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Thursday, January 27, 2022

In his crusade to promote trade and investment, President Hichilema must not ignore what other leaders ignored

Columns In his crusade to promote trade and investment, President Hichilema must not...

By Edward Chisanga

President Hichilema is on overly-ambitious crusade to promote local, regional and global trade and investment for Zambia. He is calling for more trade and investment with DRC. In developed countries, he is asking them to trade and invest more with Zambia.

He is right. Zambia needs robust trade and investment in order to develop particularly its manufacturing sector, add value to exports and obtain more income from external receipts. This is important so that each Zambian family can boast of having three meals a day and end the begging among youths and adults that is plaguing this country into a culture we never had many years ago.

The new culture by the new government, in particular the President to try and upgrade Zambia’s image locally, regionally and internationally has many manifestations. For me, the upgrading must manifest itself in booming export value addition on the one hand, and domestic and foreign direct investment on the other hand. Lusaka Times reports, “President Hichilema says trade and investment are the main issues raised during the discussion because they are one of the driving forces for jobs, business opportunities and other related aspects of social and economic development.” With this background information, containing several complicated and baffling technical issues, I was forced to ask for help from Sisi, my niece whose understanding of economic, trade and investment matters is simply impeccable.

I began by asking her, “Sisi my little one but with bigger brains than mine, I’m here facing you but confronted with this question that I’m unable to answer on my own. The new President is preaching promotion of trade and investment as Zambia’s top development agenda. If he called you tomorrow for a discussion over these subjects, what would be your first point?”

“He must not ignore what preceding Presidents ignored. They ignored to first look at statistics to see where,” She said. “He must know where Zambia’s trade is coming from, where it is and then decide where it should go. Without statistics showing Zambia’s past performance, the President will be implementing this agenda without a strong basis. He is likely to be excited and call it an increase when the proportion of exports rises to 5% the next one year.”

I asked, “What’s wrong with the rise of share to say 5% when it comes?” I asked.

“You see, a common mistake made by preceding Presidents and their civil servants was that they simply touted, planned and came up with implementation without first knowing the baseline. Here, baseline means knowing where the country is in terms of international trade and foreign direct investment. They simply asked the international community to help them increase trade and investment. They simply presented to Zambians budgets on trade and investment without showing past performance. “

“I see the danger with that approach,” I disrupted Sisi. “And I understand your point. Without a information on past performance, leaders simply use ad hoc measures and get excited when they see rise of proportion of exports to 0.9% the following year when in fact, that growth or rise is simply addressing the deficits of past years.”

“Correct uncle. But statistics are also simply a basis of planning and implementation. In his analysis of the country’s strengths, weaknesses, opportunities and threats, (The SWOT tool), he certainly needs to understand the S and W first. Let me show you two statistics that were ignored by all preceding Zambian leaders which, if President Hichilema does not ignore them too, would make him a great leader and Zambia, a great country.”

“So, how would you explain these graphs to help the President?”

Performance in International Trade

“Figure 1 below makes the point clear. It shows the proportion of Zambia’s exports of all products in the world since independence, 1964 to 2020. You see where the country is coming from: between 1964 and 1970, Zambia had the highest peak of proportion of exports in the world of about 0.4%.”

“Which has since then fallen to almost 0.05% in 2020?” I asked.

“That’s right uncle. It shows massive erosion of global competitiveness. It means other countries have overtaken ours in global competitiveness in trade. According to the same Unctadstat data, in 1964, Zambia ranked number two, only after Nigeria in Sub-Sahara Africa excluding South Africa’s top exporters to the world expressed in shares. It means Nigeria had a share of number one followed by Zambia. By 1980, Zambia’s ranking had dropped to number nine, overtaken by Cote D’Ivoire, DRC, Gabon, Angola, Namibia, Zimbabwe and Cameroon.”

“So, Sisi, with such huge erosion of global shares of the past, it means today, when UPND registers a rise in global share of 0.09%, it will mean nothing because it is simply taking care of the deep erosion seen in Figure 1?

“That is exactly my point uncle. That is what President Hichilema should focus on. If the proportion of Zambia’s global trade fell so much, how can leaders of today vaunt about a rise in proportion to 0.9%? It means nothing really. First, they should get back to the proportion of 0.4% of 1970 after which they can then gasconade with rise in share of 0.9%. Otherwise, it is embarrassing to brag about this rise when you have so much downturn over the years as a country, even if that downturn was not caused by you.”

 

Performance in Foreign Direct Investment

Now, Sisi, let us discuss Zambia’s attraction of foreign direct investment (FDI). What do your statistics tell us?”

“Looking at Figure 2 below, President Hichilema will understand that Zambia’s global competitiveness in inward FDI in terms of global proportion has been eroding significantly since 1980, the period that Unctadstat covers. In 1980, Zambia’s proportion was about 0.30%. But there has been a momentous erosion of share down to 0.05% in 2020. That is hilarious.”

