Essays on Statecraft: Why Is Zambia Broke Part 3

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Zambia still relies heavily on the mines

By Jones K. Kasonso

Having a population of 60% plus living below the poverty line, 54 years after independence, is an urgent crisis that requires immediate attention. It is no longer acceptable that in a nation of people with brains and so many resources we must leave this issue to plague the republic for so many years. This level of poverty must be reduced and the time to do that is right now. Perhaps we must first reflect on where we stand now. We are a divided nation. There are two Zambias. A look at the electoral map of 2016 clearly shows a nation divided into two blocs of East and West. But the division is more than regional. It permeates every fabric of our society. There is a Zambia for the few that have all the means and the other of the majority that is failing to make ends meet. A Zambia for the ruling class with those well connected to them and a Zambia for everybody else left to fend for themselves. There is one Zambia for the foreign investor and another Zambia for the local peasant and the marketeer. There is one Zambia for the Zambezi provinces, and another for the Easterners and a few of their selected face-savers from other regions seething in anger and despair. A Zambia for President Lungu and his friends and a Zambia for everybody else. There can be no hope or dignity or prosperity in a divided country. In this article, I address the crisis of worldview in statecraft as an explanatory factor of why the nation is broke.

Defining a crisis of worldview

According to dictionary.com, a worldview is “a particular philosophy of life or conception of the world” whereas a crisis is “an unstable or crucial time or state of affairs in which a decisive change is impending; especially: one with the distinct possibility of a highly undesirable outcome such as a financial crisis.” Zambia’s public debt under the current administration stands at 63% of GDP. Most of the earnings of the nation is committed to foreign investors or debt servicing and other obligations. The impact of this on the average family is that there is no money to spend in both the national and family coffers. There is a serious strain on money for social investments and personal advancement. This stems from the way we think about money and investments. Where we see money and wealth, and where money and wealth are, are totally different places. How we see the world of money and wealth, and where that world is, are two different places. We glorify and elect the poor among us with no proven financial credentials over those with money in the hope that our fellow poor once in power will understand us better and help us become wealthier. Alas, it’s a fantasy. Once the poor get in there with a poverty-stricken worldview and a poverty of ideas, they get overwhelmed and do nothing but make themselves to be the rich they once stood against. Zambia is broke in part because in statecraft there is a crisis of worldview on how we make money at the country, firm, and personal levels.

A crisis at country level

Our thinking that investors come to develop our country is very well misplaced. No investor goes to any country to develop it

At the country level, our politicians for almost three decades now have advocated for wooing foreign investors as a way to develop Zambia. Our thinking that investors come to develop our country is very well misplaced. No investor goes to any country to develop it for their unfortunate peasants. The drive of every investor is increasing the earnings of their shareholders or simply profit-maximization. In short, every investor you bring into your country has come to make more money out of you and take it to their country. That’s the correct position. A healthy dose of foreign investment is crucial to access global markets, foreign low-cost capital, and valuable technical competences, but a nation where nearly all the most important industries are owned by foreign investors has an imprudent government. This why Zambia is broke. We are economic slaves in our own country because of putting very unwise people in charge.

A crisis at firm level

At the firm-level, 59 percent of Zambia’s GDP comes from service industries but more than 90% of the nation’s wealth in exports is in natural resources (copper, cobalt, electricity, tobacco, flowers, cotton). Where we see more opportunities in services rather than in natural resources is evidence of the crisis in worldview. The gravitation towards a majority services economy underscores abandoning or failing to invest in natural resources. This is a mismatch of competence applications that can be corrected through appropriate public policy. The failure to exploit natural resources by local firms can also be explained by insufficient retained earnings or high interest on potential loans to invest in heavy-duty equipment.

A crisis at personal-level

At the personal level is where the crisis of worldview is even more apparent as it impacts cash in people’s pockets and bank accounts. The gross national savings stood at 38.3 percent of GDP in 2017 but 60% are living below the poverty line and therefore saving no money, pointing to a very small population contributing to this accounting of national savings. Growing up in rural and peri-urban Zambia we didn’t know that we were very poor and that our situation needed to be corrected. A few well-to-do people were the anomaly, widely gossipped about, and often thought to have some African charms or magical alien creatures that brought them wealth. Simply put, wealth was synonymous with insidious witchcraft rather than a sign of hard work or technical financial savvy. Ironically, everybody wanted to be rich in some way but apparently not courageous enough to appropriate the required magic charms because it was evil. In school, we were taught to work hard so we could get a good job someday and live well. We have a culture that demonizes wealth and cast a suspicious eye at those who do well financially. Even in recent years where we have had spiritual intervention by those who preach the gospel to us that it’s okay to be “blessed” or to have money, they are teaching that the way to accumulate wealth is to give it away, especially to them.

