By Venus N Msyani

President Hakainde Hichilema may leave office more affluent than expected if people choose to remain quiet during his presidency.

Being in the highest position, it is acceptable for a president to leave office richer than he came. The problem is the abnormal increase in one’s wealth during the presidency, which is the case with some Zambian presidents.

It can be prevented and it starts with standing up for accountability with the sitting president’s finances. Thumbs up to people demanding President Hakainde publicly declare his assets and liabilities.

For the first time in Zambian history, people have heard a sitting president being asked whether he has relinquished interests in his businesses or not.

Some people have concluded that President Hakainde Hichilema is being singled out. It is not true. Asking such a question is part of standing up for accountability with the president’s finances or wealth.

We never heard journalists asking former presidents whether they have relinquished interests in their businesses or not because none of them had business as highlighted on their CVs. In other words, none of them was a businessman.

The highlight on former president Edgar Lungu CV is lawyer, the late Michael Sata and Rupiah Banda politician, and the late President Mwanawasa’s CV highlight lawyer.

Go on and do research on late President Fredrick Chiluba and Kenneth Kaunda. Will notice both were not businessmen.

Hichilema is the only Zambian president whose CV highlight is business. He is not just a businessman but a very successful businessman who has revealed that he maintains interests in his businesses.

If not checked, President Hichilema will leave office richer than expected. Not only richer but the richest in the region. His waged war against the rich (clique of thieves as he calls them) explains everything. Hichilema is the only person freely making money in the country now. The clique of thieves is scared as is a target for Hichilema’s fight against corruption.

On Friday, September 9th during the official opening of the Second Session of the Thirteenth National Assembly in Lusaka, Hichilema announced that going forward, people will see a different approach to the fight against corruption.

“We promised to fight corruption and we are fighting corruption. You will see what happens going forward.” President Hichilema said.

Ironically Hichilema is saying get ready for a more selective fight against corruption. Unless he publicly declares his assets and liabilities, he cannot fairly fight corruption. He maintains interests in his businesses. Hichilema needs to explain how he is dealing with conflicts of interest.

Sad to conclude that corruption is fighting corruption in Zambia. As we speak Hichilema is getting richer. Like his predecessor, he may leave office more affluent than expected if we choose to remain quiet.

To fight a sincere fight against corruption, Hichilema must publicly declare his assets and liabilities. Together we must continue to demand.

By NJ Ayuk, Executive Chairman, African Energy Chamber (www.EnergyChamber.org)

After U.S. energy company Enron made global headlines in the early 2000s for accounting and corporate fraud, attention quickly shifted to the decision-makers behind the company’s actions. Ultimately, Enron executives Kenneth Lay, Jeffrey Skilling, and Andrew Fastow were convicted on federal felony charges.

That was the appropriate response. When corporations engage in illegal behavior, the people responsible should face repercussions — and they often do.

Why, then, have the executives at Switzerland-headquartered commodities and mining multinational Glencore Plc been spared the consequences of their responsibility for years-long corrupt behavior?

In May, two of the company’s subsidiaries pleaded guilty to several charges of market manipulation and bribery in multiple countries after extensive investigations by Brazil, the United Kingdom, and the United States. One month later, a Glencore subsidiary pleaded guilty to seven counts of bribery related to its oil operations in Cameroon, Congo, Equatorial Guinea, Ivory Coast, Nigeria, and South Sudan.

I realize that more than USD 1.5 billion in penalties have been imposed on Glencore by the U.S., the United Kingdom, and Brazil — and more could follow after Swiss and Dutch investigations are completed. But the repercussions shouldn’t be limited to fines. No company has ever pleaded guilty to this much corruption. We find it extremely troubling that the executives who approved and benefited from the corruption have, as of yet, gone unscathed.

The African Energy Chamber strongly believes that Glencore’s leaders must be held accountable for their actions. Anything less sends the message that “bribery is a necessary evil” in regions of the world like Africa. That is not true. Now is the time to make that reality abundantly clear to corporate leaders who do business here.

