have gained value," said Prof Saasa.
" Because of the stressed euro, most of the investors are hedging their money in US dollar, and American dollar has gained so much power, and since we are so dependent on the American for much of our trade and commerce, we have actually been affected."
Prof Saasa warned that the intervention of BoZ in the bearish kwacha should not result in exchange controls in the local foreign exchange market. "The central bank sometimes might be required where the kwacha tends to be very stressed but one has to be extremely careful because one does not want to end with a situation whereby you control the exchange rate to a level where you ignore the market and you allow too many administrative controls," said Prof Saasa.
Labels: BOZ, KWACHA, OLIVER SAASA
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Fuel increase threatens economic gains - Saasa
By By Gift Chanda
Sun 13 Feb. 2011, 04:01 CAT
THE fuel price hike is likely to affect the country's economic projections this year, says economic consultant Professor Oliver Saasa. And energy consultant Andrew Kamanga said the increase in fuel prices was inevitable considering the rise in oil prices on the international markets.
The Energy Regulation Board (ERB) on Friday announced an increase of almost K1,000 in the fuel pump price. A litre of petrol was adjusted from K7,639 to K8,647 while diesel was increased from K6,999 to K7,958 per litre. The price of kerosene has now been pegged at K5,641 from K5,008 per litre.
ERB attributed the increase to the rise in prices of crude oil which have surpassed US$100 per barrel on international markets and the depreciation of the kwacha. It stated that the latest cargo of crude was procured last December at US$81 million compared to the May 2010 consignment procured at US$68.6 million when the last price review was done.
In an interview, Prof Saasa said the country’s growth projections were not likely to be met this year if fuel price hikes were not stabilised quickly.
He said this also threatened to reverse the recent economic gains.
Prof Saasa said the country was likely to experience an increase in inflation while gross domestic products faces a reduction from what was being projected because costs of inputs in the production line may go up if fuel prices were not stabilised.
¨The long-term effect of this is actually transferring the effect to the consumers and also to production which will have a disturbing effect on prices,” he said.
¨Fuel is one of the inputs in production and with these increases, one hopes that the effect is not too significant to seriously affect the economic fundamentals because if it does, it may affect our growth projections.”
He said despite ERB increasing fuel by a minimal K866, transport costs were likely to go up.
¨You find that the increases in transportation costs are not proportionate to the actual increase of the cost of fuel so the consumer bears the brute. So one hopes that they will be some level of restraint on those in the transportation sector,” said Prof Saasa.
But Kamanga said the increase was unavoidable.
¨The question is that will we be able to absorb it in the economy without affecting the key parameters such as the projected inflation and economic growth? If we are able to manage or cushion the impact then that will be good,¨ he said. ¨But in a practical scenario any increase in fuel especially diesel, which is used in production, is that almost automatically we start seeing the prices of commodities going up, transport is one of them.¨
Kamanga said the transportation costs would threaten maize prices.
¨We are going closer to the end of the rainy season into harvest period. We hope that this will not lead to an increase in price of maize, which obviously the farmers will be happy with,¨ he said.
He said in the short term, the fuel price increase may have an impact on the economic growth the country achieved last year.
¨We are just in February and our budget cycle starts in January so the impact may not be that much. But we have to see how sustainable these prices are going to hold. If they are going to hold for the next one quarter, then we can safely say the negative impact will be manageable, if it exceeds that then definitely inflation is going to go up," said Kamanga.
Labels: ANDREW KAMANGA, ECONOMY, ERB, FUEL, OLIVER SAASA
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Fuel increase threatens economic gains - Saasa
By By Gift Chanda
Sun 13 Feb. 2011, 03:59 CAT
THE fuel price hike is likely to affect the country's economic projections this year, says economic consultant Professor Oliver Saasa. And energy consultant Andrew Kamanga said the increase in fuel prices was inevitable considering the rise in oil prices on the international markets.
The Energy Regulation Board (ERB) on Friday announced an increase of almost K1,000 in the fuel pump price. A litre of petrol was adjusted from K7,639 to K8,647 while diesel was increased from K6,999 to K7,958 per litre. The price of kerosene has now been pegged at K5,641 from K5,008 per litre.
ERB attributed the increase to the rise in prices of crude oil which have surpassed US$100 per barrel on international markets and the depreciation of the kwacha. It stated that the latest cargo of crude was procured last December at US$81 million compared to the May 2010 consignment procured at US$68.6 million when the last price review was done.
