by Mwansa Chalwe Snr
The Finance and National Planning Minister, Dr. Situmbeko Musokotwane recently presented the 2024 Budget. And now, the 2023 fiscal year is 75% complete. It is, therefore, appropriate that as people debate the budget, they have available an independent assessment of the performance of the economy to-date. This will enable stakeholders ascertain the reasonableness of the budget. You cannot objectively debate or evaluate a budget without reference to the actual performance of the current year, with its attendant variances – adverse or favourable.
This performance review is evidence based; and a result of the interpretation of data obtained from credible sources such as: the Ministry of Finance and National Planning, International Monetary Fund, Stanbic Purchase Managers index (PMI), Bank of Zambia and many others. It is an independent analysis devoid of any spin or bias. The objective is to give a fair and factual picture of the country’s economic performance for the past nine months, so as to help readers make informed views on the 2024 budget, and the economy as a whole.
According to existing evidence thus far, the economic growth (level of activities) for 2023 is poor when compared to 2022. Zambia Statistics Agency reported that the economy grew by 2.3% in the first Quarter and 5.0% in the second Quarter of 2023. And both numbers were lower than the 2022 corresponding growth rates of 7.9% and 5.9% respectively. As a consequence, the Ministry of Finance and National Planning has adjusted the 2023 growth rate from 4.2% to 2.7% for 2023, compared to 5.2% in 2022.
There is no way of sugar coating the fact that the rate at which the Zambian economy is growing is way too low. It is even below the population growth rate of 3.4%. As a result, very few jobs are being created; and the poverty rates continue to be very high. And even the IMF agrees with the above assertion, and states that: “Despite its abundant resources, growth has been insufficient to lift its young and growing population from poverty. More than 60 percent of Zambia’s population lives below the international poverty line compared to 35 percent across Sub – Saharan African countries.”
HOUSEHOLDS PERCEPTION OF ECONOMY
The majority of ordinary Zambians’ current perception of the economy is that it is not in good shape; and certainly not working for them based on their personal experiences. They justify this by pointing to the high cost of living and the lack of money in their pockets (shortage of liquidity).
The high cost of living is reflected in the high prices of mealie meal, petrol, electricity, interest rates and other imported commodities. These claims by citizens are not just allegations, but are supported by evidence from economic statistical surveys; like inflation from Zamstats which is now at 12%; Jesuit Centre for economic reflection (JCTR) basket of goods for August,2023 which was at K9,267.34 compared to K8,982.82 in December, 2022; interest rates at over 25%. And the Kwacha depreciation which closed at K21 to a Dollar on 30 September, 2023.
PRIVATE SECTOR PERFORMANCE
The Zambian private sector has not been doing particularly well for most of 2023, for a variety of reasons. And the top most reason is the high cost of doing business in Zambia. The term: “high cost of doing business”, is made up many components. These include high interest rates, high fuel prices, high cost of imported inputs, excessive taxation, high electricity tariffs, multiplicity of regulations and licences with their attendant levies. And if indeed the government wants to achieve the 2024 Budget theme of: “Unlocking Economic Potential,” it is vital that they seriously address the above constraints to the growth of the Zambian Private sector, by properly sequencing and prioritizing interventions.
The evidence of the general poor performance of the Private Sector was captured in the monthly Stanbic Purchasing Manager’s Index (PMI) Surveys, which showed that for most of 2023, the index was below the 50 threshold, or just marginally above, with the highest reading being 51.4 in May. Any number below 50 indicates poor performance of private sector activity.
“The latest reading pointed to a renewed decline in the country’s private sector activity, amid widespread reports of money shortages related to currency depreciation and high fuel prices, and lower customer numbers. Although business sentiments plunged to a four-month low, companies were still positive that business activity would pick up over the coming year,” The PMI Surveys stated in two of their reports during the year.
GOVERNMENT FINANCIAL MANAGEMENT
One of the major achievements of the New Dawn administration is its adherence to fiscal discipline. Fiscal discipline has been very high since they took over. They have reduced waste in government expenditure, such that even in the current 2023 financial year, the fiscal deficit is projected at 5.8 percent of GDP, which is below the target of 7.7%. They need to be commended for this. Financial mismanagement was one of the major causes of Zambia’s economic problems in the previous administration. It is what led to excessive borrowing and even negated any good monetary policies.
