By Dr. Lubinda Haabazoka

You see the reason why the government of today is failing to win the hearts of people over the increase in electricity tariffs and fuel prices is what they said when they were in the opposition.

The reason why people like me are finding it difficult to defend the government on this one is that when we defended the then PF government over the same thing, we were castigated, insulted and the public was made to believe that we had no moral standing in society.

The role of an academician is to unpack information and help citizens understand or make decisions on certain issues in the country.

Some academicians move with the wind and say what people want to hear but others will say it the way it is regardless of what the public court of opinion will say. This lesson was learned from the school where the majority were not always right! When the majority in class think an answer is correct, in most cases it’s a minority that is correct because the truth is always hard to find.

Albert Einstein was considered a lunatic until after some time. The Wright brothers were laughed at until now when we were not on the fly because of their innovations but we also peacefully sleep on planes they discovered.

Back to Zambia, what hinders democracy in Zambia is the inability of the majority to decipher data. Therefore, popularist slogans easily go and people believe. But as people come into power, it becomes difficult to sing popularism because now the real issues are faced and the true narrative has to come out.

In July 2021, I wrote an article explaining that fuel prices and even prices of other commodities were cheaper in Zambia than other countries and that’s why we saw motorists coming to shop in Zambia. I have never been ridiculed like that in my life. People brought in purchasing power parity arguments and even the top leadership of the opposition was very upset with me.

Now, all I was saying was the truth. Fast forward today, the minister of finance announces that fuel prices and electricity tariffs are cheap because of subsidies. The economic wing of government further says prices have increased on the international market but in Zambia they are stable. What has happened to the purchasing power parity theory?

If fuel in Zambia was not cheap as they alleged then, then why all of a sudden it has become expensive?

There are a lot of things I said and I was castigated for being a carder and a fake economist. That’s not the case. I just had the courage to tell the nation the truth regardless of whether the nation wanted to hear it or not!!!!

Today economists who wrote articles debunking my articles are in the forefront saying the same things I was saying! What has changed within 100 days? I really wanted to put in a word for the government on issues to do with fuel and electricity tariffs but I can’t because I was convinced in July that we can’t increase fuel prices before increasing salaries.

When I gave examples to explain the happenings in the country, even formulae were given to prove how just by a stroke of a pen, fuel prices would fall in Zambia. Of course, people in Zambia believed. Why is that not happening now? Sometimes we have to learn to apologize to others.

To the youths, you see job creation is not as easy as you think. You need to force it. Don’t make mistakes that were made by the youths of the 1990s who saw over 245 companies privatized and up to today, the country has not recovered. Work together with this government and pressure them to come up with job opportunities. Work with the government so that new factories are created! Work with the government to ensure that INDENI is not closed. Work with the government to ensure that Mopani and KCM are Zambian-owned and that they operate efficiently to help solve our economic challenges.

Don’t sleep youths of this country and don’t support things blindly. Work with the government so that government does what is in your best interest.

The elders also should not just sit down and let fate be decided by the youths. You have more experience so take a leading role. Solutions for our problems are in Zambia and nowhere else in the world.

There are a lot of ideas we should be discussing like building factories, mining industry development, 24-hour economy, green economy creation but today it’s a task force on corruption and IMF.

I will be writing these articles one by one to remind people of what they ridiculed me on but they are saying the same things. I am doing so because this country should start speaking only the truth and people should not be malicious against other people. Only the truth shall set us free be it in politics or in national development!!!

By Sean Tembo – PeP President

1. In seeking to justify why they need to increase pump prices of fuel as well as electricity tariffs, the New Dawn Government has been peddling the narrative that they are merely removing subsidies on these two commodities so that they can become “cost-reflective”. Well, we are here to tell you that that’s one big blue lie. There are no subsidies on either electricity nor fuel at the moment. Government simply wants to increase prices so that they can make a bigger profit on these two key factors of production. Allow us to expose the lies which Government has been peddling, one at a time.

2. Firstly let us start with fuel. The way fuel pricing in Zambia has been operating for the past few decades is that the Energy Regulation Board (ERB) has what they call the Fuel Stabilization Fund. When world prices are low, the profit which ERB makes is deposited into this fund. And when world prices of oil are high, the deposits in this fund are used to subsidize the cost. The whole idea is for pump prices to remain stable so that we don’t have to increase pump prices up and down every time in response to changes in oil prices on the world market.

