By Kalima Nkonde
There is no doubt that the number one problem that Zambia faces is unemployment with its offshoots of poverty, crime, prostitution and other social ills. I am a firm believer that Government should not be the main focus for job creation as it does not generate revenue and pay tax but rather relies on taxes from private sector to operate. The PF administration, however, has fallaciously believed that Government can be the main source of jobs as demonstrated by its big government policy of creating a myriad of districts, embarking on fast tracking some infrastructure projects that have no immediate economic value, the creation of a bloated government with one of the biggest cabinets in the world ( bigger than UK, USA, South Africa and Nigeria which are bigger economies).
Zambia has an overpaid civil service which consumes 50% of the Government budget and one of the highest per diem rate for foreign travel which is as big as $500 per day for some senior staff and is higher than most developed countries thus encouraging foreign travel and creating a per diem industry within Government.With the latest ill timed lifting of the wage freeze, the civil service wage bill will soon balloon to 55% or 60% of total Government expenditure and mark my words, sooner or later civil servants wages will either be delayed, or not paid in time as they may be no revenue to meet the wage bill!
In regard to job creation, which is the essence of this analysis, I would like to suggest, as a non partisan and patriotic Zambian, who has run businesses in a foreign country, read about how economies can create jobs, I would like to suggest some simple, practical and short term policy measures that the Government can put in place immediately in order to generate sustainable quality jobs from the private sector.
Mining as a source of indirect jobs
The Government has recently given in to the mining houses’ demand for revising the royalty tax regime to suit their interests and one wonders what we got in return for reducing the tax from 20% to 9%. In my view, as part of the negotiations, we should have given the mines, some non tax conditions before agreeing to the reductions so that we have a give and take and win -win situation. This strategy could have an impact on employment creation and thereby enabled us to recover some losses the revision. The following is how the mines could be made to empower Zambians and create employment indirectly:
- They should be required to purchase the majority of their requirements apart from heavy equipment from Zambian suppliers. At the moment, the mines are exporting our copper and exporting jobs too. There are exporting jobs by purchasing most of the requirements from abroad especially South Africa. This should not be allowed when they have been arm twisting Government about reducing taxes reversing policies.
- The Government should tell the mines and ask their suppliers abroad to set up shop in Zambia and partner with Zambians so that industries that are dependent on the mines can flourish and create jobs in Zambia and not abroad. One can ask how many companies have been set up in Solwezi and Kalumbila to support the mines? This is a great anomaly and Government policy should ensure foreign companies with technology and know how and currently supplying the mines are made to set up shop as joint venture with Zambians in all mining towns. Mining towns will boom and this is not rocket science to implement. I suggest that the Government should take stock and find how many companies supplying mines are domiciled in mining towns! They should challenge the mining houses to ensure this anomaly is corrected!
Improve compliance to 20% reservation on infrastructure projects
At the moment, the Government has a policy of ensuring that foreign contractors should subcontract 20% of their works to Zambians as an empowerment policy. Government should give consideration to increase this percentage to 25% . There should, however, be strict monitoring to compliance to this requirement and heavy penalties for non compliance imposed. Zambians especially party cadres who get jobs when they have no capacity and then “ sell” them to foreigners should be made to account and punished. The President has appointed Lucky Mulusa as the Project implementation and Monitoring assistant who I can call the Projects implementation Czar to borrow from the term from Obama administration’s expert appointees during the 2008 financial crisis. His department’s role should include the job creation impact of the infrastructure projects as well as the skills transfer from the foreigners to locals.
The department should also ensure that foreign contractors do not employ foreigners for jobs that can be done by Zambians! The major problem the reservation policy and many more positive policies meant to create jobs is the lack of monitoring and ensuring the parties involved are complying. The problem is that nobody checks when the parties are complying! Funds should be invested in ensuring that foreign investors are complying to the undertakings they took in their bids and when signing of contracts. The employment of expert Zambians for the monitoring aspects, is money worth spending money on as it will have a direct impact of acting as a deterrent to foreign companies not taking the country for a ride.
