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Alba Iulia
Saturday, June 6, 2020

Zambia risks economic meltdown: Government needs COVID-19 economic impact mitigation dialogue

Columns Zambia risks economic meltdown: Government needs COVID-19 economic impact mitigation dialogue

By Kalima Nkonde.

The impact of Cov-19 requires all Zambians and residents to pull together. Zambians regardless of their political persuasion should use their brains to come up with ideas that can help our leaders with solutions. There should be a time out for partisan politics and finger-pointing. This article is my humble contribution to a body of ideas. I hope it helps in a small way.

The Covid-19 pandemic has two major impacts-public health (life) and economic health (livelihood). It is important that the nation addresses both, and a proper balancing act is done so that solutions are found for both. Of course, the public health issue does rank higher than the economic health of the country but the latter cannot be totally ignored.

I would like to leave the public health solutions to the health professionals and focus on the economic issues which is within my area of competence. This analysis is indifferent to whether the country goes to full lock down or maintains the status quo -partial lock down. However, maintaining the status quo, based on experience of other countries, appears to be the riskiest option with more dire consequences – both health and economic – should the worst case scenario materializes. It may not have been the wisest decision but you never know, as the decision makers have more information than all of us.

It is public knowledge that Zambia’s economy is already in a very bad shape even before the coronavirus pandemic. The Covid-19 pandemic, however, will make the current bad situation much worse as it will affect almost all areas of the economy. We need to involve more players for ideas how the economy can be saved. There is also need for decisive leadership to take timely and bold action.

In the past, as a country, we have been poor at managing risk. We have tended to wait until something happens to act rather than planning ahead and anticipating what is likely to happen. We can ill afford to have this attitude with Covid-19. Zambia needs to anticipate the economic impact of the pandemic with proper scenario planning. This is a prerequisite in uncertain times. The approach ensures that mitigation measures are put in place in advance, awaiting implementation at appropriate times.

COVID -19 economic impact on Zambia

The overarching negative economic impact of the Covid-19 pandemic is the reduction in the country’s economic activity. The reduction in economic activity is such that, in my view, Zambia is most likely to go into a recession despite the revised projected growth rate of 2.0% for 2020 announced by the finance minister. We are coming from a very low base and so a recession is a very distinct possibility. The Organisation for economic cooperation and development (OECD) does share my view.

“Even if you don’t get worldwide recession, you are going to get either no growth or negative growth in many economies of the World,” Said Secretary General of OECD, Angel Gurria.

The worldwide shutdown will disrupt commerce and supply chains as factories are shutdown. Our trading partners such as China and South Africa will be adversely affected which may result in possible shortages and subsequently price hikes. The Chinese economy’s growth is expected to slow down from 6.0% in 2019 to 3.5% in 2010.

It is a given that the reduction in the growth of the economy mentioned above means nothing to an ordinary and non technical person reading this article. It is, therefore, important to amplify and simply the effects so that people can relate them. The major negative economic impacts that ordinary Zambians are likely going to face due to covid-19 are: increased unemployment, the continued depreciation of the kwacha, rising cost of living and worsened shortage of cash (liquidity). To further simplify these effects, it means businesses closing down and unable to pay tax and wages, people losing jobs, people losing their source income as they go without wages, banks foreclosing on people’s loans for failure to meet installments and people losing properties, people being evicted from houses for failure to pay rent, people going hungry as they cannot afford food as it is expensive, people unable to pay for utilities like rent and water. As for the government, it will mean impairing its ability to pay civil service salaries, service debt and pay suppliers due to reduced tax revenue. All in all, Cov-19 has the potential to cause unprecedented havoc in the economy and untold suffering.

The above are the matters that should be focused on when mapping out strategies for mitigation measures. And it goes without saying that it is not possible for the government to have all the knowledge, skills and resources to handle this alone. The involvement of other players is important and the approach has to be holistic and not just focus on one area of giving incentives to big business.

