By Dante Saunders
I urge the people of Zambia not to allow the Patriotic Front (PF) government with its planned project of fundraising using the subsidies removed from fuel and maize. I am aware that there will be a lot of money that will be realized from the removal of the said subsidies.
The money will end up in the pockets of private individuals that hijacked the Patriotic Front who cannot be trusted. They will squander the money from subsidies the same way the MMD [squandered] the money that was realized from the sale of mines and other parastatals during the age of privatization on Zambia. Some of the ministers in this government held top positions at the time money from the privatized mines was misused or stolen at that time.
Another reason why we don’t want this government to have anything to do with the issue of subsidies is the sudden change on the part of government. There is nowhere in the PF manifesto where it is indicated that subsidies on essential commodities will be removed. All mentions was that, they will change the way to deal with subsides if they formed government. In line with this promise in their manifesto the removal of subsides is quiet suspicious.
I am also aware that, the removal of subsidies on maize and fuel will generate a lot of money. Regrettably, the money from the subsidies will be misapplied in areas such as by elections, funding the constitution in an adhoc fashion, meeting extra expenses in an over bloated government, funding of over other countries’ internal affairs such as exporting of maize to countries like Tanzania, Malawi and Zimbabwe. Similarly, we have proved that at the moment the most compelling need for the PF government is to increase the tally in parliament.
Now, this government want to legitimize the removal of subsides by championing arguments in support of subsidies that it will use these proceed for “resource security” or “access” or “social or trade protection.” All these are another set of lies. This government just wants to use the proceeds from subsidies to champion its political agenda of wanting to create a one state where only the top brace of the PF leaders will benefits.
Equally, what has gone unnoticed in the PF explanation of the removal of subsidies is the fact that government is running out of cash pure and simple and can no longer afford the KR2.3b ($430m) of subsidies as well as continue with its budget implementation and development projects. Its debt nudges 4.3% of GDP and bond yields are rising. Let me make it clear here is that the disaster over the removal of subsidies hides the real predicament that the government is in.
The government claims it wants to shift spending to social sectors and infrastructure investment especially in poor rural areas. We advise the PF that “the era of being a consumer economy is over and now is the time for putting resources in real development” and that means the economy must be controlled by Zambians and not foreigners as it is today. The end of the “consumer era” bluntly means the consumer pays more for fuel and virtually all transported goods and labor derived services and maize. Farmers will pay more for fertilizer and the consumer will pay more for food and unconditional maize buying by the state will cease food security. What this PF government has failed to know is that, energy subsidies are costly to a national budget and crowd out other spending, including on much-needed infrastructure and social services.
My advice to this government is that, cut down on the overheads; deal directly with the suppliers of fuel and fertilizers, cut out all the middle men because they are responsible for the following activities. The cost of fuel taking into account both direct subsidies and foregone taxes, amounted to 1.4% of the region’s GDP in 2012. For oil exporters, the fiscal cost was 3.2% of their GDP. The data for Zambia shows the 5% fuel subsidy totaled KR754m ($145m) or 0.7% of GDP in 2012 rising from KR100m or 0.1% of GDP in 2010. According to the Zambia Institute for Policy Analysis and Research (ZIPAR) the subsidy was projected at KR1.2b ($225m) or 1% GDP in 2013. The rise is due to 25% increase in oil prices as well as rising consumption.
When it comes to the electricity sector, the available information indicates that the substantial costs are incurred by fixing power tariffs below the costs of production. Currently Zambia experiences a shortfall of 200 megawatts during peak periods. Only 20% of the populations have electricity. Zesco, the state utility, is planning a substantial revision of tariffs of 26% next year. On this issue, the PF government claims the fuel subsidy of KR1.2b plus the maize subsidy of KR1.1b would be better spent on other social and infrastructure projects. This so called subsidies amount to $430m.
Therefore, I urge the people of Zambia not to allow the PF government to have anything to do with the removal of subsidies because it is not better place to address relevant concerns.