2008 Lessons

This is the last week of 2008 and as we proceed into 2009 it will be useful to take some lessons learned from this year as a basis for planning our future from here on.

Early in the year, as a carry over from the previous year, the Government decided to take affirmative action on the Mining Development Agreements (DA’s) in an effort to get the Mining industry to pay their fair share of taxes in the light of unprecedented high copper prices.

Although the case for Mining companies to pay higher taxes than those stipulated in their Development Agreements with the Government was legitimate, the risk of Zambia paying too much attention to the copper mining industry resulted in some mutation of the only too familiar ‘Dutch Disease’. In other words, we placed too much emphasis on the copper mining industry to be our economic rescue line out of poverty, and as the vehicle to propel our economy into prosperity. The copper price slump to below USD3,000 per ton has now brought some realities into our economic development planning strategies.

The Zambia Development Agency (ZDA) was practically launched in 2008 when the first Chief Executive Officer was put into office by Government. This decisive move allowed for a more focused dialogue with the private sector and Government, such that the agency positions itself as the prime mover for investment into Zambia. The various divisions of the ZDA were not completed operationalized by the end of the year, but 2009 promises to prod ZDA into more proactive work with the advent of the Multi Facility Economic Zones.

2008 saw some positive developments in the businesses sector where the primary activity of trading started to evolve with many large companies beginning to invest in factories, hotels and lodges, shopping malls, office blocks, and other real estate investments. This growing transformation was an indication that businesses have started to develop medium term faith in the stability of the economy and therefore look into other avenues of investment beyond trading.

Electricity availability was a major hurdle impeding the growth of the mining sector and the development of new factories. Several factories had to re-schedule their commencement of operations due to insufficient electrical power supply from the Zambia Electricity Supply Corporation (ZESCO). The year was characterized by continuous power outages, load shedding, and blackouts that forced many businesses to invest in energy hungry diesel generators while the general public had to contend with many nights of no electricity. Towards the end of the year ZESCO announced that it was securing a USD1.5 billion loan from the World Bank’s International Finance Corporation to build a new power station to be known as the Kafue Gorge Lower Power Station. This project is likely to take at least five years to complete after the contracts have been signed and pre construction work is completed. This is all on the assumption that we do not do anything to upset the World Bank, International Monetary Fund and other collaborating partners.

Zambia managed to attract several regional banks to invest in the financial sector in 2008 and by the year of this year at least four new banking licenses will have been issued or approved. The impact of more investors in the banking sector suggests that the private sector will have more options to choose from when looking for investment capital for their businesses. An increase in the number of banks in the financial sector also puts more aggressive competition within the banking sector and should result in improved banking services and products in the market.

The Citizens Economic Empowerment Commission (CEEC) was officially launched in 2008 when a Chief Executive Officer was employed and an operational premises and staff complement was inaugurated on Los Angeles Boulevard. The CEEC spent much of the year marketing its programs and activities but one hopes that in 2009 we should see more implementation work being carried out.

Half way through the year we noted that some investors from West Africa had decided to invest in Zambia in a fairly large way. Through this initiative we have seen a large cement investment totaling to USD400 million being developed in Lusaka with the eventual impact of bringing down the price of cement to the construction industry as well as to the region. Zambia could turn out to be the largest producer of cement in the region with a local impact of supporting and facilitating a construction boom in the country.

Zambia had started some work on the Economic Zones in 2007 and spent much of 2008 in various efforts to rationalize the development of the three initial zones namely Chambishi, Lusaka-Chalala, and Lusaka International Airport. Some focus was placed on attracting investors from abroad to build factories in these three zones with very little information being shared with local businesses on how domestic investors could benefit or invest in the Economic Zones. Hopefully, 2009 will see some significant changes to this marketing effort by targeting Zambians more aggressively.

Zambia pondered whether to belong to Southern African Development Community (SADC) or Common Market for East and Southern Africa (COMESA) during 2008 and was further pushed to consider the SADC Free Trade Area (FTA). Both regional grouping are looking to developing a Customs Union (CU) within a few years with COMESA aiming to operationalize its Customs Union by December 2008. The implications and impact to the Zambian economy in respect to FTA’s and CU’s was subject for much debate and dialogue during the year.

The European Union had persuaded Zambia to initial a pre Economic Partnership Agreement (EPA) document at the end of 2007 and the same manner of commitment to ongoing dialogue was agreed in 2008 by Zambia initialing another pre EPA document due to the fact that Zambia is not likely to sign the full EPA by the end of 2008.

In the second quarter of the year some rehabilitation work was started on the Zimba to Livingstone road which had deteriorated to an extent that the 80 kilometre stretch could be covered in no less than four hours by car or bus. These ongoing road works have not yet been completed by the end of the year with the onset of the rainy season. It still remains a road traveler’s nightmare.

Midway through 2008 Zambia suffered a national blow with the demise of the incumbent State President Levy Patrick Mwanawasa. Much uncertainty was introduced into the economy and the immediate effect was for the Kwacha to depreciate against the US Dollar. The subsequent run up to the Presidential By-Elections introduced even more uncertainty such that some investments were put on hold and the kwacha further depreciated.

The inauguration of President Rupiah Banda brought some stability to the country. The Banda Government remained significantly unchanged from the Mwanawasa Government and that sent good messages of confidence to the business community both at the domestic level and the international level.