On the contrary, the fact of life is that if you keep more of what you earn, overtime the savings will grow and it’s these savings that give you spending flexibility and puts you in a position to take advantage of investment opportunities. It starts at a personal level. The failure of the privatization policy at the beginning of the third republic can be partially attributed to the crisis of worldview in our cultural disposition towards wealth at the personal and family levels. Our forebears did not inculcate an education system that shapes the thinking of economic players in a market economy. A strong and thriving private sector is built on a culture of rugged individualism defined as: “the practice or advocacy of individualism in social and economic relations emphasizing personal liberty and independence, self-reliance, resourcefulness, self-direction of the individual, and free competition in enterprise.” [Merriam-Webster]. There is a need for a serious multi-generation cultural paradigm shift at a personal and family levels, from a culture of envy and suspicion towards wealth to a regulated and deliberately inculcated rugged individualism.

Conclusion

The greatest need in the country is to build one Zambia. A Zambia in which all citizens regardless of region, education level, field of work or political affiliation, have equal access to the fundamentals of a happy life in their own land. This calls for reinvigorating the nation with a new sense of purpose and ushering in change around which we can unite our nation currently fragmented by politics of tribe, injustice, and random public policy. We need a new way of thinking in statecraft to resolve the dilemma of the majority poor country. A new perspective towards handling national financial resources.

The crisis of worldview means where we see the world of money and the reality of how the money world works are two different places. It calls for a shift from random public policy pronouncements to a principles-based approach. We must ensure our policies and practices in statecraft are grounded in principles that have long been sustained and proven in research. Today, when you ask government officials what their target borrowings were and why, they are keen to give a general answer such as “we are within acceptable limits of GDP” but they can’t name a country borrowing at their level or for their purposes. Rather than going out of their way to borrow for debt servicing or more infrastructure constructions, the government should adopt the applied economist’s principles of retained earnings.

This principle means, at the national level, Zambia should for once start keeping more of what the country is earning at home. Only unwise people think you can get rich by borrowing. Wise governments create conditions for locally owned companies to keep more of what they earn at the firm-level. There is a need to make simultaneous investments in small-scale manufacturing and merchandizer levels of the economy. For example, alongside giving loans to marketeers, provide small business grants for small companies to set up and locally produce some of the goods we are buying from other countries. If local small-scale producers are empowered in this way, then they can compete on price with goods from South Africa or other regional economies and win. Similarly, the local investor should be more supported than the foreign investor and given access to low-cost capital. At the personal level, there is a need for serious curriculum revisions in grade school to teach the correct values of rugged individualism.

Finally, the so-called health insurance scheme is truly a scheme in the sense that in substance it’s a tax on all Zambians with a job. This is clearly a diversion from Michael Sata’s promise of low taxes and more money in your pockets. Instead, this tax-burden should be shifted to more capable institutions among us rather than the individual worker in Zambia. For example, the more capable bodies among us are artificial persons in multinational corporations operating in Zambia. Many of these companies are foreign-owned corporations extracting natural and other resources. These multinational firms are thriving and already pay very low taxes if any. The Zambian workforce should be allowed to keep more of what they earn at the personal level.

Thank you for taking your precious time to read this article. Please drop me a comment so I can also learn from your feedback. In the next article, I will address the structure of the investment portfolio in mines as an explanatory factor in the financial position of Zambian families.

The author is a Zambian, An Author, A Consultant and Accounting Professor in Washington DC and holds Ph.D., CPA, CGMA, MBA, BSc., NATech qualifications.

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24 COMMENTS

  1. Zambia is not broke but good effort Dr.

    Dr Kasonso, I am impressed with your education background ( Ph.D., CPA, CGMA, MBA
    )

    We are birds of the same feather…

    Thanks

    BB2014,2016

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    • Magande sorted out our being broke, then some people took us miles backwards where we came from. We are broke because of reckless borrowing and reckless spending. Do you know how much the government spent on one presidential trip to New York?

