John Moyo is at the end of the road. At least now it’s paved.
“I never imagined a paved road coming to my village,” said the spry and bespectacled 82-year-old Zambian as he sat in the shade of a tree. About 42 km (26 miles) of freshly tarred road, replacing a gravel one, end exactly at his homestead.
President Michael Sata’s drive to upgrade the country’s rough roads, which often become impassable in the rainy season, is popular with many Zambians like Moyo. But foreign investors, who must partly fund such ambitious schemes, are less keen on his costly promises and very public dust-ups with business.
Sata swept to power in 2011 on a platform to defend workers’ rights, create jobs – and pave roads.
The government plans to continue paving a winding route beyond Moyo’s home about 50 km south of Lusaka for another 400 km to the Zimbabwean border, part of the campaign to seal 8,000 km of dirt roads in the landlocked southern African country.
Sata is pursuing his vision with gusto, building on a legacy of reforms in Africa’s top copper producer that are helping many of the 14 million Zambians to climb out of poverty. With annual economic growth rates of 7 percent and more, the World Bank now classifies Zambia as a lower-middle-income nation rather than low-income, meaning its gross national income per person has risen above about $1,000.
His government has tapped global capital markets – unthinkable a few years ago – to help fund the 31.4 billion Zambian kwacha ($5.6 billion) road project. Zambia’s debut $750 million Eurobond last year was oversubscribed 15 times.
Now Sata, nicknamed “King Cobra” for his sharp tongue, is unnerving investors, threatening his ability to raise the affordable capital required to meet his development promises.
His disputes with South African retailer Shoprite and Konkola Copper Mines – Zambia’s biggest private sector employer which is owned by Vedanta Resources – over their plans to fire or lay-off workers, has cooled what was becoming one of Africa’s more promising investment climates.
At the same time, Sata is pursuing costly budget policies.
The government has increased civil servants’ pay by between 4 and 200 percent to close salary gaps, while sacrificing revenue by raising the threshold where Zambians start paying income tax to 3,000 kwacha a month from 2,200.
Next year’s budget deficit is forecast to double to 8.5 percent of gross domestic product. As the risk of lending to Zambia rises, so will its commercial borrowing costs, ultimately making Sata’s mega-projects less affordable.
A treasury official said last month that Zambia may issue a second Eurobond to finance the 2014 budget.
However, these funds would be considerably dearer than the first Eurobond which yielded 5.625 percent when it launched in September 2012. It is now yielding 7.37 percent, having risen close to 8 percent in September this year.
Many of the roads are being built by Chinese contractors who arrange soft loans to fund them. While cheaper, few details of this debt are published, making it hard to determine what Zambia owes China, according to AidData, a research initiative tracking development finance.
Sata has also criticized the Chinese and scolded road contractors earlier this month for not hiring more Zambians to work on their projects.
Zambia, which AidData estimates borrowed over $1 billion from China between 2010 and 2012, is looking increasingly at other sources of funding. However, yields on its 12-month debt have also risen steadily from around 9.50 percent in January to 15.25 percent last week, underscoring the fiscal fragility.
Last month the Fitch agency cut Zambia’s credit rating to B from B-plus, citing “crumbling government finances”. Just when Lusaka might be wooing markets, the public rows with companies have rattled investors.
In October the government threatened to shut Shoprite’s Zambian stores for firing 3,000 workers who went on strike over pay. Africa’s biggest retailer quickly backtracked.
Earlier this month, Sata tilted at Konkola chief executive Kishore Kumar over KCM’s plan to lay off around 1,500 workers as it mechanizes some of its mining operations. “If he is threatening to lay off people, let him lay off one and we will take away the license from him,” Sata said.
Such comments are helping to boost Sata’s working-class support in mining communities.
“We asked him to intervene and stop what KCM was doing. And for us as a union we were very glad that he stepped in and defended the workers,” Joseph Chewe, the General Secretary of the Mineworkers Union of Zambia, told Reuters in an interview.