In the last quarter of 2008 a new bridge over the Luapula River was completed and commissioned as the Levy P Mwanawasa Bridge. This life line crossing between Zambia and the Democratic Republic of Congo via the pedicle access road, cuts travel time to and from the Luapula Province by at least three hours.

The year saw the Global Financial Crises develop and eventually convert into a world recession and economic meltdown in many counties across the world. Major banks, mortgage companies, and insurance companies either ran aground or were speedily rescued by their Governments in an effort to ward of a snowball collapse of the financial systems of ‘strong’ economies.

The last few months of 2008 saw the Zambia State Insurance Company mutate into three separate business entities as a result of a re-engineering process that should see the state enterprise survive and thrive in years to come.

The significant major event of the last quarter of the year was the change of guard at the Ministry of Finance and National Planning. Mr N’gandu Peter Magande was replaced by Dr Musokotwane Situmbeko who is a seasoned civil servant with experiences that span the Bank of Zambia, the National Treasury, State House and the IMF.

What are the major lessons to be learned from 2008? The most important lesson is that Zambia must focus on developing economic activity across the various sectors. 2008 teaches us that we cannot become too complacent when copper prices are good. We must diversify and spread the burden or financing the economy as evenly as possible so that when there is a slump in one sector the other sectors will still hold the country up. Another big lesson is that competition brings down prices and improves quality of services or products. We must encourage competition pro actively for the benefit of our people. A special lesson from 2008 is that proper planning and commitment is essential. We have energy shortages due to poor planning and commitment. We have bad roads due to poor planning and commitment. We have mediocre tourism due to poor planning and commitment. We have a bad railway network due to poor planning and commitment. We have neglected coal resources which could be used for alternate energy, due to poor planning and commitment. We are grappling with the future of the Zambia Telecommunications Company (ZAMTEL) due to poor planning and commitment.

2009 looks encouraging and prosperous, if we work as a team towards developing the economy and opportunities for our people. The partnership starts with the Christmas and New Year’s celebrations where Government officers, business men and women, and the general public laugh, drink and merry make together in sincerity. We must take the season’s spirit into 2009 and into our board rooms and conference rooms so that together we build Zambia. Seasons greetings you all and a prosperous 2009!

Published 30th December, 2008

Basic Existence

Last week I chaperoned my 16 year old son to the Department of National Registration under the Ministry of Home Affairs to get his first ‘carry on person’ identity card namely; a National Registration Card or NRC.

In the process, I was advised at the National Registration Office on Dedan Kimathi Road that my own NRC was no longer useable and needed to be replaced with a new card that would have a more recent photograph as my existing card was one of those issued in the 1970’s and did not have all the new security features that are now standard on NRC’s.

I immediately left for the ‘Old Boma’ building near the Central Police Station where the records of my NRC are kept and was pleased to note that there were very few people standing in the queue. After a few minutes my turn came up and the woman responsible for checking my records in the Registry only took a few minutes to verify that my existing NRC was genuine and referred me to the cash office to pay my K3,100 NRC replacement fee. That exercise took less than 5 minutes and I went back to the Registry where the earlier woman immediately typed up my new replacement NRC. My wait in the Studio was longer due to the requirement that photographs are only taken in groups of four owing to the fact that the old Polaroid ‘Snap and Give’ camera’s in use place 4 photographs on one film card. Eventually when the required 4 applicants were assembled the photographer woman took my photograph, assembled the NRC for lamination, and a few minutes later I was out of the building with my hot new NRC.

There are some interesting perceptions to be made through the experience of replacing my NRC. The first was that the Registry appeared to be very well arranged and the woman working in the section was very familiar with the system and therefore worked very efficiently. The second observation was that none of the staff were distracted by phone calls on their landlines or mobile sets. They systematically worked towards moving the queue forward and dispensing whatever service was required to the public. The third issue worth noting was that the section seemed to be dominated by women with the exception of one man in the cashier’s office. I had made this observation about the prevalence of women in this section twice before, when assisting my brother and father with NRC replacements during the last 10 years.

Now that I was up to date with my credentials as the father of the 16 year old that was looking forward to having his first taste of unique basic existence as a Zambian and as an individual, we proceeded back to the Dedan Kimathi offices to go about the business of securing his NRC.

The staff at this office was more apt to respond to the public with a ‘wait in the corridor’ answer to enquiries, or to redirect a customer to another office without too much explanation. This could be because the staff are too overwhelmed with work and have to multitask in addition to responding to special cases.

I was pleased to note that one officer insisted that we resolve any issues in respect to the issuance of my son’s NRC. Where she needed higher authority, she referred us to that relevant office for action. We shuttled back and forth a couple to times owing to some mistakes in capturing data from the Record of Birth 16 years ago, and eventually found ourselves waiting once again in a Studio and hoping that we would soon make up the 4 customers that are required for the Studio staff to take the photographs. After 20 minutes the numbers added up to 4 and ‘click, click, click, click, ‘snap and give’ again. We soon walked out of the building with my son’s new NRC and he proudly and protectively placed it in his shirt pocket feeling very Zambian and looking forward to registering and voting in the 2011 General and Presidential Elections.

The experiences at the Department of National Registration indicated to me that the systems are in place, that the staff is knowledgeable about the work that they do, that the Department is not very well equipped, and that some basic Computerization would greatly assist in making the Department much more efficient and productive.

