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Saturday, September 26, 2020

Roadway infrastructure, minimum wages and production viability in Zambia

Economy Roadway infrastructure, minimum wages and production viability in Zambia

File: The driver of a light truck ponders his move in flooded roads in Libala township

By Nellow Simukonde (Civil Engineer)

In the last 10 years, Zambia has seen a huge influx of used vehicles from Japan. Many individuals and families are now able to afford one or two of these cheap used vehicles. Vehicles of different types flood the streets everyday, many being used for businesses as cabs and minibuses. While it is unarguably a pleasant change to be able to afford and own a vehicle for most individuals, there is a downside in our current economic climate that seriously needs attention in Zambia as traffic volumes continue to grow.

The increase in traffic volume without proportionate improvement in roadway capacity and quality and,consequently, it’s direct and indirect impacts on the economy should be a major concern for the government.

Bad roads have had a wider negative impact on the Zambian economy than just direct impact on businesses. Fuel in Zambia costs up to k10,000 per liter (approximately $7 a gallon), depending on where you are in the country. This is very expensive. If you have inadequate roads, businesses and individuals spend more time on the road. In Lusaka, in particular, motorists, including individuals, spend time every day idling in traffic jams from excess traffic volumes.

firms and businesses will find it unfair for the government to ask them to pay higher wages when it has not created an environment that would enable better profitability to enable those firms to pay the higher wages

There is a significant amount of money wasted everyday by people and businesses just sitting on the road, burning expensive fuel. More money is also
spent to maintain the quickly wearing vehicles as they are driven on trenchy unpaved roads, dust, potholes and jagged edges of pavement.

On a macroeconomic scale, billions of kwacha are wasted every year because of inadequate roads. This is money individuals could save, start businesses and employ people thereby, boosting demand in those businesses. The result is the same – those businesses do better,expand and employ/pay more.

This waste applies to government operations as well.An efficient road system – safe roads with good, smooth pavement, good geometric design and good traffic control devices – means that businesses spend less time on transportation. Less time spent on the road means less money spent on fuel and overtime payments to drivers.

Most importantly, a good paved road will result in lower rates of depreciation of capital (trucks, etc) and reduce lost production. A business that owns a truck for 20 years instead of 10, as a result of good roads, saves money for expansion, hiring more workers and better wages.

In Zambia, fuel has an inelastic demand for almost every one that owns a functional vehicle. Individuals will sacrifice other important necessities just to buy fuel and be able to drive. This inelastic demand helps to keep fuel prices up and increasing. This is strange given people can easily do without a vehicle, or at least drive only occasionally.

Public transportation is available everywhere. A new culture in which a car has become a necessity has overtaken the country right under the MMD government’s nose, otherwise government would have seen the need to invest in good, durable roads or at least control the influx of these cheap vehicles. And I do not consider the recent mediocre work on roads for purposes of swaying voters as improvement or sound investment. It is a complete waste of money.

The PF government has taken a zealous approach towards change and, in particular, improving labor conditions and creating employment. It is
important to note that while creating employment is a noble pursuit,we need to consider that jobs in the private sector are a result of long term initiatives and policy implementation. Job creation is a result of effective implementation of supply side policies -investment in good roads, lowering taxes, most important of all being the need to address the prohibitive interest rates.

The government’s effort to raise the minimum wage is cause for a lot of excitement for workers. However,it is important for the Ministry of Labor to consider the impact of suddenly raising the minimum wage, ahead of implementing policies that lower business costs, increase productivity and profitability;i.e.policies that will lower production costs for firms and lead to higher productivity from existing factors of production. Without these changes, raising the minimum wage may force many small businesses to lay off workers and we may accomplish the very opposite of what we seek in the short term.

It sounds good to many to hear that their wages will be increased, but not so good if it means that they will have to sacrifce their job so that a co-worker can be paid a higher wage as required by government. In other words, firms and businesses will find it unfair for the government to ask
them to pay higher wages when it has not created an environment that would enable better profitability to enable those firms to pay the higher wages. The latter must come before the former. If the cost of labor increases in the absence of the capacity to increase productivity otherwise, firms and businesses will likely downsize and unemployment will go up.

In some cases, the increased wages may increase the productivity of the remaining workers and maintain the firm’s production, but someone will still have lost a job and will hurt to feed his/her family. The current reality is that one would rather have a job earning k500,000 than not to have a job at all. The government must approach this issue cautiously because, for right now,it needs a wide tax base, and also has expectations to live up to by
December 22.

