Saturday, January 26, 2008

Magandenomics 101 – How far does $3.6 Billion go!

As the wheels of the global economy, grind growth to a near halt under the weight of a slump triggered by the US sub prime mortgage crisis and high oil prices, there is debate among economists on how to jump start economic activity. Whether to implement trickle down policies that give tax breaks/other incentives to the wealthy with the hope that their quest for more wealth, will motivate them to invest more; or the trickle up policies that give monetary incentives such as tax refunds, grants, food stamps etc to the poor and middle class with the expectation that their propensity to spend will create more demand leading to more productivity in the economy.

Given the size and rigidity of the Zambian economy, this year’s national budget of 13.76 trillion kwacha reflects Mr. Magande’s attempt at making the most of both the trickle down and trickle up approach to unlock Resources for Economic Empowerment and Wealth Creation.
Reducing VAT by 1.5% may have the effect of giving some relief to both the consumers and producers putting 21.6 billion at their disposal but does this go far enough?

On the other hand, new tax measures for the mining sector which include corporate tax at 30 per cent, mineral royalty at three per cent and a variable profit of up to 15 per cent on taxable income will increase government revenue.
However might government’s continued borrowing of 1.2% of the national budget from BOZ possibly keep interest rates at uneconomic rate and erode gains from reduced VAT.

The revised Pay As You Earn (PAYE) increases the non-taxable monthly threshold income from K500, 000 to K600, 000 while those getting over K4 million per month will be paying 35 per cent instead of the previous 30 per cent effective April 1, 2008. This is another attempt at trickle up and ZK100, 000 or $26 may go some distance but is it enough to achieve a significant impact on increasing productivity in the economy.
In other aspects of the national budget Mr. Magande promised ZK 120 billion for a Citizens' Economic Empowerment Fund, however do these measures go far enough to uplift the majority of Zambians who have had no real opportunity for economic empowerment?

With unemployment over 70%, the only real relief/empowerment for these people in this year’s budget maybe the VAT reduction and this economic empowerment fund. Mr. Magande needs to do more to create jobs and more private enterprise.

Indeed, ZK 13.76 trillion or $3.6 billion maybe a small piece of cloth for our ever bloated national suit, this is essentially why am glad, Mr. Magande is learning to cut with a little bit more precision and care.

Tuesday, January 22, 2008

O that we might see!

It’s only Zambians who can make a difference, not foreigners. But we need to have good projects to capitalize on these resources that we have. If we fail, we run the risk that others will come. And this risk around Lusaka is very apparent. Why is it that foreigners are flocking to this country in large numbers if there is nothing to be gained? I think that is the warning signal. These people coming have seen that the opportunities are there. So let us seize these opportunities ourselves before we lose what we have.' Caleb Fundanga

As I read this most poignant statement of the Zambian condition, I can indeed, envision Zambians waking up in 50 or less years to find themselves a population without means or recourse against increasing poverty.
If that is a possible future fate, what does our past look like? When westerners, first came to the land without a name, at the time over a hundred years ago; they found then as Equinox, Vedanta and others have now, a land indeed that flows with milk and honey, whose indigenous people lacked then, as now the clarity of vision to fully appreciate or exploit the wealth or opportunity before them.
Confronted with cotton clothing, new crops, horse drawn wagons etc our ancestors by assimilation enhanced some aspects of life as they had it known for generations primarily because they could see that western culture had developed the means for a better way of life. However, there appears then as now, a failure to directly see in Zambia’s abundant natural resources the real and present potential to enhance our personal lives.
I have discussed before, how a young Abe Galuni came to Northern Rhodesia penniless, yet in less than forty years he owned more land than is owned by the entire Zambian population in present day city of Lusaka (residential areas). Foreigners own more and benefit from precious stone mines than ordinary Zambians.

How can indigenous people who have lived in Mapatizya, Chama, and Mushili fail to see and recognize the potential to enhance their personal lives, gemstones in these areas have?

A friend of mine once said perhaps if one (1) million Zambians were put on plane and sent to a city like New York US, to live there for six months then flown back to Zambia, maybe then we would have a revolution!
Is that what it might take to give sight to the multitudes living in abject poverty in a land, Caleb says is so God favored and lucky or might we be blind still as in the story of –

An Old Woman having lost the use of her eyes, called in a Physician to heal them, and made this bargain with him in the presence of witnesses: that if he should cure her blindness, he should receive from her a sum of money; but if her infirmity remained, she should give him nothing. This agreement being made, the Physician, time after time, applied his salve to her eyes, and on every visit took something away, stealing all her property little by little. And when he had got all she had, he healed her and demanded the promised payment. The Old Woman, when she recovered her sight and saw none of her goods in her house, would give him nothing. The Physician insisted on his claim, and. as she still refused, summoned her before the Judge. The Old Woman, standing up in the Court, argued: "This man here speaks the truth in what he says; for I did promise to give him a sum of money if I should recover my sight: but if I continued blind, I was to give him nothing. Now he declares that I am healed. I on the contrary affirm that I am still blind; for when I lost the use of my eyes, I saw in my house various chattels and valuable goods: but now, though he swears I am cured of my blindness, I am not able to see a single thing in it.