The NRC’s are typed on manual typewriters, while on the other hand the Birth Certificates are printed via a computer system. The photographs are taken with a film based camera which must be very expensive to maintain and run, but new Passports are being printed with imbedded digital photographs that require no film at all. The numerous searches and verifications are done manually and are prone to records not being in the right place thereby introducing delays and repeated follow up visits by the public, when a little computerization would make searches only a click away on the computer screen. The current system requires some dedicated and focused staff to deliver services to the public, but a more robust way of re-engineering the Department would be via simple and predictable systems that are process driven rather than discretion or personality influenced.

Since the NRC is the first piece of national identification for every Zambian or resident, it also becomes the most useful tracing mechanism for displaced people, unidentified corpses, various documentation, educational qualifications, tax references, family trees, bank references, and military – civil service and security history.

Many of our other references often refer to the NRC. The issuance of a passport is dependent on a NRC. The registration of a company requires that a NRC number must be quoted in the appropriate forms. The registration for taxation requires the NRC number to identify the tax payer. The submission of pension funds depends on the NRC as part of the account description. Insurance policies require the NRC number to be part of the insured’s identification details. The many licenses and permits issued by state institutions and private bodies demand the NRC number to be quoted on the various documents for proper identification of the holder.

It is my hope that the general public experiences a similar treatment to the one I experienced last Friday, or better. We must acknowledge however, that the population of the country is steadily growing. There will be need for purposeful investment in technology, re-engineering of systems, and continuous human resource development if we are to expect the Department of National Registration, or indeed any other Government institution, to deliver efficient and productive services to the public.

Seasons' greetings to all Zambians out there. The basic existence of an individual impacts on the basic existence of any company. If we can fix the fundamentals, then there will be hope for Credit References, improved Financial Services, Trade Credit Facilities, broader Tax collection, and much better planning at Government level and Local Governemnt level.

Published 23 December 2008

ZAMTEL Re-Loaded

Zambia and more specifically, the Ministry of Communications and Transport has been thinking about how to turn around the state communications company Zamtel, so that it can become efficient and competitive in the ICT sector where innovation, quality of service, efficiency, and cost of service are key survival elements.

Generally, Zambia has often swung from one extreme to the other when considering the future of state enterprises. During the privatization era we hurriedly sold off many state enterprises that if re-structured could have still been around and well today. But because of our haste, probably due to World Bank and International Monetary Fund pressure, we converted state owned companies that had purpose, into assets and properties to be broken down and sold in various auction yards. The other extreme was to hang on to some state enterprises through 'hail and high water' and at the tax payer's cost without making any meaningful efforts to improve the productivity of these bloated giants. Zamtel, ZESCO, ZSIC, NAPSA, are some of the few remaining state companies that require some strategic and researched re-engineering so that they can continue providing the core services for which they were created, in a more productive and efficient manner.

Recently, ZSIC went through an internally motivated and managed re-designing program such that the company is splitting into three clear units that have specific core goals. We hope to see three separate companies that will emerge out of the ZSIC unbundling that will focus on the three main activities currently occupied by ZISC which are namely; Short and Medium Term Business, Long Term Business, and Properties and Investments. This proactive and locally developed evolution process is likely to result in the three arms of ZSIC becoming more efficient, productive, competitive, profitable, and sustainable with time. Hopefully, this formula should steer the ZSIC companies away from the auction yard.

Zamtel has similar characteristics to ZSIC because one can clearly identify five core functions within the company. The basic telephone service offered by Zamtel has always been landlines across the city. Zamtel has installed landlines in all major cities and towns and many telephone exchanges have serviced the communication needs of both the business sector and residential areas. This sector of Zamtel's operations can easily be turned into a standalone company.

All international phone calls in Zambia are routed through the Mwembeshi Earth Station where two satellite dishes continuously pipe information and communications across the globe via the satellite array in orbit around the Earth. This multimillion dollar investment can also be parceled out and formed into a separate company that will primarily buy and sell international communications connectivity and bandwidth for internet use.

Zamtel On-line offers internet services to the public and is one of the four largest Internet Service Providers in the country. Again, Zamtel On-line is clearly a division within Zamtel that can run as a separate company.

Cell-Z has always run as a separate entity under Zamtel. This was done to introduce competitiveness in the Cell-Z operations so that the mobile phone service could compete favorably with the other two privately owned companies in Zambia.

The last distinct development in Zamtel is the Fibre network that is currently being laid to cover the line of rail from Livingstone to Chililabombwe. This 1,500 kilometre fibre backbone can easily be incorporated into a separate company much like the Mwembeshi Earth Station but for national connectivity. The prospect for providing high speed connectivity to businesses and Governemnt departments are quite wide and opens up some new profit centres for Zamtel.

It is quite clear that Zamtel has already split itself into clear service centres and now needs to follow up by physically separating the various entities into separate companies with possible partners from the private sector. Zamtel may need some foreign investment partner for the landline telephone service, but Mwembeshi Earth Station will probably do better to offer some shareholding to local mobile phone service providers and internet service providers who both need fast and reliable connectivity to the outside world. Zamtel On-line can operate quite productively and efficiently with its current profile. As soon as Zamtel On-line is weaned from the parent company Zamtel, it should adopt some new strategies for sustained operations and profitability that will ensure its continued operations for years to come. Cell-Z will have to up its quality of service so that it can compete with the other two players in the industry. Cell-Z will have to introduce a more solid service in respect to international SMS services and international roaming. Many mobile phone users often use two companies to cater for their everyday uses. Cell-Z for local calls and landline calls, and one of the other mobile services provides to give them efficient SMS services to and from outside Zambia. There is a target to install a total of 4,000 kilometres of Fibre cable throughout the country. Opportunities exist for local partners to take a stake in this development through partnerships with the Zamtel Fibre Back Bone entity.