In an interview, Prof Saasa said the country’s growth projections were not likely to be met this year if fuel price hikes were not stabilised quickly.
He said this also threatened to reverse the recent economic gains.
Prof Saasa said the country was likely to experience an increase in inflation while gross domestic products faces a reduction from what was being projected because costs of inputs in the production line may go up if fuel prices were not stabilised.
¨The long-term effect of this is actually transferring the effect to the consumers and also to production which will have a disturbing effect on prices,” he said.
¨Fuel is one of the inputs in production and with these increases, one hopes that the effect is not too significant to seriously affect the economic fundamentals because if it does, it may affect our growth projections.”
He said despite ERB increasing fuel by a minimal K866, transport costs were likely to go up.
¨You find that the increases in transportation costs are not proportionate to the actual increase of the cost of fuel so the consumer bears the brute. So one hopes that they will be some level of restraint on those in the transportation sector,” said Prof Saasa.
But Kamanga said the increase was unavoidable.
¨The question is that will we be able to absorb it in the economy without affecting the key parameters such as the projected inflation and economic growth? If we are able to manage or cushion the impact then that will be good,¨ he said. ¨But in a practical scenario any increase in fuel especially diesel, which is used in production, is that almost automatically we start seeing the prices of commodities going up, transport is one of them.¨
Kamanga said the transportation costs would threaten maize prices.
¨We are going closer to the end of the rainy season into harvest period. We hope that this will not lead to an increase in price of maize, which obviously the farmers will be happy with,¨ he said.
He said in the short term, the fuel price increase may have an impact on the economic growth the country achieved last year.
¨We are just in February and our budget cycle starts in January so the impact may not be that much. But we have to see how sustainable these prices are going to hold. If they are going to hold for the next one quarter, then we can safely say the negative impact will be manageable, if it exceeds that then definitely inflation is going to go up," said Kamanga.
Labels: FUEL, OLIVER SAASA
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Sierra Leone finance minister urges Zambia to reconsider windfall tax
By Mutale Kapekele and Chiwoyu Sinyangwe
Wed 20 Oct. 2010, 04:00 CAT
SIERRA Leone Minister of Finance and Economic Development Samura Kamara has advised Zambia to re-introduce the windfall tax. And Professor Oliver Saasa has called for sustained public pressure to compel the government to reintroduce the popular windfall mining tax or raise mining taxes in view of current high copper prices.
In an interview in Washington DC, Kamara said mineral rich countries on the continent like Zambia should always be alive to the fact that mining investors were solely interested in growing their balance sheets and that it was up to individual countries to generate revenue from the sector.
“In the case of Zambia, although I must admit that I am not very familiar with the reasons for the government to reverse the windfall tax, it is however very important that they (government) reconsider that position,” Kamara said. “In Sierra Leone which is a mineral rich country, we will definitely not go the Zambia way.”
Kamara said there was need for African countries to look at the quality of investments that were getting into the mining sector.
“We need to address incentives packages vis-a-vis the tax we hope to generate from the mines,” he said. “There has to be a balance, this is usually a delicate balance but it has to be there. We should decide if we are to get tax upfront or after wards but we should ensure that our people see the benefits of our natural resources. Investors’ business plans are about selling shares but we also don’t want to lose our tax. The challenge is getting the balance.”
Kamara further urged African countries to improve their capacity to negotiate for mining investments to favour the continent and their people.
“We need to strengthen our negotiation skills especially when dealing with Chinese investors who are very good negotiators. Let’s match that skill and come up with win-win solutions,” Kamara said.
“Economics of the world are changing. Africa is the last station for development and it has enough opportunities in terms of mineral wealth. The financial sector is growing and all we need now is to strategise on how to attract global interest that will favour our economic growth.”
And several stakeholders in the country have expressed concern at the low revenue the government is collecting from the mining sector despite the high metal prices after having suspended the windfall taxes under the Rupiah Banda regime.
Zambia’s key economic partner the International Monetary Fund has already noted with concern the low revenue from the mining sector after the suspension of the windfall taxes.
IMF resident representative Perry Perone last week observed that the contribution of mining to Zambia’s Treasury was very small though the sector comprises a very large part of the economy.
