SPECIAL REPORT: Economy down but still falling


Whatever could have possibly gone wrong with the Zambian economy in 2015 did surely go wrong. Regardless of the glasses one wants to use to relook 2015, though I actually think you don’t need any glasses at all, you will see that not a single sector was spared by the turbulent economy; the year has simply a total mess!

Some economic stories were less inspirational; some plain depressing, some outrageous and others poignant. There were some very inspirational decisions, however faint-hearted they were.

For all the ills seen in the economy, the presidency is at the centre of them as “the President is the economy” and the buck stops with him. President Edgar Lungu right now is riding a wrecked and leaking economy.

Massive job losses are being seen every month; the economy is running out of revenue, banks are no longer lending, the economy has inadequate electricity, prices of goods and services are more than doubling, government’s over-expenditure is acutely becoming a danger to the country, the discontent among the citizenry is rising; the Zambian economy is reeling in shame after years of pride and immaculate beauty.

Even the good news that was supposed to hallmark 2015 has been diluted and allowed to decompose in the economic rot of 2015. But how did we get here?

The most inspiringly unfulfilled story.

There was no better signal to the investor world that President Lungu made on his arrival than the appointment of Dr Denny Hamachila Kalyalya to replace Dr Michael Gondwe as governor of the central bank. Dr Kalyalya is an astute central banker who commands respect in Zambia and beyond. I am sure every journalist in Zambia had their own experiences or story to tell about Dr Gondwe, but hey who am I to judge? President Lungu made no secret why he was appointing Dr Kalyalya – in order for him to seek a magic wand to save the kwacha, which, by then, was trading at K7.50 to one US dollar. But the worst was yet to come!

Kwacha falls to its all-time low

By November 2015, the kwacha breached the K14 psychological mark to hit all-time lows of K14.63 per dollar on interbank, making it the world’s worst performing currency. The government blamed the kwacha fall on external factors – the gulobo factors – such as the falling copper prices, China’s ‘reduced’ copper imports from Zambia, strengthening US dollar against major convertible currencies and speculative tendencies by local players wanting to cash in on the turbulent local currency. As far as the government was concerned, and probably not concerned, they had done nothing to exacerbate the position of our fragile currency. By November this year, the kwacha had lost 55 per cent in its value but thanks to a cocktail of monetary policy interventions, it had recouped some of its lost grounds and is now closing the year at a 42 per cent loss since January 2015. This depreciation brought about unprecedented price increments for all commodities, some justified, some not.

The copper collapse

Over 10, 000 residents of the Copperbelt have been rendered jobless this year alone after copper mining collapsed in the absence of electricity, poor international copper prices and inconsistent fiscal policy. The jobless people were once revered mine workers for companies like Konkola Copper Mines, Mopani Copper Mine, CNMC Luanshya Copper Mines, among others. Job cuts on the Copperbelt were a bitter pill that has left a bitter taste. All this resulted from policy changes that saw an increased mineral royalty tax to as high as 20 per cent; electricity shortages and copper price fall to levels last seen during the 2008 financial crisis. These factors made it impossible for most mines to operate, causing them to hold back investments in the sector.

When power dries without water

It’s been called an “act of God” but the scientists have said the truth. Zambia is currently experiencing its worst power crisis since 1992 and both the government and Zesco blame this position on the low rainfall during the last rainy season. Contrary to this, the Zambezi River Authority and the Engineering Institution of Zambia (EIZ) say Zesco, like its neighbouring utility, ZESA in Zimbabwe, notoriously overused their allocations of water in Lake Kariba. In the typical Zesco fashion, the change of leadership after president Michael Sata’s death to President Lungu also saw the change of top management. Energy experts now blame the current power challenges to the change in management, arguing that those in control of the utility were not fully discharging their duties as they are not qualified to hold such senior positions. What is not clear, though, is how long these power problems will last. Investments in alternative energy sources are being sought, although the manner in which government is driving the process is raising many unanswered questions as it is riddled with suspicions of wrongdoing.

Power vanishes, it
goes up!

It sounds ironic but the government directed Zesco to increase the price of electricity at the time when there is insufficient power. Zambia currently faces a power deficit of over 1,000 megawatts; and in fact, one gets more shocked when they have power than its absence. Maybe the theory is that since we are only accessing electricity for less than half a time, in order to make Zesco liquid enough to fund ‘other activities’ next year, maybe, consumers need to pay even for the time they don’t have power. Effective last month, electricity tariffs have been increased by as much as 200 per cent for all consumers, excluding mining companies and the low-income band consumers.

Indeni oil saga

There is definitely no chance to forget the saga that followed the importation of contaminated crude oil for our Indeni Petroleum Refinery mid this year. This act was called all sorts of names, including sabotage, but what is clear is that whoever bought that cheap crude oil knew it would not work for Indeni but obviously the theory that cheap is expensive only applies when one is not making a cut out of the deal. Thank God our beloved but aging Indeni was not poisoned or chocked to death.

Honest story but maybe a little too late

When finance minister Alexander Chikwanda went to National Assembly mid this year and said the budget deficit had ballooned to K20 billion, only naïve citizens or bystanders got shocked. The PF regime has consistently overspent; the budget deficit for this year is seen at eight per cent of the GDP, its highest in more than 10 years, inflation peaked at 19.5 per cent last November, Zambia Revenue Authority no longer has the courage to face reality and update the nation on the their revenue collection exercise because there is no corporate tax, there is no mineral royalty to collect; maybe that is why their officers are enjoying a wild goose chase at The Post.
More borrowing, another Eurobond
The PF has been spending money it is not making and sinking the country into abyss. In fact, it is very difficult to keep up with the PF’s borrowing track record because more often than not, the regime is economical with the truth. The PF has contracted three Eurobonds in the last four years and evidently the latest US $1.25 billion contracted at 9.37 per cent is punitive! Obviously for an economy run by an undisciplined and wasteful regime, it seems only the ruling class will be left with the money to spend!
Evidently, Zambia is becoming debt-saddled and the PF regime is seen to be plunging the country into an economic genocide.

President Lungu announces austerity measures

When President Lungu announced those austerity plans in November, most would be forgiven for not having taken him seriously. It will not be the first time the regime would be negating on its own word. Maybe the reason President Lungu rejected an International Monetary Fund (IMF) programme is because PF’s economic plans and decisions are subject to change at no notice!

What lies ahead

The new year, 2016, will, without doubt, be another tough year for Zambia. One thing Zambians should not forget is that all the problems faced in 2015 are coming with them to the new year – high commodity prices, electricity shortages, poor rainfall, etc. A reversal of the country’s economic fortunes only lie in the decisions the people will make at the coming general elections. For now, all we have to do is brace ourselves for the worst!

Courtesy of Post Newspaper

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