Hopefully, Zamtel will get it right and strategize its commercialization and privatization such that the transformation will be in the best interests of Zambia and will result in more productive and efficient services to the public.

Published 16 December 2008

Cleaning Up

The nail biting four days from 30^th October to 2^nd November put a great pressure on all Zambians as we waited patiently and anxiously for the election results to trickle in and provide some facts on the direction that the poll would go in as far as our preferred Presidential candidate was concerned.

Every Zambian was on edge and considering what life will be like under the leadership of each of the prospective Presidents. As the results mounted and two Presidential candidates distanced themselves ahead of the pack running neck and neck, the back pair recognized that they were no longer in contention, but savored the experience as a worthwhile test run for the impending 2011 Presidential and Parliamentary elections.

Interestingly though, when the adrenaline started to run slower as each candidate realized that the Presidency was fast disappearing out of reach, the more nationalist thinking started to kick in with the consideration of which of the two front runners would be the preferred Head of State that would move the country forward towards prosperity. They became common Zambians, concerned as everybody else about the fate of the country.

The burden of national responsibility now rests on the shoulders of President Rupiah Banda, fourth President of the Republic of Zambia.

There is an old Wild West saying that goes; ‘don’t fix it if it ain’t broken’. President Rupiah Banda will do well to think about that saying as he moves into the driving seat of Mother Zambia. In addition, the nation is running slower and sometimes even in reverse in some key areas that need urgent and immediate attention.

The global energy crisis is hurting every nation of the world, but Zambia is taking an unnecessary beating to due to clear incompetence in the Ministry of Energy, the Energy Regulation Board, and the Zambia Electricity Supply Corporation Limited (ZESCO). These highly educated and schooled Zambians at the helm of these institutions do not seem to understand the phrase ‘Strategic Planning’, ‘Conflict of Interest’ or ‘Disaster Management’. It may be because of these simple issues that Zambia will continue to suffer power deficits, compromised business contracts for ZESCO, and extravagant costs for building new Power Stations that will choke our economy for generations to come. The option for developing Maamba Collieries into an alternate source for Zambia’s energy needs must be implemented and not continuously discussed and debated as the company accumulates more debt.

Zambia is looking to become food secure by growing enough food to feed our own people and much of the region. To this end, the endless discussions about the future of Nitrogen Chemicals of Zambia (NCZ) must come to an end and a sustainable plan for NCZ’s resurrection needs to be adopted and acted upon immediately. The nonsense of relying on foreign suppliers in favour of local production must be done away with, because food is serious business and cannot be left in the hands of some benevolent donor.

Our railway system is in a deplorable state. It is quite clear that the group that is currently running the operation is in no hurry to develop the national railway system and relieve our roads of the over loaded trucks that damage the highways throughout the year. As a result, Zambia spends billions of Kwacha on road maintenance that does not go towards building the country, but helps to keep the status quo. We cannot afford to continue spending on road maintenance when we should be doing road construction and expanding our road network. Some hard decisions will need to be made in respect to how we can get investment into the railway network that will serve the people of Zambia and not become an extortionist monopoly that may squeeze the nation dry. China and India have the world’s largest railway networks and therefore have much to offer to developing countries with the appropriate technologies to ensure sustainability and growth.

There has been much debate and talk about the International Gateway for phone service providers to offer cheaper international calls. It is in Zambia’s interests to explore the option of converting Mwembeshi Earth Station into a Public Private Partnership company through a shareholding structure that allows Government to keep an eye on the facility whilst allowing it to become more commercial and efficient in serving the people of Zambia. The IGW can then work for all communications providers thereby offering lower connectivity costs to the outside world for all Zambians irrespective of which network they use. The misimpression that Mwembeshi is obsolete must not be allowed to cloud our judgment. Mwembeshi may need upgrading but not replacement. Communications plays a vital role in economic development and therefore deserves to be given high priority by the new President.

Zambia has designated several sites across the country to be developed into Economic Zones as per various agreements with the Chinese Government, the Japanese Government and other parties. The details of these Zones appear to be a tightly guarded secret that is discussed in Government circles and shared with our collaborating partners, but not the Zambian Private Sector that are expected to participate in this initiative. The Zambia Development Agency (ZDA) has very little information to provide to Zambians on the options and opportunities in these Economic Zones, and yet our colleagues the Chinese, Malaysians and Indians are being solicited by their own Governments to invest in Zambia. There is no quarrel with attracting foreign investment into Zambia, but we must also inform our own people and offer them options for investment and joint ventures in these newly developed programs. The current status of the Economic Zones is so cloaked and shrouded that the ZDA does not even have a Director to oversee, monitor and evaluate the impact of these previously developed ideas under the Multi Facility Economic Zones chapter in the ZDA Act.

