The 2010 FIFA World cup event in South Africa is now 12 months away. Zambia has not done much to take advantage of the looming masses of visitors that are destined for Southern Africa starting early in the World Cup year.
There are clear signals that many competing countries will want to visit the continent long before the actual event as part of the preparations to acclimatize the players to the African climate. At the same time, many teams will want to keep their strategies a secret only to be unleashed at the actual tournament. To this end, it is expected that many competing countries will look for secluded training camps well out of sight, in neighbouring counties which include Zambia. The opportunity for Zambia to receive this unsolicited tourism business must not be missed.
The country currently finds itself without a local airline that can facilitate a high frequency of travel between Zambia and South Africa, and Zambia and Europe, to mop up some new business in 2010.
However, there will be plenty of opportunity for foreign airlines to camp in Zambia, as the airports in South Africa are likely to get congested with aircraft which will be forced to relocate for parking spaces in neighbouring countries. Zambia can quickly start to negotiate options for foreign airlines to park in Lusaka, Ndola, Mfuwe, and Livingstone in an effort to ease the congestion in South Africa and more importantly, to bring in and take back the much needed tourists that the World Cup will bring to the continent.
Zambia has witnessed the development of many hotels and lodges across the country. Unique experiences are available for any visitor to the country, and the fact that Zambia has always marketed herself as a peaceful country with very friendly people, will go a long way in polarising visitors to South Africa to consider their welfare and safety in Zambia, compared to South Africa and other neighbouring countries. There is a good business case for Zambia to engage with the opportunities that the 2010 World Cup presents to fast track both the development of the tourism industry, and the attraction of Foreign Direct Investment.
There is an old business rule that highlights that; ‘it is more difficult to attract a new customer, than to keep an old customer’. Zambia can definitely make it easier for World Cup visitors to visit the Victoria Falls, the Luangwa Valley, the Kafue National Park, and the Copperbelt, and make that first trip to Zambia. Repeat visits are almost guaranteed, and new tourists generated by the experiences of World Cup visitors to Zambia will increase the sustained flow of tourists to our national parks and resorts.
Back in South Africa, residents and investors in the hospitality industry have already gone into high gear by sourcing for camping equipment and tents in an effort to benefit from visitors that will look for cheap accommodation in people’s back yards and camp sites in 2010. The South African Government has invested in expanding their International Airports, Transport systems, and Stadia, but the private sector has taken the lead in developing more accommodation, services, restaurants, and other facilities that will support the large number of visitors to the country.
South Africa looks to the 2010 World Cup to put itself prominently on the tourism map of the world, and expects the private sector to create wealth and jobs on the foundation of an influx of visitors into the country. It is not too late, a 2010 Team can be put together to coordinate and program the options for linking Zambia to the 2010 World Cup in South Africa.
Published 26th May, 2009
Tuesday, May 26, 2009
Tuesday, May 19, 2009
Land and Property
The Government and the Business community have been working together to develop a conducive environment for doing business in Zambia.
Some quarters of Central and Local Government have been very extravagant in allocating land to all description of investors, be it to local or foreign businesses. Huge tracts of land have been given out to people and businesses that have sat on these properties only to re-sell years later at astronomical prices, while local residents cannot access land for domestic and small scale development.
One therefore understands the current concern about the allocation of large portions of land to any investors.
A drive along the shores of Lake Kariba from Siavonga right down beyond Maamba, reveals that big chunks of land have been given to people outside the local communities. Many of these pieces of land have not seen a single piece of development in the form of buildings or any other infrastructure beyond a simple barbed wire perimeter fence. As the middle class grows in the country, no opportunities are available for one to build a holiday home or some small business premises along the lake as an investment in the tourism potential that exists in the country.
