Third Time Lucky

Today President Banda leaves for China on a state visit in response to an invitation from that country’s head of state.

This event will mark the third encounter in the last seven years between Zambia’s head of state and the leadership of China.

The first recent encounter was the state visit of Late President Mwanawasa to China in 2003 which was later reciprocated by a state visit to Zambia by President Hu Jintao and his entourage during his African tour of 2007.

The net impact of the two encounters was a pledge by President Hu Jintao for China to slash Zambia’s debt by 8 million dollars, invest around 800 million dollars in the Chambishi Economic Zone, build two rural schools, construct a hospital for malaria treatment, and the building of a new football stadium in Ndola.

Slowly the pledges are crystallizing into implemented projects but the impact on national development is too small for such a significant partnership with the world’s largest exporter of goods and services.

Zambia may be third time lucky if today’s visit can be strategically arranged to put Zambia’s key development hurdles on the agenda in Beijing.

China is the world’s biggest developer of hydro electric power stations. Zambia has lost its competitive advantage of being a country that is self sufficient in electricity at relatively low tariffs. In order to address this situation Zambia can negotiate with China to develop the vast hydro electricity potential across the country. This sector requires investments in the order of around 6 billion dollars. The higher production of electricity in Zambia will enable the country not only to steer away from the use of petrol and diesel for industry and transport, with surplus electricity being marketed to the neighbouring countries. This would be a useful engagement with China in an effort to invest in the future of Zambia’s economy and address the energy requirements of the growing Chinese investments in the mining and steel sectors.

China has the world’s widest railway network and boasts the cutting edge Mag Lev shuttle train which floats on a magnetic track at speeds of up to 480kms per hour. Zambia can dialogue with China on a program to overhaul and resuscitate the defunct operations of our railway network such that a meaningful investment is made into the rail transport sector. If the Zambian railway system can be made to operate efficiently, many of the huge trucks carrying cargo on our roads today can be eliminated and the lifespan of our roads can be extended probably by another 10 years. In addition, both India and China use rail transport to move people across the country in a very extensive way thereby making it the number one choice for cost effective travel.

China has a very successful track record in the agriculture sector and therefore can be a very useful partner in bringing Nitrogen Chemicals of Zambia back to life. Food security is a key aspect of state sovereignty. With China’s support Zambia can make food security and food surplus a living reality as fertilisers and other inputs are efficiently manufactured at NCZ.

The plight of Mulungushi Textiles in Kabwe should be addressed during the state visit so that the company can secure re-investment and Kabwe can begin to convert Zambia’s cotton into finished products for both domestic consumption and export.

Imports from the south are brought to a slow pace due to the cumbersome operation of the pontoon at Kazangula which connects Zambia to Botswana. The solution is to build an all weather heavy duty bridge that will support the high volume of traffic between the two countries. There again, is an opportunity for Zambia and China to do some good infrastructure development work that will support the growing economy.

Tourism is high on the agenda in Zambia’s development program. In order for tourism to really deliver it is necessary to build proper airports that will allow tourists to fly into Mansa, Siavonga, and along Lake Tanganyika in the Northern Province. Airports that can handle commercial aircraft flying in from South Africa and other neighbouring countries will escalate the tourism traffic into the country. Airports not only provide efficient access into the country, but also provide quick access to the tourism sites across the country.

The state visit to China can either be one that the President and his entourage have great time eating, drinking and seeing good things, or it can be a strategic series of discussions and negotiations that will ultimately bring useful development investments into Zambia.

Hopefully, the President and his team will focus on the latter. Hopefully the state visit to China will be third time lucky wherein the best interests of Zambia are not only focussed upon, but tangible results will be seen by the people of Zambia in the near future.

Published 23 February 2010

GMO Again

The Genetically Modified Organisms (GMO) debate on food products has made it into the media again. This time the debate is taking place in India where Bio Tech (BT) Brinjal (Egg Plant or Aubergine) is causing a fierce debate in political circles, amongst the scientists, and more importantly, within the farming community.

This month India imposed a moratorium on the production of BT Brinjal for various reasons which were brought out by the wider set of stakeholders.

What issues have surfaced as a consequence of the BT ban?