The Civil Service has been undergoing various transformational changes to become more service orientated to the public. Much of the current legislation that impacts on business is being upgraded to become more supportive and facilitative of private sector development. This monumental task is under way and needs to be kept going until the Civil Service truly becomes a Service to Zambians and recognizes that it exists to serve the people of Zambia, and not vice versa. This work requires political will from the highest office in order for the pace and motivation to be set for all the ranks to follow.

The immediate plague that besets any new leader in office is that of human vultures, hangers on, and every description of family and friends. This cadre of contacts usually does the Presidency more harm than good. The nation can only hope that the President of the day will be alert to this type of interaction and deal with the various issues with national interests at heart and at the top of his priorities.

It is said that ‘a new broom sweeps clean’. This suggests that when the broom ages it becomes less efficient and eventually fails to do the tasks that it was designed for. Zambia and our new President Rupiah Banda may want to argue that ‘a properly used broom always sweeps clean’. The future of this nation is now guided by the actions of President Rupiah Banda.

Published 11 November 2008

Presidents And CEO's

Last month was a marketing period for Presidential aspirants in Zambia that finally came to an end on polling day October 30.

Today we have a new Republican President marking the Fourth person to take that top office and place the weight of the country firmly on his shoulders.

The campaigns by all Presidential aspirants dutifully compared the work of a President to that of a Company Chief Executive Officer. Several candidates even referred to the country as Zambia Limited or Zambia PLC, to graphically illustrate the similarity between the two forms of leadership. Not many people will doubt that there is credence to this analogy although it must be acknowledged that the stakes are quite different and the challenges have their own special dynamics and character.

From an economic and business development perspective it may be worth focusing on the similarities rather than trying to extract a list of differences.

It came out quite clearly during the campaigns that all political parties and their Presidents want to see a more prosperous Zambia with educated, healthy, productive, and happy citizens across the nation. The programs, methods, mechanisms, and priorities differ from party to party but the human spirits look to the same goals.

As one considers the similarities even the various political party symbols and names seem to emanate some messages that are pro development and pro business.

One political party uses the boat as its symbol that can represent the vehicle to prosperity. Another political party uses the clock possibly to indicate that the time is now to make that journey to prosperity and we should not lose any more time as we travel forward. Yet another political party uses the open hand that seems to point the direction towards prosperity. A fourth political party focuses on Heritage as a national asset to capture our cultural and traditional African values in our quest for better lives, without which we erase our history, self worth, and identity. There definitely appears to be many synergies amongst the political players in Zambia that conclude on a set of programs dedicated to lifting the lives of all Zambians.

These political symbols and identities basically define the tools and resources to move Zambia forward in her people’s national agenda for socio economic development.

These parameters make common ground for Presidents and CEO’s to help take their countries or companies to new heights of development and prosperity for all.

In this regard one may equate the President of a country, or indeed the CEO of a company, to a Captain of a large row boat.

The Captain must initially select a crew of strong, healthy, focused and committed people to take on the arduous tough work of being oars (wo)men. In the case of the President this is the Cabinet and as for the CEO, this is his Management Team.

The Captain must Co-ordinate the oars (wo)men such that their rowing action is synchronized and timed perfectly in order to get maximum speed out of the boat. He does this by beating the drum with each stroke as he steers the course with the rudder. In this case the President must ensure that the Cabinet is working as a team and that he is part of the team. In addition, the President keeps the vision of the country in sight as he guides the Government towards set national goals. The CEO delegates and shares the burden of management with colleagues that must either deliver on the Board’s mandate or be replaced with more competent people.

The Captain will check with the weather and meteorological crew for signs of danger ahead, storms, wind changes, and any damage to the boat so that he can be equipped to take corrective action or evasive maneuvers in order to remain on course. A President however, must assess his Cabinet and many other factors continuously so as to be better informed about the quality of service that he provides to his country and people. Is the private sector really being consulted? What other options are there for public health and education? What new input can we generate to expand our manufacturing and mining sectors? Who are the players and stakeholders? Have we exhausted our Tourism potential? What do they think? A CEO demands management reports, sales figures, marketing trends, brain storming sessions, management meetings, departmental meetings, market polls, research and development teams, and many other mechanisms to be as educated and knowledgeable of his business and the sector, in order to make the most calculated decision that will be in the best interests of the company.

The Captain must constantly use land marks to reference his journey for errors in direction, resources, water and other key requisites. A President is compelled to refer to the National Constitution, the various Development Plans, the National Budget, Signed Agreements, the various Parliamentary Bills that are placed before him for assent, and the statutory bodies which include the Auditor General and the Accountant General to keep the country’s development agenda on course. A CEO embraces the Auditors Report, the Company’s Strategic Plans, and the various Board Resolutions to keep his company on the right track that will show profits for the shareholders at the end of the year.

The Captain mentors his crew during the storms and rough waters in an effort to keep the momentum going such that the boat journey does not stall. The Captain becomes the strength for the entire crew and vows to stay the course through thick and thin and his crew stands by him because the Captain is always the beacon of hope, the source of new inspiration, and the face of determination. A President is the rock of authority in his Government. He is the symbol of leadership for the nation. He is the measure of discipline in his administration. He is the passionate and humane father of the nation. A CEO is the benchmark for all staff. He is the bearer of company problems, the motivator for productivity, the disciple of systems and processes, and the flag bearer of the company.