Due to the COVID-19 pandemic, the world prices of oil have been at an all-time low on the world market for the past two years, and traded below $0 (negative) per barrel for a while in 2020. What it meant for oil prices to trade at negative prices is that instead of us paying the producers of oil, they had to pay us so that we could collect their oil and prevent their oil fields from flooding!!

However, even when these world oil prices were negative, there was no reduction of pump prices here at home, which meant that ERB was putting all these supernormal profits into the Fuel Stabilization Fund, to be utilized when world oil prices rise. The next obvious question is; have world oil prices risen so much in the recent past such that the ERB has exhausted the reserves which had been accumulated when oil was trading at negative prices on the world market?

The answer is a definite no. As a matter of fact, even at current world oil prices and current fuel pump prices in Zambia, ERB is not in a deficit but still records a healthy surplus. Here is some basic mathematics to prove this point. Current average world prices for Brent crude oil are $72 per barrel. A barrel is made up of 159 liters of fuel, which gives an average cost of $72/159 liters = $0.45 per liter. Using the current exchange rate of K18 per US$, this gives us a cost of K8.10 per liter of fuel. Of course there are other incidental costs such as insurance and freight, but these are not supposed to be more than 50% of the cost, and if we added them, the cost per liter of fuel comes to about K12.15, which is still way below the current pump price. This means that ERB is still recording a surplus for its Fuel Stabilization Fund, which it is supposed to add to the huge surpluses recorded when world oil prices were negative.

3. Secondly, let us look at electricity. The Government has been peddling a false narrative that the current cost of generating electricity is 11 cents per kilowatt hour (KWH) and that the electricity is then sold at 7 cents / KWH thereby making a loss of 4 cents / KWH, which they claim to be subsidizing. Fellow countrymen and women, this is completely false. Here is the truth;

4. Let us start with the 11c/KWH alleged cost of generation, transmission and distribution. This inflated cost is based on the highest price that independent power producers (IPPs) sell the power to ZESCO. Now, we have several IPPs in Zambia and they include Maamba Collieries Limited, Ndola Energy Limited, Lusemfwa Power etcetera. Each of these IPPs sell power to ZESCO at different prices with the lowest that l know of selling at 5.3c/KWH and the highest at 10.7c/KWH which some people round off to 11c/KWH and use to make their false argument.

However, whatever the average price IPPs charge to ZESCO, the bottom line is that the power from IPPs constitutes less than 20% of the total power which ZESCO sells. The bulk of the power sold by ZESCO is generated, transmitted and distributed by ZESCO itself. The latest available cost of supply study information puts the average cost of generation for ZESCO at 3.4 cents per kilowatt-hour. That is inclusive of all the inefficiencies at ZESCO. This means that even if the power is sold to consumers at an average of 7c/KWH, ZESCO is still able to make a decent markup.

5. Let us now go to the 7c/KWH price which Government has been using to make its argument that existing electricity tariffs are too low. You may be aware that tariffs are graduated, which means that we have different tariffs for different consumers and at different levels of consumption per month. The 7c/KWH which Government has been using to make their argument is the lowest tariff for domestic consumers for the lowest level of consumption per month.

The tariffs for higher levels of domestic consumption, commercial and industrial consumers are double, triple and quadruple this rate. And for purposes of establishing the weights to be used for calculating the average tariff per kilowatt-hour, l want to put it on record that commercial and industrial use accounts for more than 60 percent of overall current consumption, and the average current weighted tariff across the board is about 15.6 cents per kilowatt-hour. This means that ZESCO is making a decent markup even with its current high levels of inefficiency. There is no subsidy here whatsoever.

6. Therefore Government should not lie to the people that by increasing fuel prices and electricity tariffs, they are just removing subsidies in these two key factors of production. There are no subsidies on fuel at the moment. ERB is still recording a healthy surplus in addition to the huge reserves that they accumulated when fuel was selling at negative prices. Equally there is no subsidy at ZESCO. Even at current tariffs, ZESCO is recording very healthy markups.

The Government should just say the truth as to why they want to increase electricity tariffs and fuel prices, instead of trying to apply cotton wool in the eyes of the Zambian people. In fact, they need to make public the conditionalities of the IMF bailout loan, so that the Zambian people can see for themselves what other punishment they have to endure as a result of Government’s insatiable appetite to borrow.

By Dr. Lubinda Haabazoka

In economics, there are several ways one can reach the promised land. The easy way would normally be with the help of others while the hard way would be choosing to go it alone.