One sector of private business will smuggle the BT crop and technology into the country in defiance of the ban, and possibilities of the agriculture sector being contaminated by GMO crops is open to unbridled abuse.

Another sector of society will be biased against GMO crops and the many imaginary perceptions of scientifically made products that are considered to create new diseases and even new unnatural creatures will be fuelled.

In India, some scientists submit that many tests and trials have been done over the last nine years to ensure that the GMO crops that are introduced into the country are safe and profitable across the board for the country.

Another group of scientists are of the opinion that the tests and trials done by seemingly local government owned universities, are funded by outside stakeholders who may influence the work in favour of supporting GMO technologies.

The farming community are generally supportive of GMO technologies through the positive experience of BT Cotton, but they largely are concerned about the fact that Brinjal is a local food and that there are no convincing tests that indicate that BT Brinjal will be safe for human consumption.

This situation brings to the table a challenge that also faces Zambia.

The challenge is twofold. Firstly, the need for a state owned and funded research centre on GMO’s and Biotechnologies. Secondly, a forum for all stakeholders to air their views and concerns, to form a basis on which to arrive at pertinent decisions on the use of GMO’s at national level.

Some influential leaders in India are not very happy with the constitution of the members of the state owned Genetic Engineering Approval Committee (GEAC). The GEAC itself has the power to approve GMO products, but due to the ferocious debate going on in the country in respect to GMO’s, it has passed on its opinions to the top government officials for consideration and decision making on behalf of the nation.

There are calls for the government to invest public resources into GMO research such that the opinions and decisions made by the GEAC will be in the best interest of the nation. Calls are also made for the introduction of a GMO regulation authority that will authorise and monitor the use of GMO technologies and products. This would probably be the best course of action for Zambia too.

Interestingly, the various states of India have shied away from Bt Brinjal, substantially on the basis of concerns about human health and safety issues. At least eight states banned the introduction of BT Brinjal even before any national government decision was released on the matter. Even Tamil Nadu, the state in which one key GMO research laboratory has done extensive work on BT Brinjal, has banned the introduction of the crop.

For the lay person and wider society at large, this state of affairs raises more questions about GMO crops than it gives answers or reassurances. The public tend to error on the side of caution when faced with decisions that are connected with complex technologies, hence the public outcry and political frenzy on BT Brinjal.

As a result, the government has decided to make public most of the GMO documentation through their web site (www.moef.gov.in) and has marked January and February 2010 for a series of proposed consultations in different parts of the country with consumer groups, scientists, Non Governmental Organisations, farmers organisations, agriculture experts, and all civil society who want to engage in a responsible manner.

Zambia has already made some progress by developing a GMO laboratory system at Mount Makulu under the umbrella of the Ministry of Science Technology, and Vocational Training. Of course, for the laboratories to do research work that will be in the best interests of Zambia, it is imperative for the research centre to be funded through the national budget and not through direct donor or cooperating partner funding.

Some concerns pertaining to GMO crops include; safety in respect to the environment, human and animal health; the lack of conclusive research for GMO bio-safety and its possible contributions to food security and the well-being of the farmers community; the lack of a government agriculture commission to examine various technical reports and forward their views to the relevant government department to support a well informed decision making mechanism; lack of focus on the interests of small and marginal farmers; and the impact of pesticide use that can have a damaging effect on public health.

GMO’s and BT crops have the potential to leap frog decades of development in the agriculture sector. But as long as the scientists and the politicians use the GMO debate to further both scientific and political causes, the benefits may never trickle down to the poor people that the technology can lift out of poverty and hunger.

It is now time for the intellectuals and government experts to come together with the single agenda of looking to make GMO’s benefit Zambia as a whole. This single goal will set the stage for sincere, comprehensive, and inclusive debate and dialogue on GMO’s and BT such that at the appropriate time, national consensus will be achieved on Zambia’s national strategy.

Published 16 February 2010

Small And Medium Enterprises

The integration of various state economies with their specific peculiarities, into one global economy overseen by the World Trade Organisation brings out new challenges for developing nations.

The protectionist mechanisms that traditionally supported small scale industries (SME’s) have had to fall away as WTO rules become enforced in developing economies. India has experienced the survival crisis for SME’s as a result of globalisation, and some vertical and horizontal evolution has taken place in response to the shifting environment.

