By Field Ruwe
I tip my hat to two gallant Zambian musicians, Petersen and Pilato, for their timely “Bufi” song. PF cadres and kaponyas do not know how to respond to the words watile ukapanga road; bufi! Watile ukatupele nchito; bufi! Ati fuel ika chipaa; bufi! Actually, kaponyas do not know how to react to the current friable political mood. They are as thunderstruck as the rest of us. They do not know what has hit them. What they thought was light at the end of the tunnel has turned out to be an approaching train. It has hit them hard below the belt and shattered their hopes and aspirations.
The Kiss of Death
First, let me say this; the word “subsidy” is sanctified—it is a lifeline; a bail-out. It is meant to help the poor cope with high costs of food and other essentials. Presidents who remove subsidies do so at their own peril. In 1986, KK tampered with subsidies on food and fertilizer. Prices of commodities skyrocketed and the disgruntled took to the street. It is believed that this was his kiss of death. In the early 1990s, some of his lieutenants, including president Sata, turned against him. They incited street vendors to riot, and before KK knew it, he was gone.
The appropriate term for “subsidy removal,” is “live and let die.” It is the “kiss of death” synonymous with the International Monetary Fund (IMF) and the World Bank. The term, often referred to as “subsidy reforms” or “subsidy cuts,” has been in existence since the 1970s. The catalyst of the term is Iran. In 1977, Iranians, unhappy with the pro-U.S. Shah Mohammad Reza Pahlavi, began a revolution that would last two years. On January 16, 1979, the Shah fled to Egypt and ended up in the U.S. Hundreds of Iranian students stormed the U.S. Embassy in Tehran and took 60 Americans hostage. In response, the U.S. president Jimmy Carter imposed an embargo on Iranian oil and drove prices of imports and exports up the roof.
African countries, including ours, were suddenly hit by inflation. Hunger and famine were widespread. IMF and the World Bank came to our “rescue.” The institutions’ money lenders were dispatched to Africa to dish out “low-conditionality loans.” One condition for lending was to remove subsidies on essential commodities. In Botswana they were turned away. The Botswana president told the IMF group that Botswana did not need to remove subsidies; that its people would “tighten their belts, pull together, and plough through the economic crisis with their cattle and diamonds.”
The Botswana president told the IMF group that Botswana did not need to remove subsidies; that its people would “tighten their belts, pull together, and plough through the economic crisis with their cattle and diamonds.
For 43 years subsidy reforms have not benefited a single African country
In Zambia, KK, faced with low copper prices, opened the doors for them even after Civil Rights leader Reverend Jesse Jackson had appealed to him not to. Jackson, during his 1986 “Truth Trek to Africa” appeared on Television Zambia and denounced IMF/World Bank policies and lambasted the two institutions for removing subsidies and dragging poor countries into poverty and more economic woes. KK ignored his advice and joined the other 34 African countries.
For 43 years subsidy reforms have not benefited a single African country. President Sata must name one African country that has wiped out poverty as a result of subsidy reforms. If anything, countries have been returning to subsidies. In 2005, Ghana increased fuel prices by 50%. The move benefited mostly the rich and left the poor virtually unattended. The Ghanaian government abandoned subsidy reforms in 2008. In 2007, Gabon increased gasoline and diesel prices by 26% after a Stand-By Arrangement with IMF. By 2009, Gabonese government was unable to meet the IMF goals. Up to this day a third of the Gabonese population still lives in abject poverty.
The Truth about Subsidy removal
Removal of subsidies has absolutely nothing to do with the improvement of the country’s economy. If this were the case, countries that applied subsidy reforms in the 1980s and 1990s would by now be boasting of much higher GDP per capita. In truth, subsidy reforms are applied to cushion the IMF/World Bank loans and bring the debt to acceptable levels. President Sata should know this. He is being totally disingenuous by telling us that “maize subsidies have been a pillar for the huge economic inequality in our society as they only benefit the already well to do middlemen and not the targeted vulnerable groups of our society.” His statement plucked verbatim from the IMF/World Bank play book is unfair; if not an insult to our intelligence. It is a talking point imbedded in most of the IMF/World Bank reports.
Removal of subsidies has absolutely nothing to do with the improvement of the country’s economy. If this were the case, countries that applied subsidy reforms in the 1980s and 1990s would by now be boasting of much higher GDP per capita.
While the statement is true to a large extent, it does not apply to the Zambian dire situation where the middle-class, with their meager wages, and the poor in shanties and villages, cannot afford high-priced essentials arising from subsidy reforms. The same IMF/World Bank analysts admit that “subsidy reforms do very little to prevent price distortion and damage to farmers in African countries.” In fact, in their report entitled “IMF Working Paper of 2010,” researchers Javier Arze de Granado, David Coady, and Robert Gillingham, observe that “eliminating subsidies can have a sizeable adverse impact on the poor households.” In our country “sizeable” is an understatement.[pullquote]
The same IMF/World Bank analysts admit that “subsidy reforms do very little to prevent price distortion and damage to farmers in African countries.