Like in politics, economists can be divided into two: Liberalists and Conservatives

Liberalists believe in 100% private sector control of the economy with the government have a very limited role. A typical example of a liberal economy is that of the United States.

Under this paradigm, the strong survive and capital thrives.

Conservatives on the other hand believe in a strong presence of government in the economy and believe that government in the economy should be there to protect small and unsophisticated citizens from exploitation by big capital and monopolies.

The ordinary Uncle Joe and Auntie Agatha are on the streets.

To be honest, liberalist concepts are more favorable to a country because they promote hard work amongst citizens and help build a strong private sector as evidenced in the United States.

The Zambian Case Study

Unfortunately for poor countries such as Zambia, a 100 % liberal direction cannot benefit a large section of the citizens, it’s foreigners that own Capital, and all we can provide is labor.

One can argue that we are the second-largest copper producer in the world, therefore, there’s hope but the mineral resources in Zambia—until KCM and Mopani transactions—are foreign-owned so the benefits from the mines elude us.

The Challenges of IMF Policies in Zambia

The reason why IMF policies fail in Africa is that the IMF fails to defend the interests of ordinary people in the countries they implement their policies. They often put the interest of the IMF first, not ordinary Zambians.

There is a very huge miss when it comes to understanding economic development as propounded by the founders of economics.

Economic development models do not have “a one size fits all approach.” Each country is unique and Africa as a continent is even more unique from the rest of the world.

When foreign capital goes to the USA or UK, the host governments keep tight control over those resources and they definitely get their fair share in form of taxes. When capital comes to Africa, it is overstated and governments get nothing from that in form of taxes.

How Does Africa Get it Wrong?

One of Africa’s biggest problems is the lack of lobbying power! Africa, Zambia included always bargains from a weaker position such that it ends up begging.

Have you ever heard the IMF mention that Africa should own its mineral resources? Have you ever heard the IMF seriously tackle the issue of illicit financial flows?

Have you ever heard the world bank fund the construction of a factory? Have you ever heard the IMF give money to build a new company to be owned by locals? No.

But they will always tell us that we should borrow from them so that we have enough forex reserves to balance our payments. They tell us that once we get an IMF package, we shall get the credibility and FDI will flow into Zambia. Let’s ask questions – Which African country has developed with the help of FDI or an IMF bailout?

Capital knows that it can only operate in countries that are playing on its own rules. So capital engaged the IMF and other strong international funders to drop up rules that favor them.

When those rules are drawn up and a country implements them, money flows into that country. Unfortunately by the time the money is flowing in, all profits go out because of tax concessions that are negotiated! A country actually does better as it has stable exchange rates and rapidly increasing GDP growth figures. But unfortunately, wealth never trickles down to the locals because apart from labour, other factors of production remain in foreign hands.

Lessons Learned

Countries that have learned this trick have advanced their economies. The trick here is to implement self-centered policies aimed at wealth creation amongst locals. But doing it quietly is very important because lobbyists are so powerful that Russia and China now are under sanctions. Sanctions because these countries have chosen not to be conformists. They have decided to create a parallel world order under BRICS to which SA is a member.

The Case of China In Continental Economics

To me, reducing the IMF debate to politics is a waste of time and missed opportunity. The discourse should be on how to prioritize wealth creation amongst citizens. Can you create wealth by increasing energy costs for your business? Can you create wealth by reducing taxes from your mineral resources?

You see, we can’t also push China away because it is set to be the number one superpower and largest economy above the United States soon. Yes this is going to happen in our lifetime.

We had Greece rule, then Rome, then Persia, then England, then USA/Soviet Union, now the USA so it’s now China’s time. The question is, what is our role in global economics? How do we prioritize our citizens? How do we win in this situation?

For me, we are not making bold decisions as the one Kaunda made. Bold decisions to get all mines and own them, build INDENI, build Mansa Batteries, build all the many factories.

Today our bold decision as mentioned by the IMF boss is that we have agreed to remove subsidies and probably privatize one or two companies then get $1.4bn. This is where I am getting worried. I am getting worried because I was born to solve huge and complex issues.

I was born to help create models in my country like never been seen before. Create a modern 24-hour economy. Create a sovereign wealth fund to fund infrastructure development. Create a Zambian Silicon Valley. Create a Zambian-dominated mining industry. Create an agriculture sector not dependent on rain.

These are the ideas we need to start discussing as a country.

But as long as discourse remains political and not serious, then we might as well follow the Clive Chirwa’s to the diaspora!

The author is an Economist, Consultant, Researcher and respected Academician of local and international repute.