Some sensible planning initiative would have considered creating thousands of small plots along the lake shore with an all weather road that would facilitate development by both Zambians and foreign investors. This idea is not new and can be seen all over the world on lake shores, river banks, and coast lines. The immediate result of this equitable distribution of land is that economic activity is initiated when many people move in to build and develop as opposed to the ‘big investor’ syndrome that Africa and Zambia seem to suffer from. ZESCO would be able to make a business case for extension of the national grid to the developments in Siavonga and beyond. In addition, the ever growing transport services system would expand to enable every Zambian to travel to the area at a reasonable cost.
There is much to be said about planning for the future, and for our future generations, when land allocation and town and country planning is properly strategized.
The aggression and phobias currently growing in many developing countries can be avoided if citizens and residents can trust the authorities to protect the public interests, in as far as land allocation is concerned.
The view that land is vested in the State President on behalf of the people of Zambia is comforting, but the reality is that our 99 year leases from the Ministry of Lands are renewable, therefore in effect, alienating the land permanently to the lessee. For the sake of security of investment, this practical reality encourages investments into the country, and facilitates the placement of blocks and concrete on the ground.
Many of the problems associated with land allocation and use are generally caused by our own people in Local Government, in Central Government, and by all the shapes and sizes of Politicians. The challenge is to do some domestic housekeeping by ensuring that strategic land planning is engaged, processes and systems are strictly followed, and the removal of discretion on land allocation is immediately instituted.
Land is but one component in the investment and socio-economic development paradigm. The flip side of the coin is the issue of Property.
Property in respect to land includes the developments made on the land which constitutes buildings, machinery, and roads, amongst many other investments.
In Zambia, we have not clearly separated Land and Property, probably because in the recent past, a piece of land had developments that were exclusively attached to that piece of land. For example, a plot would have a house built on it and the two components were inextricably connected to each other.
However, today since the Privatisation Program, we have seen blocks of Flats and Apartments built on one piece of Land being sold to sitting tenants of each Flat. This meant that the Land title would be held by the group of twenty or thirty Flat owners who each held a Title Deed for their own individual Flats. Ironically, some Flat owners owned units on the third or fourth floor thus in effect suggesting that their property was actually suspended in the air! This makes it difficult for any kind of meaningful sub-division of the land, as property owners above the ground would not be able to claim a piece of land.
One of the answers to this dilemma is to provide for Sectional Title of property such as for Flats and Apartments on a common piece of Land. A cursory look at hundreds of cities around the world show how this is done in major office and residence blocks.
Our immediate refocus now is to recognise Land ownership as per the traditional Title Deed, but to also rapidly incorporate Property ownership which now becomes the twin sister of Land, and their relationship becomes both inclusive and exclusive, depending on the circumstances.
We note these developments in our various Show Grounds around the country, where the developments on land are owned by individual companies, whereas the Land is owned by the show society in question. Some new business initiatives include the development of Multi Facility Economic Zones (MFEZ’s) and other Economic Zones that are likely to follow this blue print of Property ownership alongside Land ownership.
These developments will challenge our banking and financial sectors to redraw their description of tradable and tangible assets to support loan processing and other business development financial services.
Interestingly, our current practice is to consider bare Land which has a Title deed as insufficient collateral in business transactions, while on the other hand, Property developments on land which in the case of a block of Flats has no Title deed, is looked at as sufficient security.
The dialogue on Land and Property deserves more attention such that this important issue is targeted towards the overall social and economic development of Zambians and the 752,000 square kilometres that make up Zambia.
Published 19th May, 2009
Some quarters of Central and Local Government have been very extravagant in allocating land to all description of investors, be it to local or foreign businesses. Huge tracts of land have been given out to people and businesses that have sat on these properties only to re-sell years later at astronomical prices, while local residents cannot access land for domestic and small scale development.
One therefore understands the current concern about the allocation of large portions of land to any investors.
A drive along the shores of Lake Kariba from Siavonga right down beyond Maamba, reveals that big chunks of land have been given to people outside the local communities. Many of these pieces of land have not seen a single piece of development in the form of buildings or any other infrastructure beyond a simple barbed wire perimeter fence. As the middle class grows in the country, no opportunities are available for one to build a holiday home or some small business premises along the lake as an investment in the tourism potential that exists in the country.
