Spend Zambia Airways money on economic diversification

27
2,330 views
Zambia Airways Boeing 737-200
FILE: Zambia Airways Boeing 737-200

When an unclean spirit comes out of a man, it passes through arid places seeking rest and does not find it..”

By Economic. Governance

Mr. Chishala is right. My own advice is that the Government should spend the money intended for Zambia Airways revival on economic diversification. The airline will contribute almost nothing to economic diversification. The larger part of use will be free tickets and transportation of personal effects by the Ministers and their relatives. This is what history tells us happened with Zambia Airways, the cow that produced the milk for all public servants until it ran dry and could not produce anymore. Like an impure spirit that comes out of a person, we tried and concluded that it was not useful, so we got rid of it. But now we think we made a mistake and must go back to where we were. Then it says, ‘I will return to the house I left.’ On its return, it finds the house swept clean and put in order. In the end, it finds no rest at all. We are likely to regret if we implement the decision to revive Zambia Airways. It will heighten political and economic divisions rather than narrow them. It is far from a selling point. It is not a priority.

We all also heard that then it was the IMF and World Bank that put the last nail into the coffin by instructing the Government to finally sell the airline. Today, the IMF has a problem of debt with the Government and is refusing to grant the loan. Certainly, the rebirth of Zambia Airways cannot be a decision or support by the IMF. It is locally-made. As usual, every time we make our own decisions, they tend to be aptly unwise. As anyone else, I seriously suspect hot pressure coming from families of former Zambia Airways employees who lost jobs and benefits of flying all over the world and doing business. They have been lobbying since it was defunct. We all lobby but this one is meant to ground the whole economy including proponents of the airline’s rebirth finally to its knees. That’s how we are. We lobby for wrong things.

AS NUMBERS SHOW, ZAMBIA’S DIVERSIFICATION PROBLEM IS ALARMINGLY HUGE

Zambia’s diversification problem is more than we all think. Let us use numbers to understand. Thanks to efforts by Government to diversify but numbers show that we are still very far therefore need to use almost every penny on this important economic decision.

First, Zambia’s exports are dominated by copper, accounting for almost 70% and this is non-manufactured (Table 1 below). The top non-copper exports in the name of precious and semi-precious stones are also easy-come-easy-go. So, the top serious non-mineral or non-traditional export product is tobacco which, in 2016 accounted for only $163 million exports or 3% of total exports of $5.8 billion. The shares of the top 3-4 non-traditional products (tobacco, precious, maize and sugar are simply too low to make any significant contribution to economic development especially that they are not manufactured products. There is a potential factor here that may lead to future reduction of exports of especially tobacco – the Zimbabwe political landscape may mean some of that country’s farmers based in our country may inevitably go back.

Table 1: Zambia’s Exports of Non-Copper Products in $ Millions: 2016

2016 Share in %
       Total all products 5,804
       Copper 3,960 68
       Tobacco, unmanufactured; tobacco refuse 163 3
       Pearls, precious & semi-precious stones 153 3
       Maize (not including sweet corn), unmilled 114 2
       Sugar, molasses and honey 113 2
       Inorganic chemical elements, oxides & halogen salts 97
       Gold, non-monetary (excluding gold ores and concentrates) 95
       Lime, cement, fabrica. constr. mat. (excludingglass, clay) 79
       Cotton 66
       Manufactures of base metal, n.e.s. 59
       Miscellaneous no-ferrous base metals for metallur. 53

Source: Unctadstat

In terms of trend over the last twenty years, exports of tobacco in absolute values have enjoyed rapid rises as can be seen by the image in Figure 1 below although declines became visible in the last 2-3 years due to global price fluctuations of commodities. But this rise is nothing when export values are so low. However, chances are that in the next twenty years, if production is expanded, exports would start to grow significantly.

Second, Zambia’s efforts to diversify exports can be understand by looking at international measurements such as the diversification index, which, shows that the more numbers are close to 1, the less diversified a country is; and that the closer they are to zero, the more they are diversified. So, in Table 2, we see that in 1995, Zambia’s export diversification index was 0.9, which is almost 1, meaning it was very far from diversifying, that is why it is one of the top four countries with less diversification. In 2016, Zambia is joined by many African countries with an index of 0.8 which is not far from the number it had twenty years ago, suggesting that by international standards, the country is still very far from integrating in diversification or the global value chains and networks. In other words, we can say what we want and make public pronouncements that the country is diversifying but we cannot hide from numbers.

