Last week, the news that hit the financial markets was the devaluation of the Chinese Yuan Renminbi (CNY). The Chinese currency can be devalued to such levels and they can afford it. The reason they can afford it is simple, they import very little and export a lot. They export because they have a formula for manufacturing at a cheap rate, goods that are required by the world population to get by on a daily basis. China makes all the goods that are required for a man’s basic needs and they do so cheaply, this is the reason they can afford to devalue their currency. The basic function there is simple, devalue and make your goods cheaper and competitive.
Coming back home, we do not have any industrial development policy. The PF government is not aware of the value of manufacturing to our economy. We import everything because of the structure of our economy that cannot support manufacturing. The interest rates are prohibitive. When one wants to borrow to manufacture, within 5 years that company would have paid twice what it borrowed. This is just the cost of money. This cost does not begin to address the cost of production related to fuels and electricity. In addition to that we have load shedding that is crippling industry. How do we possibly believe that we will address manufacturing with the fore bearing?
The current leadership does not have what it takes to address this very crucial sector of the economy. Let me give you an example. If we made cornflakes from the so called maize bumper harvests since 2006, we would cut out importation of cornflakes significantly. When we import cornflakes we create one job; in retail. If we made cornflakes, we would create five (5) jobs; How? The producer of the product, the farmer, would have a job; the second job is the transporter of the commodity to the manufacturer; third job would be the manufacturer; fourth job would be the person who transports the manufactured cornflakes to the retailer; the fifth job would be the retailer. Some will argue that there are transporters in the chain even when we import, I agree, but watch the number plates of the transporters, if it’s from South Africa we are getting the imports, then the transporter will bear the GP plates. The above illustration has just showed us how we are pointing in the wrong direction for employment creation.
Ladies and gentlemen, the challenge that PF faces at the moment is that it cannot think straight. They came on a platform of appeasement. They want to appease their voters at the expense of the economy. Zambians are hardworking, that is not debatable. After this load shedding business was introduced, the young men who make gates along Alick Nkhata Road in Lusaka near Kalingalinga, have resorted to working odd hours to meet their business obligations. They start work at 16 hours and knock off at 22 hours or later. You would imagine the security risk it poses for them and their families to work outside because of load shedding arising from poor planning by the Government. But these are the people that have to compete with cheap imports from China and other countries that have got the export formula right. And Government will not do anything about it.
As I mentioned in my opening, the prohibitive interest rates are strangling manufacturing. The reason the interest rates are going up is very simple, Government has a large debt foot print, they are borrowing heavily such that money supply is becoming a problem. Even when they say they will stop borrowing internally and go external, this provides a little, very little relief to the domestic market. How? They will still come and borrow to pay back the external loans that they cannot afford to default. PF have borrowed to pay salaries and recurrent expenditure. They will therefore not generate any new revenues because those sectors are consumption sectors. How do they then create new revenue streams?
The lack of an industrial policy or better still lack of implementation modalities arise from lack of political will by those in charge. Zambia is said to be the most surveyed country. But those surveys do not add up to anything because the recommendations are not implemented. Once we fix the resourcing, the next thing is to have legislation that favours the Zambian manufacturer. We have a ZDA Act that says that for one to invest in the economic zones, they must have a minimum investment of US$500,000. This is the reason we have big companies targeting the economic zones, because we have crowded out our own small and medium scale enterprises. A UPND led Government will amend such legislation immediately upon taking over the reigns of Government.
The cost of production is also prohibitive as I mentioned earlier. Our fuel is some of the highest in cost per liter, in the region. Our electricity tariffs (when electricity is available) are high. This makes our goods very expensive to produce.
Ladies and gentlemen, no matter how much we devalue our kwacha, we are not going to benefit anything, it will just make our already expensive imports, more expensive. A car that was US$1,000 in 2011 was ZMW4,900 in kwacha, it is now ZMW7,800, that is a 59.2% increase in price in just 4 years. This does not take into account the rise in transportation costs, the rise in running costs of that vehicle, because all service parts and consumables are imported.