Proposed approach to tackle Covid-19 economic impact

The approach I am recommending is premised on the fact the Zambian government, as the situation stands now, is not the strongest financially in the Zambian economy. In Zambia, multinational companies, the Chinese government, Western cooperating partners and the Bretton Woods institutions, are the stakeholders with the financial muscle and intellectual capacity to help. These are the stakeholders who should be involved and formally engaged from the get go. It is this respect that I would suggest that the government convenes an economic indaba that can come up with a comprehensive plan and commitments for economic mitigations measures in the light of the Covid-19 pandemic.

The major weakness with the current government approach is that it has not been inclusive, at least as far as the public is concerned. If it has been, then, it has not been publicised, and therefore very ineffective in communicating to the people. The Coronavirus pandemic is one where the government can ill afford to operate with an exclusive attitude in coming up with solutions by having very limited consultations with stakeholders who may have more knowledge on what needs to be done than the Cabinet or the Bureaucracy. We can ill afford our government to make uninformed decisions. There is need to have a high level, analytical and consultative approach in dealing with this matter whose consequences are a matter of life and death.

First and foremost, there is a need to sit down with the private sector and discuss what measures they can put in place to help in safeguarding jobs and to protect the economy. The exclusive announcement of measures by governments without the buy-ins and commitment from those targeted may have zero impact as the government may be offering what the private sector do not need. The measure will just be a loss of revenue by the government with no benefit to the ordinary Zambians.

I would highly recommend that the government engages the private sector in particular, as represented by ZACCI, Bankers Association, Chamber of Mines, Manufacturing Association etc and ask them to make proposals how they intend to contribute to mitigation measures for the coronavirus economic impacts. In the current situation, the government should not be the only giver as it just does do not have the capacity.

This is the time the multinational companies should be asked by Zambians through their government, to take a leaf out late of US President Kennedy’s leaf by: “Asking NOT what the Zambian government and people can do for them, but what they can do for Zambia”. This is not the time for minor public relations social contributions of personal physical equipment (PPE) contributions, sanitisers etc by multinationals but for bigger contributions and sacrifices on their part. This is the time they should shelve dividends to their shareholders and take care of the country that has provided them with riches over the years.

It would also be a smart and high impact move if the republic President invited all the Chief Executives and Captains of the industry of major companies in Zambia and to a meeting and ask them for solutions and meaningful contributions to the mitigation measures of the pandemic. They should make commitments for the same in advance and in writing.

It is commendable that the government intends to engage the IMF, World Bank and Western cooperating for assistance which is likely to straddle public health and economic health impacts of the pandemic. It is also advisable that the government takes advantage of the Cov-19 situation to ask our Chinese friends to reschedule all their loans and give Zambia a repayment holiday.

Mitigation measures that government, Banks, Mines and other Multinationals can offer

There is no doubt that the Zambian government cannot provide economic stimuli like the $2 trillion dollar rescue package by the USA or the payment of 80% of wages for private employers like the United Kingdom government or 90% wages like Denmark or the suspension of rent, taxes, water and electricity bills like the French plan, to keep their businesses afloat; but there are measures that can be taken within our local context by consultations with stakeholders. What is important is that instead of just making announcements from the Ministry of finance or Bank of Zambia, there is a need to involve others to contribute or getting their buy-ins.

The current administration through the Minister of finance, Dr. Bwalya Ng’andu announced a number of steps meant to minimise the economic impact of Corona virus mostly targeted at big business but very little for households and small businesses. The measures include the setting of contingency funds and plan to mobilise funds from various stakeholders. There are also tax concessions to mines and a few economic sectors. These are commendable steps but I would have preferred a more comprehensive approach that looks at the entire economy including commitments to save jobs directly. The measures are indirect measures that one may not even measure their impact and are based on the goodwill of the recipient. It would have been better if they had been offered to big businesses as part of negotiations to extract some concrete commitments from them.

I would suggest, for example, that major employers undertake not to lay off their employees but keep them on their payroll for say four months? The mining houses can for example, have a moratorium on forex retentions abroad through reduced retentions and sending 80% – 90% of their revenue to Zambia for three months to help the kwacha exchange rate. The international banks could offer small businesses and households loan repayment holidays (home, vehicle, personal etc) for a couple of months or some other form loan restructuring such as extended repayment holidays so as to help with liquidity. There is a myriad of actions that could be undertaken by the private sector but the government needs to engage them in dialogue and negotiate with them for contribution. There are countries that have done that.

