State And Development

1. Role of Government in Economic Development

The concept of having a Government in place is to maintain some order in society. Law and order, an Army to protect the nation from outside aggression, and the development of logistics to support and facilitate a better life for all are part of the roles that every Government pledges to undertake. For the private sector, a conducive and motivating environment is necessary for economic activity to take place and thrive. Government therefore must put in place measures that protect investment and ensure some stability and predictability in the business environment. One basic instrument that endeavours to develop this stable and conducive environment for business to flourish is the National Constitution. Subsidiary laws and regulations that affect private sector development are hinged on the spirit of the National Constitution.

2. Government Policies and Strategic Development Plans

Zambia has over the years developed several development plans that have characterised the country’s economic development agenda. Structural Adjustment Policies and National Development Plans have been hatched and rolled out over the past four decades with various achieved results. The annual fiscal National Budget is a sub set of the medium term development plans and is generally aimed at achieving specific benchmarks that should lead the country along the road to prosperity. For Zambia, a longer term plan is in place in the name of Vision 2030 which highlights the national goals to be achieved by the year 2030. Ideally, the various plans ranging form annual budgets to the long term vision should be interlinked with developed synergies such that a strategic development program is carried out that allows the outputs of one program to become the inputs for subsequent programs thereby promoting a seamless long term set of achievements that continuously build the nation both economically and socially.

3. Socio Economic Infrastructure

For any nation to prosper there are some strategic socio economic infrastructure requirements that must be in place. Any country demands that basic roads, energy sources, access to land, communications, human resources, and water must be in place as pre requisites for economic development to take place. Many developed countries have put the burden of developing these socio economic infrastructures squarely on the shoulders of Government to whom all citizens pay taxes. National tax money is expected to finance national infrastructure that may be too expensive for individuals or companies to develop. National infrastructure is also expected to be for the service of all citizens and residents, and not developed as a money making Government venture. To this end, Police services are seldom charged over the counter, Immigration services at border posts are never charged to citizens, most Government departments provide services to the public free of charge, and roads, water and sanitation services are largely paid for through the national budget. A quick research in developed economies indicates that even electricity supply is Government owned in an effort to keep the cost of private sector production as low as possible.

4. Privatization and Commercialisation

As developing economies emerge out of the socialist era and embrace free market economics, many Government owned and public run institutions have been privatised or commercialised. In many cases the privatised entities have been asset stripped within a few years and the entire business is liquidated on the basis that it was never viable. Clever business investors made quick money and the nation lost valuable economic development assets in the process. The privatisation program was largely a failure due the possibility that the Government was not well prepared to privatise, or that corruption characterised much of the privatisation effort. Remaining parastatal companies and statutory institutions were re-engineered to become commercialised. To some commercialisation means that the entity will operate in an accountable fashion as most private companies run. This suggests that budgets are drawn and benchmarks are met during the fiscal year. The aim of commercialisation is to run an institution as cost effectively as possible while maintaining the highest standards possible. To others, commercialisation allows them to extort huge fees and levies to show a profit at the end of the year. This becomes a huge burden on the private sector when the institution demanding these fees is a monopoly that must be engaged by law.

5. Private Sector Support Government bodies

The Zambia Development Agency is the foremost Government agency that was established to promote private sector development in the country. The ZDA Act to date has some ambiguity that is left to individuals to interpret, thereby sowing seeds of doubt in the investor community. Although the ZDA endeavours to do its best to promote private sector investment in Zambia, the very fact that the board is dominated by Government officers, renders the agency quite subordinate to the whims and fancies of aggressive Government ministries. As a result, the ZDA has not been in the forefront of marketing the new Economic Zones currently being developed in Zambia.

This exercise is being carried out by the Commerce Minister and the Finance Minister who do not have the follow through capacity, nor the internal information on synergies and linkages to the domestic economy.

The Citizens Economic Empowerment Commission is an institution that aims to give Zambians citizens preference in developing the economy. The efforts of the CEEC are not linked to the initiatives for the Multi Facility Economic Zone’s and will soon be undermined by the rapid developments that are taking place in respect to the COMESA Customs Union where the citizens of all member states must be treated equally within the union. Furthermore, the CEEC has no capacity to manage funds and therfore depends on commercial banks which only add to the cost of borrowing.

The Development Bank of Zambia has not been able to realise its full potential as a private sector development support institution. DBZ can develop products that facilitate the private sector to borrow from other commercial banks by offering loan guarantees and other instruments that can be backed up by Government. Options for Bid Bonds, Performance Bonds, and Advance Payment Guarantees are only a few options for DBZ to adopt as part of their services to the business world. DBZ can pilot Greenfield investments in an effort to open new economic activities such that other commercial banks can confidently offer financing in new economic areas.