Brazen Behavior

It’s important to note that Glencore’s actions were more than a one-time event. Glencore International A.G. and its subsidiaries bribed officials in seven countries for more than a decade. Indeed, corrupt behavior was well-ingrained into the company culture. Bribery was simply one of its operating expenses.

It’s also galling to see how Glencore behaved in African countries. In 2015, for example, when Glencore wanted to buy cargoes of oil from Nigeria, it submitted $50,000 per cargo for what it described as “advance payment.”

The result for Glencore: USD124 million in illicit profits. The results for Nigeria’s government, businesses, and communities: lost opportunities to engage in productive partnerships with companies interested in creating jobs, supporting local businesses, sharing knowledge and fostering economic growth.

Glencore also managed to avoid consequences for unethical business dealings in Africa. In one instance, after the company was sued for breach of contract in the Democratic Republic of Congo and fined USD16 million in damages, Glencore paid the judge $500,000, and the lawsuit “disappeared.” Glencore has admitted to paying USD27.5 million in bribes in DRC alone.

Imagine if Glencore Were An African Company

Adding insult to injury in the Glencore scandal are the obvious double standards we’ve been observing. Consider IOCs’ know-your-client (KYC) and due-diligence policies for doing business in Africa. Local company representatives who dare to bribe or tip a police officer who harasses them on the streets are told by IOCs that they do not pass due diligence. They will never be contracted to provide goods or services.

I want to be clear: I respect companies that demonstrate high standards for ethical behavior. The problem comes when those standards are not applied evenly.

At the same time as African companies are being scrutinized for the slightest hint of corrupt behavior, Glencore continues to do business with oil, gas, and mining companies that claim to be champions of transparency. Banks are still working with Glencore as well. Aside from some negative attention and financial repercussions, Glencore seems to be avoiding serious consequences for its actions.

Last spring, I called for the Oslo-based Extractive Industries Transparency Initiative (EITI) to rescind Glencore’s membership, noting that the company’s involvement with EITI began while Glencore was engaging in the exact type of behavior that the initiative strives to eradicate. That hasn’t happened. EITI expressed concern about Glencore’s behavior in a statement by its board chair, Rt Hon Helen Clark, but nothing more has come of it. Their silence is betrayal to the very principles that they cherish.

Let’s look at the penalties imposed on Glencore. They’re large, but when you consider Glencore’s size and resources, it is difficult to imagine they’ll have a significant impact. On the contrary: Glencore appears to be thriving. In a recent article, United Kingdom-based Proactive Investors Limited noted that Glencore shares have increased in value by more than 50% during the last year.

“One reason why is that all the ESG (environmental, social and corporate governance) bluster about ending coal use is now being thrown out of the window by one European country after another, and Glencore produces a lot of coal,” Proactive writes.

And that’s only part of the picture for Glencore. As Christopher Helman wrote for Forbes, “Glencore is in the enviable position of being among the world’s biggest energy traders at a time of surging prices and shortages, as well as one of the biggest miners of metals like copper, aluminum and cobalt — all vital in making batteries for electric vehicles and other alternative energy sources.” Which means, while billions of dollars of fines may sting a bit, Glencore isn’t likely to feel it in the long term.

Glencore’s African victims aren’t quite so bullet-proof, but we have yet to hear talk about compensating them for the corruption and injustices that have taken place in their countries.

Africans, then and now, need good governance to meet their needs, grow the economy, address energy poverty, create job and business opportunities, and foster stability. Bribery undermines all of that. Currently, African oil- and gas-producing countries are fighting to sustain their energy industries — which are capable of supporting the goals listed above — against tremendous pressure from environmentalists and Western countries that want to see an immediate transition to green energy in our continent. Yes, Europe has eased up somewhat as it looks to Africa to help it lessen its reliance on Russian petroleum, but that won’t last forever.

