Professor Mwiine Lubemba
In Monday’s Times of Zambia, April fools day, President Sata has made a passionate appeal to all Zambians to assist in taking care of the less privileged as his government embarks on development projects. This is a genuine appeal and the President is right. At some point in time, our leaders have got to start doing some serious governing. We just can’t keep going from one manufactured crisis to another manufactured crisis. First, it was our MPs, they awarded themselves a huge wage increment, none of them questioned the rationale behind it or even think of the poor less privileged, and when it is now time for the civil servants, all our MP’s are mute, morally they can’t question this award. I don’t know about you folks, but I can see a pattern unfolding. The poor are alone. What the poor need is less government. The MP and new civil servants wage increases will throw this economy out of orbit and President Sata’s appeal for them and his development plans will falter. Like you’ll soon find out, I am not an economist and I could be totally wrong, but what the President is saying and what our MPs and civil servants are doing are at a variance. I just can’t stop scratching my head in dismay.
I am also thinking the nation has just come from a broad based government initiated minimum wage increase? I am also starting to wonder why the government increased the none taxable income to Kr2, 200? I have always thought all civil servants have been receiving a tax free Kr2, 200per month equivalent to Kr 26,400 per annum? When you compare this to a domestic worker’s government approved minimum wage of Kr522, I am sure you’ll also start to scratch your head. And look at the wage of a semi skilled industry worker that was raised to only Kr1, 200? And I remember, Fackson Shamenda almost punched the teeth out of the ZFE young man’s mouth on ZNBS-TV. But seriously, with the cash demand to all these development projects on increase, what reasons did government advance to justify the need for these tax breaks and wage increase laws?
Perhaps it’s because I am not an economist, so I could be getting confused, but I thought government recently gave us an inflation number of 6%? Do these people in Government expect us to believe their inflation numbers… ever again? What’s wrong with these people? Why should a government wage increase exceed their own official government inflation number? At a wage increase of Kr2, 900 per month, we see an average wage rise of close to 31%. So, is the government now saying their inflation numbers are cockeyed? If not, then this government wage increase exceeds all sane economic decision models and as good and noble the Presidents projects may sound, he’ll someday soon run out of cash.
That’s why I have always been uncomfortable with economic data from government. They also say the nation’s GDP is now US$±21 billion and a national population of 14 million. So, where will the government get the money to pay the new wages and carry out development projects if this GDP is only expected to grow by 7.3%? You mean our MPs and civil servants want to consume the entire 7.3% growth in GDP on wages alone and leave the Presidents projects and the poor with nothing?
Fair enough, if the aim is to have a fair wealth redistribution policy and take care of the poor, why doesn’t Government just cut out Kr 49.28 checks to every citizen old and young every month? After all, every citizen contributes to this economic growth. Why be choosy and just pay a select few civil servants Kr2, 900 per month especially after having increased the wages of MPs to an average of Kr 30,000 per month? The President need not look too far for assistance to the poor; he has a greedy lot of civil servants and MPs that he needs to keep in check. Somebody is creating a class of bourgeoisie using the sweat and toil of the ever increasing population of poor peasants. The privileged few in the PF are creating a class of the rich 1% in the country. There are dangers associated with this kind of game playing. Once the peasants come to know…usually the end is very-very messy, even Emperors have been known to lose their shirts.
It’s less than a year when government force whipped all employers into submission and accepted government concocted wage increments. We now have Industry and Agriculture, the major employers, under renewed pressure to increase wages- yet again- to match those in government. Service industries such as Private clinics, Pharmacies, Shop owners, Hotels, Bars, Petrol companies, Marketeers and Transporters can only increase wages by increasing the prices of their goods and services. Meanwhile the nation is enslaved with unemployment and poverty as the President rightly says, various unemployment numbers are thrown around ranging from 14% to 74% (depending on which number you wish to believe) of the nation is unemployed. With 74% of the entire national population not participating in this national wealth redistribution exercise, most of whom are more qualified than those holding government jobs today; I can only see grave unhappiness brewing in the nation and the PF government’s game playing wearing thinner and thinner by the minute.
