Some economists and players in the private sector have sharply differed with Government over the creation of the Industrial Development Corporation (IDC).
Speaking at a public discussion organised by the Economics Association of Zambia in Lusaka Tuesday evening, Economist John Kasanga warned that the IDC poses a danger to the Zambian economy.
Mr Kasanga said that the IDC might reverse the tremendous progress Zambia has made in reforming its economy.
“This IDC will have far reaching consequences for all of us. There is a danger that it might reverse the progress we have made as an economy. We have done well to make our economy more investor friendly, we fought hard to reduce the cost of doing business and enabling us to become more competitive, my fear is that this IDC will derail and take us backwards,” Mr Kasanga stated. He also challenged the PF government to tell the citizens what ideology it is pursing to govern the nation.
“Are they going back to sociology, are they running a mixed economy or free market economy?” He added, “When making major policy changes, lets plan and research before our President gives us another Easter message or this time around Valentines message.”
Mr Kasanga pointed out that that national development is not an event saying government should have a long term approach to development.
“If we continue this kind of development focusing on the next five years so that we can win the next election then we will never develop. This is the reason Botswana and Mauritius have done well, these counties thought in terms of 30 years. We are thinking of developing in five years.”
Mr Kasanga also noted that details about the specific form that the IDC will take have not been publicized.
“We are all guessing because this IDC has been incorporated and yet very few are privy to its operational structure. If anyone of you have seen the blue print, you must be lucky.”
“It therefore becomes difficult to assess what are the operational objectives of the IDC or indeed what are the investment activities it will undertake and how will it be governed. What sort of functionary relationships with other State Owned Enterprises that will fall under its structure. How will it exist or co-exist with other state institutions that are providing long term finance such as Development Bank of Zambia and the CEEC?”
Mr Kasanga was however quick to acknowledge that there are times when the state has to intervene in the economy especially for strategic reasons.
He on the other hand pointed out serious concerns on the governance of the IDC especially that it will be headed by President Sata.
“This will not only make the IDC politically led but it will also be politically compromised. Those that are supposed to provide oversight are the ones who will be managing the entity so there would be no arm’s length dealing between the entity and those who set up the policy. Whether we like to accept or not, this will lead to direct political interference, it is inevitable and the management of IDC will become opaque.”
He added, “Who would walk into State House to ask the President how IDC is working, first you will have to set up an appointment, assuming they will even entertain you and you will be lucky if that appointment is granted.”
He said he was of the view is that the objectives that Government wants to achieve using the IDC could still be achieved using existing institutions.
Mr Kasanga said government should just strengthen existing institutions and let them realize the overall development goals that Government wants to achieve.
“The IDC is not supported at least up to now is not supported by any legal and institutional framework to enable it relate to other institutions, we don’t know how that framework would look like. Which State Owned Enterprises will fall under this? The President announced that companies registered under Companies Act and the Banking and Financial Services Act, so I ask myself and say which are those companies?”
Mr Kasanga added, “You have those entities that are established by statues so those won’t fall under IDC like DBZ, CEEC. You have TAZARA managed by a bilateral agreement between two countries, ZANACO cannot fall under IDC because it is a joint venture partnership between Government and a foreign private entity and moreover it is listed on the stock exchange, it has listing rules it has to adhere to. “
He continued, “Then you have Indo Zambia which is a joint venture between the governments and India and Zambia, so that is out. What is left, Ndola Lime, this is a company that has been earmarked for privatization for the last 15 years. Most of those companies that are available are in such poor state and requires recapitalization
ZACCI President Geofrey Sakulanda making his presentation at a public discussion on IDC at Pamodzi Hotel
And ZACCI President Geoffrey Sakulanda stated that the creation of the IDC leaves more question marks than answers adding that very little has been done in terms of clearing the air.
“It is our view that the industrial development idea can be achieved without creating this IDC. What the private sector requires is a predictable fiscal policy, further promotion of existing clusters especially the export manufacturing zones, we already have a development financial institution in DBZ, we just need to capacitate that and improve its governance and management, I think we will be achieving the objectives of the IDC,” Mr Sakulanda said.
Meanwhile, Zambia Manufacturers Association President Bright Chunga said creation of the IDC is a misplaced idea.
“We have been told that this IDC will be a holding company of all State Owned Companies, this sounds like a very charitable thing because these are all sick companies, meaning that the IDC will be like an exercise in setting up a hospice, creating space for these companies to die in peace,” Dr Chunga said.
“We are told this exercise will be funded through a Sovereign Wealth Fund. The last time I heard, Sovereign Wealth Fund usually come from Central Banks as an accumulation of results of budget and trade surplus and these funds are typically created when government have budgetary surpluses and have little or no international debt. Clearly this does not sound like us.”
ZAM President Bright Chunga at a public discussion on IDC at Pamodzi Hotel in Lusaka
Another discussant Andrew Simpasa from the Jesuit Centre for Theological Reflection said the IDC has potential to deliver economic and social development it is it handled well.
Mr Simpasa said there are however serious doubts about whether the IDC can lead Zambia to industrialization.
“We have doubts because this idea of the IDC it is not rooted in the deeper realities of our time.
It is as if an agenda that was not accomplished in 1991 reforms has been brought to the fore and it now time to accomplish the agenda, we are raising dead skeletons but the times and context has changed.”
He said, “When we look at the various policies that are being done by the government, from the general policies we see one particular thing, there is lack of interconnectivity. So our cry is that can there be interconnectivity in public policy in the PF administration.”
Mr Simpasa said policies are being led from State House and not being driven by technocrats.
“Right now we have a very good strategy paper on industrialization and job creation under the Ministry of Commerce, this is a very good document, robust and well rooted in the social, political and economic realities of our times but it has been surpassed and replaced by the IDC.
The foreword to this document was signed by President Sata and Emmanuel Chenda, so the document has now become redundant because there is a new policy which has come up in form of the IDC. What we are saying is that the IDC should not be a stand-alone policy,” he said.