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Impact of subsidy removal across the world
If subsidy reforms were beneficial they would not cause so much mayhem. In 2008, the impact of subsidy cuts triggered deadly riots in Haiti, Tunisia, Egypt, and across the Middle East and spread to south Asia. In 2011, Bolivian president Evo Morales reversed his decision to support subsidy removal after massive protests, wildcat strikes and mounting opposition pressure. Today, many countries have abandoned subsidy removal. Former Chief Economist of the World Bank, and recipient of the Nobel Memorial Prize in Economic Sciences, Joseph (Joe) Stiglitz is right when he says that countries that sign up with the IMF and the World Bank end up with “a crashed economy; a destroyed government; and sometimes in flames with riots.”
Former Chief Economist of the World Bank, and recipient of the Nobel Memorial Prize in Economic Sciences, Joseph (Joe) Stiglitz is right when he says that countries that sign up with the IMF and the World Bank end up with “a crashed economy; a destroyed government; and sometimes in flames with riots.”
In the same breath, Greg Palast of The Globalizer writes that politicians who succumb to such stringent economic reforms are susceptible to “briberization.” They end up selling off the country’s key assets—water, electric, and gas. They increase prices of essential commodities and raise interest rates. In return they get 10% commission. This reward, in millions of dollars, is put in the Swiss bank account. We hope and pray president Sata is not one such heartless and unscrupulous leader.
Empty promises to poor, hungry and desperate people
If the president is indeed transparent and truthful to the Zambian people as he claims, he must stop peddling unfair reforms. Before he was sworn in, he spent a good ten years promising Zambians that he would cure the ills of society, including poverty, disease, tribalism, nepotism, and corruption. Understandably, sugaring promises is a campaign gimmick essential to winning an election. However, this works well in developed countries where there is some latitude for breaking promises.
In a country like ours, it is immoral and unjust to make empty promises to a people who are hungry and have absolutely nothing. President Sata has done just that. Campaigning under the sobriquet “King Cobra” he used the platform to hoodwink a penniless people; people with no food; no clothes; and many with no shelter. “I will put money in your pockets in ninety days,” he declared and yet he knew it was an outrageous promise. Being desperate the poor took his utterances literally. When the 90-day deadline past, PF supporters asked to give him more time. It is going to two years, he has not only failed to honor his promise, but now he has removed their lifeline.
Pleasing IMF
It is possible that subsidy removal on maize and fuel was initiated after Minister of Finance Alexander Chikwanda’s trip to Washington D.C. in April this year. His meeting with the IMF/World Bank officials coincided with the latest survey by the IMF that shows that energy subsidies are a drain on the economy of a country and should therefore be replaced by other means of consumer aid. This, according to the report, is one of the major ways of alleviating budgetary pressures faced by government. The message was relayed to the president and he bought into it. He did not take a moment to think about our villagers and shanty dwellers—the very people who put him in office. Instead, he went ahead and embraced economic policies that have been a killer for many years. And knowing him, his word is always final. He expects us to obey.
US,China and Russia largest subsidizers
While, admittedly, subsidies are a drag on economic growth, they make it possible for the poor to see another day. They are necessary everywhere even in developed nations. In fact the United States is the largest subsidizer of food and spends $502 million each year—that’s two thirds of the U.S. Department of Agriculture budget. The United States ensures no one goes to bed hungry. Poor families below a certain income, and the homeless, qualify for food stamps that enable them to purchase food products at retail.
As recent as February this year, China, which ranks as the second largest subsidizer at $279 million per year, was intensifying farm subsidy spending as an ongoing plan to promote self-sufficiency in grains. The Central Committee of the Communist Party of China is taking measures, as it has always done, to ensure that rural poverty and food insecurity are taken care of. Russia is the third largest subsidizer at $116 million per year.
[pullquote]Why can’t we emulate them and take care of our poor?[/pullquote]
Why can’t we emulate them and take care of our poor? Why can’t the president maintain fertilizer subsidies and strengthen our agricultural system? Why is he not talking about investment in agricultural science and technology? As usual the answer is “there is no money,” and yet there are many ways to raise funds to cushion subsidies. Here are but a few:
- First and foremost, he must trim his cabinet and abolish some of the ministries. It is laughable to see a man who heavily promoted the idea of small government do the exact opposite. He must use the “small government” methodology to raise funds to meet the demand for seed and fertilizer and make them affordable to both large and small scale farmers.
- Money realized from our mineral resources must be invested in education and pay lecturers a package worth their education and time.
- He must encourage city councils to buy local and long-distant buses or simply revive the United Bus of Zambia and acquire roadworthy buses for our traveling safety.
- President Michael Sata must recover $40 million from the Zamtrop account and invest in small scale industry for the poor. The money is there, somewhere, and it is ours.
- All wealthy citizens, including the president and cabinet ministers, must pay higher taxes, money which should go to the purchase of state-of-the-art equipment for our doctors at the University Teaching Hospital, so that our leaders are treated locally.
- Lastly, the money raised from tourism should go to rural health services, rural electrification, and clean water supply.
The president has dispatched his ministers to bore the people with lame excuses. Chase them away because they do not know what they are talking about. Tell them subsidy removal benefits them and hurts you. Tell them to go and tell the president that before he removes subsidies he must first protect your interest and ensure you have food and transport.
Field Ruwe is a US-based Zambian media practitioner, historian, and author. He is a PhD candidate at George Fox University and serves as an adjunct professor (lecturer) in Boston. ©Ruwe2012