Whether one is President of a country or CEO of a company the road ahead is tough, thankless, and has many challenges. There will be those on board or in the administration that are looking for short term gains or pleasures. There will be those that are keen to change the agenda and detract way from the national or company goals. There will be those that are impatient and cannot wait to get to the finish line. There will be those that enjoy the journey or being part of the administration just for the sake of being there.

Zambia is a very polarized country. Different levels of society want different things out of life. There are as many perceptions about the development of the economy as there are tribes. A President or CEO must take into account the realities on the ground. People’s perceptions are their own realities that must not be ignored. Short term, medium term and long term plans must be developed to accommodate the varying concerns of as many of the people as possible. Consultants come and go as they successfully complete their tasks in the public domain or in the corporate world. The national focus or corporate agenda must never be lost or put aside.

A President that listens to his people across the broad spectrum of citizenry offers the possibility of serving the greater interests of the country. Currently Zambia has great difficulty in paying attention to the plight of the street vendors, micro businesses, small businesses and the informal sector. Only selected sections of our economy have had their voices heard in Government corridors. Too often these voices have been from the corporates at the expense of the majority Zambians who are Small and Medium sized businesses.

A President that is a team player and does not profess to be the guru of every aspect of development recognizes that he is just another person that must be supported and strengthened to deal with the challenges of building an economy of a developing country. Such a President throws the various day to day pressures to his Cabinet for professional responses and advice. Where appropriate the private sector and civil society, are always at hand to input into national policy making that requires information from the wealth creators and general citizenry.

A President that will recognize and acknowledge that theft of public money is an attack on the people of Zambia is a true servant of the electorate. A President that will not tolerate corruption and mismanagement in the public sector will build on the stability of Zambia as an investment destination and will ensure that public resources are best employed towards uplifting the lives of all Zambians.

Above all, a President that puts his people first and plans for the security and livelihoods of future generations, is a President that serves his people. Our history shows that many short term gains have resulted in long term pain through unsustainable foreign debt that has plagued the lives of several generations.

The one clear similarity between Presidents and CEO’s is the basic fact that they both eventually are answerable to a higher and mightier body than themselves. The electorate and the Board of Directors will eventually purge a non performing President and CEO respectively. By the close of business today the USA will also be selecting their political CEO and President. The issues that are on the lips of every Zambian are also on the minds of each American that goes into the polling booth today. By January 2009, a new administration will be in place and hopefully it will bring with it a more stable political and economic world order.

Published 4 November 2008

Culture And Relationships

Zambia goes to the polls this month and many people on the streets are looking for the leader that will respond to their dreams and deliver us from poverty, hunger and disease.

There is an old proverb that states ‘The Mango does not fall far from the Mango tree’.

It can be interpreted as the son is just like his father, or the daughter is just like her mother. Further still, one can conclude that our leaders are a reflection of our people.

This understanding tells us that if corruption and short sightedness is the big issue in Zambia amongst our leaders, then corruption and shortsightedness is the big issue for all Zambians. This analysis is based on the fact that all our leaders come from within our communities and therefore corrupt leaders naturally will reflect corrupt communities.

People would like to do their best for their relatives and friends. They offer help and assistance where they can, and enjoy being referred to as the benevolent relative or friend in social circles. Part of this way of life comes from our African cultures of ‘do what you can for your friend, neighbor, and relative, so that in turn they can return the compliment during your time of need’. This idea is supported by our focus on funerals. We generally will attend almost any funeral house, especially when we are middle aged, because we recognize that soon we will the one in the coffin and would like others to attend our own funeral to wave us ‘bon voyage’ to the hereafter. Our relationships are also much broader than in the Western sense, because cousins are referred to as additional brothers and sisters, maternal aunts are looked at as additional mothers, and fraternal uncles are considered as additional fathers.

There are many good reasons for these cultural connections and relationships that assist to maintain a civilized society where human beings are central to communal development. As a result, Zambia has very few Old People’s Homes because the broader family is still available to take care of the elderly at home. Children are relocated from the biological parent’s home to an uncle’s or aunt’s home to grow through puberty in recognition that a more understanding yet firm hand will be exercised by the head of the household in guiding our children through this confusing and often very difficult time. Elders mediate domestic and community conflicts. They address misunderstandings between couples when the need arises. These are considered a noble and revered basic service and duty to the community, unlike in Western cities where one has to find the resources to visit a paid Counselor or Therapist.

In the business world and in national politics however, there is a compelling argument for certain aspects of culture and relationships to be kept out of the development process if the company or country is to move steadily ahead and prosper for the benefit of all.

We have all experienced the agony of employing friends and relatives that do not qualify for the job in our own businesses. We have also experienced the pressure that we are subjected to by the high expectations of these friends and relatives who want to be paid handsomely purely because they are related to us in one way or another. No doubt, we have all paid the price of these careless decisions.

The Zambia Electricity Supply Corporation (ZESCO) is a public company that has suffered its fair share of the effects of relationships. The relationship between the Chief Executive and the company that represents ZESCO’s largest customer would not receive any Corporate Governance approval if subjected to the opinion of business strategists. The relationship between ZESCO and a consulting firm on energy related matters including price hikes, that finally turns out to be connected to a new energy buyer to supply power to the North Western Province, brings out some aspects of integrity, conflict of interest, and issues of national interest in the contracts that ZESCO may sign.