Table 2: Zambia’s Export Diversification Index: 1995 and 2016

  1995
           Uganda 0.9
           Nigeria 0.9
           Lesotho 0.9
         Zambia 0.9
  2016
           Botswana 0.9
           Equatorial Guinea 0.9
           Mali 0.9
           Sierra Leone 0.9
           Burkina Faso 0.9
           Gabon 0.9
           Congo 0.9
           Sudan 0.9
           Chad 0.9
           Zimbabwe 0.9
           Guinea 0.8
           Nigeria 0.8
           Mauritania 0.8
           Libya 0.8
           DRC 0.8
           Burundi 0.8
           Central African Republic 0.8
           Lesotho 0.8
         Zambia 0.8

Source: Unctadstat

Third, the country’s industry value added in the economy is too low in absolute values. In the last 45 years, industry value added has only grown from $ 585 million in 1970 to $ 6 billion in 2015 compared to $11 billion for Kenya and Tanzania respectively. In 1995 Tanzania’s industry was $443 million, less than Zambia’s but it is now about twofold more than ours. As a share of GDP, industry is currently about 30% (Figure 2), at least in 2015. More importantly, the trend shows that in the last almost five decades, it has been declining, from almost 50% in 1970. Obviously, much of this is the copper story, further confirmation of lack of diversification. In relation to the Zambia Airways story, clearly, here is the challenge to invest more in industry to take it back to the level of the 1985 when the share was 51%. Expanded industry will create more jobs than Zambia Airways. It will create more manufacturing and regional and global competitiveness than the airline. The airline will be more luxurious and contribute almost nothing to regional and global competitiveness.

Figure 2: Zambia’s Industry Value Added in GDP in Percentages: 1970-2015

Conclusion

When an unclean spirit comes out of a man, it passes through arid places seeking rest and does not find it..” It then says, ‘I will return to the house I left’ hoping to find better things but instead it finds worse things. It is like African countries and the World Trade Organization (WTO). Before, it was called General Agreement on Tariffs and Trade (GATT) and developing countries thought it was a rich man’s club. So, they thought it would benefit them if it became WTO, or for all countries instead of a few rich ones. So, they created WTO in 1995. Today, Africa is only told by other members, the rich countries that what they are proposing will benefit the continent. But when Africa makes its own proposal (if any?), it is never accepted. The only gain it has obtained is that its voice has strengthened. But a strong voice without accompanying economic benefits is nothing. Africa is now wondering if it can go back to GATT.

 

27 COMMENTS

  1. If they spent £42 million on fire tracks and still mismanaging on other overpriced contracts?

    You can only suggest bwana… and it stays that way “suggestion”

    1

    1
    • The airline will contribute almost nothing to economic diversification. The larger part of use will be free tickets and transportation of personal effects by the Ministers and their relatives. Furthermore, Ethiopian airlines stands to gain, but the strategic partnerships will collapse just like the Virgin / Nigerian airlines partnership did. Government is better off creating an enabling environment for Zambian registered privately run airlines to grow and flourish.

      1

      2
    • Pathetic article and lacks real merits for causes it advocates. The author has no clue that QZ was not insolvent at the time it was dissolved.

      The discussion was made at State House because Katebo Katoto had lied to FJT that he would bring in his own airplanes to replace QZ.

      That’s why FJT in his first statement about the defunct QZ was and I quote “… we are bringing in investors who will Soon replace Zambia Airways with newer planes.

      There are no sacred cows when it comes to privatization”. End of quote.

      A year passed and no planes, Katebe was sick and the deal died so did the hopes of a new airline and the rest is history.

      2

      0
    • Remember that QZ was one of the last major business they let go after that all eyes started getting opened. FJT killed our nation airline because he was promised kick backs by Katebe not because it was a loss making enterprise.

      The so called Economic Governance had no such data apparently and just threw useless figures around that have no bearing to real diversification.

      For instance the Emirates invested heavily in aviation and their economy grew three times from a desert in 1990 to a paradise today. Qatar followed suit and same thing happened …

      2

      0
    • Further still, the new QZ is partnering with Ethiopian for a start and the set capital is mainly for operational purposes.

      The goal is to increase capacity otherwise you are not going to be profitable by operating One Boeing 737. Stop citing failed examples, they are more failures than they are winners in life.