Glencore’s corrupt acts and manipulation have robbed African countries of some of the precious time they need to fully capitalize on their oil and gas resources.

And the damage doesn’t stop there. As I’ve written more than once, corruption is not a new problem in Africa, but it’s one that many are working to eliminate. Corruption robs people of justice. Instead of empowering people to better their lives, it entrenches communities in poverty. It’s an ingredient for dissatisfaction, lack of trust in government leaders, instability, and even violence. Yes, every corrupt act that Glencore engaged in involved another party — an outreached had to accept their bribes. But the company’s “all-in” embrace of bribery, and the grotesquely large payments it handed out, only helped corruption gain a better foothold in Africa.

Again, Glencore’s corruption is about more than a company: It all goes back to the people calling the shots.

So, yes, investigating Glencore was the right decision. Financial penalties were appropriate. But those steps are simply not enough. Glencore should face the same kinds of repercussions African companies would for blatant, ongoing corruption. It should not be doing business as usual. And neither should the executives behind Glencore’s actions.
Distributed by APO Group on behalf of African Energy Chamber.

By Mwansa Chalwe Snr

Story Highlights

• Economic growth in regions or countries with large informal sectors remains below potential. Addressing informality is thus essential and urgent to support inclusive economic development and reduce poverty worldwide (IMF, Finance and Development Magazine, December,2020)
• When you walk through markets such as Kalingalinga, Marapodi, Chisokone, Maramba, and many others, you see young people welding window and door frames, gates and some are brake bonding. UPND government will ensure that business is given to these youths. These youths will create employment as a result of having a guaranteed market.( President HH on his face book page as a Candidate, 2021)
• The rise in poverty has been largely driven by falling incomes in urban areas, especially among those relying on employment income from the informal sector.The government must develop more aggressive home grown solutions to stimulate domestic resource mobilization. (JCTR Executive Director, Father Alex Maybe, S.J).
• The 2000s reveals a significant shift toward formalization of the working population in Brazil, over a period of only five years (2007-2012), a total of 4.9 million micro and small enterprises were formalized.(International Labour Organisation (ILO) Study
• Creating an economy with a higher proportion of formal enterprises and jobs is important to long term wealth creation, stability and poverty reduction.
  (Organisation for Economic Cooperation and Development–OECD)

Immediately after clinching the IMF bail-out deal on 31st August, 2022; the following day, the 1st September, 2022, President Hakainde Hichilema launched the 8th National Development Plan (NDP8). The launch of the plan symbolized that the IMF deal was not a panacea for solving the Country’s economic problems. The NDP 8 identifies a number of challenges and possible general interventions.

“The current state of development indicates persisting socio-economic challenges which include low diversification of the economy, high youth unemployment, high incidences of poverty and inequality, slow pace of decentralisation as well as low education outcomes, coupled with inadequate access to other social services,” The NDP 8 states.

It is gratifying to note that NDP8, identifies high Youth unemployment as one of the top challenges that Zambia faces. To any keen observer, the recruitment exercises of Teachers, Medical Personnel and Enumerators raised red flags. They suggest that the pursuit of solutions to youth unemployment should be government’s top priority going forward, now that IMF deal and debt restructuring are almost done.

The NDP 8 is a very good document, but Zambia is not in the current economic mess because of lack of plans. We have had many very good paper plans. Zambia’s problem has been the absence of the design of innovative and practical programmes and projects, and implementing them. This requires thinkers and extensive research to gather evidence on which to base designed programs and projects.

If one reviews the NDP 8, there is one major omission. This is in regard to what to do with the informal economy. There was a need to mention the transformation of the informal economy as a key to national development and accelerated economic growth strategy. The informal economy is hardly mentioned in NDP 8. The key challenges of youth unemployment, high incidences of poverty and inequality can only be achieved by innovative formalization of the informal sector. It should be noted that a solution to the problem, ought to be able to meet the size of the challenge for it to be credible. Formalization is the only solution that meets the size of the challenges that youth unemployment and the high level of poverty pose.

