Thursday, May 30, 2024

Zambian Economists punch holes in the IDC, it will be a hospice for sick GRZ firms

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Economist John Kasanga making his presentation during a public discussion at Pamodzi Hotel
Economist John Kasanga making his presentation during a public discussion at Pamodzi Hotel

Some economists and players in the private sector have sharply differed with Government over the creation of the Industrial Development Corporation (IDC).

Speaking at a public discussion organised by the Economics Association of Zambia in Lusaka Tuesday evening, Economist John Kasanga warned that the IDC poses a danger to the Zambian economy.

Mr Kasanga said that the IDC might reverse the tremendous progress Zambia has made in reforming its economy.

“This IDC will have far reaching consequences for all of us. There is a danger that it might reverse the progress we have made as an economy. We have done well to make our economy more investor friendly, we fought hard to reduce the cost of doing business and enabling us to become more competitive, my fear is that this IDC will derail and take us backwards,” Mr Kasanga stated.
He also challenged the PF government to tell the citizens what ideology it is pursing to govern the nation.

“Are they going back to sociology, are they running a mixed economy or free market economy?”
He added, “When making major policy changes, lets plan and research before our President gives us another Easter message or this time around Valentines message.”

Mr Kasanga pointed out that that national development is not an event saying government should have a long term approach to development.

“If we continue this kind of development focusing on the next five years so that we can win the next election then we will never develop. This is the reason Botswana and Mauritius have done well, these counties thought in terms of 30 years. We are thinking of developing in five years.”

Mr Kasanga also noted that details about the specific form that the IDC will take have not been publicized.

“We are all guessing because this IDC has been incorporated and yet very few are privy to its operational structure. If anyone of you have seen the blue print, you must be lucky.”

“It therefore becomes difficult to assess what are the operational objectives of the IDC or indeed what are the investment activities it will undertake and how will it be governed. What sort of functionary relationships with other State Owned Enterprises that will fall under its structure. How will it exist or co-exist with other state institutions that are providing long term finance such as Development Bank of Zambia and the CEEC?”

Mr Kasanga was however quick to acknowledge that there are times when the state has to intervene in the economy especially for strategic reasons.

He on the other hand pointed out serious concerns on the governance of the IDC especially that it will be headed by President Sata.

“This will not only make the IDC politically led but it will also be politically compromised. Those that are supposed to provide oversight are the ones who will be managing the entity so there would be no arm’s length dealing between the entity and those who set up the policy. Whether we like to accept or not, this will lead to direct political interference, it is inevitable and the management of IDC will become opaque.”

He added, “Who would walk into State House to ask the President how IDC is working, first you will have to set up an appointment, assuming they will even entertain you and you will be lucky if that appointment is granted.”

He said he was of the view is that the objectives that Government wants to achieve using the IDC could still be achieved using existing institutions.

Mr Kasanga said government should just strengthen existing institutions and let them realize the overall development goals that Government wants to achieve.

“The IDC is not supported at least up to now is not supported by any legal and institutional framework to enable it relate to other institutions, we don’t know how that framework would look like. Which State Owned Enterprises will fall under this? The President announced that companies registered under Companies Act and the Banking and Financial Services Act, so I ask myself and say which are those companies?”

Mr Kasanga added, “You have those entities that are established by statues so those won’t fall under IDC like DBZ, CEEC. You have TAZARA managed by a bilateral agreement between two countries, ZANACO cannot fall under IDC because it is a joint venture partnership between Government and a foreign private entity and moreover it is listed on the stock exchange, it has listing rules it has to adhere to. “

He continued, “Then you have Indo Zambia which is a joint venture between the governments and India and Zambia, so that is out. What is left, Ndola Lime, this is a company that has been earmarked for privatization for the last 15 years. Most of those companies that are available are in such poor state and requires recapitalization

ZACCI President Geofrey Sakulanda making his presentation at a public discussion on IDC at Pamodzi Hotel
ZACCI President Geofrey Sakulanda making his presentation at a public discussion on IDC at Pamodzi Hotel

And ZACCI President Geoffrey Sakulanda stated that the creation of the IDC leaves more question marks than answers adding that very little has been done in terms of clearing the air.

