By Dr. Lubinda Haabazoka
In economics, there are several ways one can reach the promised land. The easy way would normally be with the help of others while the hard way would be choosing to go it alone.
Like in politics, economists can be divided into two: Liberalists and Conservatives
Liberalists believe in 100% private sector control of the economy with the government have a very limited role. A typical example of a liberal economy is that of the United States.
Under this paradigm, the strong survive and capital thrives.
Conservatives on the other hand believe in a strong presence of government in the economy and believe that government in the economy should be there to protect small and unsophisticated citizens from exploitation by big capital and monopolies.
The ordinary Uncle Joe and Auntie Agatha are on the streets.
To be honest, liberalist concepts are more favorable to a country because they promote hard work amongst citizens and help build a strong private sector as evidenced in the United States.
The Zambian Case Study
Unfortunately for poor countries such as Zambia, a 100 % liberal direction cannot benefit a large section of the citizens, it’s foreigners that own Capital, and all we can provide is labor.
One can argue that we are the second-largest copper producer in the world, therefore, there’s hope but the mineral resources in Zambia—until KCM and Mopani transactions—are foreign-owned so the benefits from the mines elude us.
The Challenges of IMF Policies in Zambia
The reason why IMF policies fail in Africa is that the IMF fails to defend the interests of ordinary people in the countries they implement their policies. They often put the interest of the IMF first, not ordinary Zambians.
There is a very huge miss when it comes to understanding economic development as propounded by the founders of economics.
Economic development models do not have “a one size fits all approach.” Each country is unique and Africa as a continent is even more unique from the rest of the world.
When foreign capital goes to the USA or UK, the host governments keep tight control over those resources and they definitely get their fair share in form of taxes. When capital comes to Africa, it is overstated and governments get nothing from that in form of taxes.
How Does Africa Get it Wrong?
One of Africa’s biggest problems is the lack of lobbying power! Africa, Zambia included always bargains from a weaker position such that it ends up begging.
Have you ever heard the IMF mention that Africa should own its mineral resources? Have you ever heard the IMF seriously tackle the issue of illicit financial flows?
Have you ever heard the world bank fund the construction of a factory? Have you ever heard the IMF give money to build a new company to be owned by locals? No.
But they will always tell us that we should borrow from them so that we have enough forex reserves to balance our payments. They tell us that once we get an IMF package, we shall get the credibility and FDI will flow into Zambia. Let’s ask questions – Which African country has developed with the help of FDI or an IMF bailout?
Capital knows that it can only operate in countries that are playing on its own rules. So capital engaged the IMF and other strong international funders to drop up rules that favor them.
When those rules are drawn up and a country implements them, money flows into that country. Unfortunately by the time the money is flowing in, all profits go out because of tax concessions that are negotiated! A country actually does better as it has stable exchange rates and rapidly increasing GDP growth figures. But unfortunately, wealth never trickles down to the locals because apart from labour, other factors of production remain in foreign hands.
Countries that have learned this trick have advanced their economies. The trick here is to implement self-centered policies aimed at wealth creation amongst locals. But doing it quietly is very important because lobbyists are so powerful that Russia and China now are under sanctions. Sanctions because these countries have chosen not to be conformists. They have decided to create a parallel world order under BRICS to which SA is a member.
The Case of China In Continental Economics
To me, reducing the IMF debate to politics is a waste of time and missed opportunity. The discourse should be on how to prioritize wealth creation amongst citizens. Can you create wealth by increasing energy costs for your business? Can you create wealth by reducing taxes from your mineral resources?
You see, we can’t also push China away because it is set to be the number one superpower and largest economy above the United States soon. Yes this is going to happen in our lifetime.
We had Greece rule, then Rome, then Persia, then England, then USA/Soviet Union, now the USA so it’s now China’s time. The question is, what is our role in global economics? How do we prioritize our citizens? How do we win in this situation?
For me, we are not making bold decisions as the one Kaunda made. Bold decisions to get all mines and own them, build INDENI, build Mansa Batteries, build all the many factories.
Today our bold decision as mentioned by the IMF boss is that we have agreed to remove subsidies and probably privatize one or two companies then get $1.4bn. This is where I am getting worried. I am getting worried because I was born to solve huge and complex issues.
I was born to help create models in my country like never been seen before. Create a modern 24-hour economy. Create a sovereign wealth fund to fund infrastructure development. Create a Zambian Silicon Valley. Create a Zambian-dominated mining industry. Create an agriculture sector not dependent on rain.
These are the ideas we need to start discussing as a country.
But as long as discourse remains political and not serious, then we might as well follow the Clive Chirwa’s to the diaspora!
The author is an Economist, Consultant, Researcher and respected Academician of local and international repute.