We have already seen the use of Government force to control the market prices of mealie meal in Chililabombwe and for the same reason most remote areas have not seen a single bag of mealie meal on their grocery shelves for months. Yet government already gives a maize subsidy on agro inputs and retail prices to the millers from FRA meant to cushion the poor, but with the anticipated wholesale price increases only civil servants homes will afford. With this new demand on new government wages, the government will not have enough money for additional subsidies to cover the majority poor the President wants all of us to assist.
Government has also subsidized and controlled the price of petroleum, again this will mainly be bought by civil servants, with the impending increase in transport rates from transporters so as to increase their wage bills to match the new government wages; we’re likely to see increased pressure on petroleum margins due to increased cost of transport to rural areas where most poor peasants reside. We wonder how much subsidies Government will be able to afford on petroleum, given the new pressure on Government payroll.
Aaah, I hear you say… but Government will get increased taxes from higher copper production volumes. And I say, wrong! The copper futures prices don’t look pretty given the troubled European economies where there has been slow or no housing starts and to make matters worse, although the American economy is being pumped with more debt to the tune of US$85billion per month, new housing starts are low but even if they were to start an upward swing, new American housing starts only account for about 1.5% of new mined copper imports. Be mindful; 80% of all the copper ever mined on planet earth is still available and constitutes the major component of 15 million tons of new mined and recycled copper available on the world market. The major culprit for slow demand for fresh mine copper production is China. The Chinese are still sitting on large stocks of unregistered metal, some figures say 4-10 million MT, and with low export trade orders in copper wire, pipes and gadgets that use copper from the west, new increase in copper demand will easily be met from recycled metal and cause prices to stagnate. And please don’t argue I am an economic witchdoctor, just save this article and read it in December this year.
In fact specialist copper analyst Simon Hunt in his January, 7- 2011 article “The likely pattern for copper prices in 2011 and beyond” rightly predicted copper peaking in Q1-2011 and fading badly thereafter as we already saw, then prices were followed by a parabolic rise last year in 2012. But now a drastic collapse is predicated from mid 2013-2016. In his article, Hunt says copper prices will slide to a low US$1,500 by 2016. Simon Hunts article is a must read for all our policy makers. There is also interesting data and charts on the following site: The World Copper Factbook-International Copper Study Group.
Should copper prices continue to fall from now going into 2016 as Simon Hunt and many other copper analysts predict, then some small mines may have to shut down and larger mines may have to scale down production as Lumwana’s Barrick Gold report said recently, and government will have less taxes from mining activity, we may also have severe shortages of foreign exchange assuming the mines contribute 75% of the available foreign currency on the market, and this usually translates into kwacha expensive imports of goods and services such as fertilizers, petroleum, transport and medicines. We also expect to see renewed pressure for yet higher wages to meet new kwacha consumer price increases. Unless the Government resorts to further kwacha destruction by printing more kwacha to meet government payroll, we are likely to see rotten cabbages and tomatoes thrown at some people on the streets of Lusaka.
In addition, government will soon have the Bank of Zambia 2012 Amendment Bill signed into law. We expect nothing but additional bureaucracies in the way business is conducted. When dollars from copper proceeds drop, as we now know they surely will, there will be a strong temptation from Government to set in motion exchange and import controls putting further pressure on smooth operations in agriculture and industry. Imports of agricultural and industry raw materials will become erratic putting a strain on production then more agricultural and industry jobs will be lost and government tax receipts from reduced agro-industrial production as well as from agro-industrial payroll taxes will also drop. In the meantime Government will still have this new burden of government payroll to fund.
Looking at all permutations available to government, there is just not enough money now and in the future to meet increased wages to MPs and civil servants as well as for anyone to help the poor unless government wants to destroy this economy by resorting to the printing press.
During Mr. Kenneth David Kaunda’s era, only civil servants and parastetal executives could afford new cars and live a local high standard of living – but KK lost his shirt in 1991.
It’s just a thought…….
I just hope the PF’ll use a little more imagination next time around…and the Finance Minister will come up with some solutions…
Silly me, like this’s ever gonna happen…