We have witnessed the difficulties in appreciating the value of signing Economic Partnership Agreements (EPA’s) with the European Union (EU). But on the other hand, we have noted that some interim documents have been signed on the basis that not signing would lead to certain barriers being put in place to block Zambian exports to the EU. This is a prospect that Zambia cannot ignore.

The World Bank (WB) has clearly indicated that it can only lend money to Zambia to build a new Power Station at Kafue Gorge if a Feasibility Study paid for by Zambia is carried out by the International Finance Corporation (IFC) a sister organization to the World Bank. The value of the Feasibility Study will not be to support Zambia’s quest to find any other financier except the World Bank, because the Study will be seen to be biased towards the World Bank’s views.

We have experienced over the years how ‘Donor’ projects and programs have derailed local development initiatives because of our focus on the funding that accompanies these ‘Donor’ initiatives.

Zambia currently experiences difficulties in private sector consensus on economic development issues and several other pro private sector programs, simply because we now have two umbrella organizations representing the private sector. The Zambia Association for Chambers of Commerce and Industry (ZACCI) and the Zambia Business Forum (ZBF) both endeavor to represent the private sector at Government level and at various international and regional forums that engage Zambia with outside collaborating partners. The voice of the private sector is now fragmented and there appears to be no unity of purpose and representation when tackling important economic development issues. The donor in some way has put a ‘jackal in the hen house’ to cause confusion and distract the national agenda from one of development, to one of turf protection and empire building. The eventual losers are the members of the two organizations who are predominantly Zambian, while the mess maker moves on to another country.

Business and economic growth is very sensitive to the implications of Culture and Relationships in a given society. We have seen that in Asia, people are prepared to work long hours to make a living and in turn develop their economies very rapidly. In Europe, the social security mechanisms protect the workers at the cost of higher taxes for all. In the USA, workers can be laid off for not reporting for work for a couple of days without an acceptable reason. In the above examples the work culture is designed around the resources that the particular nation has at its disposal. In Europe, if a leader is tainted with the suggestion of a scandal, that leader will immediately resign his or her post to protect the integrity of the institution. In the USA on the other hand, leaders tend to use the courts of law to determine whether they are right or wrong and leave very little to morality and ethics. In Asia and Africa, there is a tendency to wait for the Head of State to make the final decision irrespective of whether it is right or wrong, immoral or unethical.

The scenario in Zambia is one of discretion and gut feel. A leader can decide against good democratic and governance principles to make place for a friend or relative in the Political Party, Government system, or indeed in a State Enterprise.

Leaders market themselves as individual political and economic acrobats that can resurrect a country from poverty to prosperity. In the background the Civil Servants just smile and standby for the new blunders to be made.

Zambia must look inwards to her own people and cleanse and purge the nation of the negative impacts of Culture, the destructive tendencies of compromised private Relationships, the damaging consequences of abdicating our development agenda to ‘Donors’ and ‘Collaborating Partners’, and generally selling the nations assets to a few privileged few at the expense of future generations to come.

The International Standards Organization (ISO) is currently struggling with definitions and mechanisms to mainstream Social Responsibility across the social and economic spectrum of all societies. The future and prosperity of our countries may in a small way be influenced by our top leadership, but the major contribution comes from every single Zambian out there that must actively challenge the processes that affect our lives and hold every public official and ourselves accountable to the nation.

Published 14 October 2008

Fuel For Growth

Fuel prices have edged downwards over the last few days as the prices of oil come down from an all time high of around USD150 per barrel to a new price in the USD90 per barrel price range.

Of course, the Oil Marketing Companies (OMC’s) seldom bring prices down even when the oil prices go down, but the Government or the Energy Regulation Board (ERB) usually have to intervene to protect the interests of the consumers from the monopolistic fuel pricing mechanism.

The demand for oil based fuels is rising every day and the commodity is quickly being depleted wherever it is found. The logical conclusion is that fuel prices are going to continue to rise for the foreseeable future, until an alternative energy source is found, or new technologies are developed that are not reliant on oil fuels.

It is safe to say that in Zambia we expect fuel prices to go up, and stay up, during at least the next twenty years.

Besides producer prices escalating, what other issues are there affecting oil based fuels, that we may need to consider?

The cost of fuel is impacted by our tax regime which places 40% tax on all imported fuels. This makes our fuel prices one of the highest in the region. The prospect of bringing the taxes down on fuel is rather slim as this is a cash cow for Government revenues. We must be able to offer a compelling argument that would convince Government to reduce the taxes and make up the revenue shortfall from some other revenue generating mechanisms. The simple notion that a reduction in taxes on fuel will lead to more production, thereby generating more business turnover, thus resulting in more taxes being collected in the medium term, is flawed if cheaper fuel leads to higher consumption for leisure and unproductive activities. A well thought out strategy must be developed that convincingly offers a very high probability of success. The strategy would necessarily encompass widening the tax net across all economic activity which is a difficult program to implement considering the poverty levels, un-employment levels, and the vulnerable status of most small to medium enterprises.

Statistics show that the bulk of our fuel consumption is in the Transport Sector which gobbles up 53 percent of imports, followed by the Mining Sector that consumes 27 percent.

A just argument therefore exists for re-designing our Transport and Mining fuel usage, taking into account the current demands, and the future requirements for the next 20 years.