On the vertical axis, many micro enterprises have emerged as some SME’s down-size and opportunities for new entrants into business become more visible. Conversely, some SME’s up-size to develop greater economies of scale, and embrace a larger portion of the value chain of production. On the horizontal axis, many SME’s have had to consider product changes and sector changes in order to survive by providing the right product for the right industry that is doing well in a particular environment.

For example in an economy where construction and other civil infrastructure developments are doing well, the SME sector has had do some extensive research to find niche products and services that can be produced and offered to the large corporates in a bid to become a player in the construction value chain. Good specific examples have been steel riggers and rigging accessories, the manufacture of electrical accessories, the production of selected plumbing components, the supply of roofing accessories, and the development of various work tools and accessories for the construction sector.

Similar options can be developed in other prominent sectors such as food processing, agriculture, and tourism.

The SME sector deserves to be given a second look in respect to facilitation and promotion. The Citizens Economic Empowerment Commission, the Development Bank of Zambia, the Zambia Development Agency, the Ministry of Commerce Trade and Industry, the Ministry of Youth and Sport, the Ministry of Tourism, and the Ministry of Culture, all have a significant role to play in supporting and developing the SME sector.

It has already been acknowledged across the world that the SME sector is the backbone of any economy. Japan, India, China, and the Asian Tiger economies have all built their strong production bases on the SME sector. 88 percent of Japan’s economy is based on the SME sector. The developed economies of Europe and North America have been financially battered partly due to the fact that corporations dominated the domestic economies such that a crisis in a corporation became a crisis for the nation. This phenomenon basically makes the survival of private corporations the responsibility of the government rather than the shareholders, because of the possible large scale loss of jobs and heavy impact on the financial systems that a corporate collapse would cause.

Having learned the lesson, developing economies must rethink social and economic development strategies. This does not necessarily mean that all development programs must be abandoned. The SME challenge requires us to possibly focus more attention on the rapid and sustainable growth of the SME sector as a key program in the development agenda.

Part of the SME strategy requires developing economies to put in place a mechanism that ensures that when a large scale business or industry is established in a particular area, a linking program is immediately installed to promote SME’s to pick up the opportunities generated by the large investment.

Economic Zones, Industrial Parks, Mining Investments, Big Industries, Large Tourism Investments, Farming Blocks, and Corporate Services Providers, are all opportunities for SME’s to emerge and flourish and build the production base of the country.

The potential for SME’s is great, but three main provisions need to be in place for the potential to be unlocked. First, business promoters must become aware of the opportunities to supply goods and services. Second, there needs to be an availability of relevant skilled labour. Third, finance must be made available in a timely manner and at affordable rates.

Government, and specifically, the Ministry of Science, Technology, and Vocational Training, and various business and support organizations must assist to build the SME sector through the promotion of new and appropriate technologies; the hosting of SME development meetings for interested stakeholders; and dissemination events to highlight the opportunities for SME’s in the COMESA region.

We must keep in mind that as soon as the COMESA Customs Union is implemented, our economies will be integrated. The implications are that those countries in the region that have strong and sustainable large industries will dominate the region at some level, and those countries that have a vibrant SME sector will grow their economies even faster as they exploit the bigger markets offered by the region.

Zambia has some comparative advantages in the mining industry and can take advantage of this special endowment. However, Zambia does not have a monopoly of large investments within the region and therefore has no choice but to focus on an aggressive SME development program to remain a competitive and equitable member of the customs union.

Development of the SME sector is the way forward now, and will be the way forward for Zambia in the medium term. The big businesses should be encouraged to invest in Zambia, but not at the expense of sidelining our focus on Small and Medium Enterprises.

Published 9 February 2010

Davos 2010

The World Economic Forum in Davos, Switzerland, ran from January 27 to 31 this year under the theme; Improve the State of the World: Rethink, Redesign, Rebuild.

Davos focussed on the global economic payers which now include the USA, Europe, China, and India. In addition, the discussions challenged the global banking sector to come up with some prescriptions to support the global economy to come out of the global crisis with as little damage as possible. Another overriding major discussion at Davos was around energy sources, energy prices, and clean energy.