“It is our view that the industrial development idea can be achieved without creating this IDC. What the private sector requires is a predictable fiscal policy, further promotion of existing clusters especially the export manufacturing zones, we already have a development financial institution in DBZ, we just need to capacitate that and improve its governance and management, I think we will be achieving the objectives of the IDC,” Mr Sakulanda said.

Meanwhile, Zambia Manufacturers Association President Bright Chunga said creation of the IDC is a misplaced idea.

“We have been told that this IDC will be a holding company of all State Owned Companies, this sounds like a very charitable thing because these are all sick companies, meaning that the IDC will be like an exercise in setting up a hospice, creating space for these companies to die in peace,” Dr Chunga said.

“We are told this exercise will be funded through a Sovereign Wealth Fund. The last time I heard, Sovereign Wealth Fund usually come from Central Banks as an accumulation of results of budget and trade surplus and these funds are typically created when government have budgetary surpluses and have little or no international debt. Clearly this does not sound like us.”

ZAM President Bright Chunga at a public discussion on IDC at Pamodzi Hotel in Lusaka
ZAM President Bright Chunga at a public discussion on IDC at Pamodzi Hotel in Lusaka

Another discussant Andrew Simpasa from the Jesuit Centre for Theological Reflection said the IDC has potential to deliver economic and social development it is it handled well.

Mr Simpasa said there are however serious doubts about whether the IDC can lead Zambia to industrialization.

“We have doubts because this idea of the IDC it is not rooted in the deeper realities of our time.

It is as if an agenda that was not accomplished in 1991 reforms has been brought to the fore and it now time to accomplish the agenda, we are raising dead skeletons but the times and context has changed.”

He said, “When we look at the various policies that are being done by the government, from the general policies we see one particular thing, there is lack of interconnectivity. So our cry is that can there be interconnectivity in public policy in the PF administration.”

Mr Simpasa said policies are being led from State House and not being driven by technocrats.

“Right now we have a very good strategy paper on industrialization and job creation under the Ministry of Commerce, this is a very good document, robust and well rooted in the social, political and economic realities of our times but it has been surpassed and replaced by the IDC.

The foreword to this document was signed by President Sata and Emmanuel Chenda, so the document has now become redundant because there is a new policy which has come up in form of the IDC. What we are saying is that the IDC should not be a stand-alone policy,” he said.

62 COMMENTS

    • So these PATHETIC FAILURES are drafting policies every day and swapping them in order of importance just like it happens with government office bearers?… Experimental government!

    • PF, most Zambians have advised not to pursue this ill conceived policy but as usual in your sil.ly ” donchi kubeba” way you are still adamant to pursue it . If and when every thing comes down falling on you do not blame it on any one but your sil.ly selves.

      PF is typical CNP party

  1. But we already know that this IDC thing is only meant to decieve people that better things are coming from PF and therefore let us give them another term as we now go into economic comma. The govt is in a hospice financially (tho it cannot die) and then it wants to boost the failed health of companies that are not financially viable? Yes theuy will pump in the Euro bond nkongole into these comatose companies (bottomless pit) and buy luxury cars for executives and set up plush offices to decieve us. After 2016, if they win, these companies will die a natural death and gone is our nkongole into a bottomless pit. Let us just conclude that “what do we expect from them bunch obviously?”

  2. Well the Economist are economizing for the multinationals not for the poor. The phobia for competition from public owned companies is the real issue.The capitalist call it unfair competition.

    • @ noel. You are very right. These guys don’t want competition from state enterprises. I am very disappointed with these so called economists because they sound political instead of just giving professional advice. How can they insinuate that the IDC will be controlled from state house? If the president takes an interest in an issue and wants to ensure it succeeds does not mean he has taken everything to state house.

    • @Noel – in addition to your point, the problem with Zambian economists is that they don’t want to develop a theory of their own and work through it until we see fruits.

      All these economists that have spoken are IMF students version of economics, namely, the market is a the alpha and omega of economics – hail NO.

      Let us learn to develop our own ideas and thinking parameters. I don’t see anything wrong a government intervening in the economy to create opportunities for jobs.