Some sensible planning initiative would have considered creating thousands of small plots along the lake shore with an all weather road that would facilitate development by both Zambians and foreign investors. This idea is not new and can be seen all over the world on lake shores, river banks, and coast lines. The immediate result of this equitable distribution of land is that economic activity is initiated when many people move in to build and develop as opposed to the ‘big investor’ syndrome that Africa and Zambia seem to suffer from. ZESCO would be able to make a business case for extension of the national grid to the developments in Siavonga and beyond. In addition, the ever growing transport services system would expand to enable every Zambian to travel to the area at a reasonable cost.
There is much to be said about planning for the future, and for our future generations, when land allocation and town and country planning is properly strategized.
The aggression and phobias currently growing in many developing countries can be avoided if citizens and residents can trust the authorities to protect the public interests, in as far as land allocation is concerned.
The view that land is vested in the State President on behalf of the people of Zambia is comforting, but the reality is that our 99 year leases from the Ministry of Lands are renewable, therefore in effect, alienating the land permanently to the lessee. For the sake of security of investment, this practical reality encourages investments into the country, and facilitates the placement of blocks and concrete on the ground.
Many of the problems associated with land allocation and use are generally caused by our own people in Local Government, in Central Government, and by all the shapes and sizes of Politicians. The challenge is to do some domestic housekeeping by ensuring that strategic land planning is engaged, processes and systems are strictly followed, and the removal of discretion on land allocation is immediately instituted.
Land is but one component in the investment and socio-economic development paradigm. The flip side of the coin is the issue of Property.
Property in respect to land includes the developments made on the land which constitutes buildings, machinery, and roads, amongst many other investments.
In Zambia, we have not clearly separated Land and Property, probably because in the recent past, a piece of land had developments that were exclusively attached to that piece of land. For example, a plot would have a house built on it and the two components were inextricably connected to each other.
However, today since the Privatisation Program, we have seen blocks of Flats and Apartments built on one piece of Land being sold to sitting tenants of each Flat. This meant that the Land title would be held by the group of twenty or thirty Flat owners who each held a Title Deed for their own individual Flats. Ironically, some Flat owners owned units on the third or fourth floor thus in effect suggesting that their property was actually suspended in the air! This makes it difficult for any kind of meaningful sub-division of the land, as property owners above the ground would not be able to claim a piece of land.
One of the answers to this dilemma is to provide for Sectional Title of property such as for Flats and Apartments on a common piece of Land. A cursory look at hundreds of cities around the world show how this is done in major office and residence blocks.
Our immediate refocus now is to recognise Land ownership as per the traditional Title Deed, but to also rapidly incorporate Property ownership which now becomes the twin sister of Land, and their relationship becomes both inclusive and exclusive, depending on the circumstances.
We note these developments in our various Show Grounds around the country, where the developments on land are owned by individual companies, whereas the Land is owned by the show society in question. Some new business initiatives include the development of Multi Facility Economic Zones (MFEZ’s) and other Economic Zones that are likely to follow this blue print of Property ownership alongside Land ownership.
These developments will challenge our banking and financial sectors to redraw their description of tradable and tangible assets to support loan processing and other business development financial services.
Interestingly, our current practice is to consider bare Land which has a Title deed as insufficient collateral in business transactions, while on the other hand, Property developments on land which in the case of a block of Flats has no Title deed, is looked at as sufficient security.
The dialogue on Land and Property deserves more attention such that this important issue is targeted towards the overall social and economic development of Zambians and the 752,000 square kilometres that make up Zambia.
Published 19th May, 2009
Tuesday, May 12, 2009
Business Barriers
Zambia like many other developing countries is on an ongoing campaign to support and facilitate both local and foreign investment in the country. There are daily pronouncements made by both Government officials and the private sector that call for more investment, and market the country as a stable and good place to do business.