      Look at a few success stories like the Emirates, Qatar, Jordanian and other similar airlines to emulate

      1

      0
  2. If properly harnessed the industry poised to benefit will be tourism. And this industry is highly dominated by foreigners and a typical zambian will register zero direct benefits. Generally speaking the economy may benefit hips.

    3

    0
  3. The pivotal argument I agree with is that it is not a PRIORITY. The debt weight is too heavy on Zambias neck. We have read in the media on how Air Malawi is not reaping any benefits from the same arrangement with Ethiopian Airlines.

    1

    1
  4. As usual sponsored by the UPND sycophants…Who doesn’t know their agenda and their sponsored hired guns who think that until the Western world says it that is when the country will develop…Airlines operating in Zambia are reaping the benefits and all the money is going out hence the resistance and sponsoring such useless articles…

    3

    2
  5. We need a national airline to diversify our economy. There is no doubt about that. It will improve our tourism potential because it will attract our local and internatinal tourists to visit our tourism sites dotted throughout the country. It will also allow both local and foreign investors to identify investment oportunities in rural areas which are difficult to reach by road especially during the rainy season. If Ethiopian Airlines have done it, we can also do it. If the for the airline is diverted and used in manner you have suggested, there is no guarantee that it will not be abused. What we need is for the airline management to be focussed and deliver to expectation without undue political interference.

    4

    0
    • Raise the quality of the contents of your argument. There’s no empirical evidence to suggest that all that is not happening because there is no national airline. One of the reasons why Zambia is a hard-sale in terms of tourism is filth. The recent exercise by uniformed personnel is but a drop in the bucket.

      Others are poor healthcare and cost of doing business.

      0

      0
  6. The decision has already been made. Get life and move. We have agreed to have zambia airways back.

    Don’t waste time and if you dont have money, we who have money will enjoy the fruits of zambia airways.

    We are going ahead.

    2

    2
  7. MOST ZAMBIANS ARE SO NEGATIVE IN EVERYTHING, ESPECIALLY IF THEY ARE NOT THE ONES ARCHIVING CERTAIN BEAUTIFUL GOALS. REVIVING OF THE NATIONAL AIRLINE IS ONE OF THE MOST ECONOMICALLY BEAUTIFUL DECISIONS THE GOVERNMENT HAS IMPLEMENTED. THE NATIONAL AIRLINE WILL HAVE A RIPPLE EFFECT ON VARIOUS SECTORS OF THE ECONOMY- AND NOT ONLY ON TOURISM. THE NATIONAL AIRLINE CAN TRIGGER AND EFFECT MODERNISATION OF THE TOWNS IMMEDIATELY AFFECTED BY THE NEW AIRPORTS. NEW ELECTRICAL TRAINS TO CONNECT TOWNS TO THESE AIRPORTS FOR FAST CONVEYANCE WOULD BE SOME OF THE RIPPLE EFFECTS OF THE AIRLINE AND AIRPORTS, AN INTERNATIONAL AIRCRAFT MAINTENANCE HUG CAN BE CREATED EITHER IN LUSAKA, KITWE OR NDOLA.

    2

    0
    • In your positive view, the absence of the national airline is stopping all that from happening? What is the US airline that facilitated the intermodal stations across the land? SA has a national airline but has no intermodal links, not even the celebrated Ethiopian.

      A national airline may be a player but it’s not a catalyst. You can take this argument to the bank.

      0

      0
    • @Peter where honestly do you see economically beautiful decisions here. This airline is not going anywhere, it’s not about Zambian being negative it’s the truth. The Zambian Government does not even own it’s own plane for the president. Did you know that the plane Edgar uses is a hired plane that has been used since Sata. Now think of this at this time if they are still flying in a hired plane, how on earth are they going to manage an airline, if they can not even afford a presidential plane. Let’s face reality here. This government has mismanaged anything that comes in their hands, how possible is it going to be?

