The calibre and comprehension of economic matters by Zambian leadership embarrassing

For a while now we are used to the unfulfilled promises of politicians. We have accepted that it is the norm to have our hopes raised and later abandoned—this has been the norm since September 2011. But what is unfortunate is when politicians, having failed in their jobs, start to make comparisons of past failures to justify their current failure. UNIP was voted out of power due to its blatant economic failure to grow the economy and secure a reasonable livelihood for Zambians until 1991. MMD was voted out on the same premise in 2011.

But Republican Vice-President, Dr. Guy Scott, having no one but his party to blame, proudly justifies the current economic failures due to PF’s policies(or lack of) arguing that the highly depreciating exchange rate has been depreciating since 1964, and also depreciated during the MMD regime ‘so why so much noise under PF?’. Here is a Cambridge trained man with some mathematical economics training blatantly failing to use his training and education, compromised, shadowed, and made arrogant by the laurels of the PF’s victory in 2011. Prior to 2011, Dr. Scot would have been empathetic to the failings in the economy: Fuel prices are higher. Electricity Costs are higher. Transport Costs are higher. The currency is weaker. Government debts are higher. Budgets deficit is higher. Overall living costs are higher, and quality jobs scarce. But no, he is too shrunken, metaphorically, to see all these in his government, and his only admittance of failure is that we have had failure before—from UNIP to MMD, so he is adding PF to the list of failed governments, and he seems proud of this.

His master, the president, has surfaced and directed Bank of Zambia Governor, Dr Michael Gondwe, to explain to Zambians issues surrounding the fall of the kwacha. He has also warned Konkola Copper Mines (KCM) against being dishonest, arguing that the kwacha was stronger before independence because Zambia had more honest entrepreneurs. True indeed, but what Mr. Sata is forgetting is that the role of foreign ownership with a 100% profit repatriation policy, coupled with non-existent government growth policies leads to our current situation.

The president’s instructions to the governor are welcome, but should move beyond explanations to actions aimed at maintaining stability of the exchange rate. But as long as there are no serious reforms underway to explicitly and efficiently tax the mining sector, or to improve the current collections, or to curtail wasteful government expenditure, there is nothing much this instruction will yield. The PF’s approach to economic policy matters is that of eagerly setting proud economic goals for public consumption without any commitment to adopt appropriate supportive policies to achieve them.

Listening to Dr. Scot justify his government’s failures, and the overall quality of economic debate among PF’s economic managers and parliamentarians, you would see a huge difference in the calibre and comprehension of economic matters by the political leadership in our country. If you watch the South African Parliament in session, compared to ours, you would be impressed, most times, by the political leaders’ depth of knowledge of economic issues and consistency in their thinking regardless of their educational background. Some strange things happens to our even highly educated politicians once they get to Manda Hill—as is evidenced by Dr. Scott’s shrunken understanding of the economy.

Sata’s economic goals and policy preferences are self-contradictory

The various economic policies and sectors are interconnected and interdependent. If there is no basic understanding of the issues, and no consistency in thinking and approach in the formulation of economic policies, a country can end up with conflicting national economic objectives, contradiction in economic policies and confusion in economic policy formulation. That is what is happening in Zambia.

Our President, his vice and his government don’t seem to have a grasp of the fundamentals of the economy. He has set no economic vision for his government. He has not demonstrated any understanding of the relationships between economic goals and economic policies. Evidently, one does not need to be an economist to think consistently or to formulate coherent economic policies. What the president ought to have done, still needs to do is to set economic targets and tell his economic team to come up with a policy package to achieve those targets. Obviously, the quality of his economic team (Chikwanda in charge of Fiscal Policy, Gondwe in Charge of Monetary Policy and Paul Siame in Charge of Presidential Economic Policy advice) will determine the success of such targets set.

Alternatively, Mr. Sata can tell his team what type of economic policies he can politically adopt and his economic team should be able to advise him of the outcome of such policies. What he cannot, and should not, do is to simultaneously set economic targets and suggest politically motivated economic policies. But that is precisely what our president seems to have been doing—a master of all–but if not, then his economic team has been failing him, and should be held accountable.

Mr. Sata’s economic goals and policy preferences seem self-contradictory. He (and his economic team) wants to control inflation but would like to follow the fiscal policy that fuels inflation. He is unwilling to mobilise tax resources but has the urge to increase expenditure. He presides over a huge budget deficit and desires to further increase borrowing.

Mr. Sata may be genuine in his quest to grow the country, but it seems his management team has no recognition that a higher-level of investment in the private sector—which is a critical engine of growth— is not possible if the fiscal policy crowds out the private sector from credit availability and pushes up nominal interest rates due to excessive government bank borrowing. An expansionary fiscal and impotent monetary policy cannot be expected to promote a high rate of economic growth and relative price stability on a sustained basis.

It should also be obvious that in the presence of widespread corruption and financial mismanagement and misappropriation of funds as reported by the Auditor General’s Office you cannot implement sound economic policies. Without adhering to principles of merit in the appointment of chief executives of economic institutions, you cannot develop a strong institutional framework for the formulation and implementation of economic policies. But this is what we have, and thus it shouldn’t be a surprise that we are in such a mess.

A National Commission of Inquiry Into Growth & Development Options

The existing governance approach of setting conflicting economic targets, adopting politically convenient policies, weakening economic institutions and indulging in corrupt practices would continue to produce what we have had for the last years since 2011: a low economic growth rate(we haven’t grown much above what MMD left), high inflation, balance of payments vulnerability, widening economic disparity, increased poverty and large-scale misery, coexisting with the luxurious life-style of a few and of course a weakening kwacha and rising debt levels.

A prudent approach to change the direction of the economy will be to set the national economic goals of containing the rate of inflation to a certain range, raising the rate of economic growth target to a certain level, reduce the deficit, introduce tax reforms and exhaustive audits of mining activities and gradually to reduce dependence on foreign and local borrowing.The government should then direct its economic team to come up with a set of fiscal, monetary, exchange rate and other policies that reinforce each other to achieve those targets and objectives.

With this, the PF government can then use its political strength to get such a package through the National Assembly and ensure its effective implementation. Once that rational approach is adopted, the president can then hold the economic team accountable for the results. Perhaps a novel starting point to all this is to set-up a National Commission of Inquiry Into Growth & Development Options, to produce a ‘Zambia Growth Commission Report’. This shouldn’t be hard to do, with all the many think tanks and experts—both local and foreign— that are willing to help Zambia in growth matters such as the Zambia Institute for Policy Analysis & Research, National Economic Advisory Council, Policy Monitoring & Research Centre, International Growth Centre, Civil Society, NGOs etc. I am sure donors would be more than willing support such a commission as it will be a signal of the PF’s concern for the nation, and a way of bring divergent views to draft a national document that all would contribute to, and thus support in implementing recommendations. But then, these are the pillars of good economic governance and that may not necessarily be the agenda of our political leadership.
By Hjoe Moono