On the ground however, there are increasingly more reasons that will undermine the country’s marketing effort as anti business experiences are shared by businesses within the economy.
A new cost to doing business has recently been introduced in the motor vehicle import sector. A Japanese firm has been contracted to check every used vehicle that is imported into Zambia for a flat mandatory fee of around K750,000 per vehicle. At the current levels of imports of used motor vehicles this revenue stream for this foreign investor is guaranteed to be in the region of K22,500,000,000 per annum because an estimated 30,000 vehicles come through our borders each year.
This is a great business opportunity for the Japanese investor which promotes a potential flight of at least K14 billion or USD3 million to Japan, and adds to the import costs of every used vehicle in the economy. Ultimately, this extra cost of doing business is passed on to the consumer.
In addition, the Road Transport and Safety Authority (RTSA) will continue to demand Fitness requirements for all motorists as part of the quarterly and annual licensing requirements. A duplicated effort is therefore being developed for no good reason.
One cannot understand why the RTSA needs a Japanese firm to check on the fitness of imported vehicles when RTSA has the mechanism and potential to do the work if structured and financed appropriately. What we are seeing instead is another Private Public Partnership (PPP) arrangement that will drain the pockets of the already struggling masses of Zambian vehicle owners.
There appears to be a lack of confidence in using our own human and other resources to do this rather simple operation of certifying the roadworthiness of vehicles, and we opt to outsource this work to companies that will take financial resources out of the country instead of investing it in the domestic economy. We may need to re-examine our motives on this issue.
Several investors that have obtained licenses and permits from the Zambia Development Agency (ZDA) have had running battles with the Zambia Revenue Authority (ZRA) over customs clearances of trucks, equipment, and machinery that are deemed tax free as per the licenses issued. ZRA demands that duty be paid in contravention of the investment incentives given by the Government. As a result, trucks, equipment, and machinery are marooned at ZRA yards and warehouses at the ports of entry for months until the demanded taxes are paid.
Eventually, any progressive business will pay the bill for fear of running into irrecoverable debt with financial institutions and business customers with who contracts have been signed for the delivery of goods and services.
ZRA wins the battle, and Zambia loses the war as it soon becomes clear that commitments made by ZDA through the investment licenses are not worth the paper that they are written on. Foreign banks and financiers begin to portray Zambia as a rogue state where contracts and agreements are not respected and therefore Zambia becomes a high risk investment destination. The cost of doing business goes up as interest rates go up, and again, the consumer in the end pays the price.
The media recently reported that the ZDA was cancelling licenses previously issued and one can only hope that these licenses will be replaced with new issues or else we may see yet another document that cannot be trusted or used to authenticate the validity of any investor under the ZDA Act.
The problem with inconsistency and reneged commitments is that word gets round in the investor communities whether local or foreign. The private sector begins to distrust the sincerity of the Government and the relevant Statutory Bodies, and the whole Fifth National Development Plan (FNDP) which is hinged on a private sector led economy, falls flat on its face.
Anarchy, corruption and side stepping become the order of the day as we have witnessed in some West African economies, and the country starts to record negative economic growth as economic activity begins to fall off the official radar screen as increasingly business is done under the table.
The many efforts of the various Government ministries to curb corruption and promote good business practices are based on the removal of barriers to business and to reduce the costs of doing business.
Clearly the various Government departments have serious problems in co-ordinating and collaborating with each other to the extent that one Ministry removes barriers to business while another introduces some new barriers under the guise of a newly introduced regulation.
The recent barriers to doing business seem to originate from a necessity to generate new revenue streams by Statutory bodies rather than to deliver services to the public that enhance productivity, promote improved quality of goods and services, and facilitate greater wealth creation in the economy.
Posted on 12 May, 2009
Tuesday, May 5, 2009
Copper Mining in 2009
Copper mining is making the headlines again as it has done in the past when copper prices begin to rise.
For many Zambians, the current copper prices that have risen from a low of USD3,000 per tone and now stand at about USD4,000 per tonne is good news and there is hope that the prices will continue to improve.