Mines Minister Chris Yaluma told Reuters the government was angry at management’s “unilateral decision” which by-passed the board, where the top civil servant from the mines ministry sits. KCM’s owner Vedanta, an Indian energy and mining conglomerate which bought KCM a decade ago, described the incident as a “misunderstanding”.
INTERVENTIONIST
Sata’s moves revive memories of heavy state control of the Zambian economy for almost three decades under founding president Kenneth Kaunda, who nationalized the copper mines, leading to a dive in production.
“It harkens back to the policies of the 1970s, which were interventionist and which is what held Zambia back as a low-income country,” said Tara O’Connor of Africa Risk Consulting.
Kaunda’s successors reprivatised the mines, lifting annual copper output from 257,000 tonnes in 2000 to around 900,000 tonnes this year with a target of 1.5 million tonnes by 2015.
As the economy opened up, Johannesburg-listed firms poured in. The malls dotting Lusaka are now dominated by South African names: Shoprite, retail rival Pik N Pay, fast-food chain Spur and lenders such Standard Bank.
Sata, who renamed Lusaka’s main airport after Kaunda, is signaling his government will take an active role in the economy and defend jobs – no matter what it costs investors.
“CAN’T ALWAYS MAKE A PROFIT”
Deputy Labour Minister Rayford Mbulu, whose union background gives him political clout in Sata’s Patriotic Front party, told Reuters in an interview that “as government we have a mandate to control the economy”.
He went on to say that under Zambian law, an employer can make an employee redundant only if the operation is closing or if “there is a shrinkage in business”.
“But none of these reasons were given by KCM. All they were saying is that the copper prices have dropped and costs have gone up,” Mbulu said.
Zambian labour law is ambiguous, stating that a business can make an employee redundant “due to the business ceasing or reducing the requirement for the employees to carry out work”.
Much is at stake for Vedanta; its Zambian unit is underperforming with margins lagging other divisions.
Asked if maintaining profitability was a legitimate reason to lay off workers, Mbulu replied: “In business, my brother, it’s not every day that you make a profit.”
A ROAD TO VOTERS’ HEARTS
Protecting jobs is a likely vote winner for the minority of Zambians who have a steady wage. Road improvements, however, also reach much of the majority who still work the land in subsistence farming.
Only about 8,000 km of Zambia’s 67,000-km road network are paved and the government’s plan is to double that by 2017.
Several Zambians interviewed by Reuters in two areas where tarred roads are replacing gravel had only praise for Sata.
A new 20 km paved road from Lusaka’s main airport to the town of Chongwe will soon be complete.
“We are very happy they are upgrading this road; we use it to take our vegetables to market in Lusaka. President Sata has done a great job because this will make life easier for us,” said 31-year-old Simon Phiri, a small-scale farmer in the area.
Source:Retuers
I dont see any multipler effect here.
I may not be an economist or financial person, but I am worried about the borrowing. These huge debts that Zambia is accumulating is a source of worry. But borrowing for infrustructural development can also be a good idea provided those infrustructure are self sustaining.
We are working. The BUFI song will soon be useless as there will be ROAD EVERYWHERE you go or you are
Sata is cooking a disastrous recipe for the Zambian economy. Very soon the investors will turn their back on Zambia and demand their money back. FDI will suffer in the long term because of PF’s toxic political climate and poor economic policies.
Constructing huge projects on borrowed money is highly unsustainable and will only force the government to raise revenue by increasing taxes and introducing toll roads already on the table because external borrowing will dry out completely.
According to this article Zambia may be owing about $4.8 Billion to date since PF came to power. The figure may be this high because of PF’s “donchi kubeba” strategy.
8000 km rural roads,
2000 km paved roads in towns,
400 km in Lusaka,
Mushindo University & Makasa University in Muchinga,
Luapula University in luapula,
King Lewanika University in western,
David Livingtone University in southern.
2016 ni landslide, followed by FDD
@Action man
Thats true if and only if people will eat the roads. People are dying in hospitals because of lack of nurses because PF angered them by telling BUFI that their pay will be rectified.
How ever there is one thing I admire about you PF zealots. You are so resolute in your support for PF so much that you ignore all the bad things that this government is doing until it affects you directly.