Government domestic borrowing as killer Jobs
The massive domestic borrowing by Government is actually killing jobs in Zambia. The Government is crowding out the private sector in the money market as financial institutions are lending more to Government which is considered to be risk free in financial theory rather than the private sector. Why should banks lend businesses and take on more risk when they can lend to the Government risk free! The private sector especially the SMMEs are unable to access finance as the Government is gobbling the bulk of the financial cake. In cases where the private sector succeeds to borrow it is at very high interest rates. This is not rocket science but basic common sense economics which appears alien to our economic managers. The consequences of the lack of loan capital for private business because of excessive Government domestic borrowing is that the businesses cannot expand or grow and new businesses cannot be set up. It is the private sector that is a source of jobs and who pay taxes and not government! The short of it is that excessive domestic borrowing by Government is one of the causes of unemployment in Zambia and this is a reality and not theory! President Lungu has to address this and ask the technocrats to be frank with him especially those who have been in the real business world and not text book economists.
Lower interest rates
The cost of borrowing in Zambia is astronomical and the Bank of Zambia is partly to blame because commercial banks have gotten away with murder as they are able to earn proportionately more from Bank charges than from interest on loans compared to others in countries. Bank of Zambia as the regulator is partly to blame! Banks in Zambia are exploiting customers and something needs to be done about this. The writer has maintained accounts with Natwest Minster bank Plc in England, Stanbic bank in Botswana and Standard bank in South Africa and Stanbic Zambia and discovered that Zambia has the highest bank charges which are not justifiable at all! There is no incentive for banks to lend especially to SMMEs when they can make easy money through bank Charges. The Bank of Zambia has a major role to play through its monetary policy instruments to lower interest rates so that it will be cheaper for businesses to borrow for investments and expansion. Businesses will inevitably employ more people!
Promotion of non traditional exports to African Countries
In Zambia, export promotion is not as pronounced as it should be and massive jobs can be created by exploiting the export market! We should ask the Chinese, Japanese, Americans, South Africans and Zimbabwe in 1980s and 1990s before the self imposed economic melt down. My view is that for short term employment creation, we need to be smart and put in policies which have immediate impact on our unemployment rather than engage in theoretical and textbook analysis and measures for employment creatiion . For as start, we have neighbours who are big markets for our food and agriculture products and are swimming in billions of dollars and we have no deliberate and aggressive efforts by Government to exploit such opportunities by engaging them. I have in mind Angola and democratic Republic of Congo ( DRC). It is so easy to earn billions from them if we have proper strategies to exploit these markets. We can sell agriculture products to them and earn easy money. Our agricultural products like maize, wheat, our beef, soya beans, beef, fish etc can find a market there but we are not making efforts to exploit these ready markets. By taking steps to exploit these markets, hundreds of thousands of jobs can be created! We are just not strategic, imaginative and committed . We are too obsessive with politics and the next election.
Nigeria is another big market to exploit and thanks to the initiative by Zambeef and CEC who have entered that massive market and more companies should be helped by Government and be encouraged to export to Nigeria. We should forget about South Africa as an export market and focus on African countries because that country’s white interests are entrenched and they have so many barriers to entry. Another issue related to the exploiting the export market of our Southern African neighbours is that we have not benefited economically from the liberation struggle and we should engage in aggressive economic diplomacy with countries like Namibia, Angola, Zimbabwe, South Africa, Botswana, Mozambique and sign bi lateral agreements for the most favoured nation status with them so that our goods and services can be exported there in preference to other countries and not subject them to rigorous tariff and non tariff barriers!
We helped and paid dearly for these countries in the late 1960s, 1970s and the 1980s when we were rich with our copper and when one could buy goods with kwacha in London, Rome, Nairobi etc. Our children and grand children do not know about this especially with the poor reading culture we have. We have not benefited anything from our investment in liberation struggle as well in helping countries like Botswana when they were “poor”, as our political leaders have been naïve and not strategic and just concentrated on politicking!
All we should be asking for from our neighbours who we helped, when we were rich is to merely buy our goods on favourable terms instead of buying from countries who never helped them! ! This will create a market for our non traditional exports products in which we have a competitive advantage with our neighbours and beyond. Exporting to these countries will create thousands of jobs, earn foreign exchange, stabilize the ailing kwacha and diversify the economy from mining! One just hopes that our politicians will find sense in this suggestion. I am proposing and take immediate action.