He said the mining sector was contributing about 70 per cent of the country’s foreign exchange earnings, constituting 9.7 per cent of the total economic output, while tax contribution stood at a paltry one per cent of the total collection by ZRA.
“The revenue trends are declining and that is not a secret, tax revenues have been trending down...Direct taxes like income tax have been relatively stable but the real problem has been in indirect taxes and of course the issue of the mining sector which contributes on a very small amount to the Treasury even though it comprises a very large part of the economy,” Perone said.
But both President Banda and finance minister Situmbeko Musokotwane have maintained that there won’t be a reversal over the suspension of windfall taxes citing the threat of scaring away mining investors despite the copper current super high prices peaking at a historic high of over US$8,000 per tonne.
And Prof Saasa regretted that the government had continued to be adamant on maximising Zambia’s revenue receipts from the vast mining sector despite the current record high copper prices.
President Rupiah Banda and his key ministers like
Musokotwane recently heightened opposition to the
reintroduction of the windfall tax on the foreign mining companies despite calls from key international organisations like the International Monetary Fund (IMF) for increased revenue collection from the mining sector.
The calls come in the wake of current robust international copper prices which last week traded around US $8, 200 per tonne with respected global market leaders Goldman Sachs predicting that within a year, copper prices will hit US $11, 000 per metric tonnes, buoyed by increased demand for copper as the global economy rebounds.
In an interview, Prof Saasa said Zambia had no option but to revisit and raise mining taxes.
“I feel that the windfall tax has to be introduced or we have to revise the tax regime in a manner that maximises the receipts to the treasury. I do not believe that we have an option at this level,” Prof Saasa said. “I was a little bit disappointed that no reference whatsoever to the mining regime was mentioned in the new budget of 2011. Even mentioning that we are going to discuss or negotiate with
them mining firms. We needed to do that.”
Prof Saasa accused the government of giving preferential treatment to the mining firms which did not commensurate to their contribution to treasury. He further accused the government of abetting the mining firms’ failure to pay legitimate taxes like the windfall tax which was introduced under late president Levy Mwanawasa.
“You imagine if you and me resisted of refused to pay tax what would happen? ZRA Zambia Revenue Authority would be knocking on your door,” he said. “So, even at the level where legitimately they are supposed to pay tax, they are refusing...”
Prof Saasa said there was need for the government to declare its seriousness towards the mining sector by getting rid of the ultra vires Development Agreements, and also introduce a clear tax regime, not the current variable profit.
“If we will be talking about variable profit tax as the basis for harvesting, as a country from the copper receipts from the good price on the global market, I have difficulties with that,” said Prof Saasa.
Labels: OLIVER SAASA, SAMURA KAMARA, WINDFALL TAX
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Mutati under fire over RP Capital
By Mutale Kapekele, Fridah Zinyama and Kasapo Chibwe
Tue 15 June 2010, 04:20 CAT
COMMERCE minister Felix Mutati has insulted Zambians by his comment that they cannot understand the RP Capital valuation report for Zamtel, development activist Mulenga Chikwanka has charged.
And Professor Oliver Saasa yesterday said transparency and accountability demands that government should release the RP Capital valuation report unless there are compelling reasons not to do so.
Meanwhile, University of Zambia economics lecturer Webby Wake has said government was also partly to blame for the poor state in which Zamtel was due to its lack of settleement of billions of kwacha in bills to the entity.
On Saturday Mutati said Zambians would not understand the government’s sale of Zamtel from the valuation report and asked that they listen to the “rational explanation” from the government.
In an interview yesterday, Chikwanka said Mutati’s comment was insulting to the general citizenry and argued that it was necessary for the government to release the report for the citizens to analyse and understand the Zamtel sale.
“I find it insulting for Mutati to suggest that Zambians could not understand a report,” Chikwanka said. “It means that the government is suggesting that knowledge and access to information is unique to the MMD.
That is very disappointing; especially that it is coming from a minister who is held in very high esteem by most Zambians.”
Chikwanka said the government should make the valuation report available for the people to effectively participate in governance.
“What has happened is like a situation where a person engages a real estate agent to sell their property and then afterwards the agent makes a sell but refuses to release the real value of that property,” he said.
“That would bring about a lot of speculation and it’s like saying Zamtel did not belong to the country but the MMD. How do they expect the people to participate in governance without information? What type of government is this which thrives on people’s ignorance?”