Selective Formalization of the Informal economy

One of the most effective solutions that can fast track Zambia’s economic growth and create millions of Youth jobs in a very short period of time, is an intervention that entails the transformation of Zambia’s huge informal sector through a well thought out, and innovative formalization process.
Zambia’s informal sector is estimated at 85% (6.8million) of total employment, whereas the formal sector is only 15% (1.2million).There is overwhelming empirical evidence that shows that there is a correlation between the size of the informal economy and the level of a country’s development and its poverty levels. The available empirical evidence clearly show that in order to achieve inclusive growth, create jobs and reduce poverty, a nation has to reduce its informal sector.
The issue of reducing the informal sector through formalization is supported by many international organizations including the World Bank, International Labour Organization and many others.

“Informality critically affects how fast economies can grow, develop, and provide decent economic opportunities for their populations. Sustainable development requires a reduction in informality over time. Addressing informality is thus essential and urgent to support inclusive economic development and reduce poverty worldwide,” IMF, Finance and Development Magazine (December, 2020) wrote.
The International Labour Organization (ILO) recommends to governments to try out solutions to reduce the size of their informal sectors. Informality restricts economic growth, promotes inequality in general, and gender inequality in particular, promotes poor labour conditions, engenders low productivity and denies the country tax revenues.

“In sub-Saharan Africa, typically, the formal segment of the economy does not employ more than 10 per cent of the labour force. Addressing the challenge of the informal economy and poverty reduction are therefore closely intertwined. There is an urgent necessity of implementing a range of integrated and coherent policies aimed at moving economic units into the mainstream economy,” The ILO wrote in its research paper, The Informal Economy: Enabling Transition to Formalization (2007).

It is, therefore, apparent that one of Zambia’s low-lying fruit growth strategies that should be explored is the reduction in Zambia’s huge informal sector through innovative formalization, like some Latin American countries, have done.

Latin America, a formalization Benchmark

In the past 20 years, there have been Studies that have been carried out by various organisations including the International Labour Organization (ILO) on Latin American countries-Argentina, Bolivia, Brazil, Colombia, Mexico, Panama, Peru and Uruguay – on the formalization process which happened between 2005 to 2015.They have all concluded that, overall, the formalization processes have been very successful in fostering economic growth, creating employment and reducing poverty, although they also found varied levels of success in the different countries under study, depending on a number of factors such as: policies, formalization strategies, structure of economy and political will.
“Almost all countries in Latin America have decreased their informal employment rates but this formalization process has not been uniform. In some countries, processes were faster and took a relatively short time. In others, progress has been slower,” ILO Report on Latin America Formalization said. “To reduce informality, it is necessary to implement deliberate and integrated economic, social and labour policies and actions”.

Brazil in particular, in the mid-2000s under the Presidency of Luiz Lula Da Silva -who has come back to stand for elections, and is favourite to win this October Presidential elections – was one of the countries that achieved spectacular results in the reduction of the size of its informal economy thereby creating formal jobs and reducing poverty and income inequality.

“Between 2003 and 2013, some 40 million people were lifted out of poverty, while extreme poverty fell by 89%. The country successfully reduced inequality and, at the same time, experienced a significant decrease in the prevalence of informal employment. Micro and small enterprises (MSEs) currently account for 95% of Brazilian firms, generate some 16.6 million formal sector jobs, and contribute 20% to GDP. Over the last three decades of the 20th century, Brazil implemented a series of measures to encourage the formalization of micro and small enterprises and to promote the creation of formal employment in this segment of companies,” The International Labour Organisation (ILO) wrote in one of its papers on Brazil.

According to ILO, Latin America has reduced its informal economy over the years substantially. Its informality is estimated to be around 47.7% whereas Africa and Zambia sits at 90%.Women and youth, are disproportionately represented in the informal economy. There is a huge scope for Zambia and African countries to create formal jobs from the informal sector through innovative interventions. And all that is required is the employment of African brains and African leaders’ political will.