An unemployed citizen does not pay income taxes.It is comforting to see that our new government has turned an ear to the prohibitive interest rates that have also prevented businesses from borrowing soft loans, expanding and creating employment. However,high interest rates have mostly resulted from lack of lender confidence in businesses and you cannot blame the banks, because they are also businesses.

Businesses must be sound to qualify for soft business loans from banks. And if they are not sound enough for a bank, they are probably not sound enough even for government grants or subsidies. So, we come back to roads (or indirectly cutting production costs) because this is a one direct responsibility of government that could help businesses (farmers included) become sound in the first place.

I know the pressure is on for the new government to present a semblance of accomplishment in a very short time. However, I hope rush decisions will not be made on the supply side of the economy,especially decisions that reduce labor market flexibility beyond what it is right now, for the purpose of putting more money in people’s pockets. With this expectation in people’s minds, losing their job instead, would be disastrous.

The PF government must not only work to cushion businesses by helping them produce more by lowering their costs, but also tell them exactly what the government will do to accomplish this. This will create confidence and encourage those that already have the ability to pay more wages to do so even before they are required to.

My congratulations to President Sata on his election victory. I wish him a lot of success as president. His success is Zambia’s success.

42 COMMENTS

  1. within 80 DAYS Zambia will be successful!
    we shall have more money in our pockets! alas will this money truly have real value or is this monopoly money?
    what does it really mean if my salary is higher by 20% and yet fuel goes up by 30%, electricity by 15%, talk time by 12%, school fees by 50%, mealie meal by 20%, cement by 10% and the like…in the end it means I am actually earning far much less!
    Mr. President we call on you to implement policies to address these issues first so that when salaries are increased we benefit and to top it off fuel and mealie meal prices go down, then we can celebrate

  2. Thank you. Good analysis, especially the trickle down effect of poor road networks in Zambia. It also doesn’t make sense for everyone to pass through Lusaka when going anywhere in Zambia.

  3. Wait and watch…within 80 DAYS Zambia will be successful!
    we shall have more money in our pockets! alas will this money truly have real value or is this monopoly money?
    what does it really mean if my salary is higher by 20% and yet fuel goes up by 30%, electricity by 15%, talk time by 12%, school fees by 50%, mealie meal by 20%, cement by 10% and the like…in the end it means I am actually earning far much less!
    Mr. President we call on you to implement policies to address these issues first so that when salaries are increased we benefit and to top it off fuel and mealie meal prices go down, then we can celebrate

  4. Wait and watch…within 80 DAYS Zambia will be successful!
    we shall have more money in our pockets! alas will this money truly have real value or is this monopoly money?

  5. what does it really mean if my salary is higher by 20% and yet fuel goes up by 30%, electricity by 15%, talk time by 12%, school fees by 50%, mealie meal by 20%, cement by 10% and the like…in the end it means I am actually earning far much less!

  6. Mr. President we call on you to implement policies to address these issues first so that when salaries are increased we benefit and to top it off fuel and mealie meal prices go down, then we can celebrate

  7. Chilu we call on you to implement policies to address these issues first so that when salaries are increased we benefit and to top it off fuel and mealie meal prices go down, then we can celebrate

  8. Can`t believe this balanced view has come from a Civil Engineer. We had the ***** called Capitalist and his friend Boot Fimofimo everyday here denying this reality. Where are they?

    The roads are pathetic in Zambia to a point where driving is not even fun at all. You feel sorry for the car as it goes in and out of those ifilongoma.

    I think Dandy Crazy was right!

  9. Good analysis on the issue of expanding our roads. Please note fuel price is about K8467 per litre across the country ($ 2).

  10. Can`t believe this balanced view has come from a Civil Engineer. We had a certain Capitalist and his friend Boot Fimofimo everyday here denying this reality. Where are they?

    The roads are pathetic in Zambia to a point where driving is not even fun at all. You feel sorry for the car as it goes in and out of those ifilongoma.

    I think Dandy Crazy was right!

    This comment is pending approval by a site moderator.