And Professor Oliver Saasa said transparency and accountability demands that government should release the RP Capital valuation report unless there were compelling reasons for them not to do so.
“The public is sufficiently enlightened to understand what government did,” he said. “We do not want the situation of the mining Development Agreements to occur again in Zambia, as government withheld vital information which only became public after a few interested people read it and understood the implications for the country.”
Prof Saasa said it was important that such a situation was not created again by government allowing the few Zambians who can understand what the valuation report says and then simplify it for the ordinary Zambians.
“Those who are given an opportunity to serve the public should be servants of the public. After all, they are in such positions because of the public. Zamtel is a public institution which is owned by ordinary Zambians and any decision made concerning it affects everybody.
Government was acting on behalf of the public and if they demand to know what the report says, they should be obliged.”
Prof Saasa aid Mutati’s position that the public would not understand the RP valuation report was very misplaced and just showed that government had something to hide.
And Lantern Solutions Ltd managing consultant Dr Bwalya Ng’andu said the whole process of selling Zamtel had been shrouded in suspicion.
“The sale of Zamtel has raised questions and suspicions from the very beginning,” he said. “It is a matter of public interest that government releases the report, and if government has nothing to hide, let them release it to the public.”
Dr Ng’andu wondered why government was so bent on withholding the RP report from the public, adding that the public has every right to know what the report says.
“We have a right to know...and how much Zamtel was valued at,” he said. “Regarding the complexity of the RP report...I do believe that there are a reasonable number of Zambians who can read and understand the report. Those should be given an opportunity to do so.”
Dr Ng’andu added that as long as government was not forthcoming with information about the sale of Zamtel, suspicion and questions would continue to be raised about the sale of Zamtel.
Meanwhile, Webby Wake said it was unfair for government to put the blame on Zamtel employees accusing them of mismanagement of the company yet it owed the company billions of money for the services.
“Zamtel was grossly abused by government which is why it is in this state today. It is not because of mismanagement by employees that the company is struggling but rather because of government’s unsettled debt,” he said.
Wake said Zamtel would have been better off if the government had paid off its’ debt instead of selling off 75 per cent shares, as the money would have been used to revamp the company. He, however, observed that privatisation was welcome as it always helped in recapitalizing a struggling institution.
On the other hand, Wake noted that it would have been nice to continue having a public telecommunications company as a nation as well as a strategic industry in the hands of the public. He said Zamtel would no longer be subject to political interference as it was now in private hands.
“Privatization is welcome as it injects new capital in a company that is struggling. However, it can also prove futile depending on the intentions of the new owners. We do not know the plans that the new owners have nor do we know the terms of negotiations of the deal,” Wake said.
He explained that privatisation could prove futile in the sense that the new owners may have a different plan for the company or fail to carry out the original operations of the company and decide to pull out.
He cited an example of RAMCOZ and Zambia Railways as areas where privatisation failed as it was left up to the new owners to run the companies to their satisfaction and bring in development, which unfortunately did not happen.
“It is not always the case that privatization brings in capital. However, it can be forced on the new owners to bring in an acceptable level of capital or technology through negotiations by government,” he said.
Wake added that the new owners of Zamtel could decide to close the cell phone part of the company depending on the way they decided to run the company.
He said one could only hope that government realised its objective of bringing in new owners so that a repeat of the Zambia Railways scenario was avoided.
And Wake advised government to stop comparing Zain and MTN to Zamtel as government paid for the services it engaged from the two companies whereas it dealt on a credit basis with Zamtel.
“Government is in the habit of praising the other two telecommunications companies while berating Zamtel but it forgets that it pays for the services of the two whereas it credits the services it obtains from Zamtel,” Wake said.
He said the three companies could not be compared as they provided different services. He said Zamtel offered three services of landline services, cell phone services and internet services hence the large work force that the company engaged.
Wake further said the sell of Zamtel would have been more valuable if government had separated the company into two entities of landline service provider and cell phone service provider.
He said there was need for a strong regulatory framework to be put in place in which government would invest heavily as telecommunications companies got away with a lot of things that bordered on abuse of the customers.
“A strong regulatory framework is needed especially that Zamtel initially carried out the regulation of cell phone companies and is now getting into private hands,” he said.
He said Zambia had the law of free capital flows which meant that a company could bank its money anywhere it chose to as there were no restrictions as to where one wanted to bank its money. Wake said if the profits made by the company could be banked in Zambia, the money could be used for developmental programs.