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    • Good points ba Kasonso! I think though that the series should be tackled on this title “Why Zambia is broke” which is not different from your question “Why is Zambia broke”

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    • It’s a miracle that we are just broke, and not bankrupt. Our level of ignorance is appalling. It is frightening.

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    • Lusaka Times give us news please not these boring essays…I bet no one even reads these boring essays…we need news..current affairs not malabish aya

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  2. Well articulated article: Zambia has every thing: mention Copper, Uranium, Gold at Kansanshi, Cobalt. We can even save money by involving ZNS to construct Township roads and make payment to ZNS and money will be revolving within Zambia. These are qualified and well educated Engineers. We have these people in Zambia. Do away with Chines. Fyonse kwesha. God loves us a lot but fwebene.

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    • Cheap, wishful thinking. We still have a long way to go. We are still toddlers in the way we think, and children in the way we act.

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  3. A research on our grade school curriculum should be done by those with the ability and then harmonise the findings so that 20 years from now our children will be hungrier for wealth building,creative for a technical perspective,business savvy and their mindsets will be those in line with mid 21 century first world setting trend not politician hero worshiping

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    • We are yet to be where Europe was half a millennia ago. Few of our economists can even mimic Adam Smith, and none of our mathematicians, Archimedes. We are simply too arrogant. We are not humble enough to learn.

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  4. Leaders can come from different backgrounds, including academia, industry or business. It does not follow that the richer the leader, the wiser the leader. Some humble leaders are more effective than rich leaders. What makes the difference is the caliber of advisers. On that basis, your argument in favor of tycoons is inconsistent. Second, you blame individuals and families for lack of saving culture. You should not blame the victim. There is need to develop a suitable mechanism for promoting saving. The incentive for saving evaporates when embezzlement meets impunity. The incentive for saving is also as low as disposable income. Third, you greet FDI with suspicion. That is strange. The prevailing view is that FDI leads to employment creation and economic growth. It does not say that…

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    • Third, you greet FDI with suspicion. That is strange. The prevailing view is that FDI leads to employment creation and economic growth. It does not say that Local Investment must be banned. It simply means that competition leads to higher growth rate and higher employment creation.

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  5. These countries which we see leading the way today did not arrive where they are merely by hunch. Check their profile to see where they have been and what they have been through. Check the profile of the best of their schools like Harvard and Cambridge. By comparison, we are still stone throwers and fruit gatherers.

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  6. Why Zambia is broke, is very simple, and do not understand why someone has to spend so much time and energy writing irrelevant stuff. Zambia is broke because of weak institutions and a thieving and fraudulent political class.

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    • That is correct , all institutions of governance are in crisis , only the institution of political violence and procecusion are functioning correctly.

      Worse is that you supposedly have a lawyer as president who is overseeing this breakdown….

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  7. Having read through the article i pick positives and negatives The read should have taken a longer view of Zambia’s debt history and then critically analysed the real options given the infra structure driven spending

    The chief main drivers of Zambia recent increase in public debt to GDP has been rise to fiscal deficit resulting from poor internal revenues mobilization from weak services and manufacturing industrial base that is diverse , coupled with weak Kwacha from currency depreciation

    We have a weak economy that needs to perform to increase revenues so that the public debt relative to GDP is reduced in accordance with the ÖECD REVENUE/TAX to GDP model Zambia…

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  8. Then you do not fall into fiscal brick man-ship or give up given that analysis,Zambia among-st the pack or portfolio of countries in Sub Sahara has performed very well

    The Minister of Finance has re-energized also the drive to sustainability and prioritized

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  9. Unless we change the way we see ourselves. The next fifty years will just be as the last fifty.
    Our own ancestors willingly sold their loved ones into slavery in exchange for beads, guns and chitenge materials. In short, we don’t value what God has given to us.
    Not long ago, Mwanawasa’s government sold a copper mining company (KCM Plc) to Indians. A company that could make $500 million a year at $25 million.
    If I have not mistaken, Mwanawasa was the first University degree holder to be elected as President.
    No one has ever criticized his government nor has ever thought of questioning those who did the negotiation of the deal which in the actual sence is a crime.
    Kaunda carelessly spent our money trying to help our neighboring countries fighting for their freedom.
    We have money…

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  10. These people in government do not follow any economic programe ….they use money like tourists …we are in trouble bane……..

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