
By Henry Kyambalesa
The recent revelation made in Parliament by Hon. Lameck Mangani that Zambia will give K2.7 billion to Zimbabwe as a contribution to the country’s economic recovery needs to be condemned, because Zambians like their counterparts in Zimbabwe are equally facing very serious socio-economic problems.
There is, therefore, no wisdom in “stealing” from the poor in Zambia to give to the poor in Zimbabwe. In fact, there is no guarantee that the money will not end up being used by Robert Mugabe in his 2011 presidential bid. Mugabe has already announced that he is ready to contest the 2011 presidential poll regardless of whether or not the country’s new constitution will have been enacted by then.
Zambia needs to stop using borrowed money on unproductive ventures. For too long, a significant portion of loans secured by the MMD government has been used on keeping inefficient state companies in operation, financing the production of non-tradables, subsidizing consumption, financing government leaders’ superfluous perquisites, and/or on other unproductive schemes.
This misapplication of loans has led to one obvious consequence: forlorn development projects and programs have not provided an enabling environment for the private sector to mass-produce for export markets and generate the foreign exchange needed to service external debts, let alone provide for capital accumulation to facilitate and expedite socio-economic development.
What Zimbabwe needs today more than ever before is greater trade with Zambia and other African countries in its quest for economic recovery, not free money which is likely to end up in the pockets of politicians.
Trade is an essential element in a country’s quest for heightened socio-economic development; it can function as a “vent for surplus” for a country like Zimbabwe which has abundant unemployed resources which cannot be fully harnessed due to a small domestic market.
Also, trade between Zambia and Zimbabwe can bolster the creation of new jobs in both countries. As economic units in each of the two countries expand their production capacities to meet the demand for their product offerings in both markets, they are more likely to hire additional employees in order to facilitate the production of higher volumes of their product offerings.
Moreover, trade among the two nations can generate competition in their domestic markets and consequently foster innovation and creativity among economic units in their domestic economies. Such competition can be beneficial to the economies of both countries; for example, it can give suppliers the incentive to be efficient in order to satisfy the changing and divergent needs and expectations of consumers. Specifically, competition can lead to lower prices, high-quality products, and greater variety and abundance of products.
Further, trade among the two countries can boost their foreign exchange reserves—depending, of course, on whether exporters in the two countries would demand for payments in currencies other than the Zambian kwacha or the Zimbabwean dollar.
Besides, greater trade between Zambia and Zimbabwe can create opportunities for commercial and industrial undertakings in both countries to attain “economies of scale”—that is, reductions in the average cost of producing a particular class of products resulting from mass production of the products. It can also make it possible for commercial and industrial undertakings to attain “economies of scope”—that is, cost savings gained through the production or distribution of a wide variety of products.
It is not prudent for Zambia to continue to secure loans beyond the current US$1.2 billion in external debt, and to become a donor country using borrowed money. Borrowed funds need to be used in providing for subsidies, tax incentives and cooperative government-industry programs designed to create a comparative advantage in industries which have the potential to support economic growth and job creation.