The various statutory Government bodies such as the Zambia Bureau of Standards and the Zambia Weights and Measures Agency are not currently useful to the private sector as they do not offer information and inspection services for voluntary and mandatory standards. The issue of counterfeit goods versus similar goods is not articulated for the public good. The challenges of regional integration are not addressed in respect to standards and packaging. By the same token the Zambia Competition Commission does not focus enough on the developing monopolies within the economy nor does the Consumer Protection Agency challenge importers and manufacturers on issues such as non Zambian power plugs, or product warranties and guarantees that are not exercisable in Zambia.

The Bank of Zambia has not yet fully grasped the various responsibilities to ensure that export earnings are officially accounted for in Zambian banks. Furthermore, Bureau de Changes are not supervised to offer a consistent and fair forex trading service to the public. BOZ does not have a good control on the timelines for electronic funds transfers, local cheque clearing, up country cheque clearing, and currency speculation within commercial banks. These grey areas all make doing business in Zambia more costly to the private sector.

The Government has now embarked on a new Private Public Partnership program which looks to engage the private sector in major development decision making processes that involve economic development. The roll out of this initiative is yet to bee seen and hopefully will employ the vast knowledge and experiences of the private sector to save the country huge amounts of money and develop much more viable and sustainable programs that will primarily focus on infrastructure development.

6. Regional Integration

Zambia is a member of the COMESA FTA and the SADC FTA. Zambia has recently signed up for the COMESA Customs Union which will remove all borders amongst member states. No strategy for supporting and developing the domestic economy has yet been articulated by Government in the face of the impending launch of the Customs Union in 2010. The Customs Union may undermine all CEEC efforts, ZDA efforts, and our domestic programs to develop the local economy, if no strategy is put in place. Zambia looks to the North South Corridor program to develop regional communications infrastructure and has had a focus on the developing the Zambia-Malawi-Mozambique Growth Triangle. Strategic planning and partnership between the Government and the private sector is essential for any regional integration initiative to bear fruit.

7. International Trade packages

Over the last decade Zambia has been a party to several trade initiatives that offered promise to expand the country’s international trade network. The United States Africa Growth opportunity Act and a similar initiative by the Canadian Government have not produced much result for the Zambian economy. The private sector has not been forthcoming in exploiting these initiatives mainly due to the limited opportunities promoted and the lack of finance to engage with the two North American countries. The European Union however, has been a relative success in providing markets for the Zambia private sector under the previous Cottonou Agreement which is now being replaced by a new Economic Partnership Agreement. The EPA discussions have been ongoing for the last two years and now that the principle EU negotiator has moved to another posting, the discussions are likely to be prolonged for a few more years before some meaningful agreement is achieved. The private sector is expected to be central in the negotiations as it is the private sector that will be subjected to the provisions of any agreement signed.

8. World Trade Organisation and International Standards Organisation

The WTO is in the throes of difficult discussions in respect to the Doha Development Round of talks. Furthermore, issues of special status of developing countries are being discussed in an effort to find a way forward for countries like Zambia to adhere to WTO provisions and yet continue to grow our own economy. The global economic crisis has now brought another dimension to the WTO as countries like China, India and Brazil begin to take up more trading market shares of Europe and North America. On the horizon are impending discussions and agreements in respect to Intellectual Property Rights which will affect the giant production nations of China and the USA. Zambia is ill equipped to deal with these negotiations and may need to partner with the private sector in order to negotiate meaningfully at the WTO.

9. Asian Tigers and African Wonders

History shows how developing countries in Asia put in place some programs that promoted their private sector such that after 20 years, these countries developed very rapidly and became middle income nations popularly known as the Asian Tigers. The Asian Tigers developed through a collaborative effort between the Government and the private sector to exploit every possible opportunity for economic development. The strategy took into account the natural and human resources in the economy and focussed on the comparative and competitive advantages with a high input on skills development. The Asian Tigers also invested much of their resources in economic development rather than social development. The premise was that if economic development was rapidly achieved, then social development would follow with the proceeds of a strong economy.

Mauritius followed a similar pattern but focussed on the African continent as a source for raw materials and developed many services that the continent did not offer. Today Mauritius is mainly a services economy specialisating in financial and insurance services which it offers to the African continent. Mauritius has a relatively small population and therefore does not carry such a huge social services burden.

Botswana has an economy that is almost solely based on diamond production. This high value natural resource allows the country to invest in housing, roads, telecommunication, and offers the private sector easy financing for economic activity. The Botswana economy is not very diversified and many rural people are very poor.

Angola and Rwanda offer some new ideas for economic development. Both countries have engaged foreign partners to work with their Governments in developing socio economic infrastructure in return for investment concessions in oil drilling and access to other mineral resources. Angola has a program to build all its major highways and railway systems through a Government to Government agreement with China. The private sector in Angola will consequently grow much more rapidly and will begin to contribute to economic development more so than is the current case. Since oil and other minerals are finite resources and will one day be exhausted, the necessity for the private sector to grow and be productive is essential in the long term.

Zambia can pick up a few lessons from around the world, but more relevantly from our neighbours where Government engages the private sector to develop it into the engine for growth as it recognises that natural resources will one day run out and the country will have to prosper on the productive capacities of its people.

Published 8 December 2009