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