      Maybe the only good point I can take from the discussants is that we need a clear legal framework of how INDECO will work, what its governance and competitiveness will be so we do not end up creating monopolies – that is where these economists should come in and help their indigenous government and build…

  3. Now can the state make its case and counteract with evidence than branding these learned gentlemen jealousy and frustrated! I want sensible answer if any!
    My view about IDC has been that this a “Slush fund” wrapped up in IDC Sovereign Fund in preparation for 2016!!!

    • How on earth can you justify having “Sovereign Fund” when you are borrowing money to fill the gaps in the budget created by extra-budgetary unauthorized expenditure?

    • King you are right. Meanwhile there is no crisis in the economy to enable the govt to intervene, like the USA govt did during the financial meltdown. The Obama administration pumped in billions of dollars in GM, Ford and Chrysler to make these companies afloat. It paid off and the govt got its money back and backed out. It wont happen in our case.

      The crisis that we have is in the lack of long term planning. As someone said, ours is a five year plan until next elections. Thereafter maimwene!

    • I think you should also add the age bracket as you discuss tribe. I see only septuagenarians and above being given jobs. We need to be rational before we exclude an equally active group of young people who desire exactly the same things as you do. Have no noted the octogenarian High Commissioner who recently passed on in Malaysia? …and oh, he wasn’t Bemba.

  4. Give ZNS milling plants to start producing cheap Millie meal and put GBM out of business. May be he will lose weight and become healthier.

  5. The PF has been asking Parastals to give money but they have been refusing so this IDC will now be a vehicle thru which state funds will be used to fund the Party and its government

    • YOU HAVE HIT THE NAIL ON THE HEAD!!
      SO accurate, time will prove this case, apart from it being A Free ZAMTROP account 4 the Boys & Family Forest to enjoy.

  6. The exploiters,the so called economists are deadly scared of compitition. Their fears are out of evil motives and the reasons for opposing the lcd are misplaced.Govt let them go hung,they are the Sunbarates of Nehemiah in the Bible.Bravo govt.

  7. Kasanga has raised some valid points. I hope that the Politicians will take note. However, I detect an attitude of ‘let us leave this to the Govt, so that we will not be part of it when it fails’. It should not be left to the politicians to work out the details of how the IDC should operate. It is up to Technocrats to make the idea work. If you sit back and expect PF to deliver; of course they will fail.

    No doubt the private sector has invested in some areas. We have shopping Malls coming up everywhere; though it is debatable who is really benefiting from this. But there are other vital sectors in the economy where nobody is willing to invest. It is in these sectors where govt. intervention is required.

    Government economists; this is your job! If you can’t do it resign.

    • Well spoken. They should be helping to define the economic path instead of waiting for government to do take initiatives and then throw a wrench into the plans.

  8. Kavundula I totally agree with you. Government has come up with an idea, let us work with them so that the idea can yield better results for all. Mistakes will be made but I think we must keep on trying other ideas to reduce poverty. Technocrats must assist government by elaborating risk factors and come up with plausible mitigating strategies. Lets keep on trying. If the president says he wants a car that drives upside down, engineers must figure out how to do that or at least come with something close to that.

    • @ chester and zigy man. You guys are now talking! If only a few Zambians start thinking like you, then we shall make some progress as a nation. A leader gives a vision and the rest is up to those who call themselves educated. School should not just be used to find a nice job and then you just start signing papers and attending meetings. school should give you the ability to solve problems.

    • @JOHN DAKA. If you don’t agree with the idea and you are a civil servant then its only fair that you step aside instead of throwing spanners in the works. Don’t cry that you are being victimised once you are singled out and removed from your position.

  9. This is just a bunch of failures,can you you tell me what the so called investors have brought to this country apart from suffering, think outside the box, useless economists, all you know is to dine with owners of these multinational firms and advise them on how to steal from your government, why don’t you discuss how Mopani and Zambia sugar company have been avoiding paying tax!!!! grow up and reason, are you telling me that its right that we should be importing even simple things like razor blades when we can do that locally, purely the purpose of the IDC is to generate and keep wealth within our country unlike the current situation were money is 100% externalized by these fake investor, the little economics i got in school tells me that you can never improve an economy with imports.

  10. Has anyone bothered to take a look at the South African IDC to learn its successess and failures. Their IDC is vibrant and one point some Zambians were working there. There is also the Swaziland Idustrial Development Company whichs a success story. Let’s not condemn the IDC formulation, but should advise on the route the company should take.

