By Sean Tembo – PeP President

1. There is little debate that our economy is in dire stress. It has been on a downward spiral for the past 2 years or so; partially due to the COVID-19 pandemic and partially due to mismanagement. Although economic pundits rarely agree on anything, l think we are agreeable that we need to turnaround our economy towards a path of growth, job creation, better standard of living and fiscal sustainability. Prior to the 12th August 2021 general elections, the then ruling PF administration put forward their Economic Recovery Plan (ERP) in December 2020. After reviewing the Government’s ERP at the time, we were not agreeable with it and on 21st January 2021, we unveiled the PeP Alternative Economic Recovery Plan for Zambia (PAERPZ). As we headed towards the August polls, we nudged the then main opposition UPND to unveil their ERP, especially given the fact that their President kept talking about his grand plan for turning around the Zambian economy. We wanted UPND’s ERP to be documented and shared with the public so that we could review it. But that never came.

2. Anyway, fast forward to the present day, UPND won the August polls and subsequently formed Government. They have been in office for slightly more than 3 months now. They have unveiled the 2022 National Budget in which there hasn’t been any significant economic policy shift compared to previous fiscal years, other than to give the mines a de facto tax holiday and to get on an IMF programme as well as embark on an expansionary fiscal drive which has seen the planned employment of 30,000 additional teachers and 11,500 additional health personnel in the 2022 fiscal year.

3. Our expectation was that the first thing which the UPND administration would do once sworn into office would be to develop an Economic Recovery Plan for Zambia. We expected such an ERP to have short-term, medium-term and long-term milestones, interventions and performance measures which would be implemented by Government with the overall aim of transforming our economy from the current downward spiral of economic stagnation, unemployment, high cost of living and general hopelessness to a new dawn of economic growth, job creation and lower cost of living over the next 5 years. We expected every subsequent economic policy by Government to fit into and advance the objectives of its ERP. We expected the 2022 National Budget and the national budgets of all subsequent fiscal years up to 2026 to fit into and advance the attainment of the ERP. We expected Government’s decision to get on or not to get on an IMF programme to be determined by whether such a programme would contribute to the economic recovery plan of our country. But where is the Economic Recovery Plan?

4. The failure by the New Dawn administration to develop an ERP means that there is no framework to guide the various economic policies and interventions by Government. When a country’s economic policies and interventions are not synchronized by a framework such as an ERP, they tend to be haphazard and in self-conflict. That means you will have one policy which is pulling and another which is pushing, with the net result being zero. But let us not speculate. Let us examine some of the recently implemented economic policies by the UPND administration and let us determine whether they have been consistent or in self-conflict.

5. One of the first things which the New Dawn administration announced to us after taking over the reigns of Government was that the coffers are empty. So if the coffers are empty, the natural next step is to fill the coffers, isn’t it? And the main way of filling our national coffers is by collecting tax isn’t it? And one of the few sectors of our economy which is doing extremely well at the moment, with copper at more than $11,000 per tonne, is the mining sector isn’t it? But instead of collecting as much tax as possible from the mining sector, why did the New Dawn administration give a de facto tax holiday to the mines? That is a self-conflict isn’t it? Whereby on one hand you are complaining that the coffers are empty and on the other hand you do not want to collect tax from the only sector of the economy that is doing exceptionally well and that is leaping supernormal profits?

6. Let us look at another example of economic policy conflict by the New Dawn administration. The issue of the cost of living. One of the main issues which the Zambian people have been complaining about in the past 5 years or so, is the high cost of living. Prices of commodities have been going up to much compared to people’s incomes. The cost of living is just too high and money is nowhere to be found. This cry is not only applicable to the low-income people in the compounds but even people mumayadi are complaining. Time and again, President Hichilema has sworn to reduce the cost of living for Zambians. But how do you reduce the cost of living by increasing the prices of key production inputs such as fuel and electricity? This is a self-conflict isn’t it?

7. Let us look at a third example. From a fiscal management point of view, the biggest challenge which our treasury has is the issue of the fiscal deficit. In simple terms, a fiscal deficit occurs when Government expenditure is larger than Government revenue. In fact, this is one of the main arguments put forward by the New Dawn administration for bringing in the IMF, so that they can provide fiscal support. But when you expenditure is larger than your income, you need to either reduce your expenditure or increase your income or both isn’t it? But for the New Dawn administration, they do the exact opposite. They increase expenditure by hiring 30,000 additional teachers and reduce income by giving the mines a de facto tax holiday. So how can Government expect to solve a fiscal deficit when their actions are actually increasing it?

8. All these economic policy conflicts which l have illustrated above, would not happen if the New Dawn administration had an Economic Recovery Plan to act as the main guiding framework for all economic policies and interventions. The failure by the New Dawn administration to develop an ERP means that their policy interventions are unlikely to be synchronized. They’ll implement a policy which pulls and another which pushes with the net result being zero. And in the midst of all this confusion, the Zambian people are suffering and getting deeper and deeper into poverty. And let us be clear about one thing here; these early failures by the New Dawn administration are not because they lack advice, no. We have always been very generous with our advice to this newly birthed administration from the word go. However, the biggest problem with the New Dawn administration is that they are too self-righteous. They think they know it all. However, their arrogance is not backed by competence. It is empty arrogance. The only question that remains to be answered is how long the Zambian people will tolerate this empty arrogance by the UPND administration in the management of national matters. Only the Zambian people themselves can answer that question.