      0

      0
  8. It is pure exaggeration that Zambia Airways went under in 1994 due to planes being always occupied mainly by staff members and relatives travelling on free tickets. How come Zambia Airways managed to meet its own salary wage bill up to the last whistle? The airline was also BP Zambia’s major client. Zambia Airways embarked on an aggressive restructuring and downsizing exercise from 1991 shedding off over 1,500 staff by 1994 leaving just over 1,000 staff at time of liquidation. Zambia Airways had paid off most of the financing loans for the 2 ATRs’ leaving a mere US$6 million, paid off half of the cost of the DC10 and was on target to be one of the first African Airlines to receive delivery of an MD11 having made major down payment made. Zambia Airways was one of the few African…

    2

    0
  9. Airlines with a largest asset base. QZ had a better outlook than a number of African Airlines that have survived since. The truth is that the MMD Government did not give Zambia Airways the chance to survive. Zambia Airways liquidators have since paid off all creditors and ex employees and still remained with excess revenues. It is true that Zambia Airways just like other airlines faced challenges with cost of aviation fuel at the height of the gulf crisis from and the unstable local currency following the foreign exchange auction system introduced in late 1980s’. At the height of Zambia Airways operations there were planes landing at Lusaka International Airport every 30 minutes creating derived demand for supportive services; travel agents, tour operators, cargo agents, taxi drivers,…

    2

    0
  10. In some sayings one said a lazy man says I will not to till land because there is a lion in the bush it will eat me up so I better sleep on in my bed .
    There are always challenges to what so ever you do even walking in the streets you meet thugs to clobber you so stay at your house , how about buying a car there are hell drivers in the streets they will bang me better I just walk.
    Failures always have excuses why it cannot work , spending money some people would only choose to keep money in the bank , one day that bank will ran bankrupt like meridian bank of 1996.
    Failures better you keep your failure mind to yourself than contaminate zambians.

    0

    0
  11. hotels and International Catering organisation. FTJ admitted before he passed away that they had been wrongly advised on the status of Zambia Airways, his admission was published on local media. The discounted staff tickets were an incentive provided under IATA regulations, by 1994 the late George Lewis management had devised a system of allocating only a set number of seats for staff from each station and only when there were spaces after full paying passengers.

    2

    0
    • Correctly Observed… Infact currently we have ministers like Mr Mutati who are on record saying Government cannot ran business…Most companies in Europe and even America are Parastatals been ran efficiently but when they come to Africa they say do not do this by influencing opinon leaders how ridiculous…Electric cars uses copper meaning the demand will be high and yet we have idle mines in Zambia instead of grabbing them back but people like Mr Mutati are saying Government cannot ran business…

      1

      0
    • Wrongly advised by who?
      The same argument MMD made about the mines. We were not give time to properly valuate our mines. Question is by who?

      And where are your business gurus while you are getting improper advice from nameless people? Who is approving the soundness of this advice?

      More importantly, have we addressed the problem of buying wrong advice? How?

      1

      0
    • Zakeyp, there’s a structural difference between the relationship between government and parastatals. In the countries you referenced, the rules of engagement are written into law. That’s not the case in Zambia. E.g.. ZESCO, ZNBC, ZamPost, and Zamtel. These are either cashcows for the party in power or they are liabilities.

      0

      0
  12. Mobility is the key to success. Being able to move freely gives room for growth. Mobility leads the way for development. If one has a well networked road system, rail system, airline system, one can import and export goods efficiently. Right now, Zambia main source of flying in and out of the country is via SA airlines. Have you seen the planes that they offer for routes to Zambia? Those planes are small, old, and not comfortable. This has also made the cost of flying to and from Zambia very expensive. As an example, in order to fly to Malawi, one has to fly to Zimbabwe then connect to another flight to Malawi. Sometimes to fly to SA or from SA one has to fly through Namibia. These flights which should be anywhere from 1 hour 30 minutes to 2 hours and up being 5 hours to 10 hours. If the…

    0

    0
  13. I don’t know why people think politicians won’t abuse the airline, You heard that Lungu will be among the first passengers maybe accompanied by other lazy officials. You have a loss on day one. The author has offered practical reasons while most of you it’s just textbook theories

    0

    0
  14. #12 do you travel ny air? Proflifht takes you direct between Lusaka -Lilongwe at least 4 times a week. You can fly direct Johannesburg from Lusaka and Ndola at least three times daily.
    I dont support the concept of a new government airline either but cannot buy your kind of thinking and lies. Typical UPND and equally diisgusting, people who will say one thing today and tomorrow say the exact opposite if they discover that government is doing it. The best oerformanxe of hh was in 2016 when he told people in Chipata that he would add value to their groundnuts by setting up a peanut butter factory without researching the facts, factory had just beenvxommissioned the previous month. The ngonis had a really good laugh at hh and his upnd!! He has never gone back there iinstead called them…

    0

    0

LEAVE A REPLY

Please enter your comment!
Please enter your name here