Can Zambia Emulate Brazil and Latin America Formalization?

The answer as to whether Zambia can emulate Latin American Countries’ success in the formalisation of the Informal economy depends on who designs it, how it is designed and who implements the programme. Success of formalization reforms is context specific as characteristics of the informal sector can greatly differ from one country to another. The informal sector is complex, and consequently, any designed interventions should be based on sound research rather than superficial analysis.

In Zambia, there is a superficial understanding of the informal economy. Most people think that this sector is only made up of marketeers, traders, small scale farmers and artisanal miners. This is a very simplistic understanding of the sector. And any formalization strategy which is based on this assumption, will be highly flawed and unlikely to succeed. There are many other demographics suitable to formalization. There are about ten Informal Sector Segments with their own sub segments. It is, therefore, vitally important to carry extensive research before embarking on a Formalization Programme.

Informality is complicated by its multiple causes, forms and heterogeneous demographic. In the light of the foregoing, it should be borne in mind that the formalization assignment cannot just be undertaken by anybody. And any intervention which is not well researched but based on shallow assumptions and adopts a one-size-fits-all solution, will certainly fail just like some past attempts in Bangladesh, Peru, Tanzania, Sri Lanka to name but a few, did.

In designing informal economy interventions, there is a need to understand the causes of informality, the barriers to formalization and the different demographics that make up the informal economy. However, extensive research and policy experiments in both developing and advanced economies, point to a set of guiding principles for policy design and interventions. The most successful cases of countries reducing informality have demonstrated that no one policy is likely to work on its own, but rather practical actions and a comprehensive policy package containing multiple policies to achieve various goals—economic growth, social protection, inclusion, and trust, is what works.

In the event that the proposed formalization programme is considered by the New Dawn government, it should be spearheaded by the Ministry of Small and Medium enterprises Development. They ministry should be able to coordinate the Programme with other Ministries because the formalization process of the informal sector can only succeed if public policy formulation and coordination involved multiple relevant ministries for necessary regulatory reforms.

In view of the complexity mentioned above, one of the prerequisite for a successful formalization program is the need for government to collaborate with the Private Sector with the necessary expertise. Empirical evidence suggests that formalisation initiatives can only succeed if government works with the private sector players with deep knowledge of the Micro enterprises and Small businesses ecosystem. Policy makers ought to bear in mind that the decision that informal entrepreneurs face as to whether to formalize or not is based on Cost-Benefit analysis.

Conclusion

In view of research done by reputable international organizations and Universities in Latin America and the Caribbean, Asia and a handful of African countries, there is a body of knowledge about the successes and failures of formalization attempts. Therefore, there are certain common guiding principles for successful formalization designs. The ingredients that a successful formalization program should contain, which can be termed as the formalization value chain critical success factors which ,include intellectual capital empowerment, utilization of technology, finance capital empowerment and a few more other facilitation components, in addition to the overarching standard stimulation type of interventions of regulatory policy reforms. In the absence of these ingredients, the objectives of any formalization program will not be achieved; and any envisaged jobs to be created or other benefits expected to accrue will be a mere mirage.

The International Monetary Fund (IMF) Bail out Agreement with Zambia has projected economic growth in 2022 as 3% and 2025 at 5%. This rate of growth will not produce jobs in the hundreds of thousands or millions nor reduce poverty. This is just a plain fact. However, if a properly designed informal sector formalization is put in place and implemented by competent and experienced people, our economic growth could jump up to as high as 10%. It could range from 8%-12%.The Informal Sector is a blue ocean that Zambia and African countries should tap in. It has long been long ignored as a source measurable economic activity and jobs by most African countries, because they have never figured out, how to do it due to its complexity. It is certainly a silver bullet solution to Youth unemployment and non- inclusive economic growth, if done properly.

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], www.youthemploymentcreation.com