It is vitally important that the government shows goodwill by implementing drastic expenditure cuts in remuneration and benefits of top earners. It should also announce further austerity measures and the suspension high profile vanity projects like the National airline and demonstrate the savings from such measures which should be diverted to COV-19 related mitigation measures. All in all, the 2020 budget needs to be revised and reprioritised with different line items.

Conclusion

The essence of the article is that Zambia is faced with an extraordinary situation that requires extraordinary action and sacrifices by everybody- Zambians and residents alike. It is a mistake for government to think they can solve this problem alone. A smart approach is a consultative approach possibly through an indaba that should include Unions, Cooperating partners, Employers’ representatives, and NGOs. The Indaba does not have to be necessarily in a physical conference given the social distancing measures that are being recommended. ICT tools such as Cisco WebEx, skype, zoom cloud meetings, etc could be used to facilitate the same. Alternatively, the government could invite important economic players to present papers with recommendations on what measures they would recommend to the government to take in order to save our economy from collapse.
Zambia cannot avoid waiting to take action depending on how the infection rates escalate because the negative economic impacts are a virtual certainty. There must be innovative ideas out there on how Covid-19 economic impact can be mitigated. It may be a smart move to form a COVID-19 Economic Task Force to complement the Public health one. The time to take action is now-this week.

The writer is a Chartered Accountant by profession. He is an independent, non- partisan finance and economic commentator/analyst and a genuine Patriot.

[Read 1,466 times, 2 reads today]

21 COMMENTS

  1. A totally wholesome and positive contribution from a real patriot. Well written, Zambian Nkonde. Brother KZ, please forward such articles to your colleagues in GRZ.

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    • To Whom Much is Given, Much Will Be Required. To whom much is given, much will be required (Luke 12:48). If you have heard that line of wisdom, you know it means we are held responsible for what we have. If we have been blessed with talents, wealth, knowledge, time, and the like, it is expected that we benefit others.

      When elected to leadership positions, its time to sweat blood and water for your people and not to be upgraded to Louis vitton or Gucci lifestyle.

  2. Good insights but needed editing e.g from 2019 to 2010 and the poor grammar in the quote about the late US President Kennedy. The article is also too long.

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  3. Pikicha??? Prevention is not just wearing masks but avoiding contact with the next person, no wonder we are encouraging social distancing

  4. The two major impacts of Covid 19 as outlined by the author are: public health and economic health. Could someone one quickly address the public health impact since former has been exhausted.
    My problem with the Public Health is that UTH should not have been used as a Centre for attending to Covid 19 cases. We know very well that Covid 19 is deadly for people with underlying illness. UTH has a significant number of people who are already sick and prone to other infections. I hope that the health workers at UTH will be able to follow proper protocols to ensure that they don’t became agents in the transmission of Covid 19.
    My suggestion, though too late, is that Levy Mwanawasa Hospital could have been turned into a 100% hospital for Covid 19 cases.
    The other possibility, which is not…

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  5. Continuation …

    The other possibility, which is not too late, is to turn a structure like Nkoloma Stadium into a Centre for Covid 19 cases. Make shift structures can quickly be organized at Nkoloma Stadium or any other suitable place because the number of cases will continue increase based on the trends of last week.

  6. You used to insult the west, telling them that its your country they can not dictate how you manage it. The chickens have now come home to roost.

  7. We are already working with various stakeholders. So I don’t know if this guy is ignorant us to what we are doing or just lazy to find out. Rather than sitting in your bedroom assuming and writing articles why not first contact us or the relevant ministry to find out what they are doing before issuing uninformed article.

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  8. @KZ,where is the evidence?What deals have you done and commitments from who ever you are talking to?Why is it publicized in your papers and ZNBC so that the public knows what you are doing. The public needs reassurance so that they dont continue suffering from psychological impacts of anxiety,stressetc due to uncertainty.Do not just be defensive. Tell us who you talked to and what you have sgreed.Your friends in Botswana have deals with banks for loan holidays etc. We want to see results so far otherwise it is all hat and no cattle as the Texans will say. Your communication strategy must be a disaster if indeed you are negotiating deals. I for one do not believe you.