Prominent world leaders voiced their concerns including French President Sarkozy who said…"Either we are capable of responding to the demand for protection, justice and fairness through cooperation, regulation and governance, or we will have isolation and protectionism." and, "We will continue to make the economy run unbearable risks, encourage speculation and sacrifice the long term to the short term unless we change banking regulation, prudential rules and accounting rules."

Deputy Governor of the Peoples Bank of China, Zhu Min noted…."Risk for sovereign debt crisis is real. It seems to me the real risk for the global economy is very weak and volatile economic growth. Currently people tend to be optimistic..."

US President Obama highlighted his State of the Union Address that job creation would be at the top of his agenda in 2010 and that his focus would also be the overhaul of the healthcare system. He tactfully left the financial sector aside since he had been beating up on it all year long through 2009.

China has lamented on the USA, Canada, Australia, and Chile blockade on Chinese state owned firms from making resource investments in those countries due to supposed labour opposition and national security concerns.

China states that protectionist practices will only amplify the economic crisis and retard any recovery process in the countries that apply such measures. All in all, China continues to source for more markets around the world to export the vast range of products coming out of factories across the country.

The banking sector in Switzerland had suffered some upheavals in the last 24 months when several banks were forced to reveal sources and balances of funds in accounts connected to political leaders and grey area business operations.

However, Swiss regulators quickly moved in and imposed more stringent banking regulations which include capital ratios in an effort to stabilize the sector.

The Bank of England estimates that governments around the world have spent as much as 14 trillion US Dollars since 2008 to support the financial systems and maintain some monetary stability across the globe.

This sort of investment raises concerns amongst some financial analysts who note that much of the support is in the form of government bonds and other securities. There is a fear that many banks will soon hold huge amounts of these government papers in their vaults and should anything go wrong, then the world would experience yet another financial crisis even bigger than the current crisis that is slowly drifting away.

The Bank of England is making available 185 million pounds to the banking sector through a government guaranteed debt program. Many banks are building their portfolios with long term government paper, financed with government money, and leading to a record world ‘carry trade’.

Some banks see themselves being forced into this corner due to the lower demand for credit from their customers, the desire to reduce risk in their balance sheets, and the pressure from regulators to ensure that banks can withstand shocks in the capital markets through greater reserves of liquid securities – government bonds.

Although government paper has traditionally been respected as risk free, the experiences of Greece and Ireland start to tell another story of cracking financial systems.

Renewable and clean energy is high on the global agenda as the Kyoto Protocol expires in 2012. National measures to reduce emissions are the current debates, with China surprisingly showing much more commitment than any other country. China and the developed western countries are racing to dominate the wind energy sector. China has doubled its installed capacity each year, every year, since 2005 and now places third after the USA and Germany in installed power.

The British government has announced that Britain will install around 32 gigawatts of off shore wind power by 2020.

Africa looks forward to a brighter future as most economies are growing steadily. The IMF suggests that sub Saharan growth will register 1 percentage point above the world average in 2010 and places 8 African countries out of 20 on its fastest growing economies of 2010 list.

Experts state that for Africa to develop alongside Latin America and Asia, a lot of work must be done to move Africa from a commodity supplier to a value addition continent.

In a recent survey it was assessed that out of the 44 large companies from the USA, Japan, and Europe with operations in Africa, less than 1 percent of their equity was allocated to Africa, and about one tenth of a percent of the bond allocation was routed to Africa. The concern for this low investment in the continent was amongst other issues, the weak capital market structures, and the low liquidity to let investments in and out of the continent.

The World Economic Forum at Davos highlighted some important lessons for Africa. Africa is where much of the world’s resources are.

Africa must build its socio economic infrastructure. Africa must develop its human resource capacity. Africa must develop its trading mechanisms such as banking and insurance to world class standards. Africa must recognise that there are several new emerging economies that can symbiotically work with the continent to develop it from extractive commodity supplier status, to a value addition supplier of goods and services to the rest of the world.

Davos may not have offered some easy solutions to Africa’s economic and social development, but it certainly highlighted the imbalances and inequities of the world development order, such that Africa is challenged to not only consider the Davos theme, but to also regroup, innovate, realign, and employ new routes to development.

Published 2 February 2010