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.