So, you prophets of doom, what do you want Sata to do? You want him to start dishing out food vouchers? Unless you are such ignorant- there’s no business that does not borrow. Running a government is one of the businesses. Borrowing is very normal when you are borrowing for sustainable projects such as building roads rail lines, lakes/sea ports, universities, schools, hospitals etc. you can only make money by spending money and if you don’t readily have it then borrow it from genuine sources. Ndimwe ma fontina maningi ma Zambians. Most of you don’t know anything.
Even the 1964 UNIP government did the same. Building roads and schools everywhere through borrowed resources, unfortunately, 1970+ the copper price went under. This resulted into serious difficulties in liquidating the debts that had accumulated, hence all those that went to school in the late 1970s up to 1990 had nothing to celebrate about our INDEPENDENCE, consequently voted out UNIP.
Such a huge capital understand changes the economical outlook of country. More jobs and more money in peoples pockets. But here its the opposit.
It’s hard to strike a balance but I know I do not subscribe to the school of becoming a place where everyone but Zambia makes money from Zambia. The roads will help but if biting off more than one can chew is detrimental then it would be ideal if the many smart brains within Zambia and dotted across the globe could be harnessed. How wonderful it would be if politics could be set aside and a united effort could be made to truly realise our potential. Smart minds and honest intentions go untapped even here on LT. I wish I were Sata in a digital generation capturing all your potential and finding a way to use it wisely without political bias/paranoia. Build on Sir. I admittedly detest politics and prefer to think in an alternate universe where potential is recognised but that is the future.
Sata hates intellectuals. He suffers from inferiority complex. Look at the way he has punished Prof.Chirwa. A check and the Zambian parliament data base reveals that 80% of our politicians are certificate holders, more especially those in PF .
What Sata hates is not relevant in my alternate universe. Things are far more positive than political landscapes which will always change in any democracy. In fact I am harnessing you right now through digital hypnosis. From this moment on every time you see the word ‘smart’ you will not see the word ‘intellectual’. Now sleeeeeeeep…
@a phiri anabwela kucoka ku america nditu anabwelela kwao ku zed.
I agree with you baba.
Sata does not hate intellectuals as such. He hates theorist intellectuals like many of you COWARDS!
You cannot politic and convince Zambians based on your education. Yet you claim to know how things should be done. let me tell you, as long as the likes of Sata can risk all and succeed in winning the mandate of the people, hear me, WINNING THE MANDATE OF THE PEOPLE, he has every right to drive this country in whichever direction he deems fit according to his SUPER INTELLECT! Wrong or right it will again be up to the Zambian people to decide.
And if zambian people are not educated enough to make good decisions or choices, WE ARE BUILDING THEM SCHOOLS AND UNIVERSITIES so that may be in 2031 one educated theorist may have some courage to stand on a pedestal and promise theories1! Shaa!
@nkamupuma – Thanks for the vote of confidence in supporting harnessing minds to help build not destroy.
@C-G-G – very passionately stated. Indeed the people made a choice and do not need to be insulted for it.
I saw plenty on the ground to make me very positive about the future of Zambia and I believe Super Intellect Man and all other super heroes to come should be encouraged to build like never before as the younger generations will need a fair shot and it is our collective responsibility to find a way to provide them with one. I believe the digital realm will be one they will need to excel on and the pioneers are not quite seeing the big picture yet and sometimes seem battle weary yet we’ve only just begun…
kwena ulelota! put all the brains together? Banani? Look at what you did to Prof. Chirwa Dream on!
do u know how long it would take us to develop if we never borrowed? forever.
moreover its not like we shall start paying tomorrow. lets develop today with borrowed funds. what ever we receive (tax and whatever ) in future will be used to pay back. u shall criticiz from the hill top. but had MMD started developing zambia, with this vigor, we would be heading to the developed country status
yeeesssiiiii.
The difference between schooled and educated is on focusing /foreseeing the future.many bloggers who are supporting pf massive borrowing lack future focusing and these are schooled people who happen to be the majority of us.sata was part of mmd for 10 years,mmd started developing the country after sata left.