  11. Call me a cynic, but am sorry this article is all over the place. The author spends too much time dealing with anecdotes; and unjustifiably slates those that drive “cheap used cars” as part of the problem for high fuel prices in Zambia. Very weak analysis of the problems Zambia faces. The issue of poor infrastructure affects not only road but also water and waste water systems, Information and communication technologies, to name but a few. The fact that people are able to afford use cars does not mean they forced the government not to invest in road infrastrastructure. The cost of transport to business affecs companies and individuals alike; meaning what affects businesses affects employes, so the equation balances. The issue of profitability is poorly argued for or against.

  12. Zambia’s rates for constructed facilities is one of the highest in the region, yet the quality of constructed products is the weakest in the region. This is not due to lack of knowledge; rather its because of mediocrity on people entrusted to managed public projects. Contractors are used to making supernormal profits, yet they pay peanuts!! No sane person can argue against the increase of a minimum wage based on transport costs, fuel and or “cheap used cars”. If i was head of RDA i would put in a clause to lengthen the defect liability period to 12years; institute an independent quality assessment team to test compliance of designs to international standards. This is the way things are supposed to be done in the real world. Before people write, let them research even a bit. Fyafula

    • Ba orgasm….
      All said and done, do u get the gist of what the author is trying to bring out though not so clearly?
      I believe you do, based on you last reply. In that regard I say why not ge in touch with the author and run some ideas by them on a follow up article. I really like your ideas n believe they r constructive n pratical.

  13. Finance Bank to be handed back to it`s owner(s). People willhave to answer some questions here.

    No wonder someone was saying he knows he will be put on trial and sent to jail. MMD raped our country people!

  14. italian bunga bunga (original)
    iwe**** we want something tangible and not sensationalism.let him honour the higher wages he promised the soldiers.wait till ants begin to bite and one will sing chorus in the choir.your man can not withstand preasure worse critisism,he`ll break.

  15. I am appealing to the president through the Ministry of Labour to also put an end on the age discrimination being practised by almost 90% of the firms in Zambia-I mean this thing of stating on the requirement for jobs advertised-many firms require that a candidate must not be over 25yrs,not over 35yrs,bla, bla-is no good good at all. How do they expect people over 35 years to get jobs? Does it mean if you ar declared redundant and you are over 35 yrs,you can never work again? It is against the Law in the UK and USA to descriminate someone based on age-everyone regardless of age must be given an equal chance to proof himself/herself.Please Mr president,put an end to this as it is discouraging many educated citizens abroad coming back home to come & contribute to the running of the economy

  16. @#12. Chano Chali Chansele. Thank you for your insults. God bless you!

    Where did you learn ifimasele from?

    • Italiano,

      Tell Chino 2get a name change to Chino Chansele coz achili wafimasele. His name(Chino Chali Chansele) gives de impression he has reformed but from his insults it looks like his worse than b4.. Abamulowa ta bachitabwino..

  17. Good afternoon

    A sober analysis from the perspective of a civil engineer. There is always a flip-side to everything: when vehicles become easily affordable, the challenge of providing adequate roads gets harder. When people start earning more, businesses are forced to reduce their work force in order to cut their costs – and a company that allows cost-cutting to replace strategic planning is putting it’s future at risk..

    What is clear is that there are no quick solutions to these problems. I think the government will have to address each situation individually to establish the best course of action to take.

  18. Talking about traffic jams; does Lusaka really need those two hideous fly-over bridges, i have travelled the world, browsed Constructions Magazines and never have i seen anything like those two dated structures. 
    Just imagine if those where removed and train station was moved in the Western side of the City or the train lines passed under the bridge below ground level. There would be options for a wider road into the city centre.

  19. Some people only wait for an article to punch holes in it. This platform is just for everyone to share ideas in a civilised manner. The article is great. He shares his opinion without offending anyone. I must re-emphasize one of his valid observations. Raising minimum wage to levels the market cant take will in the long run push unemployment. Garden boys and house maid in Lusaka get about 400,000-600,000. If minimum wage now gets to K800,000, many employers will react by laying them off. The simple analysis goes on to big companies as well. The government must balance all these issues as they embark on developing Zambia.

  20. An analysis of blogging trends on LT reveals that the first few comments on an article are either very complimentary or like #1 witness, just lost. I believe this is due to a few reasons. The first is that the guy does not read the article to fully analyse and understand it but wants to be the first to post, hence the question: ‘your point?’
    The 2nd, is that someone recognises the author and because they like them, before reading the article they immediately either concur or if they don’t like them, disagree.
    Then there is that group that are purely partisan and will oppose or agree with anything that is against or for their political affiliation respectively.
    Then the really analytical, who are few.
    Lastly, there is the likes of Mushota who are incorrigible.