  9. Are the people wearing face masks aware that the masks are contaminated with coronavirus?
    If not please check out the video of a Chinese factory worker in china rubbing his shoes on facemasks about to be sent off for donations to other countries.Make your own masks using chitenge materials.

  10. The *****s, is wearing a mask no a fashion thing? Social distancing recommends two meters apart but unfortunately for these clowns it’s another day at the circus and I hope they are the Covid-19 has reserved a place for then at Leopards Hill… Fellow citizens, please void such foolishness and maintain social distance of 2m or the best thing, stay at home in lockdown

  11. We are a rich nation. The problem is our current leadership. Ati isabi mutwe. Look at what we have. We are lead by thieves and we expect them not to steal?
    Look at how many scandals we have in Zambian. Has anyone been taken to a serious court for them?

  12. This current crisis makes it obvious to everyone – our leaders do not care about our nation or our people. They only care about staying in office and bleeding the country dry to line their own pockets.

  13. They are incompetent. If it is a by election they would talking as of they are the most educated people in Zambia. Surely what can kaizer teach us on this covid management. He is a cheap bully and the small education has done more harm than being ignoble. What an advisor? Even a cleaner at white House is more noble than him. Sorry to have such a man as an adviser

  14. This crisis should be a wake up call to jump start Africa’s self reliance for real, not just all talk but real action. Please don’t wait for ideas from foreign stakeholders to prescribe the solutions that could lead to self reliance. After the dust has settled, they (wealthy nations with financial muscle) will be busy reconstructing their battered economies. African governments and African intellectuals should also be busy working on long lasting economic solutions during the recovery period.
    My one Ngwee input: First solve the most immediate problem that African countries face…Food Security.

  15. I don’t think citizens should be patronising the govt with their opinions. What the writer reveals is their utter lack of respect for the capability of govt. We have Parliament, ministries in charge of various functions in the economy. We have Central Bank (BOZ), Treasury ect. Just what does the writer think they do day in day out!

    THE GOVT HAS GOT THIS. RESPECT/OBEY what I think the article failed to do is connect the burden poorer economies in the developing world have which is greater than larger leading economies (also facing same economic melt downs). It follows that consulting with internal private sector (they blooming we’ll have no money…), Its better to engage IMF to release loans. At this time the world needs to work together to fix this. IF ANYTHING OUR CHINESE…

  16. ANYTHING OUR CHINESE FRIENDS SHOULD STEP IP TO THE PLATE, help fix what started with them.

    The Private sector is probably looking for a rescue package from the govt.

  17. LT, why do your administrators delete comments when they are a little challenging to their views. It’s very poor form! Manipulating opinion to control the dialogue in favour of their views is dull.

  18. “It is public knowledge that Zambia’s economy is already in a very bad shape even before the coronavirus pandemic.”
    This is the result of 30 years or neoliberal economics – financialization, privatization, and emphasis on exports for international trade instead of regional economic integration. Or an indigenous manufacturing industry.

    What can be done:

    1. Local selfsufficiency
    Encourage local businesses to produce food their locality. Upto 100% of food should be locally produced/grown.
    2. Solar energy
    Getting off fossil fuels which need to be imported and paid for in foreign currency, while electricity should be practically free. Encourage use/manufacture solar panels.
    3. Local rainwater catchment
    Many farms could be selfsufficient in water through rainwater catchment,…

  19. Continued…

    Many farms could be selfsufficient in water through rainwater catchment, instead of tapping into local acquifers.
    4. Renationalize the mines
    Forget about any windfall tax, just take them back. Create a copper based currency.
    5. Demand side economics instead of supply side economics
    FDR did many things to create employment – those were the 1930s with creating national parks, loans for homesteaders, free education and mortgages for soldiers, etc. which ultimately created the US middle class of the 1950 and 1960s.

    Also, I wonder what is now going to happen to the Eurobonds. Can we now all agree how illogical it was to take on the Eurobond debt instead of tax the mines?

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