Its always good to live within your means but if u borrow put in mind your capacity to pay back at a low interest rate otherwise you are a risk hence the interest rate will be higher.$4.8 billion in 2 years is not a good sign of a bright future.the loan will stand but the citizens will be heavily taxed and leaving less money in your pockets.i would rather we embark on a gradual development with less likelihood of heavy taxes in the near future.sata please listen to the educated ones
Where I live tunina Bus via ku Chimusebo.. a new road built in Sata Days
Frankly, MMD was in power for 20 years and they fed us GDP data on an improving economy (with surplus reserves) whose effect never filtered to the common man. Only in the last 6 months of RB’s time, did we start seeing some semblance of road construction which we did not believe would last. The point is why have all the positive GDP’s and reserves, with poor infrastructure? Rephrased as ” why have a fat bank account when your house is leaking with rains and your children starving and not going to school?” Zambians need to reciprocate by using the better infrastructure to be productive (at lesser cost e.g vehicle maintenance) to help GRZ pay these debt. Also, strategic priorities need to be agreed on where to spend this debt.
wa landa bwino mu last sentence. Consensus and consultation those are the key words.
All the countries to the South which were liberated by Zambia’s sacrifice have better roads, more universities, better hospitals and well planned clean towns with plenty of shopping malls. We were the only ones in the region that our country resembled a run-down village, yet we have remained the most peaceful, but needed a least educated, least complicated but very seriously pragmatic president like the one we are now blessed with who needs support and prayers. Your other desired presidents will come later. Honestly I need to be convinced that we are not doing well, when since independence I have never enjoyed life as much as I am doing now. Hard-working people are making more money, while lazy ones even after three meals, or at least some decent meal than before are busy complaining.
Sata keep on with your infrastructure development, deplorable state of infrastructure is gone with MMD. Look at the city of Livingstone today and then look back to January, 2008.
Even for retirees, many who retired before Sata came got peanuts, now at least if for life you are going to sit at home, engage in gardening and other in-come generating activities knowing that every month something like K500 to K1000 will be trickling into your account, you can manage to live well and happily. Especially that you even got free houses from Chiluba, and could even afford second hand one/ two cars or several bicycles to ride on paved roads. Please just keep quiet. This is why people die of depression because you cannot appreciate that life is full of opportunities to make it if you work hard, and you also die easily if you are lazy and daily busy grumbling against Sata whom even God has blessed at least for once to rule this nation and make utmost difference!
The truth is this country has alot of things to be put in place,to me starting with something is the forward,we cannot do everything at the same time. Govt always borrows money for at least something and am glad that this borrowed is used to build infrastructure that be pocketed as was done by the previous regime.
@realist who must have born yesterday for you not know how your Sata contributed to ruining of the economy. Who took 2 billion unrebased government money to an mmd party conversion. Who banked government in his personal account to earn interest. Who was involved in mezaf scandal the list is endless
Zambians, we cannot have economic development without proper road network, on this I support the President. I see some bloggers condemning this initiative as a tradeoff for hospitals and food. Let us all know that free Medication is bad for us, we should towards the concept of medical insurance. Cheaper and affordable to our people, It’s a matter of education our fellow Zambians to be accountable for their lives, for better service. It’s time we changed our ways of living than believing in free services that are so bad. Well done SATA
@ wanzelu
kulibe va nzelu ve ukamba uziba so
LT QUOTES
John Moyo who lives at the end of the road said,
“I never imagined a paved road would come to my village IN MY LIFE TIME.” Said the bespectacled 82-year-old Zambian as he sat in the shade of a tree. About 42 km (26 miles) of freshly tarred road, replacing a gravel one, end exactly at MADALA JOHN MOYO’S homestead. (CAPPED LETTERS IMPLIED BY LP)
Come 2016!!
