Relaunching Zambia Airways is a bad investment decision

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CTPD Executive Director Isaac Mwaipopo
CTPD Executive Director Isaac Mwaipopo

Economic policy think tank Centre for Trade Policy and Development (CTPD) has charged that the move to re-launch Zambia airways at this time is a bad investment decision.

CTPD Executive Director Isaac Mwaipopo said the move is actually a blunder in the making than a blessing.

“We foresee the costs of owning an airline, for Zambia’s case, outweighing all perceived benefits. Zambia needs to focus on pro-poor policies which will benefits the majority of its people. Investments such as this one will end up reducing government allocations to key sectors like health and education,” Mr. Mwaipopo said.

He added, “In light of Zambia’s huge debt and soon maturing Eurobonds, the government needs to pursue fiscal consolidation and not expanded government expenditure on new projects.”

“We might also do well as a country to pick lessons from Malawi that has tried a similar model we are about to embark on, the model has failed to deliver projected benefits since they launched it 4 years ago, you will also learn that the aviation sector is one complex and sensitive sector that demands a lot of caution,” he said.

Mr. Mwaipopo said while the idea to revamp the national airline is good, the timing is wrong and will put pressure on Zambia’s fiscal position.
“While CTPD appreciates the potential benefits that government has cited such as the gains in the tourism industry, potential increase in non-traditional exports and employment creation there is risk that the potential costs of owning an airline may outweigh the benefits especially at this time when the country is already grappling with so many problems,” he said.

“Going by the announcement made by honorable Mushimba, the Zambian government will own the majority shares at 55%. With this ownership structure, the government will be expected to continuously channel significant revenue towards the project.”

He added, “This investment is against the backdrop of high and escalating public debt levels which is already more than half of our GDP, high fiscal deficits, high poverty levels, challenges in the health and education sector, stalled infrastructural development projects owing to lack of funds to mention but a few. The government also has a highly inflated wage bill in which an analysis conducted by the world bank as of September 2017 indicated that 23% of revenues were allocated to interest repayments while 54% of was allocated to salaries and wages leaving only 23% for other expenses. The investment is only likely to further lead to more debt accumulation and increase the public wage bill leaving lesser funds for poverty reduction initiatives in the country.”

Mr. Mwaipopo said CTPD has observed a number of challenges in key economic sectors which need urgent attention for instance in the education sector, public universities such as the University of Zambia and the Copperbelt University which are still closed.

“In the health sector, the Cholera crisis has had a huge bearing on government expenditure of which pending total costs spent towards dealing with the outbreak of cholera are still unknown. Long term measures to prevent the disease still need to be put in place,” he observed.

“Added to the numerous problems the country is already faced with, there is now a challenge of trading space for traders due to limited space in the existing markets which was compounded by the gutting of Lusaka City Market. The situation has been worsened with the cholera outbreak and clearance of the streets.”

The CTPD Executive Director noted that going by the poor rainfall patterns in most parts of the country, the country has a looming food crisis which may have cost implications on government coffers.

“In the agricultural sector there have been challenges implementing the e-voucher system this agricultural season. While CTPD notes that it is important that the government invests in projects with potentially high economic returns given the pressure the country has to repay its accumulated debt stock, this particular investment risks being another loss making parastatal.”

Mr. Mwaipopo said CTPD feels that government should prioritize the finalization of infrastructure projects which they have already commissioned.

“The government should also devote more time and resources in addressing the challenges in the social sectors of our economy as well as position themselves to meet the challenges that may emanate from a foreseeable crop failure due to the poor rainfall patterns being experienced in most parts of the country,” he said.

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29 COMMENTS

  1. On this one; I will always back PF even though I hate their corruption and violence; it would have been better to let Zambians like me buy some shares than give EA 45%; still it is better than not having a national airline;

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    • Everything with PF is not clean, they had better options on the national carrier but went with the worst deal just because Ka Koswe and his ministers want to have a stake in the silly deal. ET will never do anything for Zambia, they have their own expansion strategy. They will all Zambia airways routes to grow their airline. They have done that with Air Malawi. This is truly a blunder in the making than a blessing as cited. Brian and Lungu know what they have done.

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  2. Business decisions shouldn’t be confused with pure romantic wish-thinking. I’ve never heard of a compelling business argument from those who support the idea of a national airline. However, if they insist, I hope government will offload part of its shares to those interested Zambians and remain only with 25% exposure.