An obvious option is to invest in the Railway Network by rehabilitating the existing lines and expanding the network to major import and export ports at the relevant borders. This upgrade to the Railway Network will remove the necessity for large trucks to transport goods across the country, and in the process, destroying our fragile road network as they currently do today. In addition, many travellers will have the option of travelling by train to major centres around the country, after which they can use various buses to get to the specific locations required. The passenger bus business will continue to grow due to the fact that trains are much slower, they do not make several trips a day to all locations, and the rail network does not cover all cities and towns. The pulling capacity of one train is equivalent to at least 150 large 30 ton trucks and yet the locomotive engine consumes the fuel used by 5 truck engines. The mathematics naturally tells us that the fuel consumption ratio per ton is about 30 times cheaper by train than by trucks. The 53 percent fuel usage could therefore be reduced to around 15 percent, when we consider that cars, light trucks and buses will continue to operate as they currently do, and the numbers will increase over time.

At some point in the future the usage of fuel in our trains could be brought down to zero if we get our electricity generation capacity up to par and electrify our Railway Network.

The Mining industry and other manufacturing processes can be re-focused on another fossil fuel namely; Coal. Zambia has vast reserves of Coal at Maamba and this form of fuel should be our strategic energy advantage. Most of China’s electricity is generated through Coal fired power stations. Much of China’s industry is fuelled by Coal. The Mining industry and other industries can turn to Coal for a sustainable and predictable supply of fuel for their furnaces. The pricing of Coal will be much more stable than oil fuels, and the availability is not only domestic, but also easily accessible along the line of rail.

In addition, the various options for Bio Fuels are available to Zambia. Jatropha and other crops can be grown everywhere in Zambia such that the possibility of small community fuel refineries can be set up to service the local needs of the farmers, businesses and other domestic fuel requirements. This will go a long way towards eliminating Charcoal Burning in the country side that is responsible for environmental degradation in developing countries. The culture of agriculture will be entrenched in all the rural areas thereby leading to national food security and the elimination of hunger.

It may be useful to take a close look at what is happening in the region in respect to fuel pricing strategies. In Zambia we have traditionally kept our petrol at high prices because we argue that petrol is generally consumed by cars for leisure. We have tried to keep the prices of diesel lower than that of petrol on the understanding that diesel is an industrial, commercial, and agriculture fuel that drives the economy. In other neighbouring countries, it is considered that commercial, and industrial activity is profitable thus demanding a higher price for diesel over petrol. It is understood that high petrol prices hurt the consumer whilst higher diesel prices can be borne by businesses. A special distinction is made between the price of diesel for trade and commerce, and the lower price of diesel for agriculture uses. The agriculture diesel is often referred to as Agriculture Fuel for tractors, water pumps, etc. This option for fuel pricing may be useful to consider for Zambia.

In many Asian countries a deliberate effort is made to keep fuel consumption rates as low as possible to reduce the fuel import bill where possible. As such, very low customs duties are levied on motor vehicles that are 1300cc or lower as an incentive to motivate the public to buy and use small cars in their daily lives. The larger engine capacity vehicles attract much higher customs duties, whilst the commercial and industrial vehicles are levied a more reasonable duty rate that encourages investment in the development of industry. This mechanism works towards reducing the fuel consumption for pleasure and leisure activities, but does not compromise the need for heavy vehicles, equipment, and machinery to support economic activity.

There are many discussions that focus on the possibility of Zambia procuring its oil stock from Angola for refining at Indeni Oil Refinery. Too often, the easy answer is that we are not sure of the composition and quality of the Angolan oil, and its suitability to be processed by the Indeni Plant.

When will we stop speculating and do some proper research to clearly identify the suitability of the Angolan oil? Shall we continue to guess on this option or shall we invest in data and information to make the right choices for Zambia? The Angolan crude oil option offers the closest source of oil to Zambia. Initiatives are already underway to rehabilitate and reconstruct the derelict Banguela Railway line that runs from Angola’s Lobito Bay to Zambia’s North Western Province. Local investment is being channelled to building the North Western Railway link that will connect Chingola to the Banguela Railway line. Railway tankers can therefore transport the crude oil from Angola to Indeni in the medium term, and later, a pipeline such as Tazama can be laid between the oil storage farms in Angola and Indeni.

The challenge at Indeni Oil Refinery is to first rehabilitate the plant so that it can process the one million litres design capacity, instead of the current 600,000 litres that is considered maximum. The Tazama oil pipeline can transport over one million litres of feed stock to Indeni to keep the refinery operational continuously. The second challenge at Indeni is to research and asses the upgrade work and investment that will be required to refine Angolan crude oil, if at all possible or feasible. The motivating reason for considering Angolan crude oil is that it will be no more expensive than other suppliers, but the proximity to Zambia will cut down on the transportation costs, thereby making the landed cost of feedstock at Indeni much cheaper than is the current scenario.

In order for Zambia to be stable in fuel supply and to avoid expensive costs of procuring oil feed stocks, refined fuels, and the associated cost of short term finance, we must constantly do ‘Fuel Demand Forecasts’ for the nation. These forecasts will compel us to invest in strategic reserves of both oil feed stocks and refined fuels for periods that will allow the refinery to shut down for maintenance or repairs, without causing massive upheavals in the economy. It is imperative for Zambia to plan for her fuel needs to support and facilitate smooth and sustainable economic growth.

Published 7 October 2008