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