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    • @Jobeka. I can never buy shares in a company run by the Zambian government. If the current trend of appointing cadres as CEOs and board members is still there, believe me, Zambians will waste their money. Buying shares in a company shouldn’t just be for the sake of it. It’s supposed to be an investment and believe me right now the Zambian government has no capacity to make proper investment decisions. Those of us who’ve been working in the private sector where all company activities are profit oriented, know how behind our government is when it comes to investment. Next thing you will see Zambian Airways buying 10 staff buses at $2 000 000.00 each and a $200 000.00 Landcruiser Lexus (for the CEO) supplied by a friend of the president or minister.

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  3. Bwana Mwaipopo please tell that to blind optimists like minister Mushimba and to one other folly driven guy BR Mumba.

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    • Hon. Mushimba, please tell us where your priorities are ?

      Solving the problem of hundreds of DEAD Zambian Citizens from cholera, or free travel around the world for Lungus friends and PF carders like the trip to New York?

      We know there is not enough money for BOTH !!!

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    • Ask hh to rescind the sale of Zambia Airways. He sold our planes and assets at give away deals and pocketed money from it via the kickbacks. HH the the privatisation thief!!!! I hate this remorseless crook!!

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  4. Nothing ventured, nothing gained. Zambia Airways will succeed because past mistakes will be avoided. The major challenge was public debt due to economic collapse. The economy is breathing and government has leaned the hard way from past mistakes. As for Malawi, a joint venture with Zambia would be welcome. That would increase the market share and spread the cost sharing. Instead of criticizing Zambia Airways, there is need to offer some solutions. For instance, government suppliers must also fly Zambia Airways. This includes the mining companies.

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    • How will you avoid this when cadres are flown into other countries to watch a football match? who will bear the cost of all that.

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  5. Even at household level, decisions are made to onstruct nigerian type houses and buy expensive vehicles in order to improve the living standards of the family regardless of the cost implications. Similarly, there will never be a right time for govt to invest in the airline business because life is a circle. If they dont fo it now someone else will do it tomorrow. And claim the credit. So as we construct and modernise our airports, we must also equip them with modern aircrafts. If the whiteman did not come to Africa at the time he did and at huge cost, we would still be living in a dark continent. Now they want to go to the moon, and maybe to to mars regardless of the cost implecations. While we are quarreling about the cost of launching Zambia Airways, our friends are busy manufacturing…

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  6. The analysis is correct but even at household level decisions are made to construct Nigeria type houses or buy expensive luxury vehicles purely as a way of improving the living standards of the family regardless of the cost implecations. So as we build and modernise our airports, let us equip them with modern air crafts to be managed by Zambia Airways.lets give it a try. If the white man did not come to Africa at huge cost, we would still be living in a dark continent.
    Now they want to go to the moon. At great cost.

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  7. Atlast a sensible organization!!
    Zambia airways will be impounded in European capitals against Zambia debts.
    Planes will be easy debt swap merchandise by venture funds.

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  8. Give it a try: If it fails just say ” I told you” if works come out and say “I was wrong”. Like already said nothing ventured nothing gained.

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  9. HH IS JUST WISE,I KNOW IF SOMEONE CALLS SOMEON A “CROOCK”JUST KNOW THAT HE OR SHE IS LESSER WISER THAN HH.

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  10. Today in Zambia we have a lot of charlatans in the name of experts. Can some one just itemise for me forward benefits of the proposed plan for reviving Zambian airways. Who is going to manage it In simple language instead just opposing. By the way did any of you so called experts know that the Government is the biggest capitalist that can galvanise huge resources, which no single Zambian can including the so called richest capitalist thieves like HH and GBM!

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  11. Don’t worry. It is just Ethiopian Airways, Zambia Branch. They already have branches in Malawi trading as Air Malawi for example.

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  12. The government ‘s initiative is right. Who are you to say this is not the right time. There is no right timing for any investment in most cases. However, this is a requirement and the government are right to take a chance on it.

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  13. The problem with Zambian or African owned companies is miss management I like that 45% of the shares will be owned by another company it’s a good move it can bring much needed forex and add to the GDP if properly managed

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  14. Mushimba, is another *****, who thinks he knows everything. They are want the airline, so that , they can be jumping from to lane to another plane like monkeys in green maize.

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  15. Comment:my brother, don’t you know that the country without air line it’s like you have no chairs in your house, think twice my brother & it’s like you don’t want development the country.

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  16. a congolease football club TP mazembe has two planes belonging to club sponsored by individual mr Katumbi Moses what of zambian millionairs why dont they invest big in zed as well zawo ndalama niza mankhwala ?

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