Foreign Investors,Mines and RSA Chains as Exporters of Jobs from Zambia
We should not import products that can be produced in Zambia such as tomatoes, onions, beans from South Africa. Strict restriction of imports that we can produce and technically referred to as import substitution is a must for job creation. When we import what we can produce from South Africa for example, the South African farmers will produce more and employ more South Africans and our farmers will lay off their workers. In addition, we will need to externalize dollars to the South Africans and so our kwacha will lose value and it will cost more to buy goods in Zambia which are mostly imported. This is not rocket science! We just wonder how our politicians have allowed a situation where Zambian imports even tooth picks are imported. Patriotic Front, as the ruling party, please live up to your name and ensure we only import stuff that we cannot import! Please do not facilitate export of jobs! This is a lesson that I will openly say Presednt Lungu can learn from Mugabe! Protect your local industry! All countries, including Chinese, USA, UK do that!
Zambia is just to open! Our trade deficit according to the latest central statistics is K300million plus for last month! Our market has just been too open for unnecessary imports and people wonder why the kwacha is under so much pressure! It is gratifying that Government has recognized this as evidence by President Lungu’s instruction to super markets to buy more Zambian products when he opened the Mukuba Mall in Kitwe. Commerce Minister, Mrs Mwanakatwe also followed up by inspecting some Supermarket chains in Lusaka and noted that they needed to stock more Zambian products. MMD sold our soul as far as foreign interests were concerned! We need to correct this and we should not be ashamed as other smart countries do the same! Minister Yaluma recently made a decision to award Zambian transporters to participate in the oil market which has been predominantly foreign denominated. These are welcome initiatives by Government and they should be commended..
Graduate internship programmes
There is a administration measure that the Government can try by absorbing graduates in Government institutions and private sector companies for a period of two years for them to gain experience and be marketable. The graduates should be paid less than the market value remuneration as they are being given experience and effectively still undergoing training. This will address the issue of graduates being rejected by the market place due to lack of experience. Private sector companies should be encouraged to enter the programme and given tax and other incentives to employ college and university graduates.
Learn from neighbours – South Africa and Botswana about employment creation policies.
In South Africa, they have a Broad Based Black Economic Empowerment policy (BBBE) which requires big cooperates to ensure compliance with empowering the previously disadvantage community through employment, skills transfer, procurement, equity participation and partnership. In Botswana they have policies that ensure that activities such as butcheries, bottle stores, brick making etc are not for foreigners through their Reservation policy. The Botswana have also made a name by ensuring that De beers had to bend and agree to have diamonds traded in Gaborone and not London and thus creating jobs! Zambian copper is traded in some dubious markets and the foreign exchange never comes home!
For readers’ information, the Citizen Economic empowerment Commission CEEC) did not just drop from heaven nor was it a local initiative. It is a copy cat initiative suggested by Zambians residents- including the writer – in Botswana who recommended it to President Mwanawasa during his visit to Botswana. President Mwanawasa, intellectual and patriotic as he was, saw sense in it and considered it worth replicating. He saw it as a successful SMMEs financing model which Zambia could emulate. The Botswana’s Citizen Economic Empowerment Agency (CEDA) was therefore copied to be implemented in Zambia to help SMMEs development as traditional banks were not interested in helping SMMES thus the CEEC.
Labour intensive small scale farming ( irrigation farming) and Domestic tourism promotion potential
There is so much potential to promote small scale farming and the promotion of domestic tourism which can create more jobs in rural areas and these have not been exploited yet but I have not addressed them in this analysis and I will deal with them in the future.
I have attempted to suggest some simple, practical but effective job creation measures that I believe are well known to the Government, the technocrats and other experts but which I believe have not been vigorous been implemented as there is a fallacious belief that jobs can only created by some complex ,text book measures and through foreign direct investment (FDI)! I believe I have an informed, practical and layman’s angle which the man on the street can relate to by reading this article. Creating jobs is not rocket science. It just needs vision, political will ,implementing and monitoring policy pronouncements,and understanding the key drivers of job creation! I hope I have contributed in a small way to our leaders to think outside the box and I also hope that they learn to tap brains from Zambians with my three Es – Educated, Experienced and Exposed rather than a adopt a know it all attitude.
The writer is a retired financial and management consultant and a Chartered Accountant by profession, currently back home, who lived in the diaspora in England, South Africa and Botswana for over 25 years. He was one of the key persons in the USAID sponsored $30 million project in Botswana called “the Botswana Private Enterprise Development Project ( BPED)” in the early 1990s which was housed by Botswana Confederation of Commerce and Industry and Manpower( BOCCIM ).The Project transformed the Botswana’s economy and improved the working relationship between the Government and the Private sector in terms of policy dialogue which has made the Botswana economy the envy of Africa.