  21. Now, while reading this article I am reminded of the cobbler in Wm Shakespeare’s Julius Caesar. When he is asked why he leads men in the street and is not at his store, he replies, ‘to wear out their shoes, to get myself into more work.’ Yes, the terrible roads in Zambia and the high fuel costs may be unwelcome to the vehicle owner, but the other sectors of the economy are benefiting. There are garages everywhere panel beating (in this day and age!) mangled vehicles, and the state gets a big chunk of tax from the fuel charges. Simple, law of conservation of money!

  22. MC SATA alikosa mukati nakunse, he lost three times but still stood strong. RB just lost when he even tasted state house bu broke in tieyes.
    MC SATA can stand any pressure, he will make it am sure.
    God bless Zambia & our leaders.

  23. Braddocio: please check. 1 liter = 0.26 gallons. So, in your numbers, the fuel costs k8467 per 0.26 gallons, which is k32,565 per gallon. Taking the exchange rate as k4800, this works out to approximately $7 per gallon. I think the article is fairly correct. The writer says, it is UP TO k10,000, rather than ‘is k10,000’.

  24. Can some one please explain to me the relationship between bad roads and high fuel prices that the suthor speaks about.

    High fuel prices are in the Zambian context essentially a reflection of administrative inefficiency placed in the laps of the consumer. Nothing to do with bad roads.

    Perhaps a new more efficient energy board will correct this.

    Mr. author, please research and don’t assume non-existent relationships. What are your qualifications by the way?

    LT, please also place a small summary of the authors achievements, academic qualifications or current standing. We do not want stranded loafrs in the streets lowering standards here please.

  25. #24: I dont understand your failure to see simple things. Fuel is spend on roads. The impact of bad roads is worse when fuel prices are high. I dont think the author wants to establish a relationship between bad roads and fuel, but rather point out the gains from good roads.

    Overall, good article.

  26. # 28 mwebantu,

    bad roads increase the cost of TRAVELLING not the cost of fuel.

    There is no relationship between bad roads and the cost of fuel per say. That we are paying around 9 pin for fuel is just plain bad management.

    Which night school did you go to? Cavendish?

  27. #29 Kissing…: You surprise me baba. Where in the article does it say bad roads cause high fuel prices?? You cant seem to grasp a simple thing. It is saying the impact of bad roads is worst when fuel prices are high. I think you need to go back to your night school and learn some comprehension. Yes, there is no causal relationship between bad roads and the cost of fuel. But there is a relationship between the cost of your time on the road and the cost of fuel! If fuel costs you a lot of money, you cant afford to waste it sitting on a busy road or slowing down every few minutes because there are potholes baba. That is simple bwana. Why are u trying make a relationship the article is not making?? You trying too hard to be intelligent and u r making yourself look dumb.

  28. It has been said – “Don’t argue with a fool lest they think you are equals”

    I rest my case.

  29. By the way, it is spelt DAMN, not dumb. :d

    I must find out which night school you went to and have Sata shut it down and burnt by PF cadres

  30. We can solve these problems. Make car tax mandatory. Introduce road worthiness for cars this will create jobs for people repairing cars to pass road worthiness tests and people selling parts will have business and jobs for testing centres. Stricter road worthines will save lives as cars will be ok to travel in. Build toll gates and use technology so people are not stopping to pay, use what most developed countries are using so people are given 48 hours to pay if they don’t they receive an invoice with charges on them. Have strict speed limits and install speeding cameras too many peple have died from negligence and bad roads. Have road signs and use money from taxes and toll gates to pay traffic corps and to maintain roads, this is one of the ways we can create wealth in Zambia.

  31. this is a great article and a good analysis. there is beginning to be more cars than roads in lusaka.wich is why everyone seems bitter on the road,kukukanafika bwangu. it hurts me when i have to spend 2 and a half hour on the road for a 1 hour 30 minutes drive just because i have to slow down for potholes and traffic jams and now that its october, watch out for the drivers tempers. its a great article, well defined and written. One point i have taken from this article is we should not forget the fact that if there are no other plans in place, raising of salaries without a back up plan can make a lot of people lose employement. A business has to maximise its profit so salary increment can also lead to loss of jobs. thumbs up autho!!!

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