Zambia: The Need for Stable Economic Policies

1.Introduction

In practically all affluent nations of the world today, business entities are among major institutions that are in the forefront searching for efficient and effective ways and means for application in the creation and delivery of goods and services. In these nations, business undertakings, as Davis and Frederick have noted, are greatly depended upon to keep the stream of discoveries flow-ing in the form of consumer goods and services.

This certainly calls for a competitive business system, which is conspicuously lacking in Zambia today due, in part, to our current leaders’ apparent devotion to socialist state policies.

From the late 1960s to 1991, socialist state policies barred both local and foreign private investors from certain commercial and industrial sectors of Zambia’s economy and recommended the creation of state and parastatal companies to operate in such sectors of the economy. The former presi¬dent, Dr. Kenneth Kaunda, made the policy pronounce¬ments which ushered in an era of such companies in his April 1968, August 1969 and November 1970 landmark speeches to the National Council of the United National Independence Party.

Naturally, the monopolistic position enjoyed by the parastatal and state companies culminated in complacence and gross inefficiency because, in the absence of competition, the companies apparently found it unnecessary to seek or use discoveries that would have improved the quality and quantity of their out-puts.

This, in part, prompted the next government of the late Dr. Frederick Chiluba to embark on an economic liberalization program upon inauguration in October 1991 in a deliberate attempt to boost competition in commerce and industry, as well as wean the national government from direct involvement in commercial and industrial activities.

The program was later adopted and sustained by President Levy Mwanawasa (who succeeded Dr. Chiluba in 2002) and President Rupiah Banda, who suc-ceeded Dr. Mwanawasa in 2008.

Since the Patriotic Front assumed the reins of power in 2011, Zambia has been drifting backwards towards the socialist system of government. The creation (or is it resurrection?) of the Industrial Development Corporation (INDECO or IDC) and the recent transfer of 29 state companies to the IDC are tell-tale signs of the country’s re-adoption of the socialist ideology.

Out of the existing 33 state-owned companies, one would have expected only the following to continue to be operated under the auspices of the Ministry of Finance (and Revenue) as commercial entities and not under an IDC or any semblance thereof: Indeni Petroleum Refinery, Lusaka Trust Hospital, Medical Stores Limited, ZESCO Limited, ZANACO PLC, ZCCM-IH, MOFED Lon-don, and MOFED Tanzania.

By the way, the creation of government-operated maize milling plants will cer-tainly lead to the establishment of retail outlets akin to the infamous ZCBC, Mwaiseni and NIEC Stores, and the eventual nationalization or fanning away of private milling companies and large-scale retail outlets.

As Alassane Ouattara of Côte d’Ivoire has advised, there is a pressing need for national leaders to re-define the roles of government away from direct in-volvement in commercial and industrial activities toward the provision of inducements, guarantees and essential public services and facilities to primary stakeholders.

I was once a blind Marxist (or socialist ideologue) in my initial years at UNZA during the late 1970s—propounding and expounding the nature, intricacies and benevolence of socialist ideals and policies pursued by countries like Cuba and the former USSR.

Apparently, Comrade Edgar Lungu could be trying to experiment on what was in vogue at UNZA when he was pursuing the Bachelor of Laws (LLB) degree, in spite of the prevailing and worldwide skepticism regarding the efficacy of socialism and communism in addressing the development needs of any given country and concurrently upholding all the rights and freedoms of its citizens.

Unfortunately, socialism and communism largely depend on a government’s suppression of civil liberties, and certainly on authoritarian rule by government authorities—what is referred to as “dictatorship of the proletariat.” And they would normally and eventually require the creation of a one-party system of government and a monolithic social system in order to shut out dissent and criticism from any segment of society.

2. Fostering Private Investment

We need to honor and embrace what is stipulated in the current Republican constitution, the 1996 Republican constitution, Article 112(b) of which asserts that “the State shall endeavor to create an economic environment which shall encourage individual initiative and self-reliance among the people and promote private investment.”

In this regard, there is a need to include a constitutional Clause in the new Re-publican constitution that is currently being crafted that should proclaim that “the State shall not nationalize or expropriate private property” to ensure that investors know without a shadow of a doubt the country’s stance on local and foreign investment.

Besides, political parties and their leaders need to guard against the temptation of changing the country’s socioeconomic ideals when they secure the people’s mandate to assume the reins of power.

Obviously, every country needs to generate a set of socioeconomic ideals (or an ideology, to use the term that is in vogue worldwide) to serve as a guide to all national pursuits and endeavors. Among other considerations, the ideology should be generated through national consensus, either by the people’s repre-sentatives in Parliament or through a referendum, and not by an individual leader, a group of leaders, a political party, or a group of political parties.

This is an important step in the process of generating stable socioeconomic policies.

Unfortunately, there are apparently three divergent groups of officials within the PF: those who believe in incentivizing the private sector in our quest to grow the economy and to create a cornucopia of employment opportunities; those who believe socialism is the panacea that will address our country’s so-cioeconomic ills; and those who believe the disastrous “mixed economy” that we tried between 1968 and 1990 during the UNIP era can improve the liveli-hoods of the majority of our people under Comrade Lungu’s superintendence.

Nevertheless, the 1996 Republican constitution that is currently in force has mandated the creation of a socioeconomic system that is designed to “encour-age individual initiative and self-reliance among the people and promote private investment.”

Therefore, the creation and promotion of state-owned companies is clearly a violation of Article 112(b) of the current Republican constitution if such en-deavors are not provided for elsewhere in the 1996 Republican constitution, or in any of our beloved country’s subsidiary pieces of legislation.