  11. These economists and investors are shameless human beings.As @14 and other patriots have aleady said,y should WE import even a razor or icisakulo ica prastic and u seem not to see any shame in that?Dead scared of compitition?Think outside the box!

  12. Chikwanda’s mouth is working over time, while his mind has taken a day off in the slumber. You can tell that his heart is not there. The best is for him to clear up his desk.

    This is what you get when you get a president who does NOT understand a simple Zilch. PF is taking all strides for political gain and not in the best interest of the nation. The danger also is that anyone can go to plot one and tell him lies and he’s quick to announce.

    Sata is talking about the creation of a Sovereign Wealth Fund for IDC. One basic thing that Sata must understand is that:

    *** (a) Banks borrow money from the Federal Reserve. (b) The Federal Reserve gets money from the Government and ( c ) The Government gets its money from the people as Tax Revenues. (Primarily)***

    Cont..

  13. Zambia has been producing university graduates for over 50 years.lt saddens when i hear some of these graduates think within their cacoon and i expect Sata or indeed pf to grow our economy alone? EDUCATED FO OLS ! THINK BEYOND YO BOX PLS!

    • That’s why I feel like a black man has not yet reached that level of thinking equal to a white man no matter how educated. Animals also think and learn how to hunt and survive but they cant think like humans yet. Maybe after 5000 years. I say this because we are still not able to make the things our friends used to make hundreds of years ago. Forgive me I just had to say this.

  14. Private sector and public sector are complementary. The two have enormous potential to drive technology transfer, import substitution, Non Traditional Exports, price stability, employment creation, political stability. Let us learn to think outside the box. Objections must also reckon with PPP models for industrialization.

  15. The funding and endowment for a Sovereign Wealth Fund, derive from the Federal Reserve, which mount up or accumulate funds from Tax Revenue, Trade surpluses and revenues from natural resources.

    Zambia has liquidity concerns. How the hell does Chikwanda say that IDC will only have struggling companies (basically, shifting the goal posts) in less than a week, when all that he needs to do is to assist these companies by restructure and downsize these deceasing & collapsing entities to make them competitive.

  16. Good evening

    Much as the economists have a right to be concerned, why can’t they sit down with the policymakers and workout guidelines and solutions with them on how to reduce the risks in question?

    As for the ideology in pursuit, I agree that there is need for clarity on that. I personally think a mixed economy model would be the best – it is possible to maintain a state-directed industry and adopt free market policies at the same time in order to allow the private sector to forge ahead. It has worked well in Germany, Brazil and China.

  17. CAN YOU REMEMBER? THOSE DAYS OF INDECO? WHEN WE USED TO MAKE LONG QUEUES TO BUY SOAP AND SALADI AT ZCBC SHOPS. ONLY ONE TABLET WAS ALLOWED PER PERSON. THOSE DAYS WHEN WE USED TO SLEEP ON LONG QUEUES TO BUY MILIE MEAL AT MWAISENI SHOP. THOSE DAYS WHEN WE USED TO SLEEP AT UBZ BUS STATIONS WAITING FOR A BUS TO COME. CAN YOU REMEMBER? THOSE DAYS WHEN ROP FAILED TO BE COMPETITIVE AND SUPPLY THE NECESSARY COMMODITIES FOR THE HOME? CAN YOU REMEMBER WHEN ZAMBIA AIRWAYS FAILED TO BE PROFITABLE AND MANY PEOPLE LOST THEIR JOBS AND LIVES. THOSE DAYS WHEN ZAIREANS STARTED SELLING SOAP CALLED ZURI ON THE BLACK MARKET? WHEN UNIP VIGILATEES REIGNED WITH TERROR , HARASSING POOR ZAMBIANS?
    I THINK WE DONT WANT THOSE DAYS. THEY WERE THE DAYS OF INDECO. SO IT IS JUST FAIR THAT HEMCS EXPLAINS WHAT HE IS DOING.

    • Dull rantings and very rubbish contribution. Did you know that KK regime was under IMF & World Bank sanctions? Please dont just rant .