“So, as in the case of trade, here, we should be careful not to brag about any increase of share today without relating it to past falling shares. It makes no sense at all that Zambia’s share has been slumping to its lowest ebb in the last fifty years, then today, ask the orchestra to play a dance song to which every Zambian should join to dance over an annual share increase of 5%. Growth or increase of share should not start from 2021 or 2022 but from as far back as 1964 showing trends of performance. If the share eroded fifty years ago, you know that today’s increase has to take into account that loss. It then becomes a point of plus five, then minus ten.”

“So, what you’re saying is that Mr. Hichilema should first fill the deficits of fifty years such as going back to the share of 0.30% of 1980 shown in Figure 2 below, after which we can talk about increase of 5% in 2020. When you have a graph falling so steeply like the one in Figure 2, then you increase a share minimally in 2020, how can you dance without referring to the share of 1980? It’s shameful to dance. Great leaders don’t dance. They’re more worried about filling the deficit gaps of the last fifty years first.”

“I totally agree with your analysis. You have lost what you owned before. You must first get it back before going into boasting of little growth or increase of share. Past leaders ignored to plan taking into account bad performance. Bad past performance is an integral part of future planning. It cannot be ignored. Just as good past performance must be an integral part of future planning.”

“So then, it looks like the last fifty-seven years of independence has not really translated into the country attracting more FDI? What is the main problem and how can the new leadership reverse this bad trend?”

“One problem is that Zambians do not discuss important topics like where does Zambia’s money come from and how is it used. I do not come across any dialogues of Zambians discussing the role of international trade and FDI in our everyday lives. Besides borrowing, Zambia’s money comes from income generated by our participation in international trade and FDI. It is better for our country to generate money from effective participation in international trade, like Viet Nam does.”

“It is true that an average Zambian does not discuss Zambia’s major sources of income. Some only argue that Zambia will only be developed by Zambians. Others talk about the so-called many resources of the country. But how can Zambians develop Zambia when they don’t even know how bad the economy has been performing or how bad the country has been performing in international trade and FDI? Others are simply good at making funny comments against those who try to bring dialogue, or try to bring information to the public about the country’s poor performance.”

“You’re absolutely right. I also get worried that only a few Zambians really talk seriously about the economy. It is because we don’t talk about it that we allow our leaders to neglect the economy. If we were able to discuss, we would track the performance of the country in international trade and FDI. We would raise questions every year before the situation gets worse as we see the illustration done in the foregoing paragraphs.
Then I asked her, “So, with Zambia almost losing completely its global competitiveness in international trade and FDI, how will the President address this problem?”

“Zambians must hold their leaders to account. One way is to ensure that before they announce future plans or budgets, they tell citizens about past performance of the country’s participation in international trade and FDI. Why do we allow our leaders to give us new plans or budgets all the time which we like commenting on, but we don’t ask that they in parallel give us information about past performance?”

“The point you make is extremely important. They all tell us about the importance of export diversification and value addition – that the budget aims to promote value addition. But look at Zambia’s record of export value addition in international trade. Figure 3 below shows the under-performing trend in proportion of Zambia’s global exports of manufactured goods in total from 1995-2020. It shows that the proportion of exports of primary commodities has had an annual average rise of about 90% compared to less than 10% for manufactured goods. The verdict is that in the last two decades, there has almost been no value addition in exports. This year, the new government has claimed that the budget will address value addition. Can Zambians keep records to refer to in the next coming years to hold the government accountable? Can they track performance on an annual basis and dialogue publicly with leaders before the worst situation takes place?”

We ended the discussion with my comments, “Without Zambians offering quality advise and dialogue, more detailed information about past problems such as the performance of these two sectors, and simply reacting to what others propose, and often negatively, I don’t see much help coming from the public. That itself is a major challenge for the new President to promote trade and FDI. Citizens are unlikely to make substantive contribution. Instead, they will react and offer discouraging short comments as if comments have promoted trade and FDI anywhere in the world. I’m not sure that Asians use our Zambian style and culture of making sharp and short rude comments to build their countries into global competitiveness.”

3 COMMENTS

  1. Well done for encouraging debate on the economy. I agree to some extent with your views especially on trade promotion. I, however, disagree with you and President HH on FDI promotion unless changes are done.It has been a total failure in past 30 years. FDI has resulted in exportation of jobs,forex and economic growth to the West and China.
    My view is that we should promote more our local investors and that is why I support the SME Development Ministry. I have done extensive research on these issues and written numerous articles since 2015.
    I do not talk about theory in my articles but but base my arguments on practice based on 35 years local and international private sector experience.
    I wish the new administration could listen to some of us who have hands on experience and know how…

  2. “overly-ambitious crusade” has negative connotations in my reading; sound like HH is doing a bad thing. Other than that, I am 100% for data informed debate. But at the same time we should be on guard and relentlessly put down, “with sharp comments” any noise in the debate that self-servingly and consistently and cleverly re-frames the debate in highly emotional terms to elicit reaction.

    On to the article: I don’t understand disparaging any growth at all unless it is over and above what it used to be 40 or 50 years ago. Any effort that gets Zambia appreciable positive economic growth and starts eating away at the unemployment rate and poverty should be applauded.

    Otherwise it’s like telling someone recovering from serious leg injuries that unless they…

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