“I hope there is a clause that can make the company a public limited company in much the same way that BP was done,” Wake said.
He explained that in a public limited company, the new owners could not just leave when they felt they were losing out on profits. He said a repeat of the Anglo saga was not wanted and advised that a clause stipulating that they could only leave if they found new owners to fill in be strongly considered.
Wake added that government should strive to make telecommunication competitive so that tariffs could be lowered.
Labels: FELIX MUTATI, OLIVER SAASA, PRIVATISATION, RP CAPITAL PARTNERS, ZAMTEL
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Govt should reinstate fuel subsidies - Prof Saasa
By Chiwoyu Sinyangwe, Moses Kuwema and Kabanda Chulu
Thu 13 May 2010, 04:50 CAT
THE government should reinstate the fuel subsidies as a way of insulating domestic production lines and also preserving macroeconomic stability in the country, Lusaka economic consultant Professor Oliver Saasa said yesterday.
Prof Saasa warned that the economic growth rate the country had achieved in recent years risked being eroded by the current increases in energy prices.
The ERB on Tuesday announced a fuel increase of between 9.8 per cent (K598) and 13.18 per cent (K882) effective Tuesday and based on Lusaka pump prices. The move was blamed on high international oil prices and government abandonment of subsidies.
And commenting on the development, Prof Saasa feared the deterioration of the economic gains Zambia has made in recent times even amidst the global economic crisis.
He projected that Zambia would not achieve the key economic targets such as annual inflation rate and the Gross Domestic Product. He wondered why the government had abandoned fuel subsidies when it was subsidising mining activities through concessions embedded in the Development Agreements.
“There is need for the government to provide subsidies to some level that will allow for the achievement of the set macroeconomic targets,” Prof Saasa said.
“I wonder why in this country we treat subsidies as a curse…It is something governments world-over do to achieve growth targets. For me, 13 per cent increase is certainly too much to come in quick succession and in my view it is not purely market driven. So there is need for some modulation.”
Prof Saasa said some overzealous economic decisions, especially from the remains of International Monetary Fund (IMF) and World Bank peddled economic policies under the structural Adjustment Programme were pushing the idea of abolishing subsidies when key industries like mining companies were surviving and thriving on the government rebates.
“Mining companies shoulder on some relief provided to them under the development agreements for them to increase output,” said Prof Saasa. “So, at the rate we are going, the more we speed with these increases, the less we achieve the set targets for this year.”
And Mazabuka Central member of parliament Garry Nkombo said the increase in the pump price of fuel will have negative effects on the economy.
Nkombo said the increase would have an effect on prices of goods and services.
“The price of energy is the determining factor of all goods and services so the cost of transporting goods from far flung areas to the markets will go up and this will have negative effects on domestic households,” Nkombo said.
He wondered why the government kept on preaching about rural electrification when the rural communities could not afford the commodity.
He said civil servants’ salaries had only been increased by 15 per cent while the pump price of fuel had been increased by 13.18 and 9.8 per cent.
Nkombo wondered why other landlocked countries such as Zimbabwe and Malawi had lower prices of fuel as compared to Zambia.
And Zambia Association of Manufacturers (ZAM) vice-president Eugene Appel said the increase in fuel pump prices would make it difficult for companies to recover costs of production since contracts are fixed annually.
In an interview in Kitwe yesterday, Appel said fuel was an imported commodity which was affected by the foreign exchange regime.
And Chamber of Mines geal manager Frederick Bantubonse said the increase would result in higher cost of production for the mining sector.
Petrol will now cost K7,573 from K6,652 per litre, while diesel will be selling at K6,898 from K6,414 per litre.
Labels: ENERGY, FUEL, OLIVER SAASA
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Zesco proposed hike is a threat to economy – Saasa
By Chiwoyu Sinyangwe
Tue 27 Apr. 2010, 15:30 CAT
THE proposed 36 per cent electricity tariff increase by Zesco is a threat to the local economy as it will hurt macroeconomic stability, Lusaka economic consultant Professor Oliver Saasa has observed.
And Zambia Chamber of Small and Medium Business Associations (ZCSMBA) executive secretary Maxwell Sichula has said the performance of Zesco continues to manifest inefficiency despite the power utility improved rating under the Energy Regulation Board (ERB) key benchmarks.
