Chikwanda Warns On Economy

Former finance minister Alexander Chikwanda says there are indisputably severe or acute challenges in the economy but nothing is insurmountable.

He notes there is an aura of despondency about the economy inexorably downward spiralling, almost on the verge of collapse.

In a writing titled: ‘Getting the act together is an inescapable imperative of sustainable upward thrust’, Chikwanda says a radical departure from expensive government patronage is good for any economy.

“There are a host of useful activities in the economy. Fortunately, the activities are private sector driven. A radical departure from expensive government patronage is good for any economy. My hope, not at all pious, is that Zambia has many entrepreneurs including our most diligent women,” he states. “The regrettable downside issue is just lack of logistical support for our enterprising folk – there are no support financial institutions with reasonable priced money. The bottom line is that the immense difficulties that we face will be rendered easier to overcome if we all pool our efforts. There will be no easy solutions such as some of our prominent citizens showing their beautiful faces to the outside world and money starts rolling into Zambia with amazing rapidity and ease. Such ideas are naivety par excellence and are only forgivable because most of us Zambians have this trait of seeking refuge in fantasy. Behavioural scientists would have a remarkable field day accounting for our exceptionally rich fantasy complex.”

Chikwanda states that Zambia is “our individual and collective” responsibility.

“We should never outsource this responsibility even to the most benevolent fairy gods, also known as donors! We must do the right things to arrest the slide in the economy with due expedition. The ugly reality of life is that just as progress has useful multiplier effects, regression also has exponential propensities. De-escalating the rot is the only viable script for survival!” he states.

However, Chikwanda argues that there are still significant prospects for overcoming the current reverses “but a bit more seriousness and purposefulness are needed.

“We also require a bit of help from nature in the form of a good rain season taking care of both the amounts of rainfall and appropriate distribution for the duration of the season, particularly at the pollination stage of crops like maize when moisture is needed to sustain the formation of seed on the cobs,” he states. “One of the current vexing challenges is the volatility in the kwacha parity or exchange rate which is essentially the price of our currency in terms of other currencies. Exchange rates have a series of ramifications, one of the most damaging facets being inflationary spirals which result from ever downward trends in the currency – there is, of course, need to guard against exchange overvalue. Some short-term remedies are adjustments in various monetary tools such as policy rates and reserve ratios which can contain speculation by over-liquid banks. However, these measures cannot deal with currency weakening that is a function of demand and supply disequilibrium. In these circumstances, greater government fiscal tightening can help. As a country, we need import rationalisation and export diversification.”

Chikwanda states that Zambia had started doing well on that front when non-mineral exports, the so-called non-traditional exports, peaked at 30 per cent of total export earnings.

“But there has been a slide since then. This leaves copper still as the main exchange earner,” he notes. “Mining companies in the past year have reduced instead of ramping up production, partly as a result of misperception in the policy sphere more so as it relates to taxation. This is a matter of profound regret because copper prices have now shot beyond $6,000 per tonne after a series of lows. Copper stocks as captured by the London Metal Exchange (LME) are reducing quite significantly and there are no greenfield ventures in the offing. It may be expedient to look at a measured mining policy review to foster a win-win scenario for both government and the mining sector.”

Chikwanda states that Zambia was still an acceptable investment destination.

“We still remain the only credible country in the Sub-Saharan Africa without crude exchange controls, investors need free movement of capital. For a long time, mining will remain an anchor of the economy. We haven’t even touched the over one billion tonnes of iron ore in Mumbwa which at 70 per cent Fe (iron) content is the richest deposit in the world,” stated Chikwanda. “Mining, contrary to popular perception in Zambia, is not a glamourous jolly ride. There is a compelling need to send correct and hopeful signals to the current and future investors in the mining sector.”

Source: The Mast