All eyes are on China, the world’s largest buyer of copper, to see how the manufacturing economy is doing out there. Any increase in China’s manufacturing sector in areas using electrical and electronic products, will result in more copper being purchased and logically, the price of copper should increase due to the increased demand.
On the home front, ZCCM IH is looking to invest in African Copper (ACU) to the tune of USD22.5 million in a bid to pull ACU out of its present financial crisis and take advantage of a stake in a copper mining operation in view of the rising copper prices.
In Luanshya, there is growing excitement about the prospects of new investors in the mining operation there. Front runners for the Luanshya mines are a Chinese investor and several other un-named options.
As investors are poised to take over mining operations in the country, the Mine Workers Union of Zambia (MUZ) have voiced their concerns about allowing old investors that had previously operated mines in Zambia, and later pulled out due to the low copper prices, to come back now when the going seems to be getting better. This position has also been echoed by the State President Rupiah Banda who was not happy with former investors that abandoned the country and their employees when business got tough, and were now rushing in to pick up where they left off.
In the wings, we note that Lumwana Mining Company has experienced differences with Mopani Copper Mines and Glencore International in respect to the specifications of copper concentrates for processing at the Mufulira Smelter. An alternate arrangement has now been made with the Chambishi Copper Smelter for Lumwana concentrates to be processed, but Zambia is likely to eventually pay the price of building another Smelter plant as a consequence of these differences.
There is a great opportunity for the copper mining industry to collaborate where it makes sense, and to compete in areas of productivity and technologies. The duplication of Smelting plants that have capacity to process concentrates for several mining companies, is not only a waste of money for the mining companies themselves, but a waste of resources for Zambia as a whole.
Copper prices may be on the increase, but the world is increasingly competitive, and efficient, cost effective production will go a long way towards sustainable business. To this end, collaboration and cost sharing in the mining industry will benefit all investors in the long run.
Government and the Zambia Development Agency can also play a significant role in promoting, facilitating, and supporting value addition to copper within the country. The Chambishi economic zone can be targeted as the primary vehicle for developing the value chain in the copper industry. Zambia needs to see more investments such as ZAMEFA on the Copperbelt. Opportunities are there to manufacture copper cables of all sizes and description in the Chambishi economic zone and elsewhere on the Copperbelt. Many other copper based products are possible with guided investment incentives offered by ZDA.
The copper slump will go, and no doubt return after a few years. Zambia must make some decisive choices about how to tackle the rising and falling prices of copper on the world market. We can choose to go with the flow and be subject to the price variations out there, or we can decide that we will consciously invest in the value addition components of the industry, so that the changes in metal prices have as little impact as possible on our own domestic economy.
The impact of value addition in the copper industry has implications far beyond the copper industry. Copper metal fabrication and processing has the effect of creating capacity to add value to other metals such as zinc, aluminium, etc. This metal processing sector can quickly become the basis for many different forms of manufacturing across the country.
This phenomenon is evident as we currently experience the development of a steel industry in Zambia. There are several steel processing plants in operation, and several more being developed by the private sector. The impact is already being felt in the manufacturing sector as new companies are being set up to manufacture steel based products such as door frames, window frames, steel re-enforcement building products, trailers, machinery, and farming implements that were previously imported.
Reports indicate that China is stock piling copper to support its industry which is the backbone of the expected 8.3 percent growth of the economy in 2009. Although the USA, Japan, and Europe are reducing their imports of copper and other metals, China is taking up the overspill and using the opportunity to boost its own economy.
On the home front, European companies are now offering franchises to Zambian companies to procure equipment and machinery for metal processing, in an effort to market their technologies in Zambia. The net effect of these initiatives is that Zambia can become more industrialized, Zambians can gain better skills with new technologies, and Zambia can transform her economy from a primary raw material producer, to a sustainable manufacturer of semi processed and processed metal products.
For many Zambians, the current copper prices that have risen from a low of USD3,000 per tone and now stand at about USD4,000 per tonne is good news and there is hope that the prices will continue to improve.