With all the due respect, Mr Sata & his regime should review their interventionist policy in respect to labour matters and, they should adopt a softer balanced stance which weights the interests of business (capital) and labour (workers). Businesses have indicated reasons why they have opted to mechanize, and evidence suggests that capital wants to avoids shrinkages in its operations. such evidence should be researched and, outcomes of such a research project should be used by Sata to argue that it is not in the interests of any party to retrench workers, as opposed to directives currently used by the government. Directives are not good in the eyes of investors. We want a prosperous Zambia and we are willing to offer support to Sata’s attempts. Encourage capital to stay in Zambia.
You are missing the following facts.
The two investors where Sata intervened where acting unilaterally and without due consultation with stakeholders and regard to the conditions of investment licenses they poses.
SHOPRITE is a bad employer generally (in all countries where they operate) and they needed to at least meet minimum labor laws. Imagine pick and pay with few stores pay better by far compared to Shoprite. This is a fact which you can verify on your own.
KCM has been a terrible investor who always (after the Indians took over) avoids paying tax, gives most supply contracts to foreigners and now wants to fire workers. What value is an investor if they do not pay adequate taxes, they do not give business to locals and they are inclined not to give jobs to locals ?
#Voice of-Reason,
In responding to your comments, I have taken note of your concerns about the alleged low wages paid by Shoprite to its employees. Secondly, you have also alleged that KCM is guilty of tax invasion. Furthermore, you indicated that KCM does not conduct business transactions with Zambians, but it favours foreign owned businesses over Zambian owned firms. I want to believe that a government such as, the PF has clearly stipulated penalties which are yoked to a firm practising any of the above misconducts. In lieu of the PF issuing directives, Shoprite labour disputes should have been taken to the Labour Court and, then to the Labour Appeal Court. Zambia’s Labour Relations Act has sections and subsections which protect workers’ rights and employers’ rights. Furthermore,…
#Voice of-Reason,
Any Labour Court is charged with the constitutional duty of trying cases which might arise from an illegal strike or an illegal conduct taken by an employer. If an employer elects to retrench its striking workers involved in an illegal strike, then that matter can be head in a Labour Court. Moreover, if an employer threatens to dismiss striking workers for taking part in a legal strike, then the government can intervene so as to reverse such an act. However, directives amount to dogma. To argue that the PF government is correct to use directives is but subterfuge of words. Furthermore, looking at the ‘conduct’ of KCM, government should prosecute a firm which does not pay taxes and, government should not extend tax rebates to firms which do not comply to growing the…
#Voice of-Reason,
The KCM issue should systemically be dealt with by government, for instance, tax rebates should not be extended to firms that do not empower locals. Furthermore, firms which are not labour-intensive and, which do not partner with local firms should not receive government procurements such as KCM. Moreover, the tax collection system should be non-porous and entities which invade taxes should be severely pursued and prosecuted. However, to argue that the PF government is correct by using directives is, but subterfuge of words. This is a dogma in which the government cannot escape from the trap in which it arrests development and, sets the scene for grinding poverty among the vulnerable sections of the population. What we need is a wise/prudent fiscal monetary policy.
Without MMD outing UNIP Zed could have doomed unless you were born at the end of mmd.
Furthermore, on the issue of government’s investments in infrastructure projects, I fully endorse Sata & his regime’s attempts in improving the road network, building more bridges, expanding airports, constructing more power stations, expanding and improving the railway network, and improving the only oil refinery and main other projects. Sata is attempting to smoothen the corridors between Zambia and South Africa, as well as between Zambia and other neighbours it is trading with. Expanded and improved infrastructure attracts many investors due to the easy mobility of goods & services to and from ports. This has a huge multiplier effect.
As a way forward, government should supply more money into the economy in lieu of expecting capital to inject huge investments. Such a strategy can lead to full employment, but capital should be encouraged to come on board as well, whilst introducing deferred payment system in which the poor are exempt from paying taxes. Inflationary pressures can be curbed through occasional increases of interest rates and, funds accumulated through interests rates can then be invested in housing projects for the poor. Furthermore, a prudent monetary policy should be pursued, in which labour absorbing firms and firms which employ young people who enter the labour market without necessary experience should be reimbursed with taxes for a certain set period of time. Long-term lending rates should be extended
Truthfully speaking, I love infrastructure building, it brings lot of development to other hidden economical means to mature, in our country such as: peasant farming, small scale initiatives and many other forms of cash generating ventures to our poverty stricken populace. Like a number of bloggers have stated this will raise market value for most products as there are assured of timed arrival of their goods to market centers. It brings pride, dignity, self-esteem and so on so forth.