    • @Truth Hates
      EXACTLY. IT IS SUCH POLICIES THAT ATTRACTED THE IMF AND WORLD BANK SANCTIONS. THAT IS WHERE WE WILL BE HEADED WITH SUCH POLICIES. HENCE THE RANTINGS AS YOU CALL THEM.

  18. IDC is scaring away investors. Very soon the kwacha will hit K 6,000 and inflation will go to double digits because of lack of coherent economic policy from govt. Listening to Kaunda will take this country backwards. Sata has less than 2 years to rule this country so he must build on the positive economic strides and not take the country backwards.

    • Why scaring away real Investors? Real Investors will compete with parastatals. Real investors will partner with the IDC…and son. Only tuntemba Investors will go away and that will be good coz they are the ones who destroying our country.

  19. These economists are very dull…why do I say so? These guys have not shown how the IDC is going to affect the economy. They are just talking and shouting like politicians. This is the level of analysis of the Zambian economists….hey I am surprised really. These guys were told by their employers what to say …shame on them …atase bane…ati ba economist.

    Peace and Prosperity to Mother Zambia

  20. The idea of an IDC is correct but clearing the Pre incorporation issues and governance should be paramount defining the areas of operation and investments policy statement defining the clusters and industries that will be supported complimenting the initiative and functionality of the real private sector investments no Zambia being a feed nation in value creation in other countries
    Then the mind set of Zambians professionals ought to change and focus on successes given real efforts by our immerse skills in managerial similarly with othersThe country must be functionally robust in cyclical structural and frictional times You simply cannot leave it to private who may have short-term view

  21. Typical Zambian or should I say African argument.
    The government has not provided enough details on the structure and workings of this IDC but I actually can state that it will not work! No details but you know enough about it to make the verdict of its outcome?

    This might reverse the progress we have made – we have worked so hard to become competitive & this IDC will take us backwards.

    Right – Zambia has 14million people of which less than 1million are in employment.
    That is more than 90% unemployment rate and that is what you call great progress and being competitive?

    Zambian economists? Well Zambian indeed!

  22. @29. If these guys have failed to just work coherently between themselves how do you know they will plan and run efficiently an IDC. They chose the name IDC because they can only remember what indeco was. So to even assume that these guys will have what it takes to plan for and create the necessary environment for development is the worst kind of nativity.

    • We should be having a meaningful objective based discussion which is healthy in a democracy. unfortunately the debate around IDC especially the views against the policy are anything but objective and fact based.
      It is all anecdotal, fear based and sheer disregard for the genuine effort others are making in an effort to move Zambia forward.
      It is immaterial if you do not like certain people in government but not liking anyone is not a fact on which any objective view can be based on anything.
      The style of governance by the PF gov. is just that – it is a style. It is not UNIP, it is not MMD & it is not UPND and thus it can not be beyond the witt of an average human to accept that PF would govern in a different way. You can not objectively claim that the PF is totally incompetent.

  23. This concept is meant to create jobs for people of Muchinga at the top, just look at who will head the institution and then you know what will follow.

  24. Chikwanda and this govt’s reasoning is shocking. Apparently they only want the IDC to subsidise and bail struggling companies and yet they also want to earn money from the same IDC and put into the ‘Sovereign Wealth Fund’. Just how are they going to earn money if their investment is only put into companies that are struggling? It takes years for a struggling company to just break even and start making profit. And by his reasoning, when the same company start making a profit they will stop investing into it and they will then go to the next struggling company.

    I thought if you really wanted to make money you put your money into a company that is doing very well. That’s why shares for such companies are usually high because everyone wants to invest into it.

    • And just how do you have a so called ‘Sovereign Wealth Fund’ when you have massive debts and your budget is financed by aid money? Reminds me of myself few years ago: I had this personal loan in which I was paying a whopping 13% in interest and yet I was putting money into an Savings account in which I was earning a meagre 5% interest. I thought I was I was smart saving while also being able to pay my loan at the same time. One day I woke up and I was like ‘wait a minute, why am I so dumb. I’m not really saving or making money at all. So I took everything from my savings account and paid off the personal loan at once… of course I paid a little fee for paying off my loan early and I savings account had almost zero balance. But I was able to re-start ‘real’ savings from ground up.

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