All eyes are on China, the world’s largest buyer of copper, to see how the manufacturing economy is doing out there. Any increase in China’s manufacturing sector in areas using electrical and electronic products, will result in more copper being purchased and logically, the price of copper should increase due to the increased demand.
On the home front, ZCCM IH is looking to invest in African Copper (ACU) to the tune of USD22.5 million in a bid to pull ACU out of its present financial crisis and take advantage of a stake in a copper mining operation in view of the rising copper prices.
In Luanshya, there is growing excitement about the prospects of new investors in the mining operation there. Front runners for the Luanshya mines are a Chinese investor and several other un-named options.
As investors are poised to take over mining operations in the country, the Mine Workers Union of Zambia (MUZ) have voiced their concerns about allowing old investors that had previously operated mines in Zambia, and later pulled out due to the low copper prices, to come back now when the going seems to be getting better. This position has also been echoed by the State President Rupiah Banda who was not happy with former investors that abandoned the country and their employees when business got tough, and were now rushing in to pick up where they left off.
In the wings, we note that Lumwana Mining Company has experienced differences with Mopani Copper Mines and Glencore International in respect to the specifications of copper concentrates for processing at the Mufulira Smelter. An alternate arrangement has now been made with the Chambishi Copper Smelter for Lumwana concentrates to be processed, but Zambia is likely to eventually pay the price of building another Smelter plant as a consequence of these differences.
There is a great opportunity for the copper mining industry to collaborate where it makes sense, and to compete in areas of productivity and technologies. The duplication of Smelting plants that have capacity to process concentrates for several mining companies, is not only a waste of money for the mining companies themselves, but a waste of resources for Zambia as a whole.
Copper prices may be on the increase, but the world is increasingly competitive, and efficient, cost effective production will go a long way towards sustainable business. To this end, collaboration and cost sharing in the mining industry will benefit all investors in the long run.
Government and the Zambia Development Agency can also play a significant role in promoting, facilitating, and supporting value addition to copper within the country. The Chambishi economic zone can be targeted as the primary vehicle for developing the value chain in the copper industry. Zambia needs to see more investments such as ZAMEFA on the Copperbelt. Opportunities are there to manufacture copper cables of all sizes and description in the Chambishi economic zone and elsewhere on the Copperbelt. Many other copper based products are possible with guided investment incentives offered by ZDA.
The copper slump will go, and no doubt return after a few years. Zambia must make some decisive choices about how to tackle the rising and falling prices of copper on the world market. We can choose to go with the flow and be subject to the price variations out there, or we can decide that we will consciously invest in the value addition components of the industry, so that the changes in metal prices have as little impact as possible on our own domestic economy.
The impact of value addition in the copper industry has implications far beyond the copper industry. Copper metal fabrication and processing has the effect of creating capacity to add value to other metals such as zinc, aluminium, etc. This metal processing sector can quickly become the basis for many different forms of manufacturing across the country.
This phenomenon is evident as we currently experience the development of a steel industry in Zambia. There are several steel processing plants in operation, and several more being developed by the private sector. The impact is already being felt in the manufacturing sector as new companies are being set up to manufacture steel based products such as door frames, window frames, steel re-enforcement building products, trailers, machinery, and farming implements that were previously imported.
Reports indicate that China is stock piling copper to support its industry which is the backbone of the expected 8.3 percent growth of the economy in 2009. Although the USA, Japan, and Europe are reducing their imports of copper and other metals, China is taking up the overspill and using the opportunity to boost its own economy.
On the home front, European companies are now offering franchises to Zambian companies to procure equipment and machinery for metal processing, in an effort to market their technologies in Zambia. The net effect of these initiatives is that Zambia can become more industrialized, Zambians can gain better skills with new technologies, and Zambia can transform her economy from a primary raw material producer, to a sustainable manufacturer of semi processed and processed metal products.
Published on 5 May, 2009
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