Let me end by saying this. As long as Zambia continues being an import based economy, it is likely to remain a struggling economy. There are a lot of products that Zambia can manufacture locally that we are currently importing. These range from basic commodities to sophisticated equipment that we can manufacture here or at the very least manufacture components of them. For instance why are we importing brake pads, when the men at Bauleni market can bond brakes at 20% the cost of new brake pads? Let me leave you with that question.
Hakainde Hichilema
Together, we can
Back to basics. Good analysis Mr President. But I guess the proof is the pudding. implementation is the key. Thats why we need a levy,Magande etc type of mgt team.
There is too much politicking in HH’s articles. Yes the issue of manufacturing is true the way you have out it. But to blame PF govt for people’s failure to take up business opportunities is politicking.
The problem here and in many other African countries is lack of business skills. People can contribute own resources and start business. Always talking about lending rates is like playing a scratched record. There are many ways to kill a rat and if UPND things the solution is just banks lending out cash, then we would end up exactly where we came from.
HH as a businessman himself did not start with banks. It can only make sense if banks were in charity, but sorry they are in business. SOLUTION TO ME IS TO IMPART PRACTICAL BUSINESS SKILLS. THE CURRENT ONE IS ACADEMIC AS EVEN THE PEOPLE TEACHING OTHERS DO NOT UNDERSTAND BUSINESS HENCE ENDING UP BEING TEACHERS AND DEPEND ON SALARIES.
Then HH should not forget the influence developed countries play in Africa. If you stick your head too much out, they push it back or chop it off. Does HH believe all leaders and senior govt employees in sub-saharan Africa are ignorant? I leave you with that question.
Copycats can never manage simple solutions because they are too forgetful. H.H., Please stick to the formula once given chance. Borrowers are sleepless while lenders are investing. I end here.
Zambians please let us prepare ourselves and vote for Hakainde Hichilema in 2016 general elections. His vision for this country will help many to rise above poverty line. Vote HH, vote UPND.
You are so right, if only Zambians would open their eyes and brain, then the economy would change for the better forever. HH is that type of leader who can change the direction of Zambian economy for the better.
I would also never vote for any chancer. Presidential candidates must clearly tell us what policies they are going to implement before I can even consider them.
HH, your political opponents in the PF could borrow something from this simple but very tangible and practical analysis. They called you Under 5 or calculator boy instead of just admitting that you were capable.
Zambia needs leaders who understand the workings of the economy so that tricky (and risky averse civil servants – advisors and those implementing policy) do not derail the President’s vision.
Zambians should watch Obama on Youtube and they will see why the majority voters in the US (whites) voted for him twice. Obama is able to discuss the economy and any issues affecting his country, USA, off the cuff. Obama understands the issues and as such no public servant can derail his plans.
Obama will not shy away from a public debate with other aspiring candidates from the opposition because he is very clear of the vision his party has for his country.
Even Republican intellectuals respect him. It is only a few hardcore tea-party conservatives with racist motives who oppose Obama without offering alternatives.
One could say the same for some of HH’s critics are motivated by tribal inclinations especially in recent times when the ugly head of tribalism has reared to the surface. Might I add, since 2011? Come on Edith Nawakwi,Milupi, Dr Mutesa and others, you are also more than capable.
In Zambia our ruling party Presidents shy away from public debates!! They are very lucky to have a voting population which does not punish them for such behaviour. I, for one, would never risk my vote for a leader who refuses to publicly defend his vision for my future. But, people like me are very few and our candidates continue to lose elections despite coming out publicly to explain to the population what their vision is and instead the majority of voters prefer candidates who fear to debate publicly with other contestants. It is not only the current Head of State who shied away from a debate with other contestants in January 2015 by-elections. Stranger than fiction but true.