LABOUR MARKET AND JOB CREATION
It is a well-known fact that very few jobs are being created by the Zambian economy. And this is not surprising, given the current low level of economic growth. The International Monetary Fund’s Country report also alludes to this weakness in the Zambian economy.
“The participation rate in the labor force is low and only 31 percent of the working age population is employed. There are limited employment opportunities, and even among those employed only 27 percent are in formal employment,” IMF wrote in the Zambia Country Report of July, 2023.
It is apparent that the magnitude of the unemployment problem is huge, but there are no readily available up to date labour statistics to base decisions on. As Management Guru Peter Drucker famously said, “You can’t manage what you can’t measure”. There is a need for regular and timely Quarterly Labour Surveys. It is doubtful that the current job creation initiatives do fit the size of the Youth unemployment problem the country faces, because they are not critical mass based solutions.
The two critical financial markets in Zambia are the money and foreign exchange markets. The money market may be said to be doing fine from the IMF, Central Bank and Banks shareholder’s point of view, but certainly not so to Households and the Private Sector. There is some evidence of market failure in the money market, as regards to pricing and the restricted supply of money to Households and the Private sector, which requires some intervention. The average interest rate of over 25.7% is way too high. The foreign exchange market is also very unstable and unpredictable. The kwacha closed at K21 to a dollar. These two issues are critical and require urgent measures.
CONCLUSION AND COMMENTARY
There is no question that the economy is expected to perform poorly in 2023 based on the nine (9 ) months review, and the projected growth rate of 2.7% for the year end, which is much lower than both 2021 and 2022 annual growth rates of 4.6% and 5.2% respectively. There is, however, some hope for improvement based on both Government and Private Sector expectations for 2024 and beyond.
But, there is a serious concern about the size of the projected growth targets, both in the 2024 budget (4.8%), and the 2024-2026 Medium Term Budget Plan (4.7%). These are way too low. They are insufficient to generate around 2 million jobs required to solve youth unemployment, and reduce poverty from 60% to 37% in the next 3 years. However, there are innovative engines of growth that have not yet been explored in the planning documents that can grow the economy between 10-12%.
The Finance and National Planning Minister, Dr. Situmbeko Musokotwane’s Budget concluding remarks were spot on and inspirational, when he said: “The journey to a better Zambia is a collective one. It requires active participation of all citizens. Together, we can overcome the challenges we face today. Together, we can build the Zambia we want.”
The Minister effectively brought in the concept of Team Zambia. But if Team Zambia hopes to win and solve its problems, it has to be more inclusive by ensuring that some of its best players (brains) are not left on the bench or in the terraces. The credit for success will always still go to those in charge. It is a well-known fact that a team that leaves out its best players from the line-up, ends up losing most of the games, and will eventually be relegated. There are some critics of government who allege that the New Dawn has not been consultative, and has a “Know it all attitude”.
Going forward, and based on their two years’ experience, the New Dawn administrations should adopt a more inclusive approach than previous administrations, and implement Dr. Musokotwane’s call for inclusiveness in actual practice. This is crucial because the keys to unlock the illusive additional 5 -7% growth rates required to transition the economy to double digits growth, are with those who are not in government. It is vital that Authorities open up more to local thinkers. And just by casting the net wider for practical and implementable ideas – even from those who were in previous administrations – will do the trick of unlocking the economic potential of the country, to double digits growth rate.
The current traditional economic strategies contained in the National Development Plan (NDP 8),the 2022-2024 Mid- term Budget Plan and the 2024 Budget – are excellent documents – but they may take 2,3,4 or 5 years to make any impact, and sometimes not at all, because they rely on stimulation strategies which are mostly not controllable. We have been producing them for almost 60years with nothing much to show for them. The implementation of these documents need to be complemented with innovative, street wise and practical interventions using jumpstart strategies which are measurable, controllable and easily monitored. The Jumpstart strategies are especially applicable for current problems like cost of living and unemployment, which require immediate short term solutions, whose impact can be seen and felt by citizens.
The writer is a Chartered Accountant and Author. He is a semi-retired international MSMEs Consultant. He is also an Op-Ed Contributor to the Hong Kong based, Alibaba owned South China Morning Post (SCMP).Contact:[email protected].