What I hate are foreign investors who don’t share in the aspiring prospect of the citizens of this country. Investors who are not loyal to the communities that they strip away God given materials.till very recently I thought of Mugabe as a bad leader, but to think of the meager and miserly taxes we get for ores mined in Zambia, a new face should be created in our investment policies in the immediate future, Mugabe Style. Companies like KCM (Vedanta) and shop- rite can simply go to hell, they a lot of meaningful investors who can agree on lucrative terms, as long as the proceeds are go intended goals that will make the standards of our people attainable.
Foolish! Go to chililabombwe and see how people are loosing jobs. Ask them if they ll feed on those roads.
In as much ase we encourage GOV in its effort to do some prioritizing given its good drive to develop and roll out smoothly looking at the scarcity and constraints maximing theories in Internal revenue.
I personally would want a balanced Coverage,you give the negative outlook then the positive outlook in Kalumbila and others and conclude effectively to create a favourable investor perception of Zambia Given little space on the good LT one can still suggest could policies to help and save the many.
It helps to provide suggestions and alternatives I am sure leaders even though not publicly will accept if not quietly
Its like doing a small analysis of the “state of Union” position of Zambia looking at both the real options from such projects and the positive outlook from such highlighting the pitfall with the “clients interest as it were” making superior advise and seeking only best performance
Lets make a difference on LT and positively make it more viewed as a site where people can refresh and be reminded
I will urge Gov to step up its promotion of Zambia and create excitement in Sectors to show the other side
Then in economics there Two schools on optimization of labor and capital In this case lets consider the Two and formulate policies accordingly with full Knowledge of economic implications
thats why i love this president, he doesnt believe in time wasting theories and time wasting planning phases as some under 5 presidents of upnd and mmd want us to believe. He is man of action in 10yrs time we shall be shoulder to shoulder with the best coz of this man MICHAEL CHILUFYA SATA.
Mulibe Nzelu, yes, we will eat roads and prosper! Go Sata, go!
Lets have complete commentaries setting out the pros and cons There is some point though on above Maybe a carefully worked out cash flow incorporating the minimum borrowing scenario with Bank of Zambia ZRA revenue Bonds and Bills reported on the projected receipts and payments and carefully scheduled with a creation of economies and surplus in reserves in the local economy
Even in a most gloomy situation given commitment and right policies the economy can be corrected and stire back like a plane once lost its track to livingstone from Itezhi Tezhi
Being poor does not necessary mean you become useless and a patching bag for all.You will need to show your worthy and position yourself better learning to avoid what one can term “Bond markets vigilantes”Lets avoid them to shape the economy for us but rather be on top of things ourselves.Lets work up Zambia
So much opportunity even here in Itezhi Tezhi over looking Namwala District
Ibet you will be there you guys,dont fear the unknown bane those roads means alot
and out there have tarted seeing something.Gonna be cool that near future.
just coperate as one country dont urgue a lot people.one zambia one nation.
PEOPLE CONDEMNED PRESIDENT SATA WHEN HE TOOK OVER THE MANAGEMENT OF RTA!
TODAY, NEARLY ALL REPORTS INDICATE THAT EVERYONE HAS EXPRESSED GRATITUDE TO HE SATA ABOUT THE SWIFTNESS OF ROAD WORKS IN THE COUNTRY.
EVEN CONTRACTORS HAVE HAD TO CARRY ON WITH WORKS ON SCHEDULE WHIST PAYMENT IS BEING PROCESSED IN LUSAKA.
IF THIS IS THE SATA, I CAME TO KNOW DURING YESTERYEAR, WHEN HE WAS GOVERNOR OF LUSAKA, THEN WE ARE STILL YET TO KNOW WHAT THIS MAN IS REALLY IS!