Minister of Infrastructure, Housing and Urban Development Hon. Charles Milupi has announce that the Public Private Partnership (PPP) Council has approved a 25-year- Concession Agreement with Nkulu Zambia Limited, with the Southern Africa Business Development Forum as the selected bidder, for the construction and/or rehabilitation of the following international road linkages and trade facilitation routes connecting Zambia’s Copperbelt, North-Western and Western Provinces, to Namibia, Angola and the DRC through Katima Mulilo, Shangombo, and Sikongo in the Western Province, totalling over 2,000kms,

In a post on his Facebook page, the Minister named the following roads to be worked on.

1. Tapo – Kalabo – Sikongo – Angola Border Road (125km)
2. Sioma – Shangombo Road (175km)
3. Lufwanyama – Kankolonkolo – Kasempa Road (225km)
4. Kasempa – Kaoma Road – Luampa Junction (280km)
5. Luampa Junction – Machile – Simungoma Road (340km)
6. Livingstone – Katima Mulilo Road (225km)
7. Resettlement Roads (minimum of 500km)
8. Shangombo Bridge (approximately 8.5km)
9. Sikongo Border Post and Trade Hub
10. Shangombo Border Post and Trade Hub
11. Katima Mulilo Border Post and Trade Hub

Minister Milupi further said that according to this considered package dubbed Development of the Western Province Trade Facilitation Routes inclusive of Resettlement Schemes and Border Facilities Through A Finance, Design, Construct, Rehabilitate, Operate, Maintain And Transfer Public Private Partnership Model, a total of approximately 2,208.5 kilometres of core road network will be constructed and/or upgraded to international bituminous standards and bituminous standards.

The Minister further said that the project has several benefits including reduced travel times and vehicle operating costs, improved safety through the development of the critical road linkages to Angola and the Democratic Republic of Congo, as well as job creation.

“We shall keep updating you as we move forward on this very important project,” the Minister concluded.

By Liywalii Kanyimba

In my last thought piece on fuel subsidies, I raised the question on whether or not fuel pump prices will further go up after 31 December 2021. This is on the backdrop of the suspension of duties and VAT applicable up to the aforesaid date (unless there is an extension I am not aware of).

Since then, I invested my reading time and research to understand how subsidies work and what exactly we are talking about in the case of Zambia, building up on the statement by the energy regulator, the Energy Regulation Board (ERB), that ‘the increase in fuel pump prices was necessitated by the removal of subsidies on petroleum products to reflect the correct prices of the commodity.

For context, subsidies in most analyses can be broken into two types, those given to producers of a given commodity and those to consumers. In the case of Zambia, the fuel subsidy is primarily a consumer subsidy, one which reduces the end price of petroleum products through government controls of the cost.

William Blyth, an expert in energy security and climate policy and author of a 2013 report on fossil fuel subsidies for the UK’s Environment Audit Committee stated as follows:

“Consumer subsidies are in fact often applied to products…..which only the relatively rich can afford. And that subsidy is coming from the tax base. So, in fact, what you see is that that subsidy is actually creating a transfer of wealth from poorer to rich people.”

With the context set above, what is the breakdown of Zambia’s fuel subsidy? Is the information disseminated on this very important issue accurate?

The Secretary to the Treasury, Mr Felix Nkulukusa brought into exposition in one of his thought pieces justifying the removal of subsdies that Zambia’s fuel subsidy is about USD 67 Million per month or USD 800 million per year, according to him the National Treasury is losing. He further went on to say that “more than 60% of fuel in Zambia is consumed by the mines….with only less than 2% being consumed by ordinary and vulnerable people who are genuinely supposed to be subsidised”.

In my view, the real beneficiaries are the mines and those alike and accordingly, should be the ones not to be subsdised as opposed to the approach adopted to impact all including ordinary and vulnerable Zambians that the Secretary has acknowledged as being the ones that are supposed to benefit.

Information that has emerged so far in the public domain indicates that the above USD67 subsidy cost per month comprise of two things:- USD 26 Million price differential arising from the exchange rate fluctuation and balancing of world market prices; and USD 41.4 Million (more than 60%) lost because of suspending taxes (VAT at 16%, Customs Duty at 25% and Excise Duty of K0.64/ltr on petrol and K0.62/ltr on Diesel).

The above occurs clear that the recent K4 fuel pump price increase has only factored in the cost of exchange rate fluctuations and balancing of world market prices. This means the rest of the suspended taxes, accounting for more 60% of the fuel subsidy have not been adjusted for in the current fuel pump prices as these remain suspended to 31 December 2021.

It is therefore partially inaccurate as pointed out by the energy regulator that the increase in fuel pump prices is due to the removal of the subsidies to reflect the correct prices when the suspension of the taxes accounting for more 60% of the fuel subsidies has not been lifted.

When the suspension of the taxes is lifted since the government’s direction is to do away with the subsidies, inevitably the fuel pump prices will further increase. And maybe suggestions that the pump price per litre should be above K30 should be correct looking at the amount of the monthly subsidy yet to be removed.

This said and the immediate adverse impact a wholesome removal of subsidies has on the cost of living for ordinary Zambians, as confirmed by the Secretary to the Treasury that more that 98% of the fuel and electricity subsidies combined benefit the mines and those alike at the expense of ordinary Zambians and the vulnerable who deserve to be subsidised, it may be advisable that a targeted approach towards the mines and those alike is considered in the next subsidy-removal phase for the sake of managing the cost of living.