Zesco has proposed to increase electricity tariffs for 2010/11 by 36 per cent in line with the roadmap to reach cost-reflective levels.
Acting managing director Ernest Mupwaya stated that the current tariffs were still far below the cost-reflective levels required to maintain the power generation and supply infrastructure.
Last year, Zesco applied for 66 per cent tariff rise in electricity, but the ERB approved a 35 per cent average increase effective August 1, 2009 to 2010.
Commenting on the development, Prof Saasa said although the proposed electricity tariff adjustment was inline with the roadmap to reaching cost-reflective tariffs needed to ensure Zesco has enough revenues to invest in expansion of its generation and supply facilities as well as make the electricity generation sector attractive to private sector capital, there was need for a moderated approach to take care of the country’s macroeconomic targets.
Prof Saasa said there was need to balance between the need to achieve cost-reflective tariffs and macroeconomic stability in the country.
Prof Saasa said the proposed upward adjustment in power tariffs was a clear threat to the growth of the economy to targeted levels needed to make a dent on the high poverty levels in the country.
He cautioned that the tariff increase would lead to the country failing to contain the inflationary pressures, which recently were worsened by the increase in fuel prices.
Prof Saasa said the proposed 36 per cent electricity tariff increase would also lead to a surge in the cost of doing business.
Zambia's inflation accelerated to 10.2 per cent year-on-year in March from 9.8 per cent the previous last month, a jump the Central Statistical Office attributed to the increase in the prices of food products and public transport.
Most analysts predict that the country’s annual inflation rate for this year will close at around 12 to 13 per cent.
“I don’t think as Zesco continues with these adjustments, some of the economic targets will be met,” Prof Saasa said. “What we are going to see is that the producers in this country will pass on the increase to consumers and consumers will pass on to other consumers and this will certainly lead to a rise in inflation. And the consequence of all that is that the exchange rate will be affected, the interest rates will go up and so it will be difficult for the government to achieve even the economic growth target set for this year and that will definitely hurt our growth aspirations.”
Prof Saasa said there was need to ensure that electricity tariff adjustment targets were aligned to the country’s growth targets.
“Cost recovery levels are very important for any company to function in the free market but there is need to ensure the speed with which that is done is moderated because some sectors are strategic and any decision there do have ripple effects in all sectors of the economy,” he explained. “Whoever is doing that needs to be mindful that the graduation towards cost recovery levels needs to be done to moderate their impact on the general being of the economy.”
He called for a strong State to ensure there was an even platform for all economic interests in the country.
Prof Saasa said the government should either reduce the electricity surcharge costs borne by Zesco or outrightly provide some subsidies as a way cushioning the impact of this price hike on most key economic activities in the country.
He said the government subsidies in sensitive sectors were not entirely new as has been the case with fuel.
Prof Saasa said even the proposed uniform national pump price for fuel would only be achieved through Treasury subsidising consumers.
“In any case, ERB is owned by the government so they can instruct to say even as these people want a 36 per cent increase, only allow for, say, 20 per cent,” Prof Saasa said. “The government can also provide for subsidies through reducing the surcharges borne by the producer which, in this case is Zesco.”
Prof Saasa said there was need to learn from the time when the International Monetary Fund (IMF) and World Bank tailored economic policies of extreme liberalisation did a heavy damage to the local economy and almost ruined it down.
And separately, Sichula said although Zesco continued to score success measured against ERB Key Performance Indicators (KPIs), the reality on the ground was contrary.
ERB evaluates Zesco’s performance on KPIs on a quarterly basis in order to monitor its progress in improving efficiency and quality of service as agreed under the Multi Year Tariff Framework.
Sichula said there was need for improvement in the overall delivery of service by Zesco as the country moves towards cost-reflective tariffs.
He also said the proposed increase would impact negatively on the local businesses as it would increase the cost of doing business as electricity was a key input in the production line.
“We just hope that as they make these increases, they can become a little more efficient,” Sichula said. “People are still complaining…connection take months. So, we hope Zesco can offset these increases by becoming a little more efficient”
The ZCSMBA strongman also questioned the positive performance of Zesco against the ERB’s KPIs.
“I haven’t seen much from ERB and I hope they can keep a tab on Zesco,” said Sichula. “They maybe scoring on the estimation of ERB but on the ground, people feel a lot needs to be done.”
Labels: ECONOMY, ENERGY, OLIVER SAASA, ZESCO
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