So, what would be the appropriate consequences for such a violation by those who have officially pledged to honor and protect the Constitution through their respective oaths of office?

To promote private investment, the government needs to create a business environment that is conducive to both local and foreign investors. Such an envi-ronment should provide adequately for various kinds of guarantees, inducements and essential public services and facilities, such as the following:

  1. A well-developed transportation infrastructure and ad¬e¬quate transportation services to industrial, commercial and residential areas to ease or facilitate the distribution of production inputs and finished products;
  2. Adequate public services (including police protection, fire protection, public utilities, and decent housing), as well as telecommunications, educational, vocational, health, and recreational facilities;
  3. Equitable sales, corporate, and other taxes, as well as tax conces¬sions and induce¬ments that are more attractive than those in alterna¬tive countries or regions which investors are likely to consider for invest¬ment;
  4. A viable and efficient financial system, including the Lusaka Stock Exchange (LuSE) and all other financial institutions in the country;
  5. Renunciation of both price and exchange-rate controls;
  6. Assistance by the national government in nurturing entrepreneurial and management skills;
  7. A reversal of the current emphasis on stabilizing inflation at the expense of job creation and economic growth by placing greater emphasis on job creation and economic growth through low interest rates and progressive reductions in taxes in order to stimulate investment, savings and consumption;
  8. An ambitious program designed to lure private investments which can lead to the creation of new jobs, facilitate socioeconomic development, and create a more competitive economic setting that can promote efficiency, as well as compel busi¬ness entities to improve the quality of their products, as well as charge relati¬vely lower prices;
  9. Political and civic leaders who are fair and honest in their dealings with private business institutions, and stable economic policies (including a formal assurance against nationalization and/or expropria¬tion of privately owned business undertakings by the national government);
  10. Political and civic leaders who are genuine and resolute in their fight against the scourge of corruption in both governmental and non-governmental settings;
  11. Less bureaucratic licensing, import, export, and other procedures, and adequate information about investment and marketing problems and opportunities in the various sectors of a country’s economy and in cross-border markets;
  12. A system of justice that is fair, impartial and independent in both word and deed; and
  13. A social safety net designed to adequately cater to the needs of economically disadvantaged members of society that is not subject to political meddling or manipulation.

These inducements, services, facilities, and guarantees, among a host of other things, can enable economic units to operate more efficiently and eventually deliver economic and social outputs to society at reasonable costs and prices.

3. Objectives of the IDC

According to the PF government, the IDC idea is designed to revitalize the Zambian economy, and would: (a) stimulate industrial development; (b) not involve nationalization of private companies; (c) create 1 million jobs in 5 years; (d) be a development financial institution (DFI); (e) be a sovereign wealth fund; (f) be a holding company for all state-owned enterprises; (g) be chaired by the president; and (h) facilitate government investments in high-risk areas that the private sector would not find profitable enough to engage in.

But according to Jeremiah Mwansa Mweemba, industrial development can be spurred without an IDC. A predictable fiscal policy and further promotion of existing industrial clusters such as the Multi-Facility Economic Zones can achieve the same result.

In his view, the country already has a development financial institution (DFI) under the auspices of the Development Bank of Zambia, which in some ways operates like the Development Bank of Southern Africa and South Africa’s IDC, and the Citizens Economic Empowerment Commission also mirrors many of these activities.

He has further argued that the country already has a de facto sovereign wealth fund in the name of ZCCM-IH, and that the IDC would struggle to enhance corporate governance of state-owned enterprises due to the political element in decision-making that would emanate from having the President as its chairper-son.

In addition to Mweemba’s suggestions, the government can boost economic activities by incentivizing the private sector to create jobs and bolster economic growth and development if it can adequately provide for the various kinds of guarantees, inducements, and essential public services and facilities cited earlier in this commentary.

4. Conclusion

The issue regarding the resurrection of socialist ideals and policies is too im-portant to be left to the whims of a few government officials, who could be pretending to support the idea merely because they are fearful of being dis-ciplined by the appointing authorities.

Future generations will judge us harshly for our fascination with a disastrous socialist experiment that once plunged our beloved country into socioeconomic decay and backwardness—an experiment that ultimately subjected the majority of our people to want, misery, and destitution!

By the way, the devastating loss by UNIP in the 1991 Presidential and General Elections was, by and large, a reflection of the Zambian people’s extreme suffering occasioned by decades of the Party’s experiment with socialist ideals.

In all, history should offer us guidance on this matter. Socialist policies are simply a pain in the neck! There is, therefore, no justification for re-introducing an ideology that economically traumatized our people from the late 1960s to 1991.

What our beloved country needs now is the creation of what may be referred to as a “social welfare state”—that is, a dynamic free-market economy that has a human face; or, more precisely, a socio-economic setting that simultaneously provides for a highly competitive business system and an effective mechanism for re-distributing wealth to the needy.

So, neither socialist nor crude capitalism in its quest for profit maximization can improve the livelihoods of the majority of citizens in any given country. In our quest to improve the livelihoods of the majority of our people, therefore, it is perhaps important to keep in mind the following caveat provided by the late F. W. de Klerk regarding the pursuit of socioeconomic development:

“The reality is that the economy does not grow from political slogans … [b]asic require¬ments for eco¬nomic growth [and development] are peace and stability, free enter¬prise, imagi¬native entrepreneurship, efficient and frugal government, innovative and caring management, a well